1. WTO Objectives

The WTO seeks to achieve objectives such as ‘raising standards of living’ and ‘ensuring full employment’ 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 trade relations’.Footnote ¹⁰ Subject to compliance with stringent conditions, WTO rules permit both RTAs and trade remedies, even though they would otherwise violate core obligations or ‘disciplines’ imposed on WTO Members in order to liberalize trade and thereby improve national and global welfare. Thus, trade remedies are ‘trade protection that you can get away with under the anti-dumping agreement’,Footnote ¹¹ the SCM Agreement, and the Safeguards Agreement, and RTAs reflect ‘discriminatory trade policy that you can get away with under article XXIV’Footnote ¹² of the GATT 1994.

2. RTAs as an Exception to MFN Treatment

RTAs represent a major exception to the key pillar of non-discrimination in the WTO: the obligation to provide most-favoured nation (‘MFN’) treatment to each WTO Member. The MFN rule in the context of trade in goods means that a Member must provide any benefit it accords to the products of one country (whether or not that country is a WTO Member) to the products of all WTO Members (GATT article I:1). Members' overzealous entry into multiple RTAs in recent years has seriously damaged the MFN rule and the principle of non-discrimination.Footnote ¹³ One factor that has allowed this explosion of RTAs has been uncertainty surrounding the WTO exception for RTAs,Footnote ¹⁴ which arises from ambiguous draftingFootnote ¹⁵ and a dearth of relevant and helpful WTO jurisprudence and scholarly investigation. MFN treatment has become the exception rather than the rule, with almost all Members providing preferential treatment to specific Members pursuant to a range of RTAs. This distorts international trade, prevents producers from competing on a level playing field, and negates the benefits of the MFN rule (particularly for smaller and weaker Members). However, RTAs may have some trade-liberalizing effects and thus provide building blocks on the path to multilateral trade liberalization.Footnote ¹⁶ For this reason, article XXIV:5 provides an exception for RTAs, as discussed further below.Footnote ¹⁷

This article seeks to elucidate WTO law on RTAs and to harness the prevalence of RTAs to turn them from a negative to a positive force with respect to trade remedies. In particular, the existence of RTA partners trading amongst themselves without resorting to trade remedies may provide a valuable basis for learning how to reduce trade remedies in the WTO.

3. Trade Remedies as Established Exceptions to Various WTO Rules

Trade remedies represent a significant incursion into core WTO disciplines created to liberalize trade. These measures are permitted (but not required) by WTO rules. However, in the absence of the existing exceptions in GATT 1994Footnote ¹⁸ (as agreed by the WTO Members):

• • anti-dumping and countervailing measures (which generally take the form of higher tariffs/customs duties on imports of specific products from particular countries) would violate the MFN rule,Footnote ¹⁹ because the imports on which they are imposed receive less favourable treatment than imports from other countries;

• • safeguards (which typically take the form of higher tariffs or quantitative restrictions such as import quotas on imports of given products) could violate the general WTO prohibition on quantitative restrictions;Footnote ²⁰ and

• • all three trade remedies could violate individual Members' schedules of tariff bindings (ceilings above which the relevant Member has agreed not to impose tariffs on specific products).

In concluding the GATT 1947, negotiators incorporated these exceptions for trade remedies in part because some countries (the United States (‘US’) in particular) would not otherwise have agreed to other aspects of liberalization mandated by that agreement.Footnote ²¹ The GATT contracting parties maintained and clarified these exceptions in the GATT 1994 and the related trade remedy agreements upon the creation of the WTO. In this sense, trade remedies are not ‘self-balancing’: ‘[t]rade-offs between remedies reform and concessions in other areas seem to be necessary’.Footnote ²² In examining trade remedies in the WTO and RTAs, one must therefore be aware of the significance of trade remedies in facilitating liberalization more generally.

1. Anti-Dumping and Countervailing Measures

Pursuant to GATT article VI and the Anti-Dumping Agreement, a WTO Member may impose anti-dumping measures on imports of a given product from another Member where its investigating authorities have found that the imported product is being ‘dumped’ and thereby causing injury to the domestic industry that produces the like product. Products are essentially dumped when they are sold at a lower price in the importing country than in the exporting country (after making adjustments for transport costs etc).Footnote ²⁶

From the perspective of the importing country at least, anti-dumping measures are economically irrational because they are usually passed on to the consumer by increasing the price of the good. The higher prices paid by the consumer (or industrial user) in the importing country outweigh the benefits gained by the protection afforded to the competing domestic industry. Moreover, several legitimate commercial reasons exist for dumping, so dumping is not necessarily an ‘unfair’ practice for which foreign producers or exporters should be penalized. Anti-dumping measures may therefore hinder legitimate foreign competition, to the detriment of the consumer and the development of the domestic industry, even if the importer or exporter absorbs them rather than adding them to the price of the product. Although anti-dumping measures may be an economically rational response to ‘predatory dumping’ (designed to wipe out the competition before raising the price above a competitive level), this kind of dumping is extremely unlikely to occur in practice. In any case, the Anti-Dumping Agreement does not target predatory dumping by requiring domestic investigating authorities to examine intent before imposing anti-dumping measures.Footnote ²⁷

In contrast, as discussed fully elsewhere,Footnote ²⁸ competition disciplines in place of anti-dumping measures could better focus the response to dumping on commercially illegitimate behaviour. However, the question of interaction between competition policy and international trade is currently outside the negotiating mandate of WTO Members, and harmonized competition laws across the WTO Membership are a long way off.Footnote ²⁹ Moreover, a wide range of developed and developing countries are now heavily reliant on anti-dumping measures: this group has expanded significantly beyond the traditional users. Accordingly, this model for reform does not provide a feasible solution for the medium to short term.

Pursuant to GATT article VI and the SCM Agreement, a WTO Member may impose countervailing measures on imports of a given product where its investigating authorities have determined that it is being subsidized by another Member and thereby causing injury to the domestic industry that produces the like product.Footnote ³⁰ Countervailing measures will only ever be useful where the imposing Member is concerned about the impact of subsidies in its own market (as opposed to the impact in the market of the subsidising Member or in a third country), since countervailing measures are typically imposed in the form of import tariffs in the domestic market.

