October 1, 2013

Dispute Settlement under the WTO and RTAs: An Uneasy Relationship

Armand de Mestral C.M.*

ABSTRACT

The proliferation of RTAs is a recognised feature of our time. While such agreements are

permitted under Article XXIV of the GATT, this has not been without controversy and one

aspect which remains unclear concerns the role decisions rendered by RTA dispute settlement

bodies play in WTO cases. Are RTA dispute settlement systems in competition with and

possibly even in contradiction to the WTO DSU or are they complementary? Can they coexist or

are they cast in eternal opposition? Are they equal or are they inherently subordinate to the WTO

DSU? The article considers the WTO’s treatment of RTAs in GATT and WTO case law, and

weighs arguments for and against the consideration of RTA decisions by the DSB. The article

submits that the DSB should not be blind to the equities of a situation where two states have

reached an agreement in an RTA selecting dispute settlement under that body. This is more than

a theoretical argument, it has happened, and the increasingly complex co-existence of the WTO

with some 400 RTAs suggests that similar problems can arise in the future. Furthermore, these

issues deserve a much more open and careful analysis than they have had to date.

I. Introduction

The proliferation of international dispute settlement procedures is a recognised feature of our

time.1 Some have viewed this phenomenon with alarm fearing the disintegration and
1
*Armand de Mestral, Emeritus Professor, Jean Monnet Professor of Law, McGill University. The author gratefully
acknowledges the research and editorial assistance of Siena Anstis, McGill Faculty of Law, and thanks Lorand
Bartels, Ulrich Petersmann, Joost Pauwelyn and Gabrielle Marceau for their judicious comments. The author also
thanks the JIEL reviewers for their valuable insights. All errors are my own.
International Law Commission, Fragmentation of International Law: Difficulties Arising from the Diversification
and Expansion of International Law - Report of the Study Group of the International Law Commission, UNGAOR,
58th Sess, A/CN.4/L.682 (2006) (Fragmentation of International Law). For a recent analysis of regional trade
agreement dispute settlement mechanisms, see Clause Chase, Alan Yanovich, Jo-Ann Crawford and Pamela Ugaz,

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fragmentation of international law.2 Others have taken a more relaxed position, based on the

assumption that additional dispute settlement procedures should on balance promote greater

variety and sophistication in the rules of international law. 3 Nowhere is this phenomenon more

pronounced than in the field of international economic law. We have witnessed the astonishing

emergence of the World Trade Organisation’s (WTO) Dispute Settlement Body 4 (DSB) since

1994 as one of the most successful forms of compulsory international dispute settlement of all

time.5 Investor – state arbitration, under bilateral investment treaties, has emerged as a significant

form of international arbitration focusing on both public and private interests. Modern treaties in

fields as diverse as environmental protection, 6 communications,7 intellectual property,8 air

‘Mapping of Dispute Settlement Mechanisms in Regional Trade Agreements – Innovative or Variations on a

Theme?’ (2013) World Trade Organization: Economic Research and Statistics Division,
http://www.wto.org/english/res_e/reser_e/ersd201307_e.pdf (working paper) (Chase et al.).
2
Judge Stephen M. Schwebel, ‘Address to the Plenary Session of the General Assembly of the United Nations’, (26
October 1999), http://www.icj-cij.org/court/index.php?pr=87&pt=3&p1=1&p2=3&p3=1 (visited 20 September
2013); Judge Gilbert Guillaume, ‘The Proliferation of International Judicial Bodies: The Outlook for the
International Legal Order’, (27 October 2000, http://www.icj-cij.org/court/index.php?
pr=85&pt=3&p1=1&p2=3&p3=1 (visited 20 September 2013).
3
Jonathan I. Charney, ‘The Impact on the International Legal System of the Growth of International Courts and
Tribunals’ (1999) 31 NYU J Int’l L & Pol 679; Thomas Buergenthal, ‘Proliferation of International Courts and
Tribunals: Is it Good or Bad?’ (2001) 14:2 Leiden Journal of International Law 267.
4
The DSB is governed by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU),
Marrakesh Agreement Establishing the World Trade Organization, Annex 2, The Legal Texts: The Results of the
Uruguay Round of Multilateral Trade Negotiations, 33 ILM 1226 (1994).
5
Carlos M. Vásquez and John H. Jackson, ‘Some Reflections on Compliance with WTO Dispute Settlement
Decisions’ (2002) 33:4 Law and Policy in International Business 555; Bruce Wilson, ‘Compliance by WTO
Members with Adverse WTO Dispute Settlement Rulings: The Record to Date’ (2007) 10:2 Journal of International
Economic Law 397; David Palmeter and Petros C. Mavroidis, Dispute Settlement in the World Trade Organization
(Cambridge: Cambridge University Press, 2004) at 305 (Mavroidis). Palmeter and Mavroidis note that the ‘addition
of the DSU, and its important thickening of legality, has resulted in the most active and most advanced legal system
in the larger field of public international law.’
6
For example, see United Nations Convention on the Law of the Sea, 10 December 1982, 1833 UNTS 3 397, 21 ILM
1261 (entered into force 16 November 1994); Montreal Protocol on Substances that Deplete the Ozone Layer, 16
September 1987, 1522 UNTS 3, 26 ILM 1550 (entered into force 1 November 1989); Kyoto Protocol to the United
Nations Framework Convention on Climate Change, 11 December 1997, UN Doc FCCC/CP/1997/7/Add.1, 37 ILM
22 (entered into force 16 February 2005).
7
International Telecommunications Union, Final Acts of the World Administrative Telegraph and Telephone
Conference, 1988, WATTC-88.
8
Agreement on Trade-Related Aspects of Intellectual Property Rights, 15 April 1994, 1869 UNTS 299, 33 ILM 1197
(entered into force 1 January 1995).

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transportation9 and international health protection 10 all contain some form of dispute settlement

mechanism. Major new tribunals have been created to deal with international criminal law 11 and

the law of the sea.12

Recourse to dispute settlement plays a significant part in the law governing regional trade

agreements (RTAs). Some 393 such agreements have been notified to the WTO 13 since the

inception of the transparency procedure;14 at least one hundred more are known to exist. 15 Almost

without exception these agreements include some form of dispute settlement. In the majority of

cases these agreements16 adopt a panel procedure based on the WTO Dispute Settlement

Understanding (DSU) model.17 In most cases the process is weaker than the WTO DSU since the

outcome is generally weaker than the compulsory and binding process of the WTO DSB. This

may happen in several ways. RTA dispute settlement provisions often leave it up to the two state

parties to determine how the panel decision is to be implemented. It may be possible for one

party to frustrate the dispute settlement process by not naming their panelist. In some cases the

actual commitment to enter into dispute settlement may not be compulsory. Even where the

9
Convention on International Civil Aviation, 7 December 1994, 61 Stat. 1180, 15 UNTS 295 (entered into force 4
April 1947).
10
WTO Agreement on the Application of Sanitary and Phytosanitary Measures, 15 April 1994, 1867 UNTS 493
(entered into force 1 January 1995).
11
Rome Statute of the International Criminal Court, 17 July 1998, 2187 UNTS 90, 37 ILM 1002 (entered into force
1 July 2002).
12
Statute of the International Tribunal for the Law of the Sea (Annex VI), 10 December 1982, 1833 UNTS 3, 21 IL
1261 (entered into force 16 November 1994).
13
World Trade Organization, ‘Regional Trade Agreements: Facts and Figures,’
http://www.wto.org/english/tratop_e/region_e/regfac_e.htm (visited 20 September 2013).
14
World Trade Organization, ‘Transparency Mechanism for RTAs’,
http://www.wto.org/english/tratop_e/region_e/trans_mecha_e.htm (visited 20 September 2013).
15
World Trade Organization, ‘Historical Background and Current Trends’ in World Trade Report 2011 – The WTO
and Preferential Trade Agreements: From Co-Existence to Coherence (Washington, DC: World Bank, 2011) at 54
(World Trade Report).
16
Examples include the Association of Southeast Asian Nations (ASEAN) Free Trade Area Agreement, the North
American Free Trade Agreement (NAFTA), and the Southern Common Market (MERCOSUR) Agreement. See
David Morgan, ‘Dispute Settlement under PTAs: Political or Legal?’ (2008) University of Melbourne Legal Studies
Research Paper No. 341.
17
See DSU, above n 4.

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decision is binding, as with Chapter 19 of NAFTA, there may be ways of challenging or

prolonging the process.18

The last decade has witnessed the emergence of a number of major ‘regional’ agreements

made by significant groups of states. These range from the four MERCOSUR states 19 to the ten

ASEAN states.20 Other examples are the Andean Community of Nations, 21 the various African

RTAs22 and the ASEAN-India Free Trade Area. 23 Still larger and more ambitious agreements are

18
For example, decisions by the NAFTA Chapter 20 Panels are ‘non-binding in the sense that they have no direct
effect on United States law, and neither federal or state governments are bound by findings or recommendations.’
See David A. Gantz, ‘Dispute Settlement under the NAFTA and the WTO: Choice of Forum Opportunities and
Risks for the NAFTA Parties’ (1999) 14:4 American University International Law Review 1025 at 1042-1043.
Similar concerns arise under dispute resolution for AD/CVD NAFTA Chapter 19. As noted in the Senate Report on
the North American Free Trade Agreement Implementation Act: ‘a US court is not bound by (but may take into
consideration) a final decision of a binational panel or extraordinary challenge committee.’ S. Rep. No. 103-189 at
45 (1993). Also see Donald McRae and John Siwiec, ‘NAFTA Dispute Settlement: Success or Failure?’ in Arturo
Oropeza Garcia, ed, América del Norte en el siglo XXI (Mexico City: Corporación Industrial Gráfica, 2010) 363.
On the other hand, a report adopted by the DSB requires State action and accompanied by the threat of
compensation/retaliation, if required. See John H. Jackson, ‘The WTO Dispute Settlement Understanding –
Misunderstandings on the Nature of Legal Obligation’ (1997) 91:1 American Journal of International Law 60-64.
That being said, the North American Agreement on Environmental Cooperation (NACEC) provides a dispute
resolution system allowing the suspension of benefits where a Party fails to pay a monetary enforcement assessment.
See North American Agreement on Environmental Cooperation Between the Government of the United States of
America, the Government of Canada, and the Government of the United Mexican States, 13 September 1993, 28
ILM 1480 (entered into force 1 January 1994).
19
Additional Protocol to the Treaty of Asunción on the Institutional Structure of Mercosur, 26 March 1991, 34 ILM
1244 (entered into force 29 November 1991) (MERCOSUR).
20
ASEAN Free Trade Agreements, 28 January 1992, S/C/N/463 (1992),
http://www.worldtradelaw.net/fta/agreements/afta.pdf (visited 20 September 2013).
21
Codification of the Andean Subregional Integration Agreement (Cartagena Agreement), 25 June 2003, L/6737
(2003), http://www.worldtradelaw.net/fta/agreements/cartagenafta.pdf (visited 20 September 2013).
22
South African Development Community (SADC) Free Trade Agreement, 17 August 1992, WT/REG176 (entered
into force 5 October 1992), http://www.worldtradelaw.net/fta/agreements/sadcfta.pdf (visited 20 September 2013);
Common Market for Eastern and Southern Africa (COMESA), 5 November 1993, WT/COMTD/N/3 (1994),
http://www.worldtradelaw.net/fta/agreements/comesafta.pdf (visited 20 September 2013); East African Community
Free Trade Agreement, WT/COMTD/N/14 (2000), http://www.worldtradelaw.net/fta/agreements/eacfta.pdf (visited
20 September 2013); Economic Community of West African States (ECOWAS) Revised Treaty, WT/COMTD/N/21
(2005), http://www.worldtradelaw.net/fta/agreements/ecowasfta.pdf (visited 20 September 2013); Economic and
Monetary Community of Central Africa (CEMAC), WT/COMTD/N/13 (1999),
http://www.worldtradelaw.net/fta/agreements/cemacfta.pdf (visited 20 September 2013).
23
Framework Agreement on Comprehensive Economic Cooperation between the Republic of India and the
Association of Southeast Asian Nations (2003), http://wtocenter.vn/sites/wtocenter.vn/files/1-Framework
%20Agreement%20on%20Comprehensive%20Economic%20Cooperation%20ASEAN-India.pdf (visited 20
September 2013).

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under negotiation in the form of a Trans-Pacific Partnership 24 or an eventual EU – USA FTA.25

The most ambitious RTA, the European Union, has been profoundly influenced by the work of

its Court of Justice,26 a true court composed of 28 independent judges who have broad exclusive

and compulsory jurisdiction to rule on a host of trade and related non-trade matters arising under

European Union law.27

What are we to make of the existence of these many dispute settlement procedures

existing under various RTAs? Do they stand alone, relevant to their parties only, or are they part

of a larger pattern of dispute settlement, which is emerging at the present time? In particular,

what is the relationship of these agreements to the WTO DSU?

At first blush there is an extraordinary paradox in the fact that we have witnessed the

development of many procedures in the same timeframe that has seen the emergence and

consolidation of a considerable body of new substantive and procedural law under the WTO

DSU, one of the few compulsory and binding procedures to exist in the world today. This is all

the more extraordinary in that many of the legal issues arising under RTAs are similar in

principle to those arising under the law of the WTO. Most RTAs affirm their fidelity to the law

of the WTO or explicitly state that they should be interpreted in a manner conformable to that

law.28 This is true to the point that one can affirm that most RTAs, even the European Union in

24
The original Trans-Pacific free trade agreement is between Brunei, Chile, New Zealand and Singapore: Trans-
Pacific Strategic Economic Partnership, 18 July 2005, WT/REG229 S/C/N/294 (entered into force 28 May 2006),
http://www.worldtradelaw.net/fta/agreements/TransPac_SEP_FTA.pdf (visited 20 September 2013). The Trans-
Pacific Partnership proposes to expand this treaty to include Brunei, Chile, New Zealand, Australia, Canada,
Malaysia, Mexico, Peru, the United States, Vietnam and potentially Japan.
25
BBC News, ‘EU and US free-trade talks launched’ BBC News (13 February 2013),
http://www.bbc.co.uk/news/business-21439945 (visited 20 September 2013).
26
Consolidated Version of the Treaty on the Functioning of the European Union, 2008/C 115/01 (2007), http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0047:0200:en:PDF (visited 20 September 2013)
(TFEU).
27
Ibid, at art 344.
28
North American Free Trade Agreement, 17 December 1992, 32 ILM 289 (entered into force 1 January 1994) at
Preamble, art 103, art 301, art 2005.1 (NAFTA); Free Trade Agreement between the Government of New Zealand
and the Government of the People’s Republic of China (2008), http://www.chinafta.govt.nz/1-The-agreement/2-
Text-of-the-agreement/0-downloads/NZ-ChinaFTA-Agreement-text.pdf (visited 20 September 2013) at Preamble,

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the trade sphere, have the same deep structure and are based on the same fundamental principles

as the WTO. Yet each agreement has its own system of dispute settlement and no effort has ever

been made to establish or even envisage the establishment of a general world trade court, which

might receive complaints arising under all forms of trade law disputes. 29 This being the case, are

the dispute settlement systems established under RTAs in competition with and possibly even in

contradiction to the WTO DSU, are they complementary to the WTO DSU, or do they regulate

essentially the same disputes? Can they coexist or are they cast in eternal opposition? Are they

equal or are they inherently subordinate to the WTO DSU? 30 As is illustrated below by the cases

reviewed, the questions posed by the coexistence of RTA dispute settlement systems and the

WTO DSU arise in a variety of contexts and reflect a range of different legal issues. But the

overriding question is whether WTO panels and the Appellate Body have the authority to

consider other dispute settlement systems and then act in consequence, or whether they must

give precedence to WTO law in all cases.

These questions are part of a broader debate that was opened by the adoption of Article

XXIV of the GATT in 1947. Without Article XXIV, preferential agreements violate the

fundamental tenets of non-discrimination, which are at the core of the GATT and were carried

forward into the WTO in 1994. A decision was made in 1947 to permit the continuation and

future formation of customs unions. This was not surprising, given the fact that customs unions

were well understood by politicians and economists as a significant form of regional integration 31

art 1, art 3 (NZ – China FTA).

29
The only area where there has been a call to establish a general court is in the area of international investor-state
arbitration. So far these efforts have proven fruitless. There have recently been calls for a comprehensive South
American trade dispute tribunal.
30
This article focuses specifically on one aspect of RTAs and the WTO. In particular, it considers the impact of a
decision rendered by an RTA dispute resolution body on a subsequent WTO dispute. In doing so, this article largely
sets aside other issues that could arise under RTAs.
31
The original treating founding the Benelux Customs Union was signed on September 5 th, 1944. See Customs
Convention between the Netherlands, Belgium and Luxembourg, 5 September 1944, Jaargang 1944-77, 1954-117,
1958-21, 1947-282 (entered into force 1 January 1948).

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and had even played an important role in the emergence of several European states. 32 But the

founders of the GATT did not limit themselves to customs unions. Under quiet pressure from the

United States and Canada and several other countries 33 it was decided also to allow the formation

of ‘free trade areas’ (FTAs), a new and undefined form of economic integration, the essence of

which involves states reducing trade barriers with one or more countries, but maintaining the

freedom to deal directly with third countries.34 Both forms of trade association were made subject

to the conditions that they be notified to the GATT Contracting Parties, that they cover

‘substantially all trade’ and that they lead to ‘trade creation’ rather than ‘trade diversion.’ 35

Article XXIV also created the general obligation of parties to notify their customs unions and

FTAs to the GATT Contracting Parties.36

The substantive and procedural ambiguities of Article XXIV soon became evident: 37 so

much so that, for many years, commentators and GATT diplomats considered that the article was

essentially political and hortatory in nature. 38 As the GATT customary dispute settlement

procedure evolved, many continued to consider that Article XXIV was inherently non

justiciable.39 However, this did not stop a small number of disputes involving complaints against

32
For example, the German Zollverein, formed in 1834, was a step towards the political unification of Germany. See
Soamiely Andriamananjara, ‘Customs Unions’ in Jean-Pierre Chauggour and Jean-Christopher Maur, eds,
Preferential Trade Agreement Policies for Development: A Handbook (Washington, DC: World Bank, 2011) at 111.
33
See World Trade Report 2011, above n 15, at 51. For a general history of the evolution of RTAs under the GATT,
see John H. Jackson, World Trade Law and the Law of GATT (Indianapolis: Bobbs-Merrill, 1969) (Jackson); Kerry
Chase, ‘Multilateralism Compromised: The Mysterious Origins of GATT Article XXIV’ (2006) 5:1 World Trade
Review 1 at 2 (Chase).
34
See Jackson, above n 33, at 575-580.
35
General Agreement on Tariffs and Trade 1994, 15 April 1994, 1867 UNTS 187, 33 ILM 1153 (1994) at art XXIV,
paras 5 and 8 (GATT 1994). Kenneth Dam discusses RTAs and ‘trade diversion’ versus ‘trade creation’ in light of
US economic interests in Kenneth Dam, The Rules of the Global Game: A New Look at US International Economic
Policymaking (Chicago: University of Chicago Press, 2001) at 134. For a criticism of the standard set by Article
XXIV, see Kenneth W. Dam, ‘Regional Economic Arrangements and the GATT: The Legacy of A Misconception’
(1963) 30:4 U Chi L Rev 615 (Dam).
36
See GATT 1994, above n 35, at XXIV, para 7(a).
37
See Jackson, above n 33, at 575-623 (specifically 588 and 621). Jackson describes the criteria for establishing
permissible regional arrangements under the GATT as ‘ambiguous’ and ‘difficult to apply.’
38
See Dam, above n 35; see Chase, above n 33, at 2.
39
See Dam, above n 35.

