1. Introduction
The notion of ‘trade-restrictiveness' arises in various forms and contexts throughout the World Trade Organization (WTO) agreements, yet no single definition of trade-restrictiveness exists. Case law and secondary literature provide little guidance in identifying the existence of trade-restrictiveness or in measuring the degree to which a given measure restricts trade. Tribunals and scholars alike have focused not so much on the meaning of trade-restrictiveness itself as on related questions such as the ‘least trade restrictive means test’Footnote 1 and the extent to which a given alternative measure would contribute to a given non-trade policy objective.Footnote 2
The meaning of trade-restrictiveness is of fundamental importance to a number of areas of WTO law and may become increasingly significant as new types of measures are challenged in the WTO dispute settlement system. For example, the ongoing challenges brought by five countries against Australia's so-called ‘plain’ tobacco packaging lawsFootnote 3 raise difficult questions about trade-restrictiveness in the context of a measure that neither explicitly discriminates against or between imports nor entails any evident de facto discrimination. Is a measure that reduces sales of a given product (and, indeed, that is designed to do so for health reasons) ‘trade-restrictive’ if sales of domestic and imported products are equally affected? Attempting to answer this question reveals that the meaning of trade-restrictiveness is surprisingly and worryingly under-theorized. Long ago in WTO terms, the asbestos ban challenged in EC–Asbestos was relevantly comparable to the Australian measure, extending as it did to such activities as ‘manufacture, import, domestic marketing, exportation … sale and transfer under any title whatsoever of all varieties of asbestos fibres or product containing asbestos fibres'.Footnote 4 Yet, as elaborated below, the case offered no satisfactory answer to the question just posed.
The significance of the concept of trade-restrictiveness for WTO law is confirmed in the number of WTO cases that refer to it. One hundred and twenty Appellate Body Reports and Panel Reports of the WTO and its predecessor use the term ‘trade-restrictive’ or ‘trade restrictive'.Footnote 5 This includes 432 mentions in the 2012 Appellate Body Report in US–COOL, discussed further below. As elaborated in the following paragraphs, the concept of trade-restrictiveness arises across WTO agreements in various contexts. The current failure to articulate in the case law the components and characteristics of such a wide-reaching concept, so frequently litigated, converts trade-restrictiveness into a ‘black box’. WTO panelists and Appellate Body members are free to inject into trade-restrictiveness whatever assessments and judgments they see fit. The absence of a robust definition of trade-restrictiveness thus provides a mask for the interpretative and decision-making processes of WTO tribunals. This article aims to contribute to a better understanding of trade-restrictiveness in order to enhance predictability regarding whether a given measure is trade restrictive (or overly trade restrictive) and to offer tools for reviewing and critiquing WTO dispute settlement decisions on trade-restrictiveness.
This article explores the meaning of trade-restrictiveness by focusing on WTO cases addressing that concept in the context of the general exceptions in the General Agreement on Tariffs and Trade 1994 (GATT)Footnote 6 and the General Agreement on Trade in Services (GATS),Footnote 7 as well as in the context of Article 2.2 of the Agreement on Technical Barriers to Trade (TBT Agreement).Footnote 8 I focus on these provisions because of recent and ongoing WTO case law that has begun to develop further the concept of trade-restrictiveness, and because of the common approaches used in these provisions to identifying and assessing trade-restrictiveness (with the Appellate Body reiterating most recently, in EC–Seal Products, that the GATT and the TBT Agreement ‘should be interpreted in a coherent and consistent manner’).Footnote 9 In analysing the relevant case law, I aim to contribute to the understanding of trade-restrictiveness and thus provide suggestions for applying this concept to specific measures when challenged under relevant WTO provisions. In particular, I aim to explain the relationship between trade-restrictiveness and discrimination in WTO law.
In addition to the provisions addressed in detail in this article (GATT Article XX, GATS Article XIV, and TBT Article 2.2), several other WTO provisions relate to the concept of trade-restrictiveness. GATT Article XI:1 prohibits ‘quantitative restrictions' on the importation or exportation of products, addressing perhaps the most restrictive form of trade measure. GATS Article VI:4 provides that ‘qualification requirements and procedures, technical standards and licensing requirements' for the provision of services should not constitute ‘unnecessary barriers to trade’ and should not be ‘more burdensome than necessary to ensure the quality of the service’. This GATS provision recognizes that certain types of standards, procedures, and requirements can restrict trade in services by burdening entry into a market or imposing additional costs on operating in that market. Under Article 5.6 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement),Footnote 10 WTO Members must ensure that their sanitary and phytosanitary measures are ‘not more trade-restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection, taking into account technical and economic feasibility’. Calling to mind the question of reasonably available alternatives as discussed further below, footnote 3 to Article 5.6 of the SPS Agreement states:
a measure is not more trade-restrictive than required unless there is another measure, reasonably available taking into account technical and economic feasibility, that achieves the appropriate level of sanitary or phytosanitary protection and is significantly less restrictive to trade.
Finally, Article 2(c) of the Agreement on Rules of Origin Footnote 11 provides that ‘rules of origin shall not themselves create restrictive, distorting, or disruptive effects on international trade’, rephrasing the concept of trade-restrictiveness as something having ‘restrictive … effects on international trade’.
The existence of these various obligations and exceptions relating to trade-restrictiveness in the WTO agreements highlights the importance of clarifying the meaning of trade-restrictiveness, as this article attempts to do, beginning with certain WTO provisions. The substance of the article commences in Section 2 by outlining the chosen provisions (GATT Article XX, GATS Article XIV and TBT Article 2.2) and explaining how trade-restrictiveness arises from both the relevant text and the related jurisprudence. Section 3 outlines some of the general definitions that WTO tribunals (that is, panels and the Appellate Body) have offered in providing guidance on trade-restrictiveness, emphasizing the significance of the underlying obligation that has allegedly been violated in applying the concept of trade-restrictiveness in the context of the general exceptions in GATT and GATS, and similar reasoning that can be applied in the TBT context. Sections 4 and 5 delve deeper into the various ways in which trade-restrictiveness has been used in connection with the selected provisions, first (in Section 4) in the context of identifying less trade-restrictive alternatives to the challenged measure, and second (in Section 5) as a factor to be balanced against others such as contribution of the measure to its (health or other non-trade) objective.
