balance of rights and obligations’. It is therefore to be hoped, and indeed it might even beexpected, that, in an appropriate case, the Appellate Body willclearly state that a right can prevail over an inconsistent obligationor condition, and thereby lay to rest the misunderstanding thatobligations are somehow the most superior of legal norms.
ReferencesPetros C. Mavroidis (2004), Proposals for Reform of Article 22 ofthe DSU: Reconsidering the ‘Sequencing’ Issue and Suspension of Concessions (Taking Care of Business in Geneva), in:Federico Ortino / Ernst-Ulrich Petersmann (eds.), The WTODispute Settlement System, London / Den Haag (Kluwer)2004.Joost Pauwelyn (2003), Conflict of Norms in Public InternationalLaw: How WTO Law Relates to Other Rules of InternationalLaw, Cambridge (Cambridge University Press) 2003.Erich Vranes (2004), The Definition of ‘Norm Conflict’ in International Law and Legal Theory, unpublished manuscript, 2004,on file with the author.
Peter-Christian Müller-Graff*
Protectionism or Reasonable National Regulation?The Protection of Non-Economic Interests asBarriers to the Free Movement of Goods:A Comparison of EC Law and WTO LawI.II.
IntroductionRelevant Common Core and Differences in the BasicLegal Framework of EC and WTO LawA. Substantial ContentB. Legal CharacterC. SummaryIII. The Basic Legal Requirement of the Free Movementof GoodsA. EC LawB. WTO LawIV. The Criteria for Justification of Trade Barriers andImminent Restrictions of the ProhibitionA. EC LawB. WTO LawV. Means of Overcoming Justified RestrictionsA. EC LawB. WTO LawReferences
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I. IntroductionProtectionism or reasonable national regulation? By the question ofprotection of non-economic interests as barriers to the free movement of goods in comparison of EC law and WTO law, the longstanding and well-known problem is articulated under which legalconditions non-tariff barriers to the free border crossing flow of*
Professor Dr. Dr. h.c. Peter-Christian Müller-Graff, University ofHeidelberg.
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goods can be justified by non-economic national requirements(such as health or environmental protection) within the legal ordersof the European Community (EC) and the World Trade Organization (WTO).1 The following observations are split into four partsthereby dividing the overarching problem into subquestions. Firstly,it shall be asked how the basic legal framework for comparing therelevant legal standards for this problem coincide or differ (II.);then the overriding question of whether the approach of WTO rulesdiffers from that of EC law will be scrutinised under three aspects:the basic legal requirement of the free movement of goods (III.), thecriteria of justification of trade barriers stemming from the protection of non-economic interests (IV.) and eventually the means forovercoming justified barriers (V.). The substantially inherent question to be looked at is whether the fabric of WTO rules when compared to EC law has a systemic tendency to favour free trade at theexpense of non-economic interests.II. Relevant Common Core and Differences in theBasic Legal Framework of EC and WTO LawConcerning the first question – namely the relevant common coreand differences in the basic legal framework of EC and WTO law,two basic criteria for comparison should be recalled at the outset:the substantial content (A) and the legal character (B) of the twodifferent bodies of international rules.A. Substantial ContentWith regard to the substantial content, it is well known that the coreof EC law is orientated towards the establishment and functioningof an internal market, which is defined as comprising an area without internal frontiers in which the free movement of goods, persons,services and capital is ensured in accordance with the EC Treaty2and which is based upon a customs union.3
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See, e.g., Müller-Graff (2000), 120 et seqq.See article 14 para. 2 TEC; confirmed by the Treaty establishing aConstitution for Europe agreed upon by the Intergovernmental Conference 2004 (June 18, 2004) in articles I-4 and III-130 para. 2.See article 23 TEC; confirmed by the Treaty establishing a Constitution for Europe agreed upon by the Intergovernmental Conference2004 (June 18, 2004) in article III-151.
