Itl Project 1 PDF
Itl Project 1 PDF
Itl Project 1 PDF
BHOPAL
I take this opportunity to thank everyone who helped me out in completing my project directly or
indirectly. I show a special token of gratitude towards our Miss Saubhagya Bhadkaria, Assistant
Professor, International Trade Law, without whose guidance and support, it would have been
pretty difficult to complete this project. At the end I would also like to thank my parents for their
endless support and true guidance.
I acknowledge that without their help this project would not have been seen this day.
Amrapali
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TABLE OF CONTENTS
INTRODUCTION .......................................................................................................................... 4
STATEMENT OF PROBLEM ....................................................................................................... 7
HYPOTHESIS ................................................................................................................................ 8
RESEARCH QUESTION ............................................................................................................... 9
RESEARCH OBJECTIVES ........................................................................................................... 9
RESEARCH METHODOLOGY.................................................................................................. 10
LITERATURE REVIEW ............................................................................................................. 11
Defining the Contours of the Public Morals Exception under Article XX of the GATT
1994, .......................................................................................................................................... 11
ARTCILE XX GATT 1994 .......................................................................................................... 12
PURPOSE OF GATT ARTICLE XX EXCEPTIONS ............................................................. 12
NATURE OF APPLICATION OF EXCEPTIONS OF ARTICLE XX ................................... 13
DETERMINATION OF APPLICATION OF EXCEPTION ................................................... 13
ANALYZING THE TRADE AND MORALS LINKAGE .......................................................... 14
TRADE RESTRICTIVE MEASURES: WHETHER JUSTIFIABLE OR NOT? ........................ 16
CHINA – PUBLICATIONS ..................................................................................................... 16
THE FACTS .......................................................................................................................... 16
THE ISSUE ........................................................................................................................... 17
THE DECISION .................................................................................................................... 17
CHINA – RAW MATERIALS ................................................................................................. 17
THE FACTS .......................................................................................................................... 17
THE ISSUE ........................................................................................................................... 18
THE DECISION .................................................................................................................... 18
CONCLUSION ............................................................................................................................. 20
BIBLIOGRAPHY ......................................................................................................................... 21
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INTRODUCTION
An increasingly important conflict in the realm of international trade systems is that between the
level of regulatory autonomy that member states retain and their binding commitments to the free
trade of goods and services. The evolution of the World Trade Organization (“WTO”) in
particular has been characterized by the search for the right balance between disciplining trade
restrictions and preserving regulatory autonomy. While the WTO’s main goal is to foster a fair
and open trading system for the benefit of all its members, it provides for a margin of latitude to
member countries’ sovereignty by allowing trade-restrictive measures aimed at certain national
public policy purposes. One such purpose is to protect a public moral.
(d) necessary to secure compliance with laws or regulations which are not inconsistent with the
provisions of this Agreement, including those relating to customs enforcement, the enforcement
of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of
patents, trademarks and copyrights, and the prevention of deceptive practices;
(f) imposed for the protection of national treasures of artistic, historic or archaeological value;
(g) relating to the conservation of exhaustible natural resources if such measures are made
effective in conjunction with restrictions on domestic production or consumption;
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(h) undertaken in pursuance of obligations under any intergovernmental commodity agreement
which conforms to criteria submitted to the CONTRACTING PARTIES and not disapproved by
them or which is itself so submitted and not so disapproved;*
(j) essential to the acquisition or distribution of products in general or local short supply;
Provided that any such measures shall be consistent with the principle that all contracting
parties are entitled to an equitable share of the international supply of such products, and that
any such measures, which are inconsistent with the other provisions of the Agreement shall be
discontinued as soon as the conditions giving rise to them have ceased to exist. The
CONTRACTING PARTIES shall review the need for this subparagraph not later than 30 June
1960.1
The GATT is an international agreement that establishes rules for government trade policy.
There are three core GATT disciplines. Article I requires "most-favored-nation treatment"
among GATT member governments. This means that trade treatment cannot discriminate
according to the country of origin or destination. Article III requires "national treatment." This
means that imported products cannot be treated less favorably than domestic products. Article XI
forbids quantitative restrictions, such as quotas, import bans, and export bans. Article XX
contains "General Exceptions" to these rules and to other GATT rules.
