General Agreement on Tariffs and Trade 1994

GATT 1947 and GATT 1994: whats the difference ?

The GATT 1947 is a defunct international treaty predating the WTO Agreement. Originally, the GATT 1947 was to become part of the Havana Charter for an International Trade Organization that was negotiated during the United Nations Conference on Trade and Employment held in Cuba from 21 November 1947 to 24 March 1948. As of 1 January 1948, the GATT 1947 was applied through a Protocol of Provisional Application. As the Havana Charter never came into force, the GATT 1947 remained provisionally in force until its provisions became part of the GATT 1994, itself a component of the WTO Agreement. In December 1994 i.e. following the adoption, but preceding the entry into force of, the WTO Agreement the GATT CONTRACTING PARTIES decided that [t]he legal instruments through which the contracting parties apply the GATT 1947 are herewith terminated one year after the date of entry into force of the WTO Agreement, i.e. on 1 January 1996 (document PC/12, L/7583). The WTO Agreement, which established the World Trade Organization, entered into force on 1 January 1995. Annex 1A of the WTO Agreement contains the GATT 1994, which incorporates by reference (and with a few adjustments to reflect the fact that, contrary to the GATT 1947, the WTO is an authentic international organization) the provisions of the GATT 1947; the GATT 1994 also includes six Understandings on Articles of the GATT 1947, tariffs and accession Protocols, and GATT decisions adopted between 1948 and 1994 as part of what is often called the GATT acquis. The GATT 1994 and the GATT 1947 are legally distinct, as confirmed by Article II:4 of the WTO Agreement. The provisions of the GATT 1947, incorporated into the GATT 1994, continue to have legal effect as part of the GATT 1994, itself a component of the WTO Agreement. Please note that other parts of the WTO website might not make the above legal distinctions in all instances, and may refer to GATT, GATT 1947 and GATT 1994 interchangeably.

I. Language Incorporating GATT 1947 and other Instruments into GATT 1994 back to top
A. Text of the Language Incorporating GATT 1947 and other Instruments into GATT 1994 1. The General Agreement on Tariffs and Trade 1994 (GATT 1994) shall consist of: (a) the provisions in the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment (excluding the Protocol of Provisional Application), as rectified, amended or modified by the terms of legal instruments which have entered into force before the date of entry into force of the WTO Agreement; (b) the provisions of the legal instruments set forth below that have entered into force under the GATT 1947 before the date of entry into force of the WTO Agreement: (i) protocols and certifications relating to tariff concessions; (ii) protocols of accession (excluding the provisions (a) concerning provisional application and withdrawal of provisional application and (b) providing that Part II of GATT 1947 shall be applied provisionally to the fullest extent not inconsistent with legislation existing on the date of the Protocol); (iii) decisions on waivers granted under Article XXV of GATT 1947 and still in force on the date of entry into force of the WTO Agreement(1);
(footnote original) 1 The waivers covered by this provision are listed in footnote 7 on pages 11 and 12 in Part II of document MTN/FA of 15 December 1993 and in MTN/FA/Corr.6 of 21 March 1994.(1) The Ministerial Conference shall establish at its first session a revised list of waivers covered by this provision that adds any waivers granted under GATT 1947 after 15 December 1993 and before the date of entry into force of the WTO Agreement, and deletes the waivers which will have expired by that time.

(iv) other decisions of the CONTRACTING PARTIES to GATT 1947; (c) the Understandings set forth below: (i) Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994; (ii) Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs and Trade 1994; (iii) Understanding on Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994; (iv) Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994; (v) Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994; (vi) Understanding on the Interpretation of Article XXVIII of the General Agreement on Tariffs and Trade 1994; and (d) 2. the Marrakesh Protocol to GATT 1994.

Explanatory Notes (a) The references to contracting party in the provisions of GATT 1994 shall be deemed to read Member. The references to less-developed contracting party and developed contracting party shall be deemed to read developing country Member and developed country Member. The references to Executive Secretary shall be deemed to read Director-General of the WTO. (b) The references to the CONTRACTING PARTIES acting jointly in Articles XV:1, XV:2, XV:8, XXXVIII and the Notes Ad Article XII and XVIII; and in the provisions on special exchange agreements in Articles XV:2, XV:3, XV:6, XV:7 and XV:9 of GATT 1994 shall be deemed to be references to the WTO. The other functions that the provisions of GATT 1994 assign to the CONTRACTING PARTIES acting jointly shall be allocated by the Ministerial Conference. (c) (i) The text of GATT 1994 shall be authentic in English, French and Spanish.

(ii) The text of GATT 1994 in the French language shall be subject to the rectifications of terms indicated in Annex A to document MTN.TNC/41. (iii) The authentic text of GATT 1994 in the Spanish language shall be the text in Volume IV of the Basic Instruments and Selected Documents series, subject to the rectifications of terms indicated in Annex B to document MTN.TNC/41. 3. (a) The provisions of Part II of GATT 1994 shall not apply to measures taken by a Member under specific mandatory legislation, enacted by that Member before it became a contracting party to GATT 1947, that prohibits the use, sale or lease of foreign-built or foreign-reconstructed vessels in commercial applications between points in national waters or the waters of an exclusive economic zone. This exemption applies to: (a) the continuation or prompt renewal of a non-conforming provision of such legislation; and (b) the amendment to a non-conforming provision of such legislation to the extent that the amendment does not decrease the conformity of the provision with Part II of GATT 1947. This exemption is limited to measures taken under legislation described above that is notified and specified prior to the date of entry into force of the WTO Agreement. If such legislation is subsequently modified to decrease its conformity with Part II of GATT 1994, it will no longer qualify for coverage under this paragraph. (b) The Ministerial Conference shall review this exemption not later than five years after the date of entry into force of the WTO Agreement and thereafter every two years for as long as the exemption is in force for the purpose of examining whether the conditions which created the need for the exemption still prevail. (c) A Member whose measures are covered by this exemption shall annually submit a detailed statistical notification consisting of a five-year moving average of actual and expected deliveries of relevant vessels as well as additional information on the use, sale, lease or repair of relevant vessels covered by this exemption. (d) A Member that considers that this exemption operates in such a manner as to justify a reciprocal and proportionate limitation on the use, sale, lease or repair of vessels constructed in the territory of the Member invoking the

exemption shall be free to introduce such a limitation subject to prior notification to the Ministerial Conference. (e) This exemption is without prejudice to solutions concerning specific aspects of the legislation covered by this exemption negotiated in sectoral agreements or in other fora. B. Interpretation and Application of the Language Incorporating GATT 1947 and other Instruments into GATT 1994 1. General 1. The text entitled General Agreement on Tariffs and Trade 1994 specifies provisions of the GATT 1947 that are incorporated by reference in the GATT 1994, specifies certain matters concerning the interpretation of provisions of the GATT 1947 in the context of the GATT 1994, and provides for a reservation to the GATT 1994. 2. Paragraph 1 (a) Paragraph 1(a): the provisions in the General Agreement on Tariffs and Trade, dated 30 October 1947 as rectified, modified or amended 2. The negotiations that led to the GATT took place in 194647 during and after the sessions of the Preparatory Committee of the United Nations Conference on Trade and Employment. The Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee, signed at Geneva on 30 October 1947, included the 30 October 1947 original text of the General Agreement on Tariffs and Trade, the Schedules of tariff concessions negotiated in 1947, and the Protocol of Provisional Application. 3. The GATT 1947 was provisionally applied from 1 January 1948 until 31 December 1995. Concerning provisional application of the GATT. The GATT 1994 does not include the Protocol of Provisional Application, nor the provisions in protocols of accession that provided for provisional application of the GATT. The date and source of amendments to the GATT are provided in the GATT Status of Legal Instruments. (b) Paragraph 1(b): Legal instruments under the GATT 1947 (i) protocols and certifications relating to tariff concessions 4. The Panel in Japan Film found that The ordinary meaning of the text of paragraphs 1(b)(i) and 1(d) of GATT 1994, read together, clearly suggests that all protocols relating to tariff concessions, both those predating the Uruguay Round and the Marrakesh Protocol to GATT 1994, are incorporated into GATT 1994 and continue to have legal existence under the WTO Agreement.(2)

5. In US FSC, the Appellate Body examined a 1981 decision by the GATT 1947 Council and found: [I]n terms of Article II:2 of the WTO Agreement, these various legal instruments are, in themselves, integral parts of the WTO Agreement and are binding on all Members. The inclusion of these legal instruments in the GATT 1994 recognizes that the legal character of the rights and obligations of the contracting parties under the GATT 1994 is not fully reflected by the text of the GATT 1994 because those rights and obligations are conditioned by the protocols, decisions and other legal instruments to which paragraph 1(b) refers.(3) (ii) protocols of accession 6. See above concerning the non-incorporation into GATT 1994 of the provisions on provisional application in GATT accession protocols. (iii) decisions on waivers granted under GATT 1947 and still in force 7. The GATT 1994 incorporated some, but not all, of the waivers granted under Article XXV:5 of the GATT 1947 that were in force as of 1 January 1995. The list in MTN/W/FA referred to in footnote 6 omitted the 1955 waiver granted to the United States in connection with import restrictions imposed under Section 22 of the U.S. Agricultural Adjustment Act.(4) A revision of this list was issued in 1995.(5) 8. The Understanding in Respect of Waivers of Obligations under the GATT 1994 provides: Any waiver in effect on the date of entry into force of the WTO Agreement shall terminate, unless extended in accordance with the procedures [in the Understanding] and those of Article IX of the WTO Agreement, on the date of its expiry or two years from the date of entry into force of the WTO Agreement, whichever is earlier.(6) (iv) Item (iv) other decisions of the CONTRACTING PARTIES to GATT 1947 9. In Japan Alcoholic Beverages II, the Appellate Body reversed a panel finding that the other decisions incorporated into the GATT 19 94 include panel reports adopted by the CONTRACTING PARTIES to GATT 1947, noting that the decision to adopt a panel report was not intended by the GATT 1947 CONTRACTING PARTIES to constitute a definitive interpretation of the relevant provisions of GATT 1947: Article XVI:1 of the WTO Agreement and paragraph 1(b)(iv) of the language of Annex 1A incorporating the GATT 1994 into the WTO Agreement bring the legal history and experience under the GATT

1947 into the new realm of the WTO in a way that ensures continuity and consistency in a smooth transition from the GATT 1947 system. (7) Adopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute. However, they are not binding, except with respect to resolving the particular dispute between the parties to that dispute.(8) In short, their character and their legal status have not been changed by the coming into force of the WTO Agreement. [W]e do not agree with the Panels conclusion in the same paragraph of the Panel Report that adopted panel reports in themselves constitute other decisions of the CONTRACTING PARTIES to GATT 1947 for the purposes of paragraph 1(b)(iv) of the language of Annex 1A incorporating the GATT 1994 into the WTO Agreement.(9) 10. In EC Poultry, the Appellate Body found that the Oilseeds Agreement, concluded between Brazil and the European Communities was not one of the legal instruments enumerated in paragraph 1(b): The Oilseeds Agreement [] is a bilateral agreement negotiated by the European Communities and Brazil under Article XXVIII of the GATT 1947, as part of the resolution of the dispute in EEC Oilseeds.(10) Although the provisions of certain legal instruments that entered into force under the GATT 1947 were made part of the GATT 1994 pursuant to the language in Annex 1A incorporating the GATT 1994 into the WTO Agreement(11), the Oilseeds Agreement is not one of those legal instruments.(12) 11. In US FSC, the Appellate Body found that an understanding adopted by the GATT Council in connection with the adoption of four panel reports, read in the light of the circumstances, was not an other decision within the meaning of paragraph 1(b)(iv).(13) The Appellate Body remarked that The inclusion of these legal instruments in the GATT 1994 recognizes that the legal character of the rights and obligations of the contracting parties under the GATT 1994 is not fully reflected by the text of the GATT 1994 because those rights and obligations are conditioned by the protocols, decisions and other legal instruments to which paragraph 1(b) refers.(14) 12. In EC Tariff Preferences, the Appellate Body held that the Enabling Clause is one of the other decisions of the CONTRACTING PARTIES within the meaning of paragraph 1(b)(iv). On that basis the Appellate Body found that the Enabling Clause is an integral part of the GATT 1994.( 15) (c) Relationship with Article XVI:1 of the WTO Agreement

13. Regarding the relationship between Article XVI:1 of the WTO Agreement and paragraph 1(b), see the material under Article XVI:1 in the Chapter on the WTO Agreement. 3. Paragraph 2 (a) Allocation of functions of the CONTRACTING PARTIES acting jointly 14. Paragraph 2(b) of the GATT 1994 incorporation text provides that the references to the CONTRACTING PARTIES acting jointly in Articles XV:1, XV:2, XV:8, XXXVIII and the Notes Ad Article XII and XVIII of the GATT 1994, and in the provisions on special exchange agreements in Articles XV:2, XV:3, XV:6, XV:7 and XV:9 of the GATT 1994, shall be deemed to be references to the WTO; these powers of the CONTRACTING PARTIES are therefore exercised by the Ministerial Conference or by the General Council. 15. Paragraph 2(b) also provides that the other functions that the provisions of GATT 1994 assign to the CONTRACTING PARTIES acting jointly may be allocated to the various WTO organs by decision of the Ministerial Conference; as of 30 September 2011, such a decision had not taken place. (b) Authentic texts of GATT 1994 16. The text of Parts I through III of the GATT 1947 was authentic in English and French only. Part IV of the GATT 1947 was authentic in English, French and Spanish. The Secretariat prepared and published on its own responsibility a Spanish translation of the text of the GATT 1947, in Volume IV of the Basic Instruments and Selected Documents series. No authentic Spanish text was ever agreed for Parts I through III of the General Agreement; Parts IIII of the Spanish-language text of the GATT 1947 had no formal status. 17. During the final Uruguay Round legal drafting process, participants noted a lack of concordance between the French and Spanish versions of the Uruguay Round texts and the French and Spanish texts respectively of the GATT 1947. They also noted instances of a lack of concordance between the English, French and Spanish texts of the GATT 1947. Upon discussion participants concluded that the preferable course would be to conform the French and Spanish texts of the GATT 1947 to the linguistic usage reflected in the English language text and in the Uruguay Round Agreements. In addition, Spanish-speaking participants sought to establish an authentic text of Parts IIII of the General Agreement in Spanish. 18. Participants decided to implement these objectives by preparing lists of rectifications to the French and Spanish texts of the GATT 1947, and providing in paragraph 2 of the GATT 1994 incorporation text that the GATT 1994 would reflect those rectifications. With the agreement of participants,

a list of agreed rectifications to the authentic French text of the GATT 1947, and a list of corrections to Parts IIII of the Spanish text published as Volume IV of the BISD, were drawn up by the Secretariat Translation and Documentation Division and were circulated as annexes to MTN.TNC/41, a Decision of the Trade Negotiations Committee (TNC) on Corrections to be Introduced in the General Agreement on Tariffs and Trade. The French and Spanish language texts of the GATT 1994 published by the Secretariat incorporate those rectifications. For further discussion regarding this process. 4. Paragraph 3 19. The measures referred to in paragraph 3 were notified to the Director-General of the GATT.(16) The General Council conducted reviews of these measures in 19992000, 2002, 2005, 2007, 2009 and 2011.(17)