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customs unions or FTAs being taken to GATT panels. 40 Further complexity was added in 1979

when the Contracting Parties to the GATT adopted the ‘Enabling Clause,’ which relaxed the

requirements for customs unions and FTAs for developing countries with a view to fostering

their more rapid economic development. 41 The increasing numbers of FTAs in the 1980s focused

the attention of GATT negotiators engaged in the Uruguay Round of Multilateral Trade

Negotiations on the failure of the Contracting Parties or dispute settlement panels to clarify the

meaning of the substantive conditions permitting the formation of customs unions and FTAs.

Equally troubling was the failure to clarify the procedural requirements inherent in the obligation

to notify the Contracting Parties to the GATT of the formation and entry into force of such

agreements. Indeed, it appeared at the time that the obligation was being respected more in the

breach than in the observance. The result was that among the decisions emerging from the

Uruguay Round in 1994 was the Understanding on the Interpretation of Article XXIV of the

GATT 1994 (1994 Understanding), which contains various interpretative provisions designed to

clarify substantive and procedural obligations of WTO Members. 42 The Interpretation also

removes one central uncertainty by affirming that disputes under Article XXIV are justiciable

and subject to the procedures of the DSU.43

40
GATT Panel Report, European Community – Tariff Treatment on Imports of Citrus Products from Certain
Countries in the Mediterranean Region (EC – Citrus), L/5776, 7 February 1985, unadopted; GATT Panel Report,
European Economic Community – Payments and Subsidies Paid to Processors and Procedures of Oilseeds and
Related Animal-Feed Proteins (EEC – Oilseeds), L/6627-37S/86, adopted 25 January 1990.
41
Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries,
L/4903 (1979), http://www.wto.org/English/docs_e/legal_e/enabling_e.pdf (visited 20 September 2013) at art 2(c).
The ‘Enabling Clause’ has only once been the subject of dispute settlement: WTO Appellate Body Report,
European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries (EC – Tariff
Preferences), WT/DS246/AB/R, adopted 7 April 2004.
42
Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994,
LT/UR/A-1A/1/GATT/U/4 (1994), http://www.wto.org/english/docs_e/legal_e/10-24_e.htm (visited 20 September
2013) (1994 Understanding).
43
See 1994 Understanding, above n 42, at para 12. The 1994 Understanding provides that Article XXII and XXIII of
the GATT ‘… may be invoked with respect to any matters arising from the application of those provisions of Article
XXIV relating to customs unions, free-trade areas or interim agreements leading to the formation of a customs union
or free-trade areas.’

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In the years immediately after 1994 it became clear that the number of RTAs was

increasing rapidly. It also became clear that the procedural requirements of Article XXIV and the

1994 Understanding needed careful administration in order to ensure that they were respected.

To bring greater discipline to the review of RTAs once notified, the WTO created the standing

Committee on Regional Trade Agreements (CRTA) in 1996. 44 Despite the good intentions of

WTO Members, the CRTA did not prove equal to the task of providing a disciplined review

process of the many RTAs notified to the WTO in the subsequent years. By 2006 it was clear

that the CRTA had failed those who expected that there might be a substantive review of RTAs

leading to a principled evaluation of the fidelity of each agreement to the requirements of Article

XXIV, the Enabling Clause and the 1994 Understanding. By that point, only one agreement had

actually been formally approved,45 the factual description had been prepared for 19 agreements, 46

but no agreement could be reached on ‘systemic’ issues. 47 In other words, despite the good

intentions of many, WTO Members present in the CRTA could not bring themselves to act as

judges of each others’ conduct, for fear of being the object of condemnation of their own

agreements at a later date. The only way out was to agree to separate the process of judgment

upon substantive and procedural issues. To achieve this objective WTO Members adopted the

Transparency Mechanism for Regional Trade Agreements in 2006, which sets out in much

greater detail than previous documents the procedural duties of WTO Members to notify the

WTO Secretariat of the agreements they plan to negotiate, of the conclusion of the negotiations

44
World Trade Organization, Work of the Committee on Regional Trade Agreements (CRTA),
http://www.wto.org/english/tratop_e/region_e/regcom_e.htm (visited 20 September 2013).
45
Petros Mavroidis, Trade in Goods (Oxford: Oxford University Press, 2007) at 167. He notes, ‘Schott (1989)
identifies four cases where PTAs were judged broadly consistent with the GATT. Since his study there has been one
case where there has been a definitive and unambiguous acceptance, at the CRTA level, that the notified PTA was
GATT consistent: the CU between the Czech and the Slovak republics. We are simply in the dark as to the
consistency of the remaining 99% of all PTAs currently in place.’
46
World Trade Organization, Factual Abstracts,
http://www.wto.org/english/tratop_e/region_e/factual_abstracts_e.htm (visited 20 September 2013).
47
Jo-Ann Crawford, ‘New Transparency Mechanism for Regional Trade’ (2007) 11 SYBIL 133 at 135.

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and of the working of the RTAs.48 The Secretariat is required to set up a major database of RTAs

and is even empowered to make inquiries into the existence of agreements, which have not been

notified to the WTO.49 Adoption of reports is now limited to a one day meeting where the factual

report prepared by the Secretariat is studied and questions asked of the parties in the CRTA. 50 No

judgment is passed on potential conflict with the law of the WTO. 51 This is now clearly left to

complaint procedures under the DSU.

The 2006 Transparency Mechanism applied to all RTAs, but, to ensure that preferential

agreements made under the Enabling Clause or otherwise by the WTO collective membership

were not neglected, the WTO also adopted the Transparency Mechanism for Preferential Trade

Agreements in 2010.52 Publicity requirements for preferential trade agreements are similar but

review is before the WTO Committee on Trade and Development.

The result of these developments is that the ball has been sent squarely into the dispute

settlement court. The process of review of regional and preferential trade agreements in the

WTO now functions, but does not produce reasoned judgments of different agreements, still less

does it produce answers to potential disputes between parties. This is deferred entirely to the

procedures established under the DSU after a WTO Member has referred a complaint to the

48
Transparency Mechanism for Regional Trade Agreements, WT/L/671 (2006),
http://www.wto.org/english/tratop_e/region_e/trans_mecha_e.htm (visited 20 September 2013) (2006 Transparency
Mechanism). The WTO’s RTA Database is accessible here: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx
(visited 20 September 2013).
49
Ibid, at paras 20 and 21.
50
Ibid, at para 11.
51
Lorand Bartels disagrees with this position. He distinguishes between ‘full’ and interim agreements. While the
degree of control by WTO Members over ‘full’ agreements is ‘rather vague,’ this is not the case for interim
agreements. He argues that Article XXIV:7(b) allows WTO Members to recommend that an interim agreement not
be considered reasonable. Consequently, there is an obligation on the parties to that agreement not to maintain the
agreement unless modifications are made. See Lorand Bartels, ‘Interim agreements under Article XXIV GATT’
(2009) 8:2 World Trade Review 339 at 342.
52
Transparency Mechanism for Preferential Trade Arrangements, WT/L/806 (2010),
http://www.wto.org/english/news_e/news12_e/rta_13mar12_e.htm (visited 20 September 2013) (2010 Transparency
Mechanism).

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DSB. This has advantages and disadvantages. The principal advantage is that the DSU creates a

compulsory and a binding procedure, which is open to all WTO Members and can be invoked

regardless of economic or political strength. The disadvantage is that it may have placed the

attention of dispute settlement panels and the Appellate Body too much on the strict terms of the

DSU rather than on the broader framework of the totality of WTO law. What follows is a plea to

panellists and the Appellate Body to consider the problems posed by the troubled relationship of

RTAs and the WTO from the broader perspective of the unity of international trade law rather

than forcing all through the prism of the DSU.

To complete this introduction, it is important to remember that this debate on the

relationship between dispute settlement procedures of RTAs and the WTO DSU is part of a

broader debate on the legitimacy of recourse to bilateral and regional preferential arrangements.

Many commentators see these agreements as a threat to the integrity of the WTO, while others

see RTAs as a means of promoting trade liberalisation as well as experimenting with forms of

economic integration not envisaged in WTO law. The literature on the issue is vast; it

encompasses analysis by economists,53 political scientists54 and lawyers.55 The 2011 Report of

the WTO ably reviews many aspects of the question. 56 The general consensus is probably best

summed up in a report by the World Bank suggesting that trade liberalisation is always more

efficient for the global economy if it results from multilateral agreement but that, in many

circumstances, RTAs may offer an attractive second best solution from the economic and

53
Viet D. Do and William Watson, ‘Economic Analysis of Regional Trade Agreements’ in Lorand Bartels and
Frederico Ortino, eds, Regional Trade Agreement and the WTO Legal System (Oxford: Oxford University Press,
2006) 7.
54
Andrew Moravcsik, The Choice for Europe: Social Purpose and State Power from Messina to Maastricht (Ithaca,
NY: Cornell University Press, 1998).
55
Leon Trakman, ‘The Proliferation of Free Trade Agreements: Bane or Beauty?’ (2008) 42 Journal of World Trade
Law.
56
See World Trade Report 2011, above n 15.

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political perspectives.57 Suffice it to say that these agreements are permitted by the GATT Article

XXIV and the law and practice of the WTO and that the great majority of WTO Members have

had, and continue to have, recourse to RTAs. For the time being, the WTO has to deal with the

problems posed by RTAs and cannot ignore them.

II. The Disputes

A. GATT cases

While questions had been raised concerning the legal implications of the GATT Article XXIV

process and the possibility of submitting disputes arising out of RTAs to GATT panel reviews in

the years following 1947,58 few GATT Contracting Parties were eager to put these questions to

the test. There appeared to be a general reluctance to put such disputes before GATT panels.

Thus the 1962-63 ‘Chicken War,’ which arose between the United States and the EEC, was

fought by retaliation and ultimately solved by negotiation. 59 For over twenty years, GATT

diplomats used their skills to keep disputes potentially involving Article XXIV from dispute

settlement panels. In the 1976 case arising out of Canada’s dissatisfaction at the allegedly

inadequate adjustments made by the European Economic Community (EEC) to its tariff,

resulting from its enlargement, the panel refused to hear Canada’s complaint under GATT

Article XXIV.6 on the grounds that the complexity of the issues involved made a panel

procedure inappropriate.60 A similar dispute, mentioned above, between Canada and the EEC on

57
Ibid, at 198.
58
In US – Margins of Preference, the Contracting parties decided ‘the determination of rights and obligations
between governments arising under a bilateral agreement is not a matter within the competence of the
CONTRACTING PARTIES.’ US – Margins of Preference (1949), BISD 11/11,
http://www.worldtradelaw.net/reports/gattpanels/marginspreference.pdf (visited 20 September 2013).
59
Herman Walker, ‘Dispute Settlement: The Chicken War’ (1964) 58 Am J Int’l L 671 (Walker).
60
See Walker, above n 59, at 673-677.

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the issue of Canada's ordinary and quality wheat rights dating from the Article XXIV.6

negotiations on 29 March 1962 was submitted to an Arbitrator and resolved in 1990.61

By the 1980s, the EEC had granted a range of tariff preferences to different categories of

countries under a variety of trade agreements; furthermore, the success of the Common

Agricultural Policy (CAP) in encouraging the production of crops in the EC, which subsequently

supplanted imports from other GATT Contracting Parties, gave rise to several major disputes in

which the EEC sought to defend its legal position, in part, by invoking Article XXIV.

The EEC/EC was the object of several other complaints by the United States and other

GATT Contracting Parties. Some involved so-called non-violation complaints in which the EC

did not invoke Article XXIV as a defense. But, in others, it did invoke Article XXIV. In the 1985

EEC – Production Aids Granted on Canned Peaches proceeding, the United States alleged that

subsidies under the CAP resulted in nullification and impairment of exports to the EEC. 62 The

panel issued a non-binding recommendation that the EEC take steps to restore the competitive

relationship between EEC produce and the imported goods in question.

In the EC – Citrus litigation, the United States alleged that its exporters of citrus fruits

had suffered nullification and impairment of their rights as a result of the grant of preferential

tariff treatment of citrus fruit imports by the EU under its trade agreements. 63 The agreements

involved ‘association’ agreements with future EU members such as Spain and Greece, former

members of the French Customs Territory, Algeria, Morocco and Tunisia and Mediterranean

partner countries such as Malta, Cyprus, Turkey, Israel and Lebanon. Objection was also taken to

the change in tariff treatment of citrus products in the UK, Ireland and Denmark after their
61
Award by the Arbitrator, Canada/European Communities – Article XXVIII Rights (Article XXVIII Rights), DS12/R
- 37S/80, published 26 October 1990.
62
GATT Panel Report, European Economic Community – Production Aids Granted on Canned Peaches, Canned
Pears, Canned Fruit Cocktail and Dried Grapes (Complaint by the United States) (EEC – Canned Fruit), L/5778,
20 February 1985, unadopted.
63
Panel Report, EC – Citrus, above n 40, para 3.3.

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October 1, 2013

adhesion to the EC in 1973. The United States argued that the tariff preferences constituted

violations of GATT Article I, which required compensatory adjustment. The United States also

argued that the various agreements did not meet the requirements of Article XXIV in that none

appeared to involve a binding commitment to form a customs union or an FTA and further that

such agreements being exceptions from Article 1 required a restrictive interpretation. 64 The EC

responded that the preferences were contemplated by various paragraphs of Article XXIV as

being interim agreements leading to FTAs or customs unions and, in the case of the UK, Ireland

and Denmark, as part of the process of enlargement of the EC itself. The EC also argued that

Article XXIV should not be seen as derogating from Article I, but that the two articles

constituted ‘principles of equal validity’ under the GATT. 65 The EC argued that since all these

agreements had been notified to the GATT and that since the process of review by working

parties established by the Contracting Parties had led to no recommendations either positive or

negative, the issue of compatibility with Article XXIV could not be before the panel thus

implying that the EC was free to grant these preferences. 66 Finally, the EC argued that American

citrus exporters could not in fact prove that preferences were the cause of any of the adverse

commercial effects that they claimed to have suffered. The United States maintained its point

that nothing stopped it from arguing a violation of Article XXIV, but concentrated on adducing

evidence that its citrus exports had suffered nullification and impairment under Article I. 67

The five panel members appeared to accept that the issue of compatibility with Article

XXIV was not before them, partly because of the drafting of the terms of reference, and because

there had been no consensus during the process of review of each agreement and no direction
64
Ibid, at para 3.8.
65
Ibid, at para 3.4.
66
Panel Report, EC – Citrus, above n 40, paras 3.9 - 3.10. Also see para 3.11: ‘To examine the consistency of the
agreements with Article XXIV in the context of a violation complaint under Article XXIII would run counter to the
highly pragmatic attitude the CONTRACTING PARTIES had taken towards interim agreements.’
67
Ibid, at para 3.12.

14
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had been given to the EC to withdraw its measures; in consequence, the panel considered that

there was no issue of prima facie violation of the GATT but only an issue of factual nullification

and impairment. Whether the reasoning of the panel in this case was legal or diplomatic, readers

must judge for themselves. At the end of a very lengthy and complex report, the panel held that,

on the basis of the evidence available to it, the United States had suffered nullification and

impairment of its rights in respect of potential exports of fresh oranges and lemons as a result of

the EC’s granting of preferences under various agreements. The evidence adduced respecting

many other categories of citrus fruit and juices was not deemed sufficient to warrant a similar

finding. This being the case, the United States was entitled to compensatory adjustment in

proportion to the nullification and impairment suffered.68

The Citrus report displayed the reluctance of panels to make firm recommendations on

alleged violations of Article XXIV. This reluctance was displayed in several subsequent GATT

proceedings. The Citrus report was not adopted.

EEC – Oilseeds was the major non-violation case in which the United States alleged that

subsidies to the production of oilseeds by the EEC under the CAP compromised the tariff

bindings previously agreed to between the two Contracting Parties under Article II. 69 This case

was vigorously argued and the EEC’s subsequent implementing action was subject to a second

proceeding.70 The panel held that the result of CAP subsidies had in fact compromised the

original expectations of producers in the United States that they would be able to export oilseeds

to the EEC market when tariffs had first been bound. The panel thus found that there had been

non-violation nullification and impairment resulting from the EEC agricultural subsidies. The

68
Ibid, at para 5.1.
69
Panel Report, EEC – Oilseeds, above n 40.
70
GATT Panel Report, Follow-up on the Panel Report ‘European Economic Community – Payments and Subsidies
Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins, DS28/R-39S/91, adopted 31
March 1992.

15
October 1, 2013

complaint of the United States in this case was based on the failure of consultations under Article

XXIV.6. However, the EC did not base its defense on Article XXIV but rather suggested that the

original commitments had been superseded by other commitments made in later enlargement

negotiations.71

Interestingly, in the case of a dispute between Canada and the EC on the issue of

Canada’s ordinary and quality wheat rights, which originated in Article XXIV.6 negotiations,

Canada based its complaint against the EC on bilateral agreements concluded on March 29,

1962.72 In response to the argument as to the propriety of raising this bilateral agreement, the

Arbitrator agreed to consider it appropriate in the circumstances. 73 The Contracting Parties

adopted this report.

The EEC – Bananas case was the final, and ultimately unadopted, litigation under the

GATT – before the creation of the WTO and the entry into force of the DSU – in which Article

XXIV issues were argued between the United States, with support of other states, and the EEC. 74

In these cases, the EEC sought to justify its system of import quotas and other measures

governing the importation and marketing of bananas from all sources around the world,

including both former EU Members’ colonies and the major Central American producing

countries. The United States argued that the EEC quotas were a violation of Article I, tariff

bindings under Article II, as well as Article XI. Among the many arguments advanced by the

71
Panel Report, EEC – Oilseeds, above n 40, paras 54, 71, 75.
72
A 1990 complaint by Canada under Article XXIV.6, but not raising article XXIV issues, was dismissed by an
Arbitrator. Award by the Arbitrator, Article XXVIII Rights, above n 61.
73
The Arbitrator noted: ‘In principle a claim based on a bilateral agreement cannot be brought under the multilateral
dispute settlement procedures of the GATT. An exception is warranted in this case given the close connection of this
particular bilateral agreement with the GATT, the fact that the Agreement is consistent with the objectives of the
GATT, and that both parties joined in requesting recourse to the GATT Arbitration procedures.’ Article XXVIII
Rights, above n 61, 5.
74
GATT Panel Report, EEC – Member States’ Import Regimes for Bananas (EC – Bananas I), DS32/R, 3 June 1993,
unadopted; GATT Panel Report, EEC – Import Regime for Bananas (EEC – Bananas II), DS38/R, 11 February
1994, unadopted.

