Question 2
Country A and Country B are both WTO Members. They are also members of the same free trade agreement. Country A allows the importation of retreaded tires from Country B, but prohibits other countries from selling its retreaded tires to Country A. Is the import ban of retreaded tires from other countries a violation of Articles I:1 and XI:1 of the GATT 1994? If it is a violation of these articles, under what conditions the measure can be justified under Articles XX(b) and XX(d) of the GATT 1994? [50%]
Example answer:
1. The import ban of retreaded tires from other countries do not violate GATT Art. I:1.
In this case, the issue in question is whether Country A can extend preferential treatment (allowing imports of retreaded tyres from Country B only) to Country B without extending the same treatment to other WTO countries. Under WTO law, a Member must guarantee that the most preferential market access is immediately and unconditionally granted to all other WTO Members. The WTO Agreements nevertheless grant Members the right to derogate from these fundamental obligations, in certain circumstances and under certain conditions, and the provisions on Regional integration constitute major derogations to the MFN principle. For trade in goods, the main provision governing the use of these conditional derogations are GATT Article XXIV. The chapeau of Paragraph 5 of Article XXIV establishes that free-trade areas (FTAs) and customs unions (CUs) may derogate from the MFN principle.
Country A and B are members of the same free trade agreement, and thus according to GATT Art. XXIV, Country A can derogate from the MFN principle, and give preferential treatment to goods originating from Country B without extending the same treatment to other WTO members.
2. The import ban of retreaded tires from other countries constitutes as a violation of GATT Art. XI.
The general prohibition of quantitative restrictions is contained in Article XI:1 of the GATT. WTO Members cannot, as a general rule, impose quantitative restrictions on the goods imported from or exported to another Member. In this case, the measure applied by Country A constitutes as a limitation on the amount of goods imported (an absolute import ban) and thus, a quantitative restriction according to GATT Art. XI. Therefore, the import ban of retreaded tyres is in violation of GATT Art. XI.
3(a) Conditions for the measures to be justified under GATT XX(d).
Country A has to fulfill the requirements set put in GATT Art. XX(d), which covers measures that are (i) designed to secure compliance with laws or regulations and are (ii) necessary.[1]In analyzing the first element, the ABR in Mexico-Soft Drinks found that the terms "laws or regulations" cover rules that form part of the domestic legal system of a WTO Member, including rules deriving from international agreements that have been incorporated into the domestic legal system of a WTO Member or have direct effect according to that WTO Member's legal system.[2]The measures would also need to be designed to secure compliance such laws and regulations. The ABR in India-Solar Cells provides that a measure secures compliance with a specific law when its design reveals that it secures compliance with specific obligations under such law.[3]
Country A will also need to prove that its measures are necessary. To fulfil the necessity requirement, the ABR in EC-Asbestos found that a measure could be considered to be 'necessary' in terms of Article XX(b) only if there were no alternative measure consistent with the General Agreement, or less inconsistent with it. [4]
3(b)Conditions for the measures to be justified under GATT XX(b).
According to the PR in US-Gasoline, GATT Art. XX(b) covers measures that are (i) designed to protect the life and health of human, animal, and plant and (ii) necessary.[5]Firstly, in order for a measure to fall within the policy range of Article XX(B), the panel in the case EC-Asbestos found that in principle, a policy that seeks to reduce exposure to a risk should fall within the range of policies designed to protect human life or health, insofar as a risk exists.[6]For example, in the case of Brazil-Retreaded Tyres, the panel found that Brazil's declared policy of reducing exposure to the risks to human, animal or plant life or health arising from the accumulation of waste tyres falls within the range of policies covered by Article XX(b).[7]Thus in this case, country A bears the burden of proof in showing that its import ban of retreaded tyres is indeed designed to protect the life and health of human, animal and plants from risks that are found to arise from retreaded tyres.
In addition, Country A will have to prove that the measures are necessary. According to the ABR in Brazil-Retreaded Tyres, factors such as the extent of contribution of the achievement of a measure’s objective and its trade restrictiveness will be taken into account by the panel.[8]
3(c)The measures should also fulfill the requirements of GATT XX chapeau.
According to the ABR in US-Gasoline, in order for a measure to fall under the justifying protection of GATT Art. XX, the measure at issue must not only come under one or another of the particular exceptions listed under Article XX, it must also satisfy the requirements of the chapeau.[9]The chapeau of GATT Art. XX provides that the measures cannot be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. In this case, in order for Country A to fulfill the two-tier test set out in GATT Art. XX, Country A has to prove that the measures fall within one of the exceptions set out in the individual paragraphs, and also fulfill the requirements of the chapeau.
[1]ABR, Korea—Beef, [157].
[2]ABR, Mexico—Soft Drinks, [79].
[3]ABR, India—Solar Cells, [5.110].
[4]ABR, EC – Asbestos, [170-172].
[5]PR, US—Gasoline, [6.20].
[6]ABR, EC – Asbestos, [168].
[7]PR, Brazil-Retreaded Tyres, [7.98].
[8]ABR, Brazil-Retreaded Tyres, [156].
[9]ABR, US—Gasoline, p. 22.
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