The article concludes that trade-restrictiveness and discrimination are distinct but overlapping concepts. A discriminatory internal measure is likely to restrict trade by reducing the competitive opportunities for all or some imported products in contrast to the opportunities available to domestic products or other imported products. In contrast, a non-discriminatory internal measure is unlikely to amount to a barrier to trade or to be regarded as trade restrictive. However, a barrier to market access imposed at the border such as an import ban, import quota, or import licence is inherently trade-restrictive, although not discriminatory if accompanied by corresponding restrictions on domestic production or sale. In any case, the existence of trade-restrictiveness alone does not constitute a WTO violation. The general exceptions in GATT and GATS allow respondents to justify their trade-restrictive measures on the basis of the public policy objectives to which they contribute, taking account of reasonably available alternatives that would contribute equally to those objectives. Similarly, Article 2.2 of the TBT Agreement proscribes only measures that are more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. The jurisprudence that has developed around these provisions is quite similar, although clear differences are identified between TBT Article 2.2, GATT Article XX, and GATS Article XIV (for example in relation to the burden of proof). Ongoing disputes may lend further clarity to this difficult area of law, and in particular the meaning of trade-restrictiveness in the WTO.
2. Key WTO provisions on trade-restrictiveness
2.1 General exceptions: GATT Article XX and GATS Article XIV
The general exceptions in GATT Article XX and GATS Article XIV incorporate the notion of trade-restrictiveness in different ways, based on the complex test established by the WTO Appellate Body for applying the exceptions to a measure that otherwise appears to violate an obligation in GATT or GATS. GATT Article XX includes a general exception for health measures in the following terms:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures.
(b) necessary to protect human, animal or plant life or health.Footnote 12
Similarly, GATS Article XIV provides:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures:
(b) necessary to protect human, animal or plant life or health.Footnote 13
Trade-restrictiveness becomes crucial in three key aspects of these provisions:
(a) The first limb of the necessity test, for example as appears in paragraph (b) of each exception: in determining whether a challenged measure is ‘necessary’ to protect human life or health under paragraph (b), the trade-restrictiveness of the measure is a factor to be weighed and balanced, together with the contribution of the measure to its objective, and (or in the light of) the importance of the objective.Footnote 14 A more trade-restrictive measure might satisfy this first part of the necessity test if it makes a material or significant contribution to its objective,Footnote 15 particularly if that objective is important (and the Appellate Body has stated that the protection of human life or health is ‘vital and important in the highest degree’).Footnote 16 A less trade-restrictive measure might make a more modest contribution to its objective and still be found provisionally necessary under this first limb of the necessity test.Footnote 17
(b) The second limb of the necessity test: if a challenged measure is found provisionally necessary under the first limb of the necessity test, a WTO tribunal will consider whether an alternative to the challenged measure exists that is reasonably available to the respondent and less trade-restrictive than the challenged measure, and that makes an equivalent contribution to the respondent's objective.Footnote 18 If the complainant succeeds in establishing that a particular proposed alternative fulfils these criteria, the challenged measure will be found not ‘necessary’ and therefore will not qualify for the exception.Footnote 19
(c) The ‘chapeau’ (opening paragraph to GATT Article XX and GATS Article XIV): a measure that falls within paragraph (b) or another paragraph of these general exceptions will nevertheless fail to be justified thereunder if the measure constitutes a ‘disguised restriction on international trade’ (GATT) or a ‘disguised restriction on trade in services' (GATS).
The Panel's discussion of the chapeau of GATT Article XX in EC–Asbestos exemplifies the absence of structured reasoning concerning trade-restrictiveness in WTO law. The Panel stated that ‘the key to understanding what is covered by “disguised restriction on international trade” is not so much the word “restriction”, inasmuch as, in essence, any measure falling within Article XX is a restriction on international trade, but the word “disguised”’.Footnote 20 The Panel did not explain what it meant by a measure ‘falling within Article XX’ (a measure that meets the requirements of a paragraph of Article XX, a measure that falls within the general parameters of one of those paragraphs, or a measure that has been found inconsistent with another GATT provision and therefore needs to be justified under Article XX?); nor did the Panel explain why such a measure necessarily restricts trade. Maintaining its focus on the word ‘disguised’ without elaborating on the meaning of trade restriction, the Panel indicated that ‘a restriction which formally meets the requirements of Article XX(b) will constitute an abuse if such compliance is in fact only a disguise to conceal the pursuit of trade-restrictive objectives’.Footnote 21 Without elaborating on its conversion of ‘restriction on international trade’ from a noun to an adjective qualifying the word ‘objectives’, the Panel went on to imply that the term ‘trade-restrictive objectives’ is interchangeable with ‘protectionist objectives’Footnote 22 or ‘protectionist aim[s]’.Footnote 23 (The appeal in this case focused on the necessity test in GATT Article XX(b) rather than the chapeau of Article XX, with the Appellate Body upholding the Panel's conclusion that the challenged measure was justified under Article XX(b) and therefore consistent with WTO law.)
The reference to a disguised restriction on trade in the chapeau is in fact rarely explored separately and is instead often subsumed in discussion of the words ‘arbitrary or unjustifiable discrimination’ in the chapeau.Footnote 24 Therefore, most analysis of trade-restrictiveness in WTO case law has arisen in the context of the necessity test rather than the chapeau – that is, through jurisprudential references to trade-restrictiveness pursuant to the word ‘necessary’ rather as a result of the explicit treaty reference to a restriction on trade in the chapeau. Accordingly, in connection with the general exceptions, Sections 3–5 of this article focus primarily on trade-restrictiveness with respect to the necessity test rather than the chapeau.
2.2 No more trade-restrictive than necessary: TBT Article 2.2
Article 2.2 of the TBT Agreement states:
Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia … protection of human health or safety … In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products.Footnote 25
Given the inclusion of the words ‘unnecessary’, ‘trade-restrictive’, and ‘necessary’ in this provision, it is perhaps unsurprising that the Appellate Body jurisprudence on TBT Article 2.2 is closely aligned with that under the general exceptions, and specifically the necessity test developed in connection with provisions such as GATT Article XX(b) and GATS Article XIV(b). In the recent TBT case law in particular, the Appellate Body provided guidance on the interpretation and application of TBT Article 2.2 to make clear the parallels and differences with the general exceptions. Key differences include that:
(i) TBT Article 2.2 is a positive obligation (under which the complainant bears the burden of establishing a violation),Footnote 26 whereas the general exceptions are just that – exceptions or defences (under which the respondent bears the burden of establishing a justification for what otherwise appears to be a violation);Footnote 27
(ii) TBT Article 2.2 contains a non-exhaustive list of the ‘legitimate objectives’ recognized, whereas the paragraphs in the general exceptions appear to contain the only bases on which an exception can be establishedFootnote 28 (although they do not include explicit reference to all possible legitimate objectives, such as wealth redistribution, core labour standards, or the protection of privacy);Footnote 29 and
(iii) TBT Article 2.2 explicitly requires consideration of the risks of non-fulfilment of the relevant objective in determining whether a technical regulation is more trade-restrictive than necessary.
