WORLD TRADE  
ORGANIZATION  WT/DS308/AB/R 
6 March 2006 
 (06-0914) 
 Original:   English 
  
 
     
 
    
 
     
MEXICO – TAX MEASURES ON SOFT DRINKS 
AND OTHER BEVERAGES 
 
 
 
AB-2005-10 
  
 
    
 
    
Report of the Appellate Body 
 WT/DS308/AB/R 
Page i 
 
 
 I.
 Introduction................................................................................................................... ..............1  
II. Arguments of the Participants and the Third Participants ..........................................................4  
A. Claims of Error by Mexico – Appellant .........................................................................4  
1. Exercise of Jurisdiction.....................................................................................4  
2. Article XX(d) of the GATT 1994 .....................................................................5  
B. Arguments of the United States – Appellee ....................................................................8  
1. Exercise of Jurisdiction.....................................................................................8  
2. Article XX(d) of the GATT 1994 .....................................................................9  
C. Arguments of the Third Participants ............................................................................12  
1. China...............................................................................................................12  
2. European Communities ...................................................................................13  
3. Japan ...............................................................................................................14  
III. Issues Raised in This Appeal ................................................................................................... .14 
IV. The Panel's Exercise of Jurisdiction .........................................................................................15  
A. Introduction .................................................................................................................15  
B. Analysis ........................................................................................................................17  
V. Article XX(d) of the GATT 1994 .............................................................................................24  
A. Introduction .................................................................................................................24  
B. Analysis ........................................................................................................................27  
1. Are Mexico's Measures Justified under Article XX(d)?.................................27  
2. Mexico's Request to Complete the Analysis...................................................34  
3. Mexico's Claim under Article 11 of the DSU ................................................34  
4. Conclusion ......................................................................................................35  
VI. Findings and Conclusions....................................................................................................... ..35 
 
Annex I  Notification of an Appeal by Mexico 
 WT/DS308/AB/R 
Page ii  
 
CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Argentina – Poultry Anti-
Dumping Duties Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from 
Brazil , WT/DS241/R, adopted 19 May 2003, DSR 2003:V, 1727 
Australia – Salmon  Appellate Body Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327 
Canada – Aircraft  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377 
Canada – Wheat Exports and 
Grain Imports Appellate Body Report, Canada – Measures Relating to Exports of Wheat and 
Treatment of Imported Grain , WT/DS276/AB/R, adopted 27 September 2004 
Dominican Republic – Import 
and Sale of Cigarettes Appellate Body Report, Dominican Republic – Measures Affecting the 
Importation and Internal Sale of Cigarettes , WT/DS302/AB/R, adopted  
19 May 2005 
EC – Bananas III  Appellate Body Report, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 1997, 
DSR 1997:II, 591 
EC – Export Subsidies on Sugar Appellate Body Report, European Communities – Export Subsidies on Sugar , 
WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005 
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998,  
DSR 1998:I, 135 
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical and 
Agricultural Chemical Products , WT/DS50/AB/R, adopted 16 January 1998, 
DSR 1998:I, 9 
Korea – Various Measures on 
Beef Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled 
and Frozen Beef , WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, 
DSR 2001:I, 5 
Mexico – Corn Syrup  
(Article 21.5 – US)  Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU  
by the United States , WT/DS132/AB/RW, adopted 21 November 2001, DSR 
2001:XIII, 6675 
Mexico – Taxes on Soft Drinks Panel Report, Mexico – Tax Measures on Soft Drinks and Other Beverages , 
WT/DS308/R, 7 October 2005  
US – 1916 Act  Appellate Body Report, United States – Anti-Dumping Act of 1916 , 
WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000,  
DSR 2000:X, 4793 
US – Corrosion-Resistant 
Steel Sunset Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping  
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/AB/R, adopted 9 January 2004  
US – FSC  
(Article 21.5 – EC)  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Articl e 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 55 
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border 
Supply of Gambling and Betting Services , WT/DS285/AB/R, adopted  
20 April 2005 
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 WT/DS308/AB/R 
Page iii 
 
 
Short Title Full Case Title and Citation 
US – Section 337  GATT Panel Report, United States Section 337 of the Tariff Act of 1930 , 
adopted 7 November 1989, BISD 36S/345 
US – Shrimp  Appellate Body Report, United States – Import Prohibition of Certain Shrimp  
and Shrimp Products , WT/DS58/AB/R, adopted 6 November 1998,  
DSR 1998:VII, 2755 
US – Shrimp  
(Article 21.5 – Malaysia)  Appellate Body Report, United States – Import Prohibition of Certain Shrimp  
and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia , 
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481 
US – Wool Shirts and Blouses  Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R and Corr.1, adopted  
23 May 1997, DSR 1997:I, 323 
 WT/DS308/AB/R 
Page iv  
 
ABBREVIATIONS USED IN THIS REPORT 
 
Abbreviation Description 
Division Appellate Body Division hearing this appeal 
DSB Dispute Settlement Body 
DSU Understanding on Rules and Procedures Governing the Settlement of 
Disputes  
GATT 1994 General Agreement on Tariffs and Trade 1994 
HFCS high-fructose corn syrup 
Inter-American Convention Inter-American C onvention for the Protection and Conservation of Sea 
Turtles 
ITO International Trade Organization 
NAFTA North American Free Trade Agreement 
Panel Panel in  Mexico – Taxes on Soft Drinks  
Panel Report Panel Report, Mexico – Taxes on Soft Drinks  
Working Procedures  Working Procedures for Appellate Review , WT/AB/WP/5,  
4 January 2005 
WTO World Trade Organization 
 
 
 
 WT/DS308/AB/R 
Page 1 
 
 
WORLD TRADE ORGANIZATION  
APPELLATE BODY 
 
 
Mexico – Tax Measures on Soft Drinks and 
Other Beverages 
 
Mexico, Appellant   
United States, Appellee   
 
Canada, Third Participant  
China, Third Participant   
European Communities, Third Participant   
Guatemala, Third Participant  
Japan, Third Participant    AB-2005-10 
  Present:  
 Taniguchi, Presiding Member 
 Janow, Member  Sacerdoti, Member  
   
I. Introduction 
1. Mexico appeals certain issues of law and legal interpretations develope d in the Panel Report, 
Mexico – Tax Measures on Sof t Drinks and Other Beverages (the "Panel Report").
1  The Panel was 
established to consider a complaint by the Un ited States concerning certain tax measures and 
bookkeeping requirements imposed by Mexico on soft drinks and other beverages that use sweeteners 
other than cane sugar. 
2. The measures challenged by the United States incl ude:  (i) a 20 per cent tax on the transfer or, 
as applicable, the importation of soft drinks and ot her beverages that use any sweetener other than 
cane sugar (the "soft drink tax");  (ii) a 20 per cent tax on specific services (commission, mediation, 
agency, representation, brokerage, consignment, and distribution), when such services are provided 
for the purpose of transferring products such as soft drinks and other beverages that use any sweetener 
other than cane sugar (the "distribution tax");  and (iii) a number of requirements imposed on 
taxpayers subject to the soft drink tax and to th e distribution tax (the "bookkeeping requirements").2  
Before the Panel, the United States claimed that these measures are inconsistent with paragraphs 2 
and 4 of Article III of the General Agreement on Tariffs and Trade 1994  (the "GATT 1994"). 
3. In its first written submission to the Panel, Mexico requested that the Panel decide, as a 
preliminary matter, to "decline to exercise its jurisdiction in this case"3 and that it "recommend to the 
                                                      
1WT/DS308/R, 7 October 2005. 
2These measures are described in more detail in paragraphs 2.2-2.5 of the Panel Report. 
3Panel Report, para. 4.2. WT/DS308/AB/R 
Page 2  
 
parties that they submit their respective grievances to  an Arbitral Panel, under Chapter Twenty of the 
NAFTA[
4], which can address both Mexico's concern with  respect to market access for Mexican cane 
sugar in the United States under the NAFTA and the United States' concern with  respect to Mexico's 
tax measures."5  Mexico also stated that, in the event the Panel decided to exercise jurisdiction, the 
Panel should find that the measures are justif ied pursuant to Article XX(d) of the GATT 1994.6 
4. On 18 January 2005, the Panel issued a prelim inary ruling in which it rejected Mexico's 
request.7  In doing so, the Panel concluded that, "under the DSU[8], it had no discretion to decide 
whether or not to exercise its jurisdiction in a case properly before it."9  The Panel added that, "even if 
it had such discretion, the Panel did not consider that  there were facts on record that would justify the 
Panel declining to exercise its jurisdiction in the present case."10 
5. In its Report, circulated to Members of the World Trade Organization (the "WTO") on 
7 October 2005, the Panel concluded that: 
(a) With respect to Mexico's soft drink tax and distribution tax : 
(i) As imposed on sweeteners, im ported beet sugar is subject 
to internal taxes in excess of those applied to like 
domestic sweeteners, in a manner inconsistent with 
Article III:2, first sentence, of the GATT 1994; 
(ii) As imposed on sweeteners, imported HFCS11 is being 
taxed dissimilarly compared with the directly competitive or substitutable products, so as to afford protection to the 
Mexican domestic production of cane sugar, in a manner 
inconsistent with Article III:2, second sentence, of the GATT 1994; 
(iii) As imposed on sweeteners, imported beet sugar and 
HFCS are accorded less favourable treatment than that accorded to like products of national origin, in a manner 
inconsistent with Article III:4 of the GATT 1994; 
(iv) As imposed on soft drinks and syrups, imported soft 
drinks and syrups sweetened with non-cane sugar sweeteners (including HFCS and beet sugar) are subject to internal taxes in excess of those applied to like 
domestic products, in a ma nner inconsistent with 
Article III:2, first sentence, of the GATT 1994. 
                                                     
 
4North American Free Trade Agreement (the "NAFTA"). 
5Panel Report, para. 3.2. 
6Ibid. 
7The Panel's preliminary ruling is repro duced as Annex B to the Panel Report. 
8Understanding on Rules and Procedures Governing the Settlement of Disputes  (the "DSU"). 
9Panel Report, para. 7.1. 
10Ibid.   
11High-fructose corn syrup  ("HFCS"). WT/DS308/AB/R 
Page 3 
 
 
(b) With respect to Mexico's bookkeeping requirements :  As imposed 
on sweeteners, imported beet sugar and HFCS are accorded less favourable treatment than that accorded to like products of national origin, in a manner inconsistent with Article III:4 of the GATT 1994.
12 
 
The Panel rejected Mexico's defence under Article  XX(d) of the GATT 1994, concluding that "the 
challenged tax measures are not justified as measures that are necessary to secure compliance by the 
United States with laws or regulations which ar e not inconsistent with the provisions of the 
GATT 1994."13  The Panel therefore recommended "that the Dispute Settlement Body request Mexico 
to bring the inconsistent measures … into conf ormity with its obligations under the GATT 1994."14 
6. On 6 December 2005, Mexico notified the Dis pute Settlement Body (the "DSB") of its 
intention to appeal certain issues of law covered in  the Panel Report and certain legal interpretations 
developed by the Panel, pursuant to Article 16.4 of the DSU, and filed a Notice of Appeal15 pursuant 
to Rule 20(1) of the Working Procedures for Appellate Review  (the " Working Procedures ").16  O n  
13 December 2005, Mexico file d an appellant's submission.17  In its appeal, Mexico challenges the 
Panel's preliminary ruling rejecting Mexico's request  that the Panel decline to  exercise jurisdiction in 
this case, as well as the Panel's findings concerning Article XX(d) of the GATT 1994.  Mexico did not 
appeal the Panel's findings under Article III of the GATT 1994.  On 6 January 2006, the United States 
filed an appellee's submission.18  On the same day, China, the Eu ropean Communities, and Japan each 
filed a third participant's submission.19  Also on the same day, Canada  and Guatemala each notified 
the Appellate Body Secretariat of its intention to appear at the oral hearing as a third participant.20 
7. By letter dated 5 January 2006, Mexico requested  authorization to corr ect certain clerical 
errors in its appellant's submissi on pursuant to Rule 18(5) of the Working Procedures .  On 
9 January 2006, the Appellate Body Division hearing the appeal ("the Division") invited all participants and third participants to comment on Mexico's request, in accordance with Rule 18(5).  
On 11 January 2006, the United States responded that, although some of the requested corrections are 
                                                     
