This is from an article by Christopher Tran, an LLB student at Melbourne Law School:
The applicability of GATT, Art XX beyond the GATT itself has previously been left open in two panel reports. More recently, in China – Audiovisual Products, the Appellate Body held that GATT, Art XX could be invoked as a defence to inconsistency with China’s Accession Protocol Art 5.1. The introductory clause of Art 5.1 states that “[w]ithout prejudice to China’s right to regulate trade in a manner consistent with the WTO Agreement”, China has certain obligations to liberalise trade. The Appellate Body considered that where a measure enacted by China affects trade in goods, directly or indirectly, it can be protected under the introductory clause of Art 5.1 if the measure is otherwise consistent with GATT, Art XX.97 The Appellate Body reached this conclusion on a textual, dictionary-definition approach to the terms “without prejudice to” and “right to regulate trade”.98 The Appellate Body then asserted that the terms “in a manner consistent with the WTO Agreement” mean the WTO Agreement as a whole, including its annexes, and that a measure may be consistent either for not infringing the substantive obligations of the WTO Agreement, or by satisfying the terms of a relevant exception.99 Ultimately, China – Audiovisual Products has limited significance for the specific question of whether GATT, Art XX can be invoked in a SCM Agreement claim; that case turned on the particular terms of Art 5.1, whereas the SCM Agreement has no similar textual foothold.100 Rather, the doctrinal arguments in favour of applying GATT, Art XX to an SCM Agreement claim, such as they are, appear to be three-fold.
The first argument is pitched at the most general level. Since environmental measures can be excused under other agreements, it is said that consistency of obligations across the WTO Agreements requires that environmental measures can be excused, for similar reasons, under all of the WTO Agreements.101 Such an argument fits with the strong presumption in WTO law that the WTO Agreements are to be interpreted harmoniously because they form a “single package”.102 However, a preference for harmonious interpretation must give way to evidence of a contrary intention – as to which, see below – and Professor Condon has noted that it is necessary to consider the relationship of the GATT and the other WTO Agreements on a case-by-case basis.103 Harmonious interpretation is useful as a guiding principle, but it has limits when put to the test on the anvil of actual cases.
The second argument is highly textual in nature; it focuses on SCM Agreement, Art 3, which prohibits certain subsidies “[e]xcept as provided in the Agreement on Agriculture”. That agreement’s preamble in turn exhorts “the need to protect the environment”.104 Professor Condon thus suggests that the Agreement on Agriculture might be used to reach GATT, Art XX(b) in a SCM Agreement claim, although he notes the “more likely conclusion is that Article XX is not available to justify a violation of the Agreement on Agriculture”. This appears correct, given that there is no GATT, Art XX(b)-style exception in that agreement either.
The third argument is based on the lex specialis maxim of interpretation, which has been characterised by the International Law Commission as a tool for managing the relationship between two different (bodies of) norms.105 According to that maxim, a specific rule prevails over a general rule to regulate the same matter. The SCM Agreement appears to be lex specialis of GATT, Arts VI and XVI, which deal in broader terms with subsidies and countervailing measures.106 Prima facie, applying the lex specialis maxim of interpretation, when dealing with subsidies, attention should be given to the SCM Agreement first and foremost, rather than applying the GATT and its Art XX exceptions.
...
The first and third arguments face insuperable difficulties because, fundamentally, harmonious interpretation and lex specialis both depend on, and so are subject to, evidence of drafter intent that the agreements are to be interpreted harmoniously or with the assistance of the lex generalis in that particular instance. The problem for these arguments is that negotiators’ intent, such as can be discerned, suggests that GATT, Art XX should not be applicable to defend a SCM Agreement claim. First, the SCM Agreement is not “silent” on the environment. The prohibited/actionable/non-actionable structure reflects implicitly a perception that not all subsidies are to be prohibited. Moreover, Art 8.2(c) already provided an environmental “exception” in the form of a non-actionable environmental subsidy, albeit that provision has since sunsetted. Secondly, the negotiators explicitly included environmental exceptions in other agreements where they were intended, including by incorporating directly GATT, Art XX.109 Any recognition during the negotiations that subsidies could support legitimate domestic policies110 is either catered for in the prohibited/actionable/non-actionable structure, or consciously not given effect to by the final text. Thirdly, the chapeau of GATT, Art XX expressly refers to “this Agreement”, and this means, according to the cases, the GATT.111 Fourthly, allowing GATT, Art XX to be invoked to defend a claim under the SCM Agreement undermines the principle that the SCM Agreement trumps the GATT in the event of any conflict between the two agreements.112