PART I

II. Preamble

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A. Text of the Preamble The Governments of the Commonwealth of Australia, the Kingdom of Belgium, the United States of Brazil, Burma, Canada, Ceylon, the Republic of Chile, the Republic of China, the Republic of Cuba, the Czechoslovak Republic, the French Republic, India, Lebanon, the Grand-Duchy of Luxemburg, the Kingdom of the Netherlands, New Zealand, the Kingdom of Norway, Pakistan, Southern Rhodesia, Syria, the Union of South Africa, the United Kingdom of Great Britain and Northern Ireland, and the United States of America: Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods, Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce,

Have through their Representatives agreed as follows: B. Interpretation and Application of the Preamble 1. Second recital 20. The Appellate Body Report on EC Tariff Preferences, discussing the history of Part IV and the Enabling Clause, observed: When the GATT 1947 entered into force, the Contracting Parties stated that one of its objectives was to rais[e] standards of living. However, this objective was to be achieved in countries at all stages of economic development through the universally-applied commitments embodied in the GATT provisions.(18) 21. In EC Bananas III (Article 21.5 Ecuador II)/EC Bananas III (Article 21.5/US), the Appellate Body observed: We agree with the Panel that concessions made by WTO Members should be interpreted so as to further the general objective of expanding trade in goods and services and reducing barriers to trade, through the negotiation of reciprocal and mutually advantageous arrangements.(19) 2. Third recital 22. In Korea Various Measures on Beef, the Appellate Body referred to the third recital in the Preamble and stated that an evaluation of whether an enforcement measure is necessary in terms of Article XX(d) must take into account the extent to which the measure produces restrictive effects on international commerce.(20) 3. GATT practice 23. For GATT practice regarding the Preamble.

III. Article I

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A. Text of Article I Article I: General Most-Favoured-Nation Treatment 1. With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with

importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III,* any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties. 2. The provisions of paragraph 1 of this Article shall not require the elimination of any preferences in respect of import duties or charges which do not exceed the levels provided for in paragraph 4 of this Article and which fall within the following descriptions: (a) Preferences in force exclusively between two or more of the territories listed in Annex A, subject to the conditions set forth therein; (b) Preferences in force exclusively between two or more territories which on July 1, 1939, were connected by common sovereignty or relations of protection or suzerainty and which are listed in Annexes B, C and D, subject to the conditions set forth therein; (c) Preferences in force exclusively between the United States of America and the Republic of Cuba; (d) Preferences in force exclusively between neighbouring countries listed in Annexes E and F. 3. The provisions of paragraph 1 shall not apply to preferences between the countries formerly a part of the Ottoman Empire and detached from it on July 24, 1923, provided such preferences are approved under paragraph 5(1) of Article XXV which shall be applied in this respect in the light of paragraph 1 of Article XXIX.
(footnote original) 1 The authentic text erroneously reads subparagraph 5 (a).

4. The margin of preference* on any product in respect of which a preference is permitted under paragraph 2 of this Article but is not specifically set forth as a maximum margin of preference in the appropriate Schedule annexed to this Agreement shall not exceed: (a) in respect of duties or charges on any product described in such Schedule, the difference between the most-favourednation and preferential rates provided for therein; if no preferential rate is provided for, the preferential rate shall for the purposes of this paragraph be taken to be that in force on

April 10, 1947, and, if no most-favoured-nation rate is provided for, the margin shall not exceed the difference between the most-favoured-nation and preferential rates existing on April 10, 1947; (b) in respect of duties or charges on any product not described in the appropriate Schedule, the difference between the most-favoured-nation and preferential rates existing on April 10, 1947. In the case of the contracting parties named in Annex G, the date of April 10, 1947, referred to in subparagraph (a) and (b) of this paragraph shall be replaced by the respective dates set forth in that Annex. B. Text of Notes Ad Article I Ad Article I: Paragraph 1 The obligations incorporated in paragraph 1 of Article I by reference to paragraphs 2 and 4 of Article III and those incorporated in paragraph 2(b) of Article II by reference to Article VI shall be considered as falling within Part II for the purposes of the Protocol of Provisional Application. The cross-references, in the paragraph immediately above and in paragraph 1 of Article I, to paragraphs 2 and 4 of Article III shall only apply after Article III has been modified by the entry into force of the amendment provided for in the Protocol Modifying Part II and Article XXVI of the General Agreement on Tariffs and Trade, dated September 14, 1948.(1)
(footnote original) 1 This Protocol entered into force on 14 December 1948.

Paragraph 4 The term margin of preference means the absolute difference between the most-favoured-nation rate of duty and the preferential rate of duty for the like product, and not the proportionate relation between those rates. As examples: (1) If the most-favoured-nation rate were 36 per cent ad valorem and the preferential rate were 24 per cent ad valorem, the margin of preference would be 12 per cent ad valorem, and not one-third of the most-favoured-nation rate; (2) If the most-favoured-nation rate were 36 per cent ad valorem and the preferential rate were expressed as two-

thirds of the most-favoured-nation rate, the margin of preference would be 12 per cent ad valorem; (3) If the most-favoured-nation rate were 2 francs per kilogramme and the preferential rate were 1.50 francs per kilogramme, the margin of preference would be 0.50 franc per kilogramme. The following kinds of customs action, taken in accordance with established uniform procedures, would not be contrary to a general binding of margins of preference: (i) The re-application to an imported product of a tariff classification or rate of duty, properly applicable to such product, in cases in which the application of such classification or rate to such product was temporarily suspended or inoperative on April 10, 1947; and (ii) The classification of a particular product under a tariff item other than that under which importations of that product were classified on April 10, 1947, in cases in which the tariff law clearly contemplates that such product may be classified under more than one tariff item. C. Interpretation and Application of Article I 1. Article I:1 (a) General (i) Object and purpose 24. In Canada Autos, in support of its interpretation of Article I:1, the Appellate Body explained that the object and purpose of Article I is to prohibit discrimination among like products originating in or destined for different countries(21). (ii) Application to de facto discrimination 25. In EC Bananas III, in support of the proposition that Article II of GATS prohibits de facto discrimination as well as de jure discrimination, the Appellate Body noted that GATT Article I applies to de facto discrimination. See the Chapter on the GATS under Article II. 26. In Canada Autos, the Appellate Body reviewed the Panels finding that the Canadian import duty exemptions granted to motor vehicles originating in certain countries were inconsistent with Article I:1. The Appellate Body found the prohibition of discrimination under Article I:1 to

include both de jure and de facto discrimination: [T]he words of Article I:1 do not restrict its scope only to cases in which the failure to accord an advantage to like products of all other Members appears on the face of the measure, or can be demonstrated on the basis of the words of the measure. Article I:1 does not cover only in law, or de jure, discrimination. As several GATT panel reports confirmed, Article I:1 covers also in fact, or de facto, discrimination.(22) Like the Panel, we cannot accept Canadas argument that Article I:1 does not apply to measures which, on their face, are origin-neutral.(23) (iii) Order of examination 27. In Indonesia Autos, the Panel explained how to carry out the examination of a measure under Article I:1: The Appellate Body, in Bananas III, confirmed that to establish a violation of Article I, there must be an advantage, of the type covered by Article I and which is not accorded unconditionally to all like products of all WTO Members. Following this analysis, we shall first examine whether the tax and customs duty benefits are advantages of the types covered by Article I. Second, we shall decide whether the advantages are offered (i) to all like products and (ii) unconditionally.(24) (b) All rules and formalities in connection with importation or exportation 28. The Panel in EC Bananas III noted that Article I requires MFN treatment in respect of rules and formalities in connection with importation, a phrase that has been interpreted broadly in past GATT practice, such that it can appropriately be held to cover rules related to tariff quota allocations. Such rules are clearly rules applied in connection with importation. Indeed, they are critical to the determination of the amount of duty to be imposed.(25) The Panel further found that import licensing procedures, including the operator category rules are rules and formalities in connection with importation in the meaning of Article I:1.(26) 29. In Colombia Ports of Entry, textile, apparel and footwear importers arriving from Panama or the Colon Free Zone (CFZ) were subject to a special advance import declaration requirement for imports of textiles, apparel and footwear, and had to pay customs duties and sales tax on the basis of the advance declaration. Imports of these products originating in countries other than Panama were not subject to these requirements. Also, importers of textiles arriving from Panama and the CFZ were subject to additional legalization fees and customs compliance requirements. The parties agreed that these measures constituted rules and formalities in connection with

importation.(27) 30. The dispute in US Poultry (China) concerned a US legislative provision (Section 727) restricting the use of funds allocated by the US Congress to the US Department of Agriculture and its agency, the Food Safety and Inspection Service (FSIS). The legislation provided that these funds could not be used to establish or implement a rule allowing poultry products to be imported from China into the United States.( 28) The Panel observed: We conclude that in connection with importation as us ed in Article I, not only encompasses measures which directly relate to the process of importation but could also include those measures, such as Section 727, which relate to other aspects of the importation of a product or have an impact on actual importation. Given the foregoing, we determine that Section 727 is a rule in connection with importation within the meaning of Article I:1 of the GATT 1994.(29) (c) all matters referred to in paragraphs 2 and 4 of Article III 31. In EC Trademarks and Geographical Indications (US), the Panel found that the EC regulation related to protection of geographical indications and designations of origin was a law or regulation affecting the internal sale and offering for sale of products within the meaning of Article III:4 of GATT 1994, and therefore fell within the matters referred to in paragraphs 2 and 4 of Article III as that phrase is used in Article I:1.(30) 32. In EC Commercial Vessels, Korea challenged an EC Regulation providing aid in support of EC shipbuilders competing for shipbuilding contracts where Korean shipyards had offered a lower price. Korea argued that this provision breached Article I:1 because bids competing with Korean shipyards would be subsidized but bids competing with other shipyards would not. Korea argued that the Regulation was a measure within the scope of GATT Article III:4, and therefore subject to Article I:1.(31) The Panel found: [W]e have concluded that the TDM Regulation is a measure that falls within the scope of Article III:8(b) of the GATT 1994 because it provides for the payment of subsidies exclusively to domestic producers and that the TDM Regulation is therefore not inconsistent with Article III:4. In that connection, we have rejected the argument of Korea that since Korea challenges the TDM Regulation as a regulatory framework, Article III:8(b) is irrelevant. the issue here is not whether Article III:8(b) somehow affects the scope of Article I in its entirety. Rather, the question is limited to whether and if so how Article III:8(b) affects the scope of all matters referred to in paragraphs 2 and 4 of Article III. In this connection,

the argument of Korea that Article III:8(b) only refers to the provisions of this Article and therefore does not apply to Article I is unpersuasive. To the extent that Article III:8(b) plays a role in determining the scope of the matters referred to in Article III:2 and III:4, a direct reference to Article I is not necessary. Articles III:2 and 4 lay down substantive legal obligations. In light of this use of the word matters to refer to provisions containing legal obligations, we consider that among the various dictionary definitions, subject and substance are particularly pertinent to define the meaning of the word matters as used in Article I:1. Therefore, interpreting the ordinary meaning of the terms used in their context, the Panel considers that the phrase matters referred to in in Article I:1 refers to the subject matter of those provisions in terms of their substantive legal content. Understood in this sense, it is clear to us that the matters referred to in paragraphs 2 and 4 of Article III cannot be interpreted without regard to limitations that may exist regarding the scope of the substantive obligations provided for in these paragraphs. If it is explicitly provided that a particular measure is not subject to the obligations of Article III, that measure in our view does not form part of the matters referred to in Articles III:2 and 4. Thus, since Article III:8(b) provides that Article III shall not prevent the payment of subsidies exclusively to domestic producers, such subsidies are not part of the subject matter of Article III:4 and cannot be covered by the expression matters referred to in paragraphs 2 and 4 of Article III in Article I:1.(32) (d) Any advantage, favour, privilege or immunity granted by any Member (i) General 33. In EC Bananas III, the Panel considered that advantages in the sense of Article I:1 are those that create more favourable import opportunities or affect the commercial relationship between products of different origins.(33) 34. In Canada Autos, the Appellate Body found that Canadas import duty exemption accorded to motor vehicles originating in some countries in which affiliates of certain designated manufacturers were present, was inconsistent with Article I:1. The Appellate Body noted: Article I:1 requires that any advantage, favour, privilege or immunity granted by any Member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other Members. (emphasis added) The words of Article I:1 refer not to some advantages granted with respect to the

subjects that fall within the defined scope of the Article, but to any advantage; not to some products, but to any product; and not to like products from some other Members, but to like products originating in or destined for all other Members.(34) (ii) Allocation of tariff quotas 35. The appeal in EC Bananas III focused inter alia on the banana tariff rate quota (TRQ) activity function rules, under which the requirements for TRQ allocation to importers differed depending on the origin of the imported bananas. [T]he Panel found that the procedural and administrative requirements of the activity function rules for importing thirdcountry and non-traditional ACP bananas differ from, and go significantly beyond, those required for importing traditional ACP bananas. This is a factual finding. Also, a broad definition has been given to the term advantage in Article I:1 of the GATT 1994 by the panel in United States Non-Rubber Footwear. It may well be that there are considerations of EC competition policy at the basis of the activity function rules. This, however, does not legitimize the activity function rules to the extent that these rules discriminate among like products originating from different Members. For these reasons, we agree with the Panel that the activity function rules are an advantage granted to bananas imported from traditional ACP States, and not to bananas imported from other Members, within the meaning of Article I:1. Therefore, we uphold the Panels finding that the activity function rules are inconsistent with Article I:1 of the GATT 1994.(35) (iii) Flexibility in import procedures 36. In Colombia Ports of Entry, the Panel found that the advance import declaration and legalization requirements referred to in paragraph 29 above conferred an advantage on imports of the relevant products from other WTO Members, as compared with the like products imported from Panama or the Colon Free Zone (CFZ). The Panel observed that these requirements applied to goods originating in Panama or the CFZ, as well as goods originating elsewhere which transited Panama or the CFZ before arriving in Colombia. Like products originating elsewhere that did not transit Panama or the CFZ were not subject to the requirements. Observing that [i]nherently, an advantage arises for an importer that can choose how to operate his business in order to enhance his profitability and competitiveness, among other concerns, the Panel found that: [O]ne advantage arises from the fact that importers of subject goods from territories other than Panama or the CFZ are granted flexibility to make customs duty and tax payments when they see fit.

