Jamieson Greer on the Non-Violation Remedy

In a speech at UVA law school earlier this week, U.S. Trade Representative Jamieson Greer offered the following description of the GATT non-violation remedy:

The non-violation remedy in the GATT (Article 23:1(b)) makes this point clear.  It allows member countries to seek a remedy even when the challenged policy does not violate any specific written obligation, so long as it nullifies or impairs benefits the complaining member reasonably expects from prior negotiations.  Scholars have described this as “Exhibit A” for the proposition that trade agreements are incomplete contracts.  The drafters of the GATT did not attempt to enumerate every domestic policy move that could erode the value of negotiated concessions.  The agreement explicitly creates a specific gap-filling mechanism for situations the written rules do not reach.

Non-violation nullification or impairment was the main claim in the first WTO dispute I worked on, and I wrote something about it at that time. I think Jamieson's characterization of the origins of this remedy leaves out some important details, and I'll use this post to highlight them, on the basis of a draft book chapter I started but had to put aside.

Some time in the mid-2010s, I was going to do a book about regulatory trade barriers, but then events in the trade policy world during the first Trump administration got the better of me. As part of that project, I had a chapter on the "The Early History of Regulatory Issues in Trade." It never made it out of draft form, but having glanced through it quickly just now, I think/hope it's good enough to post it here.

As an initial point, let me note that the early conversations about the completeness of trade agreement contracts happened at the League of Nations economic conferences in the late 1920s and early 1930s, well before the GATT. The conclusions reached in the League discussions then made their way into the 1930s reciprocal trade agreements and later into the GATT.

Turning to the origins of the non-violation remedy, the key point for the purposes of this post is the following. When crafting agreements to limit the use of tariffs, the government and League Secretariat officials doing the negotiating and drafting were aware that, in addition to tariffs, various domestic measures could serve as protectionism as well. The concern was that these domestic measures could undermine the goals of any tariff reduction agreement, that is, they could "erode the value of negotiated concessions."

The officials were able to identify a wide range of such measures, but there was uncertainty about whether they could catch them all. So, faced with a choice of "enumerating" in a trade agreement all the domestic measures that might be considered "indirect protectionism" (i.e., the measures "that could erode the value of negotiated concessions"), on the one hand, and creating an "equitable treatment" formula as a "gap-filling mechanism," on the other hand, the drafters decided to do both.

The way this played out at the League's 1933 London conference was that the Secretariat was instructed to draw up a list of the various forms of indirect protectionism. The Secretariat put together that list, and all of the items on it ended up being covered by modern trade agreements. For example, the first item on their list is "Application of veterinary and phyto-pathological regulations for purposes of protection," which corresponds to today's WTO SPS Agreement (and SPS chapters of FTAs); and the ninth item is "Internal charges imposing upon imported goods higher or more onerous duties than those to which national products of the same nature are liable, in particular, taxes on circulation, turn-over tax, discriminatory excise duties, etc.," which corresponds to GATT Article III:2, second sentence. There's a table at the end of my draft chapter that documents all this.

But the Secretariat also worried that it would be impossible to come up with a complete list, and so it developed an "equitable treatment" clause as well in order to fill the gaps. Right at the end of the conference, this clause was re-drafted with the famous "nullification or impairment" language that made its way into the trade agreements that followed.

Summing up, governments did, in fact, "attempt to enumerate every domestic policy move that could erode the value of negotiated concessions," but then they also drafted a "gap-filling mechanism" to accomplish a similar goal. So why put the nullification or impairment provision in there when they already had enumerated all the domestic policies? Did they worry they had missed some? Or was it just that they had drafted such a nice nullification or impairment provision that they didn't want the work to be wasted? Or maybe they figured why not use both to be safe? That's hard to say. In practice, though, their enumeration of domestic policy moves has provided much of the basis for GATT/WTO law under a contract that seems fairly complete, while the non-violation remedy has proven difficult to use successfully.