16
October 1, 2013

EEC was the position that the quotas were justified under Article XXIV. In particular, the EEC

argued that the Lomé Convention trade and aid agreement with the ACP countries was an FTA

justified under article XXIV75 and that it was also a commodity agreement equally justified under

the GATT.76 The panel rejected both arguments. The panel noted that the Lomé Convention was

not a trade agreement based on reciprocity, but rather an essentially unilateral agreement offered

by the EU to ACP countries. Hence it could not be justified under the Article XXIV as a customs

union or a FTA.77 The same position was taken by the panel with respect to the argument that the

Bananas Protocol of the Lomé Convention was a commodity agreement.78 In the opinion of the

panel the protocol did not meet the requirements of the GATT for commodity agreements. 79

The significance of this litigation was not easy to establish on the eve of the

establishment of the WTO. Most reports, except the EEC – Oilseeds panel reports, had been too

controversial to adopt. There was also an obvious reluctance of GATT Contracting Parties to

submit the issue of compatibility of particular RTAs, or measures taken pursuant to RTAs to a

clear legal test under Article XXIV. The view was widely held that review of customs unions

and FTAs was essentially a policy exercise or that the criteria of Article XXIV were too

imprecise to apply and that their implementation was best left to negotiation between

Contracting Parties. But the fact remains that on several occasions these issues were pleaded and

75
Panel Report, EC – Bananas I, ibid, at para 217.
76
Panel Report, EC – Bananas II, above n 74, para 165.
77
Panel Report, EC – Bananas I, above n 74, paras 358, 372; Panel Report, EC – Bananas II, above n 74, paras 156 -
164. The Panel also rejected the EEC’s argument that Article XXIV was subject to non-reciprocity under Article
XXXVI:8. The Panel concluded that Article XXIV was ‘not specifically mentioned in the Note to Article XXXVI:8
and that the participants in the negotiations of a free trade area in the sense of Article XXIV, although involved in a
process of tariff reduction, did not derive their negotiating status from the General Agreement, nor were they bound
to follow procedures set out under the General Agreement for the conclusion of the agreement.’ The Panel
concluded that ‘the wording and underlying rationale of the note to Article XXXVI:8 thus suggested to the Panel
that Article XXXVI:8 and its Note were not intended to apply to negotiations outside the procedural framework of
the General Agreement, such as negotiations of a free trade area.’ Panel Report, EC – Bananas II, above n 74, para
161.
78
Panel Report, EC – Bananas II, above n 74, paras 165-166.
79
The Panel held that ‘in order to benefit from the exception in Article XX(h), such criteria or agreements had to be
submitted to the CONTRACTING PARTIES with an explicit invocation of that provision.’ Ibid, at para 166.

17
October 1, 2013

argued before GATT panels, so that the matter was certainly not tabula rasa when it was put to

the newly formed WTO. The affirmation of the 1994 Understanding that Article XXIV was

subject to dispute settlement rested on solid, but hotly contested ground.

B. WTO cases

Since 1994 the DSU has dealt with at least thirteen cases in which the existence of an RTA has

been pleaded or argued in one way or another. 80 As the following discussion of these cases

demonstrates, arguments have been raised in many different contexts: GATT Article XXIV, 81 the

80
WTO Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products (Turkey –
Textiles), WT/DS34/AB/R, adopted 22 October 1999; WTO Appellate Body Report, Argentina – Safeguard
Measures on Imports of Footwear (Complaint by the EC) (Argentina – Footwear), WT/DS121/AB/R, adopted 14
December 1999; WTO Appellate Body Report, United States – Definitive Safeguards Measures of Wheat Gluten
Products from European Communities (Complaint by the EC) (US – Wheat Gluten), WT/DS166/AB/R, adopted 22
December 2000; WTO Appellate Body Report, Canada—Certain measures affecting the Automotive Industry
(Complaint by the United States) (Canada — Autos), WT/DS139/AB/R & WT/DS142/AB/R, adopted 22 December
2000; WTO Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Circular Welded
Carbon Quality Line Pipe from Korea (Complaint by Korea) (US – Line Pipe), WT/DS202/AB/R, adopted 15
February 2002; WTO Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil (Argentina
– Poultry), WT/DS241/R, adopted 22 April 2003; WTO Appellate Body Report, United States — Definitive
Safeguard Measures on Imports of Certain Steel Products (Complaint by Brazil) (US – Steel Safeguards),
WT/DS259/R, adopted 10 November 2003; Appellate Body Report, EC – Tariff Preferences, above n 41; WTO
Panel Report, United States – Investigation of the International Trade Commission in Softwood Lumber from
Canada - Recourse to Article 21.5 of the DSU (Complaint by Canada) (US – Softwood Lumber), WT/DS277/R,
adopted 22 March 2004; WTO Panel Report, Mexico – Tax Measures on Soft Drinks and Other Beverages
(Complaint by the United States) (Mexico – Soft Drinks), WT/DS308/R, adopted 7 October 2005; WTO Appellate
Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres (Brazil – Retreaded Tyres),
WT/DS332/AB/R, adopted 3 December 2007; WTO Consultations, European Communities – Measures Affecting
the Tariff Quota for Fresh or Chilled Garlic (EU – Tariff Garlic), DS/349 (this dispute is still in consultations phase
see http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds349_e.htm (visited 20 September 2013)); WTO Panel
Report, Dominican Republic – Safeguard Measures on Imports of Polypropylene Bags and Tubular Fabric
(Dominican Republic – Polypropylene Bags), WT/DS415/R, adopted 31 January 2012; In WTO Appellate Body
Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (US
– Tuna II), WT/DS381/AB/R, adopted 16 May 2012, the US had originally requested consultations under NAFTA
with Mexico on the basis that Mexico should move the case from the WTO to NAFTA. Ultimately, the existence of
an RTA was not pleaded.
81
Appellate Body Report, Turkey – Textiles, ibid.

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corresponding Article V of the GATS, 82 the Enabling Clause,83 safeguards under an FTA,84

seeking justification of a special tariff regime under an FTA, 85 attempts to preclude review of a

measure under the DSU,86 invocation of GATT Article XX to justify decisions by dispute

settlement bodies of RTAs allegedly not in conformity with other provisions of the GATT, 87

arguments of forum non conveniens that the dispute before the DSB in fact involves a dispute

under an RTA,88 as well as the invocation of Article XXIV.6 to challenge the grant of new tariff-

rate quotas to a third party resulting from EU enlargement. 89 The invocations of RTAs have been

used as both a shield and a sword,90 in justification and defence. There are some relatively

straightforward cases where RTAs were used to argue exemptions from general safeguard

measures granted under many FTAs or to halt WTO proceedings in favour of proceedings under

an FTA. The most complex and controversial cases are those in which the State Parties to an

RTA have sought to plead decisions taken pursuant to their agreements before panels established

under the DSU.91 Most of these decisions have dealt with substantive legal arguments and few

have clarified the procedural rights and duties arising under Article XXIV, Article V, or the

Enabling Clause. The result is a body of decisions that have clarified some of the relevant law,

but which leave many questions unresolved.

82
General Agreement on Trade in Services, Marrakesh Agreement Establishing the World Trade Organization,
Annex 1B, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations, 15 April 1994,
1869 UTS 183, 33 IM 1167 (1 January 1995) at art 7 (GATS).
83
WTO Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products
(India – Patents (US)), WT/DS50/AB/R, adopted 19 December 1997.
84
Appellate Body Report, US – Wheat Gluten, above n 80; Appellate Body Report, US – Line Pipe, above n 80;
Appellate Body Report, US – Steel Safeguards, above n 80.
85
Appellate Body Report, Canada — Autos, above n 80.
86
Panel Report, Argentina – Poultry, above n 80; Panel Report, Mexico – Soft Drinks, above n 80.
87
Panel Report, US – Softwood Lumber, above n 80; Appellate Body Report, Brazil – Retreaded Tyres, above n 80.
88
Panel Report, Mexico – Soft Drinks, above n 80; Panel Report, Dominican Republic – Polypropylene Bags, above
n 80.
89
Consultations, EU – Tariff Garlic, above n 80.
90
If seen as a pure exception Article XXIV can only be a shield. However, it has also been seen and argued as a
justification. This reflects the tension between those who construe Article XXIV as only an exception and those who
hold it to be equal to the opening articles of the GATT.
91
Panel Report, US – Softwood Lumber, above n 80; Appellate Body Report, Brazil – Retreaded Tyres, above n 80.

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The most tantalizing issue emerging from these cases is clearly the matter of the right to

plead RTA decisions before the DSB. Does the DSU create a monopoly and give absolute

priority to the DSB? Or is it possible to imagine a dialogue between the WTO and RTAs? The

Brazil – Retreaded Tyres decision may lead to some clarifications, but many significant issues

remain unresolved.

1. Turkey Textiles

True to its mission to bring greater order to GATT law, the AB took on the challenge posed by

RTAs as soon as it was offered. The Turkey – Textiles decision remains the most important

single decision rendered by the AB in this area. 92 In this litigation Turkey argued that it was

justified in reintroducing quotas on textile imports from India, despite having bound

commitments to India to the contrary, on the grounds that the subsequent establishment of a

customs union with the EC provided justification under GATT Article XXIV. The panel, like the

AB, accepted that Article XXIV allowed a plea that the introduction of a customs union might

permit the parties to take measures which were normally contrary to the GATT. However, in

rejecting Turkey’s arguments, the panel held that Article XXIV only justified measures contrary

to GATT Article I.93 The AB took a broader approach in principle and held that Article XXIV

contemplated measures covered by a wide range of the GATT beyond the mere scope of the

Most Favoured Nation (MFN) provisions of Article I. 94 To do this the AB gave weight to the

general provisions of Article XXIV.4 as well as the preamble to paragraph 5 and the

requirements of paragraph 8. According to the AB a party invoking the benefit of Article XXIV
92
Appellate Body Report, Turkey – Textiles, above n 80.
93
WTO Panel Report, Turkey – Restrictions on Imports of Textile and Clothing Products (Turkey – Textiles),
WT/DS43/R, adopted 31 May 1999, para 9.208.
94
Even so, the AB concluded that Turkey was not required to apply the quantitative restrictions at issue in the appeal
in order to form the customs union and therefore it failed to satisfy the necessity requirement of Article XXIV.
Appellate Body Report, Turkey – Textiles, above n 80.

20
October 1, 2013

had the burden of showing that the contravening measures have been introduced on the

formation of the customs union and that it respects the substantive requirements of paragraphs 5

and 8.95 The AB also stressed the requirement of paragraph 2 of the 1994 Understanding that the

measures ‘must avoid creating adverse effects upon the commerce of other Members.’ 96 Most

significantly, the AB read into Article XXIV a condition that to be justified any measure must be

‘necessary’ for the formation of the customs union. In effect, according to the AB, for the

measure to be justified the party invoking it must demonstrate that it meets the tests of

paragraphs 5a and 8a of Article XXIV and the party ‘must demonstrate that the formation of the

customs union would be prevented if it were not allowed to introduce the measure.’97

As Trebilcock & Howse note the approach taken by the AB with respect to the scope of

Article XXIV is in principle a broad one, but at the same time the AB imposed a severe burden

of justification in the form of the necessity test. 98 Clearly the Turkey Textiles decision was not

designed to open the floodgates. Furthermore, this case deals with a customs union; there has yet

to be a fully comparable case dealing with an FTA.

2. Safeguards and Article XXIV

95
Ibid, para 46.
96
Ibid, at para 57.
97
Ibid, at para 58.
98
Michael Trebilcock, Robert Howse and Antonia Eliason, The Regulation of International Trade, 4th ed (New
York: Routledge, 2012) at 117 (Trebilcock, Howse and Eliason). Joost Pauwelyn is particularly critical of the
‘necessity’ requirement in the context of safeguards. He argues that the Appellate Body’s requirements for Article
XXIV justification, spelled out in Turkey – Textiles, are ‘supported by neither the text nor the spirit of Article
XXIV’ and that they ‘ought to be overturned.’ He argues that that the necessity requirement ‘should be replaced
with the requirement that (the exclusion of regional imports) is ‘part of’ the formation of a regional arrangement in
line with Article XXIV.’ This would allow for the exclusion of imports from a safeguard measure under Article
XXIV. See Joost Pauwelyn, ‘The Puzzle of WTO Safeguards and Regional Trade Agreements’ (2004) 7:1 Journal
of International Economic Law 109 at 141 (Pauwelyn, Puzzle of WTO Safeguards).

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October 1, 2013

Several cases have dealt with the relationship between the application or exemption of

safeguards under RTAs and Article XXIV. 99 A genuine customs union like the EU formally

prohibits safeguards and similar measures between member states, 100 and a surprising number of

FTAs, like NAFTA101 provide for the exclusion of other member states of an FTA from the

application of general safeguard measures adopted by any one of them. The first complaint

arising out of safeguards involved a plea by Argentina invoking MERCOSUR in justification of

a safeguard measure that it had taken. 102 Other cases involved complaints against the United

States in circumstances where it had exempted Canada and Mexico from general safeguards

measures pursuant to Chapter 8 of NAFTA. 103 Interestingly the panels in the Argentina –

Footwear104 and the US – Wheat Gluten105 cases considered arguments based on Article XXIV

extensively, while the Appellate Body showed much greater reserve on the same issues. The

basis of the safeguards exemption was the same in the US – Line Pipe and the US – Steel

Safeguards cases, the Article XXIV justification was argued at some length in the former and

briefly in the latter case before the panels, but was given little weight by the AB in either case. 106

In the Argentina – Footwear case, Argentina, after investigating imports and finding

injury resulting from imports from all sources, imposed safeguard duties only on imports from

non-MERCOSUR countries. The panel concluded that GATT Article XIX and Articles 2 and 4

of the Safeguards Agreement required that the assessment of the sources of injury and the
99
Appellate Body Report, Argentina—Footwear, above n 80; Appellate Body Report, US – Wheat Gluten, above n
80; Appellate Body Report, US – Line Pipe, above n 80; Appellate Body Report, US – Steel Safeguards, above n 80.
100
Treaty on European Union, Treaty of Maastricht, 7 February 1992, C 325/5 (entered into force on 1 November
1993).
101
See NAFTA, above n 28, at art 802.
102
Appellate Body Report, Argentina—Footwear, above n 80.
103
Appellate Body Report, US – Wheat Gluten, above n 80; Appellate Body Report, US – Line Pipe, above n 80;
Appellate Body Report, US – Steel Safeguards, above n 80.
104
WTO Panel Report, Argentina – Safeguards Measures on Imports of Footwear (Argentina – Footwear),
WT/DS121/R, adopted 25 June 1999.
105
WTO Panel Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the
European Communities (US – Wheat Gluten), WT/DS166/R, adopted 31 July 2000, paras 8.178 - 8.181.
106
See generally Trebilcock, Howse and Eliason, above n 98.

22
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imposition of duties must be done in parallel and, for this reason, found that Argentina had

violated its commitments by considering all sources of injury but then excluding its

MERCOSUR partners. Argentina argued in further justification of its measures that Article

XXIV.8 had the effect of prohibiting the imposition of safeguards against partners in a customs

union because Article XIX was not listed among the ‘duties and other regulations of commerce’

that might be maintained under Article XXIV.8(a)(i) or (b). The panel noted that the footnote to

Article 2.1107 of the Safeguards Agreement did not appear to be an absolute ban on retaining

safeguards and, in any case such a restriction might be maintained during the transitional period

of establishment of the customs union, or might be accepted under the ‘substantially all trade’

requirement.108 The panel also speculated on the possible difference between the treatment of a

customs union and an FTA, particularly if the customs union chose to impose safeguards as a

single unit.109 But, in the circumstances, where Argentina had found injury arising out of sources

in and outside the MERCOSUR, it could not then apply the safeguard measures only to the

external sources and exempt its MERCOSUR partners.110

The AB took issue with much of the panel’s analysis of the application of Article XXIV.

In particular the AB considered that footnote to Article 2.1 of the Safeguards Agreement only

applied to safeguard measures applied by a customs union itself, which had not happened in this

case. Secondly the AB stated that any measures to be justified under Article XXIV must be

‘introduced upon the formation’ of the customs union and were subject to the necessity test

declared in the Turkey – Textiles decision.111 Since these issues had not been properly raised the

107
Panel Report, Argentina – Footwear, above n 104, at para 8.95: ‘Nothing in the (Safeguards) Agreement
prejudges the interpretation of the relationship between Article XIX and paragraph 8 of the Article XXIV of GATT
1994.’
108
Ibid, at paras 8.93 - 8.98.
109
Panel Report, Argentina – Footwear, above n 104, paras 8.99 – 8.100.
110
Appellate Body Report, Argentina—Footwear, above n 80, para 102.
111
Ibid, at paras 99 – 109.

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October 1, 2013

AB reversed the panel on these matters. However the AB strongly affirmed that the parallelism

test derived from Article 2 of the Safeguards Agreement was applicable and led the AB, like the

panel, to conclude that Argentina had violated the Agreement.112

In the US – Wheat Gluten case, the USITC investigated the complaint that imports of

wheat gluten from all sources were causing serious injury in the United States, but subsequently

concluded that imports from Mexico and Canada, both NAFTA parties, were not contributing

importantly to the serious injury and therefore excluded Canadian and Mexican imports from the

application of safeguards measures.113 This exclusion was challenged by the EC. In response, the

United States questioned whether the AB had required ‘a broad requirement of ‘parallelism’ in

Argentina – Footwear, but asserted that in following Chapter 8 of NAFTA it had done

everything necessary to respect the concept of parallelism set out in that decision. 114 The United

States asserted its interpretation of parallelism to require that it consider injury from all sources

but allowing it to exempt from safeguard measures NAFTA partners whose exports had not

contributed to the injury.115 The panel found this approach unsupportable under the Safeguards

Agreement, which in its view required ‘symmetry’ of treatment so that all sources be considered

or excluded at the start of the investigation. 116 The panel also noted that since the United States

interpreted Article XXIV as giving a defense only to Article XIX measures, but not to the

Safeguards Agreement,117 the requirements of symmetry and parallelism must stand and had been

violated.118 The panel further stated: ‘We do not believe that we have been asked to rule, and

consequently make no ruling, on whether or not, as a general principle, a member of a free trade

112
Ibid, at paras 111 - 114.
113
Panel Report, US – Wheat Gluten, above n 105, para 8.162.
114
Ibid, at paras 8.158 - 8.159.
115
Panel Report, US – Wheat Gluten, above n 105, paras 8.174 - 8.175.
116
Ibid, at paras 8.176 - 8.179.
117
Ibid, at para 8.181.
118
Ibid, at para 8.182.

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October 1, 2013

area can exclude imports from other members of that free trade area from the application of a

safeguard measure.’119 Before the AB, the United States challenged this approach, but the AB,

upholding the panel’s findings in para 8.182 of the panel report, stated: ‘We see no error in this

approach, and make no findings on these arguments.’120

In the two subsequent cases involving safeguards taken by the United States pursuant to

NAFTA, US – Line Pipe and US – Steel Safeguards turn largely on complex arguments

pertaining to the application of the principle of parallelism in the particular facts of the

investigations, and the methodologies and findings of the customs authorities of the United

States. But, in both cases Article XXIV was raised. In the US – Line Pipe case Korea advanced a

procedural argument that the United States could not raise the Article XXIV defence, as the

CRTA ‘had not yet issued a final decision that NAFTA was in compliance with Article

XXIV.8.’121 The panel rejected this argument out of hand122 and concluded that ‘…the United

States is entitled to rely on an Article XXIV defence against Korea's claims under Articles I, XIII

and XIX regarding the exclusion of imports from Canada and Mexico from the scope of the line

pipe measure.’123 The AB did not find it necessary to deal with the issue extensively as the panel

had found that the conditions for the application of the Article XXIV defence had not been met

and therefore declared the findings of the panel on these matters to be moot. 124 Article XXIV is

briefly discussed by the panel in the US – Steel Safeguards case but dismissed because the panel

119
Ibid, at para 8.183.
120
Appellate Body Report, US – Wheat Gluten, above n 80, para 99.
121
WTO Panel Report, United States – Definitive Safeguards Measures on Imports of Circular Welded Carbon
Quality Line Pipe From Korea (US – Line Pipe), WT/DS202/R, adopted 29 October 2001, para 7.143
122
Ibid, at para 7.144.
123
Ibid, at para 7.146.
124
Appellate Body Report, US – Line Pipe, above n 80, para 199: ‘Given these conclusions, we need not address the
question whether an Article XXIV defence is available to the United States. Nor are we required to make a
determination on the question of the relationship between Article 2.2 of the Agreement on Safeguards and Article
XXIV of the GATT 1994. We, therefore, modify the findings and conclusions of the Panel relating to these two
questions contained in paragraphs 7.135 to 7.163 and in paragraph 8.2(10) of the Panel Report by declaring them
moot and as having no legal effect.’

