I'm posting here a long excerpt from an amicus submission in the EU - Palm Oil (DS600) case, co-authored by trade lawyers Stéphanie Noël and Clémentine Baldon. In my view, this submission sets out the correct way to think about GATT Article III, and I'm glad to see these arguments put before a WTO panel. I don't know what various governments believe these days about the proper approach to Article III, but I hope they will seriously consider the arguments that follow. (I haven't thought enough yet about how these arguments apply to the DS600 measures, but I support the arguments in the abstract):
B. Preliminary remarks on the ultimate purpose of GATT Article III
17. At the outset, the Applicant would like to recall the object of the whole Article III of the GATT (“National Treatment on Internal Taxation and Regulation”) as set out in Article III:1. In the Applicant’s view, it must inform any legal analysis relating to Article III – and in particular the concept of “treatment no less favourable”.
1. The object and purpose of GATT Article III
18. GATT Article III:1 reads as follows:“The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.” (emphasis added)
19. The purpose of the national treatment obligation is to avoid internal measures being applied “so as to afford protection to domestic production”.
20. The Applicant submits that it is clear from this wording that what is prohibited is the application of measures whose intended result is protection of domestic production.
21. The Applicant considers that the terms of Article III:1 are neither obscure nor ambiguous. But in order to be systematic and precise, the Applicant will demonstrate that a textual interpretation in accordance with the customary rules of interpretation of public international law, codified in Article 31, and to the extent appropriate, Article 32 of the Vienna Convention on the Law of Treaties (hereinafter the “Vienna Convention”) supports its view.
22. Article 31(1) of the Vienna Convention provides:“A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose”
23. Even if the ordinary meaning of a treaty text shall be ascertained by considering the context and object and purpose, its identification may start with the dictionary definitions of the terms to be interpreted.
24. According to the Oxford Dictionary of English (Third Edition), the phrase “so as to do something” means “in order to do something”. This clearly implies that the action to which the phrase refers (in the case at hand, applying a measure) is taken with a view to achieving an objective. This suggests the intention.
25. Had the drafters wanted to refer to a broader scope of measures, so as to include any measure having the effect – actual or potential – of protecting domestic production, they would have drafted Article III:1 so as to reflect this. For example, they could have used “such that it affords protection” “in a way that protects”, “which results in protection” or “which may have the effect of protecting”, etc. There are plenty of ways to indicate the mere consequences, regardless of the intention.
26. The general definition “protection” supplied by the Oxford Dictionary of English (Third Edition) is “the action of protecting”. The same dictionary provides several definitions of the verb “protect”. Obviously, the economic definition is the most relevant. It reads “shield (a domestic industry) from competition by imposing import duties on foreign goods”. Although the definition refers to the imposition of import duties, admittedly, shielding the domestic industry can be achieved by other means.
27. Context, object and purpose just serve to elucidate the meaning of existing treaty words and terms. In this case, they are clear. In any event, we will examine the immediate context, and the general object and purpose of the GATT.
28. Let us turn to the immediate context of Article III:1. It immediately follows Article II on Schedules of Concessions. This indicates the rationale behind Article III of the GATT, which aims at ensuring that Members’ internal charges and regulations do not frustrate the effect of their tariff concessions under Article II. Therefore, the main goal of Article III of the GATT is to prevent Members from resorting to internal measures in order to indirectly protect their domestic productions from competition boosted by their trade liberalization commitments.
29. In addition, Article III and the GATT in general must be read in conjunction with the WTO Agreement, as its Annexes (which include The Multilateral Agreements on Trade in Goods) are integral parts of the WTO Agreement. As such, the Preamble of the WTO Agreement informs the provisions of the GATT. And as the Appellate Body recognized in US – Shrimp, the Preamble “shows that the signatories to that Agreement were, in 1994, fully aware of the importance and legitimacy of environmental protection as a goal of national and international policy” (emphasis added). Therefore, even though the Appellate Body said that the sheltering scope of GATT Article III is not limited to products bound under Article II, the interpretation of GATT provisions should show deference to the policy space of WTO Members as long as their measures do not aim at shielding domestic production but have legitimate goals (especially environmental protection).
30. This interpretation is consistent with the Appellate Body’s reference to “protectionism”. As it has recognized in Japan – Alcoholic Beverages:“The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures”. (emphasis added)
31. It is clear from the above that the purpose of Article III of the GATT is to strike down internal measures that are protectionist and shield internal measures that pursue a legitimate objective in good faith.
