RESTRICTEDWORLD TRADE
ORGANIZATIONWT/GC/W/123
16 December 1998
(98-5073)
General Council Original:  English
UNILATERAL TRADE MEASURES BY STATES
Communication from India
The following communication, dated 15 December 1998, has been received from the
Permanent Mission of India.
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I. BACKGROUND
Unilateral Trade Measures are normally measures taken by stronger trading nations against
weaker ones with a view to influencing the latter. Though it is usually couched in language
such as “fair trade” or “level-playing field”, the real reasons usually have to do with either
protection of the domestic industry of the st ronger nation or gaining market access through
pressure on the weaker trading nation. Unilateral trade measures do not make economic sensebecause they go fundamentally against the theory of free trade and comparative advantage. As
will be shown in this paper, unilateral trade measure do not find any sanction or justification
either in international law or indeed in GATT/WTO law.
II. INTERNATIONAL LAW
1. The regulation of unilateral measures in international relations is one of the important areas of
international law. Most obligations created through such unilateral measures are formulated
not in terms of a definite result, but seeking only compliance with a certain pattern of
conduct. The issues arising out of unilateral measures need to be addressed within the
framework of existing international legal principles. In general, a unilateral measure or athreat thereof could take either of the following forms : a) threat to withhold some benefit or
b) to withdraw a benefit previously given in the general framework of international law. It is
argued that any threat and/or initiation of a unilateral measure could be violative of Article 2
paragraph 4 of the United Nations Charter, which prohibits use of force or the threat thereof
against the political independence or territorial integrity of any state or in any other wayinconsistent with the purposes of United Nati ons. Current practice of international relations
outlaws any form of threat or coercion that seriously threatens fundamental national interests
and also allows states to defend those interests.
2. The issues relating to the unilateral measures  are also addressed in the context of legal
regimes governing so-called “self-contained regimes”. As noted by the International Law
Commission, the self-contained regimes are characterized by the fact that the substantive
obligations they set forth are accompanied by a prescribed legal response for alleged
violations of these obligations. It is further argued that the Members of such “regimes” areWT/GC/W/123
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obliged to invoke those legal measures as are prescribed within the regime itself and are not
entitled to initiate broad counter measures which are the subject of general international law.
3. Any unilateral measure based on national law brings into sharp focus the issues concerning
the extra-territorial effects of such acts. The basic principle in international law is that allnational legislations are prima facie, territorial in character. State practice and doctrinal
evolution in international law reflect an almost unanimous rejection of the extra territorial
application of internal legislation for the purpose of creating obligations for third States. For
instance, the Heads of State belonging to countries of the Permanent Mechanism for
Consultations and concerted Political Action met in Asunicion in August 1997 and adopted a
declaration on unilateral measures, in which they clearly consider the unilateral and
extraterritorial application of national laws as actions violating the legal equality of States andthe principles of respect for and dignity of national sovereignty and non-intervention in the
internal affairs of other States.
III. GATT 1947
The General Agreement on Tariffs and Trade, 1947 was , as is well known, a contract
between States. As the name indicated in regulated trade in goods and created a set of
obligations based on commitments undertaken by countries in the area of tariffs. GATT 1947
did not sanction unilateral trade measures, it allowed for General Exceptions (Article XX).Security Exceptions (XXI) and Non-applica tion (XXXV) for political reasons. But these
exceptions had to be taken under carefully defined parameters and were subject to scrutiny in
the GATT. GATT being a self-contained regime, its contracting parties are obliged to invoke
only prescribed measures and to refrain from initiating broad counter measures, which may be
the subject of general international law. The commitments undertaken under GATT are in theform of Schedules of Concessions (Article II) a nd their security and predictability is assured
through Articles I (MFM) and III (National Tr eatment). Unilateral trade measures would
seriously erode the security and predictability of the commitments undertaken by countries
with each other. Clearly, this was not the intention of the drafters of GATT, nor does it meet
the chief objectives of GATT as it evolved till the conclusion of the Uruguay Round.
IV. WTO
1. The Uruguay Round was launched with the explicit objective of strengthening an open,
equitable and non-discriminatory multilateral trading system. Besides, the dispute settlement
mechanism was to be strengthened and made automatically binding on Parties. Both thesefeatures were specifically aimed at reducing, if not eliminating altogether, the threat of
unilateral trade measures. After all, for the weaker countries there would be the multilateral
trading system which would offer them security and assurance: for the stronger countries, a
strengthened dispute settlement mechanism would guarantee that rulings and findings by
Panels/Appellate Body would be implemented, hence obviating the need for unilateral trade
measures.WT/GC/W/123
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2. Thus, in the preamble to the WTO Agreement the last para stipulates-“Determined to preserve
the basic principles and to further the objectives underlying this multilateral trading system”.