25
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made a finding that the principle of parallelism had been violated; thus the AB did not have to

take up the matter.125

The result is that there are four decisions in which the method of evaluating justifications

for excluding imports from RTA partners from safeguard measures has been challenged by other

WTO Members and fairly extensively considered at the panel level. Panels have assumed that

exclusion from safeguards is legitimate if the principle of parallelism is followed, but there is no

ruling by the AB that the advantage given to FTA partners 126 by excluding them from safeguard

measures is either justified or unacceptable under WTO law. Thus, the four cases deal with

Article XXIV but in a partial and fragmentary fashion leaving many questions concerning the

application of an Article XXIV defence open.

3. Exemption from Customs Duties

When the NAFTA negotiations were completed Canada maintained a system of exemptions from

customs duties on automobiles directed to companies, which were both importers and producers

of automobiles in Canada. This had the effect of imposing duties on some, mainly Japanese,

automobiles, while exempting those of companies with production facilities in Canada. Japan

objected to the measures and complained to the DSB.127 This was part of an allegedly non-

discriminatory scheme, originating in the 1965 Canada – United States Automotive Products

125
WTO Panel Report, United States — Definitive Safeguard Measures on Imports of Certain Steel Products
(Complaint by Brazil) (US – Steel Safeguards), WT/DS259/R, adopted 11 June 2003, para 10.711: ‘Finally, since
the Panel has found that the exemption of imports from Canada, Mexico, Israel and Jordan in this case was
inconsistent with the requirement of parallelism, there was no need to address the question whether this exemption
in departure of Article I of GATT 1994 and Article 2.2 of the Agreement on Safeguards was justified by Article
XXIV of GATT 1994. As the Appellate Body has stated, the question of whether Article XXIV of GATT 1994 can
serve as an exception to Article 2.2 of the Agreement on Safeguards becomes relevant only when the requirement of
parallelism has been complied with.’
126
As opposed to partners in a customs union.
127
Appellate Body Report, Canada — Autos, above n 80.

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Agreement (‘Autopact’),128 by which all manufacturers of automobiles who maintained a certain

level of Canadian value added were exempted from duties both across NAFTA borders, but also

into Canada from third countries. Canada’s defence was that the measures were non-

discriminatory, but it also raised Article XXIV as a defence to the Japanese critique. 129 The EC,

as intervener, responded that the measures failed to meet the test of necessity and there was not

even a true free trade area since the Autopact, as carried forward into NAFTA Annex 300A, was

really a sectoral agreement.130 The panel summarily dismissed the Article XXIV argument on the

ground that it did not contemplate the granting of preferences to third states.131

In a 2006 complaint, that has not gone beyond the consultations stage, Argentina

complained that the EU by increasing China’s tariff-rate quota by 20,500 tonnes to import garlic,

acting pursuant to Article XXIV, as a result of its most recent expansion, had failed to respect the

conditions set by XXIV.6 by not taking into account Argentina’s ‘initial negotiating rights.’ 132

4. Status of Measures under the Enabling Clause

Until the proceedings in India’s complaint against the EU concerning treatment of certain

intellectual property rights under the EU’s implementation of the Generalized System of

Preferences (GSP), there had been no interpretation of the scope and application of the Enabling

Clause, adopted as part of the Tokyo Round of Multilateral Trade Agreements in 1979, as it

128
Agreement Concerning Automotive Products between the Government of Canada and the Government of the
United States of America, January 1965, http://www.lexum.com/ca_us/en/cts.1966.14.en.html (visited 20 September
2013).
129
WTO Panel Report, Canada – Certain Measures Affecting the Automotive Industry (Canada – Autos),
WT/DS139/R, adopted 11 February 2000, para 6.132: ‘Canada, the United States and Mexico have formed a free-
trade area and, therefore, any advantage that may be accorded by Canada to its free trade partners is exempt from
Article I:1 obligations by virtue of Article XXIV of the GATT.’ See also paras 6.183 and 6.227.
130
Ibid, at paras 6.183 - 6.188.
131
Ibid, at para 10.55: ‘Article XXIV clearly cannot justify a measure which grants WTO-inconsistent duty-free
treatment to products originating in third countries not parties to a customs union or free trade agreement.’
132
Consultations, EU – Tariff Garlic, above n 80.

27
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applied to other measures taken by WTO Members. The EU not only implemented preferences

under the GSP but also added additional categories of preferences: in particular the EU offered

preferential treatment to 12 states that agreed to implement special measures to combat

production and trafficking in drugs, the ‘Drug Arrangements.’ India, not being one of the 12,

complained that the EU had violated GATT Article I and that the measures were not justified

under the Enabling Clause – the legal basis for the GSP and part of the WTO acquis.133 The panel

held that India had shown that the measures violated Article I and that the EU had failed to show

that the Drug Arrangements were justified under the Enabling Clause or under Article XX(b). 134

The AB agreed with the panel that the Enabling Clause constituted an exception from Article I, 135

but held that it was incumbent on India to raise the violation of the Enabling Clause and for the

EU to make the case that the conditions of the Enabling Clause had been respected. This the EU

had failed to do, as the AB held that the principle of non-discrimination in the Enabling Clause

did not necessarily mean exactly the same treatment of all Generalised System of Preferences

beneficiaries but, as a minimum, did require the same treatment of all ‘similarly situated’

beneficiaries.136

The Enabling Clause is thus shown to operate in a manner similar to Article XXIV or

Article XX with respect to the collective right to development of least developed countries. It

sets conditions, which must be respected if it is to be invoked to justify tariff treatment that

deviates from that required by GATT Article I.

133
Appellate Body Report, EC – Tariff Preferences, above n 41, paras 1 - 3.
134
Ibid, at para 6.
135
For further discussion on the legal status of the Enabling Clause, see Lorand Bartels, ‘The WTO Enabling Clause
and Positive Conditionality in the European Community’s GSP Program’ (2003) 6:2 Journal of International
Economic Law 507 at 515-516. Bartels notes that the legal status of the Enabling Clause ‘is not entirely clear.’
However, he concludes that the Enabling Clause was ‘intended to affect the rights and obligations of all of the
Contracting Parties’ and was ‘designed as a legal basis for future (voluntary) measures affecting all Contracting
Parties.’
136
Appellate Body Report, EC – Tariff Preferences, above n 41, paras 173 and 190.

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5. Invocation of RTA Disputes before the WTO Dispute Settlement Procedures

Perhaps the most important WTO decisions for the purposes of this article deal with the

arguments made by WTO Members in various cases that the WTO DSB is not the appropriate

forum to hear the case or that the DSB should take note of and give effect to decisions taken

under the aegis of dispute settlement provisions of various RTAs. 137 These cases most starkly

demonstrate the potential consequences of the same states being parties to multiple trade treaties

with different dispute settlement procedures. This is particularly acute in the many situations

when the provisions of the WTO and the RTA are identical, 138 are based on the same principles139

or when it is affirmed that the RTA should be interpreted in accordance with WTO law. 140 The

nature of the WTO as the basic matrix of international trade law becomes very clear in these

cases as does the issue of whether this implies that the WTO DSB has primacy over any RTA

dispute settlement procedure or whether the DSB is precluded from considering the very

existence, let alone the results, of any such procedure.

The first case to raise these issues is Argentina – Poultry141 in which Argentina sought to

prevent Brazil from proceeding with a complaint against Argentina’s anti-dumping measures, on

the ground that Brazil had already pursued its recourses under the MERCOSUR Protocol of

Brasilia for the Solution of Controversies (‘Protocol of Brasilia’) and had obtained a judgment.

Argentina argued as a preliminary issue that Brazil should not be allowed to bring the case

before the DSB because it had not respected the principle of good faith and was therefore

137
Panel Report, Argentina – Poultry, above n 80; Panel Report, US – Softwood Lumber, above n 80, fn 12; Panel
Report, Mexico – Soft Drinks, above n 80; Appellate Body Report, Brazil – Retreaded Tyres, above n 80.
138
For example, see NAFTA, above n 28, at ch 301.
139
Ibid.
140
NAFTA, above n 28; NZ – China FTA, above n 28.
141
Panel Report, Argentina – Poultry, above n 80, paras 7.17 - 7.41.

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October 1, 2013

estopped from proceeding.142 According to Argentina, for Brazil to have pursued the procedure

under the Protocol of Brasilia and then, when dissatisfied with the outcome, to seek to pursue the

same case under the DSU was evidence of bad faith, a general principle of international law

which should prevent Brazil from proceeding. 143 Alternatively, under Article 31.3(c) of the

Vienna Convention on the Law of Treaties, interpretation must take into account all treaty

obligations existing between the parties, in particular another trade agreement dealing with the

same issues.144 Brazil responded that the requisite legal and factual elements of the plea of

estoppel were not present and that the Protocol of Brasilia (unlike the signed but not yet in force

Olivos Protocol for the Settlement of Disputes or ‘Olivos Protocol’) contained no express ‘fork

in the road’ provision. Furthermore Brazil denied abusing its rights and asserted that it was

simply exercising its rights under the DSU. 145 Chile, the EU and the United States made various

arguments in support of Argentina.146 Only Paraguay, a MERCOSUR partner, called for the full

recognition of the existence of the RTA.147

The panel found for Brazil on the grounds that to violate the principle of good faith there

must be violation of an explicit provision of WTO law and ‘more than mere violation.’ 148

Similarly the panel found no room for the plea of estoppel, laying considerable emphasis on the

142
Ibid, at para 7.18.
143
Ibid, at para 7.20.
144
Ibid, at para 7.21.
145
Panel Report, Argentina – Poultry, above n 80, paras 7.22 - 7.24.
146
Ibid, at paras 7.25 - 7.27 and 7.30 - 7.31. The arguments included: the claims are based on different issues; the
interpretation of MERCOSUR could not be relevant to interpreting a WTO dispute; there was no express
commitment by Brazil not to proceed before the DSB thus no estoppel; Brazil had never explicitly renounced its
rights under the DSU; MERCOSUR dispute settlement rules are not within the terms of reference of the panel; the
panel is restricted to interpreting the GATT and covered agreements; any plea of estoppel only relevant to
MERCOSUR proceedings; DSU art 3.2 only refers to the interpretation of WTO law.
147
Ibid, at paras 7.28, 7.29. Paraguay argued that the case was res judicata because it had already been brought under
the dispute settlement procedure established under MERCOSUR and that Article 21 of the Brasilia Protocol clearly
established ‘the unappealable and binding nature of awards rendered by the Ad Hoc Arbitral Tribunal, which are
deemed to be res judicata,’ a principle they believed should prevail. Paraguay also referred to the Protocol of Olivos
(which was not in force at the time), which allows member to choose a forum in which to pursue their disputes to the
exclusion of all other possible forums provided under the Protocol.
148
Ibid, at para 7.36.

30
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fact the Olivos Protocol was much more explicit than the Protocol of Brasilia and was not yet in

force between the parties.149 The panel also held that Argentina was not calling on it to interpret

the MERCOSUR ruling in a particular way but actually to apply that ruling as a matter of WTO

law – something which the panel considered it was not permitted to do.150

The second case in this series involved the attempt by the Government of Canada to place

evidence before a WTO panel hearing in support of its complaint against the conduct of anti-

dumping and countervailing duty measures in the United States. The evidence consisted in the

decisions of various Canada – United States bi-national panels under Chapter 19 of NAFTA

dealing with essentially the same issues. Canada sought to use these decisions as evidence that its

claims against the United States in the WTO proceeding were well founded. The panel declined

to rule on the weight to be given to the decisions but agreed to include them in a footnote of its

decision.151 In the footnote, the Panel noted that references to these decisions were

‘inappropriate’ because: a) the proceeding in the NAFTA fell outside the terms of reference of

the WTO DSU Article 21.5 Panel since ‘a determination or decision in a NAFTA proceeding is

not a measure taken to comply’ with a DSB ruling, b) the panel’s decision in the NAFTA

proceedings were the subject of a pending review, and c) that Canada had failed to point out that

the Commission was ‘erroneously precluded by the NAFTA panel from reopening the record and

that, accordingly, the Section 129 Determination is based on a different record than that in the

NAFTA proceedings.’152 The AB, since it decided the case on other grounds, did not consider the

decisions at all.

149
Ibid, at paras 7.37 - 7.39.
150
Ibid, at paras 7.40 - 7.41.
151
Panel Report, US – Softwood Lumber, above n 80, fn 12.
152
Ibid.

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The Mexico – Soft Drinks decision,153 like the Argentina – Poultry, represented a

determined attempt by Mexico to resist having to respond before the DSB to a complaint by the

United States against allegedly discriminatory taxes on imported high fructose corn syrup

(HFCS) and products containing HFCS. Mexico considered that it had acted in the context of a

dispute with the United States resulting from the failure of the United States to give effect to an

agreement to allow the importation of Mexican sugar after the conclusion of NAFTA in 1994.

Considering that the dispute was properly to be conducted under NAFTA, Mexico made a plea

of forum non conveniens before the DSB, in answer to the complaint of the United States, noting

that its efforts to institute a dispute settlement panel under NAFTA Chapter 20 had been

frustrated by the United States.

Mexico advanced three central arguments. First, that it had an agreement with the United

States – NAFTA, which was allowed by WTO law, and that NAFTA included a dispute

settlement procedure under Chapter 20, which it sought to use. 154 Due to the refusal of the United

States to refer the dispute to NAFTA Chapter 20, the measures which Mexico had adopted were

proportional and necessary under GATT Article XX(d) in order to ensure respect for Mexican

laws and regulations and to encourage the United States to respect NAFTA. This being the case

Mexico asked that the panel refrain from ruling on the case. Mexico also asked that the panel

recommend that the parties take up their dispute under NAFTA Chapter 20. 155 The United States

focused foremost on the argument that the taxes in question were discriminatory and thus

manifestly violated GATT Article III. Beyond this, the United States argued that Mexico’s plea

of forum non conveniens was beyond the mandate of the panel and that the taxes could not be

153
Panel Report, Mexico – Soft Drinks, above n 80. For an analysis of this case, see William J Davey and André
Sapir, ‘The Soft Drinks Case: The WTO and Regional Agreements’ (2009) 8:1 World Trade Review 5 (Davey).
154
As discussed, NAFTA Chapter 20 has not been interpreted as creating a binding dispute settlement procedure. See
above n 18.
155
Panel Report, Mexico – Soft Drinks, above n 80, paras 4.120 - 4.138.

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justified as necessary to ensure respect for Mexico’s laws and regulations. 156 Fundamentally the

United States argued that the only issues before the panel were Mexico’s obligations under WTO

law and that the request to refuse to make findings and refer the parties to NAFTA was quite

outside the bounds of the panel’s legal authority under the DSU and the Memorandum between

the parties.157 The United States distinguished Argentina – Poultry as being a totally different and

distinct case.158 The EU, as intervener, indicated that in principle it is ‘not excluded that other

treaties form part of public international law, relevant to a case….’159

The panel report deals extensively with Mexico’s arguments, but the panel was clearly

more impressed by the assertions of the United States that the Mexican measures dealt with

similar products and taxed a similar product (HFCS) in a discriminatory manner in violation of

Article III. In response to Mexico’s position that its measures were necessary to ensure respect

for its laws and regulations under Article XX(d) and that the panel had discretion to refuse to

rule and to refer the parties to their NAFTA obligations, the panel displayed great scepticism.

The panel would not accept the characterisation of ‘laws and regulations’ as referring to

international obligations.160 The panel held that it had no discretion under Article XXIII, the DSU

or the standard terms of reference of the dispute to refuse to make findings. 161 On the contrary,

the panel found that there existed a ‘separate’ dispute between the parties under NAFTA over

which it had no right to rule. The AB was in fundamental agreement with the panel 162 holding
156
Ibid, at paras 4.140 - 4.144.
157
Ibid, at paras 4.154 - 4.155.
158
Ibid, at para 4.193.
159
Ibid, at para 4.203.
160
Panel Report, Mexico – Soft Drinks, above n 80, paras 8.171 - 8.172.
161
Ibid, at paras 8.218 - 8.230.
162
WTO Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other Beverages (Mexico—Soft
Drinks), WT/DS308/AB/R, adopted 6 March 2006, para 79. The AB held that it agreed with the Panel’s
conclusions, but several aspects of its reasoning differed. The AB concluded that the terms ‘laws or regulations’
covered rules forming ‘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.’ The AB also found that Article XX(d) did ‘not require the ‘use of coercion’ nor that the measure
sought to be justified results in securing compliance with absolute certainty. Rather, Article XX(d) requires that the

33
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that a panel under the DSU, while it had certain inherent jurisdiction over procedure and the right

to determine its jurisdiction, certainly did not enjoy the kind of broad discretion to refuse to hear

a case as claimed by Mexico. 163 Indeed, the AB seems to have held that for a panel to refuse to

hear a case would be tantamount to denying a WTO Member’s right to having a dispute heard

under the DSU.164 One of the interesting features of this case is the manner in which a dispute

originating in the exercise of exceptional rights under an RTA, allegedly permitted by Article

XXIV which allows preferential arrangements, was largely adjudicated under Article XX(d),

which allows exceptions from the basic provisions of the GATT. Whether there is any link

between these exceptions and in particular the ‘necessity’ analysis under both articles will be

dealt with below.

The major case dealing with Article XXIV is the Brazil – Retreaded Tyres case.165 This is

a remarkable case from a number of perspectives, not the least because the measures defended by

Brazil were adopted for purposes of environmental protection, but also because Brazil pleaded

the necessity of giving effect to MERCOSUR customs union rules as determined by a

measures be designed to ‘secure compliance with laws or regulations which are not inconsistent with the provisions’
of the GATT 1994.’ And, finally, the AB did ‘not endorse the Panel’s reliance on the Appellate Body’s
interpretation in US – Gambling of the term ‘necessary’ to interpret the terms ‘to secure compliance’ in Article
XX(d).’
163
Ibid, at paras 45 - 57.
164
Ibid, at paras 53, 54 and 56. The AB first notes that ‘[a] decision by a panel to decline to exercise validly
established jurisdiction would seem to ‘diminish’ the right of a complaining Member to ‘seek the redress of a
violation of obligations’ within the meaning of Article 23 of the DSU, and to bring a dispute pursuant to Article 3.3
of the DSU. This would not be consistent with a panel's obligations under Articles 3.2 and 19.2 of the DSU.’
However, the AB goes on to note that they would ‘express no view as to whether there may be other circumstances
in which legal impediments could exist that would preclude a panel from ruling on the merits of the claims that are
before it.’ The Appellate Body’s decision is carefully tailored to the circumstances before it, and does not preclude a
finding of a legal impediment in other situations. However, it remains unclear whether the legal impediment could
take the form of an RTA. Further on, the AB remarks that Mexico’s argument ‘would entail a determination of
whether the United States has acted consistently or inconsistently with its NAFTA obligations’ and concludes that it
saw ‘no basis in the DSU for panels and the Appellate Body to adjudicate non-WTO disputes.’ Moreover, ‘accepting
Mexico’s interpretation would imply that the WTO dispute settlement system could be used to determine rights and
obligations outside the covered agreements.’
165
Appellate Body Report, Brazil – Retreaded Tyres, above n 80 and completed by WTO Arbitration under Article
21.3(c), Brazil – Measures Affecting Imports of Retreaded Tyres, ARB-2008-2/23, adopted 9 August 2008.