 
12Panel Report, para. 9.2. (original underlining) 
13Ibid., para. 9.3. 
14Ibid., para. 9.5. 
15WT/DS308/10 (attached as Annex I to this Report). 
16WT/AB/WP/5, 4 January 2005. 
17Pursuant to Rule 21(1) of the Working Procedures .  A courtesy English translation of Mexico's 
appellant's submission, prepared by Mexico, was provid ed to the participants and third participants on 16 
December 2005. 
18Pursuant to Rule 22(1) of the Working Procedures . 
19Pursuant to Rule 24(1) of the Working Procedures . 
20Pursuant to Rule 24(2) of the Working Procedures . WT/DS308/AB/R 
Page 4  
 
not "clearly clerical", within the meaning of Rule 18(5), "[i]n the circumstances of this dispute", the 
United States did not object to Mexico's request.  No other comments were received.  By letter dated 
16 January 2006, the Division authorized Mexico to correct the clerical errors in its appellant's 
submission but emphasized, however, that it had not been requested, and did not make, a finding "as 
to whether all of the corrections requested by Mexico  are 'clerical' within the meaning of Rule 18(5) 
of the Working Procedures ." 
8. On 13 January 2006, the Appellate Body received an  amicus curiae   brief from Cámara 
Nacional de las Industrias Azucarera y Alcoholera  (National Chamber of the Sugar and Alcohol 
Industries) of Mexico.
21  The Division did not find it necessary to take the brief into account in 
resolving the issues raised in this appeal. 
9. The oral hearing in this appeal was held on 18 January 2006.  The participants and third 
participants presented oral arguments (with the ex ception of Guatemala) and responded to questions 
posed by the Members of the Division hearing the appeal. 
II. Arguments of the Participants  and the Third Participants 
A. Claims of Error by Mexico – Appellant 
1. Exercise of Jurisdiction  
10. Mexico argues that the Panel erred in rejecting Mexico's request that it decline to exercise 
jurisdiction in the circumstances of the present disput e.  According to Mexico , the Panel's decision 
was primarily based on the Panel's view that Article 11 of the DSU "compels a WTO [p]anel to address the claims" on which a finding is necessary to  enable the DSB to make sufficiently precise 
recommendations or rulings to the parties to the dispute and that, therefore, a WTO panel has no 
discretion to decline to exerci se validly established jurisdiction.
22  Mexico submits that this is 
incorrect and ignores the fact that, like other inte rnational bodies and tri bunals, WTO panels have 
certain "implied jurisdictional powers"23 that derive from their nature as adjudicative bodies.  
According to Mexico, such powers include the power to refrain from exercising substantive 
                                                      
21At the oral hearing, Mexico stated that its ar guments are set out in its appellant's and oral 
submissions.  Mexico added, however, that it would not object should the Appellate Body decide to accept the 
amicus  brief.  The United States noted that the  amicus  brief had been received late in the proceedings and that 
it presented new arguments and claims of error that were not part of Mexico's Notice of Appeal.  Accordingly, 
while taking the view that the Appella te Body had the authority to accept the brief, the Un ited States argued that 
it should decline to do so in th e circumstances of this dispute. 
22Mexico's appellant's submission, para. 64 (" obliga a un Grupo Especial de la OMC a abordar las 
reclamaciones "). 
23Ibid., para. 65 (" facultades implícitas en relación con su competencia "). WT/DS308/AB/R 
Page 5 
 
 
jurisdiction in circumstances where "the underlying or  predominant elements of a dispute derive from 
rules of international law"24 under which claims cannot be judicially enforced in the WTO, such as the 
NAFTA provisions or when one of the disputing parti es refuses to take the matter to the "appropriate 
forum".25  Mexico contends, in this regard, that th e United States' claims under Article III of the 
GATT 1994 are inextricably linked to a broader dispute26 concerning the conditions provided under 
the NAFTA for access of Mexican sugar to the Unit ed States market, and that only a NAFTA panel 
could resolve the dispute between the parties. 
11. Mexico further emphasizes that there is nothi ng in the DSU that explicitly rules out the 
existence of a WTO panel's power to decline to exer cise its jurisdiction even in a case that is properly 
brought before it.  Mexico adds that the applicati on by panels of the principle of "judicial economy" 
illustrates that notwithstanding the requirement of Article 7.2 of the DSU that panels address the 
relevant provisions in any covered agreement or agreements cited by the parties to the dispute, WTO 
panels can decide not to address certain claims.  Thus, according to Mexico, there is no question that 
WTO panels have an implicit or inherent comp etence. As other examples of panels' "implied 
jurisdictional powers", Mexico points, inter alia , to the power of panels to determine whether they 
have substantive jurisdiction over a matter and the powe r to decide all matters that are inherent to the 
"adjudicative function"27 of panels. 
12. Finally, referring to the ruling of the Permanent Court of International Justice (the "PCIJ") in 
the  Factory at  Chorzów  case, Mexico calls into question the "a pplicability" of its WTO obligations 
towards the United States in the context of this dispute.28 
2. Article XX(d) of the GATT 1994  
13. Mexico appeals the Panel's finding that the m easures at issue are not justified pursuant to 
Article XX(d) of the GATT 1994.  In addition, Mexi co requests the Appellate Body to complete the 
analysis and find that its tax measures are jus tified under Article XX(d) of the GATT 1994, because 
                                                      
24Mexico's appellant's submission, para. 73 (" los elementos predominantes de una disputa derivan de 
reglas del derecho internacional "). 
25Ibid. ("foro adecuado "). 
26Ibid. 
27Ibid., para. 67 (" función jurisdiccional "). 
28See  ibid., paras. 73-74.  The passage of the ruling that Mexico refers to reads as follows: 
… one party cannot avail himself of the fact that the other has not fulfilled 
some obligation … if the former party has … prevented the latter … from having recourse to the tribunal which would have been open to him.  
(Permanent Court of International Justice, Factory at Chorzów (Germany v. Poland) (Jurisdiction), 1927, PCIJ 
Series A, No. 9, p. 31) (underlining added by Mexico omitted) WT/DS308/AB/R 
Page 6  
 
the measures are necessary "to secure compliance" by the United States of its obligations under the 
NAFTA. 
14. Mexico asserts that the Panel erred in finding that the measures at issue are not designed "to 
secure compliance" within the meaning of Article XX (d).  According to Mexico, this finding is based 
on an erroneous interpretation of the terms "to se cure compliance" as involving enforcement action 
within a  domestic  legal system.  Mexico argues that there is no basis to exclude action taken to 
enforce  international  treaty obligations from the scope of Article XX(d).  Mexico adds that, in the 
broader context of international law, counter measures are measures aimed at securing compliance 
with international obligations.  Mexico further subm its that the Panel erred by equating the concept of 
"enforcement" with that of "coercion".  In Mexico 's view, the Panel's effort to distinguish between 
actions at the domestic level and at  the international level based on it s understanding of the concept of 
coercion in this dispute has no textual basis, because  Article XX(d) simply does not refer to the use of 
coercion. 
15. Moreover, Mexico asserts that the Panel erred by  confusing the issue of the "design" of the 
measure under Article XX(d) with the issue of its "outcome".
29  Rather than examining whether 
Mexico's measures were put in place in order to secure the United States' compliance with its NAFTA 
obligations, the Panel considered the effectiveness of  those measures.  Mexico emphasizes that "even 
if the outcome of a measure is completely uncerta in or unpredictable, the measure in question can, 
nevertheless be 'designed to secure compliance with  laws and regulations' within the meaning of 
Article XX(d)".30  Contrary to the Panel's finding, the issu e of the likely outcome of a given measure 
is not legally relevant to the assessment of the design of the measure under Article XX(d).  Thus, 
Mexico takes issue with the Panel's finding th at the "uncertain outcome of international 
countermeasures is a reason for disqualifying them  as measures eligible for consideration under 
Article XX(d)".31  Mexico notes, in this regard, that nothi ng in the text of Article XX(d) suggests that 
any measure is a priori  ineligible as a measure "to secure comp liance with laws and regulations" on 
the basis of its "uncertain outcome". 
16. Turning to the meaning of the terms "laws a nd regulations" in Article XX(d), Mexico notes 
that the Panel's interpretation of these terms is ba sed on the erroneous conclusions reached by the 
Panel with respect to the terms "to secure complian ce".  Mexico submits that the words "laws" and 
                                                      
29Mexico's appellant's submission, para. 98 (" destino ";  "resultado "). 
30Ibid., para. 102 (" aun si el  resultado de la medida es totalmente incierto, impredecible, bien puede 
estar 'destinada a lograr la observancia de las leyes  y reglamentos' en el sentido del artículo XX(d) "). 
31Ibid., para. 104 (" el resultado incierto de las contramedidas internacionales es una razón para 
excluirlas como medidas que pueden se r objeto de consideración, en el marco del inciso (d) del artículo XX ") 
(quoting Panel Report, para. 8.187). WT/DS308/AB/R 
Page 7 
 
 
"regulations" are expressly qualified in other provis ions of the covered agreements;  the absence of 
qualifying language in Article XX( d) thus supports the view that  the terms are not limited to  domestic  
laws or regulations, but include international ag reements.  Mexico adds that a review of the 
Article XX exceptions reveals that only three—(parag raphs (c), (g), and (i))—are, expressly or by 
implication, concerned with an activity that would occur within  the territory of the Member seeking to 
justify its measures.  This position, according to  Mexico, is supported by the Appellate Body's 
findings in  US – Shrimp  (Article 21.5 – Malaysia) .32 
17. Mexico further requests, in the event th e Appellate Body should reverse the Panel's 
conclusion, that it complete the Panel's analysis  and find that the Mexican measures are "necessary" 
within the meaning of Article XX(d) and meet th e requirements of the chapeau of that Article.  
According to Mexico, the uncontested facts and evidence in the Panel record, and the Panel's 
acknowledgement that Mexico's measures have "attract ed the attention" of the United States, provide 
an ample basis on which to complete the analysis  and conclude that the measures are "necessary" 
within the meaning of Article XX(d). 
18. Mexico observes that, before the Panel, the United States could not identify any alternative 
measure that Mexico could and should have used in or der to attain its legitimate objective.  It further 
explains that the fact that a measure does not or has not yet achieved its objective does not mean that 
it is not "necessary" within the meaning of  Article XX(d).  It may mean that it is  insufficient to secure 
compliance, or that it is insufficient to secure immediate compliance, but can do so over time;  
however, it says nothing about whether the measure is "necessary".  Moreover, Mexico submits that 
the evidence on the record demonstrates that the measures at issue have contributed to securing 
compliance in the circumstances of this case by changing the dynamics of the NAFTA dispute and forcing the United States to pay attention to Mexi co's grievances, and also contradicts the Panel's 
finding that Mexico's measures do not contribute to securing compliance in this dispute. 
19. As regards the chapeau of Article XX of th e GATT 1994, Mexico asserts that its measures 
neither arbitrarily nor unjustifiably discriminate betw een countries where the sa me conditions prevail.  
Rather than constituting "arbitrary or unjustifiable discrimination", the measures constitute "limited 
                                                     
 
32Mexico's appellant's submission, paras. 174 and 177-178 (referring to Appellate Body Report, 
US – Shrimp (Article 21.5 – Malaysia) , paras. 123-124 and 128-130). WT/DS308/AB/R 
Page 8  
 
sectoral retaliation in the relevant market segment ( i.e., the sweeteners market)."
33  Nor can the 
measures be said to be a "disguised restriction on [international] trade" because they constitute "a 
proportionate, legitimate and legally  justified response to actions and omissions of the United 
States"34, and, furthermore, the measures have been published. 
20. Finally, Mexico argues that the Panel, "separately and in addition"35 to the previous errors, 
failed to make "an objective assessment of the facts" , as required by Article 11 of the DSU, in finding 
that "Mexico has not established that its me asures contribute to securing compliance in the 
circumstances of this case."36  According to Mexico, the Panel's finding is based solely on the Panel's 
view that attracting the attention of the United States is not equivalent to securing compliance with a law or regulation and ignores that "achieving the objectives sought by the countermeasures can take 
time".
37 
B. Arguments of the United States – Appellee 
1. Exercise of Jurisdiction  
21. The United States submits that the Panel properly rejected Mexico's request for the Panel to 
refrain from exercising jurisdiction in the present dispute. 
22. Referring to Article 11 of the DSU, the United St ates observes that, if the Panel had declined 
to exercise jurisdiction over this dispute, or had agr eed to Mexico's request th at it refrain from issuing 
findings and recommendations, the Panel would have made no findings on the United States' claims 
that Mexico's tax measures are inconsistent with  Article III of the GATT 1994.  This would have 
left  the DSB "unable to give any rulings or ( as is appropriate in this dispute) to make any 
                                                      