Additionally, an importer that has not filed an advance import declaration would retain the option to inspect his goods on site upon arrival, verifying its dimension and weight, prior to submitting a declaration, thereby assuring himself of the accuracy of the declaration and avoiding fees required to file a legalization declaration.(36) (iv) Access to certification procedures 37. In US Poultry (China), in examining the measure described in paragraph 30 above, the Panel observed that [S]uccessful completion of the mentioned procedures is the only way that an importer can enter the United States market for poultry products. The opportunity to sell poultry products in the United States market is therefore a very favourable market opportunity and not having such an opportunity would mean a serious competitive disadvantage, or rather would amount to an exclusion from competition in the US market. Such an opportunity would also affect the commercial relationship between products of two different origins where one of the countries of origin is denied access to the PPIA and the FSIS procedures. The Panel thus considers that the opportunity to export poultry products to the United States after successful completion of the PPIA and the FSIS procedures is an advantage within the meaning of Article I:1 of the GATT 1994 because it creates market access opportunities and affects the commercial relationship between products of different origins.(37) (v) GATT practice 38. Regarding GATT practice concerning the term any advantage, favour, privilege or immunity granted by any contracting party. (e) like products 39. In Indonesia Autos, examining the consistency of the Indonesian National Car Programme with Article I:1, the Panel compared the concepts of like products under Articles I and III: We have found in our discussion of like products under Article III:2 that certain imported motor vehicles are like the National Car. The same considerations justify a finding that such imported vehicles can be considered like National Cars imported from Korea for the purpose of Article I.(38) 40. In Colombia Ports of Entry, the Panel found that because the measures at issue explicitly discriminated, a full like product analysis was not needed:

In the Panels view, it is not necessary to determine through lengthy analysis whether textiles, apparel or footwear arriving from other countries are in fact like products to those goods originating in and arriving from Panama. Based on the design of the ports of entry measure, any textiles, apparel or footwear imported from territories other than Panama or the CFZ, are like products, and would necessarily be allowed entry at 11 ports of entry in Colombia without presenting an advance import declaration, as long as the product did not circulate through Panama or the CFZ prior to arrival in Colombia.(39) 41. Citing the like product analysis based on hypothetical imports in the Appellate Body Report on Canada Periodicals, the Panel then found: [S]ince Panama does not currently produce any of these products for export to Colombia, but in light of the fact that the Panel views it as proper to consider Panamas claim, hypothetical imports from Panama or the CFZ are appropriate for consideration. An advance import declaration, advance payment of customs duties and taxes, and special rules concerning legalization would be required simply because of the products origin. In the Panels view, the hypothetical origin-based distinction that would arise if Panama were to produce the subject goods and export those goods to Colombia is sufficient for the Panel to proceed in considering Panamas claim under Article I:1 of the GATT 1994.(40) 42. In US Poultry (China), the Panel set out the main approaches to determining likeness of products: The concept of like product has been abundantly interpreted in the prior decisions of panels and the Appellate Body. Whatever the provision at issue, the Appellate Body has explained that a like product analysis must always be done on a case-by-case basis. The traditional approach for determining likeness has, in the main, consisted of employing four general criteria: (i) the properties, nature and quality of the products; (ii) the end-uses of the products; (iii) consumers tastes and habits more comprehensively termed consumers perceptions and behaviour in respect of the products; and (iv) the tariff classification of the products. A different approach used by panels and the Appellate Body to determine the likeness of the products has been to assume hypothetically that two like products exist in the market place when one of two situations arises: first cases concerning origin-based discrimination, and second, cases where it was not possible to make the like product comparison because of for example a ban on imports.

The panel in China Publications and Audiovisual Products recalled the relevant WTO jurisprudence which supports a hypothetical like product analysis where a difference in treatment between domestic and imported products is based exclusively on the products origin. In these cases, the complainant did not need to identify specific domestic and imported products and establish their likeness in terms of the traditional criteria in order to make a prima facie case of likeness. Instead, when origin is the sole criterion distinguishing the products, it has been sufficient for a complainant to demonstrate that there can or will be domestic and imported products that are like. We also note that panels have found that foreign origin cannot serve as a basis for a determination that imported products are unlike domestic ones. We note that the United States has argued that the differing safety levels of poultry from China vis--vis other WTO Members may have an impact on the like products analysis. However, the United States did not provide specific evidence relating to different safety levels between poultry products From China and other WTO Members. Therefore, we see no reason not to proceed with the hypothetical like products analysis and base our determination on whether the products alleged to be like are distinguished solely because of their origin.(41) 43. Noting that the funding restriction in question was origin-based in respect of the products it affects, that Panel followed a hypothetical like products analysis.(42) 44. For the treatment of this subject-matter under GATT 1947.

(f) any product originating in or destined for any other country 45. In EC Bananas III, the Appellate Body reviewed the Panels finding that the EC import regime for bananas was inconsistent with Article XIII in that the European Communities allocated tariff quota shares to some Members without allocating such shares to other Members. Pointing out that there [were] two separate EC import regimes for bananas, the preferential regime for traditional ACP bananas and the erga omnes regime for all other imports of bananas, the European Communities appealed that the non discrimination obligations of Article I:1, X:3(a) and XIII of GATT 1994 and Article 1.3 of the Licensing Agreement apply only within each of these separate regimes.(43) The Appellate Body responded as follows: The essence of the non-discrimination obligations is that like products should be treated equally, irrespective of their origin. As no

participant disputes that all bananas are like products, the nondiscrimination provisions apply to all imports of bananas, irrespective of whether and how a Member categorizes or subdivides these imports for administrative or other reasons. If, by choosing a different legal basis for imposing import restrictions, or by applying different tariff rates, a Member could avoid the application of the nondiscrimination provisions to the imports of like products from different Members, the object and purpose of the non-discrimination provisions would be defeated. It would be very easy for a Member to circumvent the non-discrimination provisions of the GATT 1994 and the other Annex 1A agreements, if these provisions apply only within regulatory regimes established by that Member.(44) (g) shall be accorded immediately and unconditionally (i) General 46. In Indonesia Autos, the Panel found that the exemption of import duties and sales taxes to automobiles which met certain origin-neutral requirements was inconsistent with Article I:1, because of the existence of a number of conditions: Indeed, it appears that the design and structure of the June 1996 car programme is such as to allow situations where another Members like product to a National Car imported by PT PTN from Korea will be subject to much higher duties and sales taxes than those imposed on such National Cars. The distinction as to whether one product is subject to 0% duty and the other one is subject to 200% duty or whether one product is subject to 0% sales tax and the other one is subject to a 35% sales tax, depends on whether or not PT TPN had made a deal with that exporting company to produce that National Car, and is covered by the authorization of June 1996 with specifications that correspond to those of the Kia car produced only in Korea. In the GATT/WTO, the right of Members cannot be made dependent upon, conditional on or even affected by, any private contractual obligations in place.(45) The existence of these conditions is inconsistent with the provisions of Article I:1 which provides that tax and customs duty benefits accorded to products of one Member (here on Korean products) be accorded to imported like products from other Members immediately and unconditionally.( 46) We note also that under the February 1996 car programme the granting of customs duty benefits to parts and components is conditional to their being used in the assembly in Indonesia of a National Car. The granting of tax benefits is conditional and limited to the only Pioneer company producing National Cars. And there is also a third condition for these benefits: the meeting of certain local

content targets. Indeed under all these car programmes, customs duty and tax benefits are conditional on achieving a certain local content value for the finished car. The existence of these conditions is inconsistent with the provisions of Article I:1 which provides that tax and customs duty advantages accorded to products of one Member (here on Korean products) be accorded to imported like products from other Members immediately and unconditionally. For the reasons discussed above, we consider that the June 1996 car programme which introduced discrimination between imports in the allocation of tax and customs duty benefits based on various conditions and other criteria not related to the imports themselves and the February 1996 car programme which also introduce discrimination between imports in the allocation of customs duty benefits based on various conditions and other criteria not related to the imports themselves, are inconsistent with the provisions of Article I of GATT.(47) 47. In Canada Autos, the Canadian measure at issue was an exemption of import duties, granted for motor vehicles if the exporter of the vehicles was affiliated with a manufacturer/importer in Canada that had been designated (contingent on compliance with other allegedly WTO-inconsistent requirements) as eligible to import motor vehicles duty-free under the Motor Vehicle Tariff Order (MVTO) 1998 or under a so-called Special Remission Order (SRO). In practice, exporters of motor vehicles affiliated with a manufacturer/importer in Canada were located in a small number of countries. The Panel found the Canadian measure breached Article I:1. On appeal, the Appellate Body first discussed the concepts of de jure and de facto discrimination under Article I:1 (see paragraph 25 above) and then held that, by granting an advantage to some products from some Members and not to others, the measure in question was inconsistent with Article I:1: [F]rom both the text of the measure and the Panels conclusions about the practical operation of the measure, it is apparent to us that [w]ith respect to customs duties imposed on or in connection with importation , Canada has granted an advantage to some products from some Members that Canada has not accorded immediately and unconditionally to like products originating in or destined for the territories of all other Members. (emphasis added) And this, we conclude, is not consistent with Canadas obligations under Article I:1 of the GATT 1994.(48) 48. The Appellate Body in Canada Autos added that the context and the pervasive character of the MFN principle supported its finding: The context of Article I:1 within the GATT 1994 supports this conclusion. Apart from Article I:1, several MFN-type clauses dealing with varied matters are contained in the GATT 1994.(49) The very

existence of these other clauses demonstrates the pervasive character of the MFN principle of non-discrimination.(50) 49. The Panel in Canada Autos also clarified the meaning of the term unconditionally. With respect to this term, Japan argued that, by making the import duty exemption conditional upon criteria related to the importer but unrelated to the imported product itself, Canada failed to accord the import duty exemption immediately and unconditionally to like products originating in all WTO Members. The Panel held that the term unconditionally could not be determined independently of an examination of whether it involves discrimination between like products of different countries. The Panel emphasized the important distinction to be made between, on the one hand, the issue of whether an advantage within the meaning of Article I:1 is subject to conditions, and, on the other, whether an advantage, once it has been granted to the product of any country, is accorded unconditionally to the like product of all other Members: [W]e believe that this interpretation of Japan does not accord with the ordinary meaning of the term unconditionally in Article I:1 in its context and in light of the object and purpose of Article I:1. In our view, whether an advantage within the meaning of Article I:1 is accorded unconditionally cannot be determined independently of an examination of whether it involves discrimination between like products of different countries. Article I:1 requires that, if a Member grants any advantage to any product originating in the territory of any other country, such advantage must be accorded immediately and unconditionally to the like product originating in the territories of all other Members. We agree with Japan that the ordinary meaning of unconditionally is not subject to conditions. However, in our view Japan misinterprets the meaning of the word unconditionally in the context in which it appears in Article I:1. The word unconditionally in Article I:1 does not pertain to the granting of an advantage per se, but to the obligation to accord to the like products of all Members an advantage which has been granted to any product originating in any country. The purpose of Article I:1 is to ensure unconditional MFN treatment. In this context, we consider that the obligation to accord unconditionally to third countries which are WTO Members an advantage which has been granted to any other country means that the extension of that advantage may not be made subject to conditions with respect to the situation or conduct of those countries. This means that an advantage granted to the product of any country must be accorded to the like product of all WTO Members without discrimination as to origin.

