RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPDR/W/9
28 September 2000
(00-3932)
Working Party on Domestic Regulation Original:  English
COMMUNICATION FROM THE REPUBLIC OF KOREA
The Necessity Test
The following communication has been received from the delegation of Korea with the
request that it be circulated to the Members of the Working Party on Domestic Regulation.
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I. INTRODUCTION
1. There have been many constructive discussions on how to define the “necessity test” in the
context of domestic regulation for trade in services.  The proposals made by Canada, Australia, and
EC have each contributed to stimulating and advancing the discussions in this area.  However, as each
proposal and relevant agreement uses different wording for outlining and defining the necessity test,there has been some confusion as to the exact meaning and implications of its use.
2. Korea is of the view that the different wording – such as “trade-restrictive” or “burdensome,”
– despite some variance in nuance and focus, does not differ in their implications.  This paper thus
aims to clarify any differences that exist, elaborate on the possible alternatives that can be used, and
suggest a draft provision for the necessity test that could be used in establishing multilateral rules for
domestic regulation.
3. In the meantime, there still remain unresolved issues like what should be considered a
“legitimate policy objective,” or what factors should be considered to determine the feasibility of an
alternative measure.  For an effective and strict application of the necessity test, these two issues need
to be resolved. However, they will have to be discussed at another time.
II. MAIN ARGUMENT
1. The use of different wording in different contexts
4. The Secretariat’s informal note (Job No. 5929) elaborates in detail the different wording used
for the necessity test in provisions of the WTO Agreements.  The wording reflects the objectives of
the Agreement and is the result of in-depth review and discussions.
5. The Agreement on Technical Barriers to Trade (TBT) and the Agreement on the Application
of Sanitary and Phytosanitary Measures (SPS), for example, use the phrase, “not (be) more trade-restrictive than necessary/required,” in order to prevent any non-tariff barriers on the trade of goods.
6. In comparison, in the case of the Agreemen t on Import Licensing Procedures (“Licensing
Agreement”) and the Disciplines on Domestic Regulation in the Accountancy Sector (“Disciplines”),
different phrases are used in different contexts.  In the general provisions, for example, WTOS/WPDR/W/9
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Members are obliged to prevent “trade distortion” (Licensing Agreement) or ensure that measures are
“not more trade-restrictive than necessary” (Disciplines). However in both cases, when specifically
referring to the “licensing procedure,” the word, “burdensome,” is used.  Article 3.2 of the Licensing
Agreement reads, “non-automatic licensing procedures…shall be no more administratively
burdensome than absolutely necessary to administer the measure.”  Paragraph 15 of the Disciplinesprovides that the “application procedures and the related documentation shall be not more
burdensome than necessary.”
7. A similar provision is also found in Article VI:4 of GATS, which states that the “measures
relating to qualification requirements and procedures, technical standards and licensing requirements”
should be developed to “ensure that such requirements are not more burdensome than necessary to
ensure the quality of the services.”
8. Despite such differences in the wording, however, they all focus on preventing any
unreasonable “burden” or “restriction” from being imposed on the import of foreign goods or the
supply of services. And regardless of the wording that is being used, both phrases—“not more
burdensome than necessary” and “not more trade-restrictive than necessary”—appear to imply a need
to determine whether there are less burdensome or less restrictive alternatives available.
2. Comparison of the Different Proposals of the Members
9. Australia, Canada, and the EC have circulated their proposals and suggestions regarding the
necessity test.  Australia and Canada propose using the term, “trade-restrictive,” while the EC favours
using the term, “proportionality,” which seems to carry a different connotation from the others.
10. Australia proposed a draft provision that is similar to Article 5 of the SPS Agreement: “a
measure is not more trade-restrictive than required unless there is another measure, reasonablyavailable taking into account technical and economic feasibility, that achieves a legitimate policy
objective and is significantly less restrictive to trade.”
11. Canada also elaborated on the elements that should be included in the “necessity test,” which
are very similar to those suggested by Australia:
− As a general requirement, the regulations shall not be more trade-restrictive than
necessary.
− An individual measure shall be actually necessary to achieve a specified legitimate
objective, and each Member may reasonably be expected to employ a least trade-
restrictive measure to achieve the same policy objective.
− To assess the availability of alternative least trade-restrictive measures, factors such
as technical and economic feasibility should be considered.
12. The two proposals therefore have a common view on what the necessity test should contain.
They also agree on the need for a “third aspect,” the idea that “a measure that has the effect of
restricting trade can be considered ‘necessary’ only if there is no alternative measure less disruptive of
trade which a Member may reasonably be expected to employ to achieve the same policy objective.”