33Mexico's appellant's submission, para. 173 (" retorsiones sectoriales limitadas al segmento del 
mercado relevante (i.e., el mercado de los edulcorantes) ").  Mexico asserts that the facts of this case are similar 
to the situation examined by the Appellate Body in  US – Shrimp (Article 21.5 – Malaysia) .  Mexico explains 
that, in that dispute, the Appellate Body found that a United States unilateral measure was not inconsistent with 
the chapeau of Article XX of the GA TT 1994.  According to Mexico, in that case, the Appellate Body did not 
require the United States to conclude an international ag reement with the disputing parties, but rather required it 
to have made good faith efforts in that direction.  In this case, Mexico argues that it has sought to resolve the 
dispute through NAFTA and bilateral negotiations, but "the United States has essentially blocked Mexico's 
ability to have its grievance resolved." (Mexico's appellant's submission, paras. 174-181 (" Estados Unidos 
esencialmente ha bloqueado la posibilidad  de México para re solver su agravio. ")) 
34Ibid., para. 182 (" una respuesta proporcional, legítima y legalmente justificada a las acciones y 
omisiones de Estados Unidos "). 
35Ibid., heading III.E (" independiente y adicional ").  
36Panel Report, para. 8.186.  See also, Mexico's Notice of Appeal, para. 3. 
37Mexico's appellant's submission, para. 166 (" la consecución de los objetivos de las contramedidas 
puede llevar tiempo "). WT/DS308/AB/R 
Page 9 
 
 
recommendations"38 in accordance with the rights and obligations under the DSU and the 
GATT 1994.  The United States emphasizes that such a result is incompatible with the text of the 
DSU and would have required the Pa nel to disregard the mandate give n to it by the DSB.  Moreover, 
the United States observes that the Panel's own terms of  reference in this dispute instructed the Panel 
to examine the matter referred to the DSB by the United States and to make such findings as will 
assist the DSB in making the recommendations  and rulings provided for under the DSU. 
23. Referring to Articles 3.2 and 19.2 of the DSU, th e United States adds that, if a panel were to 
decline to exercise jurisdiction over a particular  dispute, it would diminish the rights of the 
complaining Member under the DSU and other covere d agreements.  The United States further notes 
that prior reports of panels and the Appellate Body  also support the Panel's findings.  In this regard, 
the United States refers to Mexico – Corn Syrup (Article 21.5 – US) , where the Appellate Body stated 
that "panels are required to address issues that ar e put before them by the parties to a dispute."39 
24. The United States observes that Mexico has refe rred to the principle of judicial economy as 
an example of "situations where WTO panels ha ve refrained from exercising validly established 
substantive jurisdiction on certain  claims that are before them."40  However, the United States submits 
that, "when a panel exercises judicial economy, it do es not decline to exercise substantive jurisdiction 
either over a dispute or certain claims in a dispute.   Rather, the panel … declines to make findings on 
certain claims when resolution of such claims is  not necessary for the panel to fulfill its mandate 
under Article 11 of the DSU and its terms of reference."41  In other words, judicial economy "does not 
relieve a panel from its duty to carry out its mandate  under Articles 7 and 11 of the DSU to resolve the 
dispute"42 before it.  
2. Article XX(d) of the GATT 1994  
25. The United States submits that the Panel properly found that Mexico's tax measures are not 
designed "to secure compliance" and, thus, are not  justified as measures "to secure compliance with 
laws or regulations" within the meaning of Article  XX(d) of the GATT 1994.  It notes that previous 
GATT and WTO disputes in which Article XX(d) has been invoked have invol ved domestic laws or 
regulations. 
                                                      
38United States' appellee's submission, para. 124. 
39Ibid., para. 127 (quoting Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 36). 
40Ibid., para. 129 (quoting Mexico's appellant's submission, para. 68). 
41Ibid. (referring to Appellate Body Report, US – Wool Shirts and Blouses , p. 19, DSR 1997:I, 323, 
at 340;  and to Appellate Body Report, Canada – Wheat Exports and Grain Imports , para. 133). 
42Ibid., para. 130. WT/DS308/AB/R 
Page 10  
 
26. The United States agrees with the Panel's analys is of the terms "laws or regulations" and, 
therefore, supports the Panel's findi ng that these terms refer only to  domestic  laws or regulations and 
not to obligations under international agreements .  The United States explains that Article XX(d) 
refers to "laws" and "regulations" in the plural, while the singular "law" is used when referring to 
"international law".
43  The United States further observes that the terms "laws or regulations" precede 
the words "which are not inconsistent" in Article XX(d) and explains that the term "inconsistent" 
appears elsewhere in the GATT 1994 in connection w ith domestic measures.  In contrast, the WTO 
agreements use the word "conflict" when  referring to international obligations. 
27. The United States further submits that Mexico's interpretation of the terms "laws or 
regulations" would undermine Article s 22 and 23 of the DSU, as it would permit action, including the 
suspension of concessions, by any Member  "outside the rules of the DSU".44  The United States 
observes that Article XX(d) was not intended to provide the basis for suspending concessions under 
the WTO agreements upon a mere allegation of a breach of a non-WTO international agreement.  
Otherwise, according to the United States, "this would effectively convert WTO dispute settlement 
into a forum of general dispute resolu tion for all international agreements."45  Furthermore, the United 
States argues that, if the terms "laws or regulations " are read to include obligations under non-WTO 
agreements, the WTO dispute settlement system "wou ld become a forum for WTO Members to allege 
and obtain findings as to the consistency of another Member's measure with any non-WTO 
agreement."46  The United States, therefore, disagrees w ith Mexico's arguments that the phrase "laws 
or regulations" in Article XX(d) re fers to international agreements. 
28. With respect to the Panel's interpretation of the phrase "to secure compliance", the United 
States notes that the references to coercion were inte nded "merely [to] reinforce the Panel's view that 
'enforcement' does not refer to the international level"47 and not, as Mexico argues, to create an 
additional requirement for justifying a measure unde r Article XX(d).  The United States therefore 
agrees with the Panel that the terms "to secure co mpliance" do not apply to measures taken by one 
Member to induce another Member to comply with obligations under a non-WTO treaty. 
29. The United States also rejects Mexico's subm ission that the "Panel wrongly found that 
measures with an 'uncertain outcome' are ' a priori  ineligible' as measures to  secure compliance with 
                                                      
43The United States observes that Article 3.2 of the DSU and Article 17.6 of the Anti-Dumping 
Agreement  also use the term "law" in the singular when referring to "public international law". 
44United States' appellee's submission, para. 37. 
45Ibid., para. 85.  (footnote omitted) 
46Ibid., para. 41. 
47Ibid., para. 54 (referring to Panel Report, paras. 8.175 and 8.178). WT/DS308/AB/R 
Page 11 
 
 
laws or regulations."48  While the United Stat es concedes that the Panel's analysis "could have 
admittedly been clearer"49, it also notes that the Panel did not require certainty, and argues that the 
Panel's remarks on this point simply characterized Mexico's failure to "put forth  any  evidence that its 
tax measures were designed to [secure] compliance."50  The United States agrees with Mexico that 
"Article XX(d) does not require the party invoking the defense to establish that its measure will, 
without a doubt or with certainty, secure  compliance with laws or regulations."51  Nevertheless, the 
United States submits that Mexico has to provide some evidence that the m easure is "designed" to 
secure such compliance. 
30. For all these reasons, the United States submits that the Appellate Body should uphold the 
Panel's conclusion that Mexico's tax measures are not designed to secure compliance and, thus, are 
not justified as measures "to secure compliance with laws or regulations" within the meaning of 
Article XX(d) of the GATT 1994. 
31. In the event the Appellate Body should re verse the Panel's finding and accept Mexico's 
request to complete the analysis, the United St ates asserts that Mexico's measures are neither 
"necessary" for purposes of Article XX(d), nor do they  meet the requirements of the chapeau of that 
Article.  According to the United States, Mexico has not demonstrated that the measures at issue 
contribute to compliance by the United Stat es with its NAFTA obligations and "ignores"52 the fact 
that the trade impact of a measure is one of the factors that must be weighed and balanced when 
determining whether a measure is "necessary".  The impact of Mexico's measures was "essentially 
[to] prohibit the use of imported HFCS in Mexican  soft drinks and other beverages and to reduce 
import volumes".53  The United States adds that "[i]t is difficult to understand how discriminating 
against imports from potentially every WTO Member is 'necessary' to secure [the United States'] compliance with [its] obligations under the NAFTA."
54  The United States further observes that the 
absence of alternative measures that could be reasona bly available does not, in itself, mean that the 
challenged measures are "necessary".  In any event, the United States submits that if Mexico's 
objective was to attract the attention of the United States, it could have pursued a variety of other 
actions, including pursuing the diplomatic avenues available under the NAFTA. 
                                                      
48United States' appellee's submission, para. 70 (quoting Mexico's appellant's submission, 
paras. 104-105). 
49Ibid., para. 71. 
50Ibid. (original emphasis) 
51Ibid., para. 72. (footnote omitted) 
52Ibid., para. 96. 
53Ibid., para. 97. 
54Ibid. WT/DS308/AB/R 
Page 12  
 
32. The United States submits, furthermore, that Me xico's measures do not meet the requirements 
of the chapeau of Article XX of the GATT 1994.  Th e only evidence that Mexico offers to support its 
contention that the measures do not constitute arb itrary or unjustifiable discrimination is the 
characterization of the measures as international countermeasures.
55  This is insufficient, argues the 
United States, for Mexico to meet its burden of proof .  Moreover, the fact that Mexico may have been 
transparent about its measures is not sufficient to establish that such measures are not a "disguised 
restriction on trade".56 
33. Lastly, the United States requests the Appellate Bo dy to reject Mexico's contention that the 
Panel did not make an objective assessment of the facts, as required by Article 11 of the DSU.  
According to the United States, the Panel did not "ignore" arguments or evidence submitted by 
Mexico.  The United States further explains that, in any event, the errors alleged by Mexico in support 
of its claim under Article 11 of the DSU "relate to  the interpretation of Ar ticle XX, and do not support 
a conclusion that the Panel breached Article 11."57 
C. Arguments of the Third Participants 
1. China  
34. Referring to Articles 7 and 11 of the DSU, Chin a argues that a WTO panel does not have an 
implied power to refrain from perfo rming its "statutory function".58  China submits that, if a panel that 
is "empowered and obligated"59 to assist the DSB in the settlement of a dispute declines to exercise 
jurisdiction, such a decision would create legal unc ertainty and be contrary to the aim of providing 
security and predictability to the multilateral trad ing system as well as the prompt settlement of 
disputes as provided for in Article 3.3 of the DSU.  China argues, moreover, that the notion of judicial 
economy is "relevant and applicable"60 only if a panel has assumed the jurisdiction defined by its 
                                                      
55According to the United States, the Appellate Body rulings in US – Shrimp (Articles 21.5 – Malaysia) 
do not support Mexico's position, because that dispute did not involve a disagreement about the commitments made under an international agreement. (United States' appellee's submission, paras. 109-110) 
56Ibid., para. 114. 
57Ibid., para. 118. 
58China's third participant' s submission, para. 5. 
59Ibid., para. 6. 
60Ibid., para. 7. WT/DS308/AB/R 
Page 13 
 
 
terms of reference and has made "such findings as  will assist the DSB" within the meaning of 
Article 11 of the DSU. 
35. China asserts that the terms "laws or regulations" in Article XX(d) do not encompass 
international agreements.  China states that Article X of the GATT 1994 provides contextual 
guidance  for the interpretation of Article XX( d).  Article X expressly distinguishes between 
"[l]aws, regulations, judicial decisions and admi nistrative rulings" and "[a] greements … between the 
government or a governmental agency of any Member and the government or governmental agency of 
any other Member".  China adds that interpretin g "laws or regulations" to include international 
agreements would allow a WTO Member to justif y under Article XX(d) its deviation from its WTO 
obligations in the name of any remedial measure in response to any alleged breach of any non-WTO 
international agreement.  Such a scenario, according to China, is not consistent with the object and 
purpose of the GATT 1994. 
2. European Communities  
36. The European Communities subm its that the Appellate Body should uphold the Panel's 
finding that it did not have the discretion to decline to  exercise jurisdiction in this case.  The European 
Communities submits that "the functions and obligat ions of WTO Panels must be established on the 
basis of the DSU, and particularly Article 11 thereof."61  On this basis, the European Communities 
agrees that a panel has an inherent power to establish whether it has jurisdiction, and whether a 
particular matter is within its jurisdiction.  Ho wever, the European Communities argues that a panel 
may not freely, or by "the notion of 'judicial economy'", decide to refrain from exercising its jurisdiction "in a case properly brought before it under the DSU."
62 
37. The European Communities asserts, furthermore, that the Appellate Body should uphold the 
Panel's finding that only measures made applicable  in the domestic legal order of a WTO Member 
constitute "laws or regulations" within the meani ng of Article XX(d).  The European Communities 
disagrees, however, with the Panel's finding that "i nternational agreements, even when incorporated 
into the domestic law of a WTO Member, can neve r be regarded as 'laws or regulations' for the 
purposes of Article XX(d)".63  In addition, the European Comm unities takes issue with the Panel's 
interpretation of the terms "to secure compliance" as requiring a degree of certainty in the results that 
may be achieved through the measure. 
                                                      
61European Communities' third participant's submission, para. 8. 
62Ibid., paras. 10-11. 
63Ibid., para. 44. WT/DS308/AB/R 
Page 14  
 