Despite these differences, several similarities arise between TBT Article 2.2 and the general exceptions when it comes to the notion of trade-restrictiveness. In determining whether a challenged technical regulation is more trade-restrictive than necessary to fulfil a legitimate objective under Article 2.2, the Appellate Body has established a test very similar to the necessity test under the general exceptions. First, a panel will weigh and balance the trade-restrictiveness of the technical regulation with its contribution to the legitimate objective, and the risks that non-fulfilment would create.Footnote 30 Second, if that first step leads to a provisional conclusion that the measure is necessary, the panel will consider whether any less-trade restrictive alternatives that would make an equivalent contribution to the objective are reasonably available to the respondent, again taking account of the risks of non-fulfilment of the relevant objective.Footnote 31 Pursuant to both limbs of this test,Footnote 32 the panel should take account of ‘the nature of the risks at issue and the gravity of the consequences that would arise from non-fulfilment’Footnote 33 (perhaps akin to making an assessment of the importance of the objective under the general exceptions).
Article 2.2 of the TBT Agreement must also be understood in the context of Article 2.1 of the TBT Agreement, which provides:
Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.
In relation to TBT Article 2.1, the Appellate Body has stated:
The balance set out in the preamble of the TBT Agreement between, on the one hand, the desire to avoid creating unnecessary obstacles to international trade and, on the other hand, the recognition of Members’ right to regulate, is not, in principle, different from the balance set out in the GATT 1994, where obligations such as national treatment in Article III are qualified by the general exceptions provision of Article XX.Footnote 34
After discussing in Section 3 below, some general approaches suggested by WTO panels and the Appellate Body for defining and identifying trade-restrictiveness, we focus in parts IV and V respectively on trade-restrictiveness as a factor to be balanced under the general exceptions or TBT Article 2.2, and on the identification of less trade-restrictive alternatives under the general exceptions or TBT Article 2.2.
3. A general definition of trade-restrictiveness?
3.1 General guidance from the WTO treaty and case law
The WTO Appellate Body has given some indication of the general meaning of trade-restrictiveness in analysing that concept under various provisions. In Korea–Beef, the Appellate Body indicated that in determining whether a measure is ‘necessary’ under GATT Article XX(d) (which covers measures ‘necessary to secure compliance with laws or regulations which are not inconsistent’ with WTO law), a panel must consider ‘the extent to which the compliance measure produces restrictive effects on international commerce, that is, in respect of a measure inconsistent with Article III:4, restrictive effects on imported goods’.Footnote 35 This description highlights the relevance of the underlying alleged violation, a matter to which I return below. In making this statement, the Appellate Body referred in a footnote to the GATT preamble:
We recall that the last paragraph of the Preamble of the GATT of 1994 reads as follows: ‘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.’Footnote 36
The Appellate Body's use of emphasis in its statements in the text and footnote here can be understood to suggest that, at least where the underlying obligation concerned involves national treatment, discrimination is a focus of the concept of trade-restrictiveness. In other words, a measure that limits or imposes burdens disproportionately or particularly on imported products is more likely to be seen as trade-restrictive than a measure that limits or imposes burdens equally on imported and domestic products. However, even this inference leaves open the question of whether a measure imposing equal burdens on imported and domestic products might nevertheless be considered to restrict trade.
Confirming the focus on imported products in connection with trade-restrictiveness, the Appellate Body in Brazil–Retreaded Tyres agreed with the Panel that ‘an import ban is “by design as trade-restrictive as can be”’.Footnote 37 The Appellate Body did not qualify this statement with reference to measures imposed on domestic products, suggesting that a ban on both sale and importation of a given product might still be regarded as extremely trade-restrictive. More recently, in US–Tuna II (Mexico), the Appellate Body stated that trade-restrictiveness in the context of TBT Article 2.2 refers to ‘something having a limiting effect on trade’.Footnote 38 Although the Appellate Body did not elaborate on the meaning of ‘trade’, its statements in Korea–Beef as outlined above (including its reference to the GATT preamble) suggest that trade means international commerce and includes imported products.
The Panel in EC–Seal Products stated that ‘trade restriction’ has a ‘broad scope’Footnote 39 and concluded, with very little discussion, that the challenged European Union seal regime is trade-restrictive within the meaning of TBT Article 2.2 because it has a ‘“limiting effect on trade” by prohibiting certain seal products, including those imported from Canada and Norway, from accessing the EU market’.Footnote 40 Again with very little discussion, the Panel held that the alternative proposed by Canada and Norway of conditioning ‘market access for seal products … on compliance with animal welfare standards combined with certification and labelling requirements’Footnote 41 was ‘less trade restrictive’ than the challenged regime because the alternative ‘could possibly permit seal products from the complainants that are prohibited under the EU Seal Regime’.Footnote 42 The Appellate Body did not review the Panel's interpretation or application of trade-restrictiveness in connection with TBT Article 2.2 or GATT Article XX, because neither Canada or Norway appealed the Panel's analysis of trade-restrictiveness or its finding that the proposed alternative was less trade restrictive than the challenged regime.Footnote 43 However, because the Appellate Body reversed the Panel's finding that the challenged seal regime is a technical regulation, the Panel's findings and reasoning on TBT Article 2.2 are ‘moot and of no legal effect’.Footnote 44 The following footnote in the Appellate Body Report may nevertheless reflect some acknowledgment of both the complexity of the relationship between trade-restrictiveness and discrimination, and the opacity of the Panel's comments in this regard:
In referring to the prohibition on the import of seal products ‘including those imported from Canada and Norway’, the Panel may have been referring not only to the restrictive impact of the ban, but also to any restrictive discriminatory impact caused by trade diversion between imports of seal products originating in different countries.Footnote 45
These general statements do little to clarify the meaning of trade-restrictiveness beyond demonstrating a focus on imported products, revealing no single overarching definition of trade-restrictiveness. In particular, as discussed in the following section, trade-restrictiveness in the context of the general exceptions in GATT Article XX and GATS Article XIV is likely to vary according to the obligation that the respondent is alleged to have breached.