More significantly, in Article XVI para 4 it is enjoined on each Member to ensure the
conformity of its laws, regulations and administrative procedures with its obligations as
provided in the annexed Agreements. While negotiating this Article in the Legal DraftingGroup, it was the clear understanding of the negotiators that laws, which authorize unilateral
trade measures with extra-territorial jurisdiction, are clearly inconsistent with the provisions
of the WTO Agreement. So, those countries, which maintain national laws authorising
unilateral trade measures, are in clear violation of their obligations under the WTO
Agreement. In fact, when the strengthened dispute settlement mechanism was sought to be
“sold” to developing countries, the argument was used that this was a quid pro quo so that
their stronger trading partners would henceforth deal with all their legal claims within theWTO and not resort to unilateral trade measures. Indeed, para 1 of Article 23 clearly provides
that when Members seek the redress of a violation of obligations or other nullification or
impairment of benefits under the covered agreements or an impediment to the attainment of
any objective of the covered agreement, they shall have recourse to, and abide by, the rules
and procedures of this Understanding.
V. ILLEGALITY OF UNILATERAL TRADE MEASURES
1. Unilateral trade measures, clearly, are legally indefensible. In the case of unilateral measures
authorised through domestic laws, negotiation is set entirely by the party taking measures,
based on which foreign practices it considers to be “unfair”. An what is an “unfair” practice is
essentially a subjective and an arbitrary judgement. Furthermore, negotiations are designed to
unilaterally force changes in the respondent nations’ policies. Finally, negotiations proceed
under the threat of denial of otherwise available trade benefits and restrictions of marketaccess for products or services of the foreign nation should the desired changes not be
accepted.
2. The above is in clear violation of the Dispute Settlement Mechanism which first asks
Members to try a mutually agreed solution be fore resorting to the Panel/Appellate Body.
3. The entry into force of the WTO and the operation of the strengthened dispute settlement
mechanism does not seem to have ended the era of resort to unilateral trade measures. The
multilateral trading system, therefore, appears to be under permanent threat from the actions
of some Members who resort to unilateral trade measures. Very recently, the United States
instituted measures prohibiting imports of shrimps from some countries if they were not
caught in vessels using Turtle Excluder Devices. The Panel and the Appellate Body ruled thatthe measure was illegal under WTO law and recommended that the US bring the measure into
conformity with its obligations under the WTO Agreement. The Panel Report also said that if
GATT were interpreted to permit countries to de viate from their obligations by taking trade
measures to implement policies, including conservation policies, within their own
jurisdiction, the basic objectives of the General Agreement would be maintained. If, however,GATT were interpreted to permit countries to take trade measures so as to force other
countries to change their policies within their jurisdiction, the balance of rights and
obligations among member countries, in particular the right of access to markets would be
seriously impaired. If this were carried forward to its logical conclusion, the GATT/WTO
could no longer serve as a multilateral framework for trade among contracting parties. Thatwould then be the end of the multilateral trading system, as we know it.  It is obvious that the
viability of the multilateral trading system depends on parties to it avoiding recourse to
unilateral action damaging to the WTO dispute settlement system which is at the heart of this
trading system.WT/GC/W/123
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VI. FUTURE
1. The above case referred to the controversial relationship between trade and environment. But
attempts are also on to base unilateral trade measures on other issues. Whatever the subject
matter, the essential objective is the same; use trading advantage and market power to
unjustly change an other country’s policies/behaviour. For example, there is an attempt to
give concessions under their GSP scheme subject to recipient governments committing to
comply with certain environmental/labour stan dard norms. This is in violation of the
“enabling clause” of GATT relating to GSP whic h clearly sets out that GSP must be non-
discriminatory,  non-reciprocal and generalised. But, by making the GSP selective in itsapplication as mentioned above, it will be rendered both discriminatory and reciprocal. This
falls foul of GATT.
2. Despite the establishment of the WTO and the operation of the strengthened dispute
settlement mechanism under it, the chances of strong trade powers resorting to unilateral
measures cannot be ruled out. Indeed, recent examples indicate that these may increase in the
future so as to put enormous strain on the multilateral trading system. The lack of a strong and
unambiguous rejection of unilateral trade measures is also leaving scope for injudicious and
‘activist’ interpretation of rules. Already, reservations of some members have been placed on
record in the Dispute Settlement Body regard ing the Panel/Appellate Body process usurping
the rights of Members by the so-called ‘evoluti onary interpretation’ of rules. This trend may
undo the delicate balance between rights and obligations being constantly negotiated in the
WTO. Hence, the WTO community needs to treat the issue of unilateral measures with the
sense of urgency it deserves.
3. Unilateral trade measures, as has been shown by this paper, make little economic sense since
they go against the fundamental tenet of any multilateral trading system – i.e. theory of
comparative advantage and of trade liberalization.  More significantly, they are fundamentally
illegal under the WTO Agreement and the Dispute Settlement Understanding, which entered
into force on 1
st January 1995.  The question therefore is, if unilateral trade measures are both
violative of international law and of WTO law, then should they not be banned forthwith.  If
so, there would also be no justification for national laws authorizing such action in the firstplace.  Full and faithful implementation of WTO Agreement would require that, not only
must WTO Members undertake never to resort to unilateral trade measures, but also they
must take immediate steps to modify national legislation that implicitly or explicitly
authorizes such action.
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