RESTRICTED
WORLD TRADE WT/REG/W/17/Rev.1
5February 1998
ORGANIZATION(98-0419)
Committee onRegional Trade Agreements
SYSTEMIC ISSUES RELATED TO"OTHER REGULATIONS OFCOMMERCE"
Background Note bytheSecretariat
Revision
1. AttheThirteenth Session oftheCommittee onRegional Trade Agreements, theSecretariat
wasrequested toprepare background documentation toassist theCommittee initsconsideration of
systemic issues related totheconcept of"other regulations ofcommerce". AtitsFifteenth Session,
theCommittee requested thatdocument WT/REG/W/17 befurther expanded.
2. Thisnotedeals withthedrafting history ofArticle XXIV oftheGATT 1947 andofthe
Understanding ontheInterpretation ofArticle XXIV oftheGATT 1994, withrespect tothatconcept.
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DRAFTING HISTORY OFLEGAL TEXTS
3. Regulations ofcommerce isanexpression which hasbeenusedintheGATT legaltextsonly
inconnection withregional trade agreements (RTAs).1
Article XXIV oftheGATT 1947
4. Article38ofthefirstdraftCharteroftheInternationalTradeOrganizationoftheUnitedNations,2
which dealtwithinteraliacustoms unions, already referred toother regulations ofcommerce (ORCs).3
Thissame language wasmaintained throughout thevarious versions which ledtothefinaltextof
Article XXIV oftheGATT 1947, where theexpression appears inthreecontexts inparagraphs 5and8
ofArticle XXIV:4
1Acomparable expression, trade regulations ,is,however, found inArticle XoftheGATT.
2Thisfirstdraft Charter, based mainly onaproposal bytheUnited States, wasprepared atthemeeting of
thePreparatory Committee oftheUnited Nations Conference onTrade andEmployment inLondon inOctober-
November 1946. (UN document E/PC/T/33.)
3Inaddition toORCs andduties (ortariffs), athird category ofmeasures ("margins ofpreference") was
temporarily added attheSecond Session ofthePreparatory Committee (Geneva, summer 1947), butwasleft
outfrom thefinal textoftheHavana Charter.
4Initsdefinition of"acustoms territory" intheGATT, paragraph 2ofArticle XXIV alsocontains areference
toORCs.WT/REG/W/17/Rev.1
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(a) Paragraph 5(a)requires that,inthecaseofacustoms union, orofacorresponding
interim agreement, theduties andORCs imposed attheinstitution oftheunion with
respect tothirdparties "shall notonthewhole behigher ormore restrictive thanthe
general incidence" ofthose previously "applicable intheconstituent territories".
(b) Paragraph 5(b)requires that, inthecaseofafree-trade area(FTA), orofa
corresponding interim agreement, theduties andORCs "maintained ineachofthe
constituent territories andapplicable" attheFTAformation withrespect tothirdparties
"shall notbehigher ormore restrictive than" those previously "existing inthesame
constituent territories".
(c) Paragraph 8(a)(ii) provides thateachmember ofacustoms union shallapply tothird
parties "substantially thesame" duties andORCs.
5. Theexpressionotherrestrictiveregulationsofcommerce(ORRCs )wasalsopresentinallversions
ofthetextwhich became sub-paragraphs 8(a)(i) and(b)ofArticle XXIV:
(a) Paragraph 8(a)(i) provides that,within acustoms union, duties andORRCs shallbe
eliminated withrespect to"substantially all"intra-trade or,atleast, withrespect to
"substantially all"intra-trade inoriginating products.
(b) Paragraph 8(b)provides that,inanFTA, duties andORRCs shallbeeliminated with
respect to"substantially all"intra-trade inoriginating products.
6. Theexceptions permitted tothegeneral rule,characterized bythe"except, where necessary"
language contained inbothsub-paragraphs, were, however, added onlyinHavana (with theexceptions
referring totherelevant Articles oftheHavana Charter).5Thedrafting history doesnotindicate why
Articles XI-XV andXXwereincluded inthelistofexceptions while others, inparticular Article XIX,
were notincluded.
7. On24March 1948, theCONTRACTING PARTIES signed aSpecial Protocol amending
Article XXIV oftheGATT inlightofthefinalversion ofArticles 42to44oftheHavana Charter.
Thepresent textisessentially thesameasthetextagreed tointhisSpecial Protocol. During subsequent
reviews ofthetextoftheGATT, nothing directly related tothese issues wasdiscussed.
