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Journal of International Economic Law 7(1), 109–142 # Oxford University Press 2004, all rights reserved

the puzzle of wto safeguards and

regional trade agreements
Joost Pauwelyn*

abstract
So far WTO jurisprudence has not resolved the puzzle of how WTO
Members that are part also of a regional trade agreement (such as NAFTA or
MERCOSUR) should conduct safeguard investigations and apply eventual
safeguards in line with WTO rules. Can or must they exclude regional imports
from the injury determination? Can or must they apply the eventual safeguard
only to third parties, or are they under an obligation rather to apply all
safeguards on a non-discriminatory basis? Those are the questions examined
in this paper. The paper refocuses some of the attention to GATT Article
XIX and criticizes the Appellate Body’s requirement of parallelism as well as
its jurisprudence under GATT Article XXIV. It also offers an alternative way
forward and ends with a list of options for WTO safeguards by members of
customs unions or free trade areas.

introduction
What are the safeguard options, under WTO rules, for a WTO Member that
is part also of a preferential trade arrangement? For example, when the United
States decides to impose import restrictions on steel to safeguard the US steel
industry from serious injury, can it exclude Mexican and Canadian steel? Or
rather, must it exclude these NAFTA imports to ensure the very qualification
of NAFTA as a ‘free trade area’? Or conversely, is the United States
prohibited from favoring its NAFTA partners given the blunt statement in the
WTO Agreement on Safeguards that ‘[s]afeguard measures shall be applied
to a product being imported irrespective of its source’?1
Those are the questions that this paper tries to answer. They were raised in
five out of six Appellate Body proceedings under the Agreement on
Safeguards so far,2 but each time skillfully (though not always convincingly)
avoided in the final Appellate Body ruling.
*
Associate Professor, Duke Law School, formerly with the Legal Affairs Division and the Appellate
Body Secretariat of the WTO. E-mail: pauwelyn@[Link]. I would like to thank Gabrielle
Marceau, the participants at the WTO Seminar on Regional Trade Agreements, Geneva, 14
November 2003, and the JIEL editorial board for very useful comments. All errors remain mine.
1
Article 2.2 of the Agreement on Safeguards, emphasis added.
2
These six cases are: (1) Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear,
WT/DS121/AB/R, adopted 12 January 2000 (‘Argentina – Footwear (EC)’); (2) Appellate Body
Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products (‘Korea – Dairy’),
WT/DS98/AB/R, adopted 12 January 2000; (3) Appellate Body Report, United States – Definitive

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The analysis begins with a reminder of why the WTO permits safeguards in
the first place, focusing on GATT Article XIX, ‘unforeseen developments’
and the existence of prior GATT concessions (Section I). I next examine
Articles 2, 4 and 5 of the Agreement on Safeguards and the requirements and
limits they impose on the origin of imports to be (1) examined in a safeguards
investigation (Section II) and (2) made subject to any eventual safeguard
measure (Section III). Section IV sets out and criticizes the requirement
developed in case law of ‘parallelism’ between the imports investigated, on the
one hand, and the imports eventually made subject to the safeguard, on the
other. Finally, Section V analyses how GATT Article XXIV on regional trade
agreements3 affects the possibility for WTO Members to impose safeguards.
In conclusion, I summarize the different safeguard options available to WTO
Members that are part also of a preferential trade arrangement.
Importantly, this paper is confined to safeguard measures permitted under
WTO rules. Many regional trade agreements include their own safeguard
mechanism limited to intra-regional trade and focused quite often on
safeguard measures permitted only during a transitional period.4 Additional
safeguard options under such intra-regional mechanisms are not covered in
this paper. Nonetheless, their consistency with WTO rules is addressed in
Section IV.A.

i. why permit safeguards in the first place and how this

may rule out regional imports as a basis for wto
safeguards
The philosophy behind safeguards is captured in the very first paragraph of
GATT Article XIX, the original GATT provision that allows the imposition
of safeguards in the following circumstances:
if, as a result of unforeseen developments and of the effect of the obligations incurred by
a contracting party under this Agreement, including tariff concessions, any
product is being imported into the territory of that contracting party in such
increased quantities and under such conditions as to cause or threaten serious
injury to domestic producers. . . (emphasis added).

Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R,
adopted 19 January 2001 (‘US – Wheat Gluten’); (4) Appellate Body Report, United States – Safeguard
Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/
AB/R, WT/DS178/AB/R, adopted 16 May 2001 (‘US – Lamb’); (5) Appellate Body Report, United
States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea,
WT/DS202/AB/R, adopted 8 March 2002 (‘US – Line Pipe’); and (6) Appellate Body Report, United
States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/AB/R, adopted
10 December 2003 (‘US – Steel’).
3
In this Article, I use the terms ‘preferential trade arrangements’, ‘regional trade agreements’ and
‘regional deals’ interchangeably. These terms, as they are used here, cover both customs unions and
free trade areas, as defined in GATT Article XXIV:8.
4
See, for example, Article 801 of NAFTA (‘Bilateral Actions’) and Article 29 of the Europe Agreement
establishing an association between the European Communities and their member States, of the one
part, and the Czech Republic, of the other part, O.J. L 360 (1994).

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WTO Safeguards and Regional Trade Agreements 111

Based on this provision, and in the absence of a solid economic rationale for
safeguards, Alan Sykes has aptly explained the reason why the GATT/WTO
nonetheless permits them:
safeguards should be understood as a mechanism for the reimposition of
temporary protection when commitments to liberal trade impose unexpectedly
severe political burdens on officials in importing nations, and when temporary
protection will impose comparatively modest political costs on trading
partners.5
Consequently, one of the major advantages of the opportunity to use
safeguard measures is that it ‘provides political cover to trade negotiators, who
will be more reluctant to make trade concessions unless safeguard measures
or some reasonably close substitute are available’.6
For present purposes, the following two conditions for the valid imposition
of a safeguard are crucial: the import surge causing serious injury must be ‘as
a result of’ (1) ‘unforeseen developments’; and (2) ‘the effect of the
obligations incurred’ under GATT. Although the panel on Argentina –
Footwear (EC) dispensed of these conditions found only in GATT Article
XIX (and not repeated in the subsequent WTO Agreement on Safeguards),
the Appellate Body overruled the panel and confirmed that for a safeguard to
be WTO consistent
(1) ‘the developments which led to a product being imported in such
increased quantities and under such conditions as to cause or
threaten to cause serious injury to domestic producers must have
been ‘‘unexpected’’’7; and
(2) ‘it must be demonstrated, as a matter of fact, that the importing
Member has incurred obligations under the GATT 1994, including
tariff concessions’.8
In subsequent cases, only the ‘unforeseen developments’ requirement has
been referred to; the ‘effect of the [GATT] obligations incurred’ requirement
never raised questions. This can be readily explained: the Appellate Body’s
current interpretation of this second requirement almost9 automatically
means that the requirement will be met. As Alan Sykes remarked
this [‘effect of the [GATT] obligations incurred’] requirement will be trivially
satisfied in every case – a member simply needs to show that it has incurred
some obligations with respect to the product in question. It is hard to imagine
how a dispute could arise without such an obligation, since a member with an
unbound tariff could always raise it unilaterally without any need to rely on a

5
Alan Sykes, ‘The Safeguards Mess: A Critique of WTO Jurisprudence’, John M. Olin Law &
Economics Working Paper No. 187 (2d Series), University of Chicago Law School, May 2003, at 2,
[Link] (visited 22 October 2003).
6
Ibid, at 1.
7
Appellate Body report on Argentina – Footwear (EC), above n 2, at para 91, emphasis added.
8
Ibid, emphasis added.
9
For an exceptional situation see below n 12.

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112 Journal of International Economic Law (JIEL) 7(1)

safeguard measure . . . It suffices for [WTO Members] to argue that in the

absence of a tariff binding, they would be able to raise tariffs to eliminate the
import surge.10
Yet, there are at least two ways to give meaning to the requirement that the
increased imports causing or threatening to cause serious injury must be ‘as a
result. . .of the effect of the obligations incurred by a Member under [GATT],
including tariff concessions’. First, as the Appellate Body seems to do, one
can construe the prior GATT obligation requirement – in most cases, a prior
GATT tariff binding – as an ex post effect (triggered only once the import
surge has materialized) which prevents the affected WTO Member from
raising its import duties so as to reduce imports and, consequently, limit the
injury on domestic producers. In that case, the tariff binding need not cause
the import surge; it only prevents reacting to such surge by means of higher
tariffs.
Second, however, and perhaps more in line with the actual words of
GATT Article XIX, one could interpret the prior GATT obligation
requirement – that is, the tariff binding – as an ex ante cause which must
actually trigger the import surge.11 This second interpretation is, obviously,
more exacting: it does not suffice to point at, for example, a US tariff
binding on steel imports which prevents a tariff hike in response to the
import surge; rather it must be demonstrated that the US tariff reduction on
steel actually caused the import surge; or, as the provision reads, the increase
in imports causing injury must be ‘as a result. . .of the effect of’ the GATT
tariff binding. This second interpretation (GATT commitment as an ex ante
cause of imports) is in line with the following policy rationale for safeguards:
countries may be willing to reduce tariffs but they want to keep the option
to temporarily raise tariffs again if it turns out that the tariff reduction, by
some unforeseen development, has caused imports to increase much more
than expected.
Crucially, if this second interpretation were adopted, then safeguards would
automatically be prohibited in case the prior GATT tariff binding did not
actually reduce the applied tariff rate (for example, the prior applied rate may
be 5%, the GATT binding or ceiling 10%; or the prior applied rate may be
0%, the GATT only having bound this rate at 0%). In that situation, GATT
did not bring about any reduction in tariffs and hence could not be the cause
of the import surge. In contrast, under the first interpretation (GATT
commitment as an ex post effect preventing a tariff hike), even a prior GATT
binding that did not reduce applied tariffs could be said to prevent the tariff

10
Sykes, above n 5, at 16.
11
Alan Sykes (ibid, at 21) talks of the prior GATT concession as the ‘exogenous variable’: ‘the import
surge had to result from one of the original GATT trade concessions, in the sense that it would not
have happened but for some such concession’.

