Trade Law: An Introduction to Selected International Agreements and U.S. Laws

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Summary

The United States has trade obligations under multilateral trade agreements, including the

General Agreement on Tariffs and Trade (GATT) and the other World Trade Organization (WTO)

agreements, as well as bilateral and regional trade agreements. A variety of domestic laws

implement these agreements, prescribe U.S. trade policy goals, or regulate international trade to

achieve specific foreign policy objectives. This report provides an overview of both international

and domestic trade law, focusing on a select group of international agreements and statutes that

are most commonly implicated by U.S. trade interests and policy.

Historically, parties to international trade agreements were obligated to reduce two kinds of trade

barriers: tariffs and non-tariff trade barriers. Whereas the former may hinder an imported

product’s ability to compete in a foreign market by imposing an additional cost on the product’s

entry into the market, the latter has the potential to bar an import from entering that market

altogether by, for example, restricting the number of such imports that can enter the market or

imposing prohibitively strict packaging and labeling requirements. Consequently, at their most

basic, international trade agreements obligate their parties to convert at least some of their nontariff trade barriers into tariffs, set a ceiling on the tariff rates for particular products, and then

progressively reduce those rates over time. However, over time, U.S. trade agreements have

become increasingly complex. The U.S. model free trade agreement now targets not only tariffs

and non-tariff barriers, but also domestic policies in areas such as labor, environmental law, and

electronic commerce that U.S. policymakers consider unfair trade practices. Trade agreements

have also evolved to include elaborate trade dispute settlement mechanisms. As illustrated in this

report, the typical international trade agreement today disciplines its parties’ use of tariffs and

trade barriers, authorizes its parties to use discriminatory trade measures to remedy certain unfair

trade practices, and establishes a dispute settlement body.

Domestic trade laws, meanwhile, can broadly be classified as laws (1) authorizing trade remedies,

including remedies for violations of trade agreements, countervailing duties for subsidized

imports, and antidumping duties for imports sold at less than their normal value, (2) setting

domestic tariff rates and providing special duty-free or preferential tariff treatment for certain

products, and (3) authorizing the imposition of trade sanctions to protect U.S. security or achieve

foreign policy goals. In addition to describing these domestic laws, this report summarizes the

constitutional authorities of Congress and the executive branch over international trade. Finally,

the report identifies many of the federal agencies and entities charged with overseeing the

development of new trade agreements and the administration and enforcement of federal trade

laws. Among the federal agencies and entities discussed are the United States Trade

Representative (USTR), the International Trade Administration (ITA), the International Trade

Commission (ITC), the United States Customs and Border Protection (CBP), and the United

States Court of International Trade (CIT).

This report is not intended as a comprehensive review of trade law. It is an introductory overview

of the legal framework governing trade-related measures. The agreements and laws selected for

discussion are those most commonly implicated by U.S. trade interests, but there are U.S. trade

laws and obligations beyond those reviewed in this report.

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Contents

Introduction...................................................................................................................................... 1

Part I: United States Trade Obligations Under International Law ................................................... 1

The Uruguay Round, Marrakesh Agreement, and World Trade Organization .......................... 2

The General Agreement on Tariffs and Trade (GATT) 1994 .............................................. 3

The Nondiscrimination Provisions of the GATT .......................................................... 3

Article XX: General Exceptions to the GATT and “the Chapeau” ............................. 13

Other WTO Agreements Reached During the Uruguay Round ........................................ 19

Antidumping Agreement............................................................................................. 20

Agreement on Subsidies and Countervailing Measures.............................................. 22

Agreement on Safeguards ........................................................................................... 24

Agreement on Rules of Origin .................................................................................... 25

Agreement on Agriculture........................................................................................... 26

Prohibited Export Subsidies Under the AA ................................................................ 27

Domestic Support Programs ....................................................................................... 28

Agreement on Technical Barriers to Trade ................................................................. 30

Agreement on Sanitary and Phytosanitary Measures.................................................. 33

General Agreement on Trade in Services.................................................................... 36

Agreement on Trade-Related Intellectual Property Rights ......................................... 38

Dispute Settlement Understanding.................................................................................... 40

The WTO Plurilateral Agreements.................................................................................... 41

Agreement on Government Procurement.................................................................... 41

Agreement on Trade in Civil Aircraft ......................................................................... 43

The Doha Development Round......................................................................................... 44

Free and Reciprocal Trade Agreements................................................................................... 44

North American Free Trade Agreement ............................................................................ 47

Investment Provisions................................................................................................. 47

Intellectual Property.................................................................................................... 48

Labor ........................................................................................................................... 49

Dominican Republic-Central America-United States Free Trade Agreement................... 50

Investment................................................................................................................... 51

Intellectual Property Provisions .................................................................................. 52

Labor Provisions ......................................................................................................... 53

Trade Negotiations for the Trans-Pacific Partnership Agreement..................................... 55

Part II: The U.S. Constitution and Separation of Powers .............................................................. 56

Article I of the Constitution and Legislative Branch Authority............................................... 56

Article II of the Constitution and Executive Branch Authority............................................... 57

Separation of Powers in Practice: Fast Track and Trade Remedies......................................... 57

Fast Track Authority: Trade Act of 1934, Trade Act of 1974, and Bipartisan Trade

Promotion Act of 2002................................................................................................... 57

Import Competition: Tariff Act of 1930 and Trade Act of 1974........................................ 58

Part III: Selected U.S. Agencies and Federal Entities with Responsibility for Aspects of

International Trade...................................................................................................................... 60

United States Trade Representative......................................................................................... 60

United States International Trade Administration ................................................................... 60

United States International Trade Commission ....................................................................... 61

United States Customs and Border Protection......................................................................... 61

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

United States Court of International Trade.............................................................................. 61

Part IV: Selected Federal Statutes Regulating International Trade................................................ 62

Trade Remedy Laws ................................................................................................................ 62

Section 301 of the Trade Act of 1974: Remedies for Violations of Trade

Agreements and Other Inconsistent or Unjustifiable Foreign Trade Practices .............. 62

Countervailing Duties: Remedies for Imports of Subsidized Goods ................................ 63

Antidumping Duties: Remedies for Imports Sold at Less Than Fair Value ...................... 65

Safeguards ......................................................................................................................... 67

Section 201.................................................................................................................. 67

Country-Specific Safeguards ...................................................................................... 68

Domestic Tariff and Customs Law .......................................................................................... 69

Harmonized Tariff Schedule.............................................................................................. 69

Generalized System of Preferences................................................................................... 69

Eligible Countries ....................................................................................................... 70

Eligible Products......................................................................................................... 70

Other Duty Free Entry Programs....................................................................................... 71

Statutory Authorities for the Imposition of Trade Sanctions ................................................... 72

Trading with the Enemy Act.............................................................................................. 72

International Emergency Economic Powers Act............................................................... 73

Contacts

Author Contact Information........................................................................................................... 75

Acknowledgments ......................................................................................................................... 75

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Introduction

The post-World War II era has been characterized by a global movement toward liberalizing trade

and creating frameworks under which trade disputes can be avoided and resolved.1 In particular,

the trade agreements of the last half-century can be seen as adopting the view that government

bodies need a global legal framework to ensure that they effectively conform their countries’

policies and laws with their citizens’ interests.2 Legal theorists posit that trade policy failure, in

both the global and domestic arenas, as well as inequitable power dynamics among countries

engaged in trade negotiations, are the products of a legal architecture that does not sufficiently

discipline how governments represent their citizens’ interests.3 In this vein, the international trade

law regime has attempted to strengthen its enforcement mechanism over time to ensure that

national governments comply with trade law despite shifting domestic pressures.4

As international trade law has developed, there has been interplay between domestic and global

trade law. Initially, international trade agreements focused on tariffs, but, over time, they have

broadened to encompass aspects of domestic policymaking and establish fairly stringent dispute

settlement mechanisms. This interplay, however, has led to criticism that trade agreements

infringe national sovereignty and autonomy by (1) limiting the kinds of policy decisions a country

can make and (2) giving international trade dispute settlement bodies too much power to shape

and constrain domestic law.

This report provides an overview of the legal framework that governs trade-related measures.

This framework is composed of both international agreements and domestic laws. The particular

agreements and statutes selected for this report are those that are most commonly implicated by

U.S. trade interests and policy. This report is not intended to be a comprehensive review of trade

law.

Part I: United States Trade Obligations Under

International Law

Often, a single trade issue, such as dumping (the sale of goods in foreign markets at lower prices

than in the domestic market), is governed by both international agreements and federal laws.

Accordingly, this report first discusses international trade agreements and then turns to domestic

law.

The United States has international trade obligations under (1) the World Trade Organization

(WTO) agreements, which include the General Agreement on Trade and Tariffs (GATT) and other

“covered agreements”;5 (2) its own free trade agreements; and (3) other international agreements

See WORLD TRADE ORGANIZATION, WORLD TRADE REPORT 2007 iii, 247 (2007).

Id. at 80 (2007).

Id. at 79.

See id. at 118.

The term “covered agreements” refers to the Marrakesh Agreement, the Agreements in Annexes I and 2 of that

Agreement, and any Plurilateral Trade Agreement in Annex 4 of that Agreement. Appellate Body Report, Brazil–

Measures Affecting Desiccated Coconut, p.13 WT/DS22/AB/R (February 21, 1997). The Marrakesh Agreement and

(continued...)

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

with narrower policy goals, such as the conservation of natural resources. The scope of this

report, however, is limited to obligations incurred under agreements that seek to liberalize

international trade. In the WTO context, trade agreements are categorized as either multilateral

(accepted by all WTO Members as a condition of membership) or plurilateral (accepted by only

some WTO Members). Other free trade agreements may be classified as bilateral agreements

(which bind only two countries) and regional agreements (which bind countries within a discrete

region of the world). No matter their classification, most trade agreements have a corresponding

body of domestic law.

The Uruguay Round, Marrakesh Agreement, and World

Trade Organization

After World War II, developed nations sought to establish an open trade network to facilitate the

recovery of the global economy. These negotiations yielded a proposal for an International Trade

Organization (ITO), and, as a temporary fix until the ITO Charter could be negotiated, the

General Agreement on Trade and Tariffs 1947 (GATT 1947). The expectation was that the GATT

1947 would expire once a more comprehensive trade agreement, the ITO Charter, was developed

and ratified.6 Then the ITO would interpret and administer the ITO Charter.

However, the ITO never materialized, and, therefore, despite its provisional nature, the GATT

1947 became a permanent fixture in international trade.7 Nevertheless, to dispel any concern that

an international organization had been established, the GATT 1947 signatories continued to be

called “Contracting Parties” rather than “Members.” Moreover, the GATT 1947 was not

considered a comprehensive trade agreement because it consisted mainly of the commercial

policy provisions of the ITO charter.

Partly as a response to concerns about the GATT 1947’s strength and breadth, Contracting Parties

engaged in a series of “rounds” of multilateral trade negotiations over the ensuing decades: the

Dillon Round (1960-1962), the Kennedy Round (1964-1967), the Tokyo Round (1973-1979), the

Uruguay Round (1986-1994), and the ongoing Doha Development Round. Each round of talks

sought to liberalize new markets, lower tariffs, and identify solutions to different kinds of trade

barriers.8 It was not until the Uruguay Round that the Contracting Parties finally reached an

agreement on a charter for an international trade organization: the WTO.

The agreements completed in the Uruguay Round are detailed in the Marrakesh Agreement. Part

of this Agreement is the Agreement Establishing the World Trade Organization (the WTO

Agreement). The other texts negotiated during the Uruguay Round are annexed to the WTO

Agreement. Annex 1 contains 13 multilateral agreements on trade in goods as well as the General

Agreement on Trade in Services and the Agreement on Trade-Related Aspects of Intellectual

(...continued)

the contents of its annexes will be discussed further in “The Uruguay Round, Marrakesh Agreement, and World

Trade Organization.”

WORLD TRADE REPORT, supra footnote 2, at 80.

See id.

The Kennedy Round was the first round to go beyond tariffs and deal with certain non-tariff measures. Id. at 184.

However, since then, non-tariff barriers have become a major part of multilateral trade negotiations.

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Property Rights.9 Annex 2 contains the Dispute Settlement Understanding, which sets out the

process by which WTO Members may resolve disputes over the meaning or application of a

WTO agreement. Annex 3 contains a Trade Policy Review mechanism, providing for periodic

review of a WTO Member’s trade laws and policies. Annexes 1 through 3, and the agreements

therein, must be accepted by a country as a condition of its membership in the WTO.

Accordingly, all of these agreements, along with the other provisions of the Marrakesh

Agreement, were approved and implemented in U.S. law through the Uruguay Round

Agreements Act (URAA, P.L. 103-465, 19 U.S.C. §3501 et seq.), which then-President Bill

Clinton signed into law on December 8, 1994.

The General Agreement on Tariffs and Trade (GATT) 1994

The GATT 1994, which is found in Annex I of the WTO Agreement, consists of (a) the GATT

1947, (b) certain protocols, waivers, and tariff concessions made pursuant to the GATT 1947, and

the GATT sets the maximum tariffs for particular goods and countries and disciplines certain

trade-restricting measures adopted by WTO Members. This report surveys many of the articles of

the GATT that are considered fundamental as well as those that are frequently raised in WTO

consultations or disputes over a WTO Member’s domestic trade measures.

The Nondiscrimination Provisions of the GATT

The GATT seeks to prohibit WTO Members from discriminating between “like products” on the

basis of their origins. More specifically, the GATT bars WTO Members from discriminating

between like products because they originated in different WTO Members or because they

originated in a WTO Member’s territory rather than domestically. The GATT articles that lay out

this prohibition, Article I and Article III, are therefore known as the nondiscrimination provisions.

Although “like product” is used in both provisions, the GATT does not offer a single precise and

absolute definition of the term.10 Consequently, to determine whether two products are “like,”

WTO panels and the Appellate Body engage in a case-by-case analysis to discern whether the two

products are in a competitive relationship given the products’ properties and end uses, consumer

preferences, and tariff classification.11

Article I: Most Favored Nation Treatment

Article I of the GATT requires WTO Members to grant immediate and unconditional mostfavored-nation (MFN) treatment to the products of other Members.12 This means that any

The other agreements included in this annex are: the Agreement on Agriculture, the Agreement on Sanitary and

Phytosanitary Measures, the Agreement on Textiles and Clothing (which terminated in January 2005), the Agreement

on Technical Barriers to Trade, the Agreement on Trade-Related Investment Measures, the Agreement on Antidumping, the Agreement on Customs Valuation, the Agreement on Preshipment Inspection, the Agreement on Rules of

Origin, the Agreement on Import Licensing, the Agreement on Subsidies and Countervailing Measures, and the

Agreement on Safeguards.

See Appellate Body Report, Japan–Taxes on Alcoholic Beverages, WT/DS8/AB/R, p. 21 (October 4, 1996) (writing

that the concept of “like product” is “like an accordion”).

See Appellate Body Report, EC–Asbestos, WT/DS135/AB/R, ¶ 99 (March 12, 2001); Working Party Report on

Border Tax Adjustments (December 2, 1980), GATT B.I.S.D. (18th Supp.) at 97.

GATT, Art. I:1. Note that domestic U.S. law refers to MFN status as “normal trade relations.” Internal Revenue

Restructuring and Reform Act of 1998, P.L. 105-206 §5003, 112 Stat. 685 (1998).

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

“advantage” that a WTO Member grants in the context of customs duties or rules regarding

importation or exportation to any product imported from one country, whether a WTO Member or

not, must also be granted to any “like” product imported from all WTO Members.13

The term “advantage” in Article I:1 has been given a very broad definition to encompass any

more favorable competitive opportunity or commercial status relative to those of like products

destined to different WTO Members.14 It can include, for example, variations in both the

procedural and administrative requirements for imports.15 As a result, variations in the licensing

requirements for imports can constitute an advantage under Article I:1.16 In EC–Bananas III,17 for

example, a WTO panel ruled that the European Union had accorded an origin-discriminatory

advantage to the products of some WTO Members by imposing additional licensing requirements

on imports from other WTO Members.18 Notably, a measure may be deemed to accord an

advantage even if it is written in origin neutral terms.19

Similarly, two products may be deemed “like” under Article I:1 even if they are subject to

different tariff classifications or, for other reasons, are not exact duplicates.20 WTO panels and the

Appellate Body assess the “likeness” of two products by examining their characteristics, their

end-uses, their tariff classification, and consumers’ tastes and habits.21 Where a complaining

Member demonstrates that the difference in treatment between imported products is based

exclusively on the products’ different origins, a WTO panel will presume that there can or will be

discrimination between imported products that are “like.”22Although it is often difficult in other

cases to predict whether a given measure would affect “like” products from WTO Members, a

measure that affects a broad range of products may be likely to result in discrimination between at

least some “like” imports.