3. Japan
 
38. Japan disagrees with the Panel's interpretati on of the terms "to secure compliance" in 
Article XX(d).  In this regard, Japan submits  that Article XX(d) does not necessarily exclude 
measures that have, as a purpose, to secure comp liance, but are not accompanied by compulsory 
enforcement.  According to Japan, compliance can be secured by a request or a command without 
being accompanied by any coercion.  Japan consider s that the Panel erred by indicating that the 
determination of whether a measure is designed "t o secure compliance" should be analyzed based on 
the degree of certainty of its outcome.  Neverthel ess, Japan agrees with the Panel's finding that  
Article XX(d) does not cover international agreemen ts.  Japan explains that the terms "laws or 
regulations", read together with the phrase "t o secure compliance", "presuppose a hierarchical 
structure that is associated  with the relation between the state and its subjects"64 and, therefore, 
excludes international agreements. 
III. Issues Raised in This Appeal 
39. The following issues are ra ised in this appeal: 
(a) whether the Panel erred in concluding th at a WTO panel "has no discretion to decide 
whether or not to exercise its jurisdiction in a case properly before it"65 and, if so, 
whether the Panel erred in declining to exer cise that discretion in the circumstances of 
this dispute; 
(b) whether the Panel erred in concluding that Mexico's measures do not constitute 
measures "to secure compliance with laws or  regulations", within the meaning of 
Article XX(d) of the GATT 199466;  and 
(c) whether the Panel failed to make an objec tive assessment of the facts of the case, as 
required by Article 11 of the DSU, in concl uding that "even if the assumption were to 
be made in the abstract that internatio nal countermeasures are potentially capable of 
qualifying as measures designed to secure  compliance", within the meaning of 
Article XX(d) of the GATT 1994, "Mexico has not established that its measures 
contribute to securing compliance in the circumstances of this case."67 
                                                      
64Japan's third participant's submission, para. 22. 
65Panel Report, para. 7.18. 
66Ibid., para. 8.198. 
67Ibid., para. 8.186. WT/DS308/AB/R 
Page 15 
 
 
IV. The Panel's Exercise of Jurisdiction 
A. Introduction 
40. In its first written submission to the Panel, Mexico requested that the Panel decide, as a 
preliminary matter, to decline to exercise ju risdiction "in favour of an Arbitral Panel under 
Chapter Twenty of the North American Free Trade Agreement (NAFTA)."68  In a preliminary ruling, 
the Panel rejected Mexico's request and found inst ead that, "under the DSU, it had no discretion to 
decide whether or not to exercise its jurisdiction in a case properly before it."69  The Panel added that 
even if it had such discretion, it "did not consider th at there were facts on record that would justify the 
Panel declining to exercise its jurisdiction in the present case."70 
41. In its reasoning, the Panel opined that "discreti on may be said to exist only if a legal body has 
the freedom to choose among several options, all of them equally permissible in law."71  According to 
the Panel, "such freedom ... would exist within th e framework of the DSU only if a complainant did 
not have a legal right to have a pa nel decide a case properly before it."72  Referring to Article 11 of the 
DSU and to the ruling of the Appellate Body in Australia – Salmon , the Panel observed that "the aim 
of the WTO dispute settlement system is to resolve the matter at issue in particular cases and to secure 
a positive solution to disputes" and that a panel is  required "to address the claims on which a finding 
is necessary to enable the DSB to make sufficiently precise recommendations or rulings to the 
parties."73  From this, the Panel concluded that a WTO panel "would seem therefore not to be in a 
position to choose freely whether or not to exercise its jurisdiction."74  Referring to Articles 3.2  
and 19.2 of the DSU, the Panel further stated that "[ i]f a WTO panel were to decide not to exercise its 
jurisdiction in a particular case, it would diminish the rights of the complaining Member under the DSU and other WTO covered agreements."
75  The Panel added that Article 23 of the DSU "make[s] it 
clear that a WTO Member that considers that any of  its WTO benefits have be en nullified or impaired 
as a result of a measure adopted by another Member  has the right to bring the case before the WTO 
dispute settlement system."76 
                                                      
68Panel Report, para. 7.1. 
69Ibid. 
70Ibid. 
71Ibid., para. 7.7. 
72Ibid. 
73Ibid., para. 7.8 (referring to Appellate Body Report,  Australia – Salmon , para. 223). 
74Ibid. 
75Ibid., para. 7.9. 
76Ibid. WT/DS308/AB/R 
Page 16  
 
42. On appeal, Mexico contends that the Panel erre d in rejecting Mexico's request that it decline 
to exercise jurisdiction in the circumstances of the present dispute.  Mexico submits that WTO panels, 
like other international bodies and tribunals, "have certain implied jurisdictional powers that derive 
from their nature as adjudicative bodies."
77  Such powers include the power to refrain from exercising 
substantive jurisdiction in circumst ances where "the underlying or predominant elements of a dispute 
derive from rules of international law under which cl aims cannot be judicially enforced in the WTO, 
such as the NAFTA provisions" or "when one of the dis puting parties refuses to take the matter to the 
appropriate forum."78  Mexico argues, in this regard, that the United States' clai ms under Article III of 
the GATT 1994 are inextricably linked to a broader dispute79 regarding access of Mexican sugar to 
the United States' market under the NAFTA.  Mexico further emphasizes that "[t]here is nothing in 
the DSU ... that explicitly rules out the existence of"80 a WTO panel's power to decline to exercise 
validly established jurisdiction and submits that "the  Panel should have exercised this power in the 
circumstances of this dispute."81 
43. In contrast, the United States argues that, "[t]he Panel's own terms of refe rence in this dispute 
instructed the Panel 'to examine ... the matte r referred to the DSB by the United States'"82 and 
"to make such findings as will assist the DSB" in making the recommendations and rulings provided 
for under the DSU.  China and the European Commun ities agree with the United States that the Panel 
had no discretion to decline to exercise jurisdiction.  China submits that if a panel declines to exercise 
jurisdiction over a dispute, such a decision will create legal uncertainty, contrary to the aim of 
providing security and predictability to the multilatera l trading system and the prompt settlement of 
disputes as provided for in Article 3.3 of the DSU.83  The European Communities agrees with the 
Panel's finding that it did not have discretion to d ecline to exercise jurisdiction in this case, and 
emphasizes that "the functions and obligations of WTO Panels must be established on the basis of the 
DSU, and particularly Article 11 thereof."84 
                                                      
77Mexico's appellant's submission, para. 65 (" tienen ciertas facultades implícitas en relación con su 
competencia, las cuales derivan de su propia naturaleza como órganos jurisdiccionales "). 
78Ibid., para. 73 (" los elementos predominantes de una disputa derivan de reglas del derecho 
internacional, cuyo cumplimiento no puede reclamarse en el marco OMC, por ejemplo las disposiciones del 
TLCAN ";  "cuando una de las partes contendientes se rehúsa a someterse al foro adecuado "). 
79Ibid. 
80Ibid., para. 65 (" Nada en el ESD ... explícita mente descarta que ... existan "). 
81Ibid., para. 72 (" el Grupo Especial debió haber ejercido esa facultad en las circunstancias de esta 
disputa "). 
82United States' appellee's submission, para. 125. 
83China's third participant' s submission, para. 6. 
84European Communities' third participant's submission, para. 8. WT/DS308/AB/R 
Page 17 
 
 
B. Analysis 
44. Before addressing Mexico's arguments, we note that "Mexico does not question that the Panel 
has jurisdiction to hear the United States' claims."85  Moreover, Mexico does not claim "that there are 
legal obligations under the NAFTA or any other in ternational agreement to which Mexico and the 
United States are both parties, which might raise legal impediments to the Panel hearing this case".86  
Instead, Mexico's position is that, although the Panel had the authority to rule on the merits of the 
United States' claims, it also had the "imp lied power" to abstain from ruling on them87, and "should 
have exercised this power in the circumstances of this dispute."88  Hence, the issue before us in this 
appeal is not whether the Panel was legally preclud ed from ruling on the United States' claims that 
were before it, but, rather, whether the Panel coul d decline, and should have declined, to exercise 
jurisdiction with respect to the United States' claims under Article III of the GATT 1994 that were 
before it. 
45. Turning to Mexico's arguments on appeal, we note, first, Mexico's argument that WTO 
panels, like other international bodies and tribunals,  "have certain implied jurisdictional powers that 
derive from their nature as adjudicative bodies"89, and thus have a basis for declining to exercise 
jurisdiction.  We agree with Mexico that WTO pane ls have certain powers that are inherent in their 
                                                      
85Mexico's appellant's submission, para. 71 (" México no discute que el Grupo Especial tiene 
competencia para resolver la reclamac ión que Estados Unidos ha interpuesto ") (quoting Mexico's response to 
Question 35 posed by the Panel;  Panel Report, p. C-16).  Mexico confirmed this point in response to questioning at the oral hearing. 
86Panel Report, para. 7.13.  In response to questioning at the oral hearing, Mexico argued that the panel 
in Argentina – Poultry  Anti-Dumping Duties  "at least contemplated the exis tence of a situation where an 
impediment found in another agreement might give rise to declining jurisdiction".  The panel in Argentina – 
Poultry Anti-Dumping Duties  referred to Article 1 of the Protocol of  Olivos, which provides that, once a party 
decides to bring a case under either the MERCOSUR or WTO dispute settlement forum, that party may not bring a subsequent case regarding the same subject-matter in the other forum, and went on to state: 
The Protocol of Olivos ... does not change our assessment, since that 
Protocol has not yet entered into force, and in any event it does not apply in respect of disputes already decide d in accordance with the MERCOSUR 
Protocol of Brasilia.  Indeed, the fact that parties to MERCOSUR saw the 
need to introduce the Protocol of Olivos suggests to us that they recognised that (in the absence of such Protocol) a MERCOSUR dispute settlement 
proceeding could be followed by a WTO dispute settlement proceeding in 
respect of the same measure. 
(Panel Report,  Argentina – Poultry  Anti-Dumping Duties , para. 7.38) (footnote omitted) 
87Thus, Mexico suggested that, in the circumstances of this dispute, it would not have been 
"appropriate" for the Panel "to issue findings on the merits of the United States ' claims." (Panel Report, 
para. 7.11 (referring to Mexi co's first written submission to the Panel, paras. 102-103)) 
88Mexico's appellant's submission, para. 72 (" debió haber ejercido esa facultad en las circunstancias 
de esta disputa "). 
89Ibid., para. 65 (" tienen ciertas facultades implícitas en rela ción con su competencia, las cuales 
derivan de su propia naturaleza como órganos jurisdiccionales "). WT/DS308/AB/R 
Page 18  
 
adjudicative function.  Notably, panels have the right  to determine whether they have jurisdiction in a 
given case, as well as to determine the scope of their jurisdiction.  In this regard, the Appellate Body 
has previously stated that "it is a widely accepted rule that an international tribunal is entitled to 
consider the issue of its own jurisdiction on its  own initiative, and to satisfy itself that it has 
jurisdiction in any case that comes before it."
90  Further, the Appellate Body has also explained that 
panels have "a margin of discr etion to deal, always in accordan ce with due process, with specific 
situations that may arise in a particular case and that are not explicitly regulated."91  For example, 
panels may exercise judicial economy, that is, refr ain from ruling on certain claims, when such rulings 
are not necessary "to resolve the ma tter in issue in the dispute".92  The Appellate Body has cautioned, 
nevertheless, that "[t]o provide only a partial resolution of the matter at issue would be false judicial 
economy."93 
46. In our view, it does not necessarily follow, ho wever, from the existence of these inherent 
adjudicative powers that, once jurisdiction has been validly established, WTO panels would have the 
authority to decline to rule on the entirety of the cl aims that are before them in a dispute.  To the 
contrary, we note that, while recognizing WTO pane ls' inherent powers, th e Appellate Body has 
previously emphasized that: 
                                                      
90Appellate Body Report, US – 1916 Act , footnote 30 to para. 54.  See also Appellate Body Report, 
Mexico – Corn Syrup (Article 21.5 – US) , para. 53.  In that dispute, the Appellate Body also stated that:  
… panels have to address and dispose of certain issues of a fundamental 
nature, even if the parties to the di spute remain silent on those issues. ... 
[P]anels cannot simply ignore issues which go to the root of their jurisdiction—that is, to their authority to deal with and dispose of matters.  
Rather, panels must deal with su ch issues—if necessary, on their own 
motion—in order to satisfy themselves that they have authority to proceed. 
(Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 36) 
91Appellate Body Report, EC – Hormones , footnote 138 to para. 152.  See also Appellate Body Report,  
US – FSC (Article 21.5 – EC) , paras. 247-248. 
92Appellate Body Report, US – Wool Shirts and Blouses , p. 19, DSR 1997:I, 323, at 340.  Mexico 
referred, in its appellant's submission, to a panel's discretion to apply judicial economy as "an example of 
situations where WTO panels have refrained from exerci sing validly established jurisdiction on certain claims 
that are before them." (Mexico's appellant's submission, para. 68 (" un ejemplo de situaciones en las que grupos 
especiales de la OMC se han abstenido de resolver ciertas reclamaciones sobre las cuales tienen competencia sustantiva validamente establecida "))  Mexico clarified at the oral hearing,  however, that "it is clear that in the 
context of the exercise of judicial economy a panel cannot decline entirely to exercise jurisdiction."  The United 
States noted, in this regard, that the doctrine of judicial economy "does not relieve a panel from its duty to carry out its mandate under Articles 7 and 11 of the DSU to re solve the dispute" before it. (United States' appellee's 
submission, para. 130) 
93Appellate Body Report, Australia – Salmon , para. 223. WT/DS308/AB/R 
Page 19 
 
 
Although panels enjoy some discretion in establishing their own working procedures, this discretion does not extend to modifying the 
substantive provisions of the DSU. … Nothing in the DSU gives a 
panel the authority either to disr egard or to modify ... explicit 
provisions of the DSU.
94 (emphasis added) 
 
47. With these considerations in mind, we examine the scope of a panel's jurisdictional power as 
defined, in particular, in Articles 3.2, 7.1, 7.2, 11, 19.2, and 23 of the DSU.  Mexico argues that 
"[t]here is nothing in the DSU ... that explicitly rules out the existence of"95 a WTO panel's power to 
decline to exercise its jurisdiction even  in a case that is properly before it. 
48. We first address Article 7 of the DSU, which governs the terms of reference of panels.  
Article 7 of the DSU states, in its first paragra ph, that panels shall ha ve the following terms of 
reference: 
"To examine, in the light of the relevant provisions in (name of the 
covered agreement(s) cited by the parties to the dispute), the matter 
referred to the DSB by (name of pa rty) in document … and to make 
such findings as will assist the DSB in making the recommendations or in giving the rulings provided  for in that/those agreement(s)." 
 