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WTO Safeguards and Regional Trade Agreements 113

increase necessary to stop the import surge: for example, although the GATT
only imposed a ceiling of 10%, the previously applied rate of 5% could no
longer be increased to 30% because of the GATT binding.12
Be this as it may, even under the more lenient first interpretation currently
upheld by the Appellate Body, the ‘effect of the [GATT] obligations incurred’
requirement may have an important consequence for safeguards by a member
of a preferential trade arrangement. Indeed, if the safeguard relates to a
product in respect of which additional trade concessions were given in the
preferential trade arrangement (say, under NAFTA the US tariff on steel was
not just reduced from 30% to 10% as in the WTO, but to 0% granting
NAFTA imports of steel duty free entry), can it still be said that the increase
in imports from within the region occurred ‘as a result. . .of the effect of’
GATT obligations, that is, as a result of the prohibition under GATT to raise
tariffs? In that case, is the legal source of the prohibition to increase tariffs not
rather, and in the first place, the preferential trade arrangement? If so, the
increase in regional imports ought to be excluded altogether from a WTO
safeguards investigation since it was not caused by GATT obligations, but
was the result of a regional trade deal.
Put differently, if the product concerned is covered also by a regional trade
deal, the increase in regional trade should be written off the GATT’s books
and attributed rather to the commitments in the regional trade arrangement.
Under the first interpretation currently upheld by the Appellate Body, this is
not so much because regional tariff reductions rather than GATT bindings
are the economic cause of the import surge (ex ante cause), but because the
legal source of the prohibition to increase tariffs to react to the import surge is
the regional deal, not GATT (ex post effect). In this sense, even if the regional
deal were only to confirm a prior GATT binding or if GATT would
subsequently bring down tariffs to the same zero duty level as in the regional
deal, the regional arrangement now encapsulates whatever GATT provided
for and most often takes it a step further (be it in the form of even lower tariffs
or other provisions limiting the scope for regional trade restrictions). As a
result, the regional arrangement eclipses the GATT as the instrument
preventing tariff hikes in response to import surges and operates as a form of
lex specialis or more detailed or specific agreement that limits the possibility

12
Note that even under the first interpretation (GATT commitment as an ex post effect), not just any
GATT binding on the product in question will suffice: the tariff binding must be below what is
necessary to offset the serious injury or threat thereof. If, for example, the pre-GATT applied rate
was 5% and the GATT binding set at 100%, before a WTO Member can impose a safeguard it will
have to show that a tariff of 100% does not suffice to offset the injury. In any event, this condition is
reflected also in the necessity requirement in Article 5.1 of the Agreement on Safeguards (although
this provision deals with the extent of application of a safeguard measure; the ‘effect of the [GATT]
obligations incurred’ requirement in GATT Article XIX, in contrast, addresses the prior question of
whether there is a right to impose a safeguard in the first place).

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114 Journal of International Economic Law (JIEL) 7(1)

to stop or offset import surges from within the region.13 Hence, when
determining the legal source of the prohibition to raise tariffs on regional
trade, preference must be given to the regional deal over and above the
GATT. Consequently, even if, for example, both GATT and the regional
deal impose duty free treatment, any surge in regional imports ought then to
be attributed to legal constraints in the regional arrangement and tackled not
by a safeguard under GATT, but rather by a safeguard mechanism under the
regional deal itself, if any such mechanism is still available.14
Finally, if the product for which a WTO safeguard is considered is subject
also to further liberalization under a regional trade deal, can the import surge,
to the extent it originates from within the region, still be seen as one resulting
from an ‘unforeseen development’? Or should one rather admit that, at least
in some circumstances, the increase in imports from within the region had to
be expected as a result of the additional concessions in the preferential trade
arrangement?
In sum, in the event a preferential trade arrangement subjects the product
concerned to trade liberalization commitments equal to or exceeding GATT
concessions, both the ‘unforeseen developments’ and, especially, the ‘effect of
the [GATT] obligations incurred’ requirements, offer strong arguments in
support of a GATT obligation to exclude the increase in regional imports
from a WTO safeguards investigation. The blame for such increase should
then go to the regional arrangement, not the GATT. Moreover, to the extent
the regional arrangement explains the increase, the increase should not be
regarded as ‘unforeseen’. In these circumstances, a WTO Member would
violate GATT Article XIX if it were to include regional imports in its
determination that increased imports cause or threaten to cause serious
injury.

13
The same applies under the second interpretation of the ‘effect of the [GATT] obligations incurred’
requirement (GATT commitment as an ex ante cause of imports): even if one could say that the
original tariff reduction under GATT and the additional tariff reduction under the regional deal then
caused the import surge in combination, it seems more appropriate to regard the regional deal as an
instrument that not only adds to GATT but takes over whatever GATT provided for and
complements it (in other words, the regional deal, as a lex specialis between regional partners, eclipses
the GATT). In that sense, the totality of the import surge can be blamed on the regional deal, and
the GATT should be left out of any causal relationship so that regional imports cannot be considered
for a safeguard under GATT Article XIX. Here, as well, regional import surges should then be dealt
with under regional safeguard mechanisms if any such mechanism exists.
14
See the examples referred to above, n 4. Obviously, there is no WTO obligation to have such regional
safeguard mechanism in place. However, if one exists it must not (i) affect the rights of WTO
Members not part of the regional arrangement; nor (ii) violate Article 11 of the Agreement on
Safeguards (which outlaws voluntary export restraints and orderly marketing arrangements).

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WTO Safeguards and Regional Trade Agreements 115

ii. the injury determination: increased imports must cause

serious injury or threat thereof, even if the
determination is limited to some imports
Moving now from GATT Article XIX to the more recent and specific
Agreement on Safeguards, Articles 2, 4 and 5 of that agreement spell out the
basic principles on how WTO Members must (1) conduct an injury
determination (that is, the determination of whether increased imports cause
or threaten to cause serious injury to the domestic industry); and (2) apply
any eventual safeguard measure.
Focusing first on the injury determination (Article 2.1, supplemented by
Article 4), the important question for present purposes is whether any
limitations apply on the imports that can or must be taken into account. Put
differently, does the Agreement on Safeguards oblige WTO Members to take
account of all imports (contrary to the argument made above that GATT
Article XIX obliges members to exclude regional imports) or does it permit,
or even impose, that regional imports be excluded?
Article 2.1 only requires a determination that the product concerned ‘is
being imported into [the Member’s] territory in such increased quantities . . .
and under such conditions as to cause or threaten to cause serious injury . . .’.
It thus defines and limits (1) the relevant import market (the territory of the
WTO Member wanting to impose the safeguard), as well as (2) the required
effect of the increased imports (serious injury or threat thereof). Article 2.1
does not, however, impose (3) restrictions or obligations in respect of the
origin of the increased imports that can or must be taken into account in an
injury determination. Hence, the Member wanting to impose a safeguard
could either take account of all imports (and check whether they cause serious
injury) or examine only imports coming from third parties, thereby excluding
regional imports (and check whether this limited list of imports causes serious
injury). This latter approach of limiting the injury determination to third-
party imports (advocated in this paper as compulsory under Article XIX) was
explicitly referred to by the Appellate Body in US – Line Pipe.15 More so, if a
WTO Member is convinced that the increased imports from one single source
(say, China) cause or threaten to cause serious injury to its domestic industry,
then nothing in Article 2.1 prevents that member from taking account of
15
Appellate Body report, US – Line Pipe, above n 2, at para 198: ‘The question of whether Article
XXIV of the GATT 1994 serves as an exception to Article 2.2 of the Agreement on Safeguards
becomes relevant in only two possible circumstances. One is when, in the investigation by the
competent authorities of a WTO Member, the imports that are exempted from the safeguard
measure are not considered in the determination of serious injury. . .’. The exclusion of regional
imports from the injury determination is implicit also in the parallelism requirement under which
WTO Members have been condemned for conducting an injury determination taking account of all
imports but subsequently applying the safeguard only to third-party imports. In those circumstances,
parallelism would require rather that also the injury investigation is limited to third-party imports (or,
in the alternative, that both the investigation and the safeguard itself apply to all imports). See below
Section IV.

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116 Journal of International Economic Law (JIEL) 7(1)

increased imports only from China and to decide, on that basis, that increased
imports cause serious injury, permitting it to apply a safeguard measure
(albeit one that must then be applied to all imports pursuant to Article 2.2,
discussed below).
Footnote 1 to Article 2.1 further defines the relevant import market – that
is, the domestic market or territory subject to the injury determination – for
cases where a customs union intends to impose a safeguard measure. In that
event, the customs union has two options: it can impose safeguard measures
(i) as a single unit or (ii) on behalf of a member state:
When a customs union applies a safeguard measure as a single unit, all the
requirements for the determination of serious injury or threat thereof under this
Agreement shall be based on the conditions existing in the customs union as a whole.
When a safeguard measure is applied on behalf of a member State, all the
requirements for the determination of serious injury or threat thereof shall be
based on the conditions existing in that member State and the measure shall be
limited to that member State (emphasis added).
As the Panel on Argentina – Safeguards (EC) stated, however, this ‘footnote
does not concern to whom but rather by whom a safeguard measure may be
applied’.16 It relates to the domestic market (i) to be examined in the injury
determination and (ii) which will eventually benefit from the safeguard
measure. In contrast, the footnote is silent on the questions of importance in
this paper, namely: (i) which imports can or must be looked at in the injury
determination and (ii) against whom can or must the safeguard eventually be
applied (discussed later in Sections III and following). Note, moreover, that
in addition to the two options pointed at, there is a third possibility for
safeguards in a customs union, which is not covered by the footnote, namely
one (or more) of the member states of the customs union can itself apply a
safeguard, not the customs union on its behalf. This third option is actually
the one exercised by Argentina in the Argentina – Safeguards (EC) case.17
When concluding that no restrictions apply as to the source or origin of
imports to be taken into account in the injury determination, one important
caveat must be pointed at. Article 4.2(a) of the Agreement on Safeguards
requires that when conducting an injury determination
the competent authorities shall evaluate all relevant factors of an objective and
quantifiable nature having a bearing on the situation of that industry, in
particular, the rate and amount of the increase in imports of the product concerned in
absolute and relative terms, the share of the domestic market taken by increased
imports, changes in the level of sales, production, productivity, capacity
utilization, profits and losses, and employment (emphasis added).
According to the Appellate Body, this provision ‘requires a demonstration
that the competent authorities evaluated, at a minimum, each of the factors
16
Panel report on Argentina – Safeguards (EC), above n 2, at para 8.83.
17
See the Appellate Body report on Argentina – Safeguards (EC), above n 2, at para 108 (reversing the
panel on this point).

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listed in Article 4.2(a) as well as all other factors that are relevant to the
situation of the industry concerned’.18 Hence, although Article 2.1 is silent on
what imports must be taken into account in the eventual injury determination,
Article 4 requires that one at least evaluates the totality of imports, from all
sources, and the injurious effect they may have on the domestic industry. Why
is this required? Simply as a means of avoiding that the injurious effects of
these other imports, as well as factors unrelated to increased imports (such as
loss of productivity or strikes), are not attributed to the imports one is
investigating. As Article 4.2(b) states, ‘[w]hen factors other than increased
imports are causing injury to the domestic industry at the same time, such
injury shall not be attributed to increased imports’.
Pursuant to the Appellate Body’s contested ruling on causality, this finding
translates as follows: When a WTO Member decides to take account only of
third-party imports in its injury determination (i.e., all imports other than
regional imports), it must nonetheless
(1) add up the injury caused by all factors (including that caused by
regional imports!);
(2) decide whether the totality of injury thus caused by all these factors
amounts to serious injury or threat thereof; and, if so, finally
(3) decide whether the increase in third-party imports ‘has, in some way,
‘‘brought about’’, ‘‘produced’’ or ‘‘induced’’ the existence of’19 this
serious injury or threat thereof.
Concerning point (3), although the Appellate Body stressed that this
‘contribution [of third-party imports to the existence of serious injury] must
be sufficiently clear as to establish the existence of ‘‘the causal link’’ required’,
it found that Article 4.2(b) ‘does not suggest that increased imports [in casu,
increased third-party imports only] be the sole cause of the serious injury, or
that ‘‘other factors’’ causing injury must be excluded from the determination
of serious injury’.20
In sum, although it is, therefore, consistent with the Agreement on
Safeguards to limit the injury determination itself to third-party imports
(excluding regional imports), because of the non-attribution requirement, the
effects of other imports (in casu, regional imports) must also be evaluated so
as not to attribute those effects to third-party imports. Moreover, once the
existence of serious injury or threat thereof has been established, there is no
need to demonstrate that the increase in third-party imports alone caused it; it
will suffice that third-party imports ‘played a part in, or contributed to,
bringing about serious injury so that there is a causal ‘‘connection’’ or

18
Appellate Body report on Argentina – Safeguards (EC), above n 2, at para 136.
19
Appellate Body report on US – Wheat Gluten, above n 2, at para 67.
20
Ibid, emphasis in original.