Panel Report, Indonesia–Certain Measures Affecting the Automobile Industry, WT/DS54/R, ¶ 14.138 (July 2, 1998).

Note that free trade agreements are often facially inconsistent with this requirement but have generally been permitted

under Article XXIV. See infra “Article XXIV: Customs Unions and Free Trade Areas.”

Panel Report, EC–Regime for the Importation, Sale, and Distribution of Bananas, WT/DS27/R/GTM, ¶ 7.239 (May

22, 1997); Panel Report, Colombia–Indicative Prices and Restrictions on Ports of Entry, ¶ 7.341, WT/DS366/R (April

27, 2009). In Colombia–Ports of Entry, the panel wrote that a measure also gives rise to an Article I:1 “advantage”

when it gives an operator the opportunity to “choose how to operate his business in order to enhance his profitability

and competitiveness.” Id. at ¶ 7.351.

See Panel Report, EC–Regime for the Importation, Sale, and Distribution of Bananas, WT/DS27/R/USA, paras.

7.193, 7.194 (May 22, 1997).

See id. In EC–Bananas III, the Appellate Body affirmed a WTO panel report ruling that the European Union’s

import licensing procedures for bananas were inconsistent with Article I:1 of the GATT because they imposed

heightened requirements for banana importers from some WTO Members but not all. Appellate Body Report, EC–

Regime for the Importation, Sale, and Distribution of Bananas, ¶ 206, WT/DS27/AB/R, (September 9, 1997).

Panel Report, EC–Regime for the Importation, Sale, and Distribution of Bananas, WT/DS27/R/USA (May 22,

1997).

Id. at paras. 7.193, 7.194.

See Panel Report, Canada–Certain Measures Affecting the Automotive Industry, paras. 14.123, 14.147, 15.1(c),

WT/DS139/R (February 11, 2000).

Rex J. Zedalis, A Theory of GATT Like Product Common Language Cases, 27 VAND. J. TRANSNAT’L L. 33, 78-84

(1994). See MICHAEL TREBILOCK, UNDERSTANDING TRADE LAW 40-41 (2011).

PETER VAN DEN BOSSCHE, THE LAW AND POLICY OF THE WORLD TRADE ORGANIZATION: TEXTS, CASES AND

MATERIALS 330-31 (Cambridge University Press 2008) (2008). Panel Report, U.S.–Certain Measures Affecting Imports

of Poultry from China, ¶ 7.425., WT/DS392/R (September 23, 2010).

Panel Report, U.S.–Poultry, supra footnote 21, at paras. 7.427, 7.428; Panel Report, Colombia–Ports of Entry, supra

footnote 14, at paras. 7.356, 7.357.

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Once a measure is found to have conferred a trade advantage that affects “like” products, that

measure will be deemed inconsistent with Article I:1 if it fails to accord the advantage

“unconditionally.” WTO panels have adopted different interpretations of the term

“unconditionally,”23 but their decisions suggest that conditions may be attached to an advantage

only if they do not discriminate, either on their face or as applied, between “like” products on the

basis of their countries of origin or destination.24 For example, an advantage is not accorded

“unconditionally” if some countries have to do or pay something to receive it.25 Similarly, an

advantage is not accorded “unconditionally” if some countries have to take a particular action,

such as adopt a specified policy, in order for exports to their territories to be eligible to receive

it.26

Notably, a measure framed in origin neutral terms so as to appear facially consistent with Article

I:1 violates the MFN principle if it has a discriminatory impact on imports of like products from

some WTO Members relative to others.27 In Canada–Autos,28 for example, a WTO panel

examined a Canadian measure that exempted car imports from a customs duty if their

manufacturers satisfied certain requirements, including establishment in Canada and the use of

Canadian materials in production.29 The panel found that the duty exemption was an “advantage”

and that, although the exemption was origin neutral on its face, the structure and characteristics of

the global automotive industry meant that the criteria for the exemption created origin-based

discrimination among auto imports from WTO Members.30 The panel buttressed this finding with

the measure’s legislative history, which suggested that the exemption was part of a scheme

intended to rationalize production in the North American automotive market and encourage U.S.owned car manufacturers to expand their production operations to Canada.31 In other words, the

panel ruled that Canada’s import duty exemption was a de facto violation of Article I:1 because it

Compare Panel Report, Canada–Autos, supra footnote 19, at paras. 10.23-10.25 (finding that measures are

inconsistent with Article I:1 “not because they involve the application of conditions that were not related to the

imported product but because they involve conditions that entailed different treatment of imported products upon their

origin”) and Panel Report, Colombia–Ports of Entry, supra footnote 14, at ¶ 7.362 (“In line with the approach

elaborated in the Canada–Autos dispute, the Panel considers that it may thus assess whether the advantage is conferred

‘immediately and unconditionally’ based on whether an advantage... is not similarly accorded to those products

originating in Panama for reasons related to [their] origin or the conduct of Panama.”) with Panel Report, EC–

Conditions for the Granting of Tariff Preferences, ¶ 7.59, WT/DS246/R (December 1, 2003) (writing that the term

“unconditionally” in Article I:1 retains its “ordinary” meaning: “not limited by or subject to any conditions”).

See Panel Report, Colombia–Ports of Entry, supra footnote 14, at paras. 7.362- 7.366; Charles Benoit, Picking Tariff

Winners: Non-Product Related PPMS and DSB Interpretations of “Unconditionally” Within Article I:1, 42 GEO. J.

INT’L L. 583, 600 (2011) (writing that the panel decisions “favoring the flexible interpretations” of the term

“unconditionally” include the latest panel report—Colombia–Ports of Entry—and have “contained lengthier and more

in depth discussions of the meaning of Article I:1.”).

See Van den Bossche, supra footnote 21, at 332.

See id.

See Panel Report, Canada–Autos, supra footnote 19, at paras. 14.123, 14.147, 15.1(c); Trebilock, supra footnote 20,

at 41.

Panel Report, Canada–Certain Measures Affecting the Automotive Industry, WT/DS139/R (February 11, 2000).

Id. at paras. 2.1, 2.2.

Id. at paras. 10.43-10.45. In particular, the panel found that the automotive industry relies heavily on “intra-firm

trade”—that is, the major automotive corporations in Canada only imported their own make of motor vehicles and

those of affiliated companies. Id. at paras. 10.43, 10.45.

Panel Report, Canada–Autos, supra footnote 28, at ¶ 10.49.

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was designed to benefit auto imports from particular sources, namely those in the United States

and North America, and had the discriminatory effect it intended.32

Similarly, in Indonesia–Autos,33 a WTO panel found that an Indonesian measure exempting

certain cars from import duties and sales taxes was also inconsistent with Article I:1. In that case,

an import’s eligibility for the exemptions depended on facially origin-neutral factors, such as the

domestic car company’s relationship with the foreign importer, the use of local content, and the

use of the imported car parts in the assembly in Indonesia of a domestic car.34 While these

criteria, like those in Canada–Autos, were framed in origin neutral terms, the panel found that in

practice only car imports from Korea could satisfy them.35 Therefore, the panel ruled that the tax

advantages, as applied, were accorded in a fashion that discriminated against products from WTO

Members on the basis of their origin.36

Article III: National Treatment

Article III articulates the basic principle of “national treatment”: Members must treat products

from other Members no less favorably than they treat their own “like” domestic products.37

Accordingly, Article III reflects concern that WTO Members could use internal taxation schemes,

regulations, and other domestic measures to protect their domestic industries. As written, Article

III forbids Members from using internal taxes, charges, and regulations that affect the “internal

sale, offering for sale, purchase, transportation, distribution or use of products,” as well as

internal quantitative regulations, so as to “afford protection to domestic production.”38

However, Article III prescribes different standards for national treatment depending on whether

the particular measure is a tax or regulation. When a measure is an internal tax or charge, Article

III:2 forbids its application if it either (1) is in excess of those taxes or charges applied to like

domestic products39 or (2) dissimilarly taxes imports and domestic products so as to afford

protection to a domestic product that is directly competitive with, or substitutable for, the

imported product.40 However, when the measure in question is a “law, regulation, or requirement

See id.

Panel Report, Indonesia–Certain Measures Affecting the Automobile Industry, WT/DS54/R (July 2, 1998).

Id. at paras. 14.145-14.146.

Id. at ¶ 14.145.

Id.

See GATT, Art. III:1. There are frequent disputes over the likeness or substitutability of the affected domestic and

imported products. E.g., Canada–Periodicals, supra footnote 39, at p. 3 (describing Canada’s argument that split-run

and non-split-run periodicals are like products); Japan–Alcoholic Beverages, supra footnote 39, at p.4 (describing

Japan’s argument that shochu and vodka are like products).

GATT, Art. III:1.

Appellate Body Report, Canada–Certain Measures Concerning Periodicals, WT/DS31/AB/R, pp. 22-23 (June 30,

1997). Under this standard, “[e]ven the smallest amount of ‘excess’ is too much” under this standard. Appellate Body

Report, Japan–Taxes on Alcoholic Beverages, WT/DS8/AB/R, p. 23 (October 4, 1996).

Japan–Alcoholic Beverages, supra footnote 39, at p. 24. The strict “in excess” standard applies only to the small

group of products that are considered “like”—that is, products that are perfect substitutes for each other. GATT,

Interpretative Note Ad Art. III:2; Canada–Periodicals, supra footnote 39, at p. 28. In contrast to “like products,”

“directly competitive and substitutable products” refers to both perfect and imperfect substitutes. Id. Therefore, when

the complaining Member’s products are directly competitive with, but not necessarily perfect substitutes for, the

respondent’s domestic products, the respondent’s tax is not subject to the “in excess” standard but rather to a two-prong

test that asks whether (1) the imported and domestic products are similarly taxed, and, if so, (2) whether the dissimilar

taxation is applied so as to protect domestic production. Japan–Alcoholic Beverages, supra footnote 39, at p. 24.

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affecting their internal sale, offering for sale, purchase, transportation, distribution, or use,”

Article III:4 proscribes its application if it treats foreign products less favorably than like

domestic products.41

A wide variety of measures fit the definition of a “law, regulation, or requirement” affecting

“internal” transactions, and, as a result, are subject to Article III:4. Examples include local content

requirements, advertising bans, and labeling requirements.42 WTO and GATT panels have also

found that, while measures that tax particular products, such as sales taxes, are governed by

Article III:2, measures that tax taxpayers for engaging in particular behavior, such as tax credits

for specified taxpayer purchases, are assessed under Article III:4.43 Even border measures—

measures that affect importation or exportation—governed by Article XI:1 can be subject to

Article III:4.44 Ultimately, whether a “law, regulation or requirement” is covered by Article III:4

typically depends on whether it might modify the conditions of competition between domestic

and imported products in the internal market.45 Significantly, WTO panels have found that these

conditions can be modified not only by measures that regulate the products but also by measures

that regulate their manufacturers or producers.46

In Thailand–Cigarettes,47 a WTO panel considered the Article III:4 consistency of Thai measures

that imposed more reporting, registration, and recordkeeping requirements on resellers of

imported cigarettes than were imposed on resellers of domestic cigarettes.48 Thailand argued,

inter alia, that the reason for the difference was to ensure that the sale of domestic products and

the sale of imports were both subject to the same regulatory regime and legal liabilities.49

The Appellate Body has defined “like domestic product” more broadly for the purposes of the Article III:4 test than it

has for the purposes of the test for internal taxes and charges laid out in Article III:2. See Appellate Body Report, EC–

Measures Affecting Asbestos and Asbestos Containing Products, WT/DS135/AB/ R, ¶ 99 (March 12, 2001). The

Appellate Body considers the term “like domestic product” in Article III:4 to include a small group of imperfectly

substitutable products in addition to perfectly substitutable products. See id.

One example of an internal regulation deemed inconsistent with national treatment is the Korean dual retail scheme

that the United States and Australia challenged in 1999. In those two cases, Korean measures confined sales of

imported beef to stores bearing a “Specialized Imported Beef Store” sign. The panel held that both the requirement that

imported beef be sold only in certain stores and the requirement that those stores bear a specialized sign violated

Article III:4. Panel Report, Korea–Various Measures on Beef, WT/DS161/R, paras. 641-643 (July 31, 2000).

Compare U.S.–Measures Affecting Alcoholic and Malt Beverages (June 19, 1992), GATT B.I.S.D. (39th Supp.) 206,

at paras. 5.13-15 (ruling that U.S. excise tax credits for domestic wine and cider producers contravened Article III:2)

with Panel Report, U.S.–Tax Treatment for “Foreign Sales Corporations,” WT/DS108/RW, paras. 2.6, 8.144 (August

20, 2001) (ruling that an income tax benefit provided for income earned predominantly as a result of goods

manufactured, grown, or extracted within the United States was governed by Article III:4).

Van den Bossche, supra footnote 21, at 347. See Panel Report, India–Measures Affecting the Automotive Sector,

WT/DS146/R, paras. 7.224, 7.306 (March 8, 2002).

Panel Report, Italy–Agricultural Machinery, GATT B.I.S.D (7th Supp.), 60 at ¶ 12 (October 23, 1958) (emphasis

added); Van den Bossche, supra footnote 21, at 369.

See, e.g., Panel Report, Mexico–Tax Measures on Soft Drinks and Other Beverages, WT/DS308/R, paras. 8.1098.113 (October 7, 2005) (finding that both “bookkeeping requirements” imposed on soft drink producers, importers,

and exporters and taxes imposed on imported sweeteners affect the use of certain sweeteners within the meaning of

Article III:4).

Panel Report, Thailand–Customs and Fiscal Measures on Cigarettes, WT/DS371/R, ¶ 7.734 (Jul 15, 2011). For

example, businesses selling imported cigarettes were required to, inter alia, obtain, complete, and file certain forms on

a monthly basis, prepare detailed tax invoices—and retain those invoices for no less than five years, and be subject to

audits. Id. at paras. 7.651-7.655.

Appellate Body Report, Thailand–Customs and Fiscal Measures on Cigarettes, WT/DS371/AB/R, paras. 98-100

(July 15, 2011).

However, in affirming the panel’s decision, the Appellate Body wrote that Thailand did not produce evidence to

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Thailand alleged that because cigarette importers are not legally responsible for paying the taxes

on their cigarettes, resellers of imported cigarettes presented a risk of tax evasion in the absence

of measures subjecting the sale of imported cigarettes to reporting, collection, and enforcement

mechanisms that mirrored those in place for the sale of domestic cigarettes.50 Therefore, Thailand

contended that the measures merely imposed requirements on resellers of imported cigarettes for

which there were already “equivalent” requirements imposed on resellers of domestic cigarettes.51

However, the WTO panel found that the Thai measures were inconsistent with Article III:4

because they could prejudice cigarette suppliers against importing and selling foreign-made

cigarettes by raising the operating costs associated with selling imported cigarettes in the Thai

market.52 The panel cited evidence that administrative burdens can and do affect business

decisions and that the Thai measures at issue were enforced through penalties and other sanctions,

including the denial of tax credits.53 Accordingly, the WTO panel and Appellate Body agreed that

the Thai measures subjected imported cigarettes to less favorable treatment in violation of Article

III:4.54

Article II: Tariffs

The original goal of the GATT was to move countries toward imposing tariffs, rather than nontariff trade barriers,55 that could then be reduced over time. Article II of the GATT embodies this

goal by requiring each WTO Member to abide by the tariff schedule that it has submitted to the

WTO. The goods that are subject to the negotiated tariff rates are called “bound” items.

Article II forbids Members from imposing tariffs on goods from other Members that are less

favorable than the tariff rates listed in the applicable schedule.56 Furthermore, Members may not

impose any other duty or charge on a product’s importation that exceeds the duties that existed at

the date the Members entered the WTO.57 There are, however, exceptions to Article II. Under

Article II:2, tariff concessions do not prevent Members from levying internal taxes consistent

with Article III:2 (these are often called “border tax adjustments”),58 antidumping or

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substantiate this assertion. Appellate Body Report, Thailand–Cigarettes, supra footnote 48, at ¶ 139.