2. Determinations under GATT Article III
32. This entails that a determination under any of the provisions of Article III should be a determination about the application of the challenged measures so as to afford protection to domestic production.
33. The logical consequence of the above is that the starting point for making such a determination should be the domestic production that the country in question intends to protect through the application of this measure. It is all about protection of domestic production, not about merely disfavouring or even targeting certain products or products from certain countries (the latter case being dealt with by Article I:1).
34. Therefore, the claimant must identify the “domestic production” that the respondent seeks to protect. In the case at hand, Malaysia has identified two distinct types of domestic productions: i) “certain biofuel feedstocks, such as rapeseed, sunflower, and soybeans” and ii) “biofuels produced therefrom”.
35. The Applicant submits that the legal tests to be applied under the provisions of Article III and any legal interpretation thereof should be performed to determine whether the measures challenged in this dispute aim at protecting “certain biofuel feedstocks, such as rapeseed, sunflower, and soybeans” produced in the EU or “biofuels produced therefrom” in the EU, as the case may be.
36. This should be so if the Panel were to give full effect to the terms of Article III:1.
3. The terms of Article III:1 should be given full effect
37. The Applicant submits that the terms of Article III:1 should be given full effect. The Applicant would like to respectfully recall the principle of effective treaty interpretation “according to which all terms of a treaty must be given a meaning”. It involves that a treaty interpreter:“… must give meaning and effect to all the terms of the treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.”
38. It follows that all the provisions of Article III should be interpreted in light of its fundamental purpose, which is to avoid protectionism in the application of internal measures.
39. Having recognized that the principle of effective treaty interpretation mandated such an approach, the Appellate Body said that the principles set forth in this paragraph shall inform the rest of Article III (including provisions on “treatment no less favourable”):“Article III:1 articulates a general principle that internal measures should not be applied so as to afford protection to domestic production. This general principle informs the rest of Article III. The purpose of Article III:1 is to establish this general principle as a guide to understanding and interpreting the specific obligations contained in Article III:2 and in the other paragraphs of Article III, while respecting, and not diminishing in any way, the meaning of the words actually used in the texts of those other paragraphs. In short, Article III:1 constitutes part of the context of Article III:2, in the same way that it constitutes part of the context of each of the other paragraphs in Article III. Any other reading of Article III would have the effect of rendering the words of Article III:1 meaningless, thereby violating the fundamental principle of effectiveness in treaty interpretation.”
40. In practice, this entails that, as the Appellate Body ruled in EC – Bananas, in relation to Article III:4 (but it applies to all the provisions of Article III):
“In short, there must be consonance between the objective pursued by Article III, as enunciated in the “general principle” articulated in Article III:1, and the interpretation of the specific expression of this principle in the text of Article III:4”.
41. With these essential considerations in mind, we now turn to Malaysia’s claims and the correct tests and interpretations that, in the Applicant’s view, should be applied.
(footnotes omitted)
The amicus submission then applies this reasoning to Article III:2, first and second sentences, and Article III:4, concluding that the measures at issue do not violate these obligations. Pasting all of that reasoning here would be too much for one blog post, but here's a key part of the Article III:4 reasoning:
92. In our view, nothing prevents a panel from interpreting the term “treatment no less favourable” so as to take into account the protectionist purpose (or lack thereof). All the above indicates that such an interpretation is even mandated by the principle of effective treaty interpretation and necessary to render a ruling on Article III:4 consistent with the spirit of the GATT and the WTO Agreement. The Appellate Body itself ruled that panels could do so in interpreting the term “treatment no less favourable” in the context of Article 2.1 of the Agreement on Technical Barriers to Trade: where the measure at issue results in a de facto detrimental impact on competitive opportunities for imported products, it can still be found non-discriminatory if such a detrimental impact “stems exclusively from a legitimate regulatory distinction”. We do not see any reason why panels could not consider the regulatory purpose in making determinations of “treatment no less favourable”.
93. Moreover, the Applicant submits that the test applied to determine the presence of a “protective application” in the context of Article III:2, second sentence could be relevant in determining in determining “less favourable treatment” under Article III:4. If a disparate impact is observed, a panel could examine the design, architecture and structure of the measure at issue in relation to its declared objectives. This would allow the panel to determine whether the measure has been deliberately designed to protect the domestic production identified by the complainant.
In essence, I take this submission to argue that Article III:2, first and second sentences, and Article III:4 may have slightly different wording, but nevertheless they should all reflect in some way Article III:1 and its clear reference to protectionist intent. And a key part of the way to do that is to consider the "design, architecture and structure of the measure at issue in relation to its declared objectives."