13. On the other hand, the EC proposal refers to a “proportionality principle,” a concept and
phrase not often used in the WTO. Generally speaking, the ordinary meaning of the phrase wouldperhaps suggest a type of “means-end” test, that is, there should be proportionality between the object
or purpose of a measure and the means adopted to achieve or procure it.  Whereas the Canadian and
Australian proposals focus on whether there is a “less trade-restrictive” alternative available, theS/WPDR/W/9
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concept of “proportionality” does not necessarily focus on whether alternatives exist.  Instead, it
would subject a given measure to a “balancing” test, which weighs the measure’s objective against its
deleterious effects.  The proportionality test would require a country to select a means of achieving its
regulatory objectives without disproportionately interfering with the free movement of goods or
services.
3. Past panel cases
14. Panel cases on the necessity test are all related to the general exception provisions of
GATT XX.  There are certain differences between the necessity test of the exception provisions and
the necessity test in the TBT Agreement and GATS Agreement, as explained in the Secretariat Note
(S/C/W/96).   However, the panel cases provide in sight on the elements that should be considered in
the necessity test.  Although Article XX does contain only the term “necessary,” it has been
repeatedly confirmed through past dispute settlement cases that “necessary” should take intoconsideration whether a “least trade-restrictive measure” is available —that is, “a measure for which
there are no alternative measures which the member could be reasonably expected to employ and
which is not inconsistent with other GATT provisions.”  In this regard, an assessment of the
alternative measures available to the Member is a central part of determining whether a given measure
is the “least trade-restrictive measure available.”
III. KOREA’S PROPOSAL
1. Korea’s proposed wording
15. The debate on whether to use the term “not more trade-restrictive” or “not more burdensome”
does not change the basic principle of the necessity test.  The terms differ only in that they focus on
different aspects of trade: one focuses on trade in goods and the other on the licensing procedure.
16. As explained above, the phrase “not more trade-restrictive than necessary” is most commonly
used, as it appears in the SPS and TBT Agreements, GATT XX cases, and also in the proposals of
both Canada and Australia.  Having evolved under the GATT regime, the term mainly focuses on
trade, in particular, trade in goods.
17. The phrase, “not more burdensome than necessary,” is used specifically in Article VI:4 of
GATS and the sections related to the licensing procedure in the Licensing Agreement and Disciplines
on the Accountancy Sector.  Also in Article VI:4 (c), another phrase was used such as "not a
restriction on the supply of the service".  All these phrases have the advantage that they implicitly
recognize four different modes of supply in the services trade instead of cross-border trade.
18. Since the issue here is on how to establish a mechanism for regulating domestic measures
regarding “qualification requirements and procedures, technical standards and licensing requirements”
in trade in services in all four modes of supply, the wording used to define the “necessity test” should
also clearly convey this goal.  In this sense, Korea proposes that a rather neutral wording such as "not
more trade restrictive to trade in services than necessary", instead of using the wording "not more
trade restrictive than necessary", "least trade restrictive than necessary" as in goods trade; or “not
more burdensome than necessary”, or "not a restriction on the supply of the service" as in Article VI:4
(b) and (c) and the Disciplines on the Accountancy Sector, be used.  The choice between “not morerestrictive than necessary” and "least trade restrictive" seems to be a matter of preference, not of
substance.S/WPDR/W/9
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2. Elements to be included
19. Korea supports the views of both Canada and Australia in regards to the elements that should
be considered in defining the necessity test, that is, a measure is necessary if the following are
satisfied:
(i) The regulatory measure must qualify for a legitimate policy objective.
− This criteria is also related to the EC’s “proportionality principle” which
focuses on the balance between the means (regulatory measure) and end(policy objective).
(ii) The measure shall not be more restrictive to trade in services than necessary:
that is, it should be the least restrictive measure available.
(iii) Relevant factors, such as economic and technological feasibility, shall be
considered.
− Whether “social factors” as mentioned by some Members should be included
needs further discussion. But, at a minimum, the economic and technologicalfeasibility element should be included in order to objectively reflect the
capacity [e.g. administrative cost] of individual Member and also to provide a
degree of some flexibility for future cases and changing circumstances.
20. Thus, accommodating these elements,  Korea proposes that the following draft provision be
included in the multilateral disciplines for domestic regulation:
"Members shall ensure that such measures are not more restrictive to trade in services than
necessary to achieve a legitimate policy objective [as specified herein]. [For this purpose,] a
measure is deemed not more restrictive to trade in services than necessary, unless there isanother less restrictive measure reasonably available taking into account technical and
economic feasibility.”
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