In this respect, it appears to us that there is an important distinction to be made between, on the one hand, the issue of whether an advantage within the meaning of Article I:1 is subject to conditions, and, on the other, whether an advantage, once it has been granted to the product of any country, is accorded unconditionally to the like product of all other Members. An advantage can be granted subject to conditions without necessarily implying that it is not accorded unconditionally to the like product of other Members. More specifically, the fact that conditions attached to such an advantage are not related to the imported product itself does not necessarily imply that such conditions are discriminatory with respect to the origin of imported products. We therefore do not believe that, as argued by Japan, the word unconditionally in Article I:1 must be interpreted to mean that making an advantage conditional on criteria not related to the imported product itself is per se inconsistent with Article I:1, irrespective of whether and how such criteria relate to the origin of the imported products. We thus find that Japans argument is unsupported by the text of Article I:1.(51) 50. The Panel in Canada Autos rejected Canadas defence that the Canadian import duty exemption, as described in paragraph 47 above, was a permitted exception under Article XXIV because, on the one hand, Canada was not granting the import duty exemption to all NAFTA manufacturers and because, on the other hand, manufacturers from countries other than the United States and Mexico were being provided duty-free treatment.(52) As this finding of the Panel was not appealed, the Appellate Body concluded: The drafters also wrote various exceptions to the MFN principle into the GATT 1947 which remain in the GATT 1994.(53) Canada invoked one such exception before the Panel, relating to customs unions and free trade areas under Article XXIV. This justification was rejected by the Panel, and the Panels findings on Article XXIV were not appealed by Canada. Canada has invoked no other provision of the GATT 1994, or of any other covered agreement, that would justify the inconsistency of the import duty exemption with Article I:1 of the GATT 1994. The object and purpose of Article I:1 supports our interpretation. That object and purpose is to prohibit discrimination among like products originating in or destined for different countries. The prohibition of discrimination in Article I:1 also serves as an incentive for concessions, negotiated reciprocally, to be extended to all other Members on an MFN basis.(54) 51. In US Certain EC Products, the United States increased the bonding requirements on imports from the European Communities in order to secure

the payment of additional import duties to be imposed in retaliation for certain EC measures. Examining the consistency of the increased bonding requirements with GATT Article I, the Panel stated, with reference to the finding of the Panel in Indonesia Autos referenced in paragraph 46 above: We find that the 3 March additional bonding requirements violated the most-favoured-nation clause of Article I of GATT, as it was applicable only to imports from the European Communities, although identical products from other WTO Members were not the subject of such an additional bonding requirement. The regulatory distinction (whether an additional bonding requirement is needed) was not based on any characteristic of the product but depended exclusively on the origin of the product and targeted exclusively some imports from the European Communities.(55)(56) 52. In EC Tariff Preferences, the Panel interpreted the term unconditionally as meaning not limited by or subjected to any conditions: In the Panels view, moreover, the term unconditionally in Article I:1 has a broader meaning than simply that of not requiring compensation. While the Panel acknowledges the European Communities argument that conditionality in the context of traditional MFN clauses in bilateral treaties may relate to conditions of trade compensation for receiving MFN treatment, the Panel does not consider this to be the full meaning of unconditionally under Article I:1. Rather, the Panel sees no reason not to give that term its ordinary meaning under Article I:1, that is, not limited by or subject to any conditions.(57) Because the tariff preferences under the Drug Arrangements are accorded only on the condition that the receiving countries are experiencing a certain gravity of drug problems, these tariff preferences are not accorded unconditionally to the like products originating in all other WTO Members, as required by Article I:1. The Panel therefore finds that the tariff advantages under the Drug Arrangements are not consistent with Article I:1 of GATT 1994.(58) 53. In Colombia Ports of Entry, the Panel found that the advantage described in paragraph 36 above was not extended immediately and unconditionally to imports from Panama, because an advantage granted to the subject goods of other Members is not similarly accorded to those products originating in Panama for reasons related to its origin or the conduct of Panama.(59) 54. In US Poultry (China), the Panel observed: [E]ven if Chinese poultry production system is found to provide

equivalent food safety standards as those applied in the United States, it will not be able to export poultry products because of the funding prohibition. Further, the United States acknowledges that the purpose and effect of Section 727 was to prevent Chinese poultry products from being imported into the United States. No other country was subject to the funding prohibition that Section 727 imposed on China. This means that China is the only WTO Member that is denied the advantage that the Panel identified earlier the opportunity to export poultry products to the United States after the successful completion of the FSIS procedures. Therefore, Section 727 discriminates against China with respect to other WTO Members by denying the above-mentioned advantage, and this discriminatory treatment means that the United States is not extending an advantage immediately and unconditionally.(60) 55. Regarding GATT practice concerning the term shall be accorded immediately and unconditionally. 2. Articles I:2 and I:4: historical preferences 56. A Secretariat Note dated 18 December 1992 provides an overview of the status of historical preferences under Article 1:2 as of that date.(61) 57. On 14 October 1996, the General Council approved waivers in respect of the base date for Article I:4 for South Africa and Zimbabwe until 31 December 1997, anticipating that the bilateral agreements of these countries would be incorporated in a regional trade agreement before the expiration date of 31 December 1997.(62) 3. Exceptions and derogations to the MFN principle (a) Enabling Clause (i) Text and adoption of the Enabling Clause 58. On 28 November 1979, the GATT Council adopted the Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries (the Enabling Clause).( 63) The text of the Enabling Clause is set out below: Following negotiations within the framework of the Multilateral Trade Negotiations, the CONTRACTING PARTIES decide as follows: 1. Notwithstanding the provisions of Article I of the General Agreement, contracting parties may accord differential and more favourable treatment to developing countries(64), without according such treatment to other contracting parties.

2.

The provisions of paragraph 1 apply to the following:(65)

(a) Preferential tariff treatment accorded by developed contracting parties to products originating in developing countries in accordance with the Generalized System of Preferences;(66) (b) Differential and more favourable treatment with respect to the provisions of the General Agreement concerning non-tariff measures governed by the provisions of instruments multilaterally negotiated under the auspices of the GATT; (c) Regional or global arrangements entered into amongst lessdeveloped contracting parties for the mutual reduction or elimination of tariffs and, in accordance with criteria or conditions which may be prescribed by the CONTRACTING PARTIES, for the mutual reduction or elimination of non-tariff measures, on products imported from one another; (d) Special treatment on the least developed among the developing countries in the context of any general or specific measures in favour of developing countries. 3. Any differential and more favourable treatment provided under this clause: (a) shall be designed to facilitate and promote the trade of developing countries and not to raise barriers to or create undue difficulties for the trade of any other contracting parties; (b) shall not constitute an impediment to the reduction or elimination of tariffs and other restrictions to trade on a mostfavoured-nation basis; (c) shall in the case of such treatment accorded by developed contracting parties to developing countries be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries. 4. Any contracting party taking action to introduce an arrangement pursuant to paragraphs 1, 2 and 3 above or subsequently taking action to introduce modification or withdrawal of the differential and more favourable treatment so provided shall:(67) (a) notify the CONTRACTING PARTIES and furnish them with all the information they may deem appropriate relating to such action;

(b) afford adequate opportunity for prompt consultations at the request of any interested contracting party with respect to any difficulty or matter that may arise. The CONTRACTING PARTIES shall, if requested to do so by such contracting party, consult with all contracting parties concerned with respect to the matter with a view to reaching solutions satisfactory to all such contracting parties. 5. The developed countries do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of developing countries, i.e., the developed countries do not expect the developing countries, in the course of trade negotiations, to make contributions which are inconsistent with their individual development, financial and trade needs. Developed contracting parties shall therefore not seek, neither shall less-developed contracting parties be required to make, concessions that are inconsistent with the latters development, financial and trade needs. 6. Having regard to the special economic difficulties and the particular development, financial and trade needs of the leastdeveloped countries, the developed countries shall exercise the utmost restraint in seeking any concessions or contributions for commitments made by them to reduce or remove tariffs and other barriers to the trade of such countries, and the least-developed countries shall not be expected to make concessions or contributions that are inconsistent with the recognition of their particular situation and problems. 7. The concessions and contributions made and the obligations assumed by developed and less-developed contracting parties under the provisions of the General Agreement should promote the basic objectives of the Agreement, including those embodied in the Preamble and in Article XXXVI. Less-developed contracting parties expect that their capacity to make contributions or negotiated concessions or take other mutually agreed action under the provisions and procedures of the General Agreement would improve with the progressive development of their economies and improvement in their trade situation and they would accordingly expect to participate more fully in the framework of rights and obligations under the General Agreement. 8. Particular account shall be taken of the serious difficulty of the least-developed countries in making concessions and contributions in view of their special economic situation and their development, financial and trade needs.

9. The contracting parties will collaborate in arrangements for review of the operation of these provisions, bearing in mind the need for individual and joint efforts by contracting parties to meet the development needs of developing countries and the objectives of the General Agreement. 59. Further information concerning the background and GATT practice in respect of the Enabling Clause. (ii) Notification, consultation and transparency for preferential measures 60. The functions of the CONTRACTING PARTIES under Paragraph 4 with respect to notification and consultations have been carried out by the Committee on Trade and Development under the GATT 1947 and the WTO. 61. On 14 December 2010, the General Council adopted a Transparency Mechanism for Preferential Trade Arrangements (PTAs), applying to all preferences under paragraph 2 of the Enabling Clause except for those under paragraph 2(c); to preferential treatment accorded by any Member to products of least-developed countries; and to any other non-reciprocal preferential treatment authorized under the WTO Agreement.(68) 62. The Transparency Mechanism for PTAs calls for Members granting such non-reciprocal preferences to notify them as early as possible (when practicable before the application of preferential treatment and at the latest within three months after the treatment is in force); notifications are to provide legislation and related instruments, and are to be considered by the Committee on Trade and Development on the basis of a factual presentation prepared by the Secretariat. Each preference arrangement is to be considered in a single formal meeting of the Committee. Changes affecting the implementation of a PTA are also to be notified. For each preference arrangement existing as of December 2010, the Secretariat is to prepare a factual abstract. All information notified is to be made available on the WTO website, and the Secretariat is to maintain an electronic database accessible to the public. The Transparency Mechanism is to apply on a provisional basis until Members approve its permanent application.(69) 63. From 1 January 1995 through 30 September 2011, the following Members have notified GSP schemes to the WTO: Australia(70); Canada(71); EU(72); Iceland(73); Japan(74); New Zealand(75); Norway(76); Switzerland(77); and United States.(78) GSP schemes notified to the GATT. (iii) Regional trade agreements (RTAs) notified under the Enabling Clause 64. As noted above, functions concerning notifications and consultation under Paragraph 4 have been carried out by the Committee on Trade and Development under GATT 1947 and the WTO. Under paragraph 4(a) of the

Enabling Clause, Members are required to notify arrangements concluded under the legal cover of the Enabling Clause, and the modification or withdrawal thereof, to the Committee on Trade and Development. 65. From 1 January 1995 through 30 September 2011, the Committee on Trade and Development has received notifications of 25 regional trade agreements among developing country Members.(79) For a complete list of RTAs notified to the GATT/WTO, see the table at the end of this Chapter. 66. Additional information on three regional trade agreements previously notified to the GATT Committee on Trade and Development has also been submitted to the WTO Committee on Trade and Development: (a) the Memorandum of Understanding on Closer Relations between Bolivia and the Southern Common Market Agreement (MERCOSUR);(80) (b) Common Effective Preferential Tariffs (CEPT) scheme for the ASEAN Free Trade Area (AFTA);(81) and (c) periodical reports on measures taken under the 1980 Treaty of Montevideo of the Latin American Integration Association (LAIA).( 82) 67. At the entry into force of the WTO on 1 January 1995, one agreement (Southern Common Market, or MERCOSUR) notified to the GATT 1947 under the Enabling Clause was being examined in a working party established by the GATT 1947 Committee on Trade and Development. In order to facilitate continuation of the work of the MERCOSUR Working Party in the WTO, on 14 September 1995, the Committee on Trade and Development adapted its terms of reference as follows(83): To examine the Southern Common Market Agreement (MERCOSUR) in the light of the relevant provisions of the Enabling Clause and of the GATT 1994, including Article XXIV, and to transmit a report and recommendations to the Committee on Trade and Development for submission to the General Council, with a copy of the report transmitted as well to the Council for Trade in Goods. The examination in the Working Party will be based on a complete notification and on written questions and answers.(84) 68. The review of MERCOSUR was later taken over by the Committee on RTAs.(85) 69. Up to December 2006, the Committee reviewed RTAs on the basis of procedures applied in respect of all notifications under the Enabling Clause. When an agreement was notified under the Enabling Clause, it was inscribed on the agenda of the Committee on Trade and Development. Subsequent actions of the Committee might have included noting the agreement,

requesting additional information, or transferring it to the Committee on RTAs for examination. In addition, the Committee also reviewed reports made by parties on changes to, or operation of, their agreements. 70. On 2 November 1998, the Committee on Trade and Development adopted general guidelines with respect to information on RTAs submitted to it.(86) On 6 March 2007, the Committee on Trade and Development adopted a common and simplified notification format for regional trade agreements.(87) 71. On 14 December 2006, the General Council adopted a Decision on a Transparency Mechanism for Regional Trade Agreements,(88) to be applied on a provisional basis and replaced by a permanent mechanism adopted as part of the overall results of the Doha Round. The Decision applies to RTAs notified under paragraph 2(c) of the Enabling Clause, as well as RTAs notified under GATT Article XXIV and GATS Article V. 72. This Decision calls on Members to notify RTAs as early as possible, and no later than directly after ratification and before the application of preferential treatment. All notified agreements, irrespective of the clause under which they had been notified, are subject to common transparency procedures. The Decision also provides that Members consideration of each notified RTA shall be normally concluded within one year after the notification date. To assist Members in their consideration, the Secretariat is to prepare a factual presentation of the RTA, on its own responsibility and in full consultation with the parties of the RTA. The Secretariat is also to prepare a factual abstract for each RTA notified under the Enabling Clause up to 31 December 2006. These Secretariat reports and other written materials submitted are to be made available on the WTO website. Each notified RTA is to be considered at a single formal meeting. 73. On 4 December 2007, the Committee on Trade and Development agreed that the consideration of regional trade agreements notified under paragraph 2(c) of the Enabling Clause, carried out in dedicated sessions of the Committee, would essentially follow the same procedures used by the Committee on Regional Trade Agreements in its consideration of agreements notified under Article XXIV of the GATT 1994 and Article V of the GATS.(89) Regarding the procedures for the examination and consideration of RTAs, see the Section of the Committee on Regional Trade Agreements in the Chapter on the WTO Agreement. 74. During 20082011, discussions have taken place in the Committee on Trade and Development concerning the notification status of the GCC Customs Union and other RTAs notified under both Article XXIV of the GATT 1994 and the Enabling Clause.(90) 75. As regards agreements notified under the Enabling Clause involving