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118 Journal of International Economic Law (JIEL) 7(1)

‘‘nexus’’’21 between the increase in third-party imports and the serious injury
or threat thereof.22

iii. applying the safeguard measure: any safeguard must,

in principle, be applied to all imports without
discrimination, but only to offset the injury caused by
the investigated imports
Crucially, although Articles 2 and 4 seem to permit the exclusion of regional
imports from the injury determination, Article 2.2 of the Agreement on
Safeguards is categorical when stating that
[s]afeguard measures shall be applied to a product being imported irrespective of
its source.23
It is, therefore, accepted that if a WTO Member wants to apply a safeguard
it must apply it to all imports including those specific imports or sources of
importation that do not cause injury.24 This reasoning is relevant when the
injury determination is based on the totality of imports (in that event, even
those imports not causing injury or new sources of imports must be subject to
the safeguard) and, particularly, when the injury determination would be
based on selected sources of import only, say, only third-party imports or, as
in the other example given, only imports from China (in that event, any
eventual safeguard measure must, in principle, still be applied to all imports,
subject, of course, to GATT Article XXIV, discussed below).25

21
Ibid.
22
Economists have pointed at the difficulty of viewing imports as causal, that is, as an exogenous factor
causing injury, since imports are in fact endogenous in that they are the result (rather than the cause)
of domestic supply, domestic demand and the world price (Sykes, above n 5, at 5–6). In this sense,
imports are, together with domestic injury, the result of, for example, changes in domestic supply such
as rising production costs, instead of the cause of such injury. This paper does not aim to resolve this
problem although it does imply distinguishing the causal effects of regional imports from the causal
effects of third-party imports, an exercise already called for by the Appellate Body but one that may,
indeed, turn out to be quite difficult.
23
Emphasis added.
24
This rule was not entirely clear under GATT Article XIX, that is, before the Agreement on
Safeguards was concluded. See WTO Secretariat, Analytical Index, Guide to GATT Law and Practice,
Vol. 1, Geneva, 1995, at 518–20.
25
Note also the other exception that permits discriminatory safeguards, namely Article 9 of the
Agreement on Safeguards which prohibits the imposition of safeguards ‘against a product originating
in a developing country Member as long as its share of imports of the product concerned in the
importing Member does not exceed 3 per cent, provided that developing country Members with less
than 3 per cent import share collectively account for not more than 9 per cent of total imports of the
product concerned’. In addition, Article 5.2 of the Agreement on Safeguards should be pointed at. It
permits the allocation of different quotas among supplying countries. Subject to consultations at the
Committee on Safeguards such quotas could even be stricter on selective importers only in case, inter
alia, ‘imports from certain Members have increased in disproportionate percentage in relation to the
total increase of imports of the product concerned in the representative period’ (Article 5.2(b)).

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This non-discrimination requirement can be interpreted in two ways: on the

one hand, one could argue that, in a manner uncommon for an agreement
promoting free trade, it requires members to impose additional trade
restrictions, on top of those that offset the specific imports causing the
serious injury; on the other hand, the non-discrimination requirement could
be seen as a disincentive to apply a safeguard in the first place since if one
decides to do so one must apply the safeguard to all imports including, for
example, those coming from close political allies.
Although a safeguard must thus, in principle, be applied to all imports
including regional imports, it must be pointed out that Article 5.1 of the
Agreement on Safeguards limits the application of safeguard measures ‘to the
extent necessary to prevent or remedy serious injury’. In its recent ruling on
US – Line Pipe, the Appellate Body interpreted this provision to mean that
safeguard measures ‘may be applied only to the extent that they address
serious injury attributed to increased imports’26 and cannot, despite the
Appellate Body’s earlier rulings on causality, offset the totality of serious
injury caused by all factors. The Appellate Body thereby rejected the US
argument that because the Appellate Body had ‘decided that in accordance
with Article 4.2(a) [on the injury determination] serious injury was the
entirety of the condition of the industry, it follows that the serious injury to
which Article 5.1, first sentence, refers must be the ‘‘entirety’’ of the serious
injury’.27
For present purposes, this decision means that if a Member excludes
regional imports from its injury determination but still applies the eventual
safeguard to all sources of import – as is, in principle, required under Article
2.2 (but subject, of course, to GATT Article XXIV, discussed below) – the
extent of the safeguard must be limited to injury caused by third-party imports,
excluding the injury caused by regional imports as well as that caused by other
factors not related to imports.

iv. the requirement of parallelism: unnecessary

complication
The concept of parallelism, first detected by the panel on Argentina –
Safeguards (EC) and later confirmed by the Appellate Body,28 stands for the
following proposition:
the imports included in the [injury] determinations made under Articles 2.1
and 4.2 should correspond to the imports included in the application of the
measure, under Article 2.2.29

26
Appellate Body report on US – Line Pipe, above n 2, at para 260, emphasis added.
27
Ibid, at para 243.
28
Panel and Appellate Body reports, Argentina – Safeguards (EC), above n 2, respectively, at para 8.91
and para 113.
29
Appellate Body report on US – Wheat Gluten, above n 2, at para 96, emphasis added.

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120 Journal of International Economic Law (JIEL) 7(1)

Although there is no clear and unambiguous wording in support of

parallelism, the Appellate Body justified its inclusion in Article 2 as follows:
The same phrase – ‘‘product. . .being imported’’ – appears in both. . .paragraphs
of Article 2. In view of the identity of the language in the two provisions, and in
the absence of any contrary indication in the context, we believe that it is
appropriate to ascribe the same meaning to this phrase in both Articles 2.1 and
2.2. . . . [To do otherwise] would be incongruous and unwarranted.30

So far, this rule of parallelism has been applied, and found to be violated, in
only one set of circumstances, namely where a WTO Member takes account
of all imports in the injury determination, but then excludes regional imports
from the application of the safeguard measure. In Argentina – Safeguards
(EC), for example, Argentina had made its injury determination based on all
imports, including those from MERCOSUR countries. Yet once it applied
the safeguard measure, it excluded its MERCOSUR partners. In response,
the Appellate Body found as follows:
Argentina’s investigation, which evaluated whether serious injury or the threat
thereof was caused by imports from all sources, could only lead to the
imposition of safeguard measures on imports from all sources. Therefore, we
conclude that Argentina’s investigation, in this case, cannot serve as a basis for
excluding imports from other MERCOSUR member States from the
application of the safeguard measures.31

In US – Wheat Gluten, US – Lamb, US – Line Pipe and US – Steel, as well,

the United States was found to violate the Agreement on Safeguards by
excluding Mexico and Canada from the application of the safeguard on the
ground that the injury determination on which the safeguard was based took
account of all imports, including those from Mexico and Canada.
In the cases involving the United States as a defendant (four out of six!), the
Appellate Body was, however, quick to add that a gap between imports
covered in the investigation and imports falling within the scope of the
measure can still be justified if the competent authorities ‘establish explicitly’
that imports from sources covered by the measure – in casu imports from third
parties only – cause or threaten to cause serious injury.32 Yet, in none of the
cases referred to it was found that the United States had provided ‘a reasoned

30
Ibid, emphasis in original.
31
Appellate Body report on Argentina – Safeguards (EC), above n 2, at para 113.
32
Appellate Body report on US – Wheat Gluten, above n 2, at para 98. In US – Lamb, in the context of a
claim under Article 4.2(a) of the Agreement on Safeguards, ‘establish[ing] explicitly’ was found to
imply that the competent authorities must provide a ‘reasoned and adequate explanation of how the
facts support their determination’ (Appellate Body Report on US – Lamb, above n 2, para 103,
original emphasis). In US – Steel, above n 2, the Appellate Body added that ‘one single joint
determination’ that third-party imports by themselves cause or threaten to cause serious injury is
required (at para 468). Two separate determinations – one on the exclusion of imports from Canada
and Mexico, another related to the exclusion of Israel and Jordan – are insufficient.

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and adequate explanation that establishes explicitly that imports from non-
NAFTA sources by themselves satisfied the conditions for the application of a
safeguard measure’.33
The first question that comes to mind is this: Why did panels and the
Appellate Body come up with this parallelism requirement? In all cases
decided so far, the problem was that the injury determination looked at all
imports, while the eventual safeguard was applied only to third-party imports.
This is, first of all, a clear violation of the non-discrimination requirement in
Article 2.2 (‘[s]afeguard measures shall be applied to a product being
imported irrespective of its source’). Why then did panels and the Appellate
Body not simply find a violation of Article 2.2? Why complicate matters and
‘invent’ the additional requirement of parallelism? Secondly, one can
understand why parallelism makes sense in the particular circumstances
examined by the Appellate Body: it seems, indeed, unfair to take account of
injury caused by all imports, including regional ones, but then to apply the
safeguard measure only to third-party imports, even though most of the injury
caused could have come from regional imports (after all, regional imports
circulate freely and they could hence be the main source of injury). However,
this rationale for parallelism has to do more with what we discussed under
GATT Article XIX (Section I), and the violation that occurs there in the
event an injury determination takes account of regional imports at all
(regional imports not being the result of ‘the effect of the obligations incurred’
under GATT nor of, in some cases, ‘unforeseen developments’). Therefore,
instead of adding the complication of parallelism, why did the Appellate Body
not find a violation simply under GATT Article XIX?
In my view, the unnecessary contortion of parallelism can only be explained
as follows: both panels and the Appellate Body wanted to circumvent the to
date unresolved conundrum of whether GATT Article XXIV on regional
arrangements can justify a discriminatory safeguard in violation of Article 2.2
of the Agreement on Safeguards (to be fair, the alternative raised here of
finding a violation under GATT Article XIX, instead of under parallelism or
Article 2.2, has so far not been raised by any complainant; hence to date the
Appellate Body was faced only with the choice between parallelism and
Article 2.2).
At the same time, I am not convinced that by hanging the issue of
discriminatory safeguards exclusively on the hook of parallelism (instead of
discrimination under Article 2.2), the Appellate Body actually avoided the
question of GATT Art. XXIV. In Argentina – Footwear (EC), it found a
violation of parallelism but expressed the view that since ‘Argentina did not
argue before the Panel that Article XXIV of the GATT 1994 provided it with
a defence to a finding of violation of a provision of the GATT 1994’, GATT
Art. XXIV was not relevant. A quick reading of the panel report indicates,

33
Appellate Body report on US – Line Pipe, above n 2, para 197. But see above n 22.

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122 Journal of International Economic Law (JIEL) 7(1)

however, that Argentina did invoke GATT Art. XXIV.34 Indeed, its core
defense under the EC’s parallelism claim was that as a member of a customs
union it had to exclude its regional partners from the safeguard. In US – Line
Pipe as well, the Appellate Body avoided the question of whether GATT Art.
XXIV can justify a violation of parallelism, as follows:
We need not, and so do not, rule on the question whether Article XXIV of the
GATT 1994 permits exempting imports originating in a partner of a free-trade
area from a measure in departure from Article 2.2 of the Agreement on
Safeguards. The question of whether Article XXIV of the GATT 1994 serves as
an exception to Article 2.2 of the Agreement on Safeguards becomes relevant in
only two possible circumstances. One is when, in the investigation by the
competent authorities of a WTO Member, the imports that are exempted from
the safeguard measure are not considered in the determination of serious injury.
The other is when, in such an investigation, the imports that are exempted from
the safeguard measure are considered in the determination of serious injury, and
the competent authorities have also established explicitly, through a reasoned
and adequate explanation, that imports from sources outside the free-trade
area, alone, satisfied the conditions for the application of a safeguard measure,
as set out in Article 2.1 and elaborated in Article 4.2.35