The Panel in this dispute was established with standard terms of reference
96, which instructed the 
Panel to "examine" the United States' claims that we re before it and to "make findings" with respect to 
consistency of the measures at issue with Article III of the GATT 1994. 
49. The second paragraph of Article 7 further stipulat es that "[p]anels shall address the relevant 
provisions in any covered agreement or  agreements cited by the parties to the dispute."  The use of the 
words "shall address" in Article 7.2 indicates, in our view, that panels are required to address the 
relevant provisions in any covered agreement or agreements cited by the parties to the dispute.97  
                                                      
94Appellate Body Report, India – Patents (US) , para. 92. 
95Mexico's appellant's submission, para. 65 (" Nada en el ESD ... exp lícitamente descarta que ... 
existan ").   
96The Panel's terms of reference in  this dispute were as follows: 
To examine, in the light of the relevant provisions of the covered 
agreements cited by the United States in document WT/DS308/4, the  
matter referred to the DSB by the United States in that document, and to make such findings as will assist the DSB in making the recommendations 
or in giving the rulings provided for in those agreements. 
(WT/DS308/5/Rev.1, para. 2) 
97In this regard, we further note the Appellate Body's  statement that, "as a matter of due process, and 
the proper exercise of the judicial function, panels are re quired to address issues that are put before them by the 
parties to a dispute." (Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 36) WT/DS308/AB/R 
Page 20  
 
50. We turn next to Article 11 of the DSU, which provides that: 
The function of panels is to assist the DSB in discharging  
its responsibilities under this U nderstanding and the covered 
agreements.  Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as 
will assist the DSB in making the r ecommendations or in giving the 
rulings provided for in the covered agreements. … 
 
51. Article 11 of the DSU states that panels  should  make an objective assessment of the matter 
before them.  The Appellate Body has previously he ld that the word "should" can be used not only "to 
imply an exhortation, or to state a preferen ce", but also "to express a duty [or] obligation".
98  T he  
Appellate Body has repeatedly ruled that a panel would not fulfil its mandate if it were not to make an 
objective assessment of the matter.99  Under Article 11 of the DSU, a panel is, therefore, charged with 
the  obligation   to "make an objective assessment of th e matter before it, including an objective 
assessment of the facts of  the case and the applicability of and co nformity with the relevant covered 
agreements."  Article 11 also requires that a panel "make such other findings as will assist the DSB in 
making the recommendations or in giving the rulings pr ovided for in the covered agreements."  It is 
difficult to see how a panel would fulfil that obliga tion if it declined to exercise validly established 
jurisdiction and abstained from making any finding on the matter before it. 
52. Furthermore, Article 23 of the DSU states that Members of the WTO  shall  have recourse to 
the rules and procedures of the DSU when they "seek  the redress of a violation of obligations ... under 
the covered agreements".  As the Appellate Body has previously explained, "allowing measures to be 
the subject of dispute settlement proceedings ... is consistent with the comp rehensive nature of the 
right of Members to resort to dispute settlement to  'preserve [their] rights a nd obligations … under the 
covered agreements, and to clarify the ex isting provisions of those agreements'."100  We also note in 
this regard that Article 3.3 of the DSU provides th at the "prompt settlement of situations in which  
a Member considers  that any benefits accruing to it directly or indirectly under the covered 
agreements are being impaired by  measures taken by another Member is essential to the effective 
                                                      
98Appellate Body Report, Canada – Aircraft , para. 187 (quoting The Concise Oxford English 
Dictionary  (Clarendon Press, 1995), p. 1283). 
99See, for instance, Appellate Body Report, EC – Export Subsidies on Sugar , paras. 329 and 335.  See 
also Appellate Body Report, Canada – Aircraft , paras. 187-188;  and Appellate Body Report, EC – Hormones , 
para. 133. 
100Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 89. (footnote omitted) WT/DS308/AB/R 
Page 21 
 
 
functioning of the WTO".101  The fact that a Member may initiate a WTO dispute whenever it 
considers that "any benefits accruing to [that Member] are being impaired by measures taken by 
another Member" implies that that Member is  entitled   to a ruling by a WTO panel. 
53. A decision by a panel to decline to exercise validly established jurisdiction would seem to  
"diminish" the right of a complaining Member to "seek the redress of a violation of obligations" within the meaning of Article 23 of the DSU, and to bring a dispute pursuant to Article 3.3 of the 
DSU.  This would not be consistent with a pane l's obligations under Articles 3.2 and 19.2 of the 
DSU.
102  We see no reason, therefore, to disagree with the Panel's statement that a WTO panel "would 
seem … not to be in a position to choose freely whether or not to exercise its jurisdiction."103   
54. Mindful of the precise scope of Mexico's appeal104, we express no view as to whether there 
may be other circumstances in which legal impedi ments could exist that would preclude a panel from 
ruling on the merits of the claims that are before it.  In the present case, Mexico argues that the United 
States' claims under Article III of the GATT 1994 ar e inextricably linked to a broader dispute105, and 
                                                      
101(emphasis added)  Thus, the Appellate Body has explained that there is "little in the DSU that 
explicitly limits the rights of WTO Members to bring an action". (Appellate Body Report, EC – Export 
Subsidies on Sugar , para. 312)  In a similar vein, the Appellate Body has also observed that a WTO "Member 
has broad discretion in deciding whether to bring a case against another Member under the DSU." (Appellate 
Body Report, EC – Bananas III , para. 135)  Further, Article 3.7 of the DSU states that "[b]ef ore bringing a case, 
a Member shall exercise its judgement  as to whether action under these procedures would be fruitful." (emphasis 
added)  Finally, Article 3.10 of the DSU stipulates that "if a dispute arises, all Members will engage in these 
procedures   in good faith in an effort to resolve the dispute ." (emphasis added) 
102Article 3.2 of the DSU provides that "[r]ecommendations and rulings of the DSB cannot add to or 
diminish the rights and obligations provided in the covered agreements." 
Article 19.2 of the DSU states that  "[i]n accordance with paragraph 2 of Article 3, in their findings and 
recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided 
in the covered agreements." 
103Panel Report, para. 7.8. 
104See  supra,  para. 44 and footnote 85 thereto. 
105Mexico's appellant's submission, para. 73.   WT/DS308/AB/R 
Page 22  
 
that only a NAFTA panel could resolve the dispute as a whole.
106  Nevertheless, Mexico does not take 
issue with the Panel's finding that "neither the subj ect matter nor the respective positions of the parties 
are identical in the dispute under the NAFTA ... and the dispute before us."107  Mexico also stated that 
it could not identify a legal basis that would allow it  to raise, in a WTO dispute settlement proceeding, 
the market access claims it is pursuing under the NAFTA.108  It is furthermore undisputed that no 
NAFTA panel as yet has  decided the "broader disput e" to which Mexico has alluded.  Finally, we 
note that Mexico has expressly stated that the so- called "exclusion clause" of Article 2005.6 of the 
NAFTA109 had not been "exercised".110  We do not express any view on whether a legal impediment to 
                                                      
106In its appellant's submission, Mexico explains that, in 1998, it initiated NAFTA dispute settlement 
proceedings because it was of the view that the United States was acting inconsistently with its obligation under 
the NAFTA relating to market access for Mexican sugar to the United States ma rket.  In 2000, Mexico 
requested the establishment of a panel under Article 200 8 of the NAFTA.  Subseque ntly, according to Mexico, 
it appointed its panelists to the NAFTA panel;  however, the United States failed to appoint its panelists and also 
instructed the United States' Section of the NAFTA Secr etariat not to appoint panelists. (Mexico's appellant's 
submission, paras. 15-27)  
As a result, "[n]o further step could be taken by  Mexico to form the NAFTA panel and have its 
grievance heard." (Mexico's appellant's submission, para. 28 (" No había otros pasos que México pudiera dar 
conforme a las disposiciones del tratado para conseguir integrar el panel y que su agravio fuera oído "))  
Mexico explains that it subsequently adopted the measures  at issue in this dispute "to compel the United States 
to comply with its obligations and [to] protect [Mexico's] own legal and commercial interests."  ( Ibid., para. 42 
("para mover a Estados Unidos a cumplir con sus obligaciones, a la vez que protegió [los] legítimos intereses 
jurídicos y comerciales [de México] "))  
The United States disputes these arguments by Mexi co and argues that "the Appellate Body [should 
not] undertake itself to assess the correctness of Mexico's assertions as to what the NAFTA requires." (United 
States' appellee's submission, para. 18)  It submits that, if the WTO dispute settlement were to "become a forum for WTO Members to ... obtain findings as to the cons istency of another Member's measure with any non-WTO 
agreement", this "would be a departure from the functio n the WTO dispute settlement system was established to 
serve". ( Ibid., para. 41)  The United States also submits that "it is in full compliance with its obligations under 
NAFTA's dispute settlement mechanism." ( Ibid., para. 84) 
While these NAFTA issues have been described by the parties by way of background to the WTO 
dispute, neither the Panel or the Appellate B ody was called upon to examine these issues. 
107Panel Report, para. 7.14.  The Panel noted, in this regard, that: 
[i]n the present case, the complaini ng party is the United States and the 
measures in dispute are allegedly impos ed by Mexico.  In the NAFTA case, 
the situation appears to be the reverse:  the complaining party is Mexico and 
the measures in dispute are allegedly im posed by the United States.  As for 
the subject matter of the claims, in the present case the United States is 
alleging discriminatory treatment against its products resulting from internal 
taxes and other internal measures im posed by Mexico.  In the NAFTA case, 
instead, Mexico is arguing that the United States is violating its market 
access commitments under the NAFTA. 
108Mexico's response to questioning at the oral hearing. 
109Article 2005.6 of the NAFTA provides: 
Once dispute settlement procedures have been initiated under Article 2007 
or dispute settlement proceedings have been initiated under the GATT, the 
forum selected shall be used to the exclusion of the other, unless a Party 
makes a request pursuant to paragraph 3 or 4 . (emphasis added) 
110Mexico's response to questioning at the oral hearing.  WT/DS308/AB/R 
Page 23 
 
 
the exercise of a panel's jurisdiction would exist in  the event that features such as those mentioned 
above were present.111  In any event, we see no legal impediments applicable in this case. 
55. Finally, as we understand it, Mexico's positi on is that the "applicability" of its WTO 
obligations towards the United States would be "call[ed] into question"112 as a result of the United 
States having prevented Mexico, by an illegal act (n amely, the alleged refusal by the United States to 
nominate panelists to the NAFTA panel), from ha ving recourse to the NAFTA dispute settlement 
mechanism to resolve a bilateral dispute between Mexico and the United States regarding trade in 
sweeteners.113  Specifically, Mexico refers to the ruli ng of the Permanent Court of International 
Justice (the "PCIJ") in the  Factory  at Chorzów  case, and "calls into question the 'applicability' of its 
WTO obligations towards the United States in the context of this dispute".114  
56. Mexico's arguments, as well as its reliance on the ruling in  Factory at Chorzów , is misplaced.  
Even assuming, arguendo , that the legal principle reflected in  the passage referred to by Mexico is 
applicable within the WTO dispute settlement system, we note that this would entail a determination whether the United States has acted consistently or inconsistently with  its NAFTA obligations.
115  We 
see no basis in the DSU for panels and the Appe llate Body to adjudicate non-WTO disputes.  
Article 3.2 of the DSU states that the WTO disput e settlement system "serves to preserve the rights 
and obligations of Members under the  covered agreements , and to clarify the existing provisions of 
those agreements ". (emphasis added)  Accepting Mexico's interpretation would imply that the WTO 
dispute settlement system could be used to dete rmine rights and obligations outside the covered 
agreements.  In light of the above, we do not see how the PCIJ's ruling in Factory at Chorzów  
supports Mexico's position in this case. 
                                                      