Panel Report, Thailand–Cigarettes, supra footnote 47, at ¶ 7.740.

Id. at paras. 7.668.

Id. at ¶ 7.736.

Appellate Body Report, Thailand–Cigarettes, supra footnote 48, at paras. 137-138, n.204; Panel Report, Thailand–

Cigarettes, supra footnote 47, at paras. 7.719, 7.222, 7.736 7.634.

Appellate Body Report, Thailand–Cigarettes, supra footnote 48, at ¶ 140; Panel Report, Thailand–Cigarettes, supra

footnote 47, at ¶ 7.738.

An example of a non-tariff trade barrier is the Korean dual retail scheme that the WTO panel ruled against in 2000.

Korea–Beef, supra footnote 42, at paras. 641-643. As explained earlier, under that scheme, Korea confined sales of

imported beef to stores bearing a “Specialized Imported Beef Store” sign. Id. These kinds of trade barriers pose unique

obstacles to trade liberalization in part because, unlike tariffs, they can not be overcome simply by a willingness to pay

more money for the privilege of exporting products to a foreign country.

GATT, Art. II:1(a).

See id. at Art. II:1(b).

Border tax adjustments have particular significance in environmental policy. When a country wants its producers to

internalize a particular environmental cost, it usually wants to do so without depriving the domestic industry affected of

its global competitiveness. Consequently, it may impose a border tax adjustment (BTA) to “level the playing field,”

that is, prevent imports from countries whose producers do not internalize that cost from being cheaper than domestic

products whose producers do. However, not all taxes are eligible for treatment as a BTA. See, e.g., Panel Report,

United States–Taxes on Petroleum and Certain Imported Substances (June 17, 1987), GATT B.I.S.D. (34th Supp.) 136,

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countervailing duties consistent with the GATT and other relevant agreements, and fees or other

charges commensurate with the cost of services rendered.59

Despite Article II’s importance to the GATT, its enforcement can be difficult because WTO

Members frequently disagree about which duty applies to a particular good. A country’s tariff

schedules address categories and sub-categories of products but do not expressly identify and

provide a tariff rate for every potential product variation and nuance.60 Despite these problems, a

country’s customs agency must rely on the tariff schedules as written to identify the kind of

product under consideration and apply a tariff rate. This leads to problems like the one

encountered in EC–Chicken Classification, in which Brazil complained that the European Union

incorrectly classified fresh chicken packed in salt as fresh chicken cuts rather than salted chicken

cuts.61 At issue was an EU regulation that provided the customs agency with guidance on the

distinction between salted and fresh chicken cuts, stating that chicken must be “deeply and

homogenously impregnated with salt in all parts” to be subject to the ad valorem duty that was

more favorable to foreign imports than the duty that was applied to fresh chicken.62

Article VIII: Fees and Formalities

Article VIII:1 of the GATT requires that all fees and charges imposed in connection with

importation or exportation be (1) limited in amount to the approximate cost of services rendered,

and (2) not represent an indirect protection to domestic products or a taxation of imports or

exports for fiscal purposes.63 The first prong (limiting the amount to the cost of services rendered)

is actually a dual requirement as it requires (a) that a service was rendered, and (b) that the level

of the charge does not exceed the approximate cost of that service.64 Moreover, the term “services

rendered” means services rendered to the individual importer in question.65

(...continued)

at paras. 5.2.3-5.2.4 (hereinafter US–Superfund); Working Party Report on Border Tax Adjustments, GATT B.I.S.D.

(18th Supp.) 97, at ¶ 14 (1970). Taxes levied on producers, such as social security charges and payroll taxes, are not

eligible for treatment as a BTA, but taxes levied on products are. See, e.g., US–Superfund, supra, at ¶ 5.2.4; Working

Party Report on Border Tax Adjustments, supra, at ¶ 14. Accordingly, in US–Superfund, a GATT panel upheld a BTA

imposed by the United States on imported products derived from certain petro and inorganic chemicals. US–Superfund,

supra, at paras. 5.2.6-5.2.7. Having deemed the tax eligible for treatment as a BTA, the panel assessed whether the tax

in fact met the qualifications, listed in Article II:2(a), for exemption from Article II:1. Id. at paras. 5.2.7-5.2.10. See

also Art. II:2(a) (exempting charges only if they are “equivalent to an internal tax imposed consistently with the

provisions of paragraph 2 of Article III in respect of the like domestic product or in respect of an article from which the

imported product has been manufactured or produced in whole or in part.”). The panel found that the tax constituted a

BTA that was, in principle, consistent with Article III:2 and, therefore, exempt from, rather than an infringement of,

Article II:1. US–Superfund, supra, at ¶ 5.2.10.

GATT, Art. II:2.

See, e.g., Panel Report, EC–Salted Chicken Cuts, WT/DS269/ R, p. 2 (May 30, 2005). In negotiating tariff

concessions, countries generally use a broad formula and do not look at every possible product individually. The result

is that the actual classification of many products is not discussed at all. Id.

Id. at 2, 10-12.

Id. at 7, 18.

Article VIII:4 provides a non-exhaustive list of the type of governmental activities connected to importation or

exportation to which Article VIII applies. These activities include licensing, statistical services, documentation,

inspection, and quarantine.

Panel Report, U.S.–Customs User Fee (February 2, 1988), GATT B.I.S.D. (35th Supp.) 245, at ¶ 69.

Id. at paras. 77, 80.

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One of the early disputes involving Article VIII was US–Customs User Fee, which was heard by

a GATT panel in 1987. In that case, the European Union and Canada challenged the GATTconsistency of an ad valorem processing fee charged by the U.S. Customs Service on all

commercial merchandise entering the United States.66 The amount of the fee charged varied

depended only on the appraised value of the merchandise, not on the costs incurred by the

Customs Service of processing the merchandise.67 The United States argued that the fee was

commensurate with the services rendered because it was commensurate with the sum costs of the

Customs Service’s commercial operations.68 The panel disagreed, finding that if the “cost of

services rendered” referred to the total cost of the relevant government activities, rather than to

the actual cost of the services rendered to the individual importers charged, Article VIII:1 would

not provide an objective standard by which the equitable apportionment of these fees could be

ascertained.69 Accordingly, it ruled that it the U.S. processing fee was inconsistent with Article

VIII:1 to the extent that it caused fees to be levied in excess of the approximate cost of the

services provided to each individual importer.70

Similarly, in Argentina–Textiles, the panel found that Article VIII:1 forbade Argentina from

imposing an ad valorem duty with no fixed fee on textile and footwear imports. In that case,

Argentina was calculating an average import price for each tariff line of textiles, apparels, and

footwear to determine what the specific minimum duty was for products in that category.71 Upon

the importation of an article within that tariff line, Argentina then applied either the specific

minimum duty or an ad valorem duty with no fixed fee depending which duty was higher.72 While

Argentina claimed that it applied the higher ad valorem duty only to recoup the costs of the

“statistical services” involved in calculating the average import price for tariff line, the panel

ruled that because the ad valorem duty had no fixed maximum fee, it was inherently not limited

to the approximate cost of the services rendered and therefore inconsistent with Article VIII:1.73

In addition, in U.S.–Certain EC Products, a WTO panel ruled that Article VIII barred the United

States from increasing bonding requirements on imports from the European Communities in order

to secure the collection of future additional import duties that it was going to impose, once

authorized by the DSB, for the European Communities’ non-compliance with a WTO decision.74

The United States argued that the increased bonding requirements were a fee for the “early

release of merchandise,” but the panel found that the United States failed to provide any evidence

that the bonding requirements represented any approximate costs of such services.75

Id. at ¶ 7.

Id. at paras. 8, 10, 26.

Panel Report, U.S.–Customs User Fee, supra footnote 64, at ¶ 28.

Id. at ¶ 81.

Id. at ¶ 86.

Panel Report, Argentina–Measures Affecting Imports of Footwear, Textiles, Apparel, and Other Items, WT/DS56/R,

¶ 2.6 (November 25, 1997).

Id.

Id. at paras. 2.20, 6.75.

Panel Report, U.S.–Import Measures on Certain Products from the European Communities, WT/DS165/R, pp. 3-5

(July 17, 2000).

Id. at ¶ 6.70.

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Article IX: Marks of Origin

Article IX of the GATT disciplines marks of origin laws, that is, laws setting requirements for the

labeling of certain products with their country or region of origin. Under Article IX:1, WTO

Members may not accord to the products of other Members “treatment with regard to marking

requirements” that is “less favorable than the treatment accorded to like products of any third

country.” Article IX thus requires most favored nation treatment in marks of origin laws just as

Article I requires most-favored nation treatment in the broader context of tariffs, other charges,

and all rules and formalities connected to importation and exportation. In addition, while Article

IX:2 recognizes that origin marking is important for protecting consumers against fraudulent or

misleading labels, it calls on WTO Members to reduce the trade barriers that may result from

domestic origin marking requirements.

Article IX is not so broad, however, as to govern measures requiring the labeling of process and

production methods, even when the measure requires this labeling based on the location where

the good was produced or harvested.76 In US–Tuna/Dolphin I, an unadopted report, a GATT panel

rejected Mexico’s allegations that provisions of the U.S. Dolphin Protection Consumer

Information Act (DPCIA) were inconsistent with Article IX.77 The challenged provisions created

civil penalties for selling tuna products with labels or other indications that the tuna was

harvested in a manner not harmful to dolphins if the tuna was caught in particular locations by

certain methods.78 The GATT panel agreed with the United States that these labeling provisions

were subject to the nondiscrimination rules set by Article I and Article III:4, not the marks of

origin rules set by Article IX.79 The panel reasoned that because Article IX does not entail a

national treatment requirement, but only a most favored nation requirement, it was intended to

regulate the marking of origin of imported products, but not the marking of products or their

process and production methods generally.80

Article XI: General Elimination of Quantitative Restrictions

Article XI:1 of the GATT bars the institution or maintenance of quantitative restrictions on

exports to, and imports from, any WTO Member’s territory. Quantitative restrictions limit the

amount of a product that may be imported or exported. Unlike internal regulations enforced at the

border, quantitative restrictions hinder the opportunity for a product to enter into, rather than

simply compete in, the enforcing country’s market.81 Common examples of quantitative

restrictions include embargoes, quotas, minimum import or export prices, and certain import or

export licensing requirements. Only duties, taxes, and other charges are Article XI:1 consistent

methods of restricting imports or exports.

By barring WTO Members from placing quantitative prohibitions or restrictions on the

importation or exportation of products, Article XI illustrates the strong preference of GATT and

See, e.g., Panel Report, U.S.–Restrictions on Imports of Tuna, (September 3, 1991) GATT B.I.S.D. (39th Supp.) 155

(unadopted).

Id. at ¶ 2.12.

Id.

Id. at ¶ 5.41

Panel Report, US–Tuna/Dolphin I, supra footnote 76, at ¶ 5.41.

Panel Report, India–Measures Affecting the Automotive Sector, ¶ 7.224, WT/DS146/R, WT/DS175/R (December 21,

2001).

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Uruguay Round negotiators for tariffs as opposed to non-tariff border restrictions.82 These

negotiators intentionally made tariffs the border protection of choice because they are more

transparent and easily satisfied without bringing trade to a halt unlike quantitative restrictions,

and, perhaps most importantly, they are capable of definitive reduction over time.83

Although Article XI:1 is a cornerstone GATT obligation, import and export restrictions are the

frequent subject of WTO dispute settlement proceedings. In U.S.–Shrimp, for example, several

WTO Members requested that a panel examine a U.S. ban on shrimp imports from nations whose

trawling procedures the United States had not certified as sufficiently protecting sea turtles.84 The

panel wrote that the express prohibition on imported shrimp from non-certified countries was

inconsistent with Article XI:1,85 raising doubts about the WTO consistency of similar measures

that ban imports or exports that do not meet certain criteria.

While an import ban can be readily identified as a quantitative restriction, WTO panels have also

characterized “discretionary” or “non-automatic” licensing requirements as prohibited

quantitative restrictions.86 As a result, a system under which the licensing authority has

universally granted licenses to applicants who satisfy the prerequisites may still violate Article

XI:1 if those prerequisites give the licensing authority unfettered discretion to deny a license. 87 In

addition, an early GATT case, Japan–Semi-Conductors,88 held that a lengthy license approval

process also has a limiting effect on exportation in violation of Article XI:1. In that case, the

GATT panel held that three-month delays in an agency’s export licensing process restrained

exports even though the delays did not result from any “mandatory” law, regulation, or

requirement.89 Japan had required exporters to obtain licenses before exporting certain quantities

of semi-conductors, and, after several years, lowered the threshold level of semi-conductors that

could be shipped without a license.90 As a result of this change in policy, the number of license

applications almost doubled. The licensing agency found itself unprepared for the sudden

increase of applications, and, due to the back-up, applications often could not be processed for

several months.91 The panel held that the practices resulting in the three-month delays in licensing

GATT, Art. XI:1. See Panel Report, Turkey–Restrictions on Imports of Textile and Clothing Products, WT/DS34/R ¶

9.63 (May 31, 1999).

See Panel Report, Turkey–Textiles, supra footnote 82, at ¶ 9.63.

Panel Report, U.S.–Import Prohibition of Certain Shrimp and Shrimp Products, ¶ 7.11, WT/DS58/R (May 15, 1998);

Appellate Body Report, U.S.–Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, paras. 2-6

(October 12, 1998). Similarly, in U.S.–Tuna, a GATT panel found that a U.S. embargo on tuna imports from countries

that did not implement a regulatory regime that prevented certain tuna harvesting practices was inconsistent with

Article XI:1. Panel Report, U.S.–Tuna, supra footnote 76, at ¶ 7.1.

Panel Report, U.S.–Shrimp, supra footnote 84, at ¶ 7.16. As discussed below, the United States sought,

unsuccessfully, to justify the measure under Article XX(b). See infra footnotes 109-115 and accompanying text.

Ultimately, the Department of State revised its guidelines for the implementation of the country certification program.

Notice of Proposed Revisions to Guidelines for the Implementation of Section 609 of P.L. 101-162, 64 Federal

Federal Register 36946 (July 8, 1999).

See, e.g., Panel Report, India–Quantitative Restrictions on Imports of Agricultural, Textile, and Industrial Products,

WT/DS90/R, paras. 5.129, 5.130 (September 22, 1999).

See e.g., Panel Report, China–Measures Related to the Exportation of Various Raw Materials, WT/DS394/R, ¶ 7.917

(July 5, 2011).

Panel Report, Japan–Trade in Semi-Conductors, (May 4, 1988) GATT B.I.S.D. (35th Supp.), 31.

Id. at paras. 108-109, 118.

Id. at ¶ 22.

Id.

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had a limiting effect on exportation and were, therefore, de facto quantitative restrictions

prohibited by Article XI:1.92

Despite the strong policy choice behind it, Article XI does provide exceptions to its rule,

including (1) export prohibitions or restrictions temporarily applied to prevent or relieve critical

shortages facing the exporting Party; (2) quantitative restrictions that are “necessary” for the

application of standards or regulations for the classification, grading, or marketing of

commodities in international trade; and (3) import restrictions designed to remove a temporary

surplus of the like domestic product.93

Other GATT articles may be implicated by the imposition of quantitative restrictions.94 Under

Article XIII, for example, quantitative restrictions must be applied in accordance with most

favored nation treatment.

Article XX: General Exceptions to the GATT and “the Chapeau”

Article XX identifies 10 policy-related exceptions to the provisions of the GATT that may justify

a GATT-inconsistent measure. To qualify for an exception, the violative measure must: (1) fall

within the scope of one of the 10 exceptions; and (2) be applied in a manner that does not

constitute arbitrary or unjustifiable discrimination between countries where the same conditions

prevail or a disguised restriction on international trade. This second condition is referred to as

“the chapeau” of Article XX because it is contained in the introductory clause, or the “hat,” of

Article XX.

The Article XX Exceptions

Among the 10 measures excepted from the GATT’s provisions are those measures (1) necessary

to protect public morals; (2) necessary to protect human, animal, or plant life and health; (3)

relating to products of prison labor; (4) imposed for the protection of national treasures of artistic,

historic, or archaeological value; or (5) relating to the conservation of exhaustible natural

resources which operate in conjunction with restrictions on domestic production or consumption.