non-WTO Members, the Committee on Trade and Development agreed on 13 March 2009 to adopt the procedures used by the Committee on Regional Trade Agreements in the consideration of these agreements in the Committee on Trade and Development. Regarding the procedures of the Committee on Regional Trade Agreements with respect to agreements involving non-WTO Members, see paragraph 1025 below.(91) 76. The Committee on Trade and Development has held dedicated sessions on RTAs on 16 October 2008, 15 July and 14 September 2009, and 28 June 2010;(92) four RTAs have been considered in these sessions. The notifications, other documentation, and status of WTO consideration of RTAs notified under the Enabling Clause are available from the Regional Trade Agreements Information System on the WTO website.(93) 77. As of 30 September 2011, all factual abstracts due for agreements notified under the Enabling Clause had been posted at the WTO Database on Regional Trade Agreements. (iv) Special treatment of the least-developed countries 78. The Transparency Mechanism for Preferential Trade Arrangements adopted on 14 December 2010 applies in respect of preferential trade arrangements taking the form of preferential treatment accorded by any Member to products of least-developed countries. These arrangements are to be considered by the Committee on Trade and Development; see paragraph 61 above. 79. From 1999 through December 2010, the Committee on Trade and Development received notifications under the Enabling Clause from the following Members, of their special treatment in respect of the leastdeveloped countries in the context of any general or specific measures in favour of developing countries: Australia;(94) Canada;(95) European Communities;(96) Iceland;(97) Japan;(98) Korea;(99) Norway;(100) New Zealand;(101) Switzerland;(102) and United States.(103) See also the Waiver on Preferential Tariff Treatment for Least-Developed Countries (referred to in paragraph 101). (v) Interpretation The Enabling Clause as an exception to Article I:1 of the GATT 1994 80. In EC Tariff Preferences, the Appellate Body addressed the relationship between Article I:1 of the GATT 1994 and the Enabling Clause and upheld the Panels characterization of the Enabling Clause as an exception to Article I:1 based on the ordinary meaning of paragraph 1 of the Enabling Clause. It also stated that such a characterization does not affect

the importance of the policy objectives of the Enabling Clause: By using the word notwithstanding, paragraph 1 of the Enabling Clause permits Members to provide differential and more favourable treatment to developing countries in spite of the MFN obligation of Article I:1. Such treatment would otherwise be inconsistent with Article I:1 because that treatment is not extended to all Members of the WTO immediately and unconditionally.(104) Paragraph 1 thus excepts Members from complying with the obligation contained in Article I:1 for the purpose of providing differential and more favourable treatment to developing countries, provided that such treatment is in accordance with the conditions set out in the Enabling Clause. As such, the Enabling Clause operates as an exception to Article I:1. In sum, in our view, the characterization of the Enabling Clause as an exception in no way diminishes the right of Members to provide or to receive differential and more favourable treatment. The status and relative importance of a given provision does not depend on whether it is characterized, for the purpose of allocating the burden of proof, as a claim to be proven by the complaining party, or as a defence to be established by the responding party. Whatever its characterization, a provision of the covered agreements must be interpreted in accordance with the customary rules of interpretation of public international law, as required by Article 3.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the DSU).(105) Members rights under the Enabling Clause are not curtailed by requiring preference-granting countries to establish in dispute settlement the consistency of their preferential measures with the conditions of the Enabling Clause. Nor does characterizing the Enabling Clause as an exception detract from its critical role in encouraging the granting of special and differential treatment to developing-country Members of the WTO.(106) Order of analysis 81. The Appellate Body stated in EC Tariff Preferences that the Enabling Clause does not exclude the applicability of Article I:1. Rather, it is amore specific rule [on GSP matters] that prevails over Article I:1. According to the Appellate Body, a panel should first examine the consistency of a challenged measure with Article I:1 and then proceed to examine the justifiability of the measure under the Enabling Clause: It is well settled that the MFN principle embodied in Article I:1 is a cornerstone of the GATT and one of the pillars of the WTO trading system, which has consistently served as a key basis and impetus for

concessions in trade negotiations. However, we recognize that Members are entitled to adopt measures providing differential and more favourable treatment under the Enabling Clause. Therefore, challenges to such measures, brought under Article I:1, cannot succeed where such measures are in accordance with the terms of the Enabling Clause. In our view, this is so because the text of paragraph 1 of the Enabling Clause ensures that, to the extent that there is a conflict between measures under the Enabling Clause and the MFN obligation in Article I:1, the Enabling Clause, as the more specific rule, prevails over Article I:1. In order to determine whether such a conflict exists, however, a dispute settlement panel should, as a first step, examine the consistency of a challenged measure with Article I:1, as the general rule. If the measure is considered at this stage to be inconsistent with Article I:1, the panel should then examine, as a second step, whether the measure is nevertheless justified by the Enabling Clause. It is only at this latter stage that a final determination of consistency with the Enabling Clause or inconsistency with Article I:1 can be made. In other words, the Enabling Clause does not exclude the applicability of Article I:1 in the sense that, as a matter of procedure (or order of examination, as the Panel stated), the challenged measure is submitted successively to the test of compatibility with the two provisions. But, as a matter of final determination or application rather than applicability it is clear that only one provision applies at a time .(107) Burden of proof under the Enabling Clause 82. The Appellate Body stated in EC Tariff Preferences that as an exception provision, the ultimate burden of proof under the Enabling Clause falls on the respondent: As a general rule, the burden of proof for an exception falls on the respondent, that is, as the Appellate Body stated in US Wool Shirts and Blouses, on the party assert[ing] the affirmative of a particular defence.(108) From this allocation of the burden of proof, it is normally for the respondent, first, to raise the defence and, second, to prove that the challenged measure meets the requirements of the defence provision. We are therefore of the view that the European Communities must prove that the Drug Arrangements satisfy the conditions set out in the Enabling Clause. Consistent with the principle of jura novit curia, it is not the responsibility of the European Communities to provide us with the legal interpretation to be given to a particular provision in the Enabling Clause; instead, the burden of the European Communities is

to adduce sufficient evidence to substantiate its assertion that the Drug Arrangements comply with the requirements of the Enabling Clause.(109) 83. However, the Appellate Body also found in EC Tariff Preferences that the complainant bears the burden of raising the Enabling Clause in its panel request, although the ultimate burden of justifying the challenged measure under the Enabling Clause is with the respondent: In our view, the special status of the Enabling Clause in the WTO system has particular implications for WTO dispute settlement. As we have explained, paragraph 1 of the Enabling Clause enhances market access for developing countries as a means of improving their economic development by authorizing preferential treatment for those countries, notwithstanding the obligations of Article I. It is evident that a Member cannot implement a measure authorized by the Enabling Clause without according an advantage to a developing countrys products over those of a developed country. It follows, therefore, that every measure undertaken pursuant to the Enabling Clause would necessarily be inconsistent with Article I, if assessed on that basis alone, but it would be exempted from compliance with Article I because it meets the requirements of the Enabling Clause. Under these circumstances, we are of the view that a complaining party challenging a measure taken pursuant to the Enabling Clause must allege more than mere inconsistency with Article I:1 of the GATT 1994, for to do only that would not convey the legal basis of the complaint sufficient to present the problem clearly. In other words, it is insufficient in WTO dispute settlement for a complainant to allege inconsistency with Article I:1 of the GATT 1994 if the complainant seeks also to argue that the measure is not justified under the Enabling Clause. This is especially so if the challenged measure, like that at issue here, is plainly taken pursuant to the Enabling Clause, as we discuss infra. The responsibility of the complaining party in such an instance, however, should not be overstated. It is merely to identify those provisions of the Enabling Clause with which the scheme is allegedly inconsistent, without bearing the burden of establishing the facts necessary to support such inconsistency. That burden, as we concluded above, remains on the responding party invoking the Enabling Clause as a defence.(110) Footnote 3 to paragraph 2(a): generalized 84. The Appellate Body addressed the meaning of the term generalized as context for the interpretation of the term non-discriminatory in EC Tariff Preferences and found that its ordinary meaning is to apply more

generally. The Appellate Body also took note of the historical context leading to this requirement: We continue our interpretive analysis by turning to the immediate context of the term non-discriminatory. We note first that footnote 3 to paragraph 2(a) stipulates that, in addition to being nondiscriminatory, tariff preferences provided under GSP schemes must be generalized. According to the ordinary meaning of that term, tariff preferences provided under GSP schemes must be generalized in the sense that they apply more generally; [or] become extended in application.(111) However, this ordinary meaning alone may not reflect the entire significance of the word generalized in the context of footnote 3 of the Enabling Clause, particularly because that word resulted from lengthy negotiations leading to the GSP. In this regard, we note the Panels finding that, by requiring tariff preferences under the GSP to be generalized, developed and developing countries together sought to eliminate existing special preferences that were granted only to certain designated developing countries.(112) Similarly, in response to our questioning at the oral hearing, the participants agreed that one of the objectives of the 1971 Waiver Decision and the Enabling Clause was to eliminate the fragmented system of special preferences that were, in general, based on historical and political ties between developed countries and their former colonies.(113) Footnote 3 to paragraph 2(a): non-discriminatory 85. In EC Tariff Preferences, the European Communities appealed the Panels findings based on the drafting history of the Generalized System of Preferences that the term non-discriminatory in footnote 3 to paragraph 2 of the Enabling Clause requires that identical tariff preferences be provided to all developing countries without differentiation, except as regards the implementation of a priori limitations.(114) While rejecting the Panels findings, the Appellate Body interpreted the ordinary meaning of the term nondiscriminatory as requiring that preference-giving countries make identical tariff preferences available to all similarly-situated beneficiary developing countries: [T]he ordinary meanings of discriminate point in conflicting directions with respect to the propriety of according differential treatment. Under Indias reading, any differential treatment of GSP beneficiaries would be prohibited, because such treatment necessarily makes a distinction between beneficiaries. In contrast, under the European Communities reading, differential treatment of GSP beneficiaries would not be prohibited per se. Rather, distinctions would be impermissible only where the basis for such distinctions was improper. Given these divergent meanings, we do not regard the

term nondiscriminatory, on its own, as determinative of the permissibility of a preference-granting country according different tariff preferences to different beneficiaries of its GSP scheme. Nevertheless, at this stage of our analysis, we are able to discern some of the content of the non-discrimination obligation based on the ordinary meanings of that term. Whether the drawing of distinctions is per se discriminatory, or whether it is discriminatory only if done on an improper basis, the ordinary meanings of discriminate converge in one important respect: they both suggest that distinguishing among similarly-situated beneficiaries is discriminatory. For example, India suggests that all beneficiaries of a particular Members GSP scheme are similarly-situated, implicitly arguing that any differential treatment of such beneficiaries constitutes discrimination. Paragraph 2(a), on its face, does not explicitly authorize or prohibit the granting of different tariff preferences to different GSP beneficiaries. It is clear from the ordinary meanings of nondiscriminatory, however, that preference-granting countries must make available identical tariff preferences to all similarly-situated beneficiaries.(115) 86. After taking into account the stated objectives of the Preamble to the WTO Agreement, the Appellate Body stated in EC Tariff Preferences that the interpretation of the term non-discriminatory in the Enabling Clause should allow the possibility of additional preferences to be given to developing countries with particular needs: We are of the view that the objective of improving developing countries share in the growth in international trade, and their trade and export earnings, can be fulfilled by promoting preferential policies aimed at those interests that developing countries have in common, as well as at those interests shared by subcategories of developing countries based on their particular needs. An interpretation of non-discriminatory that does not require the granting of identical tariff preferences allows not only for GSP schemes providing preferential market access to all beneficiaries, but also the possibility of additional preferences for developing countries with particular needs, provided that such additional preferences are not inconsistent with other provisions of the Enabling Clause, including the requirements that such preferences be generalized and non-reciprocal. We therefore consider such an interpretation to be consistent with the object and purpose of the WTO Agreement and the Enabling Clause.(116) 87. After considering its ordinary meaning, its context and the object and purpose of the WTO Agreement, the Appellate Body found in EC Tariff

Preferences that the term non-discriminatory in footnote 3 to paragraph 2 of the Enabling Clause requires that identical preference be made available to all similarly situated GSP beneficiaries that have the development, financial and trade needs to which the preference is intended to respond: Having examined the text and context of footnote 3 to paragraph 2(a) of the Enabling Clause, and the object and purpose of the WTO Agreement and the Enabling Clause, we conclude that the term nondiscriminatory in footnote 3 does not prohibit developed-country Members from granting different tariffs to products originating in different GSP beneficiaries, provided that such differential tariff treatment meets the remaining conditions in the Enabling Clause. In granting such differential tariff treatment, however, preferencegranting countries are required, by virtue of the term nondiscriminatory, to ensure that identical treatment is available to all similarly-situated GSP beneficiaries, that is, to all GSP beneficiaries that have the development, financial and trade needs to which the treatment in question is intended to respond.(117) 88. The Appellate Body further found in EC Tariff Preferences that due to the closed nature of the beneficiary list and the lack of objective criteria or standards in its GSP Regulation, the European Communities failed to make its special preferences (i.e., the Drug Arrangements) available to all similarly situated beneficiaries: We recall our conclusion that the term nondiscriminatory in footnote 3 of the Enabling Clause requires that identical tariff treatment be available to all similarly-situated GSP beneficiaries. We find that the measure at issue fails to meet this requirement for the following reasons. First, as the European Communities itself acknowledges, according benefits under the Drug Arrangements to countries other than the 12 identified beneficiaries would require an amendment to the Regulation. Such a closed list of beneficiaries cannot ensure that the preferences under the Drug Arrangements are available to all GSP beneficiaries suffering from illicit drug production and trafficking. Secondly, the Regulation contains no criteria or standards to provide a basis for distinguishing beneficiaries under the Drug Arrangements from other GSP beneficiaries. Nor did the European Communities point to any such criteria or standards anywhere else, despite the Panels request to do so. As such, the European Communities cannot justify the Regulation under paragraph 2(a), because it does not provide a basis for establishing whether or not a developing country qualifies for preferences under the Drug Arrangements. Thus, although the European Communities claims that the Drug Arrangements are available to all developing countries that are