3.2 Significance of the underlying obligation and challenged measure
The Appellate Body stated explicitly in China–Publications and Audiovisual Products that the meaning of trade-restrictiveness in the context of the general exceptions in GATT Article XX and GATS XIV depends in part on the underlying obligation to which the exception is being applied and may extend beyond the effect on imported products:
[W]hile in principle a panel must assess the restrictive effect of a measure on international commerce, this test must be applied in the light of the specific obligation of the covered agreements that the respective measure infringes. The assessment of the restrictive effect to be taken into account in a particular dispute may, in appropriate cases, extend beyond an assessment of the restrictive effect on imported products, as this assessment must be undertaken in the light of the measure at issue, the specific obligation of the covered agreements that the measure infringes, and the defence being invoked.Footnote 46
The Appellate Body made this statement in the context of GATT Article XX(a), adding nuance to its general statement in Korea–Beef. In the particular circumstances of China–Publications and Audiovisual Products, the Appellate Body's reasoning had important consequences. The relevant underlying obligation was found in China's Accession Protocol rather than the core provisions of GATT, and related to granting rights to importers (the ‘right to trade’).Footnote 47 As the Appellate Body found that China could invoke GATT Article XX(a) as a defence to the relevant provision in the Accession Protocol (in particular because of the opening words of that provision, which provide a link to GATT Article XX),Footnote 48 the Appellate Body agreed with the Panel that the trade-restrictiveness of China's measure could be understood as involving both effects on imported products and effects on prospective importers.Footnote 49 As the Panel explained:
[W]e should weigh not only the restrictive impact the measures at issue have on imports of relevant products, but also the restrictive effect they have on those wishing to engage in importing, in particular on their right to trade. In our view, if Article XX is assumed to be a direct defence for measures in breach of trading rights commitments, it makes sense to consider how much these measures restrict the right to import.Footnote 50
In turn, the inclusion of restrictive effects on prospective importers in the analysis of trade-restrictiveness was significant to the outcome of the case because the alternative measure proposed by the US did not necessarily reduce restrictions on imported products but did reduce restrictions on importers. The challenged measure involved designation of specific importers (state-owned enterprises) to import particular ‘cultural’ products, after reviewing their content to ensure consistency with public morals in China.Footnote 51 The proposed alternative was for the government to conduct this content review, which might still preclude entry of particular products while expanding the possible range of importers.Footnote 52 The availability of this less trade-restrictive alternative was one reason for the failure of China's defence pursuant to the necessity test in GATT Article XX(a).Footnote 53
On the one hand, the Appellate Body's reasoning in China–Publications and Audiovisual Products might be seen as specific to the circumstances of that case, or to rare disputes in which GATT Article XX is being applied to obligations outside the core provisions of the GATT (or GATS Article XIV applying to obligations outside the core provisions of the GATS). On the other hand, its reasoning is more generally framed and could assist in identifying the aspects of a challenged measure that should be specifically analysed in assessing its trade-restrictiveness for the purpose of the general exceptions, providing scope for flexibility and creativity in parties’ arguments and tribunals’ decision-making.
These decisions emphasizing the significance of the underlying obligation suggest that the application of GATT Article XX to a challenged measure may vary, justifying an infringement of one GATT obligation but not another. For example, if the underlying obligation involves non-discrimination (e.g. national treatment under GATT Article III:4 or most-favoured nation treatment under GATT Article I:1), discriminatory aspects of the measure may be used to demonstrate trade-restrictiveness for the purposes of the necessity test. If the underlying obligation involves market access (e.g. an import ban examined under GATT Article XI:1 or a limitation on the number of service suppliers pursuant to GATS Article XVI:2(a)), discrimination may be less relevant in the assessment of trade-restrictiveness under GATT Article XX; rather, a direct market access barrier is necessarily trade-restrictive. This reading of the case law is consistent with the Appellate Body's statement in EC–Seal Products that ‘the aspects of a measure to be justified under the subparagraphs of Article XX are those that give rise to the finding of inconsistency under the GATT 1994’.Footnote 54
Although the implications of the relevant underlying obligation for the meaning and scope of trade-restrictiveness have typically been discussed in the context of the general exceptions in GATT and GATS (where the underlying obligation has been prima facie breached, leading to the exceptions as a final avenue of justification), similar reasoning could be used in the context of Article 2.2 of the TBT Agreement. In that context, for example, if the challenged measure has been found to violate Article 2.1 of the TBT Agreement, discrimination is likely to be relevant in identifying the existence and extent of trade-restrictiveness of the challenged measure. If the challenged measure involves a GATT Article XI-type market access barrier, that market access restriction will be the focus of the assessment of trade-restrictiveness. If the alleged WTO-inconsistency of the challenged measure is neither discrimination nor a direct market access barrier, a more nuanced examination may be required to determine whether and to what degree the measure restricts trade, for example by examining the measure's impact on imported products.
4. Identifying less trade-restrictive alternatives
Analysis by WTO panels and the Appellate Body of proposed alternatives to challenged measures (in the contexts of the general GATT/GATS exceptions and TBT Article 2.2) offers certain limited material for understanding the nature of trade-restrictiveness in the WTO.
4.1 Less WTO-inconsistent alternatives?
The language used in previous panel reports has sometimes suggested that the alternative to be identified has to be somehow ‘less WTO-inconsistent’ than the challenged measure. For example, the GATT Panel in Thailand–Cigarettes stated in its report:
The Panel concluded from the above that the import restrictions imposed by Thailand could be considered to be ‘necessary’ in terms of Article XX(b) only if there were no alternative measure consistent with the General Agreement, or less inconsistent with it, which Thailand could reasonably be expected to employ to achieve its health policy objectives.Footnote 55
Similarly, the Panel in Brazil–Retreaded Tyres, in its analysis under GATT Article XX(b), said that it would ‘first examine whether the European Communities has identified a measure, other than the import ban, that is compatible, or less incompatible, with the WTO Agreement and at the same time, in its view, was reasonably available to Brazil to achieve its policy objective’.Footnote 56
These statements appear strange, both because of the difficulty of assessing degrees of WTO-inconsistency (how do we know which WTO violation is worse?) and because a WTO-inconsistent measure (even if ‘less inconsistent’ than the challenged measure) must surely not be ‘reasonably available’ to the respondent as an alternative to avoid a WTO violation. Instead, the alternative must be consistent with the WTO agreements as a whole, suggesting that the focus in assessing the alternative must be less on the obligation that has been violated because it must comply with all WTO rules.