Like anti-dumping measures, countervailing measures are almost always welfare-reducing in the importing country even though they may protect the competing domestic industry,Footnote ³¹ because they tend to be passed on so that the consumer pays a higher price for the import. Contrary to their supposed purpose, countervailing measures are also unlikely in practice to induce a State to change its practice or policy of subsidising a particular product.Footnote ³² Finally—again mirroring the Anti-Dumping Agreement—in allowing countervailing measures, Part V of the SCM Agreement does not target predatory conduct that might flow from subsidies.Footnote ³³ The agreement has in fact been described as ‘one of the least economics-informed agreements in the WTO’.Footnote ³⁴

One difference between countervailing and anti-dumping measures (or, indeed, safeguards) is that they represent only one of two means of responding to a subsidy, because they target the conduct of a WTO Member rather than commercial actors. Although the WTO Members ‘condem[n]’ dumping that causes or threatens material injury to the domestic industry,Footnote ³⁵ dumping itself is not illegal under WTO rules or challengeable in the WTO dispute settlement system, at least in part because this system is restricted to resolving disputes between WTO Members, and WTO Members themselves do not engage in dumping. In contrast, subsidies involve a ‘financial contribution by a government or any public body’.Footnote ³⁶ The WTO Members have agreed that certain subsidies are harmful and can therefore themselves constitute a violation of Part II (Prohibited Subsidies) or Part III (Actionable Subsidies) of the SCM Agreement. These violations can be challenged in the WTO dispute settlement system.Footnote ³⁷

Pursuing a subsidy through the multilateral route of WTO dispute settlement is generally preferable to imposing countervailing measures from an economic perspective.Footnote ³⁸ Although some (illegal) subsidiesFootnote ³⁹ could be countered with either a countervailing measure or a recommendation of the Dispute Settlement Body,Footnote ⁴⁰ the former is a unilateral remedy imposed following a domestic proceeding of a WTO Member. This domestic countervailing duty investigation must be conducted in accordance with multilateral rules in the WTO (as reflected in the relevant Member's own laws and regulations), but the domestic producers still get the benefit of the countervailing measures even if the investigation is not conducted in accordance with WTO rules, at least until another Member brings a successful WTO dispute challenging the conduct of the investigation. Accordingly, in the longer term, countervailing duties may be successfully eliminated in the WTO while retaining the possibility of challenging illegal subsidies in the WTO dispute settlement system (recognizing that that system itself is imperfect and that negotiations continue on its reform).

2. Safeguards

Pursuant to GATT article XIX and the Safeguards Agreement, a WTO Member may impose a safeguard where its competent authorities have found in an investigation increased imports of a given product that have arisen from unforeseen developments and are injuring domestic producers of like or directly competitive products.Footnote ⁴¹ Other forms of safeguards exist in the WTO but are not the subject of this article.Footnote ⁴² The so-called ‘global’ safeguards available under GATT article XIX should also be distinguished from the ‘bilateral’ safeguards provided for in many RTAs, as discussed below.Footnote ⁴³

Unlike anti-dumping and countervailing measures, global safeguards do not target allegedly unfair trading practices. Rather, they are intended to provide a ‘safety valve’ or ‘escape clause’Footnote ⁴⁴ for WTO Members whose domestic industries are facing a sudden flood of imports, and they provide a means for Members to deal with the ‘adjustment costs’ of trade liberalization in an orderly manner. In theory, they may therefore play a particularly significant role in enabling WTO Members to agree to open their markets.Footnote ⁴⁵ Also in contrast to anti-dumping and countervailing measures, safeguards are a temporary response to an emergency and they must generally be imposed on an MFN basis (ie on imports of the relevant product from all countries).Footnote ⁴⁶ The Member imposing them must also generally provide compensation to other affected Members who have engaged in consultations on the matter, in order to ensure that its overall level of WTO commitments is unchanged.Footnote ⁴⁷

These additional conditions on the use of safeguards typically make them preferable, from an economic perspective, to anti-dumping and countervailing measures.Footnote ⁴⁸ However, perhaps in part because of these additional conditions (and the strict way in which the WTO Appellate Body has interpreted the Safeguards Agreement), Members in fact use safeguards far less frequently than anti-dumping or countervailing measures.Footnote ⁴⁹ Safeguards also still raise economic concerns in that, for example, they may encourage lobbying of governments by domestic industries in the hope of long-term protection rather than the temporary protection intended,Footnote ⁵⁰ and they tend to ‘delay the contraction’ of declining or uncompetitive industries.Footnote ⁵¹ In addition, safeguards are central to the ambiguity surrounding the relationship between trade remedies and RTAs in the WTO. In particular, no authoritative decision or judgment exists as to whether WTO Members are allowed or required to exclude RTA partners from the application of safeguards, as discussed further below.Footnote ⁵²

Finally, safeguards suffer from a loophole in connection with the WTO dispute settlement system. A Member imposing a safeguard on the basis of an absolute increase in imports need not provide compensation to affected exporting Members for the first three years,Footnote ⁵³ and a safeguard found to be imposed contrary to WTO rules will not need to be remedied until the end of the reasonable period of time for compliance (which may be 15 months or more from the date of adoption of the relevant Panel and Appellate Body Reports),Footnote ⁵⁴ and then only on a prospective basis. Before that time, a violation may be maintained without being subject to retaliation in the form of suspension of concessions by the complaining Member. Although this feature is characteristic of WTO dispute settlement generally, it is of particular concern in the context of safeguards, because these are intended as emergency measures imposed only on a temporary basis anyway. By the time the dispute settlement process is complete, the safeguards may have already been in place for a significant portion of the usual four-year period,Footnote ⁵⁵ with the result that the domestic industry gets ‘free’ protection for that temporary period regardless of whether the safeguards comply with WTO rules.Footnote ⁵⁶

If anti-dumping and countervailing measures are to be ultimately eliminated in the WTO, itself a controversial position, then Members may need to retain the ability to impose safeguards in order to provide a safety net and so prevent a reversal of the liberalization gains that have been made over the last half century. However, the quirk of WTO dispute settlement should be remedied so that Members cannot maintain illegal safeguards for several years without consequence. These changes would likely render the use of safeguards even more unpopular, but it is crucial if trade remedies are to be restricted to legitimate purposes and no longer used as protectionist devices. Furthermore, it could be countered by other changes designed to make safeguards practically workable. As highlighted above, safeguards are intended as ‘adjustment policies in order to become competitive, avoid a social or political crisis, and provide political room for the acceptance by the people of the rest of the WTO rules’, but the Appellate Body's current jurisprudence makes it extremely difficult, if not impossible, for Members to impose safeguards consistently with WTO rules.Footnote ⁵⁷ Specifically, for reasons ably explained elsewhere, the Appellate Body's invented ‘parallelism’ requirementFootnote ⁵⁸ should be abolished,Footnote ⁵⁹ and its stringent conditions concerning matters such as ‘unforeseen developments’Footnote ⁶⁰ and ‘non-attribution’Footnote ⁶¹ revised. As detailed below,Footnote ⁶² Members should also be reassured that they are entitled to exclude RTA partners from global safeguards, subject to certain conditions.

3. Impact of the Global Financial Crisis

As foreshadowed in the introduction above,Footnote ⁶³ the problem of trade remedies is exacerbated whenever countries face difficult economic circumstances, because the pressure for protection of domestic industries intensifies.Footnote ⁶⁴ A challenging global financial climate may thus multiply the rates of applications for and imposition of anti-dumping, countervailing and safeguard measures. Indeed, although it may be too early to assess the full effects of the global financial crisis, it does appear to have had some impact on the imposition of trade remedies.