similarly affected by the drug problem, because the Regulation does not define the criteria or standards that a developing country must meet to qualify for preferences under the Drug Arrangements, there is no basis to determine whether those criteria or standards are discriminatory or not.(118) 89. The Appellate Body also stated in EC Tariff Preferences that in addition to the non-discriminatory requirement in paragraph 2(a), the Enabling Clause also sets out other conditions in paragraphs 3(c) and 3(a) that must be complied with by any particular GSP preference scheme. However, the Appellate Body did not examine per se the consistency of the Drug Arrangements with the conditions set out in paragraphs 3(c) and 3(a) due to the fact that the Panel had not made findings in this regard: Although paragraph 3(c) informs the interpretation of the term nondiscriminatory in footnote 3 to paragraph 2(a), as detailed above, paragraph 3(c) imposes requirements that are separate and distinct from those of paragraph 2(a). We have already concluded that, where a developed-country Member provides additional tariff preferences under its GSP scheme to respond positively to widely-recognized development, financial and trade needs of developing countries within the meaning of paragraph 3(c) of the Enabling Clause, this positive response would not, as such, fail to comply with the nondiscriminatory requirement in footnote 3 of the Enabling Clause, even if such needs were not common or shared by all developing countries. We have also observed that paragraph 3(a) requires that any positive response of a preference-granting country to the varying needs of developing countries not impose unjustifiable burdens on other Members. With these considerations in mind, and recalling that the Panel made no finding in this case as to whether the Drug Arrangements are inconsistent with paragraphs 3(a) and 3(c) of the Enabling Clause, we limit our analysis here to paragraph 2(a) and do not examine per se whether the Drug Arrangements are consistent with the obligation contained in paragraph 3(c) to respond positively to the development, financial and trade needs of developing countries or with the obligation contained in paragraph 3(a) not to raise barriers or create undue difficulties for the trade of other Members.(119) Paragraph 2: developing countries 90. Based on its findings on the term nondiscriminatory in footnote 3 of paragraph 2 and on its discussion of paragraph 3(c), the Appellate Body found in EC Tariff Preferences that the phrase developing countries in paragraph 2 of the Enabling Clause does not mean all developing countries: We have concluded, contrary to the Panel, that footnote 3 and

paragraph 3(c) do not preclude the granting of differential tariffs to different sub-categories of GSP beneficiaries, subject to compliance with the remaining conditions of the Enabling Clause. We find, therefore, that the term developing countries in paragraph 2(a) should not be read to mean all developing countries and, accordingly, that paragraph 2(a) does not prohibit preferencegranting countries from according different tariff preferences to different sub-categories of GSP beneficiaries.(120) Relationship between paragraphs 2(a) and 2(d) 91. The Appellate Body stated in EC Tariff Preferences that paragraph 2(d) is not an exception to paragraph 2(a) of the Enabling Clause. Rather, it found that by virtue of paragraph 2(d), preference-giving countries need not establish that the differentiation between developing and the leastdeveloped countries is non-discriminatory: We do not agree with the Panel that paragraph 2(d) is an exception to paragraph 2(a), or that it is rendered redundant if paragraph 2(a) is interpreted as allowing developed countries to differentiate in their GSP schemes between developing countries. To begin with, we note that the terms of paragraph 2 do not expressly indicate that each of the four sub-paragraphs thereunder is mutually exclusive, or that any one is an exception to any other. Moreover, in our view, it is clear from several provisions of the Enabling Clause that the drafters wished to emphasize that least-developed countries form an identifiable sub-category of developing countries with special economic difficulties and particular development, financial and trade needs.(121) When a developed-country Member grants tariff preferences in favour of developing countries under paragraph 2(a), as we have already found, footnote 3 imposes a requirement that such preferences be non-discriminatory. In the absence of paragraph 2(d), a Member granting preferential tariff treatment only to least-developed countries would therefore need to establish, under paragraph 2(a), that this preferential treatment did not discriminate against other developing countries contrary to footnote 3. The inclusion of paragraph 2(d), however, makes clear that developed countries may accord preferential treatment to leastdeveloped countries distinct from the preferences granted to other developing countries under paragraph 2(a). Thus, pursuant to paragraph 2(d), preference-granting countries need not establish that differentiating between developing and least-developed countries is non-discriminatory. This demonstrates that paragraph 2(d) does have an effect that is different and independent from that of paragraph 2(a), even if the term nondiscriminatory does not require the granting of identical tariff preferences to all GSP beneficiaries.(122)

Paragraph 3(a) 92. The Appellate Body found in EC Tariff Preferences although there was a requirement of non-discrimination, this did not mean that identical tariff preferences should be granted to all developing countries. The Appellate Body concluded that the Enabling Clause contains sufficient other conditions on the granting of preferences, including those under paragraph 3(a), to guard against such a conclusion: It does not necessarily follow, however, that nondiscriminatory should be interpreted to require that preference-granting countries provide identical tariff preferences under GSP schemes to all developing countries. In concluding otherwise, the Panel assumed that allowing tariff preferences such as the Drug Arrangements would necessarily result [in] the collapse of the whole GSP system and a return back to special preferences favouring selected developing countries.(123) To us, this conclusion is unwarranted. We observe that the term generalized requires that the GSP schemes of preference-granting countries remain generally applicable.(124) Moreover, unlike the Panel, we believe that the Enabling Clause sets out sufficient conditions on the granting of preferences to protect against such an outcome. As we discuss below(125), provisions such as paragraphs 3(a) and 3(c) of the Enabling Clause impose specific conditions on the granting of different tariff preferences among GSP beneficiaries.(126) 93. The Appellate Body stated in EC Tariff Preferences that paragraph 3(a) requires that any positive response of a preference-giving country to the varying needs of developing countries not impose unjustifiable burdens on other Members: Finally, we note that, pursuant to paragraph 3(a) of the Enabling Clause, any differential and more favourable treatment shall be designed to facilitate and promote the trade of developing countries and not to raise barriers to or create undue difficulties for the trade of any other contracting parties. This requirement applies, a fortiori, to any preferential treatment granted to one GSP beneficiary that is not granted to another.(127) Thus, although paragraph 2(a) does not prohibit per se the granting of different tariff preferences to different GSP beneficiaries(128), and paragraph 3(c) even contemplates such differentiation under certain circumstances(129), paragraph 3(a) requires that any positive response of a preference-granting country to the varying needs of developing countries not impose unjustifiable burdens on other Members.(130) Paragraph 3(c) to respond positively to the development, financial and trade needs of developing countries

94. The Appellate Body stated in EC Tariff Preferences that in the light of one of the stated objectives of the Preamble to the WTO Agreement, the text of paragraph 3(c) authorizes preference-giving countries to treat different developing countries differently: [T]he Preamble to the WTO Agreement, which informs all the covered agreements including the GATT 1994 (and, hence, the Enabling Clause), explicitly recognizes the need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development. The word commensurate in this phrase appears to leave open the possibility that developing countries may have different needs according to their levels of development and particular circumstances. The Preamble to the WTO Agreement further recognizes that Members respective needs and concerns at different levels of economic development may vary according to the different stages of development of different Members. In sum, we read paragraph 3(c) as authorizing preference-granting countries to respond positively to needs that are not necessarily common or shared by all developing countries. Responding to the needs of developing countries may thus entail treating different developing-country beneficiaries differently.(131) 95. The Appellate Body in EC Tariff Preferences also stated that paragraph 3(c) requires that a response to a particular development, financial and trade needs based on objective standard. These standards could be those particular needs as broadly recognized and explicitly set out in the WTO Agreement or in multilateral instruments adopted by international organizations. It also stated that in order to make the response positive, sufficient nexus should exist between the preferential treatment and the likelihood of alleviating the relevant need: At the outset, we note that the use of the word shall in paragraph 3(c) suggests that paragraph 3(c) sets out obligations for developedcountry Members in providing preferential treatment under a GSP scheme to respond positively to the needs of developing countries. However, paragraph 3(c) does not authorize any kind of response to any claimed need of developing countries. First, we observe that the types of needs to which a response is envisaged are limited to development, financial and trade needs. In our view, a need cannot be characterized as one of the specified needs of developing countries in the sense of paragraph 3(c) based merely on an

assertion to that effect by, for instance, a preference-granting country or a beneficiary country. Rather, when a claim of inconsistency with paragraph 3(c) is made, the existence of a development, financial [or] trade need must be assessed according to an objective standard. Broad-based recognition of a particular need, set out in the WTO Agreement or in multilateral instruments adopted by international organizations, could serve as such a standard. Secondly, paragraph 3(c) mandates that the response provided to the needs of developing countries be positive. Positive is defined as consisting in or characterized by constructive action or attitudes. This suggests that the response of a preference-granting country must be taken with a view to improving the development, financial or trade situation of a beneficiary country, based on the particular need at issue. As such, in our view, the expectation that developed countries will respond positively to the needs of developing countries suggests that a sufficient nexus should exist between, on the one hand, the preferential treatment provided under the respective measure authorized by paragraph 2, and, on the other hand, the likelihood of alleviating the relevant development, financial [or] trade need. In the context of a GSP scheme, the particular need at issue must, by its nature, be such that it can be effectively addressed through tariff preferences. Therefore, only if a preference-granting country acts in the positive manner suggested, in respon[se] to a widely-recognized development, financial [or] trade need, can such action satisfy the requirements of paragraph 3(c).(132) (b) Anti-dumping and countervailing duties 96. In Brazil Coconut, the Appellate Body upheld the Panels finding that the applicability of GATT Article VI to a countervailing duty investigation also determined the applicability of GATT Articles I and II. The panel had found that Article VI of the GATT 1994 did not apply to a countervailing duty measure that was the result of an investigation initiated prior to 1 January 1995, and as a consequence, claims under Articles I and II based on claims of inconsistency with GATT Article VI could not succeed.(133) 97. In EC Fasteners, the Appellate Body examined a Panel finding that an EC anti-dumping Regulation applying only to imports from non-market economy countries violated the MFN obligation of Article I:1; the complaining party, China, had not raised a claim under Article VI in respect of the measure at issue. The Appellate Body declined to rule on this finding and declared it moot and of no legal effect(134), observing:

Article VI of the GATT 1994 permits the imposition of anti-dumping duties, which may otherwise be inconsistent with other provisions of the GATT 1994, such as Article I:1. Therefore, in our view, a preliminary question to be addressed before determining whether an antidumping duty has been imposed inconsistently with Article I:1 of the GATT 1994 is whether the anti-dumping duty had been imposed consistently with Article VI of the GATT 1994. [I]t was not argued before the Panel and it is not disputed before us whether Article 9(5) of the Basic AD Regulation is applied consistently with the provisions of Article VI of the GATT 1994. This has significant implications for the question of whether Article 9(5) of the Basic AD Regulation is inconsistent with Article I:1 of the GATT 1994. The Panel did not engage with the implications of the absence of a claim under Article VI of the GATT 1994 for a claim under Article I:1 of the GATT 1994. Nor did the Panel consider the relationship between Article VI of the GATT 1994 and the provisions of the AntiDumping Agreement, which according to Article 1 of the AntiDumping Agreement govern the application of, Article VI of the GATT 1994. We thus consider that the Panels finding under Article I:1 of the GATT 1994 lacks an essential step in the sequence of its legal analysis, that is, the determination of whether and under what circumstances an anti-dumping measure that is inconsistent with the Anti-Dumping Agreement may be reviewed under Article I:1 of the GATT 1994 in the absence of a review under Article VI of the GATT 1994.(135) 98. Regarding GATT practice concerning antidumping and countervailing duties as an exception to Article I:1. (c) Frontier traffic, customs unions and free trade areas 99. In Canada Autos, Canada invoked an Article XXIV exception with respect to a certain import duty exemption which had been found inconsistent with GATT Article I. The Panel rejected this defence, because, on the one hand, Canada was not granting the import duty exemption to all NAFTA manufacturers and because, on the other hand, manufacturers from countries other than the United States and Mexico were being provided duty-free treatment.(136) Since Canada did not appeal this finding of the Panel, the Appellate Body did not address the issue. 100. Regarding GATT practice concerning frontier traffic, customs unions and free trade areas.