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Already in this basic respect, the legal framework of the substantially closest piece of the WTO array of agreements, namely theGeneral Agreement on Tariffs and Trade (GATT)4 together with theTechnical Barriers to Trade Agreement (TBT)5 and the Agreementon the Application of Sanitary and Phytosanitary Measures (SPS),6is differently shaped. It is true that the underlying economic idea inthe EC Treaty as well as in the GATT is inspired by the same tradetheory of comparative cost advantage as is elaborated upon byDavid Ricardo in his book on ‘Principles of Political EconomyTaxation’ in 18297 (despite its idealistic approach and its adaptationin view of the empirical conditions; headwords: neoclassical theoryof Heckscher-Ohlin8 and Leontieff-paradoxon,9 new trade theory ofeconomies of scale10). However, the common economic theoreticalpoint of orientation of the EC Treaty and the GATT has not led toidentical consequences in binding rules for the exchange of goodsbetween the participating states as a result of the obvious differences of the economic, political and historical settings in the emergence of the two treaties. It is obvious that the GATT does not aimto establish an internal market, a customs union or a free trade area– in the sense of classical customs theory or in the form of theEFTA with the abolition of all tariffs between the participatingstates. Moreover, the objective of free trade is not even explicitlymentioned in the first part of the preamble of the WTO Agreement,where the raising of living standards is emphasised as well as fullemployment, high and continuously increasing income, effectivedemand, extension of production and trade with goods and services,optimal use of resources in conformity with a sustainable development and protection and preservation of the environment.11 As a
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For the text see, e.g. Hummer / Weiss (1997), 553 et seqq.For the text see ibidem, 929 et seqq.For the text see ibidem, 888 et seqq.For the EC see, e.g., Molle (1990), 9; for the WTO see, e.g., Weiß /Herrmann (2003), 7, 10.See, e.g. Weiß/Herrmann (2003), 11.Ibidem, 12.Ibidem, 13.See Scholl / Schorkopf (2002), 31.
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means to these ends the reduction of tariffs and other trade barriersonly is introduced in the third part of the preamble.12Despite the linguistic structure of the objectives, it has to bemaintained that the means, in other words the paths for realizing thegeneral objectives, are the characteristic features of the WTOAgreement and the GATT. They are doubtlessly shaped by the aimand philosophy of free trade. This is also true for the EC Treaty,where the basic article 2 lists the establishment of a common market only as a means, but also as the most characteristic feature forpromoting a broad array of substantive objectives (such as a harmonious, balanced and sustainable development in economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationarygrowth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement ofthe quality of environment, the raising of the standard of living andquality of life, the economic and social cohesion and solidarityamong Member States).However, these similarities in basic economic philosophy didnot hinder that the means of fostering the border-crossing trade ingoods are differently unfolded. On the one side, the establishmentof an internal market with – among many more devices – the freemovement of goods, on the other side, no prohibition of tariffs – butonly the principle of the most-favoured nation treatment (article IGATT 1994) and the principle of national treatment in internaltaxation and regulation (article III), as well as the prohibition of anynon-tariff trade restriction (article XI).B. Legal CharacterThe legal characters of the two bodies of international rules onceagain show very distinct features.It is common wisdom that under EC law, in particular, the provisions of the free movement of goods which are contained withinprimary law are so called ‘self executing’ norms.13 They are directly applicable and hence have to be applied by national courts,contain subjective rights of individuals and enjoy supremacy overdeviating national law.14 At the same time the institutions of the121314
Ibidem, 32.Leading case: ECJ, case 26/62, Van Gend & Loos [1963] ECR 1.Leading case: ECJ, case 6/62, Costa/ENEL [1964] ECR 1251.