4.2 Less discriminatory alternatives?
In US–Gasoline, the Panel found that certain United States measures regarding the cleanliness of gasoline (linked to emissions from gasoline sold in previous years to establish baselines) were inconsistent with the national treatment obligation in GATT Article III:4, because ‘imported gasoline was effectively prevented from benefitting from as favourable sales conditions as were afforded domestic gasoline by an individual baseline tied to the producer of a product’.Footnote 57 The appeal concerned GATT Article XX. In assessing alternatives in the course of finding that the measures were applied in a manner constituting ‘unjustifiable discrimination’ and a ‘disguised restriction on international trade’ contrary to the GATT Article XX chapeau,Footnote 58 the Appellate Body stated that the alternative of ‘the imposition of statutory baselines without differentiation as between domestic and imported gasoline … could have avoided any discrimination at all’.Footnote 59 However, this statement should not be taken as meaning that a less trade-restrictive alternative under GATT Article XX, GATS Article XIV or TBT Article 2.2 must simply be less discriminatory (or non-discriminatory), because the Appellate Body was considering the concepts of both ‘unjustifiable discrimination’ and ‘disguised restriction on international trade’ at this point of its report. Moreover, the focus on discrimination may also simply reflect the nature of the measure (which disadvantaged imported products) and the underlying obligation (national treatment), as discussed above.
More recently, in US–COOL, the Appellate Body made some suggestion that discrimination might be relevant to the application of TBT Article 2.2, particularly in the context of assessing an alternative proposed by Canada, being a ‘trace-back system’:
[T]he participants hold opposing views as to the trade-restrictiveness of such a system. In the absence of specific information and argumentation regarding the relationship between costs, prices, and demand in the US market for livestock and meat, it is not clear to what extent an increase in costs would be trade restrictive, or would affect livestock from all sources equally … Therefore, we are not in a position to reach a conclusion as to how the trade-restrictiveness of a trace-back system would compare to the status quo.Footnote 60
This passage suggests that the impact of an alternative on imported as opposed to domestic products (or imported products from particular countries compared to those from other countries) may be relevant in assessing the trade-restrictiveness of the alternative. Again, the connection to discrimination in US–COOL may arise from the nature of the measure, which was found to violate TBT Article 2.1.Footnote 61
4.3 Less trade-restrictive alternatives: the dominant term
Rather than assessing alternatives that are ‘less WTO-inconsistent’ or ‘less discriminatory’, the dominant approach for defining reasonably available alternatives under the necessity test in the general exceptions (in GATT Article XX or GATS Article XIV) and under TBT Article 2.2 is to refer to ‘less trade restrictive’Footnote 62 alternatives. A complainant's assertion that a proposed alternative is less trade-restrictive is not routinely challenged, perhaps because a complainant would have little incentive to propose a more trade-restrictive measure. The dispute often focuses instead on the extent to which the alternative would contribute to the respondent's objective.Footnote 63 However, complainants propose alternatives to win particular disputes, and occasionally the respondent does object to the assertion that the alternative is less trade-restrictive than the challenged measure. In China–Publications and Audiovisual Products, as discussed above, China unsuccessfully contested the Panel's view that the proposed alternative was reasonably availableFootnote 64 and also that it was less trade-restrictive, on the basis that trade-restrictiveness should be assessed by reference to imported products and not would-be importers.Footnote 65
The absence of extended discussion of the relative trade-restrictiveness of a proposed alternative in comparison with the challenged measure in reports to date means that this aspect of the legal analysis sheds little light on the meaning of trade-restrictiveness more broadly. Rather, the use of trade-restrictiveness as a factor to be balanced against other factors, as discussed further in the next section, provides more fruitful material in exploring the meaning of trade-restrictiveness.
5. Trade-restrictiveness as a factor to be balanced
5.1 Degree vs existence of trade-restrictiveness
In exploring the meaning of trade-restrictiveness in WTO law, both the treaty text and the jurisprudence make clear that trade-restrictiveness is a matter of degree rather than a binary calculation. Moreover, the mere fact that a measure is trade restrictive to some degree does not mean that the measure violates WTO law. This conclusion follows from the notion of ‘weighing and balancing’ different factors under the necessity test in the general exceptions (or under TBT Article 2.2), whereby even a measure as trade-restrictive as an import ban can in some circumstances be justified under, say, GATT Article XX(b).Footnote 66 The conclusion also follows from the text of TBT Article 2.2, as recognized by the Appellate Body:
Article 2.2 does not prohibit measures that have any trade-restrictive effect. It refers to ‘unnecessary obstacles’ to trade and thus allows for some trade-restrictiveness; more specifically, Article 2.2 stipulates that technical regulations shall not be ‘more trade-restrictive than necessary to fulfil a legitimate objective’. Article 2.2 is thus concerned with restrictions on international trade that exceed what is necessary to achieve the degree of contribution that a technical regulation makes to the achievement of a legitimate objective.Footnote 67
The Appellate Body's explicit acknowledgement that the existence of trade-restrictiveness alone does not establish a WTO violation provides some comfort to WTO members in adopting – for legitimate public policy reasons – regulatory measures that may have incidental effects on international trade. Nevertheless, a measure that is not trade restrictive at all may be easier to justify, in that a balancing exercise and an analysis of alternative measures will not be required in those circumstances: ‘if a measure is not trade restrictive, then it may not be inconsistent with Article 2.2’.Footnote 68 Such a measure might still be challenged in the WTO for a variety of reasons, for example due to uncertainty about whether it is trade restrictive, pursuant to another WTO provision, or for strategic reasons such as delaying implementation or chilling similar regulatory efforts in other countries (as is arguably a key motivation behind the industry involvement in the plain packaging complaints against Australia).