Article XX operates as an affirmative defense in a WTO dispute settlement proceeding.

Consequently, Article XX is raised after a Member’s measures are deemed inconsistent with the

GATT and is invoked by the defending Member who bears the burden of proving that Article XX

exempts the measures concerned from the provisions of the GATT. The defending Member must

first show that the measure fits within one of the exceptions covered by Article XX. For Article

XX exceptions that require the defending Member to prove that the measure is “necessary” to

achieve an identified goal (e.g., to protect human, animal, or plant health), this means that the

defending Member must make a prima facie case that (1) the common interests or values

protected by the measure are important, (2) the measure materially contributes to the realization

of the ends it pursues, and (3) the restrictive impact of the measure on international commerce is

See id. at ¶ 118.

GATT, Art. XI:2. See also Panel Report, Canada–Measures Affecting Exports of Unprocessed Herring and Salmon

(March 22, 1988), GATT B.I.S.D. (35th Supp.) 98, at paras. 4.2-4.3 (assessing whether Canada’s export restrictions on

frozen fish that were not of “No. 1” quality were “necessary” for the purposes of Article XI:2(b)).

E.g., GATT, Art. XIII (requiring quantitative restrictions to be applied on an MFN basis); GATT, Art. XII

(permitting the imposition of quantitative restrictions to safeguard a Member’s balance of payments).

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outweighed by its contribution to the stated values or interests.95 The complaining Member may

then rebut the defending Member’s arguments by showing that there are less restrictive

alternatives available. Then the defending Member must show that these alternatives would not

be effective or feasible.96

The Article XX Chapeau

If the defending Member is successful in showing that the measure fits into one of the stated

Article XX exceptions, it must next show that the measure satisfies the “chapeau.” Specifically,

the defending Member must establish that, as applied, the measure neither (1) creates arbitrary or

unjustifiable discrimination between countries where the same conditions prevail nor (2)

constitutes a disguised restriction on international trade.97 The chapeau is intended to strictly

discipline the use of the Article XX exceptions so as to distinguish measures intended to protect

legitimate interests from measures intended to circumvent a Member’s WTO obligations.98

Accordingly, the chapeau imposes requirements that are more difficult to satisfy than the

requirements of any one of the 10 policy exceptions.99

Relatively few panel or Appellate Body reports have articulated the standards for determining that

a measure is a disguised restriction on international trade. Ostensibly, this analysis involves a

heightened analysis of the intent behind the measure’s application to discern whether the

defending Member’s true motive was protectionism. 100 Because the intent behind a measure

“may not be easily ascertained,” panels may scrutinize the “design, architecture, and revealing

structure” for signs of knowing or willful “protective application.”101 A WTO panel may also

consider the extent to which the measure’s application has a discriminatory effect, such as

benefiting a domestic industry to the detriment of a foreign one.102 Given the rudimentary nature

of WTO jurisprudence in this area, it can be difficult to predict whether a given measure would be

indefensible under Article XX because its application constituted a disguised restriction on trade.

In contrast to the jurisprudence on “disguised restrictions,” a host of WTO panels and Appellate

Body reports have declared measures inconsistent with the Article XX chapeau because their

application constituted arbitrary or unjustifiable discrimination. These decisions express a strong

preference for measures applied after international negotiations or pursuant to an international

agreement.103 The seeming corollary of this preference, moreover, is the distaste that panels and

Appellate Body Report, Korea–Various Measures on Beef, WT/DS161/AB/R ¶ 157 (July 31, 2000).

Appellate Body Report, Brazil–Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R ¶ 156 (December

3, 2007).

Id. at ¶ 215.

See id.

See Appellate Body Report, U.S.–Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, p. 23

(April 29, 1996) (describing the burden of demonstrating that a measure satisfies the Article XX chapeau as “of

necessity, a heavier task than that involved in showing that an exception, such as Article XX(g), encompasses the

measure at issue.”).

100

See Van den Bossche, supra footnote 21, at 650. In addition, the term “restriction” has been construed broadly to

encompass both restrictions on international trade and discrimination in international trade. See Panel Report, European

Communities–Measures Affecting Asbestos and Asbestos-Containing Products, ¶ 8.235, WT/DS135/R (September 18,

2000) (citing Appellate Body Report, U.S.–Gasoline, supra footnote 99, at 25).

101

Panel Report, EC–Asbestos, supra footnote 100, at ¶ 8.236.

102

See, e.g., id. at paras. 8.237-8.239.

103

See Appellate Body Report, U.S.–Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article

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the Appellate Body have shown for measures with a unilateral or coercive character.104 As

discussed below, these preferences are expressed both in the Appellate Body’s interpretation of

the term “discrimination” and its interpretation of the phrase “arbitrary or unjustifiable.”

According to the Appellate Body, “discrimination,” for the purposes of the Article XX chapeau,

occurs when a measure is applied without regard for the similarity of—or differences between—

the conditions in either the importing and exporting countries or two importing countries.105 In

other words, both the differential treatment of countries in which the same conditions prevail as

well as the uniform treatment of countries where different conditions prevail constitute

discrimination.106 Once a measure’s application is deemed discriminatory, a WTO panel will

assess the nature of the discrimination to determine whether it is “arbitrary or unjustifiable.” This

analysis depends on whether the discrimination has a “a legitimate cause or rationale in light of

the [Article XX] objectives,”107 and often requires an assessment of the actions, if any, that the

defending Member took to prevent foreseeable discrimination.108

For example, in U.S.–Shrimp,109 the Appellate Body examined the GATT consistency of a U.S.

measure prohibiting the importation of shrimp from countries not certified by the United States as

maintaining a regulatory program or fishing environment that satisfied the U.S. standards for sea

turtle protection.110 After determining that the shrimp import ban created discrimination because it

was “coercive,” 111 the Appellate Body assessed whether this discrimination was “arbitrary or

unjustifiable.” It described its approach to this question as “heavily” influenced by the U.S.

failure to engage all shrimp exporting Members in negotiations before enforcing the ban.112

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21.5 of the DSU by Malaysia, WT/DS58/AB/R, ¶ 124 (October 22, 2001) (“Clearly, and ‘as far as possible,’ a

multilateral approach is strongly preferred.”) (quoting Principle 12 of the Rio Declaration on Environment and

Development).

104

Appellate Body Report, United States–Import Prohibition of Certain Shrimp and Shrimp Products, paras. 171-172,

WT/DS58/AB/R, ¶ 172 (October 12, 1998).

105

See id.; Van den Bossche, supra footnote 21, at 644.

106

Van den Bossche, supra footnote 21, at 644. See Appellate Body Report, U.S.–Shrimp, supra footnote 104, at ¶ 172.

107

Appellate Body Report, Brazil–Tyres, supra footnote 96, at ¶ 225; Appellate Body Report, U.S.–Gasoline, supra

footnote 99, at 23-24. In Brazil–Tyres, Brazil sought to justify a ban on retreaded tire imports from countries that were

not part of the MERCOSUR customs union by, inter alia, claiming that the MERCOSUR exemption was necessary to

comply with a ruling by a MERCOSUR abritral tribunal. Panel Report, Brazil–Measures Affecting Imports of

Retreaded Tyres, WT/DS332/R, ¶ 7.270 (June 12, 2007). The Appellate Body held that although Brazil legitimately

needed to conform its policies with the arbitral tribunal’s decision, in the context of the Article XX chapeau, this need

was not a legitimate reason for discriminating between countries. Specifically, the Appellate Body decided that Brazil’s

discrimination against non-MERCOSUR countries was arbitrary or unjustifiable because the reason for it—compliance

with the arbitral tribunal’s ruling—was wholly unrelated to Brazil’s goal of protecting public and environmental health.

Appellate Body Report, Brazil–Tyres, supra footnote 96, at paras. 228, 232-33.

108

See, e.g., Appellate Body Report, U.S.–Gasoline, supra footnote 99, at 28 (stating that the United States failed to

adequately export international cooperation and “the resulting discrimination must have been foreseen”).

109

Appellate Body Report, United States–Import Prohibition of Certain Shrimp and Shrimp Products, paras. 171-172,

WT/DS58/AB/R (October 12, 1998).

110

Id. at ¶ 161.

111

Id. at paras. 161, 164. According to the Appellate Body, the shrimp import ban effectively required other Members

to adopt the same sea turtle-protection policies as the United States regardless of the different conditions in the

territories of those Members. Id. The Appellate Body suggested the Department of State should have incorporated an

“inquiry into the appropriateness of the regulatory program for the conditions prevailing in those exporting countries”

into its implementation of the ban. Id. at paras. 161, 165.

112

Appellate Body Report, U.S.–Shrimp, supra footnote 109, at ¶ 166 (stating that the U.S. failure to engage these

(continued...)

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Indeed, the Appellate Body ultimately found that the discrimination was unjustifiable because (1)

the import ban reflected U.S. negotiations with some, but not all, WTO Members that export

shrimp;113 and (2) the United States had not even attempted to use existing international

mechanisms to achieve international cooperation.114 As a result, the Appellate Body wrote, the

ban had a “unilateral character” that heightened both its discriminatory nature and its

“unjustifiability.”115

In a subsequent decision, U.S.–Shrimp (Article 21.5),116 the Appellate Body clarified what it

meant by international cooperation. In that case, Malaysia challenged the adequacy of the

measures the United States imposed to implement the Appellate Body’s decision in U.S.–Shrimp.

Specifically, the Department of State had revised its guidelines so that countries could be certified

for shrimp imports once they demonstrated either that their shrimp fishing environments did not

pose a threat of incidental sea turtle capture or that they had implemented, and were enforcing, a

“comparably effective” regulatory program.117 In determining whether a country’s regulatory

program was “comparably effective” to U.S. standards, the guidelines stated that the Department

of State would “take fully into account any demonstrated differences between the shrimp fishing

conditions in the United States and those in other nations.”118 In addition, the United States

commenced international negotiations with Malaysia, the complaining Member, as well as other

countries. Although these negotiations did not yield an agreement between the United States and

Malaysia, the discrimination caused by the U.S. embargo and shrimp import certification

procedures was not “arbitrary or unjustifiable” because the United States had undertaken

“serious, good faith efforts” to avoid it.119

Article XXI: National Security Exceptions to the GATT

Article XXI lists three very specific occasions when international or domestic security interests

trump a Member’s obligations under the GATT. In any one of these three situations, a Member’s

noncompliance with the GATT will not be considered a violation of its provisions. These

occasions occur when:

(1) the Member’s noncompliance is the refusal to disclose information and the Member considers

the disclosure contrary to its essential security interests;

(...continued)

WTO Members in “serious across-the-board negotiations with the objective of concluding bilateral or multilateral

agreements” “bears heavily” on the analysis).

113

See Appellate Body Report, U.S.–Shrimp, supra footnote 109, at ¶ 172.

114

See id. at ¶ 171.

115

Id. at ¶ 172.

116

Appellate Body Report, U.S.–Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5

of the DSU by Malaysia, WT/DS58/AB/R (October 22, 2001).

117

Appellate Body Report, U.S.–Shrimp (Article 21.5), supra footnote 116, at paras. 6, 7.

118

Id. at ¶ 6. See also Revised Guidelines for the Implementation of 609 of P.L. 101-162 Relating to the Protection of

Sea Turtles, 64 Federal Register 36,946 (July 8, 1999) (“In reviewing any such information, the Department of State

will take fully into account any demonstrated differences between the shrimp fishing conditions in the United States

and those in other nations, as well as information available from other sources.”).

119

See Appellate Body Report, U.S.–Shrimp (Article 21.5), supra footnote 116, at paras. 123, 134.

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(2) the Member considers noncompliance necessary to protect its essential security interests

relating to fissionable materials, the traffic in arms or other materials for the purpose of supplying

a military establishment, or a time of a war or emergency in international relations, or

(3) the Member’s noncompliance occurs in its pursuit of its obligations under the UN Charter for

the maintenance of international peace and security.

In general, Article XXI is understood as intending to remove legitimate national security matters

from the scope of GATT obligations and to discourage use of the exception for measures with

commercially inspired goals.120 Moreover, some countries, including the United States, have

taken the position that the Article is “self-judging,” that is, that each WTO Member may

determine whether a particular matter is contrary to or necessary for the protection of its essential

security interests and that determination cannot be reviewed by WTO panels or the Appellate

Body.121 While this position raises questions about the proper role of dispute settlement

proceedings in this area, to date there is no WTO case law on the application of Article XXI.

Despite the absence of case law, Article XXI has played a role in the diplomatic discourse that

precedes, and in some cases eliminates the need for, a request for consultations. For example,

when WTO Members have threatened to request consultations over the Cuban Liberty and

Democratic Solidarity (LIBERTAD) Act of 1996 (“Helms-Burton Act,” P.L. 104-114, 22 U.S.C.

6021 et seq.), the United States responded with claims that the measure was justified under

Article XXI. The goal behind the LIBERTAD Act was to dissuade other countries from investing

in Cuba and to generally undercut the Fidel Castro regime. To achieve this goal, the law codified

and strengthened the long-standing embargo against Cuba, making parties liable under U.S. law

for trafficking in property expropriated by Cuba from U.S. citizens without compensation and

requiring the U.S. State Department to deny visas to officials of companies that had trafficked in

such property.122 The European Union asked for WTO consultations, stating that the LIBERTAD

Act would violate both the GATT and the GATS by, inter alia, restraining E.U. companies who

export goods to Cuba or trade in goods from Cuba and excluding E.U. citizens from entering the

United States.123 During the ensuing meetings and negotiations between the United States and the

European Union, the United States contended that, if the LIBERTAD Act was indeed inconsistent

with the WTO agreements, it was justified under Article XXI. Moreover, because, in its view, it is

up to the country invoking Article XXI to determine when a particular trade measure is justified

by national security concerns, the United States argued that any WTO panel would lack

competence to assess the use of Article XXI and, consequently, there could be no WTO

proceedings on any dispute resulting out of the consultations on this issue.124 This dispute never

actually came before a panel because the two governments reached a diplomatic solution in the

120

Decision Concerning Article XXI of the General Agreement, Decision of November 30, 1982, GATT B.I.S.D. (29th

Supp.) 23 (1983).

121

Dapo Akande and Sope Williams, International Adjudication on National Security Issues: What Role for the WTO?,

43 VA. J. INT’L L. 365, 373-74 n.24 (2003).

122

P.L. 104-114, §§102, 401.

123

Request for Consultations by the European Communities, United States–The Cuban Liberty and Democratic

Solidarity Act, WT/DS38/1 (May 13, 1996).

124

C. O’Neal Taylor, Impossible Cases: Lessons from the First Decade of WTO Dispute Settlement, 28 U. PA. J. INT’L

ECON. L. 309, 378 (2007).

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form of a Memorandum of Understanding, and the European Union requested that the panel

suspend its work.125

Article XXIII: The Basis for WTO Dispute Settlement

Article XXIII provides the basis for dispute settlement under both the GATT and under the other

WTO agreements. Article XXIII entitles any WTO Member who considers that a benefit granted

by the GATT is being “nullified or impaired or that the attainment of any objective of the

Agreement is being impeded” to have recourse to WTO dispute settlement procedures.126 Most

often, the nullification or impairment of a benefit (or the impeding of the realization of an

objective) results from a violation of an obligation prescribed by a WTO agreement, but Article

XXIII states that it could also result from a Member’s application of a measure that does not

conflict with the provisions of a WTO agreement or from “any other situation.”127 However,

disputes alleging nullification and impairment of trade benefits from non-violative actions occur

much less frequently than disputes alleging violations of WTO agreements.

In general, proving nullification or impairment requires showing that the affected imports are

subject to and benefiting from a WTO agreement market access concession (e.g., a tariff) and

their competitive position is being upset by the challenged measure.128 However, when the

complaining Member demonstrates that the challenged measure violates an obligation prescribed

by a WTO agreement, the measure is considered prima facie to constitute a case of nullification

or impairment.129 In other words, there is a presumption that a breach of the rules adversely

affects other Members, and, consequently, it shifts the burden to the defending Member to

disprove the presumed nullification or impairment.130 To date, very few Members have tried to

rebut this presumption, and it appears that none have succeeded, which has led some to suggest

that the presumption may be rebuttable only in theory.131

Article XXIV: Customs Unions and Free Trade Areas

WTO Members’ participation in free trade agreements and customs unions132 is facially

inconsistent with the MFN obligation because parties to these arrangements may grant lower

125

European Union–United States: Memorandum of Understanding Concerning the U.S. Helms-Burton Act and the

U.S. Iran and Libya Sanctions Act, April 11, 1977, 36 I.L.M 429 (1997).