Based on Members' reports, the WTO Secretariat identified a 28 per cent increase in the number of new anti-dumping investigations in 2008 compared to 2007, and a 29 per cent increase in the number of new anti-dumping measures during the same period.Footnote ⁶⁵ Also based on Members' reports, the number of countervailing investigations exhibited a 27 per cent increase from 2007 and 2008, while the number of countervailing measures imposed shot from two in 2007 to 11 in 2008: an increase of 450 per cent, with the trend continuing in the first half of 2009.Footnote ⁶⁶ A joint report issued under the responsibility of Pascal Lamy (Director-General of the WTO), Angel Gurría (Secretary-General of the Organisation for Economic Co-operation and Development (‘OECD’)) and Supachai Panitchpakdi (Secretary-General of the United Nations Conference on Trade and Development (‘UNCTAD’) and former WTO Director-General) indicated that the number of new countervailing and safeguard investigations by G20 countries increased substantially from 2008 to 2009.Footnote ⁶⁷ Finally, Chad Bown's Global Antidumping Database revealed a 52.6 per cent increase in the initiation of anti-dumping, countervailing and safeguard investigations in the third quarter of 2009 compared to the third quarter of 2008, and a 35.7 per cent increase in the imposition of these trade remedy measures in the fourth quarter of 2009 compared to the fourth quarter of 2008.Footnote ⁶⁸ These increases may be one example of the ‘murky protectionism’ that some commentators feared was developing as a result of the crisis,Footnote ⁶⁹ rendering all the more important the quest to combat trade remedies.

1. Category 1: No Changes to WTO Rules

The 25 RTAs listed in Category 1 of Annex 1 make no mention of WTO anti-dumping, countervailing, or safeguard measures (thus leaving the WTO rules unmodified, and maintaining rights to impose trade remedies in accordance with those rules) or make no significant changes to the WTO trade remedy provisions under examination in this article. Category 1 therefore contains the most ‘WTO-equivalent’ of the RTAs reviewed. However, most of these agreements concern the 12 members of the Commonwealth of Independent States—Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russian Federation, Tajikistan, Turkmenistan, Ukraine, Uzbekistan—many of which are not yet WTO Members.Footnote ⁷¹ Some of the RTAs in Category 1 contain procedural modifications to the WTO rules. For example, the Euro-Mediterranean Association Agreement between the European Communities and EgyptFootnote ⁷² requires consultations before imposing safeguard measures under the WTO agreements,Footnote ⁷³ and the Melanesian Spearhead Group Trade AgreementFootnote ⁷⁴ requires consultations before imposing either anti-dumping or countervailing measures.Footnote ⁷⁵

2. Category 2: Introduction of Bilateral Safeguards

The 28 RTAs listed in Category 2 of Annex 1 either do not mention anti-dumping or countervailing measures at all or explicitly preserve the parties' existing rights to impose these measures under WTO rules or domestic legislation. For example, article 6.2.1 of the Trans-Pacific Strategic Economic Partnership Agreement (‘Trans-Pacific SEP’), between Brunei Darussalam, Chile, New Zealand (‘NZ’), and Singapore,Footnote ⁷⁶ states:

The Category 2 RTAs all provide additional rules on bilateral safeguards (that is, safeguards applied between RTA partners as opposed to global safeguards applied to all WTO Members in accordance with GATT article XIX and the Safeguards Agreement). These bilateral safeguards are sometimes described as ‘tariff snapbacks’, because they involve reversion to MFN tariff rates in particular circumstances. Sometimes bilateral safeguards are allowed for a transitional period only and sometimes only in relation to specific products or for specific purposes. For instance, article 6.1.1 of the Trans-Pacific SEP preserves the parties' WTO rights under GATT article XIX and the Safeguards Agreement, and a separate chapter allows Chile to apply a ‘special safeguard measure to a limited number of specified sensitive agricultural goods’ where the quantity of imports of the relevant good exceeds a particular ‘quantity trigger level’.Footnote ⁷⁷ These kinds of RTAs, in allowing the imposition of global as well as bilateral safeguards, have the potential to increase the use of ‘trade remedies’, broadly defined, among WTO Members. Although some of the agreements specify that global and bilateral safeguards cannot both be applied in the same instance,Footnote ⁷⁸ these kinds of RTAs do not provide much of a model in demonstrating how to reduce the use of trade remedies in the WTO.

3. Category 3: Procedural Modifications and Bilateral Safeguards

The 66 RTAs listed in Category 3 of Annex 1 make procedural changes to the application of WTO trade remedies and also provide additional rules regarding the application of bilateral safeguards. As with the procedural changes mentioned above in relation to Category 1, these RTAs generally provide for consultations before applying trade remedies. Other procedural changes in these RTAs include enhanced notification requirements before applying trade remedies.Footnote ⁷⁹ Lee explains how the Republic of Korea largely failed in its attempts to have similar procedural and more substantive requirements included in the United States—Korea Free Trade AgreementFootnote ⁸⁰ in respect of anti-dumping and countervailing measures.Footnote ⁸¹ Although these additional procedural hurdles may encourage RTA partners to reach a mutually agreed solution rather than imposing trade remedies, these are fairly soft obligations and do not assure that result.

1. Eliminating Anti-Dumping Measures

The first column of Annex 2 contains eight RTAs that abolish anti-dumping measures between RTA partners. One positive case study is the Australia New Zealand Closer Economic Relations Trade Agreement (‘ANZCER’),Footnote ⁸² which was signed in 1983 and amended in 1988 by the Protocol to the Australia New Zealand Closer Economic Relations—Trade Agreement on Acceleration of Free Trade in Goods (‘ANZ Protocol’),Footnote ⁸³ under which the parties agree to eliminate anti-dumping measures on goods originating in each other's territory.Footnote ⁸⁴ Interestingly, this agreement allows the parties to continue to impose countervailing measures on each other's imports, but only ‘when no mutually acceptable alternative course of action has been determined by the Member States’.Footnote ⁸⁵

In certain European and Chinese agreements,Footnote ⁸⁶ abolition of anti-dumping measures is similarly associated with deep integration (characterized by ‘harmonized or common behind-the-border measures’, ‘arrangements that allow for free or freer movement of capital and labour’, ‘monetary union or the adoption of a single currency’, or political integration).Footnote ⁸⁷ However, RTAs with a lower level of integration have also managed to abolish anti-dumping measures,Footnote ⁸⁸ often linking the abolition directly with the implementation or harmonization of effective competition rules. For example, under the Free Trade Agreement between the [European Free Trade Association (‘EFTA’)] States and the Republic of Chile:Footnote ⁸⁹

1. 1. A Party shall not apply anti-dumping measures as provided for under the WTO Agreement on Implementation of Article VI of the GATT 1994 in relation to goods of a Party'.

