CYIL vol. 8 (2017)

CYIL 8 ȍ2017Ȏ TO PERU – ADDITIONAL DUTY … quantum of the burden of proof, that a disputant had to perform in order to establish a prima facie case of the consistency of an RTA with WTO law. As NAFTA is, from the technical point of view, a regional agreement setting up a free- trade area, the WTO judging body first of all remarked that, under Article XXIV:5 of the GATT 1994, the formation of a free-trade area between the territories of WTO Members is allowed, provided the conditions set forth in sub-paragraphs b) and c) of the recalled provision are met. 30 The Panel then reported the definition of free-trade area codified in Article XXIV:8(b) of the GATT 1994, pursuant to which such area is “a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.” Setting up a free-trade area, following the requirements of the WTO system, will thus “necessarily result in more favourable treatment for free-trade area partners than for non-free-trade area partners (in respect of whom ‘duties and other restrictive regulations of commerce’ are not eliminated).” 31 Therefore, the discriminatory nature of the US safeguard measure on line pipe, -excluding from the tariff quota Canada and Mexico as Parties, together with the US, of NAFTA- can be justified by the North American Free Trade Agreement provided that the latter may be qualified as a FTA fulfilling the WTO conditions: NAFTA must “(1) comply with Article XXIV:5(b) and (c), and (2) eliminate duties and other restrictive regulations of commerce on ‘substantially all’ intra-NAFTA trade.” 32 With reference to the burden of proof of the above indicated WTO conditions, the Panel, restating the AB conclusions in the Turkey – Textiles case, declared that “[a]s the party seeking to rely on an Article XXIV defence (or ‘limited exception’), the onus is on the United States to demonstrate compliance with these conditions.” 33 The United States then argued that “NAFTA provided for the elimination within ten years of all duties on 97 per cent of the Parties’ tariff lines, representing more than 99 per cent of the trade among them in terms of volume,” figures that the North-American administration considered as respecting the threshold established under Article XXIV:8 of the GATT 1994 for “elimination of duties on substantially all trade.” With regard to the elimination of other restrictive regulations of commerce, the defendant remarked that “NAFTA applie[d] the principles of national treatment, transparency, and a variety of other market access rules to trade among the Parties … [and] eliminated the application of global safeguard measures among [NAFTA Parties] under certain conditions.” The US then stated that NAFTA did not raise “barriers to third countries, since none of the NAFTA Parties increased tariffs on trade with non-NAFTA measures,” nor did “[t]he NAFTA Parties … place other restrictive 30 I.e. that i) “the duties and other regulations of commerce maintained in each of the constituent territories [of the FTA] … and applicable … to the trade of [WTO Members] … not included in such area … shall not be higher or more restrictive than the corresponding duties and other regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area”; and, in case of the gradual definition of the free-trade area, that ii) the interim agreement specifically formulated to establish the various stages for reaching the FTA has to “include a plan and schedule for the formation of such a … free-trade area within a reasonable length of time.” FROM TURKEY – TEXTILES

31 Panel Report, US – Line Pipe, 7.140. 32 Panel Report, US – Line Pipe, 7.141. 33 Panel Report, US – Line Pipe, 7.142.

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