126

GATT, Art. XXIII. See Appellate Body Report, India–Quantitative Restrictions on Imports of Agricultural, Textile,

and Industrial Products, ¶ 84 WT/DS90/AB/R (August 23, 1999).

127

GATT, Art. XXIII:1.

128

Panel Report, Japan–Measures Affecting Consumer Photographic Film and Paper, ¶ 10.82, WT/DS44/AB/R

(March 31, 1998).

129

Dispute Settlement Understanding, Art. 3.8.

130

Id.

131

E.g., PETER VAN DEN BOSSCHE, THE LAW AND POLICY OF THE WORLD TRADE ORGANIZATION: TEXTS, CASES AND

MATERIALS 185 (Cambridge University Press 2008) (2008).

132

The distinction, under Article XXIV:8, between customs unions and free trade area lies in the different GATT

requirements placed on how these two groups treat trade with third countries (i.e., non-members of the customs union

or free trade area). Compare GATT, Art. XXIV:8(a) (defining customs union) with id. at Art. XXIV:8(b) and Art.

XXIV:5(b) (defining free trade area). Broadly speaking, a member of a free trade area can restrain trade with a nonmember country more than it restrains trade with the other members of the free trade area so long as, in doing so, the

member country does not constrain trade with the non-member more than it had prior to the formation of the free trade

area. A member of a customs union, on the other hand, can never restrain trade with non-member countries even if, in

doing so, it does not constrain trade with the non-member more than it had prior to the formation of the customs union.

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tariff rates and more favorable treatment to each other’s goods without granting those benefits to

the goods of other WTO Members. However, these arrangements are permitted under Article

XXIV as vehicles of trade liberalization.133

Like Articles XX and XXI, Article XXIV operates as a defense to justify an otherwise GATTinconsistent measure, namely a measure related to the formation of customs unions or free trade

areas. Article XXIV justifies these measures only if the formation of the customs union or free

trade area in question would be made impossible if the measure concerned was not allowed.134 It

is unclear at this time, however, how a WTO panel or the Appellate Body would determine

whether a measure satisfies this standard.

Under Article XXIV:8(a), the members of both customs unions and free trade areas are required

to eliminate “duties and other restrictive regulations of commerce” with respect to “substantially

all” trade between them. The “substantially all” standard offers customs unions and free trade

areas some flexibility in the degree to which they liberalize the trade between them.135

Furthermore, in Argentina–Footwear, the Appellate Body found that Article XXIV:8(a)’s

requirement to eliminate all tariffs and commerce-restricting regulations on trade among customs

union members did not prohibit Argentina’s imposition of safeguard measures on countries who

were part of a customs union (MERCOSUR) with Argentina.136

Other WTO Agreements Reached During the Uruguay Round

All multilateral trade agreements negotiated during the Uruguay Round are binding on WTO

Members.137 These are agreements that a country must accept in order to become a WTO

Member. As mentioned, these agreements were implemented in U.S. law through the Uruguay

Round Agreements Act (“URAA,” P.L. 103-465, 19 U.S.C. §3501), which then-President Bill

Clinton signed into law on December 8, 1994.

The WTO agreements selected for discussion below are those that are still in effect, impose

substantive, rather than purely procedural, requirements on WTO Members, and have been

commonly cited in WTO consultations and disputes. As with the overview of the selected

provisions of the GATT above, the following section is not a comprehensive list or discussion of

all of the agreements that are annexed to the Marrakesh Agreement. Instead, it is intended only as

an introduction to the WTO agreements that are frequently mentioned as governing common

types of trade measures.

133

GATT, XXIV:5(b)-(c), XXIV:8(b).

Appellate Body Report, Turkey–Restrictions on Imports of Textile and Clothing Products, ¶ 46, WT/DS34/AB/R

(October 22, 1999). (“Article XXIV can justify the adoption of a measure which is inconsistent with certain other

GATT provisions only if the measure is introduced upon the formation of a customs union, and only to the extent that

the formation of the customs union would be prevented if the introduction of the measure were not allowed.”)

135

Id. at ¶ 48. Other than noting this flexibility, the Appellate Body has offered little guidance on the meaning of

“substantially all.” Instead, in Turkey–Textiles, it simply noted that the term “substantially all the trade” is “not the

same as all the trade, and also that [it] is something considerably more than merely some of the trade.” Id. at ¶ 48.

136

Appellate Body Report, Argentina–Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (December 14,

1999).

137

However, under the Uruguay Round Agreements Act (URAA, P.L. 103-465, 19 U.S.C. §3501 et seq.), U.S. law

prevails over conflicting provisions of WTO agreements until Congress or the executive branch acts to harmonize U.S.

law with WTO agreements and rulings. See 19 U.S.C. §3512(a).

134

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Antidumping Agreement

Article VI of the GATT condemns dumping, the practice of exporting a product at a price lower

than the price charged for that product in the exporter’s home market, when it causes or threatens

material injury to an established industry in the territory of another Member or materially retards

the establishment of a domestic industry.138 The Agreement on Implementation of Article VI of

the GATT 1994 (the Antidumping, or AD, Agreement) provides substantive and procedural

requirements for WTO Members to follow in conducting antidumping investigations and

imposing antidumping duties, which supplement existing tariffs. No action against the dumping

of exports from another Member can be taken except in accordance with the provisions of the

GATT, as interpreted by the Antidumping Agreement.139

Under the Antidumping Agreement, a domestic investigation of dumping by a WTO Member

must be triggered by a written application by or on behalf of a domestic industry.140 An

application meets this standard if domestic producers expressing support for the application

produce both a greater percentage of “like products”141 than the domestic industry opposed to the

application and no less than 25% of total production of “like products.”142 All WTO Members

must inform the Committee on Antidumping Practices when they initiate anti-dumping actions

and provide reports on all ongoing investigations.

The AD Agreement defines dumping as introducing a product into a foreign country’s market at

an export price lower than the product’s “normal value”—that is, its “comparable price, in the

ordinary course of trade, for the like product when destined for consumption in the exporting

country.”143 Accordingly, the first step in assessing a dumping margin is calculating the normal

value and the export price of the product. Although the normal value is ordinarily the market

price in the country of export,144 Article 2.2 of the AD Agreement permits WTO Members to use a

different methodology for calculating the normal value in certain circumstances.145 In addition, by

incorporating an interpretative note to Article VI of the GATT, Article 2.7 of the AD Agreement

permits WTO Members to use surrogate country data to make price comparisons about the

normal value of products allegedly dumped by a government-controlled, i.e., nonmarket,

economy (NME).146 Once the normal value is determined, the investigating authorities must

138

GATT, Art. VI:1.

AD Agreement, Art. 18.

140

Id. at Art. 5.1.

141

Article 2.6 of the Antidumping Agreement defines the term “like product” to mean “a product which is identical, i.e.

alike in all respects to the product under consideration, or in the absence of such a product, another product which,

although not alike in all respects, has characteristics closely resembling those of the product under consideration.”

142

AD Agreement, Art. 5.4. Panel Report, Mexico–Antidumping Duties on Steel Pipes and Tubes from Guatemala, ¶

7.322, WT/DS331/R (June 8, 2007).

143

Id. at Art. 2.1.

144

AD Agreement, Art. 2.1.

145

E.g., id. at Art. 2.2 (permitting a different method to be used when either there are no sales of like product in the

exporting country or the particular market situation does not permit a proper comparison).

146

Appellate Body Report, European Communities–Definitive Anti-Dumping Measures on Certain Iron or Steel

Fasteners from China, WT/DS397/AB/R, ¶ 285 (July 15, 2011). For more information on the application of

antidumping law to nonmarket economies, see CRS Report RL33976, U.S. Trade Remedy Laws and Nonmarket

Economies: A Legal Overview, by (name redacted).

See also Alexander Polouektov, Non-Market Economy Issue in

WTO Anti-Dumping Law and Accession Negotiations, 36 J. WORLD TRADE 1, 18-19, 20-22, 23-25 (2002) (comparing

anti-dumping practice and criteria for qualifying as a market economy in selected legislative systems).

139

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calculate the dumping margin by comparing the product’s export price with its normal value.

Article 2.4 of the Antidumping Agreement requires this comparison be fair, made at the same

level of trade (i.e., ex-factory, wholesale, or retail), and made with sales that occurred, as nearly

as possible, at the same time.147 If the dumping margin is de minimis, the investigating Member

may not impose anti-dumping duties.148 Many WTO disputes center around the methodology that

a WTO Member uses to calculate the dumping margin. In particular, the practice of using

“zeroing”149 to assess a country’s dumping margin has been a frequent subject of WTO dispute

settlement proceedings150 and is discussed later in this report.

To form the basis for anti-dumping duties, dumping must cause or threaten injury to the domestic

industry or materially retard its establishment.151 The presence of injury is determined by

examining the import volume of the dumped product, its effect on the prices in the domestic

market for a like product, and the resulting impact on domestic producers of the like product.152

Several additional factors are relevant when the WTO Member is investigating allegations that

the dumping causes a threat of injury, rather than actual injury.153 For the purposes of these injury

and threat determinations, the term “domestic industry” generally refers to the domestic

producers as a whole of a like product or the domestic producers of a major proportion of the total

domestic production of a like product.154 Only in exceptional circumstances may a WTO Member

use a narrower regional definition.155

Finally, the AD Agreement requires a WTO Member to determine that the dumping causes the

injury to the domestic industry. Article 3.5 of the Agreement contains a non-attribution

requirement: investigating authorities must separate and distinguish the injurious effect of other

factors from the injuries effects of the dumped imports to ensure that the imposition of an

antidumping duty on the imports at issue would, in fact, be justified.156

147

Allowances shall be made on a case-by-case basis for certain differences that affect price comparability and, in

some circumstances, for costs incurred between transportation and resale and/or profits accruing. AD Agreement, Art.

2.4,

148

See AD Agreement, Art. 5.8.

149

Zeroing, which is discussed in greater detail later in this report, involves aggregating the dumping margins for all of

the different versions of a single product but assigning the value of zero to each sub-product’s dumping margin when

that sub-product’s export price exceeds its normal (home market) value. See infra “Antidumping Duties: Remedies for

Imports Sold at Less Than Fair Value.” In effect, zeroing means that the margins for sub-products sold at less than their

normal value are not offset in a dumping investigation by the margins for sub-products that are sold at more than their

normal value. Id. Consequently, a dumping margin determined under zeroing is likely to be higher than a dumping

margin determined without zeroing. See id.

150

E.g., Panel Report, U.S.–Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/R

(February 18, 2010); Panel Report, U.S.–Continued Existence and Application of Zeroing Methodology, WT/DS350/R

(February 19, 2009). See also CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending

Cases, by (name redacted) (identifying,

inter alia, cases that involve zeroing).

151

AD Agreement, Art. 3 n. 9.

152

Id. at Art. 3.1.

153

See AD Agreement, Art. 3.7; Panel Report, Mexico–Anti-Dumping Investigation of High Fructose Corn Syrup

(HFCS) from the United States, WT/DS132/R, ¶ 7.131 (February 24, 2000).

154

AD Agreement, Art. 4.1.

155

Id. at Art. 4.1(ii).

156

Id. at Art. 3.5. Appellate Body Report, Japan–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from

Japan, WT/DS184/AB/R, paras. 223-232 (August 23, 2001).

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Ultimately, WTO Members must limit the amount of any antidumping duty imposed to the

amount “adequate to remove the injury to the domestic industry,”157 and the duty must be lifted as

soon as it is no longer necessary to counteract the dumping causing the injury.158 The AD

Agreement requires WTO Members to review the need for the continued imposition of any

antidumping duty when requested by an interested party.159 Members must also “terminate” an

antidumping duty five years after its imposition unless, after review, the authorities determine that

lifting the duty would lead to the continuation or recurrence of dumping and injury.160

Agreement on Subsidies and Countervailing Measures

Like the Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures

(SCM Agreement) is an agreement meant to expand, clarify, and implement some of the original

provisions of the GATT. One of these provisions, Article VI addresses measures taken to offset

any subsidy granted to an imported product. The second, Article XVI, requires Members to notify

subsidies and be prepared to discuss limiting those subsidies if they cause serious damage to other

Members. However, neither Article VI nor Article XVI defines the term “subsidy” or provides

clear and comprehensive rules for governments who are either offering, or responding to,

subsidies. Consequently, these provisions were deemed vague and inconsistently applied, and

support developed for a new, clearer, and more comprehensive agreement on subsidies.

Accordingly, the SCM Agreement was developed to discipline Members’ use of subsidies and

their responses to countering the effects of certain subsidies.

Among the advantages that the SCM Agreement provides over the subsidy provisions of Articles

VI and XVI of the GATT is a more precise definition of subsidy. The SCM Agreement defines

“subsidy” as a financial contribution by a government or public body within a WTO Member’s

territory that confers a benefit.161 A financial contribution may take the form of (1) a direct

transfer of funds, such as a grant, loan, or loan guarantee; (2) government revenue (i.e., a tax)

“otherwise due” but foregone or not collected; (3) governmental provision of goods or services

other than general infrastructure; (4) governmental payments to a funding mechanism or the

government’s entrusting a private body to carry out at least one of the functions described

above.162 In addition, WTO panels and the Appellate Body have interpreted the word “benefit”

broadly to include receipt of a financial contribution on terms that are more favorable than those

available to the recipient in the marketplace.163

The SCM Agreement entitles a WTO Member to respond to subsidized imports in two ways. One

authorized response is to use the WTO dispute settlement process to seek withdrawal of the

subsidy or the removal of its adverse effects. The second authorized response is to launch a

domestic investigation and ultimately charge an extra duty, known as a countervailing duty, on

subsidized imports that are injuring domestic producers. For a subsidy to be remedied under

157

AD Agreement, Art. 9.1.

Id. at Art. 11.1

159

Id. at Art. 11.2.

160

Id. at Art. 11.3.

161

SCM Agreement, Art. 1.1.

162

Id.

163

Appellate Body Report, Canada–Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R ¶ 149 (August

2, 1999) (approving of the WTO panel’s finding that a financial contribution only confers a benefit if it is provided on

terms that are more advantageous than market terms).

158

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either procedure, it must be specific in law or fact to an enterprise, industry, or group thereof.164

Prohibited subsidies, as described below, are considered specific per se.

The SCM Agreement divides subsidies into two categories: prohibited and actionable. Prohibited

subsidies are contingent upon either export performance or the use of domestic over imported

products.165 If a subsidy is deemed prohibited, the WTO dispute settlement body will recommend

that the subsidizing Member withdraw the subsidy without delay and specify a time-period in

which the measure should be withdrawn.166

All other subsidies are actionable, meaning they may be subject to dispute settlement or domestic

remedies if they are used in a way that causes adverse effects to the interests of the complaining

Member.167 There are three types of adverse effects: (1) material injury to the domestic industry

of the complaining member; (2) nullification or impairment of the Member’s WTO benefits (such

as tariff concessions on a particular product); and, (3) serious prejudice to the Member’s

interests.168

Regardless of whether the subsidies are prohibited or actionable, if the defending Member does

not remove a subsidy or its adverse effects within a set compliance period, the WTO dispute

settlement body may, upon request, authorize the complaining Member to impose new or

additional tariffs, known as countervailing duties, against the subsidizing Member’s exports.169

The goal of these countervailing duties is to effectively restore the benefits that are supposed to

accrue to the complaining Member under the WTO agreements. As discussed in the later section

on domestic investigations of foreign subsidies,170 Members may also impose countervailing

duties against subsidized imports without first requesting consultations and bringing the dispute

before a WTO panel. However, when a Member imposes countervailing duties without first

litigating the dispute, it may do so only if it initiates and conducts its investigation of the foreign

subsidies in accordance with the provisions of the SCM Agreement.171

The interpretation of the SCM Agreement was at issue in the “Boeing-Airbus cases”172 between

the United States and the European Union. The United States first requested dispute settlement

164

SCM Agreement, Arts. 1.2, 2. In general, under Article 2, a subsidy is specific if it distorts the flow of resources.

