Trade in goods is central to global commerce, but navigating its complexities requires understanding the exceptions under the General Agreement on Tariffs and Trade (GATT). This blog explores key provisions, including measures for conserving resources, safeguarding security, and addressing balance-of-payment issues, highlighting how trade rules adapt to support fairness and sustainability in a dynamic global landscape.
Actions pertaining to the preservation of finite natural resources
According to Article XX(g), to ascertain whether a measure is exempt from the GATT disciplines, the following three questions must be addressed:
- Does the measure have to do with protecting finite natural resources?
- Does the action have anything to do with protecting finite natural resources?
- Does the measure go into effect with domestic consumption or production limitations?
These three questions must be considered before deciding whether the measure satisfies the opening chapeau of Article XX.
The Appellate Body favours a dynamic reading of the term “exhaustible” over a static one. As a result, it encompasses not just non-living or material resources but also, for example, renewable resources. The preservation of the environment, particularly its natural resources, is another meaning of the term “conservation.”
The measure must also consider the conservation of finite natural resources. The primary goal of the measure must be conservation, and the action must be directly related to that goal.
Additionally, the policy must be implemented with domestic production or consumption limitations. Stated differently, the relevant measure needs to limit domestic and imported items. Impositions on both domestic and foreign items must be applied fairly..
Do the actions listed in Article XX(a), (b), (d), and (g) meet the requirements of Article XX's opening clause?
The last question must be addressed to ascertain if the measures do fall under the permitted exception to the GATT regulations, following the application of the pertinent tests to each of the measures under Article XX(a), (b), (d), and (g). Does the measure meet Article XX’s chapeau requirements?
The chapeau discussed how the measure is implemented. The goal of Article XX’s chapeau is to stop the misuse of the exclusions provided by the article. Applying the measure in a way that amounts to unfair or unjustified discrimination is prohibited. Three requirements must be met to ascertain whether this is the case:
- The measure must lead to discrimination;
- the discrimination must be arbitrary or morally repugnant, and
- the discrimination must occur amongst nations with similar circumstances. Discrimination may be practised
between exporting and importing Member States and between exporting and importing Member States.
Security exception—GATT
Article XXI embodies the security exemption, which permits Member States to defy GATT rules to accomplish security goals. It consists of two parts: maintaining domestic peace and security and ensuring national security. Only one case decided by a WTO panel has used the security exemption.
A Member State can withhold information it deems against its security interests under Article XXI(a). A Member State may take any action to safeguard its fundamental security interest under Article XXI(b). Such a move could be made if:
- it has to deal with the trafficking of weapons, ammunition, and war implements;
- it has to do with fissionable material or the material from which they are formed or
- it is carried out during war or other international relations emergencies.
According to one interpretation, essential security interests are related to the state’s core duties, which include maintaining law and order within the country and protecting its citizens and territory from outside threats.
Article XXI(c) allows a Member State to take security measures that could impact international commerce relations as long as the Security Council operating under the UN Charter mandates them.
Safeguard measures—GATT
Member States are exempt from the GATT’s rules under the Agreement on Safeguards and Article XIX. You can rely on this exception if:
- as a result of unforeseen developments and the effect of GATT obligations
- goods are being imported in such increased quantities and under such conditions
- to cause or threaten to cause serious injury to
- the domestic producers of the like or directly competitive products
If all of these conditions are met, Member States may remove or alter the concession or suspend the obligation entirely or partly for a restricted period and under stringent guidelines.
Free trade exception—GATT
Rules about free trade agreements and customs unions are outlined in Article XXIV of the GATT 1994 and the Understanding on the Interpretation of Article XXIV. In response, the Enabling Clause permits developed Member States to give developing nations exclusive preference. Under specific circumstances, these clauses, agreements, and rulings permit Member States to depart from GATT norms.
Balance of payment exception—GATT
Articles XII and XVIII give Member States the authority to limit the amount of valuable commodities that can be imported. Quotas are enforced to protect their balance of payments and external financial position. The 1979 Tokyo Decision on Trade Measures Taken for Balance-of-Payment Purposes also provides other conditions. The GATT 1994 Understanding on Balance of Payment Provision adds to this.
Waiver exception—GATT
According to Article XXV:5, a Member State may waive an obligation placed on it under extraordinary circumstances. This only applies when no other GATT provision may be depended upon. Furthermore, such a waiver can only be relied upon if it receives a two-thirds majority vote, with more than half of the Member States constituting that majority.
If you need further guidance, don’t hesitate to reach out to Frei Solicitors. Schedule your complimentary 30-minute consultation with Hakan Doğancı today.