In other words, according to the Appellate Body, GATT Article XXIV only
comes into play if parallelism has been respected (in particular, when it is
demonstrated that third-party imports alone cause serious injury and the
eventual safeguard, as well, excludes regional imports). From this statement
one can deduce that for the Appellate Body GATT Article XXIV can never
justify a violation of parallelism. Yet, the Appellate Body never explained why
this is the case.
Indeed, if the Appellate Body leaves open the question of whether Article
XXIV can justify a violation of the non-discrimination principle in Article 2.2
– and as discussed below, this question should, indeed, be answered in the
affirmative – why should Article XXIV not be able to justify also a violation of
parallelism, a requirement that is, after all, to be found in the same Article 2?
Both of these questions relate to the broader dilemma of whether GATT
exceptions can justify violations under more specialized agreements on trade
in goods, such as the Agreement on Safeguards. Since the Agreement on
Safeguards is explicitly linked to, and stated as an elaboration of, GATT
34
On p. 158 of its report, for example, the Panel on Argentina – Safeguards (EC), above n 2,
summarized Argentina’s GATT Article XXIV claim as follows:
Argentina claims that it could not impose safeguard measures against imports from other
MERCOSUR countries because Article XXIV of GATT as well as secondary MERCOSUR
legislation prohibit it from doing so. With respect to Article XXIV of GATT, Argentina
emphasises that Article XIX of GATT is not listed in Article XXIV:8(a)(i) or (b) of GATT
among the exceptions from the requirement to abolish all duties and other restrictive regulations
of commerce on substantially all trade between the constituent territories of a customs union or
a free-trade area. Therefore, it is, in Argentina’s view, incompatible with the purpose of Article
XXIV:8 of GATT to impose safeguard measures within the MERCOSUR customs union.
35
Appellate Body report, US – Line Pipe, above n 2, at para 198.

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Article XIX, and the Appellate Body has confirmed that the field of
safeguards is regulated both in the Agreement on Safeguards and GATT
Article XIX,36 there can be no doubt that GATT Article XXIV remains
relevant also. However, once GATT Article XXIV can justify one type of
violation under the Agreement on Safeguards (in casu, Article 2.2), it is
difficult to see why, in principle, it could not justify also another (e.g., a
violation of parallelism under Article 2).
This is not to say, however, that GATT Article XXIV actually does justify
the situation where an injury determination is based on all imports and the
eventual safeguard measure is applied only to third-party imports (in Section
V.B(2), below, the argument to the contrary is made). Still, once the
Appellate Body opted for a violation of parallelism (pursuant to Article 2) it
should have explained why, in substance, the conditions under GATT Article
XXIV are not met, rather than dismiss outright that GATT Article XXIV is
even relevant.
There are, however, additional problems with the requirement of
parallelism. Investigating all imports while applying the safeguard measure
only to third-party imports (the situation arising in case law so far), is not the
only violation of parallelism one can think of. If parallelism is the objective
requirement of equivalence in the imports considered under both Article 2.1
and Article 2.2, then also an injury investigation limited to, for example,
Chinese imports followed by a safeguard measure applied to all imports,
violates parallelism. However, what is wrong with limiting the source of injury
in the investigation (something that, we saw earlier, the Agreement on
Safeguards permits) and, thereafter, applying the safeguard in a non-
discriminatory manner to all imports? Is such non-discriminatory safeguard
not explicitly required under Article 2.2 (‘[s]afeguard measures shall be
applied to a product being imported irrespective of its source’)? As noted
earlier, is the deal implicit in Article 2.2 not that although the source of the
injury could be imports from certain countries only (here Chinese imports),
the eventual safeguard must be applied to all imports (so as to avoid selective
targeting and to provide a disincentive to apply safeguards in the first place)?
Put differently, is the violation of the requirement of parallelism in these
circumstances not explicitly called for, and hence justified by, Article 2.2? If
so, is it conceivable that one and the same provision, here Article 2.2, includes
both the obligation of parallelism (in casu, if one investigates only Chinese
imports then the safeguard can apply only to Chinese imports), as well as a
justification for its violation (safeguards must be applied to imports
irrespective of their source)? Given this conflict between parallelism and
non-discrimination, which of the two is more important and should prevail?

36
See Appellate Body report on Argentina – Safeguards (EC), above n 2, at para 76ff. and above n 7 and
8. See also below text at n 44.

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124 Journal of International Economic Law (JIEL) 7(1)

In sum, the hypothetical above shows that rather than resolving questions of
selective safeguards, the requirement of parallelism exacerbates them. As
pointed out, the particular problem faced in the jurisprudence so far would
have been better solved under the GATT Article XIX requirements of
‘unforeseen developments’ and ‘effect of [GATT] obligations incurred’ or the
non-discrimination requirement in Article 2.2. Parallelism does not add any
substance to these requirements, nor does it resolve the question of
justification under GATT Article XXIV. Rather, parallelism only makes the
problem worse and should be abandoned.

v. gatt article xxiv and safeguards

So far the analysis has steered away from the daunting task of interpreting
safeguards in the light of GATT Article XXIV on regional trade arrange-
ments. Instead, Section I argued that, based on requirements in GATT
Article XIX (in particular, the ‘effect of the [GATT] obligations incurred’
requirement), regional imports covered by a preferential trade deal ought to
be excluded as a basis for WTO safeguards altogether. Section II concluded
that nothing in the Agreement on Safeguards requires that the injury
determination be based on all imports; it can, in principle, exclude regional
imports (even if the effects of regional imports must also be evaluated so as
not to attribute them to third-party imports). Section III, in turn, underscored
the rule that, in principle, safeguards must be applied to all imports, on a non-
discriminatory basis (albeit, however, only to offset the injury caused by the
investigated imports, in casu, third-party imports). Section IV, finally,
explained the requirement of parallelism and argued that rather than
resolving the question of selective safeguards, it made the problem worse
and did, in particular, not obviate the problem of justification under GATT
Article XXIV.
The above analysis leaves us with the following two questions:

(1) As hinted at in the introduction to this paper, does GATT Article

XXIV preclude the application of safeguard measures as between
members of a regional trade arrangement? Put differently, given the
requirement in GATT Article XXIV:8 that restrictions on ‘substan-
tially all the trade’ between, for example, NAFTA partners be
eliminated, would the imposition of safeguards by, say, the United
States on Mexico and Canada prevent NAFTA from being a valid
free trade area? (Section V.A)
(2) Assuming that intra-regional safeguards are not per se prohibited
under GATT Article XXIV:8, can violations under the Agreement on
Safeguards – in particular, the discriminatory application of safe-
guards excluding regional imports – be justified under GATT Article
XXIV? (Section V.B)

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WTO Safeguards and Regional Trade Agreements 125

A. Does GATT Article XXIV prohibit intra-regional safeguards?

GATT Article XXIV addresses both customs unions and free trade areas. In
both cases, however, the justification under Article XXIV can only be
triggered if the
duties and other restrictive regulations of commerce (except, where necessary,
those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated
with respect to [on] substantially all the trade between the constituent territories
of the union or at least with respect to substantially all the trade in products
originating in such territories [between the constituent territories in products
originating in such territories].37
Does this provision prevent that members of a regional trade arrangement
apply safeguards to products originating in the region? Put differently, can
regional imports be subject to a safeguard notwithstanding GATT Article
XXIV? In most cases, this question will arise as follows: under WTO rules, a
safeguard is imposed and it is applied to both third-party imports and regional
imports; does GATT Article XXIV permit such imposition of a safeguard also
on regional imports? Crucially, in those circumstances, the safeguard measure
will then apply to both third-party imports and regional imports in a non-
discriminatory manner and hence not violate Article 2.2 of the Agreement on
Safeguards. As a result, there will be no need for GATT Article XXIV to
operate as a justification. The question of whether Article XXIV prevents
intra-regional safeguards will, therefore, not likely arise in a WTO dispute on
safeguards (there is no discrimination in the first place). After all, since the
safeguard then applies to all imports, the only parties that could complain
about the scope of application of the safeguard are the regional partners of the
WTO Member imposing the safeguard. However, for such dispute as
between regional partners, the WTO may not provide the most specific rules
nor be the most appropriate forum.38 Hence, a dispute over inclusion of
regional partners is more likely to be raised at the regional level rather than at
the WTO. This will be all the more so in the other set of circumstances where
a safeguard may be imposed on regional trade: the Member concerned
experiences an import surge from within the region and imposes a safeguard
only on regional trade pursuant to a transitional safeguard mechanism set out

37
Article XXIV:8(a)(i), emphasis added. Bracketed text refers to free trade areas, Article XXIV:8(b).
38
Article 802:1 of NAFTA, for example, reserves the right of NAFTA members to take safeguards
under GATT Article XIX but specifies as follows:
Any Party taking an emergency action under Article XIX or any such agreement shall exclude
imports of a good from each other Party from the action unless: (a) imports from a Party,
considered individually, account for a substantial share of total imports; and (b) imports from a
Party, considered individually, or in exceptional circumstances imports from Parties considered
collectively, contribute importantly to the serious injury, or threat thereof, caused by imports.

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126 Journal of International Economic Law (JIEL) 7(1)

in the regional deal;39 does GATT Article XXIV permit such regional
safeguard? Here, in particular, the only affected parties are the regional
partners and the relevant safeguard rules are those under the regional deal.
Hence, the dispute is most likely to be submitted to the regional forum, not to
the WTO.40
However, the question of whether Article XXIV prevents intra-regional
safeguards could still be brought up in any other WTO dispute where the
defendant tries to justify a WTO violation (say, a tariff preference) with
reference to GATT Article XXIV. The Appellate Body in Turkey – Textiles
made it clear that an otherwise GATT-inconsistent measure can only be
justified under Article XXIV if the requirements in, inter alia, paragraph 8 of
Article XXIV are met.41 Hence, in such a case, the argument could be made
that since intra-regional safeguards are (or can be) imposed, restrictions on
‘substantially all the trade’ within the region have not been eliminated so that
the regional deal does not meet Article XXIV requirements and, therefore, the
tariff preference cannot be justified under Article XXIV. An element in
support of this argument is the fact that Article XXIV:8 explicitly allows for
the continuation of some restrictions on intra-regional trade, namely ‘where
necessary, those permitted under [GATT] Articles XI, XII, XIII, XIV, XV
[on quantitative restrictions] and XX [general exceptions]’. GATT Article
XIX on safeguards is not on that list. Therefore, the argument could run,
intra-regional safeguards is not a restrictive policy that can continue within a
regional trade arrangement.
In my view, however, the argument that GATT Article XXIV would
altogether prohibit intra-regional safeguards is unconvincing. The list of
GATT provisions in Article XXIV:8 offers a number of policy justifications to
validly restrict intra-regional trade. It is, however, hard to imagine that this list
would be an exhaustive one. Not only does the list exclude Article XIX on
safeguards, but also Article XXI on security exceptions and Article XVIII:B
on trade restrictions for balance of payments reasons that can be imposed by

39
For examples, see above n 4. Under WTO rules, in contrast, a safeguard limited to regional imports
only would clearly violate the non-discrimination provision of Article 2.2 of the Agreement on
Safeguards. Moreover, such exclusion of third-party imports cannot be justified under GATT Article
XXIV: imposing more trade restrictions on regional partners than on third-parties is antithetical to
regional free trade (as opposed to excluding regional imports from a safeguard, discussed below).
40
Although, in theory, one could imagine that a regional partner, instead of challenging the regional
safeguard before the regional forum under regional rules, brings the dispute to the WTO and claims
to be the victim of a discriminatory safeguard, imposed exclusively on regional partners. In that
event, it is hard to see how GATT Article XXIV could justify the exclusion of third-party imports
(see above n 39). Nonetheless, in my view, the defendant in such dispute should then be able to
invoke regional safeguard rules in its defence, even before a WTO panel, and be permitted to justify
the regional safeguard under these regional rules as long as such rules (1) do not affect other WTO
Members, not party to the regional deal; and (2) are in line with Article 11 of the Agreement on
Safeguards, see above n 14.
41
Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products (‘Turkey –
Textiles’), WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, 2345, at para 47ff.

