Necessity under GATT and National Autonomy of States

Introduction

The existence of WTO is a reform in the arena of international trade and its exponential feature lies within its dispute settlement mechanism and “thickened” normativity.¹ The members’ policy choices, according to Mitchell, means “freedom to pursue domestic policy choices in accordance with the particular economic, social and cultural needs and/or preference of that State.”² The insertion of exceptions under GATT is to allow “countries to sidestep the normal trading rules if necessary to protect human, animal or plant life or health”³ with a rider that its use is not “arbitrary or unjustifiable discrimination, or it creates disguised restriction on international trade.”⁴ The existence of predictable legal regime⁵ depends on its core two limbs, namely, (1) determinacy; and (2) coherence.⁶ The earlier objective test as per EC-Hormones⁷ is widened due to trade-off theory (national treatment, simple means-end rationality, necessity or least trade restrictive test, proportionality test, balancing test) as per Trachtman.⁸ These varied tests allow the adjudicating bodies to interpret phrase necessity under a completely different standard to balance competing interest. It, therefore, sends conflicting messages, making it arbitrary, unpredictable, and illegitimate system.⁹ WTO agreements do not merely pursue free trade promotion but seek a balance between the members' free trade commitments and the right of members to achieve non-trade related goals.¹⁰ However, Ming Du opines that “such right is often intruded by DSB by providing divergent interpretation affecting countries regulatory autonomy. Vagueness in WTO rules have allowed DSB to provide unexpected interpretations leading to a reduction in the rights of WTO members who have seen their policy freedom usurped by WTO panels and the appellate body”.¹¹ The manner of applying the test prescribed under GATT exception by the WTO adjudicatory bodies to legitimate the policy of the countries¹² has raised questions of its legitimacy, competence, and transparency.¹³

DSB and AB rulings on necessity under GATT and its excessive interpretation

The various rulings of the Dispute Settlement Body (DSB) and the Appellate Body (AB) suggest that interpretation of necessity is ultra vires to textual language used in the GATT and often shifted and erased in academic discourse.¹⁴ In US Section 337 and Thai cigarettes,¹⁵ GATT and WTO adjudicatory body enunciated least restrictive means (LRM) as an alternative strict measure to interpret the necessity test to overcome the legitimate use of domestic measure.¹⁶ This was highly criticised by some of the authors as this requirement was beyond the chapeau of Article XX¹⁷ and interfered with Thailand's right to pursue domestic policy on cigarettes. As per Ming Du and Kapterian¹⁸, this was highly controversial as the Panel ignored Thailand's difficulty in complying with suggestive alternative measure being a developing country and its economic feasibility and rendered it as pro-trade object of WTO. In Korea – Beef, the AB introduced the test of proportionality analysis for the necessity test i.e. to examine whether the contested measure was proportional to objective sought.¹⁹ It based its interpretation on three tests: (a) importance of interests or values being protected by the measure; (b) the efficacy of such measures in pursuing the policies; and (c) the impact of the measures on imports or exports.²⁰ This decision further clarified that the definition of necessity²¹ does not mean indispensable as propounded in Mexico v. United States (Dolphin Tuna case).²² In the opinion of Regan,²³ great confusion arose because “the Tribunal did not develop with enough clarity the manner in which these elements interact with each other factors i.e. costs”. The criterion laid tilts towards balancing acts, giving more discretion to the panel and the appellate body to discern the domestic regulatory policies. Thinking objectively, the assertion of the AB to equate the intended measure with proportionality and the impact on import or export was not implicit under GATT text and expands the jurisdiction of the adjudicatory bodies. In Brazil -Tyres, the AB additionally pointed out the inclusion of “genuine relationship theory” and not marginal contribution of contested measure by the defending country.²⁴

Conclusion

It is evident that the AB and the panels are concentrating more to prevent trade abruption and often engage in deep judicial scrutiny of contested measures with quantification of the contribution of a contested measure to the objective sought.²⁵ It is tantamount to abrasion of sovereignty of the States to achieve the policy objectives. Instead of focusing on the value criteria behind the policy of the States, its role should be to look at the objective enshrined under GATT exception. Further, the margin of appreciation doctrine may be used to grant the States a degree of discretion within which the treaty obligations can be balanced “against other pressuring societal concerns”.²⁶ The varied degree of additional elements introduced by the dispute settlement body and AB to interpret the word “necessary” infuses creative interpretation (absent under international law), and the same restricts the autonomy of States.