GATT article XX(a) provides an exception from GATT rules for the "protection of public
morals." The vagueness of this provision gives rise to two central questions. First, what type of
behavior implicates public morals? Is heroin use a matter of public morals? How about alcohol
or cigarette use? Can public morals differ from one country to another, or is there a uniform
international standard? Second, whose morals can be protected? It seems clear that a government
1
General agreement on tariffs and trade 1994
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can use a trade measure to protect a state's own population. But can a trade measure be used to
protect morals elsewhere? For example, would an import ban against goods made by indentured
children be GATT-legal?
Though the liberalization of trade in goods is the central objective of the General Agreement on
Tariffs and Trade 1994 (GATT 1994), Article XX makes provisions on general exceptions to the
legally binding trade liberalization obligations. Of the ten paragraphs contained under Article
XX that provide for various exceptions, the first paragraph – Article XX(a) – allows for
derogation from the obligations under the GATT 1994 if the justification for this is based on a
necessary protection of public morals. The clash between trade and morality continues to rattle
international economic relations. At issue is whether trade restrictions may be used to promote
moral goals. An important consideration in this debate is whether morality-driven trade measures
conflict with international trade rules. The General Agreement on Tariffs and Trade (GATT)
contains an exception to its rules prohibiting trade restrictions for measures "necessary to protect
public morals."
There are very few cases on the public morals exception. The U.S. – Gambling case was the first
decided case where the public morals exception was the subject matter. However, this case was
decided under the services regime in WTO law – i.e., the General Agreement on Trade in
Services. The China – Publications and Audiovisual Products case offered the opportunity for a
WTO dispute settlement panel and the Appellate Body to provide clarity on the public morals
exception as it relates to trade in goods.
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STATEMENT OF PROBLEM
The concept of public morals can be subjective with regard to the diverse societal beliefs and
philosophies. What is morally appropriate for the people of one country may not be the case for
the people of another country. Hence it becomes very difficult to objectively determine public
morality in case of a dispute between parties contenting different facets of public morals.
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HYPOTHESIS
The content of public morals can be characterized by a degree of variation, and that, for this
reason, the Members (of WTO) should be given some scope to define and apply for themselves
the concept of public morals according to their own systems and scales of values. Although
Members have 'some scope to define and apply for themselves the concept of 'public morals' in
their respective territories, according to their own systems and scales of values', this latitude does
not excuse a responding party in dispute settlement from its burden of establishing that the
alleged public policy objective at issue is indeed a public moral objective according to its value
system.
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RESEARCH QUESTION
Can exception of public moral to the article XX of GATT 1994 be invoked to justify trade
restrictive measure by a Member (of WTO)?
RESEARCH OBJECTIVES
To develop insights into the Article XX of GATT 1994
To analyze the exception of public morals under Article XX(a) of GATT 1994
To determine the scope of exception of public morals to article XX of GATT 1994 in
case trade restrictive measures.
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RESEARCH METHODOLOGY
Given the complexity of the topic I have chosen, it was essential to use a mix of qualitative and
quantitative methodologies and tools for analysis in the research. The method used in this project
is doctrinal which is based on primary and secondary data such as the GATT 1994, WTO
Analytical Index, books, journals, articles and newspaper articles.
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LITERATURE REVIEW
Defining the Contours of the Public Morals Exception under Article XX of the
GATT 1994,
(By Bader Bakhit M. AlModarra, College of Science and Theoretical Studies Saudi Electronic
University, Riyadh, Saudi Arabia)
The above article explores the contours of the public morals exception under Article XX (a)
of the GATT 1994 by engaging in analyses of the two decided cases where the issue of
public morals was a key subject matter in the dispute. It also borrows from the jurisprudence
on other exceptions under Article XX in a bid to map out the contours of the public morals
exception. This article concludes to the importance of imposition of restrictions on trade so
as to give effect to important issues like public morals, public health and environmental
protection for balancing the economic and noneconomic benefits of international trade and
other equally important values. Though the public morals exception has been challenged
under the WTO dispute settlement system on very few occasions, the possibility of it
becoming more prominent in disputes may be inevitable. Using the judicial arm of the WTO
to expand the remit of the public morals exception will evidently result in accusations of
judicial activism. The onus therefore lies on the legislative decision making bodies in the
WTO to develop international trade law in a manner that keeps it in step with possible trade
related issues like human rights and core labor standards.