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certain developing countries.42 Does this mean that within a regional trade
arrangement, all trade restrictions imposed for reasons of national security
must be eliminated? Or that restrictions for balance of payments under Article
XII (which is explicitly mentioned in the list) are permitted, while those under
Article XVIII:B for certain developing countries, are not? This is hard to
conceive.
After all, and perhaps more important than the list in Article XXIV:8, the
requirement is the elimination of restrictions on ‘substantially all the trade’;
not the elimination of all trade restrictions except those necessary under the
list of GATT provisions explicitly mentioned. As the Appellate Body stated:
[GATT Article XXIV:8(a)(i)] requires the constituent members of a customs
union to eliminate ‘‘duties and other restrictive regulations of commerce’’ with
respect to ‘‘substantially all the trade’’ between them. Neither the GATT
CONTRACTING PARTIES nor the WTO Members have ever reached an
agreement on the interpretation of the term ‘‘substantially’’ in this provision. It
is clear, though, that ‘‘substantially all the trade’’ is not the same as all the
trade, and also that ‘‘substantially all the trade’’ is something considerably
more than merely some of the trade. We note also that the terms of sub-
paragraph 8(a)(i) provide that members of a customs union may maintain,
where necessary, in their internal trade, certain restrictive regulations of
commerce that are otherwise permitted under Articles XI through XV and
under Article XX of the GATT 1994. Thus, we agree with the Panel that the
terms of sub-paragraph 8(a)(i) offer ‘‘some flexibility’’ to the constituent members of
a customs union when liberalizing their internal trade in accordance with this sub-
paragraph. . . 43
In other words, even if safeguards are applied on a number of products in
intra-regional trade (for example, even if the United States imposes
safeguards on certain steel products from Canada and Mexico), this should
not prevent that restrictions on ‘substantially all the trade’ within, in our
example, NAFTA have, nonetheless, been eliminated. Put differently, the
degree of flexibility offered in Article XXIV:8 should be wide enough to
include the possibility for intra-regional safeguards. Only if such safeguards
were to be imposed on a significant percentage of the trade could the question
arise of whether the remaining trade that continues to circulate freely still
qualifies as ‘substantially all the trade’. Another element that should play in
favor of this flexibility in Article XXIV:8 is the fact that unlike, for example,
continuing tariff restrictions on intra-regional trade in sensitive agricultural
products, safeguards are of a temporary nature. Article 7.1 of the Agreement

42
Contra: James Mathis, Regional Trade Agreements in the GATT/WTO (TMC Asser Press, 2002),
Chapter 9. Note that also GATT Article VI is excluded from the Article XXIV:8 list. As a result, if
this list were, indeed, exclusive all intra-regional anti-dumping and countervailing duties would also
be prohibited. This would, in turn, mean that the trade remedy chapters in, for example, NAFTA
and MERCOSUR, as well as most bilateral free trade agreements, could not be used if those
arrangements were to qualify as regional deals in line with GATT Article XXIV:8.
43
Appellate Body Report, Turkey – Textiles, above n 41, at para 48, emphasis in original, except in the
last sentence were italics were added.

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128 Journal of International Economic Law (JIEL) 7(1)

on Safeguards provides, for example, that safeguards shall, in principle, not

exceed four years. On that basis, safeguards as a limited and time-bound
exception to regional trade should probably not weigh as heavy as, for
example, continuing trade restrictions on sensitive textile or agricultural
products.

B. Can GATT Article XXIV justify safeguards that exclude regional

partners?
Assuming that the above conclusion is correct, so that intra-regional
safeguards are not per se prohibited under GATT Article XXIV:8, one
crucial question remains: intra-regional safeguards may be permitted, but is it
consistent with WTO rules to impose a safeguard and exclude regional
partners? In particular, can Article XXIV justify the exclusion of regional
partners from safeguard measures in violation of the non-discrimination
requirement in Article 2.2 of the Agreement on Safeguards? This question
must, in turn, be split in two:
(1) Is it at all possible for GATT Article XXIV to justify a violation under
the Agreement on Safeguards?; and
(2) If so, under what circumstances does GATT Article XXIV offer an
exception for violations of the Agreement on Safeguards?
1. Is the GATT Article XXIV defense available for violations of the Agreement
on Safeguards?
As noted in Section IV above, there should be little doubt that the defense
under GATT Article XXIV is available as much for violations under GATT
as for violations under the Agreement on Safeguards. The Agreement on
Safeguards is explicitly linked to, and stated as an elaboration of, GATT
Article XIX, and the Appellate Body has confirmed that the field of
safeguards is regulated both in the Agreement on Safeguards and GATT
Article XIX.44 As the Panel on US – Line Pipe rightly stated:
A contrary interpretation would ignore the close interrelation between Article
XIX and the Safeguards Agreement. This interrelation is evidenced in
particular by Article 1, whereby the Safeguards Agreement
‘ . . . establishes rules for the application of safeguard measures which shall
be understood to mean those measures provided for in Article XIX of
GATT 1994.’
By virtue of this provision, therefore, safeguard measures subject to the
provisions of the Safeguards Agreement are understood to be Article XIX
measures. Thus, if an Article XXIV defence is available for Article XIX
measures, by definition it must also be available for measures covered by the
disciplines of the Safeguards Agreement.

44
See the Appellate Body report on Argentina – Safeguards (EC), above n 2, at para 76ff. and above text
at nn 7 and 8. The Appellate Body report on US – Steel, above n 2, at para 275, refers to the
‘inseparable package’ and ‘inseparable relationship’ between GATT Article XIX and the Agreement
on Safeguards.

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An additional element in support of the argument that Article XXIV

remains available for safeguard measures under Article XIX, as elaborated in
the Agreement on Safeguards, is the last sentence in footnote 1 to the
Agreement on Safeguards:
Nothing in this Agreement prejudges the interpretation of the relationship
between Article XIX and paragraph 8 of Article XXIV of GATT 1994.45

Therefore, discriminatory safeguards excluding regional imports in viola-

tion of Article 2.2 of the Agreement on Safeguards remain subject to the
exception in GATT Article XXIV.
Crucially, the relationship between Article 2.2 and Article XXIV is one of
general rule versus exception. GATT Article XXIV:5 explicitly states that ‘the
provisions in this [GATT] Agreement shall not prevent, as between the
territories of WTO Members, the formation of a customs union or a free-
trade area’. The GATT provisions that shall hence not prevent regional trade
deals include GATT Article XIX as elaborated in the Agreement on
Safeguards.
This type of rule versus exception inter-action between WTO rules set out
in different agreements must be distinguished clearly from the altogether
different situation where a measure is, for example, permitted under GATT
Article XX, but prohibited under the self-standing SPS or TBT Agreement.46
In the latter type of situation GATT Article XX does not operate as a direct
exception to SPS or TBT rules. Unlike in the Agreement on Safeguards,
nothing in the SPS or TBT Agreements links the entire agreement back to a
GATT provision. Hence the SPS and TBT Agreements are self-standing but
still interact with GATT because all WTO agreements are legally speaking
part of one and the same Marrakesh Agreement.47 Rather than a rule versus
exception relationship, one and the same measure is then permitted under
one agreement but prohibited under another, so that a genuine conflict may
arise.48 If so, this conflict must be resolved with reference to the General
Interpretative Note to Annex 1A, which states as follows:
45
It is true that this sentence occurs in the context of a footnote that deals only with customs unions
and how they (or their member states) can impose safeguards. However, to argue on that basis that
therefore the last sentence itself is limited only to customs unions (as, for example, Korea did in US –
Line Pipe, Panel report, above n 2, para 7.152) would go too far. Clearly, the unambiguous terms of
this last sentence are not limited to customs unions but apply to ‘paragraph 8 of Article XXIV’,
which includes the definition of both customs unions and free trade areas (in support, Panel report
on US – Line Pipe, above n 2, para 7.153). For similar reasons, the last sentence in footnote 1 cannot
be limited either to Article 2.1 of the Agreement on Safeguards but applies in respect of all provisions
of the Agreement on Safeguards. It starts after all with the words ‘[n]othing in this Agreement. . .’ (in
support, Panel report on US – Line Pipe, above n 2, para 7.157).
46
Respectively, the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) and
the Agreement on Technical Barriers to Trade (TBT).
47
See Article II:2 of the Marrakesh Agreement Establishing the WTO.
48
See Joost Pauwelyn, ‘Cross-agreement Complaints before the Appellate Body: A case study of the
EC – Asbestos Dispute’, 1 World Trade Review (2002), 63 and Conflict of Norms in Public International
Law, How WTO Law Relates to Other Rules of International Law (Cambridge: Cambridge University

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130 Journal of International Economic Law (JIEL) 7(1)

In the event of a conflict between the provisions of the General Agreement on

Tariffs and Trade 1994 and a provision of another agreement in Annex 1A to
the Agreement Establishing the World Trade Organization [including the SPS
and TBT agreements]. . ., the provision of the other agreement shall prevail to
the extent of the conflict.

In other words, where GATT permits, but SPS or TBT prohibits, SPS or
TBT prevails. In contrast, when it comes to the Agreement on Safeguards, no
conflict between Article 2.2 and Article XXIV arises: as all exceptions do,
Article XXIV explicitly carves out and limits the scope of application of
Article XIX, including Article 2.2 of the Agreement on Safeguards. Hence,
there is no conflict (the rule must simply give way to the exception) and the
principle in the General Interpretative Note to the effect that the more specific
Agreement on Safeguards prevails, does not apply.
In sum, a defendant should, in principle, be able to rely on GATT Article
XXIV as a defense for violation of the Agreement on Safeguards. The
question remains, however, whether the specific conditions related to such
defense will be fulfilled.
2. In what circumstances can GATT Article XXIV justify a violation of the
Agreement on Safeguards?
Two situations arise where GATT Article XXIV could be invoked as a
defense for discriminatory safeguards in violation of the Agreement on
Safeguards.
First, while the safeguard excludes regional imports, the injury determina-
tion preceding the safeguard is based on all imports (as was the case in five out
of six WTO disputes so far, be they against the United States or Argentina).
As noted in Section IV above, by finding that this type of situation is a
violation of the parallelism requirement, the Appellate Body did not avoid, let
alone resolve, the question of whether GATT Article XXIV can justify
violations of Article 2 of the Agreement on Safeguards (including
parallelism!). Moreover, as pointed out in Section I, in my view, including
regional imports in the injury determination is, in the first place, a violation
also of GATT Article XIX (in particular, inconsistent with the ‘effect of the
[GATT] obligations incurred’ requirement). The question remains, however,
whether this violation can be justified under Article XXIV. We deal with this
particular situation at the very end of this sub-section.
Second, and more importantly, GATT Article XXIV could be invoked as a
defense when both the injury determination and the safeguard measure itself

Press, 2003). This crucial distinction escaped the recent Panel on EC – Conditions for the Granting of
Tariff Preferences to Developing Countries, WT/DS246/R, circulated 1 December 2003 (currently under
appeal), which held that GATT Article I (MFN) and the Enabling Clause are in a rule/exception
relationship (rightly so), but ‘conflict’ in case the Enabling Clause exception is met. In such a case
there is, however, no conflict. Rather the exception explicitly carves out the rule and both provisions
can be applied without conflict.