2. 2. The Parties recognise that the effective implementation of competition rules may address economic causes leading to dumping.Footnote ⁹⁰

De Araujo, Macario and Steinfatt conclude that the degree of integration is a more important factor in allowing for the abolition of anti-dumping measures in RTAs than is the creation of a common competition policy or competition rules to replace anti-dumping at the international level, noting that these different regulatory policies have different objectives. In contrast, they explain the RTA between Canada and ChileFootnote ⁹¹ as involving the replacement of anti-dumping with bilateral safeguard measures.Footnote ⁹² Hoekman and others reach a similar conclusion.Footnote ⁹³ If correct, this is a positive sign, since it means that agreement on competition rules at the multilateral level is not necessarily a precondition to the abolition of anti-dumping measures among WTO Members. Progress on the competition front would certainly not hinder the goal of abolishing anti-dumping, but, as already noted, neither of these issues is currently on the WTO agenda.Footnote ⁹⁴ Agreement on competition policy beyond national borders is difficult. In the context of the ANZCER, Taylor concludes that ‘[t]he success of replacing anti-dumping laws with competition law … appears to be linked with the high degree of similarity in business practices, legal systems and existing competition law, along with similar social, economic and cultural backgrounds’.Footnote ⁹⁵ Gradual liberalization within an RTA over an extended period of time may also allow the industries in the partners' markets to adjust and become more closely integrated, facilitating harmonization of competition law and policy.

One concern about restricting anti-dumping measures between RTA parties is that non-parties will suffer greater discrimination with respect to anti-dumping or be subject to more anti-dumping measures by those parties, distorting and restricting international trade.Footnote ⁹⁶ Teh, Prusa and Budetta express this concern, after determining that 56 in a survey of 74 RTAs either abolish anti-dumping measures or contain specific anti-dumping provisions.Footnote ⁹⁷ The assumption that WTO Members ‘need’ to engage in a certain degree of protectionism and that this will manifest in the form of anti-dumping measures against imports from one country or another could be valid. However, little empirical evidence exists to support the authors' hypothesis regarding the impact on non-RTA parties of restricting intra-RTA anti-dumping measures, and further economic and statistical analysis is required to assess this conclusion.

Moreover, Members do not impose anti-dumping duties on an MFN basis anyway; nor do the WTO rules require them to do so. Rather, a Member imposing these duties in respect of a given product following an anti-dumping investigation must simply do so ‘on a non-discriminatory basis on imports of such product from all sources found to be dumped and causing injury’,Footnote ⁹⁸ except for imports from sources that have provided undertakings to revise their prices in accordance with article 8 of the Anti-Dumping Agreement. An anti-dumping investigation is initiated upon an application by or on behalf of the domestic industry or (more rarely) by the investigating authorities themselves, in both cases subject to the existence of sufficient evidence of dumping, injury and causal link to justify the initiation of an investigation.Footnote ⁹⁹ The domestic industry may choose to target imports from particular countries and not others, in applying to the investigating authorities to commence an anti-dumping investigation. Similarly, Members with particular historical, political or economic ties may choose not to subject each other's imports to anti-dumping investigations, whether or not they have an RTA obligation to refrain from doing so (indeed, with the exception of the EU, the RTAs identified in column 1 of Annex 2 appeared to have little impact on the actual rate of anti-dumping investigations initiated or measures imposed with respect to RTA partners—that is, these partners were not frequent targets anyway). An RTA obligation would of course entrench this approach, removing the discretion of Members to decide from one case to the next whether to investigate imports from specific countries. Nevertheless, given the economic difficulties with anti-dumping measures highlighted earlier, without further investigation, this concern provides an insufficient basis on which to discourage RTAs that abolish anti-dumping measures or discount their potential value as a precedent in reducing anti-dumping measures on a broader scale.

2. Eliminating Countervailing Measures

The second column of Annex 2 contains the only four RTAsFootnote ¹⁰⁰ that abolish countervailing measures between RTA partners. This is somewhat surprising, given that, as noted above, WTO Members can challenge prohibited or actionable subsidies in the WTO dispute settlement system. It seems that this additional ‘multilateral’ avenue for obtaining a remedy is insufficient to encourage Members to forego the ‘unilateral’ avenue of countervailing measures, in the absence of a high degree of economic integration or a common approach to subsidies or ‘state aid’.Footnote ¹⁰¹ Teh, Prusa and Budetta speculate that Members may be reluctant to commit to reduce subsidies in RTAs because all WTO Members will reap benefit from this commitment, and so RTA partners are correspondingly reluctant to agree to eliminate countervailing measures.Footnote ¹⁰²

Any concerns about RTA abolition of countervailing duties leading to increased countervailing duties with respect to non-RTA WTO Members (that is, WTO Members not party to the relevant RTA) is subject to the considerations outlined above in relation to anti-dumping: in particular, countervailing duties are not imposed on an MFN basis against imports of the relevant product from all sources. Article 19.3 of the SCM Agreement merely requires that Members imposing countervailing duties in respect of any given product do so ‘on a non-discriminatory basis on imports of such product from all sources found to be subsidized and causing injury’,Footnote ¹⁰³ except for imports subject to undertakings in accordance with article 18 of the SCM Agreement. If a Member does not subject imports from a particular exporting country to a countervailing duty investigation, it need not (and cannot) impose countervailing duties on those imports. This means that, even in the absence of an RTA, Members are free to decide which Members to target in a countervailing duty investigation and which to exclude. Thus, an RTA obligation to shield RTA partners from countervailing duties will not necessarily increase the application of countervailing duties to imports of other countries.

3. Eliminating Safeguards

The third column of Annex 2 lists 30 RTAs that allow or require RTA partners to exclude the products of other RTA partners from the application of global safeguards pursuant to GATT article XIX and the Safeguards Agreement, on certain conditions. A number of these RTAs allow RTA partners to impose bilateral safeguards as between themselves, and/or modify the WTO rules regarding anti-dumping or countervailing measures, including by imposing the ‘lesser-duty rule’ in anti-dumping proceedings or raising the de minimis dumping margin from 2 per cent to 5 per cent.Footnote ¹⁰⁴ Some RTAs not included in the Annexes contain similar substantive modifications to WTO anti-dumping rules.Footnote ¹⁰⁵ Other RTAs that are being negotiated or have not yet entered into force contemplate restricting the application of global safeguards to RTA partners while allowing bilateral safeguards.Footnote ¹⁰⁶

As an example of how RTA partners restrict the availability of global safeguards as between themselves, the North American Free Trade Agreement (‘NAFTA’),Footnote ¹⁰⁷ between Canada, Mexico and the US, provides:

NAFTA also provides for bilateral safeguards for a transitional period,Footnote ¹⁰⁹ as well as independent bi-national panels to assess final determinations in anti-dumping and countervailing duty cases against domestic lawsFootnote ¹¹⁰ (a compromise flowing from Canada's unsuccessful attempt to have anti-dumping measures eliminated from the earlier Canada—United States Free Trade Agreement).Footnote ¹¹¹

