Proposal for addressing the selective application of global safeguard measures on the basis of FTA preferences

Abstract

This thesis examines whether the selective application of global safeguard measures on the basis of free trade arrangement (FTA) preferences is required, permitted or prohibited under the WorId Trade Organization (WTO) regime. The aim of this thesis is to provide a proposal to address the issue of selective safeguards on the basis of FTA preferences, which has been one of the most controversial issues among WTO members.

Neither the General Agreement on Tariffs and Trade (GATT) nor the Agreement on Safeguards has made it clear whether members of a customs union or free trade area can exclude their free trade partners from global safeguard measures. Although Article 2.2 of the Agreement on Safeguards states that safeguard measures must be applied to an imported product 'irrespective of its source', the Appellate Body has stated that members of a customs union or free trade area can invoke GATT Article XXIV to justify a GATT/WTO-inconsistent measure provided that certain conditions have been fulfilled. One of these conditions is that the customs union or free trade area in question must fully meet the requirements under Articles XXIV:5 and XXIV:8 of the GATT.

Due to the lack of clear pronouncement from the GATT/WTO, state practice has been inconsistent. While some free trade arrangements require or permit their members to apply global safeguard measures selectively, others require such measures to be applied consistently with the GATT and/or the Agreement on Safeguards. The Appellate Body has also avoided specifically ruling on whether the defence under Article XXIV can be invoked to justify the exclusion of free trade partners from global safeguard measures. The cases on selective safeguards have been decided on other grounds.

Because the issue of selective safeguards on the basis of FTA preferences directly involves the competing interests between multilateralism and bilateralism/plurilateralism, this thesis argues that the issue cannot be dealt with outside the policy balancing exercise reflected in Article XXIV. However, the application of the requirements under Article XXIV is inconclusive whether the Article XXIV exception can be invoked to justify the exclusion of free trade partners from global safeguard measures. While Article XXIV:8's 'substantially all the trade' requirement may provide a basis for excluding free trade partners from global safeguard measures, Article XXIV:5 is likely to prohibit such exclusion as it results in adverse trade effects against third countries.

To shed light on the issue, this thesis proposes that the object and purpose of customs unions and free trade areas, as stated in Article XXIV:4, should be taken into account. It argues that Article XXIV:4 and the interpretative principle which requires exceptions to treaty obligations to be narrowly construed support the non-discriminatory safeguard regime. This thesis concludes that the selective application of global safeguard measures on the basis of FTA preferences should be prohibited. The non-discriminatory application of global safeguard measures is not only consistent with the object and purpose of the Agreement on Safeguards and the WTO Agreement, but also helps to preserve the integrity of the GATT/WTO system as a whole. Show more