34
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MERCOSUR arbitral tribunal.166 For reasons of public health and environmental protection,

Brazil had, in 2000, adopted rules banning the importation of retreaded and used automobile and

truck tires from all sources. As a result of a legal challenge by Uruguay that the ban violated the

MERCOSUR guarantees of free access of products from other partners, Brazil adopted a revised

rule in 2004 exempting retreaded tires from MERCOSUR countries from the general ban. The

EC challenged this measure a) as violating Article XI and not being justified under Article XX

and also b) as violating Articles I.1 and XIII.1 and not being justified under Article XXIV.5. The

panel concluded that the ban could indeed reduce the number of waste tires in Brazil and hence

contribute to protecting public health and the environment. 167 The AB agreed that a WTO

Member had the right to set its own environmental objectives and also the level of protection

desired.168 In answer to the EC objections to the panel’s approach, the AB ruled that the

appropriate test was that the measure challenged should ‘…bring(s) about a material contribution

to the achievement of its objective.’169 In the circumstances the AB concluded that the import ban

met Brazil’s objectives170 and that the panel, after weighing all the alternatives, had not erred in

finding that the ban was ‘necessary to protect human, animal or plant life or health.’171

The AB parted company and reversed the panel’s analysis of the application of the

chapeau to Article XX. Whereas the panel had found that compliance with a MERCOSUR

arbitral decision to be a rational basis for the ban and the resulting discrimination between

MERCOSUR and non-MERCOSUR states, the AB held that there had to be a clear link between

166
Appellate Body Report, Brazil – Retreaded Tyres, ibid, at fn 163 (The exemption was incorporated into Article 40
of Portaria SECEX 14/2004).
167
WTO Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres (Brazil – Retreaded Tyres),
WT/DS332/R, adopted 12 June 2007.
168
Appellate Body Report, Brazil – Retreaded Tyres, above n 80, para 140.
169
Ibid, at para 152.
170
Ibid, at para 155.
171
Ibid, at para 183. The AB also agreed that the panel had made an objective analysis of the facts as required by the
DSU Article 11 (para 209). See generally paras 210-212.

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the discrimination and the objective pursued. 172 In this case the AB found that the environmental

objective was not the reason given for the ban and compliance with an arbitral decision bore no

rational link with the true objective pursued. According to the AB, discrimination based on an

unrelated objective was arbitrary and could not meet the test of the chapeau to Article XX. Brazil

could have raised the environmental justification and arguably might have succeeded, but it was

not for the AB to second-guess its reasons for not doing so. 173 Similarly, the AB concluded that

for the same reasons the ban constituted a ‘disguised restraint on international trade.’174

The AB in Brazil – Retreaded Tyres does several very interesting things. From the

environmental perspective it comes as close as any WTO case to recognising the necessity of

environmental measures and their consequent impact on international trade. Similarly, both the

panel and the AB, while certainly not ruling on MERCOSUR issues, go a considerable way in

analysing the consequences of decisions taken pursuant to an RTA. The RTA ceases to be

something that dares not speak its name. The panel even goes so far as to suggest that an RTA

may in appropriate cases be part of public international law, which may be relevant to the

decision on a complaint under the DSU. 175 The AB did not deem it appropriate to respond to

various arguments of the EU and of some interveners that it should not consider MERCOSUR as

172
Ibid, at para 227.
173
Ibid, at para 234. In fn 445 to the same paragraph the AB notes: ‘In addition, we note that Article XXIV.8(a) of
the GATT 1994 exempts, where necessary, measures permitted under Article XX from the obligation to eliminate
‘duties and other restrictive regulations of commerce’ with respect to ‘substantially all the trade’ within a customs
union. Therefore, if we assume, for the sake of argument, that MERCOSUR is consistent with Article XXIV and
that the Import Ban meets the requirements of Article XX, this measure, where necessary, could be exempted by
virtue of Article XXIV.8(a) from the obligation to eliminate other restrictive regulations of commerce within a
customs union.’
174
Ibid, at para 239.
175
Panel Report, Brazil – Retreaded Tyres, above n 167, para 7.283. The Panel notes that ‘in observing that the
MERCOSUR ruling provided a reasonable basis for Brazil to enact an exemption from the import ban in favour of
remolded tyres originating MERCOSUR, we are not suggesting that the invocation of any international agreement
would be sufficient under any circumstances, in order to justify the existence of discrimination in the application of
a measure under the chapeau of Article XX. Rather, we have considered the specific circumstances of the case,
including the nature of the international agreement and of the ruling on the basis of which Brazil has acted, and
concluded that in the circumstances, this provided a reasonable basis for Brazil to enact an exemption from the
import ban in favour of its MERCOSUR partners.’

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it had not been approved by the CRTA, or Brazil’s position that RTAs enjoyed a prima facie

presumption of compliance with Article XXIV 176 or that MERCOSUR was subject to different

rules as it had been negotiated under the Enabling Clause. 177 As in the case of Mexico – Soft

Drinks, the link between the possible justifications of exceptional measures under an RTA in

violation of other provisions of the GATT is argued as much in function of Article XX as under

Article XXIV.

After a lengthy process under its safeguards legislation in 2010 the Dominican Republic

imposed safeguard duties of 38% on polypropylene bags and tubular fabric, with partial

exemption for Columbia, Indonesia, Mexico and Panama. Several South and Central American

WTO Members complained to the DSB that these duties violated GATT Articles I, II, XIX as

well as the Agreement on Safeguards. The Dominican Republic responded that it bound GATT

customs duties on the items in questions and alleged that the dispute in fact had nothing to do

with its obligations under WTO law but represented a dispute with certain countries concerning

rights and obligations under two RTAs, the Central America – Dominican Republic FTA and the

Dominican Republic – Central America FTA. 178 On this basis, the Dominican Republic requested

that the panel issue a preliminary ruling staying the proceedings on the ground that they were an

abuse of the WTO DSU process.179 The complainants denied that they had ever raised other

agreements and asserted that they enjoyed complete freedom to assert their WTO rights before

the DSB.180 The United States, the EU and Turkey supported them in this view as third parties. In

176
Appellate Body Report, Brazil – Retreaded Tyres, above n 80, para 78.
177
Ibid, at para 116: ‘The United States argues that regional arrangements as defined under Articles 1, 2, and 3 of the
Enabling Clause have different characteristics and are subject to different obligations than customs unions and free
trade areas covered by Article XXIV.’
178
Panel Report, Dominican Republic – Polypropylene Bags, above n 80, para 7.92.
179
Ibid.
180
Ibid, at para 7.93.

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response to questions from the panel, all parties, including the Dominican Republic, expressed

the view that:

There were no limitations under the covered agreements for a Member to impugn a
measure through the WTO dispute settlement mechanism if it considered that that measure,
as well as being inconsistent with commitments incurred by another Member under an
FTA, was inconsistent with obligations under the covered agreements.181

This being the case the panel felt that ‘no additional comment’ on the matter was

needed.182

US – Tuna II (Mexico) (also known as Tuna Dolphin II) demonstrates the tension

between RTA dispute settlement and the WTO’s DSB. In this case, Mexico requested

consultations on a series of measures passed by the US addressing the labelling of tuna as

‘dolphin-safe.’183 Mexico argued that these measures were discriminatory under the GATT and a

violation of the Technical Barriers to Trade (TBT) agreement. 184 The US requested that the

dispute be moved to NAFTA, invoking the NAFTA choice of forum provision under Article

2005(4).185 When Mexico failed to move the proceedings, the US announced that it had requested

NAFTA dispute settlement consultations with Mexico on its failure to move the ‘dolphin-safe’

labelling complaint from the WTO to NAFTA. 186 The US also made a statement in front of the

DSB on Mexico’s panel request where the US underlined that it was ‘very concerned’ that

Mexico was proceeding with the request despite the fact that the US had invoked the choice of

181
Ibid, at para 7.94.
182
Ibid, at para 7.96.
183
World Trade Organization, United States – Measures Concerning the Importation, Marketing and Sale of Tuna
and Tuna Products, http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds381_e.htm (visited 20 September 2013).
184
Ibid.
185
Office of the United States Trade Representative, United States Initiates NAFTA Dispute with Mexico over
Mexico’s Failure to Move its Tuna-Dolphin Dispute from the WTO to the NAFTA,
http://www.ustr.gov/about-us/press-office/press-releases/2009/november/united-states-initiates-nafta-dispute-
mexico-over (visited 20 September 2013). NAFTA article 2004(5) gives the choice of forum to the defendant rather
than to the complainant in standards related cases. Whether a mixed NAFTA and TBT based case could be decided
exclusively by one forum was not argued or decided. It should be noted that NAFTA contains Chapter 9 on TBT.
186
Ibid.

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forum provision.187 Mexico argued that the provisions cited by the US did not apply to the

dispute and that the dispute had ‘important multilateral implications that had to be resolved in the

WTO.’188 In the end, however, the NAFTA issue was not argued by the US in front of the Panel

and was not raised in the Panel or Appellate Body reports.

In conclusion, this somewhat lengthy review of the cases dealing with Article XXIV

shows that, sixty-five years after the adoption of the GATT and sixteen years after the creation of

the WTO, and despite the existence of literally hundreds of RTAs, the law governing their

relationship with the WTO remains a matter of considerable uncertainty. The DSB will give

effect to certain provisions of RTAs such as the exemption for safeguards as long as the

parallelism principle is respected. The exact reading of the exemption for ‘laws and regulations’

is far from clear, as is the relationship between Articles XXIV and XX. Whether dispute

settlement proceedings under RTAs can be invoked before the DSB is also a matter of debate.

On one hand there seems to be a claim to a virtual monopoly by the AB and yet there does

appear to be some limited openness to dealing with the consequences of RTA dispute settlement

decisions. Context may be the key.

III. Arguments for and Against Accounting for RTAs at the WTO

A. Arguments for Accounting for RTAs at the WTO

Many different explanations have been given in various cases by panels, the AB, parties and

interveners for the difficulties faced by WTO panels and the AB in taking into account RTAs or

proceedings under RTAs as they hear cases under WTO law. On the other hand, it is possible to

187
Dispute Settlement Body, Minutes of Meeting (held on 20 April 2009), WT/DSB/M/267,
http://www.worldtradelaw.net/dsbminutes/m267.pdf (visited 20 September 2013), para 77 (DSU Meeting).
188
Ibid, at para 79.

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advance arguments in favour of a more open policy towards RTAs and especially the dispute

settlement provisions of RTAs. This part of the article is devoted to an appraisal of the

arguments that can be made on both sides of the ledger.

1. RTAs are not WTO law

The most common explanation of why it is not possible to take RTAs into account in WTO

proceedings is that an RTA is not part of the WTO legal acquis. This being the case, so the

argument runs, the provisions of an RTA or decisions taken under RTA dispute settlement

proceedings do not form part of the law relevant to reaching a decision under the DSU. 189 The

assumption is that WTO law is defined and exhaustively set out in the Final Act of the

Marrakesh Agreement, and that the GATT 1994, the Agreement Constituting the WTO, the

covered agreements, understandings and declarations constitute the complete and definitive

statement of WTO law.190 This is surely based on an impoverished vision of law itself. It is based

on a highly positivist view of law embracing both procedural and substantive matters and

implying that law can exist in a vacuum and can be limited to a particular set of texts. This is an

extreme view of law and is, in fact, not one which the AB has fully espoused since a number of

decisions indicate that WTO law must be more broadly cast to include fundamental procedural

norms as well as general principles of public international law. 191 Thus it seems anomalous that
189
Another issue to consider, although not addressed further in this article, is whether arbitration under Article 25 of
the DSU would allow parties to mandate panels to take into account RTA rules and decisions. Marceau and
Tomazos suggest that arbitration under this provision would still be WTO arbitration and thus subject to the
exclusivity provision of Article 23 of the DSU. See Gabrielle Marceau and Anastasios Tomazos, ‘Comments on
Joost Pauwelyn’s Paper: ‘How to Win a WTO Dispute Based on Non-WTO Law?’ (2008) 8 European Community
Studies Association of Austria Publication Series 55 at fn 7 (Marceau and Tomazos).
190
Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, 1867 UNTS 14, 33
ILM 1143 (1994) (Final Act of the Marrakesh Agreement); Marrakesh Agreement Establishing the World Trade
Organization, 1867 UNTS 154, 33 ILM 1144 (1994) (Agreement Constituting the WTO); see GATT 1994, above n
35.
191
For a summary of cases applying principles of public international law, see World Trade Organization, Principles
and Concepts of General Public International Law, online: WTO
http://www.wto.org/english/tratop_e/dispu_e/repertory_e/p3_e.htm (visited 20 September 2013).

40
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the DSB should be refusing to draw upon other treaties made by WTO Members while at the

same time being willing to draw upon other general elements of public international law.

However, as a working hypothesis in a world where WTO Members are highly jealous of

their prerogatives as ‘masters of the treaty,’ 192 where states are concerned not to expand the reach

of the very specific commercial commitments that they have made to each other and where they

do not wish to see the emergence of any kind of international economic government or the

expansion of the powers of the WTO as an international organisation, this approach is

understandable. One can see why panels and the AB have adopted this position on a number of

occasions when they have been asked to consider an RTA or decisions taken pursuant to an RTA

as relevant to deciding a case. But, a working hypothesis can hardly be erected into a principle of

law. There must be more weighty reasons at work. Furthermore, Joost Pauwelyn has provided a

very convincing distinction between adding to WTO obligations to all Members, something

which is prohibited, and applying RTAs to the parties in the context of a WTO dispute in a way

which binds them alone and in no way increases general WTO commitments. 193 If this approach

were to be adopted, RTA parties would be held to their RTA obligations without affecting the

general rights and duties of WTO Members.

2. RTAs are not a part of the mandate of a panel under the DSU

A number of parties and interveners and the AB itself have stated that panels must strictly adhere

to the standard terms of reference governing the case in the sense that the terms of reference

alone empower the panel and the AB to hear and decide the case. This is a much more weighty

argument which sounds both in procedure and in substance. The terms of reference agreed by the
192
An expression first used by the German Constitutional Court.
193
Joost Pauwelyn, ‘The Application of Non-WTO Rules of International Law in Dispute Settlement’ in Patrick
Macrory, Arthur Appleton, and Michael Plummer, eds, The World Trade Organization: Legal, Economic and
Political Analysis (Springer, 2005) 1405 at 1416 (Pauwelyn, Application of Non-WTO Rules).

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DSB do define the limits of a case, just as the agreement to arbitrate defines the jurisdiction of an

arbitral tribunal. Article 7 of the DSU authorises the panel:

1. … To examine, in the light of the relevant provisions in (name of the covered

agreement(s) cited by the parties to the dispute), the matter referred to the DSB by (name
of party) in document ... and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in that/those agreement(s).

2. Panels shall address the relevant provisions in any covered agreement or agreements
cited by the parties to the dispute.194

These terms of reference as described in Article 7 do lend themselves to the suggestion that the

panel should confine its attention to the covered agreements and to the dispute between the

parties, but are they exhaustive?195 Are the bounds of the dispute set by WTO law as narrowly

defined as this or can they be expanded or limited by the DSB and the parties? Is there an

element of discretion that can be exercised by both or is it restricted by the wording of Article 7,

especially when read in conjunction with Article 11 and 19? If by the parties, what happens if

one party believes that an RTA is relevant to their dispute? If by the DSB or WTO law in

general, then it must be noted that the basic principles of the GATT are not mentioned in the

terms of reference, but this does not stop the parties alleging violations of the GATT in virtually

every case. If one party alleges a violation of GATT Article I, the allegation must be

substantiated, but after that, the burden shifts to the other party, which cannot simply refuse to

194
DSU, above n 44, at art 7.
195
Scholars have argued that this provision is not exhaustive. For example, see Joost Pauwelyn, ‘How to Win a WTO
Dispute Based on Non-WTO Law? Questions of Jurisdiction and Merits’ (2003) 37:6 Journal of World Trade 997 at
1001 (Pauwelyn, How to Win a WTO Dispute) and see Pauwelyn, Application of Non-WTO Rules, above n 193, at
1405. However, Pauwelyn’s position has proved controversial. For example, Gabrielle Marceau and Anastasios
Tomazos argue that while the WTO should not be interpreted in complete isolation from the rest of international
law, WTO adjudicating bodies have a limited jurisdiction (see Marceau and Tomazos, above n 189). Steve
Charnovitz, in a groudbreaking analytical article, has tackled a different aspect of this question by focusing on the
enforceability of WTO accession agreements in dispute resolution procedures. He concludes that accession
agreements are enforceable because ‘Article XII of the WTO Agreement empowers the Ministerial Conference to
conclude accession agreements in the name of the WTO, and such agreements are enforceable as Article XII
agreements.’ See Steve Charnovitz, ‘Mapping the Law of WTO Accession’ (2013) George Washington Law Faculty
Publications & Other Works 1 at 80 (Charnovitz).

42
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debate a particular GATT article as being irrelevant to the case. The same is true of the broader

WTO legal acquis. If this is correct, the parties and the DSB can define the parameters of the

dispute at the outset and this can preclude raising arguments not made in the initial complaint,

but the terms of reference cannot stop a party from advancing an argument based on its vision of

WTO law. A further objection to placing emphasis on the mandate is that it begs the question of

what law governs the interpretation of the covered agreement in question or of the GATT itself.

A liberal interpretation of the content of WTO law greatly increases the scope of the mandate

given by the DSB in a given case. A further objection to limiting the relevant agreements to the

mandate is that rules of treaty interpretation and general principles of public international law are

also applicable in the dispute resolution process. A narrow reading of article 7 of the DSU would

not reflect the fact that the AB has already reached outside the four corners of the treaty text.

A further question raised by the argument that the mandate, as set out in the specific

terms of reference of a case, defines the ambit of the law applicable to a dispute is whether the

DSB might not declare an RTA relevant to a dispute in setting the terms of reference. What if

this happened? By this logic the panel would be bound to consider arguments based on the RTA.

On the other hand, continued refusal by the DSB to give such a mandate when requested by one

party would almost certainly have a profound influence upon the manner in which the panel

approaches the dispute and, in all likelihood, panels will see this as a direction not to consider the

RTA.

3. The Impact of the DSU Article 11 and 19

Related to the issue of the mandate of panels and the law that they are authorised to apply is the

interpretation of articles 11 and 19. Article 11 refers to the ‘matter’ before the panel and also to

43
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‘rulings provided for in the covered agreements.’ Similarly, Article 19 makes panel and AB

recommendations dependent on the conclusion ‘that a measure is inconsistent with a covered

agreement.’ These two provisions can be interpreted as requiring a panel to confine itself to

applying WTO law as defined by the covered agreements. This interpretation is certainly

possible, but is it the only plausible approach? For the reasons set out above, this approach does

not appear to be entirely convincing. Even if one accepts the premise that the matter referred to

in Article 11 requires a claim grounded in a covered agreement, this does not necessarily mean

that an RTA cannot furnish a valid defence to the claim. Beyond this lies the broader question of

the definition of WTO law and the suggestion that the net has been cast too narrowly up to now.