The parties to the New Zealand—China Free Trade AgreementFootnote ¹¹² (the first developed country RTA with China) agree that, when imposing safeguard measures pursuant to GATT article XIX and the Safeguards Agreement, they ‘may exclude imports of an originating good from the other Party from the action if such imports are non-injurious’.Footnote ¹¹³ The parties to this RTA otherwise ‘maintain their rights and obligations’ under articles VI and XIX of GATT 1994 and the Anti-Dumping Agreement, SCM Agreement and Safeguards Agreement,Footnote ¹¹⁴ although they also agree not to take any anti-dumping action ‘in an arbitrary or protectionist manner’.Footnote ¹¹⁵

According to Baldwin, Evenett and Low, RTAs under which ‘parties have agreed to exempt other parties from any global safeguards that they impose under the respective WTO agreement’ provide ‘an example of exactly the opposite of multilateralizing regionalism, with RTAs undermining an established non-discriminatory multilateral norm’.Footnote ¹¹⁶ This conclusion assumes, of course, that the WTO rules allow Members to impose global safeguards only on a non-discriminatory basis, an issue discussed further below.Footnote ¹¹⁷ However, if RTAs can constitute an exception to the MFN rule in relation to safeguards under WTO law, then RTAs that allow the exclusion of RTA products from a global safeguard do not alter this position, and even RTAs that require such exclusion simply remove Members' discretion in imposing safeguards (but these RTAs will still need to comply with article XXIV:5 of the GATT 1994).Footnote ¹¹⁸

Nevertheless, regardless of the WTO requirements, the practical impact of allowing or requiring Members to exclude imports of RTA partners from the application of a global safeguard deserves further empirical and economic investigation. In one study, Bown and McCulloch concluded that ‘country exemptions for PTA members and small developing-country suppliers have a discriminatory impact of redistributing import market shares toward these suppliers, at least on average, at the expense of other exporting countries’.Footnote ¹¹⁹ However, the overall impact of excluding RTA partners from global safeguards is likely to differ depending on whether the relevant RTA provides for RTA partners to impose bilateral safeguards on each other's products. All other things being equal, an RTA that precludes a party from imposing bilateral or global safeguards on other RTA parties will be less restrictive of intra-RTA trade than an RTA that allows for bilateral but not global safeguards between RTA parties, even if neither RTA affects the parties' rights to impose global safeguards on other WTO Members. On the other hand, an RTA that prohibits bilateral and global safeguards may increase trade diversion away from non-RTA WTO Members, distorting international trade.

As indicated in Annex 2, only five of the RTAs surveyed exclude both bilateral and global safeguards as between the parties.Footnote ¹²⁰ This kind of arrangement is generally associated with deeper integration, as in the European Union (‘EU’),Footnote ¹²¹ MERCOSUR (the Mercado Común del Cono Sur between Argentina, Brazil, Paraguay, and Uruguay),Footnote ¹²² and ANZCER.Footnote ¹²³ However, Singapore's RTAs with both Australia and NZ demonstrate that this level of liberalization is possible even in the absence of full or deep economic integration,Footnote ¹²⁴ providing a useful bilateral lesson for the multilateral stage.

1. Applicability of Article 41(1) of the VCLT in the WTO

As a general matter, the question whether groups of WTO Members may make inter se modifications to the WTO agreements remains undetermined. Article 41(1) of the VCLT provides guidance on when inter se modifications are allowed. Article 41(1) provides:

Panels and the Appellate Body have long recognized the interpretative provisions of articles 31 to 33 of the VCLT as codifying or declaring customary international law. These provisions are therefore widely accepted as crucial in interpreting WTO agreementsFootnote ¹²⁸ in accordance with article 3.2 of the WTO's Understanding on Rules and Procedures Governing the Settlement of Disputes (the ‘Dispute Settlement Understanding’ or ‘DSU’),Footnote ¹²⁹ which indicates that one purpose of the WTO dispute settlement system is to ‘clarify the existing provisions of [the WTO] agreements in accordance with customary rules of interpretation of public international law’.

As article 41(1) is not concerned with interpretation, it falls outside the description in article 3.2 of the DSU, and the Appellate Body has not included article 41(1) in this characterization of the VCLT as customary law. Nevertheless, article 41(1) has been recognized outside the WTO as constituting customary international law,Footnote ¹³⁰ along with most if not all of the VCLT.Footnote ¹³¹ Accordingly, leading commentators such as Martti Koskenniemi and Joost Pauwelyn have concluded that article 41 applies to the WTO agreements,Footnote ¹³² and the Panel in Turkey–Textiles relied on article 41(1)(b)(i) in reaching a conclusion on a customs union.Footnote ¹³³

Moreover, a number of other WTO dispute settlement decisions have applied provisions of the VCLT apart from articles 31 to 33. For example, Arbitrators in proceedings under article 22.6 of the DSU have relied on articles 30, 60 and 70 of the VCLT.Footnote ¹³⁴ The Appellate Body in Brazil—Desiccated Coconut and Canada—Patent Term and the Panel in EC—Sardines referred to article 28 of the VCLT on ‘Non-retroactivity of treaties’ as a ‘general principle of international law’ and applied it on that basis.Footnote ¹³⁵ The Appellate Body has also recognized the ‘principle of good faith’ reflected in article 26 of the VCLT.Footnote ¹³⁶ Similarly, the Panel in Korea—Government Procurement described article 26 of the VCLT as expressing the ‘principle of pacta sunt servanda’, falling with the ‘general principles of customary international law’.Footnote ¹³⁷ The same Panel applied article 48 of the VCLT (on error in a treaty) on the basis that it represented customary international law.Footnote ¹³⁸

The language used by Panels and the Appellate Body regarding various VCLT provisions has not always been consistent, but whether these provisions reflect ‘general principles of law’ within the meaning of article 38(1)(c) of the Statute of the International Court of Justice, or rules or principles of ‘customary international law’ pursuant to article 38(1)(b) of that Statute, Panels and the Appellate Body have been ready to apply them. Although the Appellate Body in EC—Sardines relied on the ‘interpretation principle codified in article 28 of the VCLT’,Footnote ¹³⁹ it arguably applied article 28 rather than merely using it as an interpretative rule.

The Panel in Korea—Procurement went even further than other WTO dispute settlement reports, stating that the relationship between the WTO agreements and customary international law was broader than that expressed in article 3.2 of the DSU. Specifically, ‘[c]ustomary international law … applies to the extent that the WTO treaty agreements do not “contract out” from it’.Footnote ¹⁴⁰ This statement goes beyond what the Appellate Body has acknowledged with respect to the relationship between the WTO and public international law more generally.Footnote ¹⁴¹ However, based on the evidence provided above, it is much less controversial to suggest that the VCLT's role in the WTO is not limited to guiding interpretation pursuant to article 3.2 of the DSU. On this basis, I conclude that article 41 does apply to the WTO agreements, except to the extent that specific WTO provisions indicate otherwise.

