The Rationality of State Sovereignty’s
Export Restrictions – From the Perspective of
International Law
Master’s Thesis
Graduate School of law
The International Trade and Investment Law
Track of the Master’s Programme
Yanni Lyu - 12134457
Supervisor: Dr. J.H.(James) Mathis
Date of Submission: 26 July 2019
Table of Contents
1 Introduction ……… 4
2 Environment Exceptions to GATT - Art. XX………... 5
2.1 Factual Aspects in China - Rare Earths ………... 5
2.2 Arguments of the Parties in China - Rare Earths ………... 6
2.3 Appellate Body Findings on China - Rare Earths………... 8
2.3.1 China’s Measures at Issue Were Inconsistent with Its Accession Protocol... 8
2.3.2 China’s Export Quotas Was in Violation of GATT Art. XI………... 9
2.3.3 China’s Restrictions on Trading Rights Violated China’s Working Party Report and Its Accession Protocol…………...………... 11
2.4 Comments on China - Rare Earths Panel’s Findings ………...… 11
2.4.1 The applicability of GATT Art. XX………...…. 12
2.4.2 Export Restrictions on Critical Minerals and Metals – Flaws of WTO Rules… 14 2.4.3 Relationship between WTO Agreements and Accession Protocols……… 17
2.4.4 The Impact of the Panels’ Determinations on This “Relationship”……… 20
3 National Security Exception to GATT – Art. XXI ………. 22
3.1 Factual Aspects in Russia – Traffic in Transit ………... 22
3.1.1 Notable Factual Aspects ……...………. .23
3.2 The Parties’ Arguments in Russia – Traffic in Transit ………. 23
3.3 The Panel’s Analysis and Findings in Russia – Traffic in Transit …………...24
3.3.1 Security Exception: Whether It Is Self-judging Or Subjects to the Panel Review………...24
3.3.3 Defining an “emergency in international relations” under Art. XXI(b)(iii)……..26 3.3.4 Definition of “Essential Security Interests”, application of the plausibility test,
and the determination of the “necessity” of measure…………...………..27
3.4 Comments on Russia- Traffic in Transit Panel’s Findings ………28
Abstract
Recently, the WTO Work Panel just released its decisions on Russia – Traffic in Transit case related to Russia’s restrictive trade measures to Ukraine. A tiny detail attracting people’s attention, the Russian Federation invoked the national security exception contained in Art. XXI of the GATT. With the heated global market competition and high degree of globalization, countries are trying to introduce new policies and regulations to protect their non-economic objectives, like national security interests and environment interests. This then violates the multilateral trading system under the WTO framework. In light of this situation, States are trying to rely on exceptions to GATT to exempt their violations to WTO obligations, mostly, general exception – GATT Art. XX. Meanwhile, in order to balance the conflicts between the liberalization of trade and the protection of national societal interests, invoking States have to satisfy certain conditions under exception clauses. However, the wordings of Art. XX and Art. XXI are somewhat vague and abstract. The invocation of these two articles is therefore mainly determined by case by case analysis, which brings lots of uncertainty. Thus, this article uses the relevant WTO leading cases to analyse the restrictive conditions under Art. XX and Art. XXI of the GATT and the uncertainty of invocation of them.
Keywords
International trade, sustainable development, exceptions to GATT, environmental protection, exhaustible natural resources, national security interests, GATT, General Agreement on Tariffs and Trade, WTO, World Trade Organization
1 Introduction
As the Preamble of the Marrakesh Agreement1 emphasized the goals of sustainable development and
environmental protection, the question now becomes its legal relevance in establishing the balance with trade liberalization. The high importance of societal interests and values such as public morals, public health, the environment and national security are widely recognized as a core of public policies by each country. However, in real life, a government’s implementation of its non-economic policy objectives often raises a market protection concern because of its undesirable effects on free trade under the WTO framework. Since “exception” clauses are established in General Agreement on Tariffs and Trade (GATT), which is designed to balance of members’ need for autonomy in ensuring their own interests of the multilateral trading system in preventing unilateral trade action, Member States are allowed to choose restrictive trade measures to protect their legitimate policy objectives, such as national security and environment interests. For the WTO and its Member States, how to maintain trade liberalization on the one hand, and preserving Member States’ special interest on the other hand is always challenging. Exceptions provided in the GATT, like Art. XX, permit Member States to take restrictive trade measures on human, animal and plant health protection and exhaustible natural resources conservation, as long as these measures do not differ from country to country when the same conditions prevail. At the same time, as the conflicts between the multilateral trading system and national environment protection becoming sharper, Art. XX is being cited at a big rate. In EC-Asbestos, Korea-Beef, US-Shrimps and Brazil-Tyres cases, Panels have been clarifying the conditions under Art. XX. 2 3 4 5
In the first part of this article, as a very high profile case, I will use the 2014 China - Rare Earths case
1 Marrakesh Agreement Establishing the World Trade Organization, adopted 15 April 1994, entered
into force 1 January 1995.
2
European Communities – Measures Affecting Asbestos and Asbestos Containing Products, Appellate Body Report, WT/DS135/AB/R, 12 March 2001.
3 Korea — Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Appellate Body Report,
WT/DS161/AB/R, 11 December 2000.
4 United States-Measures Relating to Shrimp from Thailand (DS343), United States-Customs Bond
Directive for Merchandise Subject to Antidumping/Countervailing Duties, Appellate Body Report, DS345, WT/DS343/AB/R, WT/DS345/AB/R, 01 August 2008.
5 Brazil – Measures Affecting Imports of Retreaded Tyres, Appellate Body Report,
to explore the States’ rationality on export restrictions under GATT Art. XX.6 In China - Rare Earths,
the USA, the EU and Japan complaint that China has restricted its exports on the unrenewable natural resource - rare earths. Since this restriction helps to conserve the exhaustible natural resources, in light of the societal interests, it falls within the scope of Art. XX(g).I begin with the case facts in China – Rare Earths and then states the parties’ arguments. The Panel’s findings are discussed. Consequently, I introduce my own commentary on the Panel’s findings.
As for the second part, States can also justify their export restraints by invoking national exception to GATT, that is Art. XXI. On April 2019, in Russia – Traffic in Transit case, a WTO Panel has for the very first time ruled on the merits of a matter in which the GATT Art. XXI was invoked to justify deviation from its WTO obligations.7 In this case, Russia has taken transit restrictions and imposition
of stringent border measures to Ukraine. On this part, Russia defended that their alleged measures can be justified by the security exception provided in GATT Art. XXI. Finally, Russia invoked Art. XXI(b)(iii), which allows States take actions in a case where such an action is “taken in time of war or other emergency in international relations”. The Panel’s interpretation of Art. XXI is likely to have important consequences for other pending disputes. For example, Member States can justify their export restrictions by invoking Art. XXI when they found their restraints do help to protect national security interests during the “time of war or other emergency in international relations”. I begin by outline the factual aspects of the recent transit national security exception case, and then summarize the legal claims brought by Ukraine and Russia. Subsequently, the findings of the Panel are discussed. The conclusion would be the commentary of this decision and the potential implications of the present decision.
2 Environment Exceptions to GATT - Art. XX
2.1 Factual Aspects in China - Rare Earths
On March 2012, the United States filed a case with the Dispute Settlement Body (DSB) of the WTO
6 China-Measures Related to the Exportation of Rare Earths,Tungsten and Molybdenum(China-Rare
Earths), Panel Reports, WT/DS431/R (US), WT/DS432/R (EU), WT/DS433/R (Japan); Appellate Body Report, WT/DS431/AB/R (US), WT/DS432/AB/R (EU), WT/DS433/AB/R (Japan),07 August 2014.
and claimed that China conducted unequal export control measures on several forms of rare earths, tungsten and molybdenum between domestic consumers and foreign consumers, including export duties, quantitative restrictions such as quotas and the administration and allocation of the export quotas. The European (EU) and Japan joint the US side afterwards. In this dispute, the raw materials at issue are all unrenewable resources and are used in everything from electric car motors and electronics to oil refining and clean diesel. They are vital to a State’s national security, as they are used in many major weapons systems, including lasers and radar. However, rare earths, tungsten and molybdenum are often radioactive. Moreover, in the smelting and extraction process, dangerous chemicals are frequently added, therefore polluting surrounding air, water and land. Following China’s domestic rules and laws,8 the raw materials at issue are also legitimately subject to export
licensing and quota control.
2.2 Arguments of the Parties in China – Rare Earths
The US, the EU and Japan brought claims concerning export duties, export quotas and the administration and allocation of the export quotas.
At first and foremost, the complaints assert that, in 2012, China imposed export duties on 363 products, including 58 rare earths products, 15 tungsten products, and nine molybdenum products. The complaints submit that these latter 82 products are not identified in Annex 6 of China’s Accession Protocol, and that China’s imposition of export duties on these products is therefore inconsistent with Paragraph 11.3 of its Accession Protocol.9
Then the complaints argued China subjects the exportation of various forms of rare earths, tungsten, and molybdenum to quantitative restrictions, such as export quotas.10 And the Complaints also
asserted that the legality of China’s quantitative restrictions are deriving out of China’s domestic laws
8 Such as Notice on Issuing the “2012 Export Licensing Management Commodities list”; 2012 Notice
on the Total export Quota Quantity for Agricultural and Industrial Products in 2012; Notice Publishing the List of Enterprise Applying for the Export Quota for Rare Earths Coke in 2012; Measures for the administration of Export Commodities Quotas; Measures for the Administration of Licensing for the Export of Goods…
9 China – Rare Earths, Panel Report, para 7.30. 10 China – Rare Earths, Panel Report, para 2.11.
and regulations.11 The principle about quantitative restrictions also included in Art. XI of GATT. It
states
[A]ny restrictions applied ... shall not be such as will reduce the total of imports relative to the total of domestic production, as compared with the proportion which might reasonably be expected to rule between the two in the absence of restrictions. In determining this proportion, the contracting party shall pay due regard to the proportion prevailing during a previous representative period and to any special factors which may have affected or may be affecting the trade in the product concerned. The EU and Japan also opined that China could take alternative measures to achieve the environmental purpose.
Finally, complaints claimed that China imposed restrictions on the trading rights of enterprises seeking to export various forms of rare earths and molybdenum, such as prior export performance and minimum registered capital requirements.12
China did not argue that its restrictions were consistent with Paragraph 11.3 of its Accession Protocol.13
However, China defended that the obligation in Paragraph 11.3 is subject to the environment exception in GATT Art. XX. That is to say, China held that the export duties at issue can be justified under Art. XX because they are consistent with the exhaustible natural resources’ conservation.
China also provided arguments to support that quantitative export restrictions can prevent illegal mining for sale to the domestic market. China explained that it can ensure their export volume will be met by legal producers by means of the quantitative export restrictions.14 If there is no export quotas,
most parts of legally produced rare earths products could be exported. The overseas demand of rare earths products will quickly increase, which the legitimate Chinese producers cannot satisfy. This
11 China – Rare Earths, Panel Report, para 2.13. “Foreign Trade Law of the People’s Republic of
China; Regulation of the People’s Republic of China on the Administration of the Import and Export of Goods; Measures for the administration of the Organs for Issuing the licenses of Import and Export Commodities; Measures for the Administration of Licensing for the Export of Goods; Working Rules on Issuing Export Licenses…”
12 China – Rare Earths, Panel Report, para 2.14. 13 China’s response to Panel question No.9.
would make the illegal producers to meet domestic Chinese demand.
In the China’s position, it defended that WTO regulations allow countries to impose export duties and quotas for reasons of conservation of exhaustible natural resources (Art. XX (g)).15 Thus, in this case,
the most extensive-debated issues are around China’s Accession Protocol and the applicability of GATT Art. XX.
On 26 March 2014, WTO released the Panel Report of this dispute and found that China’s export control measures are in violation of WTO rules and laws. On 25 April 2014, China appealed to the WTO Appellate Body and lost again, since the Appellate Body confirmed China’s measures at issue violated WTO rules and China’s Accession Protocol, which led China to drop the export quotas in 2015.
2.3 Appellate Body Findings on China – Rare Earths
2.3.1 China’s Measures at Issue Were Inconsistent with Its Accession Protocol
The Panel found that China’s export duties on rare earth metals were inconsistent with its Accession Protocol. Paragraph 11.3 of China’s Accession Protocol states that “China shall eliminate all taxes and charges applied to exports unless specifically provided for in Annex 6 of this Protocol or applied in conformity with the provisions of Article VIII of the GATT 1994.” At most, a panel may take into account of prior adopted panel and Appellate Body reports. In US – Stainless Steel (Mexico) case, the Appellate Body has explicitly stated that “the legal interpretation embodied in adopted panel and Appellate Body reports becomes part and parcel of the acquis of the WTO dispute settlement system.” In China – Rare Earthscase, in light of examination of the issues and China’s defence under Art. XX, the Panel was mindful of the Appellate Body ruling that absent “persuasive reasons and an adjudicatory body will resolve the same legal questions in the same way in a subsequent case”.16 China appealed
an intermediate finding made by the Panel that Art. XX of GATT 1994 was not available to justify a
15 Gavin, Brigid, ‘China's growing conflict with the WTO’. Intereconomics. 48 (4): 254–
261. Available at:10.1007/s10272-013-0467-6, 03 August 2013.
16US – Stainless Steel (Mexico), Appellate Body Report, para.160. It is rare in the WTO
jurisprudence that the Appellate Body relied on award made by International Center for Settlement of Investment Disputes (ICSID) arbitration tribunal. Specifically, most ICSID tribunals are famous for not bounded by prior (often contradictory) awards.
breach of para.11.3 of its Accession Protocol regarding export duties. The Appellate Body then opined that it did not find a “cogent reason” to depart from its prior ruling in China - Raw Materials case, which concluded that China’s Accession Protocol provided no basis for allowing the application of GATT Article XX to para.11.3 of the protocol.17
2.3.2 China’s Export Quotas Was in Violation of GATT Art. XI
The Panel found that China’s export quotas on several forms of rare earths, tungsten and molybdenum was in violation of Art. XI of GATT 1994. Following the two-tire test, the panel firstly confirmed that the export quotas could not be justified under the exception in paragraph(g) of GATT Art. XX.18 It
mainly stated that WTO Members are allowed to implement GATT-inconsistent measures “relating to the conservation of exhaustible natural resources”. China then appealed the panel’s interpretation and application of Art. XX(g)19, while the panel denied that the export quotas at issue were measures
“relating to the conservation of exhaustible natural resources”. The Appellate Body findings were mainly in accordance with the panel’s finding20. Both of the Panels acknowledged that China did not 17 China – Raw Materials, Appellate Body Report, para. 307. Paragraph 11.3 of China’s Accession
Protocol states that China “shall eliminate all taxes and charges applied to exports unless specifically provided for in Annex 6 of this Protocol or applied in conformity with the provisions of Art. VIII of the GATT 1994.”
18 Article XX(g) GATT 1994 “…measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures relating to the
conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.”
19 China’s appeal did not challenge the ultimate findings concluded by the Panel regarding the
inconsistency of China’s export duties with its WTO obligations. Actually, China only appealed that “China has not demonstrated that the export quotas that China applies to rare earths, tungsten and molybdenum are justified pursuant to Art. XX(g) of GATT 1994.”
20 China – Rare Earths, Appellate Body Reports, para 6.1-6.2. The Appellate Body found that “the
Panel did not interpret Article XX(g) as requiring it to limit its analysis to an examination of the design and structure of the measures at issue and did not either in its interpretation or in its
application of Art. XX(g), consider itself precluded from taking account of evidence of the effects of China’s export quotas and other elements of China’s conservation regime in the marketplace.” The Appellate Body also “finds the Panel erred, to the extent that it interpreted Art. XX(g) as imposing a separate requirement of “even-handedness” that must be fulfilled in addition to the conditions expressly specified in subparagraph (g), and to the extent that it interpreted Art. XX(g) as requiring Member seeking to invoke Art. XX(g) to prove that the burden of conservation is evenly distributed, for example between foreign consumers and domestic consumers and producers.” However, the Panel’s certain flaws in interpretation of Art. XX(g) did not commit legal error in its application of Art. XX(g) to the export quotas. Therefore, the Appellate Body upholds the Panel’s finding that
provide cogent reasons to prove the export quota’s structure and design show a “close” “substantial” and “genuine” relationship to the goal of conservation of exhaustible natural resources.
Then the Panel confirmed China’s export quotas cannot be justified under the chapeau of Art. XX. By virtue of Art. XX of the GATT, it is true that Member States enjoy the rights to restrict mining for reasons of exhaustible natural resources conservation. However, complying with the chapeau requirements, WTO Member States are prohibited from discriminating between domestic consumers and producers and foreign consumers. In China – Rare Earths case, the complaints argued China’s alleged measures constituted a national treatment-type discrimination arising from the difference in treatment when China implements export control on rare earths, while no restriction on domestic production or consumption. In response to this claim, China raised two main arguments in support of its position that its export quota system does not impose any discrimination. The first one is the export quota 201221 on rare earths was unfilled. The second one is its quota system does not impose any
discrimination, that is to say, there is no price difference between the foreign and domestic rare earth markets.
After examination and consideration, the Panel found that China has applied export restrictions on rare earths for over a decade and therefore caused the term international market distortions. The long-term distortions also caused business uncertainty, which forced the foreign companies to move more of their production chains to China, including relocation of downstream users to China to ensure a stable supply of rare earths. This also can be seen as the reason of why foreign demand of the product under quota. To conclude, the Panel was not convinced that the unfilled export quota is evidence of non-discrimination because the unfilled export quota may be a consequence of distorted rare earths market, besides, an unfilled export quota may also be a consequence of the quota itself (in order to satisfy the foreign demand under quota, illegal production is encouraged implicitly), as acknowledged by China, there is a large amount of rare earth metals being illegally demanded, for example, smuggling (beyond production restrictions). Turning to China’s second argument in price difference,
China has not demonstrated that the export quotas that China applies to rare earth metals, tungsten and molybdenum by virtue of the series of measures at issue are justified pursuant to subparagraph (g) of GATT Art. XX.
21 Notice regarding 2012 export quotas amounts for agricultural and industrial products (Minister of
to support its position, China provided estimates of price differences between foreign and domestic markets among 15 products22 and China excluded samarium and gadolinium from the analysis (China
asserted the trade between these two products is sporadic).23 China also excluded yttrium oxide from
its price analysis on the ground that the domestic and exported yttrium oxides are of different purity.24
Given the consistent price gap between foreign and domestic prices, in the opinion of the Panel, China’s evidence25 does not exclude the possibility that existing price differences (whether large or
small) have indeed provided a competitive market to domestic consumers and producers of value-added products containing rare earths.26
Overall, the Panel concluded that China’s export quota system on rare earths, tungsten, and molybdenum was not “relating to the conservation of exhaustible natural resources” on the one hand, and constituted arbitrary measures and unjustifiably discriminated against users of rare earths in the US, the EU and Japan on the other hand. Therefore, the environment exception provided in GATT Art. XX is not China’s justification.
2.3.3 China’s Restrictions on Trading Rights Violated China’s Working Party Report and Its Accession Protocol
The last key finding made by the Panel ruled against China is about trading rights. The Panel found that China maintained restrictions (minimum registered capital, prior export experience performance) on trading rights of enterprises exporting rare earth metals contrary to paragraphs 83-84 under China’s Working Party Report. In this situation, China tried to invoke Art. XX(g) of GATT to justify its violations but failed. Because the Panel held that China was unable to refer a prior WTO case to justify
22 This evidence is in Annex 1 of China’s second written submission. Namely, europium,
dysprosium, terbium, neodymium, praseodymium, cerium, lanthanum, in their oxide and metal forms respectively, and for yttrium in metal form only).
23 China’s response to Panel question No. 40-42. 24 China’s second written submission, footnote 261.
25 China’s response to Panel question No.78. This illustrates two of China’s argument with regard to
price difference. Firstly, the price gap between foreign and Chinese consumers collapsed dramatically by the end of 2012, which also can be explained as the 2012 export quota is not
designed to create a price difference to advantage Chinese’ domestic rare earth consumers. Secondly, the conditions prevailing in the Chinese rare earths market is strict, the export duties between 10-25%, a largely unfilled quota and a large number of firms are allocated export quota shares. Thus, China argued that the price difference was not caused by export quota in 2012.
its deviation from WTO obligations under Art. XX(g), followed by prima facie standard. In this respect, the Panel considered that China’s trading rights obligations are not “normal” and the breaches of these obligations shall be justified separately from the justifications that China’s imposition of export quotas in violation of Art. XI of the GATT 1994.
2.4 A commentary on the Appellate Body’s Decision in China – Rare Earths case 2.4.1 The applicability of GATT Art. XX
As mentioned by the Appellate Body in its report in US - Gasoline case27, in order for the justification
of Art. XX to be extended to a given measure, it must not only come under one or another of the particular exceptions – paragraphs (a) to (j) listed under Art. XX; it must also satisfy the introductory requirements of Art. XX. The Appellate Body in US – Shrimp case28 also emphasized the sequence of
the two-tire test: first, provisional justification by reason of characterization of the measure under specific exceptions; second, further appraisal of the same measure under the chapeau of Art. XX. The chapeau requirements are designed to prevent the abuse or misuse of the specific exemptions provided for in Art. XX. Following this sequence, on whether a measure is “relating to the conservation of exhaustible natural resources” under Art. XX(g), a “substantive relationship” must exist between the measure and the conservation effort.29
The Appellate Body in China – Rare Earths emphasized the interpretation of the phrase “made effective in conjunction with restrictions on domestic production or consumption” in the second clause of GATT Art. XX(g). The Appellate Body rejected the “even-handedness” requirement mentioned in in the Appellate Body report of US – Gasoline.30 31 Consequently, the Appellate Body recognized “the logic boundary” that even-handedness cannot require identical treatment on the one hand, and
27United States – Standards for Reformulated and Conventional Gasoline, Appellate Body Report,
WT/DS2/AB/R, 20 May 1996.
28 United States – Imports Prohibition of Certain Shrimp And Shrimp Products, Appellate Body
Report, WT/DS58/AB/R, AB-1998-4, 12 October 1998, para. 119.
29 Niall Moran, ‘The First Twenty Cases Under GATT Article XX: Tuna or Shrimp Dear?’,
International Economic Law, 30 December 2016.
30 United States – Standards for Reformulated and Conventional Gasoline, Appellate Body Report,
WT/DS2/AB/R, 29 April 1996, pp.20-21.; China – Rare Earths, Panel Report, para. 7.317.
31 Art. XX(g) is designed to ensure that the “conservation burden is distributed in an even-handed
that domestic restrictions on production or consumption shall be at least in existence, on the other hand. The Appellate Body in this case then held that respondents should reserve certain policy space under the second clause of Art. XX (g).
In WTO jurisprudence, a number of respondents have won on Art. XX(g), only got caught in the chapeau requirements. With respect to “a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail,” it requires that the application of the measure must not be discriminatory. That is to say a measure cannot impose a significantly more onerous burden on foreign consumers or producers. Second, the discrimination cannot be “arbitrary or unjustifiable in character.” It implies the Member States can invoke Art. XX with reasons for such significantly more onerous burden imposed on foreign consumers. With respect to “a disguised restriction on international trade”, the measure cannot be designed for other policy purposes except resources conservation. Practically, if a burden by a measure is solely on foreign users, it is easily regarded as “a disguised restriction on international trade”. However, once the domestic restrictions are existed and work together and reinforce trade restrictive measures, even if a greater burden is imposed on foreign users, it can be argued that it is not “a disguised restriction on international trade”. Besides, Member States cannot take “a significantly more onerous burden on foreign users.” Because it is more likely to be considered as “a disguised restriction on international trade”.32
One ongoing question is whether the reasons for preliminary justification need to be the same as those provided for satisfying the chapeau. The question was also addressed in EC – Seals.33 In Brazil –
Retreaded Tyres,34 the Appellate Body found that it would be difficult to find any discrimination compliant with the chapeau. The WTO website endorses the idea of “rational connection test” for trade restrictive measure to be justified under the chapeau: “WTO jurisprudence has highlighted some of the circumstances which may help to demonstrate that the measure is applied in accordance with the chapeau. These include…an analysis of the rationale put forward to explain the existence of a
32 Yingying Wu, ‘Policy Space under the Second Clause of GATT Article XX(g) – An Analysis of
the China – Rare Earths Case’, The Korean Journal of International and Comparative Law, 06 December 2016. Available at: https://doi.org/10.1163/22134484-00402003
33 EC – Measures Prohibiting the Importation and Marketing of Seal Products, Appellate Body
Report, WT/DS400/AB/R, 22 May 2014.
34 Brazil – Measures Affecting Imports of Retreaded Tyres, Appellate Body Report,
discrimination (the rationale for the discrimination needs to have some connection to stated objective of the measure at issue)”.35 Other circumstances listed include a measure’s design, flexibility and
coordination and cooperation activities undertaken by the defendant.
Overall, recalling to the above analysis, if a Member State found there is a necessity to restrict its exports in order to conserve exhaustible natural resources, then its restrictive trade measures’ structure and design must show a “close” “substantial” and “genuine” relationship to the goal of conservation of exhaustible natural resources on the one hand, and the domestic restrictions on production or consumption shall be at least in existence on the other hand.
2.4.2 Export Restrictions on Critical Minerals and Metals – Flaws of WTO Rules
Although the WTO award is not binding on the later case, it is easy to conclude that China – Rare Earths Appellate Body’s determination was largely consistent with an earlier ruling on similar issues (China – Raw Materials case), it strengthened the relevance of GATT standards relating to the health and environmental aspects of natural resource extraction, particularly with respect to the mining of raw materials in a developing country.36 In the instant case, although China supplies more than 90
percentage of the world’s rare earths, it only reserves amount one third of the world’s total. Therefore, the Panels’ decisions have profound impacts to the further cases.
Among the countries which most frequently using mineral export restraints are resource-rich developing countries and emerging economies such as China, the Russian Federation, India, Indonesia, Kazakhstan, South Africa, and Vietnam.37 These countries often adopt such restrictive
measures to fulfill non-economic public policy goals directly related to the negative externalities associated with the exploitation of raw materials of mineral origin, such as resource conservation and environmental protection.38 The tension in the use of export restrictions on critical minerals and
35 Secretariat of World Trade Organization, “WTO rules and environmental policies: GATT
exceptions”. Available at:
https://www.wto.org/english/tratop_e/envir_e/envt_rules_exceptions_e.htm, accessed on 30 January 2016.
36 Elizabeth Trujillo, ‘China Measures Related to the Exportation of Rare Earths, Tungsten, and
Molybdenum’, American Society of International law, Volume 109, Issue 3, 20 January 2017, pp. 616.
37 ‘Taking Stock of Measures’, European Commission, “Tenth Report”. 38 ‘Taking Stock of Measures’, pp. 7-18.
metals such as rare earths, tungsten, and molybdenum between industrialized countries historically rely on the massive importation of minerals and metals (EU, the US and Japan) and resource-rich countries resorting to export control on minerals.39 The importance of these minerals and metals
gave rise to a general sense to demand for conservation.
Under the WTO framework, demand of critical minerals and metals conservation is reflected by the environmental exceptions to GATT – Art. XX(g), it permits a party to restrict trade justifiably under certain conditions. GATT Panel’s interpretations have established that restrictive trade measures must satisfy four requirements in order to qualify Art. XX(g):
a. The particular trade measure must show a “close” “substantial” and “genuine” relationship to the goal of conservation of exhaustible natural resources.
b. It must be made effective in ‘conjunction with restrictions on domestic production or consumption’.
c. It must not be arbitrary or unjustifiable discrimination between countries where the same conditions prevail.
d. It must not be a disguised restriction on international trade.
However, not only these requirements set high standard for States, in WTO jurisprudence, GATT Panels also tend to interpret the “exception” clause narrowly. By both of these two respects, it is very difficult for invoking States to justify their export restrictions under Art. XX(g). Sometimes, this leads States cannot protect their justifiable public policy objectives.
By contrast, developed countries have continuously attempted to use environmentally related processes and production methods (PPMs) as grounds for restricting trade. However, the text of GATT Art. XX remains silent in this regard. As mentioned before, the GATT Panel has previously adopted a strict interpretation of its chapeau and Art. XX(g), as the WTO is intending to limit the use
39 IIaria Espa, Export Restrictions on Critical Minerals and Metals: Testing the Adequacy of WTO
of trade restrictions.40 While this assists developing countries, the bar for relying on Art. XX(g) and
its chapeau to facilitate resource conservation and environment protection is set high, with only one environmental trade restriction (on the sale of asbestos41) being successfully litigated in WTO
jurisprudence.42 That is also to say the WTO Panels and the Appellate Body sought to avoid carrying
out the responsibility that allowing flexibility for national environmental measures for Member States. Sometimes, the Appellate Body has done so by exalting textualism over the broader context, object, and purpose of provisions of WTO law, and sometimes the Appellate Body has done the opposite of textualism: by accepting limits on the analysis carried out by Panels where those limits are expressed in the WTO treaty, and the inconsistent with the plain terms of that treaty.43 For
example, in the China – Rare Earth case, the Appellate Body has done limited analysis on the term “the WTO Agreement” (only refers to the Marrakesh Agreement), which therefore confirmed China cannot invoke Art. XX of the GATT to justify its WTO violations.
Turning to the accession to the GATT/WTO, it is also problematic. How to determine which States can join these international institutions? Existing theories of the Multilateral trade regime
emphasizes gains from cooperation. Some scholars, as Christina noted, political ties rather than issue-area functional gains determine who joins and geopolitical alignment shapes the demand and supply sides of membership.44 We also can imagine the accession protocol is a place at which
discrimination takes place. China had been allowed to join the GATT in 1989 (three years after its application), trade by 2001 (the time it actually joined) might have been more than twice as long as observed.45 Instead, the Tiananmen Square incident led GATT members to halt accession talks in 40 United States-Measures Relating to Shrimp from Thailand (DS343), United States-Customs Bond
Directive for Merchandise Subject to Antidumping/Countervailing Duties, Appellate Body Reports, DS345, WT/DS343/AB/R, WT/DS345/AB/R, 01 August 2008.
41 European Communities – Measures Affecting Asbestos and Asbestos Containing Products,
Appellate Body Report, WT/DS135/AB/R, 12 March 2001.
42 Elisa Morgera, Jona Razzaque, ‘Biodiversity and Nature Protection’, Edward Elgar Publishing, 28
April 2017, pp. 325.
43 Joel P. Trachtman, ‘WTO Trade and Environment Jurisprudence: Avoiding Environmental
Catastrophe”, Harvard International Law Journal, Volume 58, Number 2, Spring 2017.
44 Christine L. Davis, Meredith Wilf, ‘Joining the Club: Accession to the GATT/WTO’, The Journal
of Politics, volume 79, number 3, 10 May 2017, available at http://dx.doi.org/10.1086/691058.
45 The figures are calculated by the estimated coefficients of annual membership trade gains from
the analysis of Goldstein et al. (2007) to deduct the value of accumulated trade for China. Appendix fig. A.I (available online) details annual estimates for China and Mexico.
1989 and China underwent one of the longest and most rigorous accession negotiations of any state in the regime while losing the trade gains of membership during the intervening years.
Then reflecting all the discussion above and in light of the importance of these critical metals and minerals, it is necessary to call to reform the current WTO rules and achieve a coherent and appropriate jurisprudence of trade and environment.
2.4.3 Relationship between WTO Agreements and Accession Protocols
Recent years, China always fails in the WTO cases, especially in China - Raw Materials and China -
Rare Earths. Most confusion on the applicability of the GATT general exception to China’s
accession commitments stems from the lack of a clear understanding of the systematic relationship between China’s Accession Protocol and the WTO agreements. This then leads China in
disadvantage position. Therefore, considering China’s failures, analyzing the nature and legal effect of China’s Accession Protocol, clarifying the relationship between China’s WTO Accession
Protocol, the Marrakesh Agreement and other Multilateral Trade Agreements and defining the legal status of China’s Protocol of Accession in WTO legal system can bring Member States advantages in
export restrictions disputes related to accession protocols in WTO cases. In some degree, clarifying
such systematic relationship can also be a precondition to interpret the provisions of accession protocols.
To be clear, the scope of the term “the WTO Agreement” in the second sentence of Paragraph 1.2 of China’s Accession Protocol significantly impacts the relationship between individual provisions in the accession protocols and the Marrakesh Agreement and Multilateral Trade Agreements. In China- Rare Earths case, the Panel upheld the complainants’ argument that the term “the WTO Agreement” means that China’s Accession Protocol is made an integral part of the Marrakesh Agreement, but individual provisions of its Accession Protocol are not integral parts of Multilateral Trade
Agreements annexed to the Marrakesh Agreement. On the ground of this intermediate finding, the Panel then rejected China’s argument on invoking GATT Art. XX to justify its violations to the commitments in its Accession Protocol. China then appealed this Panel decision on two grounds. Firstly, China defended that the Panel erred on the analysis of the systematic relationship between specific provisions in the Marrakesh Agreement, the Multilateral Trade Agreement and China’s
Protocol Accession to the WTO in support of Art. XII:1 of the Marrakesh Agreement46 and
Paragraph 1.2 of China’s Accession Protocol. Secondly, China appealed the Panel’s interpretation and application of Art. XX of GATT.
On China’s first argument, the Appellate Body opined that the scope of the term “the WTO
Agreement” in Paragraph 1.2 is of limited consequence in this case. Paragraph 1.2 and Article XII:1 only function to make the Marrakesh Agreement become an umbrella under which all of the annexed Multilateral Trade Agreements are united in a single package of rights and obligations. The Appellate Body then added that Paragraph 1.2 only serves to build a bridge between the package of protocol provisions and the existing package of WTO rights and obligations under the WTO legal framework in a general nature and it cannot answer the question as how individual provisions in China’s
Accession Protocol are related to other obligations under the Multilateral Trade Agreements.47
Therefore, the Appellate Body held that whether there is an objective link between an individual provision in China’s Accession Protocol and existing obligations under the Marrakesh Agreement and the relevant Multilateral Trade Agreements, and whether China can rely on an exception
provided for in those agreements to justify a breach of its Accession Protocol stay unclear. Because it must be answered through a case by case analysis. This argument then rejected China’s position that a provision in its Accession Protocol is necessarily an integral part of either the Marrakesh
Agreement or one of the Multilateral Trade Agreements by virtue of an “intrinsic relationship”, and in particular its position that applicability of Art. XX of the GATT.48
Overall, the Appellate Body held that the “text” in the relevant provisions should be the starting point of the thorough analysis. Since the Appellate Body did not find any objective linkage in the “text” between Paragraph 11.3 of China’s Accession Protocol and the Multilateral Trade Agreements, and the obligations and rights in China’s Accession Protocol cannot be automatically transformed under the WTO framework, it then determined that China cannot invoke Art. XX as defence to the
46 Art. XII of the Marrakesh Agreement states “any State or separate customs territory possessing
full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the
Multilateral Trade Agreements annexed thereto.”
47 China - Rare Earths, Appellate Body Report, para 5.47. 48 China - Rare Earths, Appellate Body Report, para 5.67-5.68.
violation of Paragraph 11.3. In light of the relationship between provisions on accession protocols and other WTO agreements, it conducted an “integrated assessment” on such relationship.49
From my own perspective, although China’s argument on “intrinsic relationship” is not such clear, every single provision in China’s Accession Protocol naturally links with the provisions in the Multilateral Trade Agreements. The general exception in Art. XX of the GATT should be applied to justify the violations to the Paragraph 11.3 of China’s Accession Protocol.
On the other hand, although an accession protocol is regarded as integral part of the WTO Agreement, it does not mean the accession protocol should be integrated as the same way and manner as the Multilateral Trade Agreements are. The main reason behind this is the different functions of accession protocols and the Multilateral Trade Agreements. The Multilateral Trade Agreements were designed to provide the substantive disciplines of the WTO. While the accession protocols usually have two functions: first, enabling the new Member to accede to the Marrakesh Agreement. Second, stipulating special terms that will apply to the relationship between the new-in Member and other existed Members under the WTO Agreement.50 That is to say, accession
protocols are only legal instruments for the WTO to admit new member complying with their nature and shall abide by the substantive disciplines of the Multilateral Trade Agreements. Overall, in light of the accession protocols’ nature and function, only when their specific terms and the Multilateral Trade Agreements interact and address the same subject matter, their integration into the WTO Agreements can be effectively achieved.
2.4.3 The Impact of the Panels’ Determinations on This “Relationship”
According to the Appellate Body’s interpretation that individual provisions of China’s Accession Protocol are not integral part of the Multilateral Trade Agreements, China cannot invoke Art. XX to justify its breach on Paragraph 11.3 of China’s Accession Protocol. However, because of the legislative slip, China’s Accession Protocol does not include general exception clause. Once China violates Paragraph 11.3, the only “exceptional circumstances” are existed in Annex 6 of its Accession
49 China - Rare Earths, Appellate Body Report, para. 5.57.
50 Julia Ya Qin, ‘Judicial Authority in WTO Law: A Commentary on the Appellate Body’s Decision
in China – Rare Earths’, Chinese Journal of International Law, Volume 13, issue 4, December 2014, pp. 639-651.
Protocol.51 Referring to the Appellate Body’s analysis in China – Raw Materials, it did not limit to
the text of Paragraph 11.3 alone. It also relied on the context provided by Annex 6.52 However,
imposition of export duties on rare earth metals, tungsten and molybdenum are not listed in Annex 6. From this perspective, in China – Rare Earths case, as long as the US, the EU and Japan charged China’s export duties are in violation of Paragraph 11.3, China cannot have any legal remedy to justify its violations. In this dillemma, we can metaphorize paragraph 11.3 as an “abandoned child” who cannot gain protection under the WTO free trade rules.
On the other hand, in order to satisfying its underlying logic needs, the Appellate Body explained the term “the WTO Agreement” in Paragraph 1.2 as different scopes. In China – Rare Earths case, “the WTO Agreement” was only defined as the Marrakesh Agreement, excluding the Multilateral Trade Agreements. At the same time, the Appellate Body noted that the term “the WTO Agreement”, as used throughout China’s Accession Protocol, indicates that the definition of this term contained in the preamble does not necessarily preclude the annexed Multilateral Trade Agreements from also falling within the scope of it in some circumstances. For example, in China - Publications case, this term was explained to include the annexed Multilateral Trade Agreements. The Appellate Body in this case overlooked the GATT provisions on State trading and China’s trading rights commitments under its Accession Protocol. And then it declared that China’s measure on censorship regime may become “WTO-consistent”. Consequently, it rejected the Panel’s approach to apply Art. XX on an arguendo basis and instead it held that China may rely on the introductory clause of Paragraph 5.1 of its accession protocol to invoke GATT Art. XX(a) directly as defence for the breach of its trading rights commitments under its Accession Protocol. The reason why the Appellate Body admitted China to invoke Art. XX as defence is because the first two sentences of Paragraph 5.1 of the Accession Protocol mentioned the WTO Agreement, which the Appellate Body found it includes GATT Art. XX.53
51 Annex 6 specifically provides for maximum export duty levels on 84 listed products, which did
not include the rare earth metals, tungsten and molybdenum.
52 China – Raw Materials, Appellate Body Report, para. 307.
53 First two sentences of paragraph 5.1 on China’s Accession Protocol states “Without prejudice to
China’s right to regulate trade in a manner consistent with the WTO Agreement, China shall progressively liberalize the availability and scope of the right to trade, so that, within three years after accession, all enter- prises in China shall have the right to trade in all goods throughout the customs territory of China, except for those goods listed in Annex 2A which continue to be subject
It then can be concluded that the term “the WTO Agreement” may include a reference to the annexed Multilateral Trade Agreement, or it may refer to the Marrakesh Agreement alone. But this interpretation also has disadvantages.
The different definitions of the term “the WTO Agreement” may contribute to the textual uncertainty and unpredictability, which is contrary to the legal principles. Besides that, if there are any other unprecise wordings such as the term “the WTO Agreement” appearing in WTO law and being interpreted in accordance with the Appellate Body in this case, the relevant provisions cannot have certainty and predictability anymore and would lead to bad impacts to the whole WTO system. In light of the single case, this interpretation also harms the DSB’s authority and prestige.
At this point, we can arrive at a conclusion that the Appellate Body would do broad interpretations of the term “the WTO Agreement”, when it refers to agreements (China – Publications), and would do narrow and strict interpretations when “the WTO Agreement” implies to specific provisions (China – Rare Earths). Then based on the uncertainty of panel’s interpretation on “the WTO Agreement”, I think States may challenge the panel’s interpretation on the relations between individual provisions in accessions protocols and the Multilateral Trade Agreements and therefore invoke exceptions to GATT to justify their export restrictions to WTO violations.
3 Other Possibility of State Sovereignty to Restrict Exports – The Security Exception
For seventy years, the security exception in the multilateral trade regime has mostly lain dormant. The exception first appeared in the GATT 1947, before being incorporated in the GATT 1994 upon the creation of the WTO. Besides, security exceptions also exist in several other WTO provisions, including the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS). Yet, suddenly, the WTO Panels issued a
groundbreaking decision on Russia – Traffic in Transit54 about the GATT national security
to state trading in accordance with this Protocol. Such right to trade shall be the right to import and export goods.” The Appellate Body illustrated the phrase “right to regulate trade in a manner consistent with the WTO Agreement” in the introductory clause of Paragraph 5.1. It stated not only rights that the covered agreements affirmatively recognize as accruing the WTO Members, but also certain rights to take regulatory action pursuant to relevant exceptions, such as Art. XX of the GATT 1994.
exception – Art. XXI. While the US domestic statues have adopted economic situations into consideration when formulating national exceptions, the WTO regime is not entirely clear.55 The
Panel in Russia – Traffic in Transit confirmed from the negotiating history that the “balance” that was struck by the security exceptions was that Members would have "some latitude" to determine what their essential security interests are, and the necessity of action to protect those interests, while potential abuse of the exceptions would be curtailed by limiting the circumstances in which the exceptions could be invoked to those specified in the subparagraphs of Article XXI(b).56
3.1 Factual Aspects of Russia – Traffic in Transit
On 14 September 2016, Ukraine brought claims against Russia under the WTO dispute settlement mechanism, requesting the WTO Panel to consider whether Russia’s imposition of transit restrictions and imposition of strict border measures and conditions on Ukrainian goods delivered to Kazakhstan and other members of the Eurasian Economic Union are legal, following the 2014 Ukrainian Crisis. Ukraine alleged that Russia’s conduct violated its WTO obligations, specifically under GATT Art. V (an obligation to ensure freedom of transit of goods through territories of Member States) and Russia’s Accession Protocol. On the other side, Russia relied upon the security exception provided in GATT Art. XXI as a justification to its violations to general WTO obligations. Specifically, Russia invoked Art. XXI(b)(iii) successfully, which allows States to take actions in a case where such an action is “taken in time of war or other emergency in international relations” (and consequently doing such action is in violation of their WTO obligations). Russia argued that the geopolitical tension between Russia and Ukraine is an “emergency in international relations”, giving a ground of the application of Art. XXI(b)(iii).
3.1.1 Notable Factual Aspects
The case facts are not complicated, compared to other trade disputes at WTO. However, this case this Panel report left a prime significance in WTO jurisprudence. There are two reasons. First, the Panel
55 Jaemin Lee, ‘Commercializing National Security: National Security Exceptions’Out Parameter
Under GATT Article XXI’, Asian Journal of WTO & International Health Law and Policy, 2018, pp.277.
56
clarified whether such a case could be treated as a normal trade dispute (as suggested by Ukraine), or whether the invocation of security exception completely changed the general understanding of the Panel’s role and the entire WTO dispute settlement process (as suggested by Russia). Because this was a highly politicised legal dispute at the DSB and may have a systemic impact on the whole international trading system. Secondly, in terms of the merits of the case, the Panel considered the scope of Art. XXI(b)(iii). The Panel found that the existence of “war or other emergency in international relations”, as provided in Art. XXI(b)(iii), includes a “change of or circumstances which radically alters the factual matrix in which the WTO-consistency of the measures at issue is to be evaluated.”57
This understanding delivers an opinion that WTO Members do not have unlimited leeway to determine what should be essential security interests. Thus, by settling a threshold for the applicability of Art. XXI(b)(iii) in order to justify the violative measures, the Panel has, for the first time, clearly defined the scope of the exception under Art. XXI(b)(iii). That is, WTO Panel owns the right to review whether the requirements envisioned in Art. XXI are met.
3.2 The Parties’ Arguments in Russia – Traffic in Transit
The most notable detail in this case is whether the security exception under Art. XXI must be understood as judging. As a complaint, Russia argued that the security exception is entirely self-judging and therefore the invocation of any such measures shall keep the WTO Panel review out. In Russia’s interpretation of Art. XXI, once a Member States considers their trade restrictive measures at issue were undertaken as actions that they believe necessary to protect its essential security interests, the Panel then should defer to such consideration and limit its own recognition of Member States’ invocation of the security exception. Specifically, Russia held that the Panel should not do any objective assessment of the character of the measure taken under Art. XXI. On the other hand, Ukraine firmly opposed that Art. XXI provided a complete self-judging right for Member States and a unilateral determination of the existence of grounds can justify a Member’s invocation of security exceptions. As for the third-party submissions, the EU stated that the Panel should be given the right to review the determination of the necessity and the bona fide application of the measure invoked for the protection of essential security interests. The US, on the Russia’s side, stated that the WTO Panel had no
jurisdiction whatsoever in the case and Art. XXI of the GATT leaves total discretion to WTO Member State to decide on their course of action.
3.3 The Panel’s Analysis and Findings in Russia – Traffic in Transit
3.3.1 Security Exception: Whether It Is Self-judging Or Subjects to the Panel Review The Panel undertook an analysis of the phrase “which it considers” covered in the chapeau of Art. XXI(b). Emphasizing that the specific security exceptions enumerated under Art. XXI(b)(i)-(iii) serves as “limitative qualifying clauses”58 to an unlimited self-judging right available to Members invoking
the exceptions, the Panel then confirmed it is necessary to reduce the discretionary powers accorded to Members under Art. XXI. In this case, the Panel adopted Art. 31(1) of the Vienna Convention on the Law of Treaties and a purposive interpretation of Art. XXI(b)(iii), which leads to a conclusion that the term “when it considers” found it in the chapeau of Art. XXI(b) does not qualify the substantive requirement of the existence of circumstances which fall under the specific security exceptions under Art. XXI(b)(i)-(iii).
By implication, the Panel found that once a Member invokes a national security exception fitting for self-judging, the alleged measure is necessarily adopted in order to protect essential security interests, but not such measure conform with the specific exceptions enumerated under Art. XXI(b)(iii). Thus, conforming with this Panel report, the invoking Members claims under Art. XXI is subject to Panel scrutiny and objective determination.
The core of the security exception in GATT Art. XXI is the doctrine of self-judging. Under this doctrine, the question of which factual circumstances qualify the conditions under the exceptions is left to the invoking Member States to determine. As noted by Professor Alfred, all States agree the security exception can only be invoked in good faith.59 In this case, in the third-party submissions, the US
maintained its position that the security exception is totally self-judging. States interpret the exception as totally self-judging are concerned with the need to effectively protect their security interests and to subordinate trade commitments to those interests. Some States opposes a self-judging interpretation
58 Russia – Measures Concerning Traffic in Transit, Panel Report, para. 7.65.
59 Roger P. Alford, ‘The Self-Judging WTO Security Exception’, Utah Law Review, 2011, pp. 697.
express concerns about abuse of the security exception by economically powerful States.
Roger Alfred also asserted the self-judging nature of the security exception was balanced by a well-functioning understanding that the exception should be invoked rarely, wisely.60 Once entitling all the
discretional power to the parties, the security exception would become a “nuclear button”. For example, if a State for any reason that it considers “necessary to protect its essential security interests” and invoke a self-defining “essential security” exception afterwards, then how to prevent other countries from using the same exception to block this State’s exports or to affect other rights without enough justification? Therefore, the Panel in Russia – Traffic in Transit deems that it holds the power to review whether the requirements of the enumerated subparagraphs are met instead of leaving it to the unfettered discretion of the invoking Member. By this panel report, the Art. XXI(b)(iii) of GATT 1994 is not totally “self-judging” in the manner asserted by Russia.
3.3.2 Scope of the Security Exception under Art. XXI(b)(iii)
After considering whether it has jurisdiction to review the GATT-violative measures, the Panel then moved to judge on whether restrictions Russia imposed on transit of Ukrainian goods were “taken in time of war or other emergency in international relations” as required under Art. XXI(b)(iii). As mentioned earlier, a “profound change of circumstances” is previously required for the invocation of the security exception under Art. XXI(b)(iii) to justify measures taken in time of “war or other emergency in international relations.” By this observation of the Panel, it has serious implications and works to restrict the scope of application of the security exception: a Member will not be able to justify its measures as those “taken in times of an emergency in international relations”, unless such an emergency involves a situation which evidences “a fundamental change of circumstances which radically alters the factual matrix.”61
3.3.3 Defining “Emergency in International Relations”
60 Roger P. Alford, ‘The Self-Judging WTO Security Exception’, Utah Law Review, 2011, pp. 705.
Available at: https://scholarship.law.nd.edu/law_faculty_scholarship/330
61 Advalyot Sharma, ‘The Russia-Ukraine WTO Panel Report and the Security Exception: Analysis
and Implications’, Radboud Economic Law Blog. Available at:
https://www.ru.nl/law/research/radboud-economic-law-conference/radboud-economic-law-blog/2019/russia-ukraine-wto-panel-report-security-exception/, accessed 2019.
Russia has relied on an “emergency in international relations” to justify its imposition of the transit hurdles on Ukrainian goods. Then the Panel referred the UN General Assembly Resolutions62 and
certain sanctions imposed against Russia by some countries to provide evidence that the escalating situation between Russia and Ukraine is an “emergency in international relations”.
From the ordinary meaning, the phrase “taken in time of” describes the connection between the action and the events of “war or other emergency in international relations” in that subparagraph. The Panel comprehends this phrase as such action should be taken during the time of “the war or other emergency in international relations”. The Panel also added the existence of a war as one characteristic example of a large category of “emergency in international relations”. In international relations, war always refers to armed conflict occurred between States or between armed groups within one territory. In dictionary, the definition of “emergency” includes a “situation of danger or conflict that arises unexpectedly and requires urgent action”, and a “pressing need …a condition or danger or disaster throughout a region”.63 The term “international relations” is defined generally to mean “word politics”,
or “global political interaction, primarily among sovereign States”.64 An “emergency in international
relations” appear to refer generally to a situation of armed conflict, or of latent armed conflict, or of armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a State.65 Accordingly, the determination of whether the action was “taken in time of” an “emergency
62 Russia – Measures Concerning Traffic in Transit, Panel Report, para 7.122.
63 Shorter Oxford English Dictionary, 6th edition, A. Stevenson (ed.) (Oxford University Press
2007), Vol. 2, p. 819. The Panel observes that in the GATT 1994, the term "emergency" is used in only two places. First, the term is employed in Article XXI(b)(iii) as part of the phrase "other emergency in international relations". Second, the term appears in the title of Article XIX, which refers to "emergency action on imports of particular products". The word "emergency" is not, however, used in the text of Article XIX itself.
64 Black's Law Dictionary, 8th edition, B.A. Garner (ed.) (West Group 2004), p. 836. The same
concept is used in Article 2(4) of the UN Charter, which provides that "All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations." (Charter of the United Nations, done at San Francisco, 26 June 1945, 1 UN Treaty Series XVI. Available at:
https://treaties.un.org/doc/Publication/UNTS/No%20Volume/Part/un_charter .pdf.
65 Russia – Measures Concerning Traffic in Transit, Panel Report, para 7.92. The interpretation of
the phrase an “emergency in international relations” is consistent with the preparatory work. It indicates that when the US proposed the provision of the Geneva Draft of the ITO Charter that was
in international relations” is followed by exact objective facts.
3.3.4 Definition of “Essential Security Interests”, the application of the plausibility test, and the determination of the “necessity” of a measure
The Panel then move to interpret the scope of a Member’s “essential security interests”. The Panel deemed the notion of a State’s “essential security interests” must be limited to “those interests relating to the quintessential functions of the State”66, which the Panel concluded to “the protection of its
territory and its population from external threats, and the maintenance of law and public order internally.” Subsequently, the Panel remains the prerogative to judge what is the essential national security interests for Members. Certainly, such determination must be made in good faith.
By the Panel Report, the notion of “essential security interests” cannot be read and illustrate as to cover any and every security interest. So, not every GATT-violative measure can be justified under the exceptions under Art. XXI. The question is which asserted measure can use Art. XXI as its justification. The Panel then applied a so-called “plausibility test” to determine “whether the measure at issue are so remote from, or unrelated to, the 2014 emergency that it is implausible that Russia implemented the measures for the protection of its essential security interests arising out of the emergency.”67
Stéphanie Noël, a trade lawyer in Geneva said, “WTO Members are accorded a rather high level of deference in deciding what their essential security interests are, and how to defend them. At the same time, the obligation of good faiths applies to both the definition of those interests, and to their
connection with the measure at issue. Both must be found plausible.” Based on the plausibility test, the Panel found that Russia’s restrictions were in the background of an emergency between Russia and Ukraine following the 2014 Ukrainian crisis, and closely related to the security of the Russia’s border next to Ukraine. Thus, the Panel opined the asserted measures at issue are for the protection of Russia’s essential security interests arising directly out of the emergency.
carried over into Article XXI of the GATT 1947, and in referring to an "emergency in international relations", we need to pay attention the situation that existed between 1939 and 1941. During this period of time, the US had not yet participated in the Second World War, despite the situation, the US was also necessary to take certain measures for the protection of its essential security interests.
66 Russia – Measures Concerning Traffic in Transit, Panel Report, para. 7.130. 67 Russia – Measures Concerning Traffic in Transit, Panel Report, para. 7.139.