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ARTCILE XX GATT 1994
As world trade continues to rapidly grow, the economic interdependence of these countries and
the rest of the world is also continuously increasing,2 presenting both a greater significance of
potential trade barriers as well as a growing challenge to national governments regarding their
control over domestic policy. This provision allows member countries to act in contravention of
their WTO obligations through measures “necessary to protect public morals.”3 The concept of
morality in the context of government regulation has been the subject of legal and philosophical
debate since as early as the seventeenth century.4
Historically, trade controls based on morality have included matters such as religion, human and
fundamental rights, and attitudes on alcohol, drugs, sexuality, bigamy, gambling, corruption in
business and politics, consumer protection, or cruelty toward animals. 5 In contrast to many of the
other general exceptions, the public morals clause—which now appears in both GATT and
GATS6—has only been invoked at the WTO Dispute Settlement Body on few occasions, and
until recently its parameters remained largely unexplored. In light of the changing dynamics of
the WTO, and in view of the recent EC—Seal Products decision, however, it is likely that the
public morals exception will be utilized more frequently as a defense of trade-restrictive
measures by member countries defending their domestic policies in the future.
2
HOEKMAN & KOSTECKI, THE POLITICAL ECONOMY OF THE WORLD TRADING SYSTEM: THE WTO
AND BEYOND 1 (3d ed. 2009).
3
GATT 1994, art. XX(b).
4
ALAN HUNT, GOVERNING MORALS: A SOCIAL HISTORY OF MORAL REGULATION (1999).
5
Steve Charnovitz, The Moral Exception in Trade Policy, 38 VA. J. INT’L L. 689, 717 (1998)
6
GATT 1994, art. XX (a) & GATS, art. XIV.
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NATURE OF APPLICATION OF EXCEPTIONS OF ARTICLE XX
As a Defense which is to be invoked only when a measure has been found to be
inconsistent with any provision of the GATT (e.g. Articles I, III, XI)
It seeks a balance between affirmative commitments and the exceptions (as opposed to
narrow interpretation of Article XX)
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ANALYZING THE TRADE AND MORALS LINKAGE
Questions of morality are implicated in numerous contemporary policy debates. Should trade to
pariah regimes like Serbia or Cuba be embargoed? Should international traffic in products made
by child labor be halted? Should local morals be able to trump economic globalization? Should
international morals be able to trump the exercise of power by local elites? Policymakers trying
to answer these questions will want to examine the potential effectiveness of trade measures as
well as their legality under international trade rules. Assessing effectiveness requires a
specification of the moral goal - for example, to prevent the abuse of young children. Once the
goal is specified, an important variable will be the number of states involved. Multilateral action
will probably be more effective if the goal is to change behavior. With unilateral action, the
potential usefulness of a trade measure can be undercut through trade diversion. As one political
scientist explained, "[a] single state may adopt what it deems to be effective measures to combat
certain evils, only to find that its policies are largely defeated by the failure of neighboring states
to adopt similar measures."
International trade law comes into the analysis in two ways. First, if a morally-motivated trade
measure violates international trade rules, then employing it anyway undermines the rule of law
and subverts values that may be dear to the country contemplating a trade measure. Second, if
the trade measure is adjudged a violation of the GATT, then the target country might retaliate if
the measure is not repealed. This could raise costs to the originating country and could change
the expected value of using the trade measure. Thus, being able to predict whether an import ban
for moral purposes will violate trade law is a critical factor in the overall analysis.
Policymakers may also want to consider the morality of interfering with consensual exchange.
As Robert W. McGee has reminded us, "any kind of trade restriction violates someone's rights."
Thus, the moral gain achieved by prohibiting certain transactions (e.g., the purchase of
pornography) needs to be balanced against the moral loss caused by denying freedom. There are
several ways that morally-based trade restrictions can be employed. First, they may seek to
"protect" the morality of the individual engaged in the trade.
For example, sale of liquor from A to B can be halted to protect the buyer B's morality (or seller
A's morality).
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Second, trade restrictions can be used to safeguard the morality of a participant in production.
Thus, photos of a child C might be banned in international trade in order to protect C even
though A and B want to trade the photos. Third, trade restrictions can be used to give moral
support to a class of individuals. For example, Country E might ban trade with Country F as a
means of protest against immoral acts by F's government against citizens of F.
In the present position where trade is in the emerging stage, there the relationship between free
trade and morality is no doubt a significant issue. This free trade and morality co-exist in a
precarious balance. However finding a proper balance between the two notions is an arduous
task. Article XX of the GATT reflects an exhaustive list of exceptions to the basic GATT
obligation, which is designed to provide the member states with flexibility in regulating the
sensitive areas like protection of public morals, of human, animal or plant life or health. A broad
interpretation of this clause might trigger excessive invocation of this exception which may
defeat the ultimate purpose of the GATT and a narrow interpretation may pose a threat to the
national sovereignty of the member states. Thus, the challenge is to find an apt interpretation of
the term ‘public morals’.