See MARC BENITAH, THE LAW OF SUBSIDIES UNDER THE GATT/WTO SYSTEM, 259 (2001). For example, if the U.S.

gives a subsidy to all U.S. industries, that subsidy is not specific because it does not direct more resources to a

particular part of U.S. territory. However, that subsidy would be specific if the U.S. gave it to only those industries that

are in Alabama. See SCM Agreement, Art. 2.2. In that case, the flow of resources would be distorted within the United

States since more resources would be directed to one particular state, Alabama. In addition to geographic distortion, the

SCM Agreement is also concerned with distortion among industries, enterprises, and groups of industries or

enterprises. However, it can be difficult to define an “industry” or “group of industries.” Accordingly, a WTO Panel

has suggested that a subsidy to any industry or group of industries is specific unless it is “sufficiently broadly available

through an economy as not to benefit a particular limited group of producers of certain products.” Panel Report, U.S.–

Subsidies on Upland Cotton, WT/DS267/R, ¶ 7.1142 (September 8, 2004).

165

SCM Agreement, Art. 3.1.

166

Id. at Art. 4.7.

167

Id. at Art. 5.

168

Id.

169

These countervailing measures can be imposed on any of the defending Member’s exports, but the amount of the

countervailing duty must not exceed the full amount of the subsidy. See SCM Agreement, Art. 19.2.

170

Infra notes 484-500.

171

SCM Agreement, Art. 10.

172

U.S.–Large Civil Aircraft, DS317; EC and Certain Member States–Large Civil Aircraft, DS316.

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proceedings in 2004, alleging that several European Union countries provided a variety of

actionable and prohibited subsidies to Airbus, including, inter alia, “launch aid,” grants and loans

for research and development, and the governmental provision of infrastructure goods and

services to develop and upgrade Airbus manufacturing sites.173 The European Union filed a

countersuit, alleging that the U.S. provided actionable and prohibited subsidies to Boeing,

including, inter alia, state and federal tax incentives, access to NASA and Department of Defense

(DOD) facilities and equipment for corporate research and development, and payments by both

agencies to Boeing pursuant to contracts for research and development.174

Agreement on Safeguards

A safeguard measure is a temporary restriction imposed on imports to allow a domestic industry

time to adjust to import surges. These measures can be applied even in the absence of the unfair

trade actions required for antidumping or countervailing duties. Possible safeguards include

quotas, tariffs, and tariff rate quotas. Under Article 2.2 of the Agreement on Safeguards, however,

a safeguard measure must be product, not country, specific.175 Because safeguard measures

disturb the balance of rights and obligations, the Members affected by a safeguard are entitled to

appropriate trade compensation.176

The foundation for both domestic and international safeguard law is Article XIX of the GATT,

which permits Members to apply safeguards where two conditions are met: (1) imports are

increasing as a result of both unforeseen developments and the effect of obligations incurred by

Members under GATT, and (2) imports are increasing in such quantities as to cause or threaten

serious injury to domestic producers of like or directly competitive products.177 Both the U.S. law

on safeguard measures, discussed later in this report, and the WTO Agreement on Safeguards are

based on Article XIX.

The Agreement on Safeguards lays out (1) substantive requirements that must be met in order to

apply a safeguard,178 (2) procedural requirements for the application of a safeguard measure,179

173

Appellate Body Report, EC–Large Civil Aircraft, WT/DS316/AB/R, ¶ 1 (June 1, 2011); Request for Consultations

by the United States, EC–Measures Affecting Trade in Large Civil Aircraft, WT/DS316/1 (October 12, 2004).

174

Appellate Body Report, U.S.–Measures Affecting Trade in Large Civil Aircraft, WT/DS353/AB/R, ¶ 2 (March 23,

2012); Panel Report, US–Large Civil Aircraft, WT/DS353/ R, paras. 3.1, 7.940-7.947, 7.111-7.1112 (March 31, 2011).

175

In other words, safeguard measures must be applied without discrimination between the Members supplying the

product. For example, if the steel industry of Member A suffers serious injury as a result of a sudden surge of imports

of steel from Members B and C, Member A, if it chooses to impose a safeguard measure, must impose the measure

against imports from both Members B and C. Member A cannot choose to overlook the damage caused by Member B’s

steel industry and impose the safeguard measure only against Member C.

176

Agreement on Safeguards, Art. 8.1. The amount and character of this compensation is determined by consultation

between the two Members. Id. at Art. 12.3. If the Members fail to reach an agreement on compensation, the affected

exporting Member may suspend the application of substantially equivalent concessions or other obligations to the trade

of the Member applying the safeguard. Id. at Art. 8.2.

177

GATT, Art. XIX:1(a).

178

See, e.g., Agreement on Safeguards, Art. 2.1.

179

See, e.g., id. at Art. 3 (requiring Members to apply a safeguard measure only after undertaking and publishing an

investigation made pursuant to procedures that were previously established and publicly available); Art. 12.1 (requiring

Members to immediately notify the WTO when they initiate a safeguard investigation).

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and (3) characteristics of, and conditions relating to, a safeguard measure.180 Today, all safeguard

measures must comply with both Article XIX of the GATT and the Agreement on Safeguards.181

Under the Agreement on Safeguards, a Member may apply a safeguard measure only when it

determines that the product is being imported in such increased quantities as to cause or threaten

serious injury to the domestic industry that produces like or directly competitive products.182 The

Appellate Body has clarified the “increased imports” requirement to mean an increase that is

“recent, sudden, sharp, and significant.”183 This means that the legality of a safeguard hinges in

part on the rate and amount of the increase in the recent past. Import trends that precede the

recent past (e.g., import trends over the previous five years rather than the previous two) are not

grounds for imposing a safeguard measure, and, if older data and more recent data show

conflicting trends, the most recent data on imports takes precedence in a determination of a

safeguard measure’s legality.184 Moreover, WTO panels have narrowly interpreted the causation

element: the domestic industry’s injury must be caused solely by the import surge and not by any

other factor.185

Agreement on Rules of Origin

Rules of origin are national rules that determine the source of imported goods, and, accordingly

what restrictions and duties should apply to their importation. Determining a product’s country of

origin can be difficult given the increasing globalization of manufacturers’ supply chains.

Preferential rules of origin determine whether a particular good is entitled to enter the importing

country on better terms than products from other countries.186 For example, preferential rules of

origin determine whether a product originated in a country that participates in a reciprocal trade

agreement with, or benefits from a tariff preference program administered by, the importing

country. Nonpreferential rules of origin determine a product’s country of origin for all other

purposes, including application of most favored nation treatment, quantitative restrictions,

imposition of antidumping and countervailing duties, and government procurement

requirements.187

180

See, e.g., Agreements on Safeguards, Art. 7 (limiting the duration of safeguard measures to four years with the

possibility of one four-year extension).

181

Van Den Bossche, supra footnote 131, at 673.

182

Agreement on Safeguards, Art. 2.1.

183

Panel Report, U.S.–Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities,

WT/DS166/R, ¶ 8.31 (July 31, 2000). See also Appellate Body Report, Argentina-Footwear, supra footnote 136, at p.

47 (“... the increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough,

both quantitatively and qualitatively, to cause or threaten to cause ‘serious injury.’”).

184

Van Den Bossche, supra footnote 131, at 677.

185

Panel Report, Korea–Safeguard Measure on Imports of Certain Diary Products, WT/DS98/R, paras. 7.89-7.90

(June 21, 1999) (“[I]f the national authority has identified factors other than increased imports which have caused

injury to the domestic industry, it shall ensure that any injury caused by such factors is not considered to have been

caused by the increased imports ... the [national] authority has the obligation not to attribute to the increased imports

any injury caused by other factors.”). This interpretation of the causation element is often referred to as non-attribution.

186

Asif H. Qureshi and Roman Grynberg, Preferential Rules of Origin and WTO Disciplines with Specific Reference to

the U.S. Practice in the Textiles and Apparel Sectors, 32 LEGAL ISSUES ECON. INTEGRATION 25, 27 (2005); Joseph A.

LaNasa III, Rules of Origin and the Uruguay Round’s Effectiveness in Harmonizing and Regulating Them, 90 AM. J.

INT’L L. 625, 626 (1996).

187

Qureshi and Grynberg, supra footnote 186, at 27; LaNasa, supra footnote 186, at 626.

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There is no international consensus on how countries should formulate their rules of origin. The

United States and many WTO Members apply the “substantial transformation” standard under

which the source of a given import is the country in which the last “substantial transformation”

occurred.188 However, other countries may identify a product’s country of origin as the country in

which (1) a certain percentage of value was added to the good; (2) the activity resulting in a

particular change in the product’s tariff classification occurred; or (3) a specified production

process occurred.189

By agreeing to the WTO Agreement on Rules of Origin (RO Agreement), WTO Members agreed

to a negotiate a uniform set of nonpreferential rules of origin.190 Once the negotiations (also

known as the Harmonization Work Program) are completed, all WTO Members will apply only

one set of non-preferential rules of origin for all purposes. However, the negotiations are

currently running more than 10 years behind schedule.191 Until WTO Members reach an

agreement that harmonizes their nonpreferential rules of origin, Article 2 of the Agreement, which

governs the application of rules of origin during the “transition period,” is the major source of

guidance on these rules. Among Article 2’s lengthy list of directives is both a national treatment

and an MFN requirement,192 a prohibition on the use of rules of origin as a primary means of

protecting domestic industries or favoring a particular Member’s imports,193 and a requirement

that rules of origin not themselves create restrictive, distorting, or disruptive effects on trade.194

However, Article 2 has been interpreted rather narrowly, with the WTO panel in U.S.–Textiles

Rules of Origin195 emphasizing that, until harmonization is completed, WTO Members retain

considerable discretion in designing and applying their respective nonpreferential rules of

origin.196 Nevertheless, in the name of transparency, Members are required to notify the WTO

Committee on Rules of Origin of their respective rules of origin.197

Agreement on Agriculture

Members’ agricultural support policies can be governed by both the Agreement on Agriculture

(AA) and other non-agriculture specific WTO Agreements such as the GATT and the SCM

188

“Substantial transformation” occurs if an imported article is subjected to a manufacturing process that results in the

article having a name, character, or use different from the one it had when it was imported. See 19 C.F.R.

§§134.1(d)(1), 134.35.

189

Qureshi and Grynberg, supra footnote 186, at 28; Rod Falvey and Geoff Reed, Rules of Origin as Commercial

Policy Instruments, 43 INT’L ECON. REV. 393, 394 (2002).

190

Agreement on Rules of Origin, Arts. 1.1, 1.2.

191

See Unfinished Rules of Origin Business, WASH. TRADE DAILY (May 5, 2010); WORLD TRADE ORGANIZATION, WTO

ANNUAL REPORT 2009, 41 (2009); Van Den Bossche, supra footnote 131, at 435.

192

Agreement on Rules of Origin, Art. 2(d).

193

Id. at Art. 2(b); Panel Report, US–Rules of Origin for Textiles and Apparel Products, WT/DS243/R, ¶ 6.36 (June 20,

2003).

194

Agreement on Rules of Origin, Art. 2(c).

195

Panel Report, US–Rules of Origin for Textiles and Apparel Products, WT/DS243/R (June 20, 2003).

196

See, e.g., id. at paras. 6.24, 6.25, 6.73. In U.S.–Textiles Rules of Origin, a WTO panel rejected India’s allegations

that U.S. rules of origin were inconsistent with Article 2(d) of the RO Agreement. The panel held, inter alia, that,

unlike the MFN and national treatment provisions of the GATT, which prohibit discrimination between “like

products,” the MFN and national treatment provisions of the RO agreement prohibit discrimination between the same

good regardless of its provenance. Panel Report, U.S.–Textiles Rules of Origin, supra footnote 195, at paras. 6.2466.249.

197

Id. at Art. 2(a).

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Agreement.198 The objective of the AA is to ensure that Members undertake “progressive

reductions in agricultural support and protection over an agreed period of time.”199

An agricultural support or protection program is governed by the AA if it (1) satisfies the SCM

Agreement’s definition of a “subsidy”;200 and (2) supports a product listed in Annex 1 of the

AA.201 Because WTO Members make commitments under the AA, a covered agricultural support

program is inconsistent with the AA if it does not conform with the Member’s schedule or

domestic support reduction commitments. However, as discussed below, the AA prescribes

different rules for export subsidies than domestic agricultural support measures.

Prohibited Export Subsidies Under the AA

Like the SCM Agreement, the AA defines “export subsidies” as subsidies that are contingent on

export performance.202 Unlike the SCM Agreement, the AA does not prohibit all export subsidies.

Instead, Article 3.3 prohibits Members from providing the six types of export subsidies identified

in Article 9.1 to:

•

unscheduled agricultural products,203 and

•

scheduled products in excess of the specified reduction commitment levels.204

Among the export subsidies listed in Article 9.1 are direct subsidies, payments on the export of an

agricultural good, subsidies to reduce the costs of marketing agricultural exports, and subsidies

contingent on the product’s incorporation in exported products. The AA also prohibits export

subsidies and non-commercial transactions that are not identified in Article 9.1 when they

circumvent, or threaten circumvention of, the Member’s export subsidy commitments.205

In U.S.–Upland Cotton,206 Brazil challenged several U.S. policies designed to support a variety of

U.S. agricultural industries. Among these policies were the so-called “Step 2 payments” to

domestic purchasers and exporters of U.S. cotton. The Commodity Credit Corporation of the U.S.

Department of Agriculture provided these commodity certificates and cash payments to exporters

of U.S. cotton as compensation for marketing or otherwise enhancing the international

198

For additional discussion of the Agreement on Agriculture, see CRS Report RS20840, Agriculture in the WTO:

Limits on Domestic Support, by (name redacted). However, on those occasions when a conflict arises between the AA

and either the GATT or the SCM Agreement’s rules, the AA’s rules prevail. See AA, Art. 21 (“The provisions of

GATT 1994 and of other Multilateral Trade Agreements in Annex 1A to the WTO Agreement shall apply subject to the

provisions of this Agreement.”). Ordinarily, all Annex 1A agreements prevail when there is a conflict with the GATT.

199

Appellate Body Report, U.S.–Subsidies on Upland Cotton, WT/DS267/AB/R, ¶ 49 (March 3, 2005) (emphasis

added).

200

See Appellate Body Report, U.S.–Tax Treatment for “Foreign Sales Corporations,” WT/DS108/AB/R, ¶ 136

(February 24, 2000) (hereinafter U.S.–FSC). Accordingly, an economic support program will be deemed a subsidy

under the AA if it is a financial contribution by a government that provides a benefit to the recipient.

201

These products include, inter alia, all products covered by first 24 chapters of the Harmonized Tariff System (HTS)

that are not fish or fish products.

202

AA. , Art. 1(e).

203

Id. at Art. 3.3.

204

Id.

205

Id. at Art. 10.1.

206

Panel Report, U.S.–Subsidies on Upland Cotton, WT/DS267/R (September 8, 2004).

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competitiveness of U.S. cotton when it was more expensive than foreign-grown cotton.207

Determining that the phrase “contingent on exports” has the same meaning it is given under the

SCM Agreement, the Panel found that the Step 2 payments were export subsidies under the AA

because, to receive them, exporters had to prove that they had exported U.S. cotton.208

Furthermore, because the United States had not scheduled export subsidy commitments for

upland cotton, the Step 2 payments were inconsistent with U.S. commitments under the AA.209

Having found that the Step 2 payments were inconsistent with the U.S. schedule, the Panel in

U.S.–Upland Cotton did not need to consider whether the payments circumvented U.S.

commitments. In contrast, the WTO Appellate Body in U.S.–FSC210 determined that U.S. tax

benefits for Foreign Sales Corporations (FSCs) circumvented, but did not violate, U.S. export

subsidy commitments. In that case, the tax benefits at issue excluded from a U.S. taxpayer’s gross

income all income that was earned with respect to goods in transactions involving property that:

(1) was manufactured, grown, or extracted within the United States; (2) was held primarily for

sale, lease, or rental outside the United States; and (3) had a fair market value, no more than 50%

of which was attributable to articles manufactured or extracted outside of the United States or

direct costs of labor performed outside of the United States. The Appellate Body found that the

tax measure was inconsistent with the Agriculture Agreement because it allowed for the provision

of an unlimited amount of the subsidy to scheduled agricultural products that already received the

maximum level of subsidies specified by the U.S. Schedule.211 In other words, by implementing

the FSC measure, the United States threatened to circumvent, if not actually circumvented,

Article 3.3 of the AA.212

Domestic Support Programs

In addition to their export subsidy commitments, WTO Members are required by the AA to make

and abide by reduction commitments for their domestic subsidy programs. Accordingly, two types

of domestic subsidy programs are consistent with the AA: those that are exempt from the

subsidizing Member’s domestic support reduction commitments and those that are provided in

conformity with (i.e., not in excess of) those commitments.213 A given subsidy program is exempt

from a WTO Member’s reduction commitments if it is either:

•

a so-called “green box” program;214 or

207

Id. at ¶ 7.696. See also P.L. 107-171, §1207; 116 Stat. 134, 161 (2002). For more on U.S.–Upland Cotton, see CRS

Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program, by (name redacted).