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are limited to third-party imports.49 Although in this situation parallelism is

met and regional imports were excluded from the injury determination – as,
we have argued earlier, they should be pursuant to GATT Article XIX – the
fact remains that a discriminatory safeguard violates Article 2.2 of the
Agreement on Safeguards. However, is this discrimination justified under
GATT Article XXIV? This is what we examine next.
(a) The Turkey – Textiles requirements: timing and necessity. According to
the Appellate Body in its report on Turkey – Textiles, two cumulative
conditions must be met for Article XXIV to justify a violation of GATT (in
casu, Article XIX as elaborated in the Agreement on Safeguards):
First, the party claiming the benefit of this defence must demonstrate that the
measure at issue is introduced upon the formation of a customs union that fully
meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV. And,
second, that party must demonstrate that the formation of that customs union
would be prevented if it were not allowed to introduce the measure at issue.50
The Appellate Body deduced these two conditions from the chapeau of
Article XXIV:5 which states that GATT provisions
shall not prevent. . .the formation of a customs union or of a free-trade area or
the adoption of an interim agreement necessary for the formation of a customs
union or of a free-trade area; Provided that. . .
Now, if these two conditions apply also in order to justify the exclusion of
regional imports from a safeguard measure (the second situation referred to
above), there is little chance that Article XXIV can ever work as a valid
defense. Firstly, it would be an extraordinary coincidence if the particular
safeguard measure were, indeed, ‘introduced upon the formation’ of the
customs union or free-trade area. Most often, the safeguard will be
introduced after that event, not at the very same point in time as the date
of creation of the regional arrangement.51
Secondly, and more importantly, based on the discussion in Section V.B(1)
above, it will be very hard to establish that the formation of the regional
arrangement, in line with Article XXIV:5 and 8, would be ‘prevented if the
introduction of the measure [i.e., the exclusion of regional imports from the
safeguard] were not allowed’. Put differently, a WTO Member will be hard
49
This second situation covers both types of cases referred to by the Appellate Body in US – Line Pipe,
namely: (1) cases where regional imports ‘are not considered in the determination of serious injury’
and (2) cases where regional imports ‘are considered in the determination of serious injury, and the
competent authorities have also established explicitly, through a reasoned and adequate explanation,
that imports from sources outside the free-trade area, alone, satisfied the conditions for the
application of a safeguard’ (see above text at n 35).
50
Appellate Body Report, Turkey – Textiles, above n 41, at para 58, emphasis added.
51
Unless one construes this Article XXIV timing requirement as referring not so much to the safeguard
itself, but to the provision in the regional deal that prohibits safeguards on regional imports, albeit
only in certain circumstances as NAFTA does. See above n 38. Such interpretation would, however,
lead to absurd results. Imagine an original regional deal that permits regional safeguards ‘upon
formation’. To further liberalize later and lift this permission would then not be consistent with Article
XXIV since not ‘upon formation’.

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132 Journal of International Economic Law (JIEL) 7(1)

pressed to convince a panel that without excluding regional imports, the legal
conditions for a valid customs union or free trade area under Article XXIV:8
cannot be met. As we saw earlier, the language in Article XXIV:8 (requiring
the elimination of restrictions on ‘substantially all the trade’) offers enough
flexibility to permit regional safeguards. Hence, it is difficult to say that
imposing the safeguard measure also on regional imports would ‘prevent’ the
formation of a GATT-consistent regional trade deal.52
(b) A critique of the Turkey – Textiles requirements: measures ‘part of’ the
formation of a GATT-consistent regional arrangement. In my view, however,
both of the conditions referred to by the Appellate Body are questionable,
even when examining the very words in GATT Article XXIV.
First, the requirement that the otherwise inconsistent measure be
‘introduced upon the formation of’ the regional arrangement does not find
support in the language of Article XXIV. The chapeau of Article XXIV:5
states that GATT provisions ‘shall not prevent. . .the formation of a customs
union or of a free-trade area’. It does not say that GATT provisions ‘shall not
prevent . . . measures introduced upon the formation of a customs union or of a
free-trade area’. The Appellate Body’s interpretation has simply added these
words. Nowhere does the GATT restrict the timing of measures that can be
justified under Article XXIV. The absurdity of this timing requirement is
apparent from the following hypothetical. Imagine that a free trade area
originally covers all products except bananas, i.e., all regional trade occurs
duty free, except for bananas where each member state continues to apply its
own tariff. Now, if after 10 years, the members to that regional arrangement
decide to lift the tariffs also on regionally traded bananas, would such lifting of
tariffs only on regional imports – in violation of the MFN principle in GATT
Article I – be justified under GATT Article XXIV? If the Appellate Body
conditions apply and only measures ‘introduced upon the formation of’ a free
trade area can be justified under Article XXIV, then surely lifting the trade
restrictions on regional bananas 10 years after the formation of the free trade
area cannot be tolerated.53 In other words, perfecting the free trade area by
making all trade free would then not be GATT consistent.

52
Obviously, it is one thing to conclude that GATT Article XXIV:8 permits the imposition of regional
safeguards and hence Article XXIV does not prevent the formation of a regional trade deal even
where the possibility for regional safeguards is maintained. In practice, this does not mean, however,
that the exclusion of regional imports from safeguards was unimportant in clinching the regional
deal. On the contrary, in all free trade agreements concluded, for example, with the United States,
one of the demands that is very high on the list of US negotiating partners is to be excluded from US
safeguards in the future. Hence, not to exclude regional partners from safeguards may have meant
that, politically, the regional deal would not have been concluded. However, what counts under the
Appellate Body test is not the politics of free trade negotiations, but rather the legal question of
whether a free trade arrangement with regional safeguards could also pass the Article XXIV test.
53
For cases where the elimination of tariffs also on bananas was foreseen as of the day of formation of
the free trade area, one could argue that ‘upon formation’ the future elimination of tariffs on bananas
was already envisaged. However, this argument does not work where ‘upon formation’ there was no

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Second, no support in the text of Article XXIV can be found either for the
requirement that ‘the formation of the customs union [or free-trade area]
would be prevented if the introduction of the measure were not allowed’, that
is, in our case, the condition that the exclusion of regional imports was
required or necessary for the formation of a GATT-consistent regional
arrangement.54 The chapeau of Article XXIV:5 states that ‘the provisions
in this Agreement [GATT] shall not prevent . . . the formation of a customs
union or of a free-trade area’. It does not say that ‘the provisions in this
Agreement [GATT] shall not prevent . . . measures necessary for the formation
of a customs union or of a free-trade area’. Once again, the Appellate Body’s
interpretation has simply added these words (measures necessary for). The
word ‘necessary’ does occur in the chapeau to Article XXIV:5, but it relates
only to interim agreements ‘necessary for the formation of’ regional
arrangements fully meeting Article XXIV. It has to do, in other words, with
the relationship between interim regional trade deals and finalized regional
trade deals; not with the relationship between particular measures or
violations of GATT and the formation of a GATT-consistent regional
arrangement.
More importantly, the word ‘prevent’ in the beginning of the chapeau – ‘the
provisions in this Agreement [GATT] shall not prevent. . .the formation of a
customs union or a free-trade area’ – cannot be read either as requiring that
only measures necessary for the formation of a GATT-consistent regional
arrangement can be justified under Article XXIV. The word ‘prevent’, in the
chapeau of Article XXIV:5, affects the relationship between, on the one hand,
‘the provisions in this Agreement’ (i.e., GATT provisions other than Article
XXIV) and, on the other hand, ‘the formation of a customs union or of a free-
trade area’: ‘the provisions in this Agreement [GATT] shall not prevent . . .
the formation of a customs union or a free-trade area’. The word ‘prevent’, in

plan whatsoever to eliminate or even reduce tariffs on bananas (and, of course, even in that case a
valid free trade area can exist as long as ‘substantially all the trade’, though excluding trade in
bananas, has been liberalized).
54
The Panel on US – Line Pipe, above n 2, came to the same conclusion, albeit on different grounds (it
confirmed the criteria in Turkey –Textiles but distinguished that case where an additional restriction
was imposed on third parties, from the safeguards case at hand, i.e. where regional partners were
excluded from a trade restriction, at para 7.148):
In our view, the Appellate Body’s findings in Turkey – Textiles were conditioned by the facts of that
case. In particular, Turkey – Textiles concerned the imposition by a member of a customs union of
restrictive measures against imports from a third country, upon the formation of that customs
union. Clearly, if members of a customs union seek to introduce restrictive measures against
imports from third countries, contrary to GATT 1994, it is entirely appropriate that they should
be required to demonstrate the necessity of such measures. That being said, we are not at all
convinced that an identical approach should be taken in cases where the alleged violation of
GATT 1994 arises from the elimination of ‘duties and other restrictive regulations of commerce’
between parties to a free-trade area, which is the very raison d’être of any free-trade area. If the
alleged violation of GATT 1994 forms part of the elimination of ‘duties and other restrictive
regulations of commerce’, there can be no question of whether it is necessary for the elimination of
‘duties and other restrictive regulations of commerce’.