2. Effect of Articles X and IX of the Marrakesh Agreement

Joel Trachtman maintains that the WTO provisions on amendment and waiver (articles X and IX of the Marrakesh Agreement Establishing the World Trade Organization (‘Marrakesh Agreement’)Footnote ¹⁴² respectively) ‘are best understood as contracting out of any possible permission for inter se modification’ pursuant to the VCLT and that, in any case, they amount to a prohibition on inter se modifications pursuant to article 41(1)(b).Footnote ¹⁴³

The WTO provisions on amendment and waiver do impose specific conditions on certain agreements that are essentially inter se modifications. For example, most amendments, if approved by consensus or the requisite majority of Members pursuant to article X of the Marrakesh Agreement, would take effect only for those Members that have accepted them.Footnote ¹⁴⁴ These amendments are therefore inter se modifications of WTO rules between those Members that have accepted them. The Protocol Amending the TRIPS Agreement, if accepted by two-thirds of the WTO membership, would be an example of such an amendment, in accordance with article X:3 of the Marrakesh Agreement.Footnote ¹⁴⁵ Similarly, the Ministerial Conference may decide by a three-fourths majority under article IX:3 of the Marrakesh Agreement to waive an obligation imposed on a Member, effectively allowing that Member to modify the WTO rules as between itself and the rest of the WTO, without modifying the rules as between all WTO Members. For instance, in 2006, the General Council extended until 2012 the waiver of MFN and other WTO obligations with respect to measures taken by certain Members to prohibit the import or export of rough diamonds to non-Participants in the Kimberley Process Certification Scheme.Footnote ¹⁴⁶

To the extent that articles X and IX of the Marrakesh Agreement allow for inter se modification, they may be seen as providing more detailed rules than article 41 of the VCLT and therefore prevailing over it. However, articles X and IX of the Marrakesh Agreement are not in fact specifically directed at inter se modifications, in the sense of groups of WTO Members seeking to modify the WTO agreements as between themselves. Rather, article X is directed at proposals to amend the WTO agreements as a whole (for all Members), even though in some cases an amendment would apply only to those Members who had accepted it. Similarly, article IX is directed at requests for waivers by individual Members, even though in some cases a number of Members may make a request at the same time and in relation to the same circumstances. These provisions do not clearly exclude the possibility of article 41 of the VCLT playing a role in relation to other kinds of inter se modifications, and so may be properly regarded as falling within the terms of article 41(a): they simply provide one means for WTO Members to achieve inter se modifications.

In determining the implications of article 41 of the VCLT for inter se modifications not governed by articles IX and X of the Marrakesh Agreement, the particular circumstances surrounding the modification in question must be examined. In the context of RTAs, inter se modifications are specifically contemplated in article XXIV of the GATT 1994, as discussed further below. This confirms the conclusion that articles IX and X of the Marrakesh Agreement do not ‘cover the field’ with respect to inter se modifications.

3. Implications of Article 41(1) of the VCLT for RTAs

Article XXIV of the GATT 1994 confirms that Members may enter RTAs modifying their WTO obligations, subject to the conditions laid out in that provision and the rest of the WTO agreements. Specifically, article XXIV:5 states that ‘the provisions of this Agreement shall not prevent, as between the territories of Members, the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of a customs union or of a free-trade area’,Footnote ¹⁴⁷ subject to certain conditions.Footnote ¹⁴⁸ A free-trade area or customs union will necessarily reduce the ‘duties and other restrictive regulations of commerce’ applicable between the parties,Footnote ¹⁴⁹ thereby prohibiting certain trade barriers that may be otherwise permitted under the WTO agreements, and so modifying the WTO agreements between RTA partners. Thus, article XXIV at once provides an exception to the MFN rule (as between RTA partners and other WTO Members) and implicitly authorises inter se modifications (as between RTA partners).

Modifications in RTAs pursuant to article XXIV may therefore fall within article 41(1)(a) of the VCLT. This is apparently the conclusion reached by Koskenniemi for the International Law Commission's Study Group on Fragmentation, as well as Thomas Cottier and Marina Foltea, and James Mathis,Footnote ¹⁵⁰ with the result that the WTO rules alone govern modifications in RTAs, leaving no scope for article 41(1)(b) of the VCLT with respect to RTAs. In contrast, Pauwelyn states that the WTO rules prohibit inter se agreements to liberalize trade among WTO Members unless they are extended on an MFN basis to all Members or they comply with the conditions in article XXIV of the GATT 1994 (or the corresponding article V of the General Agreement on Trade in Services (‘GATS’)). Pauwelyn's approach also appears to leave no room for article 41(1)(b)(i) and (ii) of the VCLT with respect to RTAs, because he regards RTAs that do not comply with article XXIV of the GATT 1994 as prohibited within the meaning of the ‘chapeau’ of article 41(1)(b).Footnote ¹⁵¹

However, RTAs are not necessarily entirely trade liberalizing or trade restrictive (to use Pauwelyn's distinction),Footnote ¹⁵² and many modifications to WTO rules that arise within RTAs are not expressly addressed in article XXIV of the GATT 1994, or in other WTO provisions. In these circumstances, it is simplistic to suggest that the RTA as a whole either falls within article 41(1)(a) or is prohibited under the chapeau of article 41(1)(b). If a particular modification in an RTA is neither ‘provided for’ nor ‘prohibited by’ a treaty, the remaining conditions in article 41(1)(b) become relevant. For instance, I have elsewhere argued that certain modifications in ‘TRIPS-Plus’ RTAs that limit flexibilities in relation to public health are contrary to article 41(1)(b)(i) and (ii).Footnote ¹⁵³ Article XXIV of the GATT 1994 and the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (‘TRIPS Agreement’)Footnote ¹⁵⁴ do not specify whether these kinds of modifications are allowed. Similarly, article XXIV of the GATT 1994 and the DSU do not indicate explicitly whether WTO Members are entitled to modify dispute settlement procedures in RTAs, for example by including a choice of forum clause preventing resort to the WTO dispute settlement system in certain circumstances. This issue is likely to arise in a recent complaint brought by Mexico against the United States regarding tuna products,Footnote ¹⁵⁵ and article 41(1)(b) of the VCLT may assist in resolving it.

In order, then, to determine whether an RTA that restricts the application of trade remedies among RTA partners violates WTO law or public international law more generally, we must examine article XXIV of the GATT 1994 in more detail. As we shall see, article XXIV neither clearly provides for nor clearly prohibits such a modification, suggesting that the modification must meet the conditions of article 41(1)(b)(i) of the VCLT (not affecting third party rights or obligations under the WTO agreements) and article 41(1)(b)(ii) of the VCLT (not relating to a provision from which derogation is incompatible with the effective execution of the object and purpose of the WTO agreements as a whole). These conditions lend weight to the purpose of RTAs under article XXIV, and to the importance of maximizing intra-trade liberalization while minimizing trade distortion and diversion with respect to WTO Members outside the RTA. Put differently, the VCLT article 41(1)(b) conditions are reflected in articles XXIV:4 and XXIV:8 of the GATT 1994, as discussed further below.