4. The DSB is precluded from denying a request to establish a panel

It has been held that a decision by the DSB or a panel that a dispute should be referred to

procedures under an RTA, rather than being argued under the DSU, would be tantamount to

denying the right of a WTO Member to having its case heard by the WTO. 196 There are two

central aspects to this claim: a) that no request to form a panel can be denied and b) that a panel

could not decide that a case before it should be heard before another body.

Perhaps the most persuasive basis for this position is not the legal but the policy

justification. If the WTO is to serve as the fundamental and irreducible minimum of international

trade law between states it must provide the central means of settling disputes. If it is really

compulsory and binding, there can be no opting out of the DSU, no reservations are allowed and

all states, great or small, must be able to rely on their right of access to the DSB. As a matter of

policy this is a tempting argument, especially if one takes the view that RTAs run the grave risk

196
Appellate Body Report, Mexico – Soft Drinks, above n 162, para 53.

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of weakening the very structure of the WTO and WTO law. 197 By this token, RTAs are permitted

but must not be allowed to swamp the WTO as an institution and as a mode of settling trade

disputes. At a time when over 393 RTAs have been notified to the WTO under Article XXIV or

the Enabling Clause, where the pace of negotiation of new and even larger agreements remains

frenetic198 and where the conclusion of the Doha Round of Multilateral Trade Negotiations

remains a remote possibility, this approach serves to maintain the essential integrity of the WTO

as an institution and as reflecting an essential body of trade rules not to be diluted by others.

If the policy arguments in support of this position are strong, the legal underpinnings are

less convincing. In the first instance, this position does not deal with the legal implications of the

fact that many states have made treaties, before or subsequent to adhering to the WTO, which

give priority to dispute settlement procedures under FTAs. 199 In some circumstances the earlier in

time general treaty may forbid the conclusion of later, more specific treaties. 200 However, in the

case of the WTO, Article XXIV expressly allows the conclusion of later more specific treaties

between some WTO Members. At the very least, this argument fails to deal with the problem of

coexistence of conflicting treaty commitments. If states have decided to give themselves the

option of choosing FTA procedures, why should the WTO frustrate this choice? Secondly, is

referral of parties to the procedure that they have specifically chosen a failure to deal with the

dispute? Surely not. Domestic and international courts do this all the time. Lex specialis is

frequently given preference over lex generalis by international tribunals and this is done to give

197
For example, see Jagdish Bhagwati, ‘Regionalism versus Multilateralism’ (1992) 15:5 The World Economy 535;
Sam Laird, ‘Regional Trade Agreements: Dangerous Liaisons?’ (1999) The World Economy 1179. See generally
James Mathis, Regional Trade Agreements in the GATT/WTO (The Hague, T.C.M. Asser Press, 2002) at Part Four.
198
See WTO Facts and Figures, above n 13. As mentioned earlier in this article, a series of new RTAs are being
negotiated, namely the Trans-Pacific Partnership, the Canada – EU agreement, and the US – EU agreement.
199
For example, see Olivos Protocol for the Settlement of Disputes in MERCOSUR, 42 ILM 2 (2003) at arts 1-2 and
NZ – China FTA, above n 28. For a complete list, see Joost Pauwelyn, ‘Going Global, Regional or Both? Dispute
Settlement in the Southern Africa Development Community (SADC) and Overlaps with the WTO and Other
Jurisdictions’ (2004) 1 Minnesota Journal of Global Trade (Pauwelyn, Going Global).
200
For example, see Commission v Council (ERTA), (1971) ECR 263.

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effect to the will of the parties to the more specific treaty. 201 Thirdly, the denial of the legitimacy

of the choice of a non-WTO procedure suggests a narrow reading of Article XXIV, which would

then allow states only a partial authority to enter into RTAs. To insist that a state always has a

right to a WTO panel is to assert the primacy of the WTO in a powerful way, which negates

other treaty commitments and reads down the very language of the GATT Article XXIV.

5. The doctrine of forum non conveniens is unhelpful202

To invoke this maxim in order to deny the recourse sought by a party to a dispute is to replace

analysis by nomenclature. There is either a legal right existing under an RTA, which is

recognised by the WTO, or there is not. Asserting a legal maxim does little to solve the

underlying tension of how to reconcile divergent obligations between RTAs and the WTO. As

Marceau notes, the WTO will always be the convenient forum for WTO-law breaches, while an

RTA dispute body will always be the convenient forum for a breach of that agreement. 203

Furthermore, to assert that there may be a right but there is no remedy recognised by the WTO is
201
Caroline Henckels, ‘Overcoming Jurisdictional Isolationism at the WTO – FTA Nexus: A Potential Approach for
the WTO’ (2008) EJIL 19:3 (Henckels).
202
Other principles addressed in the literature as potentially precluding a party from instituting proceedings at the
WTO after receiving a final judgment under the dispute settlement body of an RTA include res judicata, abuse of
process, good faith and lis pendens. However, the literature is divided on whether such principles would help resolve
the relationship between RTA dispute settlement and the DSU process. See Jennifer Hillman, ‘Conflicts Between
Dispute Settlement Mechanisms in Regional Trade Agreements and the WTO – What Should the WTO Do?’ (2009)
Cornell Int’l LJ 193 (Hillman); Kyung Kwak and Gabrielle Marceau, ‘Overlaps and Conflicts of Jurisdiction
Between the World Trade Organization and Regional Trade Agreements’ in Lorand Bartels and Frederico Ortino,
eds, Regional Trade Agreements and the WTO Legal System (Oxford: Oxford University Press, 2006) 465 (Kwak
and Marceau, Overlaps and Conflicts); Gabrielle Marceau and Julian Wyatt, ‘Dispute Settlement Regimes
Intermingled: Regional Trade Agreements and the WTO’ (2010) 1:1 Journal of International Dispute Settlement 67
(Marceau and Wyatt); Nguyen Tan Son, ‘Towards a Compatible Interaction Between Dispute Settlement under the
WTO and Regional Trade Agreements’ (2008) 5 Macquarie J Bus L 113 (Tan Son); Joost Pauwelyn, ‘Adding
Sweeteners to Softwood Lumber: the WTO-NAFTA ‘Spaghetti Bowl’ is Cooking’ (2006) 9:1 Journal of
International Economic Law 197 (Pauwelyn, Adding Sweeteners to Softwood Lumber); Leonila Guglya, ‘The
Interplay of International Dispute Resolution Mechanisms: the Softwood Lumber Controversy’ (2011) 2:1 J Int Disp
Settlement 175 (Guglya); Tim Graewert, ‘Conflicting Laws and Jurisdictions in the Dispute Settlement Process of
Regional Trade Agreements and the WTO’ (2008) 1 Contemporary Asia Arbitration Journal 287 (Graewert);
Gabrielle Marceau, ‘Conflicts of Norms and Conflicts of Jurisdictions: The Relationship Between the WTO
Agreement and MEAs and Other Treaties’ (2001) 35 J. World Trade at 1112 (Marceau, Conflicts of Norms); see
Davey, above n 153; see Henckels, above n 201.
203
See Marceau, Conflicts of Norms, above n 202; see Kwak and Marceau, Overlaps and Conflicts, above n 202.

46
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to return to a vision of law which has been rejected in most legal systems and which is certainly

not consistent with modern public international law.204 Contemporary international law places

great stress on the principle of effectiveness and rejects the suggestion that no solution can be

found.205

6. WTO law as supreme law

Does the position adopted by the AB in various cases reflect a claim of supremacy of WTO law

over all other treaties governing the economic relations of states? 206 This suggestion is appealing

at first blush. The WTO was conceived as providing a minimum level of rights and duties, which

should bind all WTO Members.207 There is an unarticulated, but nonetheless significant,

aspiration to universality, which is slowly being realised as the last major economies of the world

join the WTO.208 The provisions of the Agreement Establishing the WTO and various covered

agreements and the GATT before them are designed to set basic standards to be respected by all

WTO Member. They are generally described as forming a floor not a ceiling constituting a level

below which states are not permitted to descend. 209 There is a certain logic to the idea that the
204
See Jackson, above n 33, at 31.
205
Non liquet has generally been rejected under public international law. See Gideon Boas, Public International
Law: Contemporary Principles and Perspectives (Cheltenham: Edward Elgar Publishing Limited, 2012) at 109-110;
David J Bederman, The Spirit of International Law (Athens: University of Georgia Press, 2002) at 99.
206
Scholars have explored different aspects of the WTO’s possible supremacy, namely the constitutionalization of
the WTO. See generally Matthew Fischer, ‘Is the WTO Appellate Body a ‘Constitutional Court’? The Interaction of
the WTO Dispute Settlement System with Regional and National Actors’ (2008-2009) 40 Georgetown Journal of
International Law 291; Joel P. Trachtman, ‘The Constitution of the WTO’ (2006) 17:3 The European Journal of
International Law; Robert Howse and Kalypso Nicolaidis, ‘Enhancing WTO Legitimacy: Constitutionalization or
Global Subsidiarity?’ (2003) 16:1 Governance 73; Jeffrey L. Dunoff, ‘Constitutional Conceits: The WTO’s
‘Constitution’ and the Discipline of International Law (2006) 17:3 European Journal of International Law 647. Also
see generally E.U. Petersmann, Constitutional Functions and Constitutional Problems of International Economic
Law (University of Fribourg Press & Westview Press: Bolder, Oxford & San Francisco, 1991).
207
Arie Reich, ‘The WTO as a Law-Harmonizing Institution’ (2004) 25:1 U Pa J Intl’l Econ L 321.
208
World Trade Organization, Accessions: Russian Federation,
http://www.wto.org/english/thewto_e/acc_e/a1_russie_e.htm (visited 20 September 2013); World Trade
Organization, Member Information: China and the WTO,
http://www.wto.org/english/thewto_e/countries_e/china_e.htm (visited 20 September 2013).
209
Raj Bhala and Kevin Kennedy, World Trade Law (Charlottesville: Lexis Law, 1998) at 4: The GATT sets out four
legal commitments from which deviation by Members is disapproved: the unconditional most-favoured nation

47
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dispute settlement arrangement applicable to them all and designed to resolve all disputes

between them should exclude recourse to any other form of settlement.

But is WTO law in general and the DSU in particular designed to be supreme over all

other trade treaties? This is questionable. First, there is no statement of supremacy or exclusivity

such as that which exists in Article 345 of the Treaty on the Functioning of the European

Union.210 Nor is there any statement that the DSB must be the exclusive body to hear trade

disputes between WTO Members. The DSU Article 23 can be interpreted as requiring all

disputes under covered agreements to go before the DSB, but it surely does not preclude the

creation of dispute settlement procedures under RTAs. There may be a limited claim to

procedural supremacy to hear disputes under covered agreements, but there is no claim to

substantive supremacy. Supremacy of WTO law would have to be read into the DSU. Second, to

be supreme in law there has to be a desire on the part of the makers of the treaty to be subject to

a supreme treaty or international organisation. Yet, the WTO is not even a formal Specialised

Agency of the UN, still less an acknowledged institution of global economic government. The

only real obligation of WTO Members is to obey WTO law. The WTO is not a supranational

institution and WTO law is not directly effective in the legal systems of member states. Where

do the hypothetical supremacy and the alleged exclusivity of the DSU come from? It is droit

prétorien of the purest form. Yet the AB and even more panels have been careful not to take an

‘activist’ stance with respect to WTO law and have been careful to base their reading of the law

squarely on the text and the letter rather than on its spirit and purpose. 211 It is generally asserted

obligation, the national treatment obligation, binding commitments to reduce tariffs and the elimination of quotas on
imports. However, there has been some debate over whether newer Agreements create a minimum or maximum set
of standards, namely in regards to the Trade-Related Aspects of Intellectual Property Rights. See Global Intellectual
Property Centre, TRIS: Floor Versus Ceiling? (2010),
http://www.theglobalipcenter.com/sites/default/files/reports/documents/TRIPS_FloorVsCeiling_WP_1_10_2.pdf
(visited 20 September 2013).
210
Treaty on the Functioning of the European Union (Consolidated Version 2012), OJ C 325, 26.10.2012 at art 345.
211
Susan Esserman and Robert Howse, ‘The WTO on Trial’ 83 Foreign Aff. 130 at 133.

48
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that this conservative approach is well suited to a legal system based on careful and limited

consent to very specific commitments, which are reached only after careful negotiations. 212 It is

quite clear that the WTO is not a supranational body; it is a ‘member-driven’ organisation whose

decisions are reached by consensus. If the WTO is supreme this principle should be enunciated

in the texts and not read in by the AB.

If one must reject the idea of supremacy of WTO law in general is there still an argument

for the supremacy of the DSU? Again, it is hard to find an explicit statement of supremacy or

even of a will to exclude other remedies, unless one focuses on the wording of the terms of

reference of a particular dispute. The insufficiency of this approach has been discussed above. It

is hardly convincing.

A further interesting line of questioning relates to the status of the DSB. Should it be seen

as the supreme arbiter of international trade law? However appealing this suggestion may be to

WTO supporters there is no foundation for the argument in WTO law. Suggestions have been

made that there should be a supreme arbitral tribunal for investor-state and other forms of

international commercial arbitration, but all attempts to attain this objective in the field of

arbitration have failed.213 The International Chamber of Commerce Research Foundation has

recently released a report supporting the WTO in general and calling for the creation of a global

212
For a discussion and critique of the ‘textualist’ approach, see William Magnuson, ‘WTO Jurisprudence & Its
Critiques: The Appellate Body’s Anti-Constitutional Resistance’ (2010) 51 Harvard ILJ Online 121.
213
For example, there have been suggestions to create an appellate review system for investment arbitration under the
International Center for Settlement of Investment Disputes and for the Free Trade Area for the Americas. See
August Reinisch, ‘The Proliferation of International Dispute Settlement Mechanisms: The Threat of Fragmentation
vs. the Promise of a More Effective System? Some Reflections From the Perspective of Investment Arbitration’ in
Isabelle Buffard, James Crawford, Alain Pellet, Stephan Wittich, eds, International Law Between Universalism and
Fragmentation (Leiden: IDC Publishers, Martinus Nijhoff Publishers and VSP) at 119-120 and Noemi Gal-Or, ‘The
Concept of Appeal in International Dispute Settlement’ (2008) 19:1 EJIL 43.

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trade tribunal in particular.214 However appealing this may be, the idea of a global trade tribunal

has yet to find support among WTO Members.

7. RTA law may be violated, but not WTO law

In the Argentina – Poultry case it was argued that if any rule was violated by refusal to take a

decision of a MERCOSUR tribunal into account before the DSB, it was that of MERCOSUR and

not the DSB. By this logic WTO Members who consider that their rights under an RTA are

denied by a proceeding before the DSU should look to their remedies under the RTA in question:

these states should not look to a WTO panel to resolve the differences which they have with an

RTA partner. This position begs the question, raised above, as to whether it is proper for a WTO

panel to act as though it must be blind to a claim or a defence based on the law governing two

WTO Members under an RTA. This position leads to the same difficulties as those encountered

by states, which wish the WTO to be sensitive to treaties enshrining other values like labour,

environmental or human rights standards. Is it any more justified to draw a sharp distinction

between pure trade and environmental standards as between a WTO dispute and a dispute under

another trade treaty? Many states and commentators have been insisting that the WTO should

accommodate other values into trade law.215 Can the same argument not be made, even more

strongly, for the mutual accommodation of the DSU and dispute settlement proceedings in trade

disputes under RTAs? Interpretation of disputes based on mutual accommodation between

potentially conflicting or overlapping international commitments is surely vital for the

214
Gary Hufbauer and Jeffrey Schott, Payoff from the World Trade Agenda 2013 (Washington, DC: Peterson
Institute for International Economics, 2013) at 52,
http://www.iie.com/publications/papers/hufbauerschott20130422.pdf (visited 20 September 2013).
215
For example, see Ernst-Ulrich Petersmann, ‘The WTO Constitution and Human Rights’ (2000) Journal of
International Economic Law 19; Daniel C. Esty, ‘Greening World Trade’ in Jeffrey J. Schott, ed, The World
Trading System: Challenges Ahead (Peterson Institute, 1996) at 69; Gabrielle Marceau, ‘WTO Dispute Settlement
and Human Rights’ (2002) 13:4 EJIL 753.

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maintenance of the international legal order as long as there is no global legislator with authority

to resolve such conflicts.

8. All WTO Members have agreed to the DSU, but not to every RTA

Another reason given for the refusal to give effect to RTA dispute settlement commitments and

decisions in proceedings under the DSU is that particular RTAs only bind a few WTO Members

and thus cannot be used to commit all the others. This appears to fit the logic of the WTO as

involving specific commitments between states and not requiring any obligations beyond those

formally contracted by each one. At first blush this argument appears to be based on the

universally accepted principle that states can only be bound by treaties they have agreed to

accept. But, on further analysis, this argument is not well founded. Indeed, this is a curious

position to be adopted by parties to the most significant MFN commitment in history, GATT

Article I.1, which grants WTO Members whatever rights any other Member has granted to

another state without any requirement of formal offer or acceptance. To suggest that a panel

cannot give effect to an RTA because all WTO Members are not party to it is to deny the very

legitimacy of the RTA. It suggests that no legal relationship can be recognised under

international law unless each state has entered into it. Yet international law is made up of a

myriad of interrelated treaty commitments, which have to coexist even when they are not all

mutually compatible. To refuse to recognise the legal effect of commitments made by other

states is in a sense to question the legitimacy of these commitments, despite the fact that WTO

Members have agreed to the possibility of creating customs unions and RTAs by virtue of

Article XXIV of the GATT. But, even without Article XXIV, is it not the practice of states to

recognise the effects of legal relationships, which are created by others unless these relationships

51
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violate international law or unless they contradict their own international commitments?

Furthermore, this is not an instance of states being forced to accept obligations to which they did

not subscribe. Only parties to an RTA can invoke its terms and only other parties can be called

upon to accept the consequences of having made their commitment. If a panel were to recognise

the effect of a decision under an RTA or if the panel were to refer the parties to the dispute

settlement provisions under their agreement, the panel would not be binding on other WTO

Members in any way. WTO cases only bind immediate parties and a dispute under the DSU only

involves the parties to it or those who voluntarily choose to intervene.

9. No State may avoid the force of WTO law

It has been asserted that states cannot invoke an RTA before a WTO proceeding, in mitigation of

WTO obligations, because it is impossible for them to avoid the force of WTO law. This

assertion has been made in association with the assertion that WTO Members cannot be deprived

of their right to obtain the constitution of a panel by the DSB. 216 As suggested above, this is

based on circular reasoning and does not answer the question as to the content of WTO law. It

constitutes a denial of the legitimacy or an assertion of the incompleteness of commitments

under an RTA by WTO Members. The effect of such reasoning is to allow a state to make a

commitment in one treaty, which can be negated by proceedings before the DSB, as happened

between Canada and the United States in the Canada – Periodicals case.217 But, is it really the

object of the WTO to undermine commitments validly made by two or more Members? If states

are allowed to join the WTO on the basis of temporarily diminished obligations, are these

provisions of accession agreements to be deemed invalid? Unless it is a violation of WTO law

216
Appellate Body Report, Mexico – Soft Drinks, above n 162, para 53; Panel Report, Argentina – Poultry, above n
80, paras 7.40 - 7.41.
217
WTO Appellate Body Report, Canada – Certain Measures Concerning Periodicals (Canada – Periodicals),
WT/DS31/AB/R, adopted 30 June 1997.

