RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG/W/29
29 July 1998
(98-3013)
Committee on Regional Trade Agreements Original:  English
COMMUNICATION FROM JAPAN
Other Regulations of Commerce
1. The intention of this paper is to contribut e to the systemic debate in the Committee on
Regional Trade Agreements regarding "other regulations of commerce" in Article XXIV:5 of the
GATT and "other restrictive regulations of commerce" in Article XXIV:8 of the GATT.
I. INTRODUCTION
(a) Regional Trade Agreements and the Multilateral Trading System
2. The task of the WTO is to maintain and enhance the multilateral trading system, and one of
the basic principles of the WTO Agreements is to ensure the MFN principles and non-discriminatory
treatment.  The formation of customs unions and free-trade areas is permitted under Article XXIVbecause they could contribute to the expansion of world trade.
3. In the Singapore Ministerial Declaration, Ministers reaffirmed the primacy of the MTS and
renewed commitments to ensure that regional trad e agreements (RTAs) are complementary to the
multilateral trading system (MTS) and consistent with its rules.  RTAs derogate inherently from the
MFN principle of the GATT and can bring discriminatory treatment to third countries.  RTAs,therefore, may run the risk of weakening the open multilateral trading system.  In this context, in
accordance with Article XXIV of the GATT, it is necessary to avoid negative effects of RTAs upon
third countries.  This point was reaffirmed by the preamble of the Understanding on the Interpretation
of Article XXIV of the GATT 1994 (the Understanding) – i.e. "Reaffirming that the purpose of such
agreements should be to facilitate trade … and not to raise barriers … and that … the parties to them
should to the greatest possible extent avoid creating adverse effects on the trade of other Members").
(b) Article XXIV of the GATT and Other Provisions of WTO Agreements
4. RTAs are governed by Article XXIV of the GATT, but the parties to RTAs, as Members of
WTO, should also abide by the MFN principle and other provisions of WTO Agreements.
Article XXIV must be interpreted in a way consistent with other provisions, in the context of
WTO Agreements as a whole, and with due consideration given to their overall spirit and basic
principles.
II. "OTHER REGULATIONS OF COMMERCE" IN ARTICLE XXIV:5
5. According to Article XXIV:5 of the GATT, "o ther regulations of commerce" in a customs
union or in a free-trade area shall not be higher or more restrictive than the general incidence prior to
the formation of that RTA.  The Understanding provides that "for the purpose of the overall
assessment of the incidence of other regulations of commerce …, the examination of individualmeasures, regulations, products covered and trade flows affected may be required."
6. There are cases, however, where third countries might be adversely affected and face
disadvantages due to other regulations of commerce applied in regional arrangements in a mannerWT/REG/W/29
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which is not consistent with Article XXIV:5.  For example, there might be a case where an RTA sets
regional rules of origin that require higher standard s for local (regional) content than those effective
before its formation, thereby making them substantially more restrictive to third countries.  There
might also be RTA enlargement cases where safeguard measures and anti-dumping measures that
have already been taken by an RTA against imports to the existing RTA members from third partiesare automatically taken against imports to new members to the RTA as well.
7. Those measures would not be permissible under Article XXIV:5, which requires that
regulations of commerce in RTAs shall not be higher or more restrictive than those prior to the
agreements' formation.  Indeed they would raise trade barriers to third countries and would not have a
basis for justification in the Agreement on Rules of Origin, the Agreement on Safeguards, and the
Agreement on Implementation of Article VI of the GATT 1994.  In addition, we should be cautious
about the view that a customs union may be allowed to raise barriers to trade with third countries inspecific areas through regulations of commerce other than customs duties as long as they are "on the
whole" no more restrictive than the prior level.
III. ARTICLE XXIV:8(a)(i) AND (b):  INTERPRETATION OF THE EXCEPTIONS
8. There is a divergence of views on whether the Articles listed in the parentheses in
Article XXIV:8(a)(i) (Articles XI, XII, XIII, XIV, XV and XX of the GATT) are an exhaustive list ofexceptions to the requirement that restrictive regulations of commerce be eliminated.  It would be
difficult to interpret that the exceptions are limited only to those permitted under those Articles listed
in the parentheses.  Such interpretation would require members of RTAs to eliminate, for example,
regulations permitted under Article XXI of the GATT (the exception for national security) against
other Members of the RTA, even if the regulations were essential for the national security of thatMember.  This interpretation would be very unrealistic.  Therefore, we should examine whether there
are exceptions other than those listed in the parentheses of Article XXIV:8 in light of the intents of
other WTO provisions.  In so doing, it is necessary to keep in mind the guiding principle that adverse
effects on third countries must be avoided to the highest possible extent.
(a) Article XXIV:8:  Safeguards and Anti-dumping
9. Safeguard measures are considered to provide a safety valve for domestic industries against a
sudden increase in imports that cause serious injury and grave economic and social costs.  This
function of safeguard measures should not be changed even if the imports are from members of an
RTA.
10. As safeguards are urgent and temporary m easures, derogation from Article II and other
provisions is allowed on an exceptional and temporary basis.  If it is not necessary to apply safeguard
measures against imports from members of an RTA,  safeguard measures should not be applied against
third countries, either.  Otherwise it would create discrimination between RTA members (which do
not face safeguard measures) and third countries (which face safeguards).  Therefore, it should be
understood that safeguard measures should be a pplied on an MFN basis without discrimination
between RTA members and third countries, as provided for in Article 2:2 of the Agreement on
Safeguards.
11. This understanding would also apply to anti -dumping measures.  If anti-dumping measures
are applied discretionarily, free and non-discriminatory trade will be distorted.  It should be kept in
mind that the development in the harmonization of co mpetition policy in RTAs would not be uniform.
(b) Article XXIV:8(a)(ii):  Substantially the Same Regulations of Commerce
12. Article XXIV:8(a)(ii) stipulates that "substantially the same duties and other regulations of
commerce are applied" vis-à-vis  third parties.  In other words, exactly the "same" regulations ofWT/REG/W/29
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commerce, for instance anti-dumping measures, are not always required for a member of a customs
union in the trade with third countries.  If there are regulations of commerce that should not be applied
uniformly by the members of a customs union, we  should consider what those regulations are.
13. In considering this matter, we should again examine the viewpoint of avoiding adverse effects
on third countries, taking due consideration of the relevant WTO provisions and their intents.
14. Consideration of both Article XXIV:8 of the GATT, the Agreement on Safeguards and the
Agreement on Implementation of Article VI of the GATT 1994 would lead us to the conclusion that it
is not appropriate for new members of RTAs to automatically take safeguard or anti-dumping
measures at the enlargement of an RTA.  And, it would not be appropriate to understand that members
of an RTA are granted, just by joining the RTA, the "right" to apply new restrictive measures against
third countries (including quantitative import restrictions, licensing measures and restrictive rules of
origin) which they would have not been able to apply if they had not joined the RTA.
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