1. Article XXIV:8—Lowering Intra-RTA Barriers

Article XXIV:8 of the GATT 1994 defines a ‘free-trade area’ and a ‘customs union’, both of which fall within the scope of an ‘RTA’ for the purposes of this article.Footnote ¹⁵⁶ These definitions make clear that RTAs are allowed under WTO rules because of their potential to act as stepping stones towards greater multilateral trade liberalization. Accordingly, significant intra-RTA trade liberalization is required to qualify as an RTA, and derogation from this requirement could well be ‘incompatible with the effective execution of the object and purpose’ of the WTO agreements as a whole.Footnote ¹⁵⁷ This reading is consistent with the purpose of the RTA exception as expressed in article XXIV:4: ‘The Members recognize the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements …’.Footnote ¹⁵⁸

Article XXIV:8(b) defines a ‘free-trade area’ as:

Similarly, article XXIV:8(a) defines a ‘customs union’ as the:

In addition, under article XXIV:8(a)(ii), the members of a customs union must generally apply ‘substantially the same duties and other regulations of commerce … to the trade of territories not included in the union’. This second limb of the definition of a customs union may be relevant when members of a customs union apply trade remedies to non-union members but does not affect the central question of this article, which concerns application by RTA partners of trade remedies among themselves.

Article XXIV:8 of the GATT 1994 has to date been inadequately illuminated in WTO dispute settlement proceedings and academic commentary. Greater certainty about the definition of ‘free-trade areas’ and ‘customs unions’ under this provision, specifically as regards the interaction between RTAs and trade remedies, could assist in encouraging existing RTA partners to amend their agreements and future RTA partners to abolish trade remedies amongst themselves. Below, I examine article XXIV:8 in more detail in relation to the different forms of trade remedy that could be excluded in an RTA.

2. Article XXIV:5—Restricting Impact on Non-RTA Members

An RTA that meets the definition of a ‘free-trade area’ or ‘customs union in article XXIV:8 of the GATT 1994 must also fulfil certain other conditions in order to benefit from the exemption in article XXIV:5. These conditions demonstrate that RTAs must not on the whole lead to greater restrictions on external trade (that is, trade with non-RTA WTO Members); this would ‘affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations’.Footnote ¹⁵⁹ Again, this principle is reflected in article XXIV:4, under which the Members ‘recognize that the purpose of a customs union or of a free-trade area should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other Members with such territories’.Footnote ¹⁶⁰ The Appellate Body has recognized article XXIV:4 as setting forth ‘the overriding and pervasive purpose for article XXIV’.Footnote ¹⁶¹

The article XXIV:5 conditions include:

1. (a) with respect to a customs union, … the duties and other regulations of commerce imposed at the institution of any such union … in respect of trade with Members not parties to such union … shall not on the whole be higher or more restrictive than the general incidence of the duties and regulations of commerce applicable in the constituent territories prior to the formation of such union …;

2. (b) with respect to a free-trade area, … the duties and other regulations of commerce maintained in each of the constituent territories and applicable at the formation of such free-trade area … to the trade of Members not included in such area or not parties to such agreement shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area …

I have already discussed the implications of excluding RTA partners from anti-dumping and countervailing measures above, challenging assumptions that this will necessarily increase the application of these measures to WTO Members not party to the relevant RTA or otherwise increase trade distortion.Footnote ¹⁶² I further explore the meaning of article XXIV:5 in the context of specific trade remedies below.

3. Eliminating Safeguards

In assessing the WTO-consistency of RTAs that exclude the application of global safeguards among their members, we must bear in mind the underlying purposes and detailed conditions of article XXIV:8 and article XXIV:5 of the GATT 1994. In addition, as noted above, unlike in the context of anti-dumping and countervailing measures, article 2.2 of the Agreement on Safeguards stipulates that ‘Safeguard measures shall be applied to a product being imported irrespective of its source’. In other words, safeguard measures must prima facie be applied on an MFN basis.Footnote ¹⁶³

Views on the exclusion of RTA partners from global safeguards generally take three forms:Footnote ¹⁶⁴ (i) RTA partners must impose global safeguards on each other's imports;Footnote ¹⁶⁵ (ii) RTA partners must not impose global safeguards on each other's imports;Footnote ¹⁶⁶ and (iii) RTA partners may impose global safeguards on each other's imports.Footnote ¹⁶⁷ The text of the WTO agreements does not clearly correspond to any of these approaches, which is why this is such a difficult issue.Footnote ¹⁶⁸ The Appellate Body has to date avoided resolving it in the abstract,Footnote ¹⁶⁹ addressing the parallelism requirementFootnote ¹⁷⁰ rather than GATT article XXIV in disputes concerning the application of safeguards to RTA partners.

Beginning with the first approach, on its face, the language in parentheses in article XXIV:8 suggests an exhaustive list, meaning that any measure that constitutes a duty or other restrictive regulation of commerce (‘ORRC’) and that is not mentioned in parentheses is included in the requirement to eliminate duties and ORRC on substantially all trade.Footnote ¹⁷¹ As article XIX is not mentioned in the parentheses in article XXIV:8, and as safeguards under article XIX take the form of increased duties or quantitative restrictions that may be described as ORRC,Footnote ¹⁷² this means that RTA partners cannot be required to impose safeguards on each other's products. On the contrary, when taken as a whole together with all other duties and ORRC, safeguards should be eliminated on substantially all the relevant trade. Thus, the Panel in Argentina—Footwear (EC) stated: ‘There is also no doubt in our minds that the letter and spirit of article XXIV:8 of GATT permit member States of a customs union to agree on the elimination of the possibility to impose safeguard measures between the constituent territories’.Footnote ¹⁷³

How does this interpretation of article XXIV:8 of the GATT 1994 (and the allowance under article XXIV:5 for RTAs as defined in article XXIV:8) sit with article 2.2 of the Agreement on Safeguards? Any conflict between article XXIV:5 of the GATT 1994 and article 2.2 of the Agreement on Safeguards would ordinarily be resolved in favour of the latter,Footnote ¹⁷⁴ such that RTA partners would have to impose global safeguards on each other's imports. However, rather than viewing these provisions as conflicting, they should be interpreted harmoniously where possible, particularly given that these are both parts of the same treaty and that the Agreement on Safeguards constitutes an elaboration of GATT article XIX.Footnote ¹⁷⁵ This is consistent with Footnote 1 of the Agreement on Safeguards, which specifically states that ‘Nothing in this Agreement prejudges the interpretation of the relationship between Article XIX and paragraph 8 of article XXIV of GATT 1994’. It is also consistent with the general rule of interpretation set out in article 31(1) of the VCLT, which requires a treaty to be interpreted ‘in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose’.Footnote ¹⁷⁶ On this reading, article 2.2 need not override article XXIV:5 and article XXIV:8; read together, article XXIV:5 of the GATT 1994 provides an exception to the MFN rule in article 2.2 of the Agreement on Safeguards (with the words ‘this Agreement’ in article XXIV:5 referring to the WTO treaty as a whole, rather than just the GATT 1994).Footnote ¹⁷⁷