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for two states to agree between themselves to hold each other to a different or lesser standard

than that required by the WTO, by granting exceptions to what would normally be the WTO

rule,218 it is submitted that the refusal by WTO panels to give effect to RTAs weakens the very

fabric of international law, and should not be seen as an affirmation of the rule of law under the

WTO.

10. No reservations from WTO law are permitted

Another reason given for why it is difficult, if not impossible, to plead an RTA before the DSB is

that the WTO in general and the DSU in particular brooks no reservations. Formal waivers are

permitted by a special vote under Article IX of the Agreement Constituting the WTO and

declarations or interpretative notes may specify how a provision is to be interpreted; in which

case a particular interpretation is mandated. This being the case, so the explanation runs, panels

and the AB have no capacity to give effect to choices made by WTO Members in the context of

FTAs, should these regional agreements not conform to the clear requirements of WTO law. This

explanation may be well founded if RTAs are understood to involve restrictions upon or

deviations from WTO law. However, if one takes the view that Article XXIV permits RTAs,

provided they meet the conditions of that article, it is difficult to believe that they should be

considered to be illegitimate. This is all the more arguable in the many cases of RTAs whose

fundamental structure and principles are based on WTO rules and principles. Is the DSU any less

binding if it takes into account the results of a dispute settlement provision of an RTA? A further

justification for this view can be found in the wording of the DSU, which makes it plain that the

dispute procedure is both compulsory and binding. Article 23 of the DSU conditions a finding of

nullification or impairment on having followed the procedures of the Understanding on Rules

218
An example being the ‘cultural industries exception’ under NAFTA. See NAFTA, above n 28, at art 2106.

53
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and Procedure Governing the Settlement of Disputes. This suggests a procedural monopoly, but

does not necessarily rule out a broad definition of WTO law or formally restrain a panel from

considering the effect of an RTA.

11. The problem of WTO-minus commitments219

Does Article XXIV allow two states to make commitments to each other not to enforce the full

rigour of WTO law? When two states can agree to reduce certain tariffs to ‘0’ as between

themselves when goods from other WTO Members must face higher bound rates, is this a case of

a WTO-minus commitment? Some might say this is simply a case of greater liberalisation. 220

But, in other circumstances, can two WTO Members not agree to exempt each other’s goods

from other WTO requirements provided these measures have no impact on third parties? Unless

a narrow definition of ‘duties and other restrictive regulations of commerce’ is adopted it would

seem that they should be able to do so. Arguably, this view runs contrary to the concept of the

WTO as providing an irreducible minimum or a floor of obligations below which no WTO

Member may go. States can agree in RTAs to heavier burdens than those required by the WTO,

such as the elimination of export taxes, 221 but can they not agree between themselves to a lesser

standard of treatment such as that entailed when they agree never to apply safeguard measures

against each other or agree to the maintenance of discriminatory measures designed to protect

cultural industries?222

219
See Pauwelyn, Application of Non-WTO Rules, above n 193, at 1422. Pauwelyn argues that examining non-WTO
rules in a WTO dispute would simply give effect to obligations that had been agreed to by both parties; it would not
add or diminish from existing agreements.
220
See Charnovitz, above n 195, for valuable analysis of the concepts of WTO-plus and WTO-minus obligations in
protocols of accession.
221
See NAFTA, above n 28, art 314.
222
See NAFTA, above n 28, at arts 802 and 2106.

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One dimension of this question is posed by the wording of Article XXIV.8 which defines

a customs union or an FTA as requiring that ‘duties or other restrictive regulations of commerce

(except where necessary), those permitted under Articles XI, XII, XIII, XIV, and XX) are

eliminated on substantially all trade….’ If this definition were interpreted restrictively,

exceptions to safeguards or other measures, including dispute settlement exceptions, which are

not listed, would not be permitted unless they are deemed necessary for the formation of the

RTA. Opinions of scholars differ sharply on this point. Some accept a broader definition. 223

Others consider that it cannot include trade remedies. 224 So far the AB has not adopted a clear

position and its decisions on safeguards focus on parallelism without criticising the practice of

not imposing safeguards measures between FTA member states.

The broader issue is posed by general principles of treaty law. Under the WTO treaty

acquis, which in principle accepts no reservations on substance and which, in the DSU, requires

full submission to the procedure, is it not the case that there can be no release from the duty to

submit to the procedures created by the DSU? This would surely be true if Articles XXIV and

XX did not exist. Customs unions and FTAs are in fact permitted under the law of the WTO. The

attempt to resolve the question by invoking the prohibition on reservations is therefore circular.

The problem of WTO-minus obligations in RTAs may in fact be posed much more

starkly under the General Agreement on Trade in Services (GATS). Recent studies 225 suggest

223
See Trebilcock, Howse and Eliason, above n 98; see Mavroidis, Trade in Goods, above n 45, at 44. Pauwelyn
rejects the ‘necessity’ requirement adopted by the AB entirely, arguing that it is not supported by the text of the
GATT (see Pauwelyn, Puzzle of WTO Safeguards, above n 98). See generally James Mathis, Regional Trade
Agreements in the GATT/WTO (The Hague: T.C.M. Asser Press, 2002) 250 – 253.
224
Lorand Bartels, ‘WTO Dispute Settlement Practices on Article XXIV of the GATT’ in Frederico Ortino and
Ernst-Ulrich Petersmann, The WTO Dispute Settlement System: 1995-2003 (The Hague: Kluwer La, 2004) 263;
Dukgeun Ahn, ‘Foe or Friend of GATT Article XXIV: Diversity in Trade Remedy Rules’ (2008) 11:1 Journal of
International Economic Law 107; Gabrielle Marceau, Anti-Dumping and Anti-Trust Issues in Free-Trade Areas
(Oxford: Clarendon Press, 1994).
225
Rudolf Adlung and Peter Morrison, ‘Less than the GATS: ‘Negative Preferences’ in Regional Services
Agreements’ (2010) 13:4 Journal of International Economic Law 1103 (Adlung and Morrison). For a discussion of
RTAs liberalizing trade and services, see Chase et al., above n 1.

55
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that there is evidence that a considerable proportion of RTAs involving service commitments

have chosen to set obligations between parties at levels below those already accepted by the

same WTO Members under their GATS schedules.226 If there is clear evidence of broad use of

RTAs to go back on GATS commitments, this is disturbing. But is it impermissible? Given the

very vague and unsatisfactory formulation of the GATS Article V the answer must lie in

tightening the wording of the article or increased scrutiny in the CRTA and self-restraint on the

part of WTO Members.

Whether it is with respect to goods or services, can the creation of a dispute settlement

procedure in an RTA be deemed to be a WTO minus obligation? This is the real question. When

two or more WTO Members establish a special rule between them and agree to settle disputes

concerning this rule under the RTA, is this a WTO minus commitment, which is not permitted by

Article XXIV or GATS Article V? One can regret as a matter of policy, but can one object as a

matter of law?227

12. Are ‘fork in the road’ provisions not well drafted or sufficiently explicit?

An intriguing suggestion in the Argentina - Poultry is that the ‘fork in the road’ provision of the

applicable FTA dispute settlement commitment was not sufficiently explicit. 228 This was stated

obiter and on further analysis holds little hope of resolving the question. An examination of fork

in the road provisions – as in NAFTA – reveals that these provisions are explicit. Efforts could no

doubt be made to reword or standardize them, but it is hard to see how they could be made

clearer than they are. Furthermore, if it were impossible to opt out of the DSU, then no wording
226
Several such agreements appear to be going back on their GATS commitment to apply national treatment to
access to subsidies. Adlung and Morrison discuss three agreements: the EC and the CARIFORUM States, the US
and Australia, and China and ASEAN Members. See Adlung and Morrison, ibid, at 1127.
227
Recall Charnovitz’s discussion of whether WTO accession agreements are legally enforceable in dispute
settlement. See Charnovitz, above n 195.
228
Panel Report, Argentina – Poultry, above n 80, paras 7.37 - 7.39.

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of an FTA would be sufficient to overcome this obstacle. With that said, it interesting to note that

Article 345 of the Treaty on the Functioning of the European Union contains an explicit

provision requiring that all disputes involving EU law must be submitted to the Court of Justice

of the EU. This provision has seldom been violated, and when it happened in the Mox Plant

litigation, the UK and Ireland promptly complied with the European Court of Justice (ECJ)

decision.229 It is virtually unthinkable that two EU member states would ever submit a dispute

over trade in goods or services, raising the same issues in EU and WTO law, to the DSB. But this

may have more to do with the strength of EU legal commitments.

13. Is the block procedural, but not substantive?

Is it possible that the block on reference to the provisions of an RTA before the DSU is a purely

procedural matter? Most of the cases reviewed earlier in this article appear to turn on the

procedural difficulties of attempting to avoid proceeding before the DSB or to refer a case to an

FTA process. But some cases such as Brazil – Retreaded Tyres or US – Softwood Lumber do

suggest an attempt to argue that substantively decisions taken under an RTA should be binding

or at least persuasive before the DSB.

14. Is the AB concerned about the consequences of making an opening for one FTA on

the broader WTO system?

It is quite possible that the decisions reviewed above can be explained as much in policy as in

legal terms and that the AB is deeply concerned with protecting the integrity of the DSU, in

particular, and the force of the WTO legal acquis in general. There is a longstanding and
229
ITLOS, Case No. 10 The Mox Plant Case (Ireland v United Kingdom) (2001),
http://www.itlos.org/fileadmin/itlos/documents/cases/case_no_10/Order.03.12.01.E.pdf (visited 20 September
2013); ECJ, Case 459/03 Commission of the European Communities v Ireland (2006), Case C-459/03.

57
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unresolved tension between the establishment of RTAs and respect for the WTO as an institution

and as a legal system, which purports to set a minimum standard binding on all WTO Members.

As guarantor of WTO law the AB has a right to take a protective stance vis à vis the massive

number of RTAs which have been and continue to be adopted. But does this really justify a

stance, which appears to deny the possibility of any serious interaction? This position results in a

restriction of the scope of Article XXIV and could surely be accomplished without

compromising the claim to primacy that the AB would no doubt wish to maintain.

B. Arguments in favour of allowing Panels to Take RTAs into Account

While it is possible to advance a range of legal and policy reasons for the DSB to refuse to give

effect to dispute settlement provisions or decisions taken under RTAs, it is equally possible to

advance arguments in favour of the WTO accommodating and giving greater effect to other

forms of dispute settlement. Some of the weaknesses of the legal arguments against mutual

accommodation have been alluded to in the analysis above. Other arguments in favour of mutual

accommodation are set out below.

1. Respect for the Logic of Article XXIV

Several strong arguments can be based on the text of Article XXIV. The first is that Article

XXIV permits RTAs. Limits are set by the Article on the exercise of the authority to establish

and maintain RTAs, but there can be no doubt as to the authority given to WTO Members to

proceed. Article XXIV.4 could not be more explicit. It is quite possible, as Jackson noted many

years ago,230 that the article has been used more frequently than the drafters of the GATT may

230
See Jackson, above n 33, at 621. In particular, Jackson notes that the two goals behind the preparatory work of
Article XXIV – increasing free trade and allowing less-developed countries to ally themselves – are probably
‘inconsistent when applied to specific cases.’ He also notes that parties have used Article XXIV to pursue political
goals that are inconsistent with the above stated economic goals. He concludes that attempts at reconciling these
tensions have largely been achieved by ignoring them.

58
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have envisaged, but this does not detract from the fact that it exists and that it is explicit. WTO

Members have insisted on interpreting WTO law in a manner that adheres to the strict letter of

the law; it still behoves these same states then to advance policy arguments against the

coexistence of the DSU and dispute settlement provisions of RTAs.

The logic of the text of Article XXIV strongly suggests a policy in favour of allowing

what would otherwise be prohibited by Articles I and III et al; the text supports the argument

that RTAs can be compatible with the general objective of trade liberalisation of the WTO. Not

all economists and political scientists 231 or senior members of the WTO Secretariat 232 agree with

this position, but they are adopting a stance based on policy, not necessarily on the text of Article

XXIV.

Furthermore, the manner and detail in which the Article is drafted and the care taken to

set out the conditions governing the creation of RTAs and the safeguards against abuse of this

authority, strongly suggest that WTO members enjoy broad latitude in the design and functioning

of RTAs. This is supported by the variety of existing RTAs. They range from minimalist

bilateral statements of principle233 covering a few pages to highly detailed FTAs like NAFTA

and the China – NZ FTA,234 to complex regional arrangements such as the MERCOSUR 235 or

ASEAN236 and finally the quasi-federal arrangement of the EU economic and monetary union.

231
Jagdish Bhagwati, ‘Regionalism and Multilateralism: An Overview’ in Jaime de Melo and Arvind Panagariya,
eds, New Dimensions in Regional Integration (New York: Center for Economic Policy and Research, 1995) at 46.
232
Pascal Lamy, ‘The Multilateral Trading System and Regional Economic Cooperation’ (Delivered at the
University of International Business and Economic, Beijing, 20 September 2012),
http://www.wto.org/english/news_e/sppl_e/sppl246_e.htm (visited 20 September 2013).
233
For example, Morocco has encouraged Pakistan to participate in Morocco’s FTA with the US through the sale of
readymade garments. There is no formal FTA between the two countries yet. See Daily Times, ‘Time is ripe to
finalise Pakistan, Morocco FTA’ Daily Times (17 March 2012), http://www.dailytimes.com.pk/default.asp?
page=2007%5C08%5C03%5Cstory_3-8-2007_pg5_7 (visited 20 September 2013).
234
See NAFTA, above n 28; NZ – China FTA, above n 28.
235
See MERCOSUR, above n 19.
236
See ASEAN, above n 20.

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Perhaps most telling of all is the fact that most FTAs and even customs unions are

explicitly based on the legal principles that are inherent in the WTO legal acquis. This fact is not

only implicit in the ‘deep structure’ of most RTAs but is expressed explicitly and throughout the

treaty texts. To take but one example, NAFTA states that it is drafted in accordance with the

principles of the GATT and must also be interpreted in accordance with the same principles. This

is not only done both in a general chapter,237 but also in specific articles238 and in many schedules

and annexes.239 Similar instances can be cited in a wide range of other RTAs. 240 If the law of

RTAs is based on the same principles as the WTO, surely there is a strong argument to be made

in favour of seeking to promote principles of coexistence at all levels including – and perhaps

especially with respect to – dispute settlement. At the least there should be a degree of mutual

trust that would allow the DSB to refer cases back to RTA procedures in appropriate cases. 241

2. Effet utile of Article XXIV

The principle of effectiveness has been applied regularly to the texts of WTO law in the sense

that every word is deemed to be speaking and must be given meaning. 242 Article XXIV.4 could

hardly be more explicit when it permits ‘…voluntary agreements of closer integration...’ subject

237
See NAFTA, above n 28, at Preamble.
238
Ibid, at arts 101, 103, 301(1), 317, 603, 1902.
239
Ibid, at Annex 702.1 and Section B – Canada and Mexico.
240
See NZ – China FTA, above n 28, at art 6 and ASEAN, above n 20, at Preamble. Marceau, Izaguerri and Lanovoy
note that courts and tribunals are increasingly relying on the WTO acquis. See Gabrielle Marceau, Arnau Izaguerri
and Vladyslav Lanovoy, ‘The WTO’s Influence on Other Dispute Settlement Mechanisms: A Lighthouse in the
Storm of Fragmentation’ (2013) 47:3 Journal of World Trade 481 (Storm of Fragmentation). See generally Ignacio
Garcia Bercero, ‘Dispute Settlement in European Union Free Trade Agreements: Lessons Learned?’ in Lorand
Bartels and Frederico Ortino, eds, Regional Trade Agreements and the WTO Legal System (Oxford: Oxford
University Press, 2006) at 384 for a discussion of the relationship between RTAs and the WTO, namely where
RTAs and the WTO overlap. For a comprehensive table indicating the relationship between various RTAs and the
WTO see Kwak and Marceau, Overlaps and Conflicts, above n 202, at 465.
241
See Henckels, above n 201.
242
This principle was applied to Article III of the GATT in WTO Appellate Body Report, Japan – Taxes on
Alcoholic Beverages (Japan – Alcoholic Beverages II), WT/DS8/AB/R, adopted 4 October 1996, Sections D, G and
H. See generally James Cameron and Kevin R. Gray, ‘Principles of International Law in the WTO Dispute
Settlement Body’ (2001) 50:2 International and Comparative Law Quarterly 248 at 257-258.

60
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to the provisos of paragraphs 5 and 8.243 The principle of effectiveness is applied under the WTO

in a conservative manner stressing the literal text rather than the broader spirit, unlike under EU

law.244 But when the text itself explicitly authorises the creation of RTAs and states further that

such agreements are conducive to the same goals of trade liberalisation, there can be no doubt as

to their legitimacy.

It might be argued that since dispute settlement provisions are not explicitly mentioned in

Article XXIV their existence can only be deemed to be implicit in or consequential upon the

general authorisation and are not explicitly allowed. This is a serious argument as the AB has

hesitated to adopt a general doctrine of implicit powers under WTO law. But to the extent that

recognition of RTA dispute settlement provisions or the consequences of such provisions reflects

the very fact of the existence of an RTA it would seem that this is a matter of explicit rather than

implicit powers. If this is the case, the doctrine of the effet utile of WTO law surely suggests the

need to respect and harmonise RTA dispute settlement provisions with WTO law.

3. Plain meaning of Article XXIV

Dispute settlement is not explicitly mentioned in Article XXIV. Therefore, it is possible to argue

that there is no authorisation to include such provisions in RTAs and there is no consequential

duty upon the WTO to accommodate them. Article XXIV.5 speaks of ‘duties and regulations of

commerce’ while paragraph 8 refers to ‘duties and other restrictive regulations of commerce

(except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX)….’245

These two paragraphs refer to a wide range of measures, suggesting that RTAs will cover at least

243
See GATT, above n 35, at art XXIV.4.
244
Paul Craig and Graáinne de Búrca, EU Law: Texts, Cases and Materials, 5th ed (Oxford: Oxford University Press,
2011) (Craig and Búrca).
245
See GATT, above n 34, at Article XXIV.5, 8.

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an equally wide range. In fact many other measures are included in RTAs. It is surely not too

much to suggest that these can legitimately include dispute settlement provisions.

Article XXIV.7 establishes the duty of WTO Members to inform the organisation of the

establishment of RTAs. This duty has been reinforced by the creation of the Committee on

Regional Trade Agreements (CRTA)246 in 1996 and the subsequent adoption of the Transparency

Mechanisms in 2006247 and 2010,248 which are designed to further tighten the process of

notification of all stages of the adoption of an RTA. 249 The duty to inform other WTO Members

of the content and working of RTAs is very broad and covers every aspect of the agreement. The

duty is not restricted to information about tariffs and other forms of trade regulation; it can

certainly cover dispute settlement. No review conducted under the CRTA has commented

negatively on RTA provisions dealing with dispute settlement. WTO Members appear to assume

that they have broad latitude in designing such provisions and in practice appear to have

interpreted their authority liberally. If WTO Members assume that the presence of dispute

settlement provisions is a normal phenomenon, they are the collective masters of the treaty. Why

should they accept this in one forum and then express such doubt later in the DSB?