It may be recalled that the 2009 Panel Report in China- Measures Affecting Trading Rights and
Distribution Services for Certain Publications and Audiovisual Entertainment Products, was the
first occasion for a WTO panel to directly interpret the scope and meaning of measures
“necessary to protect public morals” under GATT Article XX(a). The public morals exception
could potentially make room under the realm of the WTO rules for the protection of human and
civil rights, and even animal rights, as seen in the EC—Seal Products dispute. At the same time,
a public morals doctrine that is too expansive could provide a cloak for protectionism, potentially
undermining the immense progress made toward trade liberalization and even threatening the
validity of existing trade agreements. This fear has been raised by an apparent shift in the public
morals doctrine in the WTO Appellate Body’s recent EC—Seal Products decision. While this
decision shed some further light on the public morals exception, some commentators argue that
by leaving open the definition of which public morals fall within the scope of the exception, the
Appellate Body left the doctrine with no boundaries at all, leaving the door open for validation of
protectionist measures disguised as measures intended to preserve a public moral.
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TRADE RESTRICTIVE MEASURES: WHETHER JUSTIFIABLE OR NOT?
CHINA – PUBLICATIONS7
China invoked Article XX(a) to justify an exception to a violation of China’s accession protocol.
AB held that it was possible to apply Article XX to an agreement other than the GATT if it is
incorporated (see China Accession Protocol, Article 5.1)
THE FACTS
United States challenged China’s restrictions on imports, distribution and failure to afford
national treatment to the imported products. US further contended that China violated the
responsibilities imposed under its Accession Protocol and Working Party Report that enumerates
the trading rights commitments of China. United States claimed that China has violated such
commitments by refusing to permit any foreign enterprises or foreign individuals to import the
products, but permitting only the state owned Chinese enterprises to import the products.
China challenged these arguments and stated that such system for selecting importation was
necessary to protect the public morals of the country as it provides effective mechanism to
review materials that depict violence and pornography. China asserted that the screening
responsibility given to the state owned enterprises were justified under the public morals
exception clause under Article XX (a) of the GATT and also the Accession Protocol and the
Working Party Report. However United States further challenged such arguments by holding
that the measures taken by China were not necessary “to protect public morals as there were
reasonable available WTO consistent alternatives”. It further provided that the screening of the
imports could also be conducted by foreign enterprises by developing the expertise by training
the existing personnel of such of such foreign enterprises or hiring experts. China countered
these arguments by holding that the measures were necessary with respect to the high level of
protection as desired to afford to its public morals and it also opined that the alternative cited by
the US was not a reasonably available alternative as according to China the foreign enterprises
would not understand the concept of Chinese morals and as they were not registered according to
Chin’s laws and regulations, the enterprises couldn’t be held liable for their failure to conduct
such review of offensive materials.
7
CHINA – PUBLICATIONS AND AUDIOVISUAL PRODUCTS (DS363)
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THE ISSUE
Whether a series of Chinese measures regulating activities relating to the importation and
distribution of certain publications and audiovisual entertainment products, are in violation of
GATT 1994?
THE DECISION
The Appellate Body found that, by virtue of the introductory clause of para. 5.1 of China's
Accession Protocol, China could, in this dispute, invoke Art. XX(a) to justify provisions found to
be inconsistent with China's trading rights commitments under its Accession Protocol and
Working Party Report. Apart from a finding that the Panel erred in making an intermediate
finding that a requirement in one of China's measures can be characterized as “necessary” to
protect public morals, within the meaning of Art. XX(a), the Appellate Body found that the Panel
did not err in respect of the other challenged elements of its analysis under Art. XX(a). The
Appellate Body accordingly upheld the Panel's conclusion that China had not demonstrated that
the relevant provisions were “necessary” to protect public morals, and that; as a result, China had
not established that these provisions were justified under Art. XX(a).8
China––Audiovisuals left a great deal of ambiguity regarding the meaning of public morals. The
analysis assumed, argued, that public morals may be affected by the challenged measures, and
neither the Panel nor the Appellate Body analyzed the issue of what constitutes a public moral
and whether a country may unilaterally define the term.9
THE FACTS
United States requested consultations with China with respect to China's restraints on the export
from China of various forms of raw materials. The United States cites 32 measures through
8
https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds363sum_e.pdf
9
THE PUBLIC MORALS EXCEPTION AFTER THE WTO SEAL PRODUCTS DISPUTE: HAS THE
EXCEPTION SWALLOWED THE RULES? Pelin Serpin, Columbia Business Law Review
10
CHINA – RAW MATERIALS (DS394, 395, 398)
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which China allegedly imposes restraints on the exports in question and note that there appear to
be additional unpublished restrictive measures.