The drafting history of article XXIV may be referred to pursuant to article 32 of the VCLT to confirm the meaning resulting from the application of article 31. Article 32 does indeed confirm the inapplicability of the first approach, given that the debate about the relationship between articles XIX and XXIV centred on the second two approaches, and whether RTA partners either ‘need not’ or ‘should not’ apply safeguards to each other's imports.Footnote ¹⁷⁸ The drafting history also indicates that article XIX was deliberately omitted from the list of exceptions.Footnote ¹⁷⁹ Although article XXI (security exceptions) is similarly omitted from the list of exceptions in parentheses, this omission is also arguably explained by the drafting history.Footnote ¹⁸⁰

Turning then to the second approach, requiring RTA partners to exempt each other from global safeguards may be consistent with the MFN rule in article 2.2 of the Agreement on Safeguards. However, it is inconsistent with the language of article XXIV:8. Even assuming that safeguards constitute ORRC and that the exceptions listed in parentheses in article XXIV:8 comprise an exhaustive list (as suggested above), flexibility remains inherent in article XXIV:8 because the obligation on RTA partners is simply to eliminate duties and ORRC on substantially all the relevant trade rather than on all the trade. The Panel in Argentina—Footwear (EC) and a number of commentators have reached a similar conclusion.Footnote ¹⁸¹

The first two approaches also seem inconsistent with the purpose of RTAs as expressed in article XXIV:4. If RTA partners must impose global safeguards on each other's imports, this is consistent with article 2.2 and will reduce trade distortion and diversion in accordance with article XXIV:5, but it will restrict intra-RTA trade contrary to the principle behind article XXIV:8, defeating the purpose of allowing RTAs in the first place. At the same time, requiring RTA partners to impose global safeguards on each other may contravene article 41(1)(b)(ii) of the VCLT, since it derogates from the purpose of the WTO agreements of promoting trade liberalization as a means to improving global welfare. Conversely, if RTA partners must not impose global safeguards on each other's imports, this will have a positive impact on intra-RTA trade liberalization in accordance with article XXIV:8 of the GATT 1994, but it will necessarily create trade distortion and diversion of trade away from WTO Members not party to the relevant RTA, contrary to the principle behind article XXIV:5 of the GATT 1994, article 2.2 of the Agreement on Safeguards, and article 41(1)(b)(i) of the VCLT.

The third approach, in contrast, leaves flexibility to RTA partners and charges them with the responsibility of ensuring compliance with the letter and spirit of the WTO rules. In particular, in accordance with GATT article XXIV:5 and VCLT article 41(1)(b)(i), RTA partners need to minimize the impact on other WTO Members of excluding each other from global safeguards, should they choose to do so. At the same time, pursuant to GATT article XXIV:8 and VCLT article 41(1)(b)(ii), RTA partners need to ensure sufficient intra-RTA trade liberalization should they decide to impose global safeguards on each other.

This approach does not necessarily render the list of exceptions in article XXIV:8 redundant, as argued by Estrella and Horlick.Footnote ¹⁸² Rather, provisions falling within that list may be maintained as long as they are ‘necessary’ (as stated in article XXIV:8), whereas duties and other ORRC not falling within that list must be eliminated on substantially all the trade. It is true that this means that the WTO-consistency of the RTA could vary from time to time,Footnote ¹⁸³ but that is the case with respect to any RTA anyway. Assessing consistency with article XXIV:8 is a difficult task requiring substantial evidence and fact collection because ‘the entire gamut of duties and other regulations of commerce must be examined’,Footnote ¹⁸⁴ and ‘the examination of individual measures, regulations, products covered and trade flows affected may be required’.Footnote ¹⁸⁵ Under this third approach, safeguards are assessed along with all the other remaining restrictive trade measures, given that maintaining either will have similar trade effects.Footnote ¹⁸⁶ The Appellate Body's decision in Turkey—Textiles also does not preclude this third approach. As explained elsewhere, the Appellate Body's ‘timing’ and ‘necessity’ requirements should be read as applying (if at all)Footnote ¹⁸⁷ only to article XXIV:5 (external trade) and not to article XXIV:8 (internal trade).Footnote ¹⁸⁸

My assessment of the three approaches with respect to the purpose of RTAs is summarized in the table below.

4. Eliminating Anti-Dumping and Countervailing Measures

Like article XIX, article VI of the GATT 1994 is not included in the list of exceptions in article XXIV:8. However, as anti-dumping and countervailing measures are not imposed on an MFN basis,Footnote ¹⁸⁹ many of the difficulties associated with analysing safeguards in RTAs do not arise. In particular, the potential conflict between the MFN provision in article 2.2 of the Agreement on Safeguards and the exception in GATT article XXIV disappears in the context of anti-dumping and countervailing measures. Nevertheless, agreeing not to impose anti-dumping or countervailing measures on RTA partners would probably violate the general MFN rule in GATT article I:1, and so such an RTA would still need to rely on the exception in article XXIV.

In interpreting the meaning of article XXIV for such an RTA, the option of requiring RTA partners to actually impose anti-dumping and countervailing measures on each other makes little sense, since all WTO Members are free not to impose any such measures or not to impose them on imports from particular countries. This leaves the options of requiring RTA partners to eliminate anti-dumping and countervailing measures, or permitting RTA partners to apply these measures. In 1994, Gabrielle Marceau called for the elimination of anti-dumping duties within free-trade areas.Footnote ¹⁹⁰

The benefits of excluding RTA partners from anti-dumping and countervailing measures are clear, given their doubtful economic foundations.Footnote ¹⁹¹ However, keeping in mind the potential problem of such exclusion leading to greater imposition of anti-dumping and countervailing measures on other WTO Members,Footnote ¹⁹² and the flexibility inherent in article XXIV:8,Footnote ¹⁹³ I conclude that RTA partners have the same obligations with respect to anti-dumping and countervailing measures as they do with respect to safeguards: namely, they are entitled to impose them on each other provided that they ensure compliance with article XXIV:5 and XXIV:8 of the GATT 1994, and article 41(1)(b) of the VCLT.

One possible contrary argument is that anti-dumping and countervailing measures are not ORRCs at all, and therefore RTA partners have no obligation to reduce them pursuant to article XXIV:8. This argument is premised on the assumption that anti-dumping and countervailing measures are designed to offset unfair trading practices of other Members (in the form of dumping or subsidization) and thus do not represent restrictive measures of the imposing Member. However, even accepting this assumption, it does not explain why provisions such as GATT article XX (General Exceptions) are included in the article XXIV:8 list, when measures falling under article XX are also aimed at specific legitimate purposes and therefore justified derogations from other WTO provisions. If exceptions to WTO rules were not intended to fall within the description of ORRCs, the drafters need not have included GATT article XX in the list of provisions in article XXIV:8.