In the China - Publications AB report, the EU, a third participant in the appeal, was very influential on one particular issue. In fact, I'm not sure I've ever seen a third participant have this much impact on the AB's reasoning. Here's what happened.
In addressing China's GATT Article XX(a) defense, the Panel had said it would assume arguendo that Article XX(a) applies in the context of China's "trading rights commitments," and it would return to this issue of applicability if it were to find that the substantive terms of Article XX(a) were satisfied. After rejecting the Article XX defense on the basis that the terms of Article XX(a) had not been met, the Panel never addressed the issue of whether Article XX could apply here. (See paras. 7.735-745, 7.914)
On appeal, according to the AB's summary of the arguments, China was willing to let the issue of applicability go if its substantive arguments on Article XX(a) failed on appeal:
35. In response to questioning at the oral hearing in this appeal, China clarified that, if the Appellate Body were to uphold the Panel's findings that the measures at issue are not "necessary" within the meaning of Article XX(a) of the GATT 1994, then China does not seek a ruling by the Appellate Body on the issue of whether Article XX(a) is available as a defence to a violation of China's trading rights commitments under its Accession Protocol.
For its part, the U.S. thought what the Panel did was fine, and it asked the AB to take the same approach:
64. ... At the oral hearing in this appeal, the United States urged the Appellate Body to review the Panel's findings under Article XX(a) using the same arguendo approach, and likewise to refrain from deciding whether Article XX(a) is available as a defence to a violation of China's obligation to grant the right to trade.
By contrast, the EU had some serious concerns with the arguendo approach and wanted the AB to decide the issue of Article XX(a)'s availability as a defense:
111 ... The Panel in effect found that none of the measures at issue correspond to "core" measures regulating trade, but left open the question of whether the measures are consequential, incidental, and/or necessary to measures regulating trade in the relevant goods, that is, to measures prohibiting certain content or requiring content review prior to importation. Because the availability of Article XX(a) depends on the answer to this question, the European Communities considers that the Panel erred in law by examining China's Article XX(a) defence on an arguendo basis. A detailed substantive analysis under Article XX(a) should follow, and depend upon, a positive finding that Article XX(a) applies—yet the Panel made no such finding. Before undertaking its Article XX(a) analysis, therefore, the Panel should first have shown that "the measures found to be inconsistent with [China's] trading rights commitments are incidental (in the sense of 'necessary') to the regulation of the relevant goods". Moreover, the Panel's arguendo approach was not helpful for effectively resolving the dispute between the parties because China does not know whether it can adopt "less GATT-inconsistent (less restrictive) alternative measures, such as those pointed out by the United States" without running the risk of a renewed and successful WTO challenge of such measures. (emphasis added)
So what did the AB do in response to all this? Well, pretty much what the EU asked for, and for similar reasons. Here's what the AB said:
213. We observe that reliance upon an assumption arguendo is a legal technique that an adjudicator may use in order to enhance simplicity and efficiency in decision-making. Although panels and the Appellate Body may choose to employ this technique in particular circumstances, it may not always provide a solid foundation upon which to rest legal conclusions. Use of the technique may detract from a clear enunciation of the relevant WTO law and create difficulties for implementation. Recourse to this technique may also be problematic for certain types of legal issues, for example, issues that go to the jurisdiction of a panel or preliminary questions on which the substance of a subsequent analysis depends. The purpose of WTO dispute settlement is to resolve disputes in a manner that preserves the rights and obligations of WTO Members and clarifies existing provisions of the covered agreements in accordance with the customary rules of interpretation of public international law. In doing so, panels and the Appellate Body are not bound to favour the most expedient approach or that suggested by one or more of the parties to the dispute. Rather, panels and the Appellate Body must adopt an analytical methodology or structure appropriate for resolution of the matters before them, and which enables them to make an objective assessment of the relevant matters and make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.
214. In this case, China asserted that the introductory clause of paragraph 5.1 of its Accession Protocol allowed it to justify the provisions of its measures found to be inconsistent with its trading rights commitments as necessary to protect public morals in China within the meaning of Article XX(a) of the GATT 1994. The Panel did not decide whether paragraph 5.1 gave China access to this defence. Instead, the Panel proceeded on the assumption that such a defence was available. Yet, if China cannot rely on Article XX(a) to defend its measures as ones that protect public morals in China, the findings of inconsistency with China's trading rights commitments would be the end of the matter, and any analysis of the measures under Article XX(a) would be unnecessary. Moreover, certain elements of the Panel's reasoning under Article XX(a), notably its analysis of the appropriate restrictive effect to be taken into account, depended, at least to some extent, on the availability of Article XX(a) as a defence to a violation of China's trading rights commitments. Thus, these parts of the Panel's analysis rest upon an uncertain foundation as a result of the absence of a ruling on the applicability of Article XX(a) in this case. In addition, the absence of clarity on the issue of whether China may rely on Article XX(a) as a defence to a violation of paragraph 5.1 of its Accession Protocol may leave the participants uncertain as to the regulatory scope that China enjoys in implementation and as to whether any implementing measure is, in fact, consistent with China's WTO obligations or susceptible to further challenge in proceedings under Article 21.5 of the DSU.215. In our view, assuming arguendo that China can invoke Article XX(a) could be at odds with the objective of promoting security and predictability through dispute settlement, and may not assist in the resolution of this dispute, in particular because such an approach risks creating uncertainty with respect to China's implementation obligations. We note that the question of whether the introductory clause of paragraph 5.1 allows China to assert a defence under Article XX(a) is an issue of legal interpretation falling within the scope of Article 17.6 of the DSU. For these reasons, we have decided to examine this issue ourselves.
Summing up, both participants were fine with the Panel's arguendo assumption, but the AB took a different approach, putting strict limits on the use of such techniques. This alone was not all that surprising. The AB has certainly gone a different way than the participants before. But it is striking how the AB seems to have been convinced by the EU's third participant reasoning, and relied heavily on it (in particular the part about effectively resolving the dispute and establishing clearly what China's implementation options might be).
I'm not sure what to take from all of this, except perhaps that third participants should not feel that their submissions are just a formality and that their views will likely be ignored. Clearly, the AB is listening!