Understanding ontheInterpretation ofArticle XXIV ofGATT 1994
8. During theUruguay Round, Article XXIV ingeneral, andORCs andORRCs inparticular,
wereconsidered intheNegotiating Group onGATT Articles. Asbackground tothediscussions on
Article XXIV, delegations benefitted from twobriefnotes bytheSecretariat describing thedrafting
history ofArticle XXIV, along withanaccount ofsalient problems thathadarisen withrespect tothe
Article 'sinterpretation andapplication.6
5Forbothcustoms unions andfree-trade areas, paragraph 8acknowledges thepossibility ofmaintaining duties
andORRCs "permitted under Articles XI,XII,XIII, XIV, XVandXX", where necessary.
6Documents MTN.GNG/NG7/W/13, of11August 1987 andMTN.GNG/NG7/W/13/Add.1, of10August
1988.WT/REG/W/17/Rev.1
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9. Inasummary review oftheliterature onpreferential arrangements,7theSecretariat highlighted
thefactthat,ingeneral, studies onpreference regimes hadconcentrated onaspects thatwereamenable
toquantitativeanalysis(mainlytariffs),leavingasideinstitutionalandotheraspectsofsucharrangements.
Various proposals were tabled toaddress some ofthese, inparticular therelationship between
Article XXIV provisions andemerging rules negotiated inother contexts (e.g., rules oforigin and
standards).
10. ANotebytheChairman, dated 21May1990, proposed aninterpretation oftheterm"duties
andother regulations ofcommerce" inArticle XXIV:5 soastocover "allborder measures taken in
connection withimportation orexportation which haveadifferential impact onimported products as
compared todomestic products." Thisproposal gaverisetoconcerns withrespect totheinclusion
ofareference to"exportation", tothepossible coverage of"border measures" (inparticular whether
theyincluded health andsafety standards) andtotheimplications ofthephrase "which haveadifferential
impactonimportedproductsascomparedtodomesticproducts"vis-à-visthenationaltreatmentprinciple.
Itwasalsoasserted bysome thatthephrases "duties andother restrictive regulations ofcommerce"
and"substantially thesame" inArticle XXIV:8 wererelated tothisandthatthiswould require common
quotas inacustoms union.
11. Informal consultations wereheldinSeptember 1990withaviewtofinalizing adraftdecision
fortheBrussels Ministerial Meeting. These showed again twodistinct approaches toORCs in
Article XXIV:5 -i.e.either toconstrue thetermnarrowly through anindicative listortomaintain
ageneral definition sothatawiderange oftrade policy instruments which might haveatrade impact
could betaken intoaccount. Therelationship between paragraphs 4and5ofArticle XXIV was
underscored, onthegrounds thattherequirement nottoraisebarriers tothetradeofthirdparties referred
directly toduties andORCs.8Thepoint wasalsomade thattheeffects ofORCs could prove difficult
toquantify. Because timewasperceived astoolimited toreach agreement onthematter, itwasproposed
thatdiscussion shifttoArticle XXIV:6, which would entail different criteria from Article XXIV:5.
12. Adraftdecision onArticle XXIV, based onthese informal consultations, wascirculated on
24September 1990. Itcontained revised proposals onORCs andORRCs, whereby "duties andother
regulations ofcommerce" under Article XXIV:5 weredefined ascovering "allduties andcharges and
measures imposed onorinconnection withimportation orexportation"; italsoincluded arecognition
that"theoverall assessment oftheincidence ofthose other regulations ofcommerce forwhich
quantification andaggregation aredifficult" might "involve acase-by-case examination".
13. TheChairman 'sNote ofMay1990 alsoproposed thefollowing paragraph concerning the
exclusion ofArticle XIXsafeguard actions from thepermitted exceptions under Article XXIV:8:
"Itisrecognized thatwhen anArticle XIXaction istaken byamember ofacustoms
union orfree-trade area, orbythecustoms union onbehalf ofamember, itneednot
beapplied toother members ofthecustoms union orfree-trade area. However, when
taking suchaction itshould bedemonstrated thattheserious injury giving risetothe
7Document MTN.GNG/NG7/W/54.
8Inthatsame series ofinformal consultations, delegates discussed aproposal foramechanism toredress
serious adverse affects stemming from theformation ofRTAs; itwaspointed outthatthe1985 Panel report
on"EC-Tariff Treatment onImports ofCitrus Products from Certain Countries intheMediterranean Region",
which hadnotbeen adopted, suggested thattheavailability ofArticles XXII andXXIII might notbesufficient
forproblems arising under Article XXIV (SeeL/5776, unadopted, dated 7February 1985, paras. 4.15-4.16 and
4.18-4.19).WT/REG/W/17/Rev.1
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invocation ofArticle XIXiscaused byimports fromnon-members; anyinjury deriving
from imports fromother members ofthecustoms union orfree-trade areacannot be
taken intoaccount injustifying theArticle XIXaction."