208

See Panel Report, U.S.–Upland Cotton, supra footnote 206, at paras. 7.724, 7.736.

209

See id. at ¶ 7.749 (stating that the Step 2 program violated U.S. obligations under Article 3.3. to “not provide

subsidies in respect of any agricultural product not specified in... its Schedule” and Article 8 “not to provide export

subsidies otherwise than in conformity” with the AA and its commitments).

210

Appellate Body Report, U.S.–Tax Treatment for “Foreign Sales Corporations,” WT/DS108/AB/R (February 24,

2000) (hereinafter U.S.–FSC).

211

Id. at ¶ 152.

212

Id. at ¶ 153.

213

The United States domestic support commitment is approximately $19 billion in AMS. Note by the Secretariat,

Total Aggregate Measurement of Support, TN/AG/S/13/ADD.3/Rev.1 (November 23 2009).

214

AA, Art. 7.1 (“Each Member shall ensure that any domestic support measure in favor of agricultural producers

which are not subject to reduction commitments because they qualify under the criteria set out in Annex 2 to this

Agreement are maintained in conformity therewith.”).

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•

provided at levels that do not exceed the relevant de minimis level.215

To be considered a “green box” program, a domestic agricultural support program must satisfy

the applicable criteria in Annex 2. In addition to requiring that domestic agricultural support

programs have “no, or at most minimal, trade-distorting effects or effects on production,”216

Annex 2 prescribes different requirements for different kinds of domestic agricultural support

programs. These programs include, inter alia, domestic food aid programs,217 payments for relief

from natural disasters,218 and payments under environmental programs.219

Measures that are not exempt from the subsidizing Member’s domestic support reduction

commitments must be included in the Member’s calculation of its “Current Total” Aggregate

Measurement of Support, or AMS. This is a monetary measurement of the Member’s domestic

agricultural support programs and it is reported annually to the WTO.220 The total can then be

compared with Member’s commitments to ensure that Members are complying with their

reduction commitments. For example, the United States is committed to providing no more than

$19.1 billion per year in AMS.221 Therefore, if the United States provides domestic subsidies

covered by the AA in excess of its $19.1 billion AMS commitment, the United States may be in

violation of the AA.

215

AA, Art. 7.2(b) (“Where no Total AMS commitment exists in Part IV of a Member’s Schedule, the Member shall

not provide support to agricultural producers in excess of the relevant de minimis level set out in” Article 6.4). Article

6.4 measures the de minimis level of support differently for different kinds of domestic support measures. For “nonproduct-specific” domestic support, the de minimis level of support is 5% of the value of the Member’s total

agricultural production. The WTO Panel in Korea–Beef interpreted the term “non-product-specific” to refer to domestic

support granted in favor of all agricultural producers generally rather than only in favor of a particular subset of

agricultural producers. Panel Report, Korea–Measures Affecting Imports of Fresh, Chilled, and Frozen Beef,

WT/DS161/179/R, ¶ 836 (July 31, 2000). For “product-specific” domestic support, the de minimis level of support is

5% of the Member’s total value of production of a basic agricultural product during the relevant year. For developing

countries, the de minimis level of product-specific and non-product-specific domestic is 10%, rather than 5%. AA, Art.

6.5(b).

216

AA, Annex 2.1. The minimal trade distortion requirement is satisfied if the subsidy is provided through a publicly

funded government program and does not provide price support to producers. Id.

217

AA, Annex 2, Art. 4.

218

Id. at Annex 2, Art. 8.

219

Id. at Annex 2, Art. 12. Environmental and conservation programs are exempt from a Member’s commitments if, in

addition to being provided through a publicly funded government program and avoiding the effect of providing price

support to producers: (1) the amount of the payments is limited to the extra costs or loss of income involved in

complying with the environmental program; (2) the environmental program is “clearly defined”; and (3) eligibility for

the payments is dependent upon the fulfillment of certain conditions, including conditions related to production

methods or inputs. Id.

220

The AA requires Members to include all domestic agricultural support measures that are not exempted from the

Member’s commitments in their calculation of their current total AMS. See AA, Arts. 6.4, 7.2. A Member must

calculate its AMS in compliance with the methodology prescribed by Article 1 and Annex 3 of the Agreement. AA,

Art. 1, Annex 3.1. See Panel Report, Korea–Beef, supra footnote 215, at paras. 825, 830. A WTO Member may

challenge another Member’s calculation of its current total AMS. See e.g., Panel Report, Korea–Beef, supra footnote

215, at ¶ 823 (examining the complaining Members’ claims that Korea’s Current Total AMS, as calculated, violated

Articles 3, 6, and 7 of the AA because Korea’s domestic support for its beef industry exceeded Korea’s scheduled

commitments).

221

Note by the Secretariat, Total Aggregate Measurement of Support, TN/AG/S/13, 3, 14 (January 27, 2005). Note that

the United States initially reported its base level of agricultural support as $23.9 billion in AMS.

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Agreement on Technical Barriers to Trade

Members frequently adopt measures that regulate a product’s characteristics or its production

methods to protect the environment or human health, to ensure the quality of products, to prevent

deceptive practices, or to achieve some other legitimate objective. However, these measures can

create obstacles to international trade. To that end, the WTO Agreement on Technical Barriers to

Trade (TBT Agreement) is intended to balance the need to protect Members’ regulatory autonomy

with the need to prevent unnecessary obstacles to international trade.

The TBT Agreement applies to measures that are not governed by the WTO Agreement on

Sanitary and Phytosanitary Measures (which focuses primarily on food safety) but that regulate a

product’s characteristics or process and production method (PPM).222 A measure meets this

definition if it regulates on the basis of either a product’s intrinsic qualities, qualities that that are

related to the product, or qualities that the product lacks.223 Characteristics that are related to the

product include their identification, presentation, and appearance.224 In EC–Sardines,225 for

example, Peru challenged an EU regulation prescribing common marketing standards for

preserved sardines.226 The EU regulation required that all fish labeled and marketed as “preserved

sardines” belong to one species of fish, Sardina pilchardus, effectively prohibiting all other fish

species from being sold as “preserved sardines” in the EU market.227 Because the regulation

conditioned the “naming” of preserved sardines on product characteristics, the WTO Appellate

Body held that it prescribed product related characteristics.228

The measure in EC–Sardines was a positive TBT measure: it specified a characteristic that a

product must have in order to carry a particular label. In EC–Asbestos,229 however, the Appellate

Body found that measures framed in the negative can also be TBT measures. In that case, Canada

challenged a French decree that criminalized, inter alia, the sale, import, and placing on the

domestic market of asbestos fibers and materials, products, or devices containing those fibers.230

Although the French measure mandated that all products not contain asbestos, it had the same

effect, in the Appellate Body’s view, as requiring all products to have a shared characteristic

because it effectively required all products to be asbestos-free.231

The TBT Agreement classifies measures that regulate on the basis of a product’s characteristics or

PPM as technical regulations, standards, and conformity assessment procedures. Technical

regulations are documents that prescribe product characteristics or their related processes and

222

TBT Agreement, Arts. 1.3, 1.5. Sanitary and phytosanitary measures include measures applied to protect human

health from arising from additives, contaminants, toxins or disease-causing organisms in food and feedstuffs, or to

protect from risks arising from diseases carried by animals or plants or from the entry of pests.

223

Appellate Body Report, EC–Measures Affecting Asbestos and Asbestos-Containing Products, ¶ 67,

WT/DS135/AB/R (March 12, 2001).

224

Id.

225

Appellate Body Report, EC–Trade Description of Sardines, WT/DS231/AB/R (September 26, 2002).

226

Id. at ¶ 2.

227

Id. at ¶ 190.

228

Id. at paras. 190-193.

229

Appellate Body Report, EC–Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R

(March 12, 2001).

230

Id. at ¶ 2.

231

See id. at ¶ 72.

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production methods with which compliance is mandatory.232 Technical regulations can include

import bans and prohibitions that are related to product characteristics or PPMs.233 Standards are

documents that have been approved by a recognized body and prescribe product characteristics or

their related processes and production methods with which compliance is voluntary.234

Conformity assessment procedures (CAPs) are procedures, such as those related to testing,

verification, inspection, or certification, that are used to ensure that the requirements prescribed

by a given standard and/or technical regulation are satisfied.235

The TBT Agreement lays out different commitments for technical regulations, standards, and

conformity assessment procedures. However, to date, most of the WTO panel and Appellate Body

decisions interpreting the TBT Agreement have focused on the provisions on technical

regulations. These provisions are contained in Article 2 of the Agreement. Members must, inter

alia:

•

ensure that their technical regulations provide Most Favored Nation (MFN) status

to other Members’ products;236

•

ensure that their technical regulations do not violate the national treatment

principle (i.e. Members’ technical regulations must not accord imported products

less favorable treatment than that accorded to like products of national origin);237

•

base their technical regulations on international standards unless international

standards would, because of unique country conditions, result in ineffective or

inappropriate regulations; 238

•

give positive consideration to accepting as equivalent technical regulations of

other Members that fulfill the objectives of their own domestic regulations;239

and

•

specify technical regulations based on product requirements in terms of

performance rather than design or descriptive characteristics wherever

appropriate.240

The TBT Agreement also bars Members from preparing, adopting, or applying technical

regulations that are “more trade-restrictive than necessary to fulfill a legitimate objective, taking

account of the risks non-fulfillment [of that objective] would create.”241 The Agreement provides

232

TBT Agreement, Annex 1.2. For example, a technical regulation could include or be limited to “terminology,

symbols, packaging, marking, or labeling requirements as they apply to a product, process, or production method.”

233

Appellate Body Report, EC–Asbestos, supra footnote 229, at ¶ 64.

234

TBT Agreement, Annex 1.1.

235

Id. at Annex 1.3.

236

TBT Agreement, Art. 2.1.

237

Id.

238

Id. at Art. 2.4 In EC–Sardines, the Appellate Body explained that an ineffective technical regulation is one that lacks

the capacity to accomplish all of the objectives pursued, and an inappropriate technical regulation is one that is not

suitable for the fulfillment of all of the objectives pursued. Appellate Body Report, EC–Sardines, supra footnote 225, ¶

289.

239

TBT Agreement, Art. 2.7.

240

Id. at Art. 2.8.

241

Id. at Art. 2.2.

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an illustrative non-exhaustive list of “legitimate objectives,” which includes: the protection of

national security; the prevention of deceptive practices; and the protection of human health or

safety, animal or plant life or health, or the environment.242 WTO panels have suggested that the

analysis of whether a technical regulation is, in fact, “more trade-restrictive than necessary” is an

inquiry into whether the measure’s trade-restrictiveness is required to achieve the Member’s

chosen level of protection.243 Accordingly, WTO panels have compared the extent to which a

given technical regulation contributes to the achievement of the Member’s policy goal with “a

potential less trade restrictive alternative measure” to determine whether the latter would

similarly fulfill the Member’s objective at the chosen level of protection.244 Notably, a measure

that is trade-restrictive and does not contribute to the fulfillment of the Member’s objective

necessarily violates Article 2.2.245

Significantly, unlike the GATT and GATS, the TBT Agreement does not provide Members with

an affirmative defense for technical regulations that are inconsistent with the Agreement but

necessary for national security or the protection of the environment or human and/or plant life or

health.246 The lack of a general or national security exception to the TBT Agreement has

contributed to the view that it is a “stricter” agreement than the GATT or GATS.247

In addition to restraining the preparation and adoption of TBT measures that interfere with

international trade, the TBT Agreement encourages WTO Members to participate in the work of

international standardizing bodies with the aim of achieving broader consensus on the creation

and content of international standards.248 The Agreement also established processes and

mechanisms that enhance the transparency of countries’ TBT measures and a forum for Members

to resolve concerns relating to TBT measures without resorting to formal dispute settlement

procedures. Article 2.9.1, for example, requires Members to publish notice of—and allow time for

other Members to comment on—proposed technical regulations that were created in the absence

of, or deviate from, an international standard or may significantly affect trade. Additionally,

representatives from each WTO Member sit on the Committee on Technical Barriers to Trade

(TBT Committee), which affords Members the opportunity to consult and resolve concerns

relating to the TBT Agreement or the accomplishment of its objectives.249

242

Id. The Agreement also suggests relevant considerations for a Member’s assessment of the risks of non-fulfillment

of those objectives. Id. This illustrative list of considerations includes the available scientific and technical information

and the related processing technology or intended end-uses of products. Id.

243

Panel Report, U.S.–Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, ¶ 7.460

WT/DS381/R (September 2011).

244

Id. at paras. 7.465, 7.475, 7.620.

245

See Panel Report, U.S.–Certain Country of Origin Labelling (COOL) Requirements, paras. 7.719, 7.720

WT/DS384/R (November 18, 2011).

246

Compare e.g., GATT, Arts. XX, XXI with TBT Agreement, Art. 2.2.

247

See, e.g., NATHALIE BERNASCONI-OSTERWALDER ET. AL., ENVIRONMENT AND TRADE: A GUIDE TO WTO

JURISPRUDENCE 215 (2006) (“[I]n contrast to the GATT, the TBT Agreement offers no exceptions to the national and

most-favoured nation treatment obligations in its body text... Thus, the TBT Agreement could be perceived to be

stricter than the GATT.”).

248

E.g., TBT Agreement, Art. 2.6 (“With a view to harmonizing technical regulations on as wide a basis as possible,

Members shall play a full part, within the limits of their resources, in the preparation by appropriate international

standardizing bodies of international standards for products for which they either have adopted, or expected to adopt,

technical regulations.”).

249

TBT Agreement, Art. 13.1. The TBT Committee has, for example, been used as a forum to resolve WTO Members’

concerns about a technical regulation the country of Colombia implemented to promote the use of biofuels. See, e.g.,

(continued...)

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Agreement on Sanitary and Phytosanitary Measures

Sanitary and phytosanitary measures (SPS measures) are measures intended to protect human,

animal, or plant life or health within a WTO Member’s territory from food-safety risks and other

risks relating to pests or diseases.250 Possible examples include bans on imported beef to prevent

the spread of mad cow disease or a food-safety regulation requiring all imported chicken meat to

be heated to a certain temperature for a specified length of time.251 While SPS measures can be

thought of as a subset of technical barriers to trade, as noted above, a measure can not be covered

by both the SPS and the TBT Agreements.252 Therefore, SPS and TBT measures are mutually

exclusive for the purposes of applying WTO obligations.253

SPS measures covered by the SPS Agreement are those that “may, directly or indirectly, affect

international trade.”254 The Agreement defines an SPS measure to include four types of protective

or preventative measures: (1) measures to protect animal or plant life or health arising from the

entry, establishment, or spread of pests or diseases; (2) measures to protect human or animal life

or health from risks arising from additives, contaminants, toxins, or disease-causing organisms in

foods, beverages, or feedstuffs; (3) measures to protect human life or health from risks arising

from diseases carried by animals, plants, or products, or from the entry, establishment, or spread

of pests; and (4) measures to prevent or limit other damage from the entry, establishment, or

spread of pests.255

Articles 2 and 5 of the SPS Agreement set out Members’ basic rights and obligations. Article 2.2

requires WTO Members to ensure that any covered SPS measure is (1) applied only to the extent

necessary to protect human, animal or plant life or health; (2) based on scientific principles; and

(3) not maintained without sufficient scientific evidence, unless it is provisionally adopted and

maintained in conformity with Article 5.7.256 Article 2.3 requires WTO Members to further ensure

that their SPS measures neither “arbitrarily or unjustifiably discriminate between Members where

(...continued)

Committee on Technical Barriers to Trade, Minutes of the Meeting of 5-6 November 2009, G/TBT/M/49 at paras. 193195 (December 22, 2209); Committee on Technical Barriers to Trade, Specific Trade Concerns Raised in the TBT

Committee, G/TBT/GEN/74/Rev.6, pp. 27-28.