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134 Journal of International Economic Law (JIEL) 7(1)

this context, does not affect or impose requirements on the relationship

between, on the one hand, the measure in question (here, exclusion of
regional imports) and, on the other hand, the formation of a customs union or
of a free-trade area. Once again, the word ‘measure’ does not even appear in
the chapeau of Article XXIV:5. What the chapeau states, therefore, is that the
scope of GATT provisions shall not be such as to prevent the formation of a
customs union or of a free-trade area; in other words, GATT provisions must
be carved out so as to permit the formation of a customs union or of a free-
trade area. Nowhere does it say that this permission to form a customs union
or free-trade area is limited to measures absolutely necessary to this formation.
To conclude otherwise would be reading the words ‘measures necessary for’
into the chapeau of Article XXIV:5. As a result, Article XXIV:5 should not
only justify ‘measures necessary’ for the formation of a customs union (i.e.,
the exclusion of regional imports only in case such exclusion is necessary to
form a valid customs union); but should permit more broadly ‘the formation’
of a customs union (which may include the exclusion of regional imports from
safeguards, as discussed below).
To illustrate this point, compare GATT Article XXIV:5 to GATT Article
XX(b). Article XX(b) states that ‘. . . nothing in this Agreement [GATT] shall
be construed to prevent the adoption or enforcement . . . of measures . . .
necessary to protect human . . . health’. Here, clearly, Article XX(b) only
justifies ‘measures . . . necessary to protect human . . . health’. However, it
does so not because of the word ‘prevent’ in the chapeau to Article XX
(‘nothing in this Agreement [GATT] shall be construed to prevent. . .’, a
phrase comparable to that in the chapeau of Article XXIV:5), but rather
because Article XX(b) goes on to restrict the exception to ‘measures . . .
necessary’ to protect human health. Again, this addition is not made in Article
XXIV:5 (the words ‘measures necessary’ do not appear in that provision). Put
differently, if the Appellate Body’s interpretation were correct, and Article
XXIV is limited to measures necessary for the formation of a customs union,
then Article XX(b) would equally be limited to measures necessary to protect
human health even if Article XX(b) were phrased differently as follows:
‘. . . nothing in this Agreement [GATT] shall be construed to prevent . . . the
protection of human . . . health’, without its current and restrictive reference
to ‘measures necessary’ to protect human health. The difference in words in
Article XXIV:5 and Article XX(b) must have a meaning. Under the current
Appellate Body interpretation of Article XXIV:5 no difference is made.
The absurdity of the Appellate Body’s necessity requirement is illustrated
further by the hypothetical outlined earlier. Remember that our hypothetical
free trade area originally covered all products except bananas. Crucially, since
the trade in bananas represents only a minor fraction of all trade, as of the
conclusion of the original regional deal all conditions in paragraphs 5 and 8 of
Article XXIV were met (in particular, restrictions on ‘substantially all the
trade’ had been eliminated). Now, 10 years later, the members to that

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regional arrangement decide to lift the tariffs also on regionally traded

bananas. Would such lifting of tariffs only on regional imports – in violation of
the MFN principle in GATT Article I – be justified under GATT Article
XXIV? Not so under the Appellate Body’s necessity requirement since from
the very beginning the regional deal was GATT consistent, so lifting tariffs
also on bananas was not at all necessary for the formation of a GATT-
consistent regional arrangement. Once again, perfecting the free trade area by
making all trade free would then not be GATT consistent. As with the timing
requirement discussed earlier, it is hard to imagine that this is what the drafter
of Article XXIV had in mind.
In sum, both the Appellate Body’s timing and necessity requirements are
supported neither by the terms nor the spirit of GATT Article XXIV. They
unduly restrict the exception offered for regional trade agreements.55
So what then are the conditions for a violation to be justified under the
terms of GATT Article XXIV? The very words of Article XXIV:5 permit ‘the
formation of a customs union or of a free-trade area . . . Provided that’ the
conditions in paragraph 5, as well as those in other paragraphs of Article
XXIV, in particular paragraph 8, are met. As a result, the first two questions
when addressing conformity with Article XXIV (firstly, under paragraph 5;
secondly, under paragraph 8) relate to the customs union or free trade area as
a whole, that is, the aggregate of measures taken to establish the regional
arrangement, not the individual measure that is being challenged (in our case,
the safeguard excluding regional imports):
(1) restrictions on trade with third parties at the time of institution of the
regional arrangement ‘shall not on the whole be higher or more
restrictive than the general incidence’ of restrictions in place
beforehand (Article XXIV:5, the so-called economic test); and
(2) the customs union or free trade area meets the definition in Article
XXIV:8, inter alia, restrictions on ‘substantially all the trade’ within
the region have been eliminated (the so-called definitional test).
However, once these two aggregate tests have been met, does this mean
that all violations of GATT can now be justified with reference to the
regional trade deal and GATT Article XXIV? Surely not. In addition, it
must be examined whether the individual measure violating GATT can be
said to be part of ‘the formation of a customs union or of a free-trade area’
in line with GATT Article XXIV, as required in the chapeau of Article
55
The panel on Turkey – Textiles, above n 41, would have gone even further then the Appellate Body in
this case by finding (at para 9.121) that Article XXIV:5(a) cannot justify any violation of GATT:
‘While [Article XXIV:5(a)] authorizes the formation of customs unions, it does not contain any
provision that either authorizes or prohibits, on the occasion of the formation of a customs union, the
adoption of import restrictions otherwise GATT/WTO incompatible, by any of the parties forming
this customs union’. That panel also found, more generally, (at para 9.188) that ‘the wording of
Article XXIV does not authorize a departure from the obligations contained in Articles XI and XIII
of GATT and Article 2.4 of the ATC [Agreement on Textiles and Clothing]’.

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XXIV:5.56 How then does one distinguish a measure that is part of the
exercise of forming an overall GATT-consistent regional deal, from one that
is not? The text in the chapeau of Article XXIV:5 itself is hardly clear on
this question. As a result, it must be answered by looking at its context, in
particular

(1) the economic test in paragraph 5;

(2) the definitional test in paragraph 8;
(3) the purpose of customs unions or free trade areas set out in paragraph
4 (‘to facilitate trade between the constituent territories and not to
raise barriers to trade of other contracting parties with such
territories’); and
(4) the paragraph 6 requirement of compensation in case a WTO
Member, in fulfilling the economic test in paragraph 5(a) relating to
customs unions, increases any rate of duty above its bindings in
violation of GATT Article II.

What does this mean for safeguards excluding regional imports and their
justification under GATT Article XXIV? Can the act of excluding regional
imports from an otherwise WTO-consistent safeguard (apart from, obviously,
the non-discrimination requirement in Article 2.2 of the Agreement on
Safeguards) be regarded as part of ‘the formation’ of an Article XXIV-
consistent regional arrangement?57
Firstly, the economic test in paragraph 5 sheds little light on this question.
This test asks the question of whether trade restrictions on third parties were
added with the creation of the regional area; not whether regional partners
have been or can be excluded from pre-existing restrictions. Paragraph 5
could therefore only be relevant if the regional deal made safeguard measures
on third parties more easily available as compared to the times before the
regional deal. It does not answer the question, at issue here, of whether the
regional deal can exclude regional partners from pre-existing trade restrictions
left intact as they relate to third parties (i.e., the WTO Member’s safeguard
regime as it applies to third parties).
Secondly, excluding regional imports from an otherwise WTO-consistent
safeguard seems to be the exact kind of exercise required under the
definitional test in paragraph 8: the very formation of a customs union or
56
In support, see the Panel report on US – Line Pipe, quoted above n 54 (at para 7.148: ‘If the alleged
violation of GATT 1994 forms part of the elimination of ‘duties and other restrictive regulations of
commerce’, there can be no question of whether it is necessary for the elimination of ‘duties and
other restrictive regulations of commerce’).
57
That is, the second situation set out at the beginning of this sub-section. We examine subsequently the
other (first) type of situation for which Article XXIV may be relevant, namely safeguards excluding
regional imports but based on an injury determination that takes account of all imports, in violation
of the Appellate Body’s parallelism requirement and, in my view, inconsistent also with GATT
Article XIX.

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free trade area requires the elimination of restrictions as between regional

partners, at least in respect of ‘substantially all the trade’.58
Thirdly, excluding regional imports from an otherwise WTO-consistent
safeguard seems in line also with the purpose of customs unions or free trade
areas set out in paragraph 4, namely: ‘to facilitate trade between the
constituent territories and not to raise barriers to trade of other contracting
parties with such territories’. Although the safeguard does raise barriers as
against third parties, it does so not because of the regional arrangement but on
the ground of Article XIX and the Agreement on Safeguards, that is, because
third-party imports cause or threaten to cause serious injury. At the same
time, the safeguard also excludes regional imports but it does so, arguably, ‘to
facilitate trade between the constituent territories’ of the regional deal. Here
lies the first of two major differences between safeguards excluding regional
imports and the quota that Turkey imposed on Indian textiles to bring its
external trade restrictions in line with those of its customs union partner, the
EC (i.e., the measure at issue in the Turkey – Textiles case). The textile quota
on third parties was clearly an ‘increase in barriers to trade’ with third parties
that did not exist beforehand, against the objective in paragraph 4. Crucially,
the only justification for the quota was the regional arrangement with the EC
itself, more particularly, Article XXIV:8(a)(ii) requiring that ‘substantially the
same duties and other regulations of commerce are applied by each of the
members of the [customs] union to the trade’ with third parties. Unlike the
safeguard (where the safeguard on third parties is justified by Article XIX and
the Agreement on Safeguards), no other WTO rule justified the imposition by
Turkey of the quota.59 Nonetheless, even for safeguards, a close evaluation of
possible trade diversion, contrary to the general objective in paragraph 4 (‘not
to raise barriers to trade of other WTO Members’) remains warranted.60
Fourthly, a safeguard excluding regional imports is not imposed to fulfill the
economic test in paragraph 5(a), that is, to ensure that trade restrictions with
third parties at the time of institution of the regional arrangement ‘shall not on
the whole be higher or more restrictive than the general incidence’ of
restrictions in place beforehand. Hence, the paragraph 6 compensation
requirement for increases in third-party tariffs above Article II bindings does
not apply. Yet paragraph 6 points at the second of two differences between
safeguards excluding regional imports and the quota that Turkey imposed on
Indian textiles in the Turkey – Textiles dispute. In the latter case, the quota was

58
In support, see above n 56.
59
Although the original EC quota was consistent with WTO rules, the Turkish quota, imposed so as to
avoid circumvention of the EC quota, was not justified under any WTO provision and was, rather, in
violation of Article 2.2 of the Agreement on Textiles and Clothing.
60
In particular the situation where excluding regional imports has serious trade diversion effects, more
than trade creation effects, ought to be carefully scrutinized and could, in extreme circumstances,
lead to the conclusion that the exclusion of regional imports from a safeguard is not part of the
formation of a free trade area since contrary to the objective in Article XXIV:4.

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138 Journal of International Economic Law (JIEL) 7(1)

imposed to harmonize external trade policies of the EC – Turkey customs

union and hence at least partly in fulfillment also of the economic test in
paragraph 5(a). As a result, paragraph 6 was relevant in that dispute.
However, the Turkish measure involved the imposition of a new quota; not an
increase in Turkish tariff duties. Now, if an increase in tariff duties above
bindings can only be carried out after the payment of compensation to, in this
case, India, how could it be that the imposition of a new quota – quotas being
considered in GATT as trade restrictions far less desirable than tariffs – can
be tolerated without any compensation?61 On this ground, paragraph 6 seems
to indicate that if an increase in barriers on third parties is at all carried out in
order to fulfill paragraph 5(a) requirements, such increase must take the form
of a tariff increase cum compensation, not of an extra quota limitation.62
In sum, based on an examination of the four paragraphs in Article XXIV
that inform the notion of ‘the formation of a customs union or of a free-trade
area’, one could conclude that excluding regional imports from an otherwise
WTO-consistent safeguard does qualify as a measure part of ‘the formation of
a customs union or of a free-trade area’ in line with GATT Article XXIV (for
the two reasons explained above, the same cannot be said, however, about the
extra quota restriction on India in the Turkey – Textiles dispute). As a result,
the violation of Article 2.2 of the Agreement on Safeguards – to the extent it
involves excluding regional imports from an otherwise WTO-consistent
safeguard – can, in my view, be justified under GATT Article XXIV.
(c) Can Article XXIV justify a safeguard applied only to third parties but
based on an injury determination including regional imports (in violation of
parallelism and Article XIX)? The final question is then whether Article
XXIV can also justify a safeguard, not only in violation of the non-
discrimination requirement of Article 2.2, but also inconsistent with the
Appellate Body’s requirement of parallelism or inconsistent with GATT
Article XIX itself (on the ground that the injury determination included
regional imports). This is the first of the two situations pointed at earlier for
which Article XXIV may be relevant.
When applying the timing and necessity requirements upheld by the
Appellate Body in Turkey – Textiles, there can, again, be little doubt that
Article XXIV cannot justify such violation of parallelism or GATT Article
XIX. The injury determination that includes regional imports in violation of

61
Note, however, that although no compensation is provided for under Article XXIV when a new
quota is imposed, even a quota has some built-in compensation for affected WTO Members in that it
offers quota rents to exporters, in this case, Indian exporters of textiles.
62
This point was hinted at also by the Panel report on Turkey – Textiles, above n 41, when it considered
paragraph 6 of Article XXIV (at para 9.127):
in the adoption of the common external tariff of a customs union, compensation is due if a pre-
existing tariff binding is exceeded. We note that there is no parallel provision to compensate
Members for the introduction of quantitative restrictions. In our view, this is the case because
quantitative restrictions are generally prohibited by GATT/WTO, while increases of tariffs above
their bindings, if re-negotiated, are WTO compatible.