111In this context, Mexico has alluded to paragraph 7.38 of the Panel Report in Argentina – Poultry  
Anti-Dumping Duties.  See also  supra,  footnote 86 . 
112Mexico's appellant's submission, para. 73 (" [es] cuestion[able] "). 
113See Panel Report, para. 7.14.   
114Mexico's appellant's submission, para. 73 (" cuestiona que sus obligaciones sean aplicables frente a 
Estados Unidos a la luz del siguiente principio general del derecho internacional ").  The passage of the ruling 
that Mexico refers to reads as follows:  
… one party cannot avail himself of the fact that the other has not fulfilled 
some obligation, or has not had recourse to some means of redress, if the former party has, by some illegal act, prevented the latter from fulfilling the 
obligation in question, or from having recourse to the tribunal which would 
have been open to him. 
(Permanent Court of International Justice, Factory at Chorzów (Germany v. Poland)  (Jurisdiction), 1927, PCIJ 
Series A, No. 9, p. 31) (underlining added by Mexico omitted) 
115We also note that the ruling of the PCIJ in the Factory at Chorzów case relied on by Mexico was 
made in a situation in which the party objecting to the exercise of jurisdiction by the PCIJ was the party that had 
committed the act alleged to be illegal.  In the present case,  the party objecting to the exercise of jurisdiction by 
the Panel (Mexico) relies instead on an allegedly illegal act committed by the other party (the United States).  WT/DS308/AB/R 
Page 24  
 
57. For all these reasons, we  uphold  the Panel's conclusion, in para graphs 7.1, 7.18, and 9.1 of 
the Panel Report, that "under the DSU, it ha[d] no di scretion to decline to exercise its jurisdiction in 
the case that ha[d] been brought before it. "  Having upheld this conclusion, we  find  it unnecessary to 
rule in the circumstances of this appeal on the propriety of exercising such discretion.
116 
V. Article XX(d) of the GATT 1994 
A. Introduction 
58. We turn now to Mexico's claim that the Pane l erred in finding that the challenged measures 
are not justified under Article XX(d) of the GATT 1994.  Before proceeding, we note that Mexico has not appealed the Panel's conclusion that the challe nged measures are inconsistent with Article III of 
the GATT 1994.
117 
59. Mexico argued before the Panel that its "measu res are 'necessary to secure compliance' by the 
United States with the United States' obligations und er the NAFTA, an international agreement that is 
a law not inconsistent with the provisions of the GATT 1994."118  The United States responded that 
"the NAFTA is not a 'law or regulation,' and Mexico's taxes are not 'necessary to secure 
compliance.'"119 
60. The Panel began its analysis by looking at th e meaning of the terms "to secure compliance".  
According to the Panel, "to secure compliance" means "to enforce  compliance".120  The Panel noted 
that "the notion of enforcement contains a concept of action within a hierarchical structure that is 
associated with the relation between the state and its subjects".121  It further observed that 
Article XX(d) "is concerned with action at a domestic rather than international level."122  Based on 
this reasoning, the Panel concluded that "the phr ase 'to secure compliance' in Article XX(d) does not 
apply to measures taken by a Member in order to i nduce another Member to comply with obligations 
owed to it under a non-WTO treaty."123 
                                                      
116Panel Report, paras. 7.1 and 7.18.  
117Therefore, we express no view on the Panel' s interpretation of Article III in this case. 
118Panel Report, para. 8.162 (referring to Mexico's fi rst written submission to the Panel, paras. 117-118 
and 125). 
119Ibid., para. 8.163. 
120Ibid., para. 8.175. (emphasis added) 
121Ibid., para. 8.178. 
122Ibid., para. 8.179. 
123Ibid., para. 8.181. WT/DS308/AB/R 
Page 25 
 
 
61. Having interpreted the terms "to secure complianc e", the Panel proceeded to examine whether 
Mexico's measures are designed to secure compliance.  The Panel explained that "when enforcement 
action is taken within a Member's legal system th ere will normally be no doubt, provided the action is 
pointed at the right target, that it will achieve that target."124  In contrast, "the outcome of international 
countermeasures, such as those adopted by  Mexico, is inherently unpredictable".125  Therefore, the 
Panel reasoned, international countermeasures are " not eligible to be considered as measures 'to 
secure compliance' within the meaning of Article XX(d)."126  The Panel added that "even if the 
assumption were to be made in the abstract that international countermeasures are potentially capable 
of qualifying as measures designed to secure comp liance, the Panel's conclusion would be that 
Mexico has not established that its measures contri bute to securing compliance in the circumstances 
of this case."127  Thus, the Panel rejected Mexico's argument that "the challenged tax measures are 
designed  to secure compliance by the United States with laws or regulations."128 
62. The Panel then examined whether the challenge d measures would fall within the meaning of 
the terms "laws or regulations" in Article XX(d).  The Panel underscored the link between the terms 
"to secure compliance" and the terms "laws and regulations" as set out in Article XX(d).  It indicated 
that the same reasoning that applies in determ ining whether Mexico's measures are measures "to 
secure compliance" must also apply in determini ng whether the measures are "laws or regulations" 
within the meaning of Article XX(d).129  In the Panel's view, "the conclusion that these words refer to 
enforcement action within a particular domestic legal system, and that they do not extend to 
international action of the type taken by Mexi co, necessarily applies to both parts of this 
expression."130  The Panel further observed that, "even if it were to assume that the expression 'laws or 
regulations' in Article XX(d) could include interna tional agreements such as the NAFTA, it would in 
any event conclude that, on the facts of the case, be cause of the uncertainty of their consequences, the 
challenged measures are not designed 'to secure comp liance with laws or regulations which are not 
inconsistent with the provisions' of GATT 1994."131 
63. Therefore, the Panel concluded that "Mexico  has not demonstrated that the challenged 
measures are designed 'to secure compliance with la ws or regulations', within the meaning of 
                                                      
124Panel Report, para. 8.185. 
125Ibid., para. 8.186. 
126Ibid. 
127Ibid. 
128Ibid., para. 8.190. (original emphasis) 
129Ibid., para. 8.194. 
130Ibid. 
131Ibid., para. 8.197. WT/DS308/AB/R 
Page 26  
 
Article XX(d) of the GATT 1994."
132  Having made this finding, the Panel did not consider that it 
needed to examine whether Mexico's measur es are "necessary" within the meaning of 
Article XX(d)133, and whether the measures satisfy the re quirements set out in the chapeau of 
Article XX.134  Consequently, the Panel concluded th at "Mexico has not established that the 
challenged measures are justified under Article XX of the GATT 1994."135 
64. On appeal, Mexico seeks review of the Pane l's conclusion that Mexico's measures are not 
justified under Article XX(d) of the GATT 1994.  According to Mexico, the Panel incorrectly 
interpreted the terms "to secure compliance"  as excluding international countermeasures136, and this 
error led the Panel to incorrectly interpret th e terms "laws or regulations" in Article XX(d).137 Mexico 
argues that the terms "laws or regulations" are "bro ad enough to include intern ational agreements such 
as the NAFTA."138  Mexico points out that "the use of the terms 'laws' and 'regulations' elsewhere in 
the GATT 1994 and in other WTO agreements does not demonstrate that such terms exclude 
international law rules."139 
65. The United States responds that the Panel pr operly found that Mexico's measures are not 
justified under Article XX(d).  It asserts that "the ordi nary meaning of 'laws' and 'regulations' is that 
these are rules (e.g., in the form of a statute) i ssued by a government and not obligations under an 
international agreement."140  The United States further explains that Mexico's interpretation of 
Article XX(d) is in conflict with Article 23 of th e DSU, by allowing a WTO Member to take action 
outside the rules of the DSU to secure complianc e with another Member's obligations under any 
international agreement, including the WTO agreements.141  It would also undermine Article 22 of the 
DSU by "permit[ting] the suspension of concessions  ... without DSB authorization and without any 
requirement to adhere to the rules established" in that provision.142 
                                                      
132Panel Report, para. 8.198. 
133Ibid., para. 8.202. 
134Ibid., para. 8.203. 
135Ibid., para. 8.204. 
136Mexico's appellant's submission, para. 79 and footnote 49 thereto. 
137Ibid., para. 126. 
138Ibid., para. 129 (" suficientemente amplia para incluir tratados internacionales, como el TLCAN ").  
139Ibid. ("el empleo de los términos "leyes" y "reglament os" en el resto del GATT de 1994 y en otros 
Acuerdos de la OMC no demuestran que los tales té rminos excluyen las reglas  del derecho internacional "). 
(footnote omitted) 
140United States' appellee's submission, pa ra. 30 (referring to definitions in Black's Law Dictionary , 
(1990), p. 816). 
141Ibid., para. 37.  
142Ibid., para. 38. (footnote omitted) WT/DS308/AB/R 
Page 27 
 
 
B. Analysis 
1. Are Mexico's Measures Justified under Article XX(d)?  
66. Article XX(d) of the GATT 1994 reads: 
General Exceptions 
Subject to the requirement that such measures are not applied in a 
manner which would constitute a mean s of arbitrary or unjustifiable 
discrimination between countries wher e the same conditions prevail, 
or a disguised restriction on international trade, nothing in this 
Agreement shall be construed to pr event the adoption or enforcement 
by any contracting party of measures: 
... 
(d) necessary to secure compliance with laws or regulations 
which are not inconsistent with th e provisions of this Agreement, 
including those relating to customs enforcement, the enforcement of 
monopolies operated under paragr aph 4 of Article II and 
Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices[.] 
 
67. The Appellate Body explained, in  Korea – Various Measures on Beef , that two elements 
must be shown "[f]or a measure, otherwise inconsis tent with GATT 1994, to be  justified provisionally 
under paragraph (d) of Article XX".
143  The first element is that "the measure must be one designed to 
'secure compliance' with laws or regulations that are not themselves inconsistent with some provision 
of the GATT 1994", and the second is that "the measure must be 'necessary' to secure such 
compliance."144  The Appellate Body also explained that "[a] Member who invokes Article XX(d) as a 
justification has the burden of demonstrating that these two requirements are met."145 
68. In our view, the central issue raised in this appeal is whether the terms "to secure compliance 
with laws or regulations" in Ar ticle XX(d) of the GATT 1994 encomp ass WTO-inconsistent measures 
applied by a WTO Member to secure compliance wi th another WTO Member's obligations under an 
international agreement. 
                                                      
143Appellate Body Report, Korea – Various Measures on Beef , para. 157. 
144Ibid. 
145Ibid. (referring to Appellate Body Report, US – Gasoline , pp. 22-23, DSR 1996:I, 3, at 20-21;   
Appellate Body Report, US – Wool Shirts and Blouses , pp. 14-16, DSR 1997:I, 323, at 335-337;  and GATT 
Panel Report, US – Section 337 , para. 5.27). WT/DS308/AB/R 
Page 28  
 
69. In order to answer this question, we consider it more helpful to begin our analysis with the 
terms "laws or regulations" in Article XX(d) (which we consider to be pivotal here) rather than to 
begin with the analysis of the terms "to secure co mpliance", as did the Panel.  The terms "laws or 
regulations" are generally used to refer to domestic laws or regula tions.  As Mexico and the United 
States note, previous GATT and WTO disputes in wh ich Article XX(d) has been invoked as a defence 
have involved domestic measures.
146  Neither disputes that the expression "laws or regulations" 
encompasses the rules adopted by a WTO Member's legislative or ex ecutive branches of government.  
We agree with the United States that one does not immediately think about international law when 
confronted with the term "laws" in the plural.147  Domestic legislative or regulatory acts sometimes 
may be intended to implement an international agreemen t.  In such situations, the origin of the rule is 
international, but the implementing inst rument is a domestic law or regulation.148  In our view, the 
terms "laws or regulations" refer to rules that fo rm part of the domestic legal system of a WTO 
Member.149  Thus, the "laws or regulations" with which the Member invoking Article XX(d) may seek 
to secure compliance do not include obligations of  another  WTO Member under an international 
agreement. 
70. The illustrative list of "laws or regulations" pr ovided in Article XX(d) supports the conclusion 
that these terms refer to rules that form part of the domestic legal system of a WTO Member.150  This 
list includes "[laws or regulations] relating to cu stoms enforcement, the enforcement of monopolies 
operated under paragraph 4 of Artic le II and Article XVII, the protection of patents, trade marks and 
copyrights, and the prevention of deceptive practices ".  These matters are typically the subject of 
domestic laws or regulations, even though some of these matters may also be the subject of 
                                                      