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Community are attributed legislative powers to establish or promotethe free movement of goods.15 In most cases of the approximationof national laws, to these ends single Member States can be outvoted in the qualified majority procedure in the Council.16 For theproblem at hand, it is important that justified national restrictions ofthe free movement of goods can be overcome by the preemptiondoctrine in favour of EC legislation.17In contrast to this European framework, the rules of the WTOAgreement in general and the GATT in particular, contain no supranational elements. Their provisions are neither directly applicable nor supreme over contradicting national law.18 In addition, if anon-tariff barrier which roots in non-economic interests is found tobe justified under GATT rules, the WTO is neither empowered toharmonize the laws of the Contracting States which pose obstaclesto the free flow of goods, nor to implement any non-economic policies by supranational action.19 The absence of those healing powersmay well cause higher pressure in the GATT-framework than in EClaw on the position that a national rule is justified by non-economicinterests. In the Hormones Case the Panel Report treated the recommendations of the Codex Alimentarius Commission, a commonsuborganization of the FAO and the WHO, concerning the composition, quality and labelling of products as the yardstick for evaluating the necessity of measures for life and health protection in thesense of article 3.1 of the SPS Agreement and the GATT.20 Hencethe EC regulation which prohibited the import of beef from hor151617
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In particular articles 94, 95 TEC.See article 251 TEC.See, e.g., ECJ, case 5/77, Tedeschi, [1977] ECR 1555; case 72/83,Campus Oil, [1984] ECR 2727; case C-323/93, Crespelle, [1994]ECR I-5077, para. 31; Müller-Graff (2003a), Art. 30 EG para. 13 etseq.See, e.g., ECJ, joined cases 21 to 24/72, International Fruit Company[1972] ECR 1219; case 280/93, Germany v Council, [1994] ECR I4973, 5039; case 469/93, Amministrazione delle Finanze dello Statov Chiquita Italia SpA [1995] ECR I-4533, 4558; see also MüllerGraff (2000), 127; as analysis Hilf (1998), 21 et seqq.See Müller-Graff (2000), 128 et seq.Panel Report, EC – Measures concerning meat and meat products(Hormones) – complaint by the United States, WT/DS26/R/USA,para. 8.57.
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mone-treated cattle was strictly scrutinised because it laid down ahigher level of health protection than necessary under the CodexAlimentarius recommendations.21 However, in view of the lack ofany power of the Codex Alimentarius Commission or the WTO toharmonize health protection standards with binding legal force, thisapproach is doubtful. Article 3 of the SPS Agreement does notcontain an obligation for the participating states to have food quality standards which are identical to those recommended by international commissions or organizations. Hence such international nonbinding standards can only be taken as one source or persuasiveauthority to exclude higher protection standards, but not as the finalsay as made clear by article 3.3 SPS Agreement.C. SummarySummarizing the comparison of the basic frameworks it is obviousthat EC law on free movement of goods and the WTO frameworkon trade in goods are legally and politically distinctly different.Concerning the legal nature, elementary differences show up. Nevertheless, in terms of interstate trade theory, both EC law and theWTO framework draw from the same schools of thought.III. The Basic Legal Requirementof the Free Movement of GoodsTurning to the set of questions whether the approach of WTO rulesdiffers from that of EC law in dealing with the problem of solvingconflicts between the requirements of the free movement of goodsand the protection of non-economic interests, the first aspect to becompared is the normative basis and content of the requirement ofthe free movement of goods.A. EC LawConcerning the basis of prohibitions of trade barriers stemmingfrom the national pursuit of non-economic interests in EC law, it iswell known that article 28 TEC prohibits quantitative restrictions onimports and all measures having equivalent effect without distinguishing, in principle, between the purpose of such a measure22 or
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Ibidem, para. 8.75 and 8.76.See, e.g., Müller-Graff (2003a), Art. 28 EG, para. 55.