5.2 Trade effects vs competitive opportunities
After an initial hiccup, WTO panels and the Appellate Body seem agreed that the trade-restrictiveness of a measure cannot be determined solely by its trade effects, in the sense of the absolute numbers of imports and exports before and after its implementation. The Panel in Dominican Republic–Import and Sale of Cigarettes suggested otherwise, but subsequent cases have clarified the position. That Panel stated, in the context of the necessity test under GATT Article XX(d):
[A]lthough … the tax stamp requirement modifies the conditions of competition in the marketplace to the detriment of imported cigarettes, Honduras has still been able to export cigarettes to the Dominican Republic and, in fact, its exports have increased quite significantly over the last few years. So the Panel may assume that the measure has not had any intense trade restrictive effects.Footnote 69
The Panel nevertheless found that the Dominican Republic's challenged tax stamp requirement was not necessary within the meaning of Article XX(d), primarily because (i) it ‘was of limited effectiveness in preventing tax evasion and cigarette smuggling’Footnote 70 and (ii) a less trade-restrictive alternative was available. On appeal by the Dominican Republic, the Appellate Body upheld the Panel's finding,Footnote 71 noting the Panel's statements regarding trade-restrictiveness based on an increase in exports and concluding that ‘the Panel conducted an appropriate analysis’.Footnote 72 However, the difficulty with the Panel's reasoning is that it focuses on an increase in exports from Honduras to the Dominican Republic without assessing the reason for that increase, the impact of the measure, or whether the increase would have been even greater in the absence of the measure.
For this reason, panels and the Appellate Body have subsequently confirmed that changes in the number of imports alone cannot demonstrate the trade-restrictiveness of a challenged measure. In the context of the necessity test in GATT Article XX(a), the Appellate Body explained in China–Publications and Audiovisual Products:
The Panel noted that evidence submitted by China showed that the number of titles of newspapers and publications imported into China had increased from 2002 to 2006. However, the Panel found that this increase did not necessarily indicate that China's measures had not had any trade-restrictive effects, because the statistics did not indicate what import levels might have been if the measures had not been imposed.Footnote 73
In the context of TBT Article 2.2, the US–COOL Panel more recently indicated that the focus of an assessment of trade-restrictiveness should be on the impact on competitive opportunities:
[T]he scope of the term ‘trade-restrictive’ is broad … [and] does not require the demonstration of any actual trade effects, as the focus is on the competitive opportunities available to imported products.Footnote 74
[T]he COOL measure negatively affects imported livestock's conditions of competition in the US market in relation to domestic livestock by imposing higher segregation costs on imported livestock.Footnote 75
We therefore conclude that the complainants have demonstrated that the COOL measure is ‘trade-restrictive’ within the meaning of Article 2.2.Footnote 76
The Panel did note, nevertheless, that the challenged measure ‘brought about actual negative trade effects on imported livestock as shown by a significant and negative impact on import shares and prices’.Footnote 77 On appeal, because of the way the United States’ appeal was framed, the Appellate Body did not address the Panel's finding that the challenged measure was trade-restrictive within the meaning of TBT Article 2.2.Footnote 78
A focus on competitive opportunities may assist in confirming that trade effects are not determinative, but it raises the question of the extent to which trade-restrictiveness can arise from discrimination as opposed to direct barriers to market access. The notion of ‘competitive opportunities’ has typically been used in WTO case law in the context of non-discrimination obligations such as national treatment under GATT Article III:4,Footnote 79 most-favoured-nation treatment under GATT Article I:1,Footnote 80 and national treatment under TBT Article 2.1.Footnote 81 For example, in distinguishing competitive opportunities from trade effects, the Appellate Body has explained that GATT Article III protects ‘expectations not of any particular trade volume but rather of the equal competitive relationship between imported and domestic products’.Footnote 82 In the recent EC–Seal Products case, the Appellate Body emphasized that GATT Articles I:1 and III:4 are both:
concerned, fundamentally, with prohibiting discriminatory measures by requiring, in the context of Article I:1, equality of competitive opportunities for like imported products from all Members, and, in the context of Article III:4, equality of competitive opportunities for imported products and like domestic products. It is for this reason that neither Article I:1 nor Article III:4 require a demonstration of the actual trade effects of a specific measure.Footnote 83
In the US–COOL appeal, the United States objected to equating ‘trade-restrictive’ with a denial of competitive opportunities on the basis that this entails ‘import[ing] into [TBT] Article 2.2 the analytical approach developed for purposes of Article 2.1, as well as for less favourable treatment more generally’.Footnote 84 However, some panels have also referred to the competitive opportunities available to imported products, as distinct from trade flows, in the context of the market access obligation in GATT Article XI:1:
Article XI:1, like Articles I, II and III of the GATT 1994, protects competitive opportunities of imported products, not trade flows. In order to establish that Resolution 2235 infringes Article XI:1, the European Communities need not prove actual trade effects. However, it must be borne in mind that Resolution 2235 is alleged by the European Communities to make effective a de facto rather than a de jure restriction. In such circumstances, it is inevitable, as an evidentiary matter, that greater weight attaches to the actual trade impact of a measure.Footnote 85
[T]he Panel will determine whether the ports of entry measure is a restriction on importation within the meaning of Article X:1, based on whether the measure has a limiting effect on importation by negatively affecting the competitive opportunities available to textile, apparel and footwear products arriving from Panama … Colombia cannot rely on evidence of an increase in imports to rebut arguments of a restriction on importation. Similarly, Panama cannot point solely to evidence demonstrating a decline in the level of imports to establish the existence of a restriction on importation or exportation.Footnote 86
These passages confirm the use of the term ‘competitive opportunities’ to distinguish the impact of the measure on the conditions faced by imports from evidence on the absolute numbers of imports. The term does not appear to be intended to suggest a search for discrimination in a typical WTO sense, as elaborated below; rather, in the context of GATT Article XI:1, the term is being used to determine whether a given measure so affects the competitive opportunities of imported products that it amounts to a restriction on imports. In the light of the United States’ comments in US–COOL regarding competitive opportunities, the next section considers in more detail the extent to which discrimination is relevant to trade-restrictiveness.
