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Necessity under GATT and National Autonomy of States

   

Introduction

The existence of WTO is a reform in the arena of international trade and its exponential feature lies within its dispute settlement mechanism and “thickened” normativity.1 The members’ policy choices, according to Mitchell, means “freedom to pursue domestic policy choices in accordance with the particular economic, social and cultural needs and/or preference of that State.”2 The insertion of exceptions under GATT is to allow “countries to sidestep the normal trading rules if necessary to protect human, animal or plant life or health”3 with a rider that its use is not “arbitrary or unjustifiable discrimination, or it creates disguised restriction on international trade.”4 The existence of predictable legal regime5 depends on its core two limbs, namely, (1) determinacy; and (2) coherence.6 The earlier objective test as per EC-Hormones7 is widened due to trade-off theory (national treatment, simple means-end rationality, necessity or least trade restrictive test, proportionality test, balancing test) as per Trachtman.8 These varied tests allow the adjudicating bodies to interpret phrase necessity under a completely different standard to balance competing interest. It, therefore, sends conflicting messages, making it arbitrary, unpredictable, and illegitimate system.9 WTO agreements do not merely pursue free trade promotion but seek a balance between the members' free trade commitments and the right of members to achieve non-trade related goals.10 However, Ming Du opines that “such right is often intruded by DSB by providing divergent interpretation affecting countries regulatory autonomy. Vagueness in WTO rules have allowed DSB to provide unexpected interpretations leading to a reduction in the rights of WTO members who have seen their policy freedom usurped by WTO panels and the appellate body”.11 The manner of applying the test prescribed under GATT exception by the WTO adjudicatory bodies to legitimate the policy of the countries12 has raised questions of its legitimacy, competence, and transparency.13

DSB and AB rulings on necessity under GATT and its excessive interpretation

The various rulings of the Dispute Settlement Body (DSB) and the Appellate Body (AB) suggest that interpretation of necessity is ultra vires to textual language used in the GATT and often shifted and erased in academic discourse.14 In US Section 337 and Thai cigarettes,15 GATT and WTO adjudicatory body enunciated least restrictive means (LRM) as an alternative strict measure to interpret the necessity test to overcome the legitimate use of domestic measure.16 This was highly criticised by some of the authors as this requirement was beyond the chapeau of Article XX17 and interfered with Thailand's right to pursue domestic policy on cigarettes. As per Ming Du and Kapterian18, this was highly controversial as the Panel ignored Thailand's difficulty in complying with suggestive alternative measure being a developing country and its economic feasibility and rendered it as pro-trade object of WTO. In Korea – Beef, the AB introduced the test of proportionality analysis for the necessity test i.e. to examine whether the contested measure was proportional to objective sought.19 It based its interpretation on three tests: (a) importance of interests or values being protected by the measure; (b) the efficacy of such measures in pursuing the policies; and (c) the impact of the measures on imports or exports.20 This decision further clarified that the definition of necessity21 does not mean indispensable as propounded in Mexico v. United States (Dolphin Tuna case).22 In the opinion of Regan,23 great confusion arose because “the Tribunal did not develop with enough clarity the manner in which these elements interact with each other factors i.e. costs”. The criterion laid tilts towards balancing acts, giving more discretion to the panel and the appellate body to discern the domestic regulatory policies. Thinking objectively, the assertion of the AB to equate the intended measure with proportionality and the impact on import or export was not implicit under GATT text and expands the jurisdiction of the adjudicatory bodies. In Brazil -Tyres, the AB additionally pointed out the inclusion of “genuine relationship theory” and not marginal contribution of contested measure by the defending country.24

Conclusion

It is evident that the AB and the panels are concentrating more to prevent trade abruption and often engage in deep judicial scrutiny of contested measures with quantification of the contribution of a contested measure to the objective sought.25 It is tantamount to abrasion of sovereignty of the States to achieve the policy objectives. Instead of focusing on the value criteria behind the policy of the States, its role should be to look at the objective enshrined under GATT exception. Further, the margin of appreciation doctrine may be used to grant the States a degree of discretion within which the treaty obligations can be balanced “against other pressuring societal concerns”.26 The varied degree of additional elements introduced by the dispute settlement body and AB to interpret the word “necessary” infuses creative interpretation (absent under international law), and the same restricts the autonomy of States.


† Founder and Managing Partner SDS Advocates. Author can be reached at <subirkumar@sdsadvocates.com>.

1. Joost Pauwelyn, “The Transformation of World Trade”, 104 Mich l. Rev. 1, 24 (2004). Pauwelyn uses the expression “thickened normativity” to refer to the judicialness the WTO has added to international law by way of its Dispute Settlement Body (DSB).

2. A. Mitchell (Ed.), Challenges and Prospects for the WTO (2005), p. 58.

3. Hakan Nordstrom And Scott Vaughan, Trade and Environment 1 (World Trade Organisation Special Studies 4, 1999.

4. GATT 1994, Art. XX.

5. Andrea Kupfer Schneider, “Getting Along: The Evolution of Dispute Resolution Regimes in International Trade Organisations”, 20 Mich. J. Int’l L. 697, 710 (1999) (explaining that “predictability of a dispute resolution regime is very important to its users because it creates confidence in the system”).

