The Arab League Boycott and WTO Accession: Can Foreign Policy Excuse Discriminatory Sanctions?

I. INTRODUCTION The central principle of the General Agreement on Tariffs and Trade ("GATT"), now incorporated into the rules of the World Trade Organization ("WTO"), is the prohibition of discriminatory restrictions on international trade, with a particular emphasis on rooting out protectionism. However, some scholars contend that a trade restriction's validity under GATT depends not just on its substantive content but also on the motives behind its adoption. They maintain that GATT applies only to trade restrictions imposed to protect domestic industry from foreign competition or for other "economic" purposes, and not to restrictions adopted for non-economic "foreign policy" reasons.1 In this view, even overtly discriminatory trade restrictions, such as boycotts of other nations, do not fall within GATT's purview if implemented for reasons of foreign policy. While this "foreign policy" exception has been endorsed by the influential American Law Institute,2 it has otherwise received very little attention from commentators.3 Scholars have not analyzed whether the purported exception would be consistent with the text, structure and purposes of GATT. The legitimacy of the purported "foreign policy" exception is, however, now a matter of pressing concern. Saudi Arabia, the second largest economy outside the WTO system, has reached an advanced stage in accession negotiations and is expected to be admitted into the organization in the next few years. Saudi Arabia maintains a total boycott of Israel and a secondary and tertiary boycott of firms and individuals in the United States and elsewhere that trade with Israel.4 The boycott is part of the broader Arab League Boycott of Israel ("the Boycott").5 While the United States has raised the boycott issue in accession talks with Saudi Arabia, Saudi Arabia might be allowed to accede with its boycott intact. Because the Boycott appears to be at least a prima facie violation of GATT/WTO trade rules, Saudi Arabia's potential accession puts in sharp relief the question of whether trade restrictions motivated by foreign policy concerns fall within GATT's purview. The exception appears to be the only rationale under which the secondary and tertiary boycott could be reconciled with GATT obligations. Not surprisingly, Arab League members seeking to join the WTO have explicitly invoked this exception to justify the Boycott.6 For example, Algeria has declared in its accession application that "[a]s a member of the League of Arab States, Algeria applies the different degrees of the embargo decreed by this institution in 1954 with regard to products originating in Israel. This measure is of apolitical and non-commercial nature."7 This Article uses the occasion of Saudi Arabia's accession bid to examine whether GATT applies to trade restrictions imposed solely for foreign policy purposes. It finds that an exception for measures motivated by foreign policy would be inconsistent with the language, structure, usage, purpose, and history of GATT. However, some foreign policy-oriented boycotts could be sustained under specific GATT provisions, such as Article XXI's exceptions for national security. This Article then considers the implications of these findings for the WTO accession of nations, like Saudi Arabia, that adhere to the Arab League Boycott. While the discussion of the purported foreign policy exception will be general, it will often focus on the Arab League Boycott, and Saudi Arabia's role in it, as the main example. This is because the Boycott is the oldest, broadest, and most systematic set of foreign policy trade restrictions in place today and because Saudi Arabia's imminent accession makes its role in the Boycott an urgent question for international trade policy. Only the secondary and tertiary boycotts-but not the direct Boycott of Israel-would conflict with WTO rules, as Part III.B.1 explains. Thus this Article's discussion of the Arab League Boycott will focus on its secondary and tertiary elements-the parts of the Boycott that could not be easily justified under the plain text of GATT. …