5.3 Discrimination vs barriers to market access
Internal discrimination contrasted with border measures
A direct barrier to market access such as an import ban is by definition trade restrictive but is not necessarily discriminatory (although in lay terms it might be regarded as inherently discriminatory against imports). In WTO law, discrimination in the sense of national treatment is usually concerned with the treatment of products after they have ‘crossed the border’; a prohibition on imports at the border does not involve treating imported products less favourably than domestically produced products, because domestic products do not cross the border at all. In contrast, the imposition of differential tariffs on imports from different sources can involve a violation of the MFN obligation under GATT Article I:1 through discrimination between products imported from different countries as they cross the border. In addition, a concept of discrimination can arise in connection with an import ban in the sense of the corresponding treatment of domestically produced products. Thus, a ban on importation of a given product may be loosely described as non-discriminatory if it exists alongside a ban on domestic manufacture or sale of the same product, and discriminatory in the absence of these kinds of measures on domestic products. This concept of discrimination may explain why some quantitative restrictions or aspects of them may be assessed under GATT Article III rather than GATT Article XI:1,Footnote 87 although whether Article XI:1 continues to apply to such measures as well remains uncertain.Footnote 88
Lessons from Brazil–Retreaded Tyres: GATT Article XX
The relationship between discrimination and trade-restrictiveness was explored in Brazil–Retreaded Tyres. In that case, the Panel found Brazil's prohibition on ‘the issuance of import licences for retreaded tyres’ to be a violation of GATT Article XI:1.Footnote 89 In its analysis of this effective import ban under GATT Article XX(b), the Panel considered the exemption of imports from Mercado Común del Sur (MERCOSUR) countries from the ban not in connection with trade-restrictiveness under paragraph (b) but only in connection with whether the ban had been applied in a manner amounting to arbitrary or unjustifiable discrimination under the chapeau.Footnote 90 The Appellate Body noted that the Panel's separation of these two matters (the import ban and the discrimination arising from the MERCUSOR exemption) had not been appealed and therefore did not disturb that aspect of the Panel Report.Footnote 91 However, the Appellate Body stated that the Panel's was ‘not the only possible approach’Footnote 92 and that:
the Panel might have opted for a more holistic approach to the measure at issue by examining the two elements of Article 40 of Portaria SECEX 14/2004 that relate to retreaded tyres together. The Panel could, under such an approach, have analysed whether the Import Ban in combination with the MERCOSUR exemption violated Article XI:1, and whether that combined measure, or the resulting partial import ban, could be considered ‘necessary’ within the meaning of Article XX(b).Footnote 93
The contrasting reasoning of the Panel and Appellate Body in Brazil–Retreaded Tyres raises interesting questions in relation to the meaning of trade-restrictiveness. Had the Panel examined the MERCOSUR exemption within the necessity test in paragraph (b) of Article XX, the import ban might have been seen as contributing less to its health objectives (because the exemption could allow more retreaded tyres into Brazil, as was confirmed by the Appellate Body's chapeau analysis),Footnote 94 but what effect would the exemption have had on the assessment of the trade-restrictiveness of the import ban? Perhaps counter-intuitively, the exemption might have meant that the import ban was less trade-restrictive because the exemption allowed more imports into Brazil. That would arguably be the result if trade-restrictiveness refers to the impact of a measure on total global trade.Footnote 95 However, an assessment of trade-restrictiveness (and discrimination and market access) instead typically focuses on the impact on trade with the complainant, rather than trade with the world at large.Footnote 96 Focusing on the impact of trade with the complainant (the European Communities), the MERCOSUR exemption had no impact on the trade-restrictiveness of the import ban. That is, the import ban was already ‘as trade-restrictive as can be’,Footnote 97 whether or not the MERCOSUR exemption was taken into account.
This conclusion brings us back to the relationship between discrimination and trade-restrictiveness. The existence of discrimination against or between imported products is likely to create trade distortions – and arouse greater suspicions under WTO law – as well as enhancing the likelihood of trade-restrictiveness by negatively affecting the competitive opportunities of all or some imported products. Conversely, the non-discriminatory nature of a measure enhances the likelihood of it being found WTO-consistent, even if the measure is also found to be trade-restrictive. But considering discrimination separately from trade-restrictiveness does not necessarily render a given measure any more or less likely to be found WTO-consistent, because the existence of trade-restrictiveness alone is not a WTO violation, and because the discriminatory or non-discriminatory nature of the measure can be considered in other parts of the legal analysis. Thus, although the Panel in Brazil–Retreaded Tyres did not consider the discrimination effected by the MERCOSUR exemption – which was implemented to comply with a ruling by a MERCOSUR arbitral tribunal – when analysing the import ban under GATT Article XI:1 or pursuant to the necessity test in paragraph (b) of Article XX, the MERCOSUR exemption was ultimately a key reason for Brazil being found in violation of its WTO obligations. In the context of the chapeau to Article XX, the Appellate Body said:
[T]he ruling issued by the MERCOSUR arbitral tribunal is not an acceptable rationale for the discrimination because it bears no relationship to the legitimate objective pursued by the Import Ban that falls within the purview of Article XX(b), and even goes against that objective, to however small a degree. Accordingly, we are of the view that the MERCOSUR exemption has resulted in the Import Ban being applied in a manner that constitutes arbitrary or unjustifiable discrimination.Footnote 98
Brazil–Retreaded Tyres provides an example of an import ban that is applied in a discriminatory manner and consequently not justified under GATT Article XX. An import ban that exists together with restrictions on domestic production or sale might be equally trade-restrictive, but its contribution to its non-trade objective and non-discriminatory application could mean it satisfies an exception in GATT Article XX.
Lessons from US–COOL: TBT Article 2.2
Similar issues about the relationship between discrimination and trade-restrictiveness arise under the TBT Agreement. In US–COOL (Article 21.5), the United States argued that trade-restrictiveness:
refers to the restricting of trade flows, and not the concept of discrimination. The text of Article 2.2 … refers to ‘trade restrictive’ measures, not measures that are ‘discriminatory’, which are the subject of a separate provision.Footnote 99
In other words, the United States contended that trade restrictive means ‘limiting trade effects, i.e., limiting market access’.Footnote 100 The Panel disagreed that ‘trade-restrictiveness under Article 2.2 is limited to actual and quantifiable effects on trade or market access’ and instead based its finding of trade-restrictiveness on the amended measure's ‘detrimental impact on the competitive opportunities of imported livestock’.Footnote 101
The United States’ submissions highlight the textual basis for examining discrimination and trade-restrictiveness under the TBT Agreement. Unlike in the general exceptions in GATT Article XX, where trade-restrictiveness arises under both the necessity test and the chapeau, Article 2 of the TBT Agreement can be seen as addressing discrimination and trade-restrictiveness separately. While Article 2.2 explicitly addresses trade-restrictiveness, Article 2.1 addresses non-discrimination in the form of both national treatment and MFN treatment. Article 2.1 (like Article 2.2)Footnote 102 ‘does not operate to prohibit a priori any restriction of international trade’;Footnote 103 ‘if any obstacle to international trade would be sufficient to establish a violation of Article 2.1, Article 2.2 would be deprived of its effet utile’.Footnote 104 This interpretation is consistent with the ‘principle of effectiveness’, according to which WTO provisions ‘should not be interpreted in such a manner that whole clauses or paragraphs of a treaty would be reduced to redundancy or inutility’.Footnote 105 Articles 2.1 and 2.2 of the TBT must therefore be interpreted to have independent effect, notwithstanding their close relationship.