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between discriminatory and non-discriminatory measures.23 This isrooted in the famous broad Dassonville-definition – given by theEuropean Court of Justice – of measures having equivalent effect asany measure which is capable of directly or indirectly, actually orpotentially, hindering trade between Member States.24 As a consequence, the prohibition covers measures having a protectionist purpose as well as, in principle, those without such a purpose.25 This isnot unreasonable, as indistinctly applicable general rules for noneconomic purposes have fairly often been discovered as being disguised protectionist measures.26On the other hand, it is also obvious that indistinctly applicablerules very often serve to protect non-economic national interestseven beyond those embodied in the exception clause of article 30TEC, where the founders listed: public morality, public policy andpublic security; the protection of health and life of humans, animalsor plants; the protection of national treasures possessing artistic,historic or archaeological value and the protection of industrial andcommercial property. Hence within the scope of the prohibition ofarticle 28 TEC, the question arises as to how a line could be drawnbetween rules which aim at establishing or which generate illegitimate protectionism on the one side and the pursuit of legitimatenon-economic interests on the other. The famous, but in its delineating value doubtful Keck-restriction27 of the Dassonville-formuladoes not aim at this distinction, but has been created for solving adifferent problem: namely drawing a borderline between cases ofinterference of national measures with the border-crossing freedomof market access and cases of interference with general economicfreedom.28 In contrast the so-called Cassis-jurisprudence29 of the23242526272829
See, e.g., Epiney (2002), Art. 28, para. 14, et seq.; ECJ, case 178/84,Commission v Germany [1978] ECR 1262.ECJ, case 8/74, Dassonville [1974] ECR 837.See, e.g., ECJ, case 178/84, Commission v Germany [1987] ECR1262.See e.g., Müller-Graff (2003a), Art. 28 EG, para. 211.ECJ, case C-267/91 and C-268/91, Keck and Mithouard [1993] ECRI-6097.See, e.g., Müller-Graff (2003a), Art. 28 EG, para. 237 et seq.ECJ, case 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung fürBranntwein [1979] ECR 649.
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European Court of Justice began to restrict the scope of the prohibition in relation to those indistinctly applicable measures which arefound to be necessary to fulfil so called non-economic mandatoryrequirements such as environmental protection,30 fair trade,31 consumer protection,32 efficient tax control33 and numerous other requirements.34 Since it quickly turned out that, notwithstanding twospecific features, the legal conditions for such a restriction of theprohibition parallel the basic pattern of the criteria of justificationinherent in the explicit exception clause of article 30 TEC, they willbe later discussed in conjunction with them.B. WTO LawTurning to WTO law, the basis for a prohibition of trade-barriersstemming from indistinctly applicable national rules does not seemto be as clear as in EC law. As a result of a less concise and moreabstract wording than in the EC Treaty, several provisions can betaken into consideration, in particular articles XI and III of theGATT.351. Article XI GATT bars any prohibition or restriction, be it inthe form of: quantitative restrictions, import or export licences,or of ‘other measures’. From the outset, the term ‘other measures’ could well be conceived as including any measure capable of hindering trade36 in the sense of the Dassonville-formula. Alternatively, in view of the explicit emphasis on quantitative restrictions and import or export license requirements,the wording of article XI could also be restricted to specificrules on border-crossing trade, thereby excluding all those
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See, e.g., ECJ, case 302/86, Commission v Denmark [1988] ECR4630, para. 8; Müller-Graff (2003b), 273.See, e.g., ECJ, case C-30/99, Commission v Ireland [2001] ECR I4660, para. 29.See, e.g., ECJ, case C-239/90, Boscher [1991] ECR I-2039, para. 17;case C-390/99 [2002] ECR I-607, para. 34.See, e.g., ECJ, case 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649.See as an overview Müller-Graff (2003a), Art. 28 EG, para. 225.See for the dispute on the scope of application of these provisions,e.g., Weiß / Herrmann (2003), 185 para. 470 et seqq.In this direction Weiß / Herrmann (2003), 184 para. 465.
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measures which pursue non-economic interests.37 If not, anoverlap with article III GATT is inherent.38Article III GATT in several paragraphs requires national treatment of imported goods in internal taxation and regulation.Par. 1 stipulates that internal taxes and other internal charges,laws, regulations and requirements affecting the internal sale,offering for sale, purchase, transportation, distribution or useof products and internal quantitative regulations requiring themixture, processing or use of products in specified amounts orprohibitions, shall not be applied so as to afford protection ofdomestic goods. In comparison, par. 4 concentrates on therules themselves. It states that imported products shall be accorded treatment no less favourable than that accorded to likeproducts of national origