3.

5 GATT 1994 3

1. GATT 1994: TRADE IN GOODS

After completing this Section, the reader will be able to:

• define the GATT 1994 and its scope of application;
• list the constituent elements of the GATT 1994:
• explain the relationship between the GATT 1994 and other WTO
agreements.

1.1 What Does “GATT” Mean?

GATT The acronym “GATT” stands for the “General Agreement on Tariffs and Trade”.
It is an agreement between States aiming at eliminating discrimination and
reducing tariffs and other trade barriers with respect to trade in goods.

Trade in Goods The GATT was originally, and is still today, only concerned with trade in
goods, although its main principles now also apply to trade in services, and
intellectual property rights as dealt with respectively by the General Agreement
on Trade in Services and the TRIPS Agreement. The GATT is a WTO
agreement that deals exclusively with trade in goods, but it is not the only one.
All the agreements listed in Annex 1A to the Marrakesh Agreement
Establishing the World Trade Organization (hereinafter the “WTO
Agreement”) concern particular aspects or sectors of trade in goods.

The WTO “ Goods ” The so-called WTO “goods agreements” in Annex 1A to the WTO Agreement
Agreements consist of 1:

WTO Agreement

ANNEX 1
ANNEX 1A: Multilateral Agreements on Trade in Goods
GATT 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of the General Agreement
on Tariffs and Trade 1994 (also known as the Anti-Dumping Agreement)
Agreement on Implementation of Article VII of the General Agreement
on Tariffs and Trade 1994 (also known as the Agreement on Customs
Valuation)

1
Please refer to Module 3.1, Section 1.1. Several of these agreements are dealt with in separate
Modules of this course.
4 Dispute Settlement

Agreement on Preshipment Inspection

Agreement on Rules of Origin
Agreement on Import Licensing Procedures
Agreement on Subsidies and Countervailing Measures
Agreement on Safeguards

GATT 1947 The GATT was concluded in 1947 and is now referred to as the GATT 1947.
The GATT 1947 was last amended, last in 1965. Later on, additional disciplines
were agreed to in side agreements, such as the Tokyo Round agreements,
which did not amend the GATT 1947 as such, but only bound the GATT
Contracting Parties that became a party to these side agreements.2 The GATT
1947 was terminated in 1996. However, the provisions of the GATT 1947 as
well as all legal instruments concluded under the GATT 1947 are integrated
into the GATT 1994, subject to clarifications brought about by Understandings
which also form integral parts of the GATT 1994.

Terminology The acronym “GATT” is sometimes confusingly used to describe a number of

different things. It is sometimes referred to as the “GATT disciplines”, or
“GATT disputes”, to mean the current WTO obligations or disputes relating
to trade in goods. However, it may also be referred to as the “GATT” to mean
the old multilateral trading system and/or Secretariat preceding the WTO. In
this Module, “GATT” only means the current obligations under the GATT
1994.

1.2 Scope of Application of the GATT 1994

A WTO agreement The GATT 1994 is one of the multilateral agreements annexed to the WTO
Agreement. It is an international treaty binding upon all WTO Members.

Scope of Application The GATT 1994 is only concerned with trade in goods. The GATT 1994 aims
at further liberalizing trade in goods through the reduction of tariffs and other
trade barriers and eliminating discrimination.

GATT 1994 vs. GATS In EC – Bananas III, the question arose whether the General Agreement on
Trade in Services (hereinafter the “GATS”) and the GATT 1994 were mutually
exclusive agreements. The Appellate Body said:

… The GATS was not intended to deal with the same subject matter as the
GATT 1994. The GATS was intended to deal with a subject matter not covered
by the GATT 1994, that is, with trade in services. Thus, the GATS applies to
the supply of services. It provides, inter alia, for both MFN treatment and
national treatment for services and service suppliers. Given the respective
scope of application of the two agreements, they may or may not overlap,
depending on the nature of the measures at issue. Certain measures could be

2
For more information on the history of the GATT, please refer to Module 3.1, Section 1.1.
3.5 GATT 1994 5

found to fall exclusively within the scope of the GATT 1994, when they affect
trade in goods as goods. Certain measures could be found to fall exclusively
within the scope of the GATS, when they affect the supply of services as services.
There is yet a third category of measures that could be found to fall within the
scope of both the GATT 1994 and the GATS. These are measures that involve
a service relating to a particular good or a service supplied in conjunction
with a particular good. In all such cases in this third category, the measure in
question could be scrutinized under both the GATT 1994 and the GATS.
However, while the same measure could be scrutinized under both agreements,
the specific aspects of that measure examined under each agreement could be
different. Under the GATT 1994, the focus is on how the measure affects the
goods involved. Under the GATS, the focus is on how the measure affects the
supply of the service or the service suppliers involved. Whether a certain
measure affecting the supply of a service related to a particular good is
scrutinized under the GATT 1994 or the GATS, or both, is a matter that can
only be determined on a case-by-case basis.3

1.3 Structure of the GATT 1994

Constituent Elements The GATT 1994 is a bizarre agreement. It “assembles” legal provisions from
different sources. It consists of the provisions of the GATT 1947, of legal
instruments concluded under the GATT 1947, of Understandings concluded
during the Uruguay Round on the interpretation of the provision of the GATT
1947, and of the Marrakesh Protocol of Tariff Concessions.

AGREEMENT ESTABLISHING THE WORLD TRADE ORGANIZATION

ANNEX 1
ANNEX 1A: Multilateral Agreements on Trade in Goods
GATT 1994:
• Provisions of the GATT 1947
• Provisions of Legal Instruments concluded under the GATT 1947:
- protocols and certifications relating to tariff concessions;
- protocols of accession;
- waivers granted under Article XXV of the GATT 1947 and
still in force on the date of entry into force;
- other decisions of the CONTRACTING PARTIES to the GATT
1947.
• Understandings concluded during the Uruguay Round on the
interpretation of certain provisions of the GATT 1947
• Marrakesh Protocol to the GATT 1994

3
Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution
of Bananas (“EC – Bananas III ”), WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591,
para. 221.
6 Dispute Settlement

The GATT 1994 incorporates as is the provisions of the GATT 1947, and
yet, it clarifies the nature and extent of some obligations set out in the GATT
1947 through the so-called “Understandings” and other legal instruments,
including “other decisions” of the Contracting Parties to the GATT, which
also form part of the GATT 1994. Furthermore, it changes the wording to be
used when referring to the provisions of the GATT 1947. For instance, the
phrase “Contracting Parties” in the GATT 1947 is now deemed to read
“Members”. In particular, the “Explanatory Notes” of Paragraph 2 stipulate:

2. Explanatory Notes
(a) The references to “contracting party” in the provisions of
GATT 1994 shall be deemed to read “Member”. The references to
“less-developed contracting party” and “developed contracting
party” shall be deemed to read “developing country Member” and
“developed country Member”. The references to “Executive
Secretary” shall be deemed to read “Director-General of the WTO”.

1.4 Provisions of the GATT 1994

Para. 1(a) Paragraph 1(a) of the language incorporating the GATT 1994 into the WTO
GATT 1994 Agreement provides that:

1. The General Agreement on Tariffs and Trade 1994 (“GATT 1994”) shall
consist of :
(a) the provisions in the General Agreement on Tariffs and Trade, dated
30 October 1947, annexed to the Final Act Adopted at the
Conclusion of the Second Session of the Preparatory Committee of
the United Nations Conference on Trade and Employment (excluding
the Protocol of Provisional Application), as rectified, amended or
modified by the terms of legal instruments which have entered into
force before the date of entry into force of the WTO Agreement; …

The provisions of the GATT 1947, now the provisions of the GATT 1994,
consist of 38 articles – numbered in roman digits – which are split up into four
“parts”.

Part I Part I of the GATT 1994 contains Articles I, enshrining the most-favoured-
nation treatment obligation, and Article II, setting out the obligations applicable
to the Schedules of Concessions of each WTO Member.

Part II Part II of the GATT 1994 comprises Articles III through XXIII. Article III
establishes the national treatment obligation. Articles IV to Article XIX cover
mainly non-tariff measures, such as unfair trade practices (dumping and export
subsidies), quantitative restrictions, restrictions for balance-of-payments
reasons, state-trading enterprises, government assistance to economic
development, and emergency safeguards measures. In addition, this Part also
3.5 GATT 1994 7

deals with numerous technical issues relating to the application of border

measures. Articles XX and XXI deal with the possible exceptions to the
GATT 1994, namely the general exceptions and those for security reasons.
Articles XXII and XXIII provide for dispute settlement procedures, which
are further elaborated in the Understanding on the Principles Governing the
Settlement of Disputes (hereinafter the “DSU”).

Part III Part III of the GATT 1994 consists of Article XXIV through Article XXXV.
Article XXIV concerns mainly customs unions and free trade areas and the
responsibility of Members for the acts of their regional and local governments.
Articles XXVIII and XXVIII(bis) deal with the negotiation and renegotiation
of tariff concessions.

Part IV Finally, Part IV of the GATT 1994 is entitled “Trade and Development” and
aims to increase trade opportunities for developing country Members in various
ways.

Other Provisions The provisions that deal with the entry into force, accession, amendments,
withdrawal, non-application and joint action are no longer valid because they
have been superseded by the relevant provisions of the WTO Agreement.

1.5 Legal Instruments Adopted under the GATT 1947

Para. 1(b) Paragraph 1(b) of the language incorporating the GATT 1994 into the WTO
GATT 1994 Agreement provides the following:

1. The General Agreement on Tariffs and Trade 1994 (“GATT 1994”) shall
consist of:
…
(b) the provisions of the legal instruments set forth below that have
entered into force under the GATT 1947 before the date of entry
into force of the WTO Agreement:
(i) protocols and certifications relating to tariff concessions;
(ii) protocols of accession (excluding the provisions (a)
concerning provisional application and withdrawal of
provisional application and (b) providing that Part II of
GATT 1947 shall be applied provisionally to the fullest extent
not inconsistent with legislation existing on the date of the
Protocol);
(iii) decisions on waivers granted under Article XXV of
GATT 1947 and still in force on the date of entry into force of
the WTO Agreement;
(iv) other decisions of the CONTRACTING PARTIES to
GATT 1947; …

The effect of incorporating by reference the provisions of these legal instruments

into the GATT 1994 is to maintain their prior status under the GATT 1947,
8 Dispute Settlement

and to bind all WTO Members.

In US – FSC, the Appellate Body said: :

… The inclusion of these “legal instruments” in the GATT 1994 recognizes

that the legal character of the rights and obligations of the contracting parties
under the GATT 1994 is not fully reflected by the text of the GATT 1994
because those rights and obligations are conditioned by the “protocols”,
“decisions” and other “legal instruments” to which paragraph 1(b) refers.4

In Japan – Alcoholic Beverages II, the Appellate Body stated that not every
decision of the Contracting Parties to the GATT 1947 constituted an “other
decision” within the meaning of paragraph 1(b)(iv) of the language
incorporating the GATT 1994 into the WTO Agreement.5 In that case, the
Appellate Body concluded that adopted panel reports do not constitute such
“other decisions”.6 In US – FSC, the Appellate Body confirmed the Panel’s
finding that “other decisions” did not include a Council action adopting a
panel report as a result of the parties’ agreement.7

1.6 Understandings and the Marrakesh Protocol

Paras. 1(c) and 1(d) Paragraphs 1(c) and 1(d) of the language incorporating the GATT 1994 into
GATT 1994 the WTO Agreement provide:

1. The General Agreement on Tariffs and Trade 1994 (“GATT 1994”) shall
consist of:
…
(c) the Understandings set forth below:
(i) Understanding on the Interpretation of Article II:1(b) of the
General Agreement on Tariffs and Trade 1994;
(ii) Understanding on the Interpretation of Article XVII of the
General Agreement on Tariffs and Trade 1994;
(iii) Understanding on Balance-of-Payments Provisions of the
General Agreement on Tariffs and Trade 1994;

4
Appellate Body Report, United States – Tax Treatment for “Foreign Sales Corporations” (“US –
FSC ”), WT/DS108/AB/R, adopted 20 March 2000, para. 107.
5
Appellate Body Report, Japan – Taxes on Alcoholic Beverages (“Japan – Alcoholic Beverages II
”), WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, pp. 12-15. See also
Appellate Body Report, US – FSC, para. 108.
6
Appellate Body Report, Japan – Alcoholic Beverages II, pp. 12-15. See also Appellate Body
Report, US – FSC, para. 108. The Appellate Body reasoned that adopted panel reports “are not
binding, except with respect to resolving the particular dispute between the parties to that dispute”.
The Appellate Body finally said that the decision to adopt a panel report was not intended by the
GATT 1947 Contracting Parties to “constitute a definitive interpretation of the relevant provisions
of GATT 1947.”
7
See also Appellate Body Report, US – FSC, paras. 22 and 114. The reasoning of the Appellate
Body is set out in paragraphs 107 to 113.
3.5 GATT 1994 9

(iv) Understanding on the Interpretation of Article XXIV of the

General Agreement on Tariffs and Trade 1994;
(v) Understanding in Respect of Waivers of Obligations under
the General Agreement on Tariffs and Trade 1994;
(vi) Understanding on the Interpretation of Article XXVIII of the
General Agreement on Tariffs and Trade 1994; and
(d) the Marrakesh Protocol to GATT 1994.

Understandings The six Understandings are legal documents which have been concluded during
the Uruguay Round with a view to clarifying some obligations set out in the
GATT 1947. They concern six particular GATT provisions, namely, the ones
relating to the schedules of concessions, state-trading enterprises, balance-of-
payments exceptions, regional trade agreements, waivers and the withdrawal
of concessions.

Some of these Understandings aim to introduce further “transparency”

obligations, while others seek to refine terms or paragraphs of the concerned
GATT article. For instance, the Understanding on Article II:1(b) requires
that the nature and level of any “other duties or charges” levied on bound
tariff items, as referred to in that provision, be recorded in the Schedules of
Concessions annexed to GATT 1994 against the tariff item to which they apply.
The Understanding on Article XVII (on state trading enterprises) sets out
notification procedures and provides for subsequent reviews. The
Understanding on Balance-of-Payments Provisions essentially aims to clarify
the existing obligations under the provisions of the GATT 1994, but it also
provides for transparency measures and consultation requirements. The
Understanding on Article XXIV regarding regional trade agreements clarifies
some of the subparagraphs to Article XXIV. The Understanding on Waivers
sets out the elements to include in the request for a waiver and explains when
and how it is possible to challenge the application of a waiver by a Member.
Finally, the Understanding on Article XXVIII (concession withdrawal) defines
the phrase “principal supplying interest” of Article XXVIII of the GATT 1994.

Marrakesh Protocol With respect to the Marrakesh Protocol to the GATT 1994, it is the legal
instrument that incorporates the Schedules of Concessions and Commitments
on Goods negotiated under the Uruguay Round into the GATT 1994. It
confirms their authenticity and sets out their implementation modalities.

1.7 The Relationship Between the GATT 1994 and Other

WTO Agreements
The provisions of the GATT 1994 apply to a disputed measure even where the
provisions of other WTO agreements are applicable, to the extent that the
provisions of the GATT 1994 do not conflict with any of the provisions of the
other applicable WTO agreements. In other words, if there is no conflict, the
measure at issue should be examined against all the relevant provisions of the
10 Dispute Settlement

different WTO agreements, including the GATT 1994.

The Appellate Body defined the term “conflict” in Guatemala – Cement I.8
There is a conflict when adherence to one provision will lead to a violation of
another provision. Following the terms of the Appellate Body, an interpreter
must identify an inconsistency or a difference between the provisions examined
before determining which one of the provisions will prevail.9

In the event of a conflict, and to the extent of that conflict, the GATT 1994
never prevails. The other WTO agreements on trade in goods contained in
Annex 1A to the WTO Agreement always prevail over the GATT 1994.
Moreover, the WTO Agreement always prevails over any of the multilateral
trade agreements, including the GATT 1994 and all the other agreements on
trade in goods included in Annex 1A to the WTO Agreement.

1.7.1 The Relationship Between the GATT 1994 and the

WTO Agreement

Article XVI:3 The relationship between the GATT 1994 and the WTO Agreement is regulated
WTO by Article XVI:3 of the WTO Agreement, which provides:

In the event of a conflict between a provision of th[e WTO] Agreement and a

provision of any of the Multilateral Trade Agreements, the provision of th[e
WTO] Agreement shall prevail to the extent of the conflict.

1.7.2 The Relationship Between the GATT 1994 and Other

Agreements in Annex 1A to the WTO Agreement

General Interpretative Annex 1A to the WTO Agreement, which includes all multilateral agreements
Note to Annex 1A on trade in goods, is introduced by a “General interpretative note” giving
prevalence to the other agreements on trade in goods over the GATT 1994 in
the event of a conflict, and to the extent of that conflict.

General interpretative note to Annex 1A

In the event of a conflict between a provision of the [GATT 1994] and a
provision of another agreement in Annex 1A to the [WTO Agreement], the
provision of the other agreement shall prevail to the extent of the conflict.

A number of disputes have raised the issue of conflict between the GATT
1994 and other multilateral agreements on trade in goods in Annex 1A to the

8
Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from
Mexico (“Guatemala – Cement I ”), WT/DS60/AB/R, adopted 25 November 1998, para. 65. Although
in that case, the alleged conflicting provisions came from the DSU and the Anti-Dumping Agreement,
the Appellate Body’s analysis is relevant to the determination of whether there is a “conflict” between
GATT provisions and provisions from other WTO agreements.
9
Appellate Body Report, Guatemala – Cement I, para. 65.