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WTO Safeguards and Regional Trade Agreements 139

Article XIX as elaborated in the Agreement on Safeguards (in particular, the

parallelism requirement in Article 2) would then not constitute a measure
‘introduced upon the formation’ of a regional arrangement, but rather one
adopted subsequently. Moreover, it would be hard also to convince a panel
that including regional imports in the injury determination was necessary for
the formation of a GATT-consistent regional arrangement (in other words,
that excluding regional imports – in line with parallelism and the way we
construed Article XIX – would have prevented the formation of a GATT-
consistent arrangement). Clearly, even if one excludes regional imports from
the injury determination (as one should, in my view, do), one can still have a
regional arrangement consistent with GATT Article XXIV: Article XXIV is
silent on what imports to take into account in an injury determination; it
addresses only actual trade restrictions (in casu, the eventual safeguard),
requiring, inter alia, the elimination of trade restrictions on substantially all
the regional trade, thereby expressing a preference rather for regional imports
not to be the basis for safeguards.
However, could this type of situation – where the injury determination
includes all imports but the safeguard applies only to third-party imports –
still meet the more lenient test, advocated here, for justification under GATT
Article XXIV? In other words, is including regional imports in a safeguards
injury determination a measure part of (though not necessary for) ‘the
formation of a customs union or of a free-trade area’ consistent with GATT
Article XXIV? Not so, in my opinion. Once again, it is, first of all, difficult to
see any link between, on the one hand, the scope of imports to be taken into
account in an injury determination and, on the other hand, the requirements
for a GATT-consistent regional arrangement. Moreover, rather than ‘part of’
the formation of a customs union or free trade area, continuing to include
regional imports seems antithetical to the creation of regional free trade.
Finally, including regional imports in a safeguard investigation is likely to
increase the chances of a safeguard being imposed: first, regional imports may
have increased more than third-party imports given regional free trade;
second, the more imports one takes into consideration, the more likely it is to
find a causal link between increased imports and domestic injury. Imposing
more safeguards is hardly something part of ‘the formation of a customs union
or of a free-trade area’.
In sum, while excluding regional imports from the actual safeguard measure
itself can be regarded as an exercise ‘part of’ the formation of a customs union
or free trade area, nothing in the nature or objective of a customs union or free
trade area calls for, or even implies, the inclusion of regional imports in an
injury determination. Hence, the first situation referred to at the outset of
sub-section V.B(2) — where the injury determination takes account of all
imports but the safeguard applies only to third-party imports (in violation of
parallelism and GATT Article XIX) – cannot, in my view, be justified either
under the more lenient Article XXIV test advocated in this paper.

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140 Journal of International Economic Law (JIEL) 7(1)

conclusion
What are the safeguard options under WTO rules for a WTO Member that is
part also of a preferential trade arrangement? The different pieces of this
rather complex puzzle analysed above can now be put together in the
following eight points:
1. Based on requirements in GATT Article XIX itself – in particular ‘the
effect of the obligations incurred’ under GATT requirement and possibly also
that of ‘unforeseen developments’ – WTO Members part also of a regional
arrangement must exclude imports from within the region as a basis for WTO
safeguards if such imports are covered also by the preferential trade deal and
made subject there to liberalization commitments equal to or exceeding
GATT concessions. This should normally lead to fewer WTO safeguards. At
the same time, safeguard mechanisms under regional deals may still permit
regional safeguards (see below point 5).
2. The Agreement on Safeguards, in contrast, is silent on the source of
imports that must be taken into account in a safeguards injury determination.
All imports can be considered, but one can also exclude regional imports (as
advocated under point 1) or take account only of imports from one source.
Crucially, however, even if only third-party imports are considered in the
determination itself, the injurious effects of other imports (in casu, regional
imports) must still be evaluated so as not to attribute them to third-party
imports. Moreover, if only third-party imports are considered in the injury
determination, they alone must meet the causal link requirement with serious
injury or threat thereof (i.e., it must be demonstrated that third-party imports
alone ‘played a part in, or contributed to, bringing about serious injury so that
there is a causal ‘‘connection’’ or ‘‘nexus’’’ 63).
3. In principle, the eventual safeguard measure itself must be applied to all
imports, on a non-discriminatory basis (pursuant to Article 2.2 of the
Agreement on Safeguards, subject, of course, to GATT Article XXIV
discussed in point 8 below). At the same time, if the injury determination
considered only third-party imports, the ensuing safeguard measure itself can
only offset the injury caused by third-party imports (not injury caused by
regional imports).
4. The Appellate Body’s requirement of parallelism – that is, equivalence
between the imports considered in the injury determination and those made
subject to the safeguard measure – is an unnecessary complication to deal
with a problem better resolved under either GATT Article XIX itself (and the
obligation there to exclude regional imports in certain circumstances) or
Article 2.2 of the Agreement on Safeguards in combination with GATT
Article XXIV. Parallelism has not avoided, let alone resolved, the problem of
selective safeguards and the relationship between the Agreement on
Safeguards and Article XXIV. Parallelism may lead to absurd situations
63
Appellate Body report on US – Wheat Gluten, above n 2, at para 67.

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WTO Safeguards and Regional Trade Agreements 141

and complicates the problem more than it resolves it. The requirement of
parallelism should be abandoned.
5. GATT Article XXIV does not per se prohibit safeguards on trade within
a regional trade arrangement (be they WTO safeguards or safeguards under a
regional deal). In particular, Article XXIV:8 permits some internal restric-
tions (including intra-regional safeguards) as long as ‘substantially all the
trade’ is liberalized.
6. In addition, GATT Article XXIV may operate as a justification not only
for violations of GATT Article XIX but also of the Agreement on Safeguards.
7. Examining the conditions for justification under GATT Article XXIV,
the current Appellate Body requirements expressed in its report on Turkey –
Textiles (the measure must be (i) ‘introduced upon the formation’ and (ii)
‘necessary’ for the formation, of a customs union or free trade area in line with
Article XXIV) would not permit safeguards that exclude regional imports.
Such exclusion is neither (i) ‘introduced upon the formation’ of the regional
arrangement; nor (ii) ‘necessary’ for such formation.
8. However, the Appellate Body requirements for Article XXIV justifica-
tion are supported by neither the text nor the spirit of Article XXIV. They
ought to be overturned. In particular, the requirement that exclusion of
regional imports must be ‘necessary’ for the formation of a regional
arrangement in line with Article XXIV, ought to be replaced with the
requirement that such exclusion is ‘part of’ the formation of a regional
arrangement in line with Article XXIV. On that basis, excluding regional
imports from a safeguard measure can be justified under Article XXIV (the
quota on Indian textiles in the Turkey – Textiles dispute cannot; nor can the
violation of parallelism or GATT Article XIX in the event an injury
determination takes account of all imports, but the safeguard measure
excludes regional imports). An Appellate Body finding that Article XXIV can,
indeed, justify safeguards that exclude regional imports would keep regional
trade free from WTO safeguards and provide an important incentive for
WTO Members to sign regional trade deals especially with members that are
heavy users of safeguards. At the same time, a close eye should be kept on
possible trade diversion so as to ensure that the exclusion of regional imports
from WTO safeguards does not run counter to the objective in GATT Article
XXIV:4.64 Finally, it should be recalled that the absence of WTO safeguards
on regional trade does not preclude the imposition of regional safeguards
under a safeguard mechanism provided for in the regional deal itself.
The above conclusions lead to the following options for WTO Members,65
part also of a customs union (CU) or free trade area (FTA), wanting to

64
See above n 60.
65
Table 1 sets out the options for a WTO Member itself to impose a safeguard. Remember, however,
that pursuant to footnote 1 of the Agreement on Safeguards, a customs union can also impose a
safeguard, either as a whole or on behalf of one or more of its member states. See above text at n 16
and 17.

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142 Journal of International Economic Law (JIEL) 7(1)

impose a WTO66 safeguard (SG). Note that in most cases only Option 2 will
be available (since the product in question is most likely to be covered also
under the CU/FTA) and that between Option 2.a and Option 2.b, the most
obvious choice will be Option 2.a, that is, to exclude regional imports from
the actual safeguard (since regional imports will be excluded also from the
injury determination and hence be better tackled under a regional safeguard
mechanism, if such mechanism exists). The option of applying a WTO
safeguard only to regional imports is not included in the table below. As noted
above in n 39 such safeguard would run counter to Article 2.2 of the
Agreement on Safeguards and not be justified under GATT Article XXIV. A
safeguard exclusively imposed on regional imports may, however, be possible
under the regional trade deal itself.
INJURY DETERMINATION SAFEGUARD MEASURE

Option 1 Option 1.a

Based on Applied to ALL IMPORTS
ALL IMPORTS are subject to the safeguard

* If the investigated product is covered also by the * Consistent with parallelism requirement
CU/FTA, there is a violation of Art. XIX (regional * Consistent with SG Article 2.2 (non-
imports must then be excluded) discrimination)
* The violation of Art. XIX cannot be justified * Intra-regional safeguards are not per se prohibited
under Art. XXIV by Art. XXIV

Option 1.b
REGIONAL IMPORTS EXCLUDED

* Violation of parallelism requirement, not justified

under Art. XXIV
* Violation of SG Article 2.2 but justified under Art.
XXIV (though violation of parallelism and Art. XIX
remain)

Option 2 Option 2.a

REGIONAL IMPORTS EXCLUDED REGIONAL IMPORTS EXCLUDED

* If the investigated product is covered also by the * Consistent with parallelism requirement
CU/FTA, then regional imports must be excluded * Violation of SG Article 2.2 (non-discrimination)
under Art. XIX but justified under Art. XXIV
* Agreement on Safeguards (Arts. 2.1 and 4) does
not prohibit exclusion of regional imports
Option 2.b
Applied to ALL IMPORTS

* Violation of parallelism requirement but justified

under SG Article 2.2
* Consistent with SG Article 2.2 (non-
discrimination)
* Intra-regional safeguards are not per se prohibited
by Art. XXIV
* Potentially in violation of rules in the CU/FTA
itself (prohibiting regional safeguards, albeit under
certain conditions)

66
Remember, however, that even if GATT Art. XIX excludes regional imports as a basis for a
safeguard under GATT, such regional imports may still count towards an intra-regional safeguard
under the CU/FTA (as long as the regional safeguard mechanism respects the rights of other WTO
Members and is in line with Article 11 of the Agreement on Safeguards, see above n 4 and 14).

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