(d) Waivers of Article I:1 (i) Waiver on Preferential Tariff Treatment for Least-Developed Countries 101. At its meeting of 15 June 1999, the General Council adopted a decision on Preferential Tariff Treatment for Least-Developed Countries. This decision waives GATT Article I:1(137) in order to provide a means for developing-country Members to offer preferential tariff treatment to products of least-developed countries. The decision sets forth: 1. Subject to the terms and conditions set out hereunder, the provisions of paragraph 1 of Article I of the GATT 1994 shall be waived until 30 June 2009, to the extent necessary to allow developing country Members to provide preferential tariff treatment to products of least-developed countries, designated as such by the United Nations, without being required to extend the same tariff rates to like products of any other Member. 2. Developing country Members wishing to take actions pursuant to the provisions of this Waiver shall notify to the Council on Trade in Goods the list of all products of least-developed countries for which preferential tariff treatment is to be provided on a generalized, nonreciprocal and non-discriminatory basis and the preference margins to be accorded. Subsequent modifications to the preferences shall similarly be notified. 3. Any preferential tariff treatment implemented pursuant to this Waiver shall be designed to facilitate and promote the trade of leastdeveloped countries and not to raise barriers or create undue difficulties for the trade of any other Member. Such preferential tariff treatment shall not constitute an impediment to the reduction or elimination of tariffs on a most-favoured-nation basis. 4. In accordance with the provisions of paragraph 4 of Article IX of the WTO Agreement, the General Council shall review annually whether the exceptional circumstances justifying the Waiver still exist and whether the terms and conditions attached to the Waiver have been met. 5. The government of any Member providing preferential tariff treatment pursuant to this Waiver shall, upon request, promptly enter into consultations with any interested Member with respect to any difficulty or any matter that may arise as a result of the implementation of programmes authorized by this Waiver. Where a Member considers that any benefit accruing to it under GATT 1994 may be or is being impaired unduly as a result of such

implementation, such consultation shall examine the possibility of action for a satisfactory adjustment of the matter. This Waiver does not affect Members rights as set forth in the Understanding in Respect of Waivers of Obligations under GATT 1994. 6. This waiver does not affect in any way and is without prejudice to rights of Members in their actions pursuant to the provisions of the 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries.(138) 102. On 27 May 2009, the General Council adopted a decision extending this waiver until 30 June 2019.(139) 103. The Transparency Mechanism for Preferential Trade Arrangements referred to in paragraph 61 above includes within its stated scope preferences taking the form of preferential treatment accorded by any Member to products of least-developed countries. On 14 March 2001, the Council for Trade in Goods agreed that any market access measures taken in favour of the least-developed countries, whether under the Enabling Clause or under the 1999 waiver, would be referred for advice to the SubCommittee on LDCs of the Committee on Trade and Development.(140) 104. From the date of the 1999 waiver through 30 September 2011, Morocco, Korea, India and China notified preferential tariff treatment for the least-developed countries to the Council for Trade in Goods.(141) The following developing country Members notified tariff reduction or duty-free treatment for the least-developed countries to the Committee on Trade and Development before June 1999: (i) Turkey(142); (ii) Egypt(143); and (iii) Mauritius.(144) (ii) Decision on duty-free and quota-free market access for least-developed countries 105. At the Sixth Ministerial Conference in Hong Kong, China, the Ministers adopted a decision regarding provision of duty-free and quota-free (DFQF) market access to least-developed countries(145), as follows: We agree that developed-country Members shall, and developingcountry Members declaring themselves in a position to do so should: (a) (i) Provide duty-free and quota-free market access on a lasting basis, for all products originating from all LDCs by 2008 or no later than the start of the implementation period in a manner that ensures stability, security and predictability. (ii) Members facing difficulties at this time to provide market access as set out above shall provide duty-free and quota-free market

access for at least 97 per cent of products originating from LDCs, defined at the tariff line level, by 2008 or no later than the start of the implementation period. In addition, these Members shall take steps to progressively achieve compliance with the obligations set out above, taking into account the impact on other developing countries at similar levels of development, and, as appropriate, by incrementally building on the initial list of covered products. (iii) Developing-country Members shall be permitted to phase in their commitments and shall enjoy appropriate flexibility in coverage. (b) Ensure that preferential rules of origin applicable to imports from LDCs are transparent and simple, and contribute to facilitating market access. Members shall notify the implementation of the schemes adopted under this decision every year to the Committee on Trade and Development. The Committee on Trade and Development shall annually review the steps taken to provide duty-free and quota-free market access to the LDCs and report to the General Council for appropriate action. We urge all donors and relevant international institutions to increase financial and technical support aimed at the diversification of LDC economies, while providing additional financial and technical assistance through appropriate delivery mechanisms to meet their implementation obligations, including fulfilling SPS and TBT requirements, and to assist them in managing their adjustment processes, including those necessary to face the results of MFN multilateral trade liberalisation. 106. On 3 March 2006, the Committee on Trade and Development agreed to include an agenda item concerning the above decision and the steps taken by Members to provide DFQF market access to least-developed countries.(146) Following the mandate in the above decision, the Committee carried out its first annual review of the decisions implementation on 28 November 2006.(147) (iii) Other waivers of Article I:1 107. As of 30 September 2011, there had been 14 decisions under Article IX:34 of the WTO Agreement waiving Article I:1 and/or XIII:1 of the GATT 1994 in connection with trade preferences; also, a waiver of Article I:1, XI:1 and XIII:1 implementing the Kimberley Process Certification Scheme for Rough Diamonds. See the list of all waivers with document references at the end of the Chapter on the WTO Agreement.

4. Relationship with other GATT provisions (a) Article III 108. In US Gasoline, with respect to the relationship between Articles I and III, the Panel considered: [The Panels] findings on treatment under the baseline establishment methods under Articles III:4 and XX (b), (d) and (g) would in any case have made unnecessary the examination of the 75 per cent rule under Article I:1.(148) 109. With respect to GATT practice regarding the relationship between Article I and Article III. (b) Article VI 110. The Panel in Brazil Desiccated Coconut found that because Article VI of the GATT 1994 did not constitute applicable law for the purposes of the dispute, the claims made under Articles I and II of the GATT 1994, which were derived from claims of inconsistency with Article VI of the GATT 1994, could not succeed.(149) The Appellate Body in Brazil Desiccated Coconut confirmed this finding.(150) 111. In EC Fasteners, the Appellate Body found:

Article VI of the GATT 1994 permits the imposition of anti-dumping duties, which may otherwise be inconsistent with other provisions of the GATT 1994, such as Article I:1. Therefore, in our view, a preliminary question to be addressed before determining whether an antidumping duty has been imposed inconsistently with Article I:1 of the GATT 1994 is whether the anti-dumping duty had been imposed consistently with Article VI of the GATT 1994.(151) 112. The Appellate Body considered that the Panels finding that a particular EC measure violates Article I:1 lacks an essential step in the sequence of its legal analysis because China had not claimed tha t the measure at issue violated Article VI and the parties did not present arguments regarding the relationship between the Anti-Dumping Agreement and GATT Articles VI and I. The Appellate Body then ruled that the Panel findings that the EC measure violated Article I:1 were moot and of no effect.(152) (c) Article XI 113. In US Shrimp, with respect to the relationship between Articles I and XI, the Panel stated: Given our conclusion in paragraph 7.17 above that Section 609

violates Article XI:1, we consider that it is not necessary for us to review the other claims of the complainants with respect to Articles I:1 and XIII:1. This is consistent with GATT(153) and WTO(154) panel practice and has been confirmed by the Appellate Body in its report in the Wool Shirts case, where the Appellate Body mentioned that A panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute.(155) Therefore we do not find it necessary to review the allegations of the complainants with respect to Articles I:1 and XIII:1. On the basis of our finding of violation of Article XI:1, we move to address the defence of the United States under Article XX.(156) (d) Article XIII 114. In EC Bananas III, the European Communities argued that a violation of Article XIII in respect of its tariff regime for bananas was covered by the Lom waiver, whereby the provisions of Article I:1 of the GATT 1994 were waived in respect of the allocation of country-specific tariff quotas for bananas to certain countries. The Panel agreed with this argument, however on appeal, the Appellate Body reversed this conclusion, finding that the Lom waiver waives only the provisions of Article I:1.(157) (e) Article XXIV 115. In Canada Autos, the Panel found that a Canadian duty exemption was inconsistent with Article I:1 and Canada raised Article XXIV as a defence. The Panel rejected this defence, because, on the one hand, Canada was not granting the import duty exemption to all NAFTA manufacturers and because, on the other hand, manufacturers from countries other than the United States and Mexico were being provided duty-free treatment.(158) Canada did not appeal this finding of the Panel. In this regard, the Appellate Body noted: The drafters also wrote various exceptions to the MFN principle into the GATT 1947 which remain in the GATT 1994.(159) Canada invoked one such exception before the Panel, relating to customs unions and free trade areas under Article XXIV. This justification was rejected by the Panel, and the Panels findings on Article XXIV were not appealed by Canada. Canada has invoked no other provision of the GATT 1994, or of any other covered agreement, that would justify the inconsistency of the import duty exemption with Article I:1 of the GATT 1994.(160) (f) Article XXVIII 116. In EC Poultry, the Appellate Body addressed a complaint against the allocation of tariff quotas for certain poultry products by the European

Communities, and rejected Brazils appeal that Articles I and XIII of the GATT 1994 were not applicable to the allocation of tariff quotas resulting from negotiations under Article XXVIII of the GATT 1994. The Appellate Body first confirmed its finding in EC Bananas III according to which Members may, in their concessions and commitments set out in their schedules annexed to the GATT 1994, yield rights but may not diminish their obligations.(161) The Appellate Body then held that: [t] herefore, the concessions contained in Schedule LXXX pertaining to the tariff-rate quota for frozen poultry meat must be consistent with Article I and XIII of the GATT 1994.(162) 5. Relationship with other WTO Agreements (a) SCM Agreement 117. In Indonesia Autos, the Panel rejected Indonesias argument that the SCM Agreement was exclusively applicable to measures involving subsidies and referred to its finding on the relationship between the SCM Agreement and Article III of the GATT 1994.(163) With respect to the exemption of customs duties and domestic taxes, the Panel indicated: The customs duty benefits of the various Indonesian car programmes are explicitly covered by the wording of Article I. As to the tax benefits of these programmes, we note that Article I:1 refers explicitly to all matters referred to in paragraphs 2 and 4 of Article III. We have already decided that the tax discrimination aspects of the National Car programme were matters covered by Article III:2 of GATT. Therefore, the customs duty and tax advantages of the February and June 1996 car programmes are of the type covered by Article I of GATT.(164) Footnotes:
1. By Procs-Verbal of rectification the correct date of document MTN/FA/Corr.6 was noted as 18 March 1994. back to text2. Panel Report, Japan Film, para. 10.64. back to text3. Appellate Body Report, US FSC, para. 107. back to text4. BISD 3S/32. back to text5. WT/L/3 and WT/L/Corr.1. back to text6. See under Article XXV below. back to text7. Appellate Body Report, Japan Alcoholic Beverages II, p. 13. back to text8. (footnote original) It is worth noting that the Statute of the International Court of Justice has an explicit provision, Article 59, to the same effect. This has not inhibited the development by that Court (and its predecessor) of a body of case law in which considerable reliance on the value of previous decisions is readily discernible. back to text9. Appellate Body Report, Japan Alcoholic Beverages II, p. 14. In India Patents (US), the Appellate Body acknowledged the first of the paragraphs cited above. Appellate Body Report, India Patents (US), para. 50. Also, in US FSC, the Appellate Body endorsed the second paragraph. Appellate Body Report, US FSC, para. 108. back to text10. (footnote original) Adopted 25 January 1990, BISD 37S/86; and DS28/R, 31 March 1992. back to text11. (footnote original) Those legal instruments are described

in paragraph 1(b) of that incorporating language as including certain protocols and certifications relating to tariff concessions, certain protocols of accession, certain decisions on waivers granted under Article XXV of the GATT 1947, and other decisions of the CONTRACTING PARTIES to GATT 1947. back to text12. Appellate Body Report, EC Poultry, para 79. back to text13. Appellate Body Report, US FSC, para. 111. back to text14. Appellate Body Report, US FSC, para. 107. back to text15. Appellate Body Report, EC Tariff Preferences, para 90. back to text16. WT/GC/W/228. back to text17. WT/GC/M/48, 50, 53, 55, 57, 61 (19992000); WT/L/44, WT/GC/M/72, 74, 75, 77 (2002); WT/GC/M/92, 100 (2005); WT/GC/M/107, 112 (2007); WT/GC/M/124 (2009). back to text18. Appellate Body Report, EC Tariff Preferences, para.107. back to text19. Appellate Body Report, EC Bananas III (Article 21.5 Ecuador II)/EC Bananas III (Article 21.5/US), para. 433, quoting Panel Report, EC Bananas III (Article 21.5 Ecuador II), para. 7.434. back to text20. Appellate Body Report, Korea Various Measures on Beef, para. 163; see also Appellate Body Report, China Publications and Audiovisual Products, para. 304, citing and analogizing to this example. back to text21. Appellate Body Report, Canada Autos, para. 84. back to text22. (footnote original) We note, though, that the measures examined in those reports differed from the measure in this case. Two of those reports dealt with like product issues: Panel Report, Spain Unroasted Coffee; Panel Report, Japan SPF Dimension Lumber. In this case, as we have noted, there is no dispute that the motor vehicles subject to the import duty exemption are like products. Furthermore, two other reports dealt with measures which, on their face, discriminated on a strict origin basis, so that, at any given time, either every product, or no product, of a particular origin was accorded an advantage. See Panel Report, Belgium Family Allowances; Panel Report, EEC Imports of Beef. In this case, motor vehicles imported into Canada are not disadvantaged in that same sense. back to text23. Appellate Body Report, Canada Autos, para. 78. back to text24. Panel Report, Indonesia Autos, para. 14.138. In EC Bananas III, the Appellate Body stated as follows: Also, a broad definition has been given to the term advantage in Article I:1 of the GATT 1994 by the panel in United States Non-Rubber Footwear. It may well be that there are considerations of EC competition policy at the basis of the activity function rules. This, however, does not legitimize the activity function rules to the extent that these rules discriminate among like products originating from different Members. See Appellate Body Report, EC Bananas III, para. 206. back to text25. Panel Report, EC Bananas III, para. 7.107. back to text26. Panel Report, EC Bananas III, para. 7.189. back to text27. Panel Report, Colombia Ports of Entry, para. 7.342. back to text28. Panel Report, US Poultry (China), paras. 2.22.3. back to text29. Panel Report, US Poultry (China), para. 7.410. back to text30. Panel Report, EC Trademarks and Geographical Indications (US), para. 7.713. back to text31. Panel Report, EC Commercial Vessels, paras. 7.797.81. back to text32. Panel Report, EC Commercial Vessels, paras 7.817.83. back to text33. Panel Report, EC Bananas III, para. 7.239. back to text34. Appellate Body Report, Canada Autos, para. 79. back to text35. Appellate Body Report, EC Bananas III, para. 206. back to text36. Panel Report, Colombia Ports of Entry, para. 7.352. back to text37. Panel Report, US Poultry (China), para. 7.4167.417. back to text38. Panel Report, Indonesia Autos, para. 14.141. back to text39. Panel Report, Colombia Ports of Entry, para. 7.355. back to text40. Panel Report, Colombia Ports of Entry, para. 7.356. back to text41. Panel Report, US Poultry (China), paras. 7.4247.427, 7.429. back to text42. Panel Report, US Poultry (China), paras. 7.4307.432. back to text43. Appellate Body Report, EC Bananas III, para. 189. back to text44. Appellate Body Report, EC Bananas III, para. 190. back to text45. (footnote original) For instance in the FIRA case, the Panel rejected Canadas argument that the situation under examination was the consequence of a private contract with an investor: 5.6 The Panel carefully examined the Canadian view that the purchase undertakings should be considered as private contractual obligations of particular foreign investors vis--vis the Canadian government. The Panel recognized that