14. Thelanguage inthefirstsentence wasfound toopermissive bydelegations which heldtheview
thatArticle XIXaction should notbeapplied toothermembers ofthecustoms union andthattheabsence
ofanyreference toArticle XIXinparagraph 8supported thisview. Itwasalsosuggested thatthe
absence ofareference toArticle XIXinArticle XXIV:8 could beexplained bythetemporary nature
ofanArticle XIXaction.9,10
15. Arevised version ofthisparagraph wasalsoincluded intheSeptember 1990 draftdecision.
Itread:
"When anArticle XIXaction istaken byamember ofacustoms union orfree-trade
area,orbythecustoms union onbehalf ofamember, it[need not][shall not]beapplied
toother members ofthecustoms union orfree-trade area. However, when taking such
action itshould bedemonstrated thattheserious injury giving risetotheinvocation
ofArticle XIXiscaused byimports from non-members; anyinjury deriving from
imports fromother members ofthecustoms union orfree-trade areashallnotbetaken
intoaccount injustifying theArticle XIXaction."
16. Informal consultations, heldduring October 1990, showed thatpositions were stilldivided
regarding theproposed clarification ofORCs. Inthisvein, there wereopposing views astowhether
thetermincluded internal policies suchassalestaxes, price controls, etc.11With respect tothenew
wording relating toArticle XIX, while some opposed whattheyconsidered asasignificant weakening
oftheprevious version, others favoured it.Itwasalsosuggested bysome thatthisissue behandled
bytheNegotiating Group onSafeguards.
17. Arevised draftdecision, which didnotinclude anydefinition oftheterm"duties andother
regulations ofcommerce", wassubsequently putforth.12Rather, thedraftparagraph related tothe
overall assessment ofORCs 'incidence wasreworded intothelanguage which isnowcontained in
9Regarding theArticle XXIV:8 obligation toeliminate duties andother restrictive regulations ofcommerce,
theSecretariat 'sNote of10August 1988 stated: "Itcannot beassumed thatthefailure toinclude Article XIX
inthelistofexceptions contained inArticle XXIV:8 wasanoversight onthepartofthedrafters oftheGeneral
Agreement, butrather thatthiswasadeliberate omission."
10Both intheGATT andintheWTO, thefactthatArticle XXI(Security Exceptions) isnotincluded inthe
exceptions listofArticles XXIV:8(a)(i) andXXIV:8(b) oftheGATT hasbeen presented bysome delegations
tosupport theview thatthatlistisonlyillustrative, andnotexhaustive. IntheUruguay Round negotiations on
trade inservices, theArticle oneconomic integration included alsoalistofpermitted exceptions tointra-trade
liberalization. While theDecember 1991 textoftheGeneral Agreement onTrade inServices (GATS) didnot
include inthecorresponding exception listtherelevant Article (XXIV bis)-andthatdespite thefactthat,bythat
time, security exceptions were already contained inthatArticle -thisArticle wasincluded intheexceptions list
oftheGATS Final Acttext. Thisisasignificant distinction between Article XXIV oftheGATT 1994 andArticle
VoftheGATS. Forabackground onsome elements ofthedrafting history oftheGATS Article oneconomic
integration, seedocument WT/REG/W/21/Rev.1.
11Discussion ongeneral incidence focused onthetariff aspects oftheassessment, withtheideatolookat
trade flows alsoputforth.
12Therevised draft decision, dated 18October 1990, wasattached totheNote ontheMeeting of1,15and
19October 1990, Negotiating Group onGATT Articles (document MTN.GNG/NG7/22).WT/REG/W/17/Rev.1
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paragraph 2oftheUnderstanding ontheInterpretation ofArticle XXIV oftheGATT 1994 (the
Understanding), reading: "Itisrecognized thatforthepurpose oftheoverall assessment oftheincidence
ofotherregulations ofcommerce forwhich quantification andaggregation aredifficult, theexamination
ofindividual measures, regulations, products covered andtrade flows affected mayberequired".
18. Thetextwhich hadbeengeared toward clarifying therelationship between Article XXIV:8
andArticle XIXwasdeleted, although some oftheconcerns withsafeguard actions were translated
intofootnote 1oftheAgreement onSafeguards.
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