What, then, is the impact of discrimination (whether or not amounting to a violation of Article 2.1) on the analysis of trade-restrictiveness under Article 2.2? The cases clearly demonstrate that the existence of discrimination contrary to Article 2.1 is not sufficient to establish a violation of Article 2.2. Thus, while the United States measures challenged in US–Clove Cigarettes, US–COOL and US–Tuna II (Mexico) were all found in breach of TBT Article 2.1, none of them led to an Appellate Body finding of breach of TBT Article 2.2.Footnote 106 At the same time, although a discriminatory measure is likely to restrict trade – by, for example, distorting the market in favour of domestic products and thereby reducing market access for imported products – discrimination is not necessary to establish trade-restrictiveness (or a violation of TBT Article 2.2). As explained above, an import ban may be implemented in a non-discriminatory manner, with corresponding restrictions on domestic products, but is still likely to be characterized as extremely trade restrictive. The broader context of the ban may nevertheless mean that it is not more trade-restrictive than necessary and therefore is consistent with TBT Article 2.2.
6. Conclusion
This article highlights extensive room for elaboration of the meaning of trade-restrictiveness in WTO law. Despite the centrality of the notion of trade-restrictiveness to numerous WTO obligations, its precise scope and significance remain uncertain. As a result, WTO panels and the Appellate Body are able to declare the degree of trade-restrictiveness of challenged measures and proposed alternatives with little rigour or justification. Moreover, potentially avoidable disputes continue due to the lack of clarity about the concept of trade-restrictiveness and its relationship with other factors such as discrimination, trade effects and legitimate objectives.
Although a general definition or test of trade-restrictiveness across the WTO agreements may not be possible, this article has reached certain conclusions about trade-restrictiveness based on the examples of the general exceptions in GATT Article XX and GATS Article XIV and Article 2.2 of the TBT Agreement. To begin with, the meaning of trade-restrictiveness may vary depending on the underlying obligation – particularly in connection with the general exceptions, where a challenged measure has been found prima facie inconsistent with a separate WTO provision. Thus, questions of discrimination or market access barriers may be more or less relevant to the assessment of trade-restrictiveness depending on the alleged violation leading to consideration of the general exception. This kind of reasoning also extends to the TBT Agreement, where discrimination contrary to Article 2.1 may be used to demonstrate the existence of trade-restrictiveness. If the measure forms a direct barrier to market access, it is by definition trade-restrictive regardless of whether it is in any sense discriminatory. A focus on the underlying obligation and nature of the challenged measure creates the potential for flexibility in argument and decision-making while simultaneously adding to the uncertainty surrounding trade-restrictiveness.
The cases also make clear that the trade effects or impacts of a challenged measure – in terms of an increase or decrease in imports or exports of the relevant product during the period in which the measure has been in place – are not conclusive of whether a measure is trade restrictive or the degree of any trade-restrictiveness. Rather, other contextual factors must be taken into account in assessing such effects, such as other possible causal factors and trends in domestic sales. Nevertheless, trade effects may be relevant, for example in confirming the trade-restrictiveness of the challenged measure suggested by other indicators. In the absence of an explicit barrier to market access – such as a prohibition on imports, an import quota or an import licence – a WTO panel is likely to focus on the impact of the measure on the competitive opportunities of imported products, in comparison to domestic products or imported products from other sources.
The use of the term ‘competitive opportunities’ is frequently used in contradistinction to trade effects, to emphasize that changes in absolute numbers of imports are less important than the potential for imports to access the market. The term can nevertheless create confusion in relation to the significance of discrimination in identifying trade-restrictiveness. Discrimination and trade-restrictiveness are two distinct concepts that, while overlapping, should not be conflated. A non-discriminatory internal measure is unlikely to restrict trade, because it is unlikely to reduce the competitive opportunities of imported products vis-à-vis domestic products. A discriminatory internal measure may act as a barrier to trade and therefore be trade-restrictive. However, discrimination is not necessary to establish trade-restrictiveness, because trade-restrictiveness can exist without discrimination, for example in the case of an import ban that operates in conjunction with corresponding restrictions on domestic production or sales.
In the TBT Agreement, discrimination is addressed in Article 2.1 and trade-restrictiveness in 2.2, with the two provisions operating as separate and independent obligations as shown in the recent case law. In the general exceptions under GATT and GATS, trade-restrictiveness arises both under the necessity test in the sub-paragraphs to GATT Article XX and GATS Article XIV and under the chapeau. Discrimination is explicitly incorporated in the chapeau and may also arise in the assessment of trade-restrictiveness for the purpose of the necessity test, particularly if the prima facie violation leading to reliance on the general exceptions concerns discrimination (e.g. national treatment or MFN treatment). Under TBT Article 2.2, GATT Article XX and GATS Article XIV, both a discriminatory internal measure and a market access barrier imposed at the border are likely to be trade-restrictive. Returning to the question posed at the start of this article, a non-discriminatory internal measure that reduces sales of both domestic and imported products (e.g. for health reasons) is unlikely to be seen as affecting the competitive opportunities of imported as opposed to domestic products and therefore is unlikely to be seen as trade-restrictive at all.
In EC–Seal Products, the Appellate Body declined to import into its national treatment analysis under GATT Article III:4 the test regarding less favourable treatment that it had developed under TBT Article 2.1Footnote 107 (under which a detrimental impact on imports does not breach Article 2.1 if it ‘stems exclusively from a legitimate regulatory distinction’).Footnote 108 Future disputes, such as the ongoing compliance proceedings in US–COOL and the disputes against Australia's plain tobacco packaging measure, may provide another opportunity for the Appellate Body to reflect on the relationship between the TBT Agreement and the general exceptions. In particular, the parallels between TBT Article 2.2 and GATT Article XX in relation to trade-restrictiveness and necessity may be further refined and explained.