investors might have an economic advantage in assuming purchase undertakings, taking into account the other conditions under which the investment was permitted. The Panel felt, however, that even if this were so, private contractual obligations entered into by investors should not adversely affect the rights which contracting parties, including contracting parties not involved in the dispute, possess under Article III:4 of the General Agreement and which they can exercise on behalf of their exporters. See Panel Report, Canada FIRA, para. 5.6. back to text46. (footnote original) See Working Party Report, the Accession of Hungary, BISD 20S/34. back to text47. Panel Report, Indonesia Autos, paras. 14.14514.147. Preceding the cited paragraphs, the Panel refers to the GATT Panel Report, Belgium Family Allowances. back to text48. Appellate Body Report, Canada Autos, para. 81. back to text49. (footnote original) These relate to such matters as internal mixing requirements (Article III:7); cinema films (Article IV(b)); transit of goods (Article V:2, 5, 6); marks of origin (Article IX:1); quantitative restrictions (Article XIII:1); measures to assist economic development (Article XVIII:20); and measures for goods in short supply (Article XX(j)). back to text50. Appellate Body Report, Canada Autos, para. 82. back to text51. Panel Report, Canada Autos, paras 10.2210.25 (not reviewed by the Appellate Body). back to text52. Panel Report, Canada Autos, paras. 10.55 10.56; see also para. 1030. back to text53. (footnote original) Such as in Articles XX (general exceptions), XXI (security exceptions) and XXIV (customs unions and free trade areas). back to text54. Appellate Body Report, Canada Autos, paras. 8384. back to text55. (footnote original) Panel Report, Indonesia Autos, para. 14.147. back to text56. Panel Report, US Certain EC Products, para. 6.54. back to text57. (footnote original) The New Shorter Oxford English Dictionary, 4th Edition, p. 3465. back to text58. Panel Report, EC Tariff Preferences, paras. 7.597.60. back to text59. Panel Report, Colombia Ports of Entry paras. 7.6327.365. back to text60. Panel Report, US Poultry (China), paras. 7.4397.440. back to text61. MTN.TNC/LD/W/1. See also US reports on the waiver in respect of the Former Trust Territory of the Pacific Islands (e.g. WT/L/816), referring to the US Virgin Islands, Guam and American Samoa as territories subject to Article I:2 and Annex D to the GATT. back to text62. WT/L/188, WT/L/189; WT/GC/M/13. back to text63. BISD 26S/203. back to text64. (footnote original) The words developing countries as used in this text are to be understood to refer also to developing territories. back to text65. (footnote original) It would remain open for the CONTRACTING PARTIES to consider on an ad hoc basis under the GATT provisions for joint action any proposals for differential and more favourable treatment not falling within the scope of this paragraph. back to text66. (footnote original) As described in the Decision of the CONTRACTING PARTIES of 25 June 1971, relating to the establishment of generalized, non-reciprocal and nondiscriminatory preferences beneficial to the developing countries (BISD 18S/24). back to text67. (footnote original) Nothing in these provisions shall affect the rights of contracting parties under the General Agreement. back to text68. WT/L/806. back to text69. WT/L/806. The decision provides templates for abstracts and for notifications. back to text70. WT/COMTD/N/18. back to text71. WT/COMTD/N/15 and addenda. back to text72. WT/COMTD/N/4 and addenda. back to text73. WT/COMTD/N/17 and Corr.1. back to text74. WT/COMTD/N/2 and addenda. back to text75. WT/COMTD/N/5 and addenda. back to text76. WT/COMTD/N/6 and addenda. back to text77. WT/COMTD/N/7 and addenda. back to text78. WT/COMTD/N/1 and addenda. back to text79. Regarding regional trade agreements notified under the Enabling Clause within the GATT framework, Article I . Also, regarding the role of the GATT Committee on Trade and Development in the operation of the Enabling Clause. back to text80. The Memorandum was circulated in WT/COMTD/4. Parties to MERCOSUR are: Argentina, Brazil, Paraguay and Uruguay. back to text81. See WT/COMTD/3. ASEAN is the abbreviation of the Association of South-East Asian Nations, whose members are Brunei Darussalam, Cambodia, Indonesia, Lao Peoples Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. back to text82. See WT/COMTD/7, WT/COMTD/11,

WT/COMTD/59 and WT/COMTD/72. back to text83. MERCOSUR was notified to the GATT 1947 under the Enabling Clause (GATT 1947 document L/6985 and L/4044). See also documents in the WT/COMTD/1 series and GATT documents L/7370/Add.1 and L/7540. back to text84. WT/COMTD/M/3, section A; WT/COMTD/5. Regarding the discussions leading to these terms of reference, Article I. back to text85. The tasks of this working party, as well as all other working parties established by the Council for Trade in Goods for the examination of regional trade agreements notified under Article XXIV of GATT 1947 or 1994, were taken over by the Committee on RTAs after its establishment on 6 February 1996. See WT/L/127, fn. 2. In this regard, see also Section XXVI of this Chapter on Article XXIV below. back to text86. WT/COMTD/M/22, section H. The text of the adopted procedures can be found in WT/COMTD/16. These procedures were adopted following recommendations made by the Committee on Regional Trade Agreements (Committee on RTAs) at its meeting on 20 February 1998. See the material on the Committee on Trade and Development in the Chapter on the WTO Agreement under Article IV. back to text87. Notification format: WT/COMTD/63. This format had been previously adopted on 13 October 2006 by the Committee on RTAs; following its adoption, the Committee on RTAs agreed to recommend it to the relevant bodies. See also WT/REG/M/44, paras. 1719 and WT/COMTD/M/62, paras. 4955. back to text88. WT/L/671. See also Section XXVI of this Chapter on Article XXIV below. back to text89. WT/COMTD/M/67, paras. 4749. back to text90. See WT/COMTD/66 and Add.13; WT/COMTD/W/175; WT/COMTD/M/79, 80, 81 and 82. back to text91. WT/COMTD/M/73, paras 6672. back to text92. WT/COMTD/RTA/M/14. back to text93. Website: http://rtais.wto.org/ui/PublicMaintainRTAHome.aspx back to text94. WT/COMTD/N18. back to text95. WT/COMTD/N/15. back to text96. WT/COMTD/N/4/Add.2. back to text97. WT/COMTD/N/17 and Corr. back to text98. WT/COMTD/N/2/Add.10. See also WT/COMTD/29 and WT/LDC/SWG/IF/12. back to text99. WT/COMTD/N/12. back to text100. WT/COMTD/N/6. back to text101. WT/COMTD/N/5/Add.2. See also WT/GC/36 and WT/COMTD/27. back to text102. WT/COMTD/N/7. back to text103. WT/COMTD/N/1/Add.2. back to text104. (footnote original) GATT 1994, Art. I:1. back to text105. (footnote original) In this regard, we recall the Appellate Bodys statement in EC Hormones that: merely characterizing a treaty provision as an exception does not by itself justify a stricter or narrower interpretation of that provision than would be warranted by examination of the ordinary meaning of the actual treaty words, viewed in context and in the light of the treatys object and purpose, or, in other words, by applying the normal rules of treaty interpretation. (Appellate Body Report, para. 104) back to text106. Appellate Body Report, EC Tariff Preferences, paras. 90 and 98. back to text107. Appellate Body Report, EC Tariff Preferences, paras. 101102. back to text108. (footnote original) Appellate Body Report, p. 14, DSR 1997:I, at 335. (See also, Appellate Body Report on US FSC (Article 21.5 EC), para. 133; and Appellate Body Report on India Quantitative Restrictions, para. 136) back to text109. Appellate Body Report, EC Tariff Preferences, paras. 104105. back to text110. Appellate Body Report, EC Tariff Preferences, paras. 110 and 115. back to text111. (footnote original) Shorter Oxford English Dictionary, 5th ed., W. R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 1, p. 1082. back to text112. (footnote original) Panel Report, paras. 7.1357.137. The Panel also observed that statements by developed and developing countries indicated the aim of providing GSP schemes with a broad scope, encompassing the granting of preferences by all developed countries to all developing countries. (Ibid., paras. 7.1317.132) back to text113. Appellate Body Report, EC Tariff Preferences, para. 155. back to text114.Panel Report, EC Tariff Preferences, paras. 7.1267.161. back to text115. Appellate Body Report, EC Tariff Preferences, paras. 152154. back to text116. Appellate Body Report, EC Tariff Preferences, para. 169. back to text117. Appellate Body Report, EC Tariff Preferences, para. 173. back to text118. Appellate Body Report, EC Tariff Preferences, paras. 187188.

back to text119. Appellate Body Report, EC Tariff Preferences, para. 179. Actually, in this case, India had not challenged the inconsistency of the Drug Arrangements with either paragraph 3(c) or paragraph 3(a) during the proceedings. See Appellate Body Report, EC Tariff Preferences, para. 178. back to text120. Appellate Body Report, EC Tariff Preferences, para. 175. back to text121. (footnote original) Enabling Clause, para. 6 (attached as Annex 2 to this Report). Similarly, paragraph 8 of the Enabling Clause refers to the special economic situation and [the] development, financial and trade needs of least-developed countries. back to text122. Appellate Body Report, EC Tariff Preferences, para. 172. back to text123. (footnote original) Panel Report, para. 7.102. back to text124. (footnote original) The European Communities argues in this respect that the GATT Contracting Parties and the WTO Members have granted a number of waivers, as mentioned in the Panel Report, for tariff preferences that are confined ab initio and permanently to a limited number of developing countries located in a certain geographical region. (European Communities appellants submission, paras. 184185 (referring to Panel Report, para. 7.160)) See also, Panel Report, footnote 31 to para. 4.32 (referring to Waiver Decision on the Caribbean Basin Economic Recovery Act, GATT Document L/5779, 15 February 1985, BISD 31S/20, renewed 15 November 1995, WT/L/104; Waiver Decision on CARIBCAN, GATT Document L/6102, 28 November 1986, BISD 33S/97, renewed 14 October 1996, WT/L/185; Waiver Decision on the United States Andean Trade Preference Act, GATT Document L/6991, 19 March 1992, BISD 39S/385, renewed 14 October 1996, WT/L/184; Waiver Decision on The Fourth ACPEEC Convention of Lom, GATT Document L/7604, 9 December 1994, BISD 41S/26, renewed 14 October 1996, WT/L/186; and Waiver Decision on European Communities The ACPEC Partnership Agreement, WT/MIN(01)/15, 14 November 2001. back to text125. (footnote original) Infra, paras. 157168. back to text126. Appellate Body Report, EC Tariff Preferences, para. 156. back to text127. (footnote original) We note in this respect that the language contained in paragraph 3(a) of the Enabling Clause is reflected in waivers referred to in supra, footnote 323. back to text128. (footnote original) Supra, paras. 153154. back to text129. (footnote original) Supra, paras. 162165. back to text130. Appellate Body Report, EC Tariff Preferences, para. 167. back to text131. Appellate Body Report, EC Tariff Preferences, paras. 161162. back to text132. Appellate Body Report, EC Tariff Preferences, paras. 158, 163 and 164. back to text133. Appellate Body Report, Brazil Coconut, paras. 280281. back to text134. Appellate Body Report, EC Fasteners, para. 398. back to text135. Appellate Body Report, EC Fasteners, paras. 388, 395. back to text136. Panel Report, Canada Autos, paras. 10.5510.56; see para. 1032 of this Chapter. back to text137. WT/L/304. back to text138. WT/L/304. back to text139. WT/L/759. back to text140. G/C/M/47, section IV. back to text141. G/C/6 and WT/LDC/SWG/IF/18 (Morocco); WT/COMTD/N/12 and Rev.1 (Korea); WT/COMTD/N/38 (India); WT/COMTD/N/39 and Add.1 (China). back to text142. WT/COMTD/W/39. back to text143. WT/COMTD/W/47. back to text144. WT/COMTD/W/53. back to text145. Decision 36 on Measures in Favour of LeastDeveloped Countries, in Annex F of the Hong Kong Ministerial Declaration (WT/MIN(05)/DEC). back to text146. The discussion that took place under this agenda item in 2006 can be found in the minutes of the meetings, WT/COMTD/M/57 WT/COMTD/M/59. back to text147. Report, review transmitted as part of CTD annual report to the General Council: WT/COMTD/58. See also WT/COMTD/M/61. back to text148. Panel Report, US Gasoline, para. 6.19. back to text149. Panel Report, Brazil Desiccated Coconut, para. 281. back to text150. Appellate Body Report, Brazil Desiccated Coconut, p. 21. back to text151. Appellate Body Report, EC Fasteners, para. 392. back to text152. Appellate Body Report, EC Fasteners, paras. 395398. back to text153. (footnote original) See, e.g., Panel Report, Canada FIRA, para. 5.16. back to text154. (footnote original) See, e.g., Panel Report, Brazil Desiccated Coconut, para. 293. back to text155. (footnote original) Appellate Body Report, US Wool Shirts and Blouses, p. 19. back to text156. Panel Report, US

Shrimp, paras. 7.227.23. back to text157. Appellate Body Report, EC Bananas III, paras. 183187. back to text158. Panel Report, Canada Autos, paras. 10.5510.56, which is referenced in para. 1032 of this Chapter. back to text159. (footnote original) Such as in Articles XX (general exceptions), XXI (security exceptions) and XXIV (customs unions and free trade areas). back to text160. Appellate Body Report, Canada Autos, para. 83. back to text161. Appellate Body Report, EC Poultry, para. 98, citing Appellate Body Report, EC Bananas III, para. 154, which is referenced in para. 139 of this Chapter. back to text162. Appellate Body Report, EC Poultry, para. 99. back to text163. See para. 419 of this Chapter. back to text164. Panel Report, Indonesia Autos, para. 14.139. back to text* For the convenience of the reader, asterisks mark the portions of the text which should be read in conjunction with notes and supplementary provisions