146United States' appellee's submission, footnote 62 to para. 39;  Mexico's response to questioning at the 
oral hearing. 
147Panel Report, footnote 419 to para. 8.193;  United States' appellee's submission, para. 31. 
148In some WTO Members, certain international rule s may have direct effect within their domestic 
legal systems without requiring implementing legislation.  In such circumstances, these rules also become part 
of the domestic law of that Member.   
 149The European Communities notes that: 
[i]t is entirely possible that international agreements may be incorporated 
into the domestic legal order in such a way that they can be invoked as 
against individuals, and enforce[d] against them. If this is the case, the 
international agreement, albeit international in origin, may be regarded as 
having become an integral part of the domestic legal order of such Member, 
and thus a law or regulation within th e meaning of Article XX (d) [of the] 
GATT [1994].  
(European Communities' third participant's submission, para. 41) 
150The participants agree that the list in Article XX (d) is not exhaustive. (See Mexico's response to 
Question 67 posed by the Panel after the second Panel meeting;  Panel Report, p. C-61;  United States' response 
to Question 31 posed by the Panel after the first Panel meeting;  Panel Report, p. C-42;  and United States' 
response to Question 67 posed by the Panel after the second Panel meeting;  Panel Report, pp. C-79-C-80) WT/DS308/AB/R 
Page 29 
 
 
international agreements.  The matters listed as ex amples in Article XX(d) involve the regulation by a 
government of activity undertaken by a variety of  economic actors (e.g., private firms and State 
enterprises), as well as by government agencies.  For example, matters "relating to customs 
enforcement" will generally involve rights and oblig ations that apply to importers or exporters, and 
matters relating to "the protection of patents, trad e marks and copyrights" will usually regulate the use 
of these rights by the intellectual property right holders and other private actors.151  T h u s ,  t h e  
illustrative list reinforces the notion that  the terms "laws or regulations" refer to rules that form part of 
the domestic legal system of a WTO Member and do not extend to the international obligations of 
another WTO Member.152 
71. Our understanding of the terms "laws or regula tions" is consistent with the context of 
Article XX(d).  As the United States points out153, other provisions of the covered agreements refer 
expressly to "international obligations" or "internatio nal agreements".  For example, paragraph (h) of 
Article XX refers to "obligations under any inte rgovernmental commodity agreement".  The express 
language of paragraph (h) would seem to contradict Mexico's suggesti on that international agreements 
are implicitly included in the terms "laws or regulations".154  The United States and China also draw 
our attention to Article X:1 of the GATT 1994155, which refers to "[l]aws, regulations, judicial 
decisions and administrative rulings" and to "[a]gr eements affecting international trade policy which 
are in force between a government … of any Member  and the government … of any other Member".  
Thus, a distinction is drawn in the same provision between "laws [and] regulations" and "international 
agreements".  Such a distinction would have been  unnecessary if, as Mexico argues, the terms "laws" 
and "regulations" were to encompass international ag reements that have not been incorporated, or do 
not have direct effect in, the domestic legal system of the respective WTO Member.  Thus, Articles X:1 and XX(h) of the GATT 1994 do not le nd support to interpreting the terms "laws or 
                                                     
 
151European Communities' third participant's submission, para. 38. 
152The United States also points out that the terms "laws or regulations" are qualified by the 
requirement that they not be "inconsistent" with the GATT 1994.  The United States explains that the word 
"inconsistent" appears elsewhere in the GATT 1994 in connection with domestic measures.  In contrast, when 
referring to treaty obligations, the WTO agreements use the word "conflict". (United States' appellee's 
submission, para. 33)  In our view, this distinction s upports the position that the terms "laws or regulations" 
refer to the rules that are part of the domestic legal system of a WTO Member, including international rules that have been incorporated or have direct effect in a particular domestic legal system. 
153United States' appellee's submission, para. 34. 
154If an international commodity agreement contains GATT-inconsistent provisions, Article XX(h) 
would still serve the purpose of justifying such an ag reement, even if it could not be justified under 
Article XX(d). 
155United States' appellee's submission, para. 35;  Ch ina's third participant's submission, para. 21. WT/DS308/AB/R 
Page 30  
 
regulations" in Article XX(d) as including the interna tional obligations of a Member other than that 
invoking the provision.
156  
72. We turn to the terms "to secure compliance", which were the focus of the Panel's reasoning 
and are the focus of Mexico's appeal.  The term s "to secure compliance" speak to the types of 
measures that a WTO Member can seek to justify u nder Article XX(d).  They relate to the design of 
the measures sought to be justified.157  There is no justification under Article XX(d) for a measure that 
is not designed "to secure compliance" with a Memb er's laws or regulations.  Thus, the terms "to 
secure compliance" do not expand the scope of th e terms "laws or regulations" to encompass the 
international obligations of another WTO Memb er.  Rather, the terms "to secure compliance" 
circumscribe the scope of Article XX(d). 
73. Mexico takes issue with several aspects of th e Panel's reasoning related to the interpretation 
of the terms "to secure compliance".  We recall that , according to the Panel, "[t]he context in which 
the expression is used makes clear that 'to secure co mpliance' is to be read as meaning to enforce 
compliance."158  The Panel added that, in contrast to enforcement action taken within a Member's 
legal system, "the effectiveness of [Mexico's] measures in achieving their stated goal—that of 
bringing about a change in the behaviour of  the United States—seems ... to be inescapably 
uncertain."159  Thus, the Panel concluded that "the outcome  of international countermeasures, such as 
those adopted by Mexico, is inherently unpredictable".160 
74. It is Mexico's submission that the Panel erred in requiring a degree of certainty as to the 
results achieved by the measure sought to be justified.161  Mexico also asserts that the Panel, in its 
reasoning, incorrectly relied on the Appellate Body Report in US – Gambling .162  We agree with 
                                                      
156The Panel noted that there are examples of intern ational "regulations" within the WTO agreements 
themselves.  The Panel cited, as examples, Article VI of the Marrakesh Agreement Establishing the World 
Trade Organization  that refers to "regulations" to be adopted by the Ministerial Conference, and Article VII 
that refers to "financial regulations " to be adopted by the General Council and to the "regulations" of the 
GATT 1947. (Panel Report, footnotes 423 and 424 to para. 8.195)  Article XXIV of the GATT 1994 also uses 
the term "regulations" when referring to rules applied by free trade areas or customs unions.  Nevertheless, we agree with Japan that, in these inst ances, the context makes it clear that the regulations are international in 
character. (Japan's third particip ant's submission, paras. 17-19) 
157Appellate Body Report, Korea – Various Measures on Beef , para. 157. 
158Panel Report, para. 8.175. 
159Ibid., para. 8.185. 
160Ibid., para. 8.186.  See also Mexico's appellant's submission, paras. 104-116. 
161The European Communities and Japan agree with Me xico that the Panel erred in implying that 
whether a measure falls within the meaning of the phra se "to secure compliance" depends on the degree of 
certainty that the measure will achieve its intended  results. (European Communities' third participant's 
submission, para. 26;  Japan's third participant's submission, para. 10)   
162Panel Report, paras. 8.187-8.188 (referring to Appellate Body Report , US – Gambling , para. 317). WT/DS308/AB/R 
Page 31 
 
 
Mexico that the  US – Gambling  Report does not support the conclusion that the Panel sought to draw 
from it.  The statement to which the Panel referred w as made in the context of the examination of the 
"necessity" requirement in Article XIV(a) of the  General Agreement on Trade in Services , and did 
not relate to the terms "to secure compliance".  As  the Appellate Body has explained previously,  
"the contribution made by the compliance measure to the enforcement of the law or regulation at issue"
163 is one of the factors that must be weighed and balanced to determine whether a measure is 
"necessary" within the meaning of Article XX(d).  A measure that is not suitable or capable of 
securing compliance with the relevant laws or regul ations will not meet the "necessity" requirement.  
We see no reason, however, to derive from the Appe llate Body's examination of "necessity", in  
US – Gambling , a requirement of "certainty" applicab le to the terms "to secure compliance".164  In our 
view, a measure can be said to be designed "to secure compliance" even if the measure cannot be 
guaranteed to achieve its resu lt with absolute certainty.165  Nor do we consider that the "use of 
coercion"166 is a necessary component of a measure designed "to secure compliance".  Rather, 
Article XX(d) requires that the design of the meas ure contribute "to secur[ing] compliance with laws 
or regulations which are not inconsistent  with the provisions of" the GATT 1994. 
75. Nevertheless, while we agree with Mexico that the Panel's emphasis on "certainty" and 
"coercion" is misplaced, we consider that Mexico's  arguments miss the point.  Even if "international 
countermeasures" could be described as intended "t o secure compliance", what  they seek "to secure 
compliance with"—that is, the international oblig ations of another WTO Member—would be outside 
the scope of Article XX(d).  This is because  "laws or regulations" within the meaning of 
Article XX(d) refer to the rules that form part  of the domestic legal order of the WTO Member 
invoking the provision and do not include the international obligations of  another  WTO Member. 
                                                      
163Appellate Body Report, Korea – Various Measures on Beef , para. 164. 
164We note that, at the request of the United States, the Panel clarified in the interim review phase that: 
… its reasoning does not focus on wh ether the achievement of Mexico's 
objective through the measures at  issue is certain or uncertain .  Rather, the 
Panel considers that international countermeasures (as the ones allegedly 
imposed by Mexico) are intrinsically unable to secure  compliance of laws 
and regulations.  In contrast, national measures are, beyond particular 
factual considerations, usually in a pos ition to achieve [] that objective, 
through the use of coercion , if necessary. 
(Panel Report, para. 6.12) (original italics;  underlining added) 
165The European Communities notes that "even within the domestic legal order of WTO Members, 
enforcement of laws and regulations may not simply be taken for granted, but may depend on numerous 
factors". (European Communities' third participant's submission, para. 28) 
166Panel Report, para. 8.178. WT/DS308/AB/R 
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76. Mexico finds support for its interpretation in the Appellate Body's rulings in  US – Shrimp  
and US – Shrimp (Article 21.5 – Malaysia) .
167  We fail to see how these rulings support Mexico's 
position.  In those cases, the United States sought to  justify its measures under Article XX(g) of the 
GATT 1994, and the measures at issue were domes tic laws and regulations of the United States.168  
The reference to the Inter-Ameri can Convention for the Protection and Conservation of Sea Turtles 
(the "Inter-American Convention") was made in the context of the examination of whether the 
measures constituted "a means of arbitrary or unj ustifiable discrimination between countries where 
the same conditions prevail" for pur poses of the chapeau of Article XX.169  The United States, in those 
cases, did not argue that its measures were justif ied under Article XX(d) because they were intended 
to secure compliance with the obligations of anot her Member under the Inter-American Convention.  
In the present case, Mexico seeks to justify its me asures under paragraph (d) of Article XX, and not 
under paragraph (g).  Moreover, Mexico not only re fers to the NAFTA in relation to the chapeau of 
Article XX, but also seeks justification for its meas ures under paragraph (d) on the basis that they are 
allegedly intended to secure compliance with  the United States' NAFTA obligations. 
77. We observe, furthermore, that Mexico's interp retation of Article XX(d) disregards the fact 
that the GATT 1994 and the DSU specify the actions that a WTO Member may take if it considers 
that another WTO Member has acted inconsistent ly with its obligations under the GATT 1994 or any 
of the other covered agreements.  As the United States points out170, Mexico's interpretation of the 
terms "laws or regulations" as including internatio nal obligations of another WTO Member would 
logically imply that a WTO Member could invoke Ar ticle XX(d) to justify al so measures designed "to 
secure compliance" with that other Member's WTO ob ligations.  By the same logic, such action under 
Article XX(d) would evade the specific and detaile d rules that apply when a WTO Member seeks to 
take countermeasures in response to another Me mber's failure to comply with rulings and 
recommendations of the DSB pursuant to Article  XXIII:2 of the GATT 1994 and Articles 22 and 23 
of the DSU.171  Mexico's interpretation would allow WTO Members to adopt WTO-inconsistent 
measures based upon a unilateral  determination that another Member has breached its WTO 
obligations, in contradiction with Articles 22 and 23 of the DSU and Article XXIII:2 of the 
GATT 1994. 
                                                      
167Mexico's appellant's submission, paras. 174-178. 
168See Appellate Body Report, US – Shrimp , paras. 2-6. 
169See ibid., paras. 169-172;  and Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia ), 
para. 128.  See also United States' appellee's submission, para. 108. 
170United States' appellee's submission, para. 37. 
171Mexico's interpretation would also undermine the limitations in paragraphs 3 and 4 of Article 22 as 
to the magnitude and the trade sectors in wh ich such countermeasures could be taken. ( Ibid., paras. 37-38) WT/DS308/AB/R 
Page 33 
 
 
78. Finally, even if the terms "laws or regulations" do not go so far as to encompass the WTO 
agreements, as Mexico argues172, Mexico's interpretation would imply that, in order to resolve the 
case, WTO panels and the Appellate Body would have  to assume that there is a violation of the 
relevant international agreement (such as the NAFTA) by the complain ing party, or they would have 
to assess whether the relevant international agre ement has been violated.  WTO panels and the 
Appellate Body would thus become adjudicators of non-WTO disputes.173  As we noted earlier174, this 
is not the function of panels and the Appellate Body as intended by the DSU.175 
79. For these reasons, we agree with the Panel that Article XX(d) is not available to justify WTO-
inconsistent measures that seek "to secure complia nce" by another WTO Member with that other 
Member's international obligations.  In sum, while  we agree with the Panel's conclusion, several 
aspects of our reasoning set out above differ from the Pa nel's own reasoning.  First, we conclude that 
the terms "laws or regulations" cover rules that form part of the domestic legal system of a WTO 
Member, including rules deriving from international agre ements that have been incorporated into the 
domestic legal system of a WTO Member or have direct effect according to that WTO Member's legal system.
176  Second, we have found that Article XX(d) do es not require the "use of coercion" nor that 
the measure sought to be justified results in secu ring compliance with absolute certainty.  Rather, 
Article XX(d) requires that the measure be designed "to secure compliance with laws or regulations which are not inconsistent with  the provisions of" the GATT 1994.
177  Finally, we do not endorse the 
Panel's reliance on the Appellate  Body's interpretation in US – Gambling  of the term "necessary" to 
interpret the terms "to secure compliance" in Article XX(d).178 
                                                      