6. See Thomas M. Franck, The Power of Legitimacy Among Nations 16, 49 (1990). “Determinacy” refers to the ability of legal regimes to transmit clear signals about required standards of conduct; “coherence,” by contrast, means the potential to transmit consistent signals about required standards of conduct.

7. EC-Measures Concerning Meat and Meat Products, WT/DS48/AB/R, 16-1-1998, para 116.

8. See J.P. Trachtman, “Trade and … Problems, Cost-Benefit Analysis and Subsidiarity”, European Journal of International Law 9 (1998), 32-85, <http://ejil.org/journal/Vol19/No1/art3.html,1>.

9. J. Patrick Kelly, “The Twilight of Customary International Law”, 40 Va. J. Int’l L. 449, 451 (2000) (arguing that customary international law has become “a matter of taste” and, therefore, “cannot function as a legitimate source of substantive legal norms”); observing that creative law making can diminish respect both for adjudicators and for “the entire system of international law”, at 529.

10. Gisele Kapterian, “The International and Comparative Law Quarterly”, Jan. 2010, Vol. 59, No. 1 (Jan. 2010), pp. 89-127.

11. Ming Du, M. (2011), “The Rise of National Regulatory Autonomy in the GATT/WTO Regime”. Journal of International Economic Law 14(3): 639-675.

12. Gisele Kapterian, “The International and Comparative Law Quarterly”, Jan. 2010, Vol. 59, No.1 (Jan. 2010), pp. 89-127.

13. See for example, S. Charnovitz, “Environment and Health Under WTO Dispute Settlement” (1998) 32 Int’l Lawyer 901, 920-21 (highlighting environmentalists’ distrust of the WTO dispute settlement system); R. Howse and E. Tuerk, “The WTO Impact on Internal Regulations—A Case Study of the Canada-EC Asbestos Dispute”, in G de Bureca and J. Scott (Eds.), The EU and the WTO: Legal and Constitutional Issues (Hart Publishing, Oxford, 2003) 283; C. Button, The Power to Protect: Trade, Health and Uncertainty in the WTO (Hart Publishing, Oxford, 2004).

14. J.C. Marwell, “Trade and Morality: The WTO Public Morals Exceptions after Gambling” (2006) 81 NYUL Rev 808-809.

15. GATT Panel Report, Thailand — Restrictions on Importation of and Internal Taxes on Cigarettes (Thailand — Cigarettes), BISD 37S/200, 223.

16. GATT Panel Report, United States — Section 337 of the Tariff Act of 1930 (US-Section 337), 1990 BISD 36S/345, 392-93, para 5.26.

17. Fontanelli, F. (2013). “Necessity Killed the GATT: Art XX GATT and the Misleading Rhetoric about ‘Weighing and Balancing'”, European Journal of Legal Studies, Vol. 5, Issue 2 (Autumn/Winter 2012/13) pp. 36-56; See also, Osiro, D. (2002), “GATT/WTO Necessity Analysis: Evolutionary Interpretation and its Im­pact on the Authority of Domestic Regulation”. Issue 2 Vol. 29, Legal Issues of Eco­nomic Integration.

18. Gisele Kapterian, “The International and Comparative Law Quarterly”, Vol. 59, No.1 (Jan. 2010), pp. 89-127 and Ming Du, M. (2011), “The Rise of National Regulatory Autonomy in the GATT/WTO Regime”. Journal of International Economic Law 14(3): 639-675.

19. Korea — Measures Affecting Imports of Fresh, Chilled and Frozen Beef: AB-2000-8: Report of the Appellate Body, 162-63, 166, WT/DS161/AB/R, WT/DS169/AB/R (11-12-2000).

20. Barnali Choudhury, “The Facade of Neutrality: Uncovering Gender Silences in International Trade”, 15 Wm. & Mary J. Women & L. 113 (2008), <https://scholarship.law.wm.edu/wmjowl/vol15/iss1/5>.

21. Mitchell, A. and Henckels, C., “Variations on a Theme: Comparing the Concept of ‘Necessity' International Investment Law and WTO Law”, Chicago Journal of International Law, (1-10-2012).

22. United States – Restrictions on Import of Tuna (No. 1), Mexico v. United States, GATT Panel Report, DS21/R, BISD/39S/155, (1991) 30 ILM 1594, ITL 41 (GATT 1991), 3-9-1991, World Trade Organisation (WTO).

23. Regan, D. (2007). “The Meaning of ‘Necessary’ in GATT Article XX and GATS Article XIV: The Myth of Cost-Benefit Balancing”, 6 World Trade Review 3.

24. Appellate Body Report, Brazil — Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R (3-12-2007).

25. GATT Panel Report, Thailand — Restrictions on Importation of and Internal Taxes on Cigarettes (Thailand — Cigarettes), BISD 37S/200, 223.

26. Laurence R. Helfer, “Adjudicating Copyright Claims under the TRIPS Agreement: The Case for a European Human Rights Analogy”, 39 Harvard International Law Journal, 357, 404-05 (1998).

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