250

SPS Agreement, Annex A, Art. 1.

251

For more on SPS measures and concerns, read CRS Report RL33472, Sanitary and Phytosanitary (SPS) Concerns

in Agricultural Trade, by (name redacted).

252

Id. at Art. 1.5. See Panel Report, EC–Measures Concerning Meat and Meat Products, WT/DS26/R/USA, ¶8.29

(August 18, 1997) (“Since the measures in dispute are sanitary measures, we find that the TBT Agreement is not

applicable to this dispute.”).

253

Consequently, dispute settlement proceedings involving the TBT and SPS Agreements may require resolution of

whether the measure in question is best characterized as a TBT or an SPS measure. Because it is more difficult to prove

that a measure is valid under the SPS Agreement, WTO Members tend to characterize their own food-related measures

as TBT measures while characterizing those of their adversaries in dispute settlement proceedings as SPS measures.

See Van Den Bossche, supra footnote 21, at 840; Marco Bronckers and Ravi Soopramanien, The Impact of WTO Law

on European Food Regulation, 2008 EUR. FOOD & FEED L. REV. 361, 363 (2008).

254

SPS Agreement, Annex A, Art. 1.

255

Id., Annex A, Art. 1.

256

Id. at Art. 2.2. Article 5.7 states: “[W]here relevant scientific evidence is insufficient, a Member may provisionally

adopt sanitary or phytosanitary measures on the basis of available pertinent information, including that from the

relevant international organizations as well as from sanitary or phytosanitary measures applied by other Members. In

such circumstances, Members shall seek to obtain the additional information necessary for a more objective assessment

of risk and review the sanitary or phytosanitary measure accordingly within a reasonable period of time.”

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identical or similar conditions prevail, including between their own territory and that of other

Members” nor are applied “in a manner which would constitute a disguised restriction on

international trade.” This language prohibiting arbitrary or unjustifiable discrimination and

disguised restrictions on trade is also in Article XX of the GATT.

Article 5.3 obligates WTO Members “to avoid arbitrary or unjustifiable distinctions” in the levels

of sanitary or phytosanitary protection “if such distinctions result in discrimination or a disguised

restriction on international trade.” Article 5.6 obligates WTO Members to ensure that their

sanitary or phytosanitary measures “are not more trade-restrictive than required to achieve their

appropriate level of sanitary or phytosanitary protection.” Notably, a measure will not be deemed

to be more trade restrictive than required unless there is a feasible alternative that would achieve

the “appropriate level of sanitary or phytosanitary protection” and be “significantly less restrictive

to trade.”257

Like the TBT Agreement, the SPS Agreement requires Members to base their SPS measures on

international standards, guidelines, or recommendations where they exist.258 The three sources of

international standards for SPS measures are: the Codex Alimentarius Commission (CODEX), the

World Organization for Animal Health (OIE), and the International Plant Protection Convention

(FAO). SPS measures that conform to these organizations’ international standards or guidelines

are deemed necessary and presumed consistent with both the SPS Agreement and the GATT.259 If

there is not a relevant international standard, Members may still apply SPS measures to imports

so long as the measures are based on “sufficient scientific evidence.”260 If the scientific evidence

is insufficient, Members may provisionally adopt SPS measures on the basis of the available

information but must seek additional information for a more objective assessment of the risk and

review the SPS measure within a reasonable period of time.261

Another core provision of the SPS Agreement requires Members to “base” their SPS measures on

“an assessment, as appropriate to the circumstances, of the risks to human, animal, or plant life or

health, taking into account risk assessment techniques developed by relevant international

organizations.”262 In EC–Biotech Products,263 the WTO panel wrote that a Member satisfies this

obligation when (1) an evaluation that meets the SPS Agreement’s definition of a “risk

257

SPS Agreement, Art. 5.6 n. 3.

Id. at Art. 5.1.

259

SPS Agreement, Art. 3.2.

260

See id. at Arts. 2.2, 5.1. The Appellate Body has ruled that the scientific evidence supporting a particular measure is

“sufficient” if there is a “rational or objective relationship between the SPS measure and the scientific evidence.”

Appellate Body Report, Japan–Measures Affecting Agricultural Products, WT/DS76/AB/R, ¶ 84 (February 22, 1999).

This is determined on a case-by-case basis in light of the particular circumstances of the case, including the

characteristics of the measure and the quality and quantity of the scientific evidence. Id. Moreover, a WTO panel has

interpreted the term “scientific evidence” broadly as information produced through a “scientific method.” Panel Report,

Japan–Measures Affecting the Importation of Apples, WT/DS245/R, at paras. 8.92, 8.93 (July 15, 2003).

261

SPS Agreement, Art. 5.7. Article 5.7 is understood as creating a “qualified exemption” from Article 2.2’s mandate

not to maintain SPS measures without sufficient evidence. Appellate Body Report, Japan–Agricultural Products II,

supra footnote 260, at ¶ 80.

262

SPS Agreement, Art. 5.1.

263

Panel Report, EC–Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R (September

29, 2006). See also Simon Lester, European Communities–Measures Affecting the Approval and Marketing of Biotech

Products, 101 AM. J. INT’L L. 453 (2007) (describing the legal conclusions reached by the WTO panel in EC–Biotech

Products). For a more in-depth discussion of the case, see CRS Report RS21556, Agricultural Biotechnology: The

U.S.-EU Dispute, by (name redacted).

258

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assessment” is conducted, and (2) the measure at issue is “based” on that assessment.264 Notably,

the Member imposing the measure at issue need not perform the risk assessment itself so long as

a risk assessment that meets the criteria in Annex A of the SPS Agreement was performed.265

The type of risk assessment required depends on the purpose of the SPS measure at stake. In the

case of measures concerned with pests or disease, the term “risk assessment” means an

“evaluation of the likelihood entry, establishment, or spread of a pest or disease... according to the

sanitary or phytosanitary measures which might be applied, and of the associated potential

biological and ecological consequences.”266 In the case of measures concerned with food

additives, a risk assessment is defined as an “evaluation of the potential for adverse effects on

human or animal health arising from the presence of additives, contaminants, toxins, or diseasecausing organisms in food, beverages or feedstuffs.”267

Assuming that a WTO panel finds that an SPS measure was imposed after the requisite risk

assessment, it will then determine whether the measure was, in fact, “based” on that assessment.

According to the WTO Appellate Body’s decision in EC–Hormones, a measure is based on a risk

assessment if the results of the risk assessment “reasonably support” the measure at stake.268 A

measure meets this test if (1) it has a scientific basis, even if it reflects “divergent or minority

views”; (2) the defending Member’s interpretation and application of that evidence is “objective

and coherent”; and (3) there is a scientific basis for determining that the results of the risk

assessment warrant the imposition of the SPS measure at issue.269 Although a WTO panel will

determine whether a Member conformed with these requirements, the panel may not substitute its

own judgment for that of the risk assessor.270

Notably, however, some measures that meet the SPS Agreement’s general definition of an SPS

measure may be imposed without a risk assessment. For example, in EC–Biotech Products,271 a

WTO panel found that although the European Union’s regulatory regime for the approval and

marketing of biotech products was designed to protect the lives and health of humans and plants,

the SPS Agreement permitted the EU to temporarily place a moratorium on the approval of

applications to market new genetically modified organisms without first conducting the risk

assessment described in Article 5.1.272 The panel stated that SPS measures have both the objective

of protecting animal, plant, or human life or health and the “nature” of “requirements and

procedures,”273 and the moratorium was a decision to delay final substantive approval decisions—

264

Panel Report, EC–Biotech Products, supra footnote 263, at ¶ 7.3019.

Appellate Body Report, EC–Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, ¶ 190

(January 16, 1998).

266

SPS Agreement, Annex A, Art. 4.

267

Id.

268

Appellate Body Report, EC–Hormones, supra footnote 265, at ¶ 193.

269

Appellate Body Report, U.S.–Continued Suspension of Obligations in EC–Hormones Dispute, WT/DS320/AB/R, ¶

591 (October 17, 2008).

270

Id. at ¶ 590.

271

Panel Report, EC–Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R (September

29, 2006). See also Simon Lester, European Communities—Measures Affecting the Approval and Marketing of Biotech

Products, 101 AM. J. INT’L L. 453 (2007) (describing the legal conclusions reached by the WTO panel in EC–Biotech

Products). For a more in-depth discussion of the case, see CRS Report RS21556, Agricultural Biotechnology: The

U.S.-EU Dispute, by (name redacted).

272

Panel Report, EC–Biotech Products, supra footnote 271, at paras. 7.1379, 7.1381-84.

273

Id. at ¶ 7.1380.

265

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not a requirement or a procedure subject to Article 5.274 Nevertheless, the panel found that, while

the moratorium was exempt from the risk assessment requirement, it was subject to and in

violation of other provisions of the SPS Agreement.275

Finally, in addition to restraining the preparation and adoption of SPS measures that interfere with

international trade, the SPS Agreement established processes and mechanisms that enhance the

transparency of countries’ SPS measures and a forum for Members to resolve concerns relating to

SPS measures without resorting to formal dispute settlement. To those ends, the Agreement

requires each Member to notify other Members of new or changed SPS regulations when the

regulation will significantly affect trade and either no relevant international standard exists or the

new regulation differs from the relevant international standard.276 It also establishes the

Committee on Sanitary and Phytosanitary Measures to, inter alia, facilitate ad hoc consultations

and negotiations among Members on specific sanitary and phytosanitary issues.277

General Agreement on Trade in Services

The General Agreement on Trade in Services (GATS) is designed to liberalize trade in services.

Unlike international trade in goods, which is largely governed by measures imposed at countries’

borders, trade in services tends to be governed mostly by internal regulations. Internal regulations

might, for example, restrict the number of drugstores allowed within a geographical area, define

technical safety requirements for airline companies, or prohibit banks from selling certain

financial products.278 As this list suggests, the GATS disciplines a wide range of domestic

measures, but some of its provisions, including those on market access and national treatment, are

limited by the scope of each country’s commitments, which are defined in the national schedules

and subject to progressive reduction.279 The GATS also contains a number of annexes addressing

specific individual service sectors.280

The GATS does not define the term “service” except to exclude “services supplied in the exercise

of governmental authority” from its definition.281 Instead, the GATS purports to regulate

measures affecting the supply of a service in four “modes”: (1) from a service supplier in one

Member to a consumer in another Member without travel (e.g., an architecture firm mails

blueprints to a consumer overseas), (2) in the territory of one Member to a consumer of any other

Member (e.g., in the U.S. to a foreign tourist), (3) by a service supplier of one Member with a

commercial presence in the territory of any other member (e.g., by a commercial bank with

branches in a foreign country), and (4) by a service supplier of one Member travelling

274

Id. at paras. 7.1379, 7.1381-84.

The panel found that the moratorium violated Article 1(a) of Annex C, which requires Members to ensure that

procedures to “check and ensure the fulfillment of sanitary or phytosanitary measures” are “undertaken and completed

without delay.” Panel Report, EC–Biotech Products, supra footnote 271, at paras. 7.1530, 7.1570. The European Union

was unsuccessful in its attempt to justify the delay in undertaking and completing approval procedures that was caused

by the moratorium. Id. at paras. 7.1511-7.1529.

276

SPS Agreement, Annex B, Art. 3.

277

Id. at Art. 12.

278

Van Den Bossche, supra footnote 131, at 477.

279

See id.

280

E.g. GATS, Annex on Air Transport Services; GATS, Annex on Financial Services; GATS, Second Annex on

Financial Services; GATS, Annex on Telecommunications.

281

See GATS, Art. I;13(b).

275

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temporarily to provide services in another Member (e.g., by a consultant on an overseas business

trip).282

Notably, a service supplier under the GATS includes entities engaged in “the production,

distribution, marketing, sale and delivery of a service.”283 Measures “affecting trade in services”

include any measure “in respect of,” inter alia, “the purchase, payment or use of a service” or

“the presence, including commercial presence, of persons of a Member for the supply of a service

in the territory of another Member.”284 Because the GATS defines both “service suppliers” and

“measures affecting trade in services” broadly, the GATS applies not only to measures directly

regulating the supply of a service, but also a wide range of other measures that affect the service

sector.285

Because the GATS permits Members to specify how they will reduce market access barriers to

trade in services, whether a particular measure is GATS-inconsistent generally hinges on the

scope of the national schedules of commitments of the Member imposing the measure. Unlike the

GATT, under which the nondiscrimination provisions apply to goods from all Members, the

GATS permits Members to schedule (1) exemptions from the Most Favored Nation (MFN)

treatment obligation,286 and (2) specific service sector commitments to the national treatment

obligation.287 As a result, each Member limits the scope of its obligations not to discriminate

between services provided by firms from different Members288 and between services provided by

foreign, rather than domestic, firms.289 Article XXI of the GATS allows a WTO Member to

modify or withdraw any of its scheduled commitments once three years have elapsed from the

date the commitment entered into force, subject to certain conditions, including possible

compensation to Members affected by the change.

The GATS does not compel a government to privatize services industries or outlaw government

or private monopolies. However, the GATS is, like the TBT and SPS Agreements discussed

above, concerned with increasing transparency. Article III of the GATS requires governments to

publish all relevant laws and regulations and to set enquiry points that can provide foreign

companies and governments with information about entering and competing in a service sector.290

This is particularly important because service sectors may be regulated by multiple government

282

Id. at Art. I:2.

Id. at Art. XXVIII(b).

284

Id. at Art. XXVIII(c)(i), (iii).

285

Id. at Art. XXVIII(b).

286

GATS, Arts. II:1; V, V bis.

287

Id. at Arts. XVI, XVII, XXI.

288

To see the U.S. exceptions from the GATS MFN obligation, see WTO, General Agreement on Trade in Services,

United States of America, Final List of Article II (MFN) Exemptions, GATS/EL/90 (April 1994). This schedule can be

found online at http://docsonline.wto.org/gen_home.asp.

289

To see the U.S. GATS national treatment commitments, see WTO, General Agreement on Trade in Services, United

States of America, Schedule of Specific Commitments, GATS/SC/90 (April 1994). This schedule can be found online

at http://docsonline.wto.org/gen_home.asp.

290

Id. at Art. III:1, 4. The WTO Council for Trade in Services releases an alphabetical list of each Member’s enquiry

points, which is available on the WTO Documents Online website. E.g., Council for Trade in Services, Contact and

Enquiry Points Notified to the Council for Trade in Services. Note by the Secretariat. S/ENQ/78 (March 23, 2001)

available at http://docsonline.wto.org/gen_search.asp?searchmode=simple (enter document symbol S/ENQ/78). The

United States’ enquiry point is the Chair of the Trade Policy Sub-Committee on Services in the Office of the United

States Trade Representative. Id. at p. 20.

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entities at both the national and local levels. Consequently, service providers seeking to do

business internationally may be stymied by a lack of transparency in how a country licenses its

service providers or regulates service delivery. U.S. service providers continue to cite the lack of

transparency in the development and implementation of foreign countries’ regulations as a

primary obstacle to increasing foreign trade in services. If the policy goals behind the GATS are

achieved, Members’ will presumably have an improved understanding of all other Members’

services regulations.291

Agreement on Trade-Related Intellectual Property Rights

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets minimum

standards for the intellectual property rights that WTO Members must offer their nationals and the

enforcement of those rights. Developing countries, however, have delayed compliance periods.

The basic tenet of TRIPS is the extension of most-favored-nation status and national treatment to

intellectual property rights (IPR). Consequently, any advantage in IPR protection granted to

nationals of one WTO Member must be granted to nationals of all other WTO Members, and

Members must treat nationals of other WTO Members no less favorably in terms of IPR

protection than they treat their own nationals.292 The term “nationals” in the TRIPS Agreement

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