The United States considers that China, through these measures as well as any amendments,
replacements, related measures, and implementing measures, is in violation of:
• Paragraphs 5.1, 5.2, 8.2, and 11.3 of Part I of the Protocol on the Accession of the
People's Republic of China (“Accession Protocol”), as well as China's obligations under
the provisions of paragraph 1.2 of Part I of the Accession Protocol (which incorporates
commitments in paragraphs 83, 84, 162, and 165 of the Report of the Working Party on
the Accession of China).
The United States considers that the measures also appear to nullify or impair the benefits
accruing to the United States directly or indirectly under the cited agreements.
THE ISSUE
Export restraints imposed on the different raw materials in form of: (i) export duties; (ii) export
quotas; (iii) export quotas management (iv) minimum export price requirements; (v) export
licensing requirements; and (vi) administration and publication of trade regulations. The
complainants identified 40 specific Chinese measures in connection with their claims.
THE DECISION
The Appellate Body upheld the Panel’s finding that there is no basis in China’s Accession
Protocol to allow the application of Art. XX to China’s obligations under para.11.3 of the
Protocol. The Panel had concluded that China’s export restraints were not justified pursuant to
Arts. XX(b) and (g). These findings were not appealed. In this context China only appealed the
Panel’s interpretation of the phrase “made effective in conjunction with” in Art. XX(g). The
Appellate Body concluded that the Panel erred and stated that these terms mean that the export
restrictions and the restrictions on domestic consumption or production “must “work
together”.11
11
China – Measures Related to the Exportation of Various Raw Materials, (DS394, 395, 398)
[18]
In both the cases the member state tried to use the public moral exception to carry out the trade
restrictive measures through imposition o export duties, export quotas, minimum export price,
etc., However the judicial evolution through these kind of cases show us that the trade
restrictive measure which are in violation of GATT 1994 and WTO principles could not be
justified by invoking the public moral exception under article XX(a) of GATT 1994.
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CONCLUSION
The public moral exception to free trade is arguably quite important enough that the original
drafters of the world trade organization constitution listed it in the list of several exceptions to
the principles of providing unfettered access to trade privileges. But for 57 years the exception
remained dormant – utilized but never formally explicated. Only recently did the doctrine re-
emerge in the US - Gambling decision. The birth of this doctrine has generated such an
excitement that the WTO finally gave greater consideration within its jurisprudence to morality
related issues such as human rights. This is evident by virtue of the position of the public moral
clause in the Article XX of the GATT.
Public moral clause has been placed at the top of the laundry list of the General exceptions.
Moreover, several countries invoke this exception clause frequently to restrict trade on the
grounds of morality. While the emergence of public moral clause doctrine is welcome, but we
should not be over optimistic as the doctrine as laid out in US – Gambling is only in the nascent
stage. Nevertheless, several questions still remain unanswered and they seek further
reconsideration on the matter. The first difficulty was in defining „public morals‟ which is
evident from both policy and textual perspectives. After all, it is better that we progress too
slowly and not tap the full potential of this newly emerging doctrine, than to move too fast in the
wrong direction and unintentionally weaken the entire system.
Amongst 164 WTO Member States, public moral could mean anything from religious views on
drinking alcohol or eating certain food to cultural attitudes towards pornography, free expression,
human rights, labor norms, women’s rights or general cultural judgments about education or
social welfare. What one society defines as public morals may have little relevance on another, at
least outside or certain core of religious or cultural traditions. A broader interpretation of the
term should not be given; as such interpretation may leave room for illegal protectionism.
Moreover, Panels while inquiring trade restrictive measures on public moral should not look into
domestic laws to check whether the State has adopted equal mechanism to protect such morals.
In this period of emerging trade, it is important to eliminate the deficiency in the clause and put
forward a more coherent interpretation of the term public moral.
[20]
BIBLIOGRAPHY
➢ General agreement on tariffs and trade 1994
READING MATERIAL
➢ https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds363sum_e.pdf
➢ https://www.uio.no/studier/emner/jus/jus/JUS5850/h16/tekster/general-exceptions.pdf
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