4. GATS Article V

Does Article V pose essentially the same problems as those arising under Article XXIV? Not

necessarily, as the wording of Article V respecting services is, if anything, more vague and

difficult to apply than its counterpart respecting goods. There is some justified concern that there

246
Committee on Regional Trade Agreements, Work of the Committee on Regional Trade Agreements (CRTA),
http://www.wto.org/english/tratop_e/region_e/regcom_e.htm (visited 20 September 2013).
247
See 2006 Transparency Mechanism, above n 48.
248
See 2010 Transparency Mechanism, above n 52.
249
Although any pretence of passing judgment on compliance of the RTA with the WTO acquis has been abandoned
in favour of reference of any such complaints to the DSB.

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is a tendency of WTO Members to use RTAs to reduce their obligations under the GATS. 250 At

this point, only the Canada - Autos251 case has involved arguments attempting to justify service

measures as being part of regional agreements, but other cases are almost certain to arise. 252

There is no doubt a legitimate concern that the GATS not be weakened, but it is not clear that

this problem in any way controls the legitimacy of recourse to dispute settlement procedures

under RTAs.

5. General Principles of Treaty Law

Modern international law must deal with the coexistence of potentially conflicting multilateral

treaties often signed by the same states. On a bilateral basis the ‘last in time rule’ can usually

resolve difficulties. But in the face of many multilateral treaties with broad but shifting patterns

of membership it would seem more consistent with the needs of the international community to

adopt principles of interpretation which promote coexistence rather than conflict. Conflict of law

rules in modern private international approach a similar problem in the same spirit. 253 The

International Law Commission (ILC) took up the study of the alleged ‘fragmentation’ of

international law,254 which some saw as the consequence of the emergence of many new

international courts and forms of dispute settlement. This phenomenon is clearly present in the

250
See Adlung and Morrison, above n 223.
251
Panel Report, Canada – Autos, above n 80, para 6.132.
252
The following cases which potentially concern services as well as goods are still in the consultations phase:
European Union and Certain Member States – Certain Measures on the Importation and Marketing of Biodiesel
and Measures Supporting the Biodiesel Industry (2003), DS459,
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds459_e.htm (visited 20 September 2013); European Union
and a Member State – Certain Measures Concerning the Importation of Biodiesels (2012), DS443,
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds443_e.htm (visited 20 September 2013); European Union
and certain Member States – Certain Measures Affecting the Renewable Energy Generation Sector (2012), DS452,
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds452_e.htm (visited 20 September 2013). Also see WTO
Appellate Body Report, Canada – Certain Measures Affecting the Renewable Energy Generation Sector (Canada –
Renewable Energy), WT/DS426/AB/R, adopted 6 May 2013.
253
Ralf Michaels and Joost Pauwelyn, ‘Conflict of Norms or Conflict of Laws?: Different Techniques in the
Fragmentation of Public International Law’ (2012) 22:3 DJCIL 349 at 359.
254
See Fragmentation of International Law Report, above n 1.

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field of international trade law. However the Report did not take the position that the integrity of

trade law was threatened. On the contrary, the broad thesis emerging from this Report is that

international law is enriched by diversity and a greater number of approaches to dispute

settlement.

RTAs are adopted by the same states that are WTO Members. The treaties that they adopt

beside the WTO can surely be given fuller effect by recognising the choices that they have made

by adopting additional forms of dispute settlement in RTAs. For the DSB to take the position

that such dispute settlement provisions must be trumped by the DSU is to ride roughshod over

the choices that the same states have made presumably for good and valid reasons. Once a more

specific and explicit commitment has been made by states party to an RTA, they should be held

to their commitments not released from them by the DSB, as happened most flagrantly in the

Canada – Periodicals case.255

6. Limitation on the Pursuit of Regional Integration

An approach to RTA dispute settlement, which frustrates the efficacy of the procedure, could

make it more difficult for the regional partners to pursue regional integration. To take an extreme

example: if the Article 345 of the Treaty on the Functioning of the European Union were

deemed to be contrary to the DSU, insofar as it requires EU Members to resolve their disputes

under EU law before the Court of Justice of the European Union, this would be a serious

constraint on the development of the EU, as many EU law disputes also raise legal issues of non-

discrimination which could go before the DSB. 256 Yet no EU Member has sought to take a

255
Appellate Body Report, Canada – Periodicals, above n 217. Also see Armand de Mestral, ‘NAFTA Dispute
Settlement: Creative Experiment or Confusion?’ in Lorand Bartels and Frederico Ortino, eds, Regional Trade
Agreements and the WTO Legal System (Oxford: Oxford University Press, 2006) at 359 (de Mestral, NAFTA
Dispute Settlement).
256
See TFEU, above n 26, at art 345.

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dispute involving discriminatory treatment of goods by another EU partner before the DSB. The

provisions of other RTAs are less sweeping and categorical: most are ‘fork in the road’

provisions which suggest that the procedure chosen by the complainant or occasionally the

defendant (whether WTO or RTA) will be binding on the parties. 257 Other procedures are more

specific such as NAFTA Chapter 19 regarding antidumping/countervailing duty disputes or

Chapter 11 disputes involving investor-state arbitration. There is potential for these chapters to

involve matters that can also be characterised as disputes arising under the WTO, 258 but they pose

no threat to the integrity of the DSU.

On the basis of the experience to date where the DSB has proceeded regardless of the

existence of other dispute settlement procedures under RTAs, even rejecting Mexico’s argument

of forum non conveniens in the taxes on high fructose corn syrup (HFCS) litigation, it is difficult

to claim that the approach taken by the DSB has impeded the formation of other RTAs or even

put a chill on the process. WTO Members do not appear to have lost their enthusiasm for RTAs

in recent years. This is certainly true for RTAs in general. One possible impact may be to

discourage private parties from urging their governments to use general dispute settlement

procedures under RTAs. Instead, they may be encouraged to resort to investor-state claims on

their own in the hope of a more tangible and rapid result, as was the case respecting the softwood

lumber and HFCS claims. Beyond this, the general impact on the formation of RTAs appears to

be relatively marginal.

7. False reliance on uniformity and efficacy of a single uniform approach

257
See NAFTA, above n 28, at art 2005.
258
As was the case in the softwood lumber and HFCS litigation. Similarly investor state claims have arisen out of
situations where there was also litigation under the WTO (Panel Report, US – Softwood Lumber, above n 80) and
arguably the European Court of Justice. See Armand de Mestral, ‘Lessons of Chapter 11: Procedural Integrity and
Systemic Integrity’ in Frédéric Bachand, ed, Fifteen Years of NAFTA Chapter 11 Arbitration (JurisNet: 2011). Also
see de Mestral, NAFTA Dispute Settlement, above n 255.

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The reaction of the DSB as displayed in the cases reviewed earlier in this article suggests a belief

in the advantages of a single and uniform guiding system for international trade law. This

reaction is surely questionable. The DSB provides strong and binding guidance as to the

application and interpretation of WTO law and in doing so informs the whole body of

international trade law which is built into RTAs. This being the case, one can overemphasise the

alleged danger of conflicting or contradictory approaches to be taken by RTA dispute settlement

panels since they are required to apply the very same principles that are enshrined in the WTO

acquis. In the circumstances where they do take a different or even clearly erroneous approaches,

the value of having more tribunals and more decisions may well outweigh the risk posed by

different approaches. Federal systems survive despite having many different tribunals. But to

take the position that panels cannot refer disputes to the relevant RTA procedure on the ground

that the WTO is inherently superior or provides uniformity of approach to all disputes is surely to

place too much confidence in a single procedure. Monopoly is very seldom the best approach to

dispute settlement when local conditions and sensitivities may vary so much from region to

region. Where RTA Members have made particular procedural or substantive choices in their

agreements, to assert a monopoly of the WTO process does not necessarily provide the best

solution tailored to local choices and conditions. The ECJ (now the Court of Justice of the

European Union) began its work assuming that it needed to assert a monopoly, but has

subsequently found that it could do its work effectively while making room for the contributions

of the courts of Member States of the EU. 259 The ILC Report on the problems posed by

fragmentation of international law does not endorse a single approach.

259
See Craig and Búrca, above n 244 at 305-343. Also see ECJ, Case C-283/81 Sri CILFIT and Lanificio di Gavardo
Spa v Ministry of Health (1982) ECR I-3417.

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8. Could Brazil – Retreaded Tyres provide the beginning of a valid justification?

It is possible to interpret the Brazil – Retreaded Tyres as reflecting a more open approach to

RTA dispute settlement than that previously adopted by the AB. This decision is of great interest

both for what it said concerning the legitimacy of measures of environmental protection and also

with respect to its consideration of decisions taken by Brazil pursuant to the MERCOSUR

disputes settlement provisions. In this case, the panel and the AB considered Brazil’s arguments

on the measures it took to allow imports of retreaded tires from other MERCOSUR parties, while

at the same time banning imports of the same products from other WTO Members. For the Panel,

the MERCOSUR ruling provided a reasonable basis to enact the MERCOSUR exemption, with

the implication that the resulting discrimination was not arbitrary. 260 The AB, taking a more

nuanced approach, considered that a binding regional dispute settlement decision under the

MERCOSUR might in appropriate circumstances constitute sufficient justification of an import

ban, but held that, in this case, Brazil’s stated objective was to protect the environment and not to

comply with a legal decision. Hence the AB found that Brazil 261 could not rely on the RTA

260
Panel Report, Brazil – Retreaded Tyres, above n 167, para 7.281.
261
In determining whether the measures were compliant with the Chapeau of Article XX, the Panel found that
Brazil’s exemption for tyres originating in MERCOSUR did not appear to be motivated by ‘capricious or
unpredictable reasons’ in light of the MERCOSUR dispute settlement tribunal decision (para 7.272). The Panel
noted that the ruling was adopted ‘specifically in the context of an agreement intended to liberalize trade among its
members’ and that ‘this type of agreement inherently provides for preferential treatment in favour of its
members….’ (para 7.273). To the extent that this discrimination is inherent to the formation of a customs union, it
should not be considered unreasonable (para 7.273). The Panel goes on to note that this type of agreement is
provided for under Article XXIV of the GATT (para 7.274). The AB, on the other hand, in its analysis of the
Chapeau requirements of Article XX, found that there was an abuse of rights and arbitrary and unjustifiable
discrimination (para 227). The discrimination was a consequence of the MERCOSUR tribunal ruling. The AB
found that ‘the ruling … (was) not an acceptable rationale for the discrimination, because it (bore) no relationship to
the legitimate objective pursued by the Import Ban that falls within the purview of Article XX(b), to however small
a degree’ (para 228). The AB went on to note ‘acts implementing a decision of a judicial or quasi-judicial body –
such as the MERCOSUR arbitral tribunal – can hardly be characterized as a decision that is ‘capricious’ or
‘random.’ However, discrimination can result from a rational decision or behaviour, and still be ‘arbitrary or
unjustifiable,’ because it is explained by a rationale that bears no relationship to the objective of a measure
provisionally justified under one of the paragraphs of Article XX, or goes against that objective’ (para 232). The AB
did remark that Brazil could have tried to raise an environmental defense under the Treaty of Montevideo in their
arbitral proceedings, suggesting that ‘discrimination associated with the MERCOSUR exemption does not
necessarily result from a conflict between provisions under MERCOSUR and the GATT 1994’ (para 234). Panel
Report, Brazil – Retreaded Tyres, above n 167.

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decision. The Panel and AB reviewed the Brazilian argument at some length and showed much

less reserve in the face of Brazil’s plea based on MERCOSUR decisions then with respect to

Canada’s attempt to plead various NAFTA Chapter 19 decisions in the US – Softwood Lumber

litigation.

9. The Role of Article XX

The Brazil – Retreaded Tyres report suggests that an RTA dispute settlement decision may

function as justification of an exception to the normal rules of the GATT. What the case

assumes, and which is not discussed at length, is why it is necessary to refer to Article XX at all.

Article XXIV is already a complex article and one may ask whether it does not provide

justification in itself of recourse to dispute settlement under and RTA. However, several

decisions have invoked Article XX and it is not likely that the AB will alter its approach in this

regard.

10. Other systems manage to be more open ended – why not WTO law?

International trade law is in the somewhat anomalous situation of having an extremely powerful

system of dispute settlement in the WTO. Arguably this is the most effective and binding

international dispute settlement system currently in existence for the 159 WTO Members.

Without necessarily wishing to abandon the many advantages of the current system it is still

possible to suggest that it would not be weakened by showing greater deference to the choices

made by WTO Members which are also parties to RTAs. Arguably what is required is greater

willingness on the part of the DSB to ensure complete coordination between the DSU and

comparable provisions of RTAs. International law recognises that states frequently make

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overlapping and apparently contradictory commitments, and does much to ensure the ongoing

coexistence of these commitments. Surely a similar effort is possible in the field of international

trade law.

IV. Conclusion

There is no simple answer to the question of the relationship between the dispute settlement

provisions of the DSU and RTAs. Some aspects of this question are more readily explained than

others and much depends on context and the facts of the particular situation in which it arises.

However, it does appear that a more nuanced approach might be possible in defining the

relationship between the DSU and the dispute settlement provisions of RTAs. A number of trade

law experts have considered the issues in recent years 262 and most appear to consider that the

current situation is not satisfactory.

On the principle – much respected by the AB – that every word of a treaty must be

given effect, it is surely reasonable to ask the DSB to make greater efforts to respect the choices

made by WTO Members in the context of RTAs. There will doubtless be situations where direct

conflicts arise and where the DSB will have no choice but to apply WTO law only. But it is

surely not too much to ask that a greater effort be made by panels and the AB to avoid conflicts.
262
Greg Anderson, ‘Can Someone Please Settle This Dispute? Canadian Softwood Lumber and the Dispute
Settlement Mechanisms of the NAFTA and the WTO’ (2006) 29:5 The World Economy 585; Jeanine Gama Sá
Cabral and Gabriella Giovanna Lucarelli de Salvio, ‘Considerations on the Mercosur Dispute Settlement Mechanism
and the Impact of its Decisions in the WTO Dispute Resolution System’ (2008) 42:6 Journal of World Trade 1013;
Henry Gao and C. L. Lim, ‘Saving the WTO From the Risk of Irrelevance: The WTO Dispute Settlement
Mechanism as a ‘Common Good’ for RTA Disputes’ (2008) 11:4 Journal of International Economic Law 899;
Nikolaos Lavranos and Nicolas Vielliard, ‘Competing Jurisdictions between MERSOCUR and WTO’ (2008) 7 The
Law and Practice of International Courts and Tribunals 205; see Pauwelyn, How to Win a WTO Dispute, above n
195; see Marceau and Tomazos, above n 195; Erich Vranes, ‘Comments on Joost Pauwelyn’s Paper: ‘How to Win a
WTO Dispute Based on Non-WTO Law?’ (2008) 8 European Community Studies Association of Austria
Publication Series 83; Colin B. Picker, ‘Regional Trade Agreements v. the WTO: A Proposal for Reform of Article
XXIV to Counter This Institutional Threat’ (2005) 26:2 U. Pa. J. Int’l Econ. L. 268; see Davey, above n 153; see
Graewert, above n 202; see Hillman, above n 202; see Guglya, above n 202; see Pauwelyn, Application of Non-
WTO Rules, above n 193; see Marceau, Conflicts of Norms, above n 202; see Marceau and Wyatt, above n 202; see
Tan Son, above n 202; see Pauwelyn, Adding Sweeteners to Softwood Lumber, above n 202; see Henckels, above n
201; see Pauwelyn, Going Global, above n 199; see Storm of Fragmentation, above n 240.

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Nor is it too much to ask that panels and the AB be more willing to examine the results of

litigation under RTAs, which create binding obligations for RTA parties. One important avenue

offering greater flexibility by the DSB would be to accept a broader definition of WTO law. The

concern that the DSB is only empowered to apply WTO law can be considerably alleviated if it

is recognised that WTO law is the source of a great deal of the law and legal principles

governing RTAs. Furthermore a broader definition of WTO law, comprising general principles

of law and the rules of public international law binding on all states would correspond to the

reality of contemporary international legal theory and treaty interpretation espoused by leading

publicists.263 The WTO legal texts will doubtless continue to be approached in a careful and

conservative fashion but there is no reason why they should be divorced from modern treaty

interpretation.

The case for this approach is based on GATT Article XXIV and on the fact that

significant accommodations have been made by WTO Members to allow for the existence of

some 400 RTAs. The review process under the Transparency Mechanisms has accepted dispute

settlement provisions in RTAs without comment or objection. A number of disputes concerning

the operation of the commitment in RTAs to exempt member states from the operation of

safeguard measures have set conditions for the exercise of the exemption but have not questioned

the exemption itself. In some disputes, panels and the AB appear to have been unwilling to take

into consideration obligations under RTAs flowing from dispute settlement decisions. However,

in the Brazil – Retreaded Tyres case, the panel and the AB both showed greater flexibility in the

face of a MERCOSUR tribunal decision than had been the case before. In the final analysis, it

does not seem appropriate that one party to an RTA can avoid its obligations under the regional

263
For example, see Pauwelyn, How to Win a WTO Dispute, above n 195; see Graewert, above n 202; see Pauwelyn,
Application of Non-WTO Rules, above n 193.

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agreement by referring a dispute to the WTO in circumstances where it has special obligations

under the RTA.

Nevertheless there do remain significant difficulties in the way of reconciling WTO and

RTA dispute settlement. The manner in which the AB accepted that it was not possible to decline

to rule on a matter and to refer a case back to dispute settlement under an RTA suggests a well-

entrenched position which will not be easy to change. Perhaps even more complex is the problem

posed by the wording of the ‘fork in the road’ provisions of many RTAs. Most of these

provisions leave the choice to the complainant, so that if the complainant has chosen the WTO

the defendant has no means of stopping the process under the terms of the choice of forum

clause. Only a few provisions leave the choice of forum to the defendant. 264 If the case arises,

will these choices be respected by the DSB? 265 Apart from the position of principle taken by the

AB that a WTO Member cannot be denied its recourse under the DSU, there is the added

problem stemming from the choice of forum clause. Similarly, once the DSB has framed the

dispute and appointed a panel, it may be very difficult for a party to seek to alter what can be

characterised as the essence of the dispute. It may well be that these matters can only be raised

and decided either before the dispute is framed or as a preliminary matter before the formal

process begins before a panel.

Services are looming larger in recent WTO disputes and it is probable that they will also

give rise to disputes involving RTA procedures. Although this is not clear it seems that the issues

of principle are similar with respect to goods and services disputes.

264
See NAFTA, above n 28, at Article 2005, para 4.
265
Chase et al. discuss the use of choice of forum provisions. They note ‘to the extent that they are respected by RTA
members, (these provisions) may minimize the potential for jurisdictional conflict by creating an irreversible choice
between the RTA system and the WTO system.’ However, it remains unclear how these ‘fork in the road’ provisions
would impact a WTO proceeding. See Chase et al., above n 1, at 51.

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Having said this, if one reflects on what happened in the Canada – Periodicals case

there can be very little excuse for a dispute settlement procedure which purports to be blind to

the equities of a situation where two states have bargained in good faith and reached an

agreement in an RTA exempting certain measures from the general rules, only to have the other

party upset the bargain by referring the dispute to the WTO. This is more than a theoretical

argument, it has happened, and the increasingly complex co-existence of the WTO with some

400 RTAs suggests that similar problems can arise in the future and should be dealt with in a

manner more consonant with fairness and legal principle.

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