172At the oral hearing, Mexico argued that the terms "laws or regulations" would not include the WTO 
agreements because the latter are  lex specialis . 
173Article 3.2 of the DSU states that the WTO's disput e settlement system "serves to preserve the rights 
and obligations of Members under the covered agreements , and to clarify the existing provisions of those 
agreements ". (emphasis added)   
174See  supra , para. 56. 
175We note that, in its analysis, the Panel also referred to the negotiating history of the GATT 1947, and 
particularly to the rejection of a proposal presented by  India during the negotiations on the International Trade 
Organization (the "ITO") Charter according to which Members would be permitted to justify, on a temporary 
basis, retaliatory measures under Article XX. (See Panel Report, para. 8.176 (referring to ITO Doc. E/PC/T/180 
(19 August 1947), p. 97;  and "Havana Charter for an International Trade Organization", United Nations 
Conference on Trade and Employment, Final Act and Related Documents (Lake Success, New York, April 
1948), pp. 33-34) 
176See  supra,  paras. 69-71. 
177See  supra,  para. 74. 
178See  supra,  para. 74. WT/DS308/AB/R 
Page 34  
 
80. Therefore, we  uphold , albeit for different reasons, the Pane l's conclusion, in paragraph 8.198 
of the Panel Report, that Mexico's measures do not  constitute measures "to secure compliance with 
laws or regulations", within the mean ing of Article XX(d) of the GATT 1994. 
2. Mexico's Request to Complete the Analysis
 
81. Mexico requests the Appellate Body to complete  the analysis by examining whether Mexico's 
measures are "necessary", within the meaning of Ar ticle XX(d) of the GATT 1994, and meet the 
requirements of the chapeau of that Article.179  Mexico's request is premised on the Appellate Body 
reversing the Panel's conclusion that the measures are not designed "to secure compliance with laws 
or regulations" within the meaning of Article XX(d ).  We have upheld the Panel's conclusion that 
Mexico's measures do not constitute measures "to secur e compliance with laws or regulations" within 
the meaning of Article XX(d) of the GATT 1994.  Th erefore, the premise on which Mexico's request 
is predicated is not fulfilled and, consequently, it is not necessary for us to complete the analysis as 
requested by Mexico.180 
3. Mexico's Claim under Article 11 of the DSU  181 
82. Mexico argues, "separately and in addition"182 to the previous errors, that the Panel failed to 
make "an objective assessment of the facts", as requi red by Article 11 of the DSU, in finding that 
"Mexico has not established that its measures contri bute to securing compliance in the circumstances 
of this case."183  Mexico argues that "[t]he evidence on the record demonstrates that the effects of the 
measures at issue have contributed to securing co mpliance in the circumstances of this case, by 
changing the dynamic of the NAFTA dispute and forcing the United States to pay attention to 
                                                      
179Mexico's appellant's submission, para. 138. 
180See, for example, Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , 
para. 74. 
181In its Notice of Appeal, Mexico claimed that the Panel "failed to  make an objective assessment of 
the matter before it, including the fact s of the case, inconsistently with its obligation under Article 11 of the 
DSU, with respect to Mexico's request for determinatio ns of fact, status and relevance of the NAFTA dispute 
between the parties." (Mexico's Notice of Appeal (attached as Annex I to this Report), para. 4 (referring to Panel 
Report, paras. 8.231 and 8.232) (footnote omitted))  Mexico also asserted that "in concluding that international 
countermeasures cannot qualify for co nsideration as measures designed to  'secure compliance' within the 
meaning of Article XX(d) of the GATT 1994, the Panel improperly increased the obligations of WTO Members and reduced the rights of Members under the covered agreements." ( Ibid., para. 5 (referring to Panel Report, 
paras. 8.181 and 8.186) (footnote omitted))  Mexico did no t offer arguments to support these two claims in its 
appellant's submission.  In response to questioning at the oral hearing, Mexico confirmed that it did not intend to pursue these claims further. 
182Mexico's appellant's submission, heading III.E (" independiente y adicional ").   
183Panel Report, paragraph 8.186.  See also, Mexico's Notice of Appeal, para. 3. WT/DS308/AB/R 
Page 35 
 
 
Mexico's grievances."184  The United States submits that, contrary to Mexico's contention, the Panel 
did not "ignore" arguments or evidence submitted by Mexico.185  The United States further explains 
that, in any event, Mexico's claim under Article  11 of the DSU "appears to be no more than a 
reiteration of its legal arguments that its ... measures are designed to 'secure compliance'".186 
83. In Section B.1 above, we held that Mexico's  measures do not constitute measures "to secure 
compliance with laws or regulations", within th e meaning of Article XX(d) of the GATT 1994.  
Therefore, Mexico's claim under Article 11 of th e DSU is predicated on an interpretation of 
Article XX(d) of the GATT 1994 that we have found to  be incorrect.  Since Mexico's measures cannot 
be justified under Article XX(d) as a matter of law , we reject Mexico's claim under Article 11 of the 
DSU. 
4. Conclusion  
84. For the reasons set out above, we uphold  the Panel's conclusion, in  paragraphs 8.204 and 9.3 
of the Panel Report, that "Mexico has not establishe d that the challenged measures are justified under 
Article XX of the GATT 1994". 
VI. Findings and Conclusions 
85. For the reasons set out in this Report, the Appellate Body: 
(a) upholds  the Panel's conclusion, in paragraphs 7.1, 7.18, and 9.1 of the Panel Report, 
that, "under the DSU, it ha[d] no discretion to decline to exercise its jurisdiction in the case that ha[d] been brought before it"; 
(b) upholds
 the Panel's conclusion, in paragraph 8. 198 of the Panel Report, that Mexico's 
measures do not constitute measures "to secure compliance with laws or regulations", 
within the meaning of Article XX(d) of the GATT 1994; 
(c) rejects  Mexico's claim that the Panel failed to  fulfil its obligations under Article 11 of 
the DSU, in finding, in paragraph 8.186 of the Panel Report, that "Mexico has not 
established that its measures contribute to  securing compliance in the circumstances 
of this case";  and 
                                                      
184Mexico's appellant's submission, para. 167 (" Las pruebas en el expediente demuestran que las 
medidas en cuestión no están desprovistas de efectos que contribuyen a lograr la observancia en las 
circunstancias de este caso, cambiando la dinámica en la controversia derivada del TLCAN y forzando a Estados Unidos a prestar atención a los agravios de México "). 
185United States' appellee's submission, para. 118. 
186Ibid. WT/DS308/AB/R 
Page 36  
 
(d) as a consequence, upholds
 the Panel's conclusion, in pa ragraphs 8.204 and 9.3 of the 
Panel Report, that "Mexico has not established that the challenged measures are 
justified under Article XX of the GATT 1994". 
86. The Appellate Body recommends  that the Dispute Settlement Body request Mexico to bring 
the measures that were found in the Panel Report to be inconsistent with the  General Agreement on 
Tariff and Trade 1994  into conformity with its ob ligations under that Agreement. 
 
 Signed in the original in Geneva th is 8th day of February 2006 by:  
 
    
_________________________ 
Yasuhei Taniguchi 
Presiding Member 
 
 
 
  
 _________________________ _________________________ 
 Merit E. Janow Giorgio Sacerdoti 
 Member Member 
 WT/DS308/AB/R 
Page 37 
 
 
ANNEX I  
 
 WORLD TRADE  
ORGANIZATION  WT/DS308/10 
6 December 2005 
 (05-5832) 
 Original:   Spanish 
   
MEXICO – TAX MEASURES ON SOFT DRINKS AND  
OTHER BEVERAGES 
 
Notification of an Appeal by Mexico u nder Article 16.4 and Article 17 of the 
 
Understanding on Rules and Procedur es Governing the Settlement of  
Disputes (DSU) and Rule 20(1) of the Working  
Procedures for Appellate Review  
 
  The following notification dated 6 December 2005, from the delegation of Mexico, is being 
circulated to Members. 
_______________ 
 
  Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  ("DSU") and Rule 20 of the Working Procedures for Appellate Review , 
Mexico hereby notifies its decision to appeal to the Appellate Body certain issues of law dealt with in 
the Report of the Panel on Mexico – Tax Measures on Soft Drinks and Other Beverages  
(WT/DS308/R) (the "Panel Report") and certain legal interpretations developed by the Panel in this 
dispute.  1. Mexico seeks review by the Appellate Body of the Panel's legal conclusion that it has no 
discretion to decline to exercise jurisdiction in this  case and its determination that, even if it had such 
discretion, the facts in the record do not justify a re fusal by the Panel to exercise jurisdiction in this 
case.  This conclusion is in error and is based on erroneous findings on issues of law and related legal 
interpretations concerning Articles 3, 7, 11 and 19 of the DSU and Articles XXII and XXIII of the 
GATT 1994.  These errors are contained, inter alia , in paragraphs 7.1 to 7.18, 8.215 to 8.230 and 9.1 
of the Panel Report. 
 2. Mexico seeks review by the Appellate Body  of the Panel's legal conclusion that the 
challenged tax measures are not justified under Article XX of the GATT 1994 as measures necessary 
to secure United States compliance with laws or regulations which are not inconsistent with the 
provisions of the GATT 1994.  This conclusion is in error and is based on erroneous findings on 
issues of law and related legal interpretations c oncerning Article XX of the GATT 1994.  Paragraphs 
8.168 to 8.204 and 9.3 of the Panel Report, among others, contain such errors, including the 
following:  WT/DS308/AB/R 
Page 38  
 
(a) The Panel's interpretation and application of the expression "to secure compliance" in 
Article XX(d) of the GATT 1994 and its conclusion that it does not apply to measures taken by a Member in order to induce another Member to comply with obligations owed to it under a non-WTO treaty.
1 
(b) The Panel's conclusion that the challenged tax measures "are not designed to secure 
compliance" within the meaning of Article XX(d) of the GATT 1994 and are not 
eligible for consideration unde r Article XX(d) of the GATT 1994.2 
(c) The Panel's interpretation and applica tion of the phrase "laws or regulations" 
contained in Article XX(d) of the GATT 1994 and its conclusion that this phrase does not cover international treaties such as NAFTA.
3 
(d) The Panel's failure to consider whether the Mexican measures are "necessary" to 
secure compliance with a law that is not inconsistent with the provisions of the 
GATT 1994.4 
3. Mexico seeks review by the Appellate Body, in  the light of DSU Article 11, of the Panel's 
conclusion that "Mexico has not established that its  measures contribute to securing compliance in the 
circumstances of this case".5  This conclusion does not reflect an objective approach to analysis of the 
available evidence on the effects of the Mexican m easures, and is inconsistent with the treatment 
given by the Panel to relevant evidence.  Accordingl y, this conclusion is inc onsistent with the Panel's 
duty to make an objective assessment of the matter before it.  4. Mexico considers that the Panel also failed to make an objective assessment of the matter 
before it, including the facts of the case, inconsis tently with its obligatio n under Article 11 of the 
DSU, with respect to Mexico's request for determin ations of fact, status and relevance of the NAFTA 
dispute between the parties.
6 
 5. Mexico also considers that, in concluding that international countermeasures cannot qualify 
for consideration as measures designed to "secure co mpliance" within the meaning of Article XX(d) 
of the GATT 1994
7, the Panel improperly increased the obligations of WTO Members and reduced 
the rights of Members under the covered agreements.  6. In the event that the Appellate Body reve rses the Panel's conclusion that Mexico's tax 
measures are not justified under Article XX(d) of the GATT 1994, Mexico requests that the Appellate 
Body complete the legal analysis under Article XX of the GATT 1994. 
  Those provisions of the covered agreements which Mexico considers the Panel to have 
interpreted or applied erroneously include Articles XX, XXII and XXIII of the GATT 1994 and 
Articles 3, 7, 11 and 19 of the DSU. 
__________ 
                                                     
 
1 Panel Report, paragraphs 8.170 to 8.181. 
2 Panel Report, paragraphs 8.182 to 8.190 and 8.197 to 8.198. 
3 Panel Report, paragraphs 8.191 to 8.197. 
4 Panel Report, paragraphs 8.199 to 8.202. 
5 Panel Report, paragraph 8.186. 
6 Panel Report, paragraphs 8.231 and 8.232. 
7 Panel Report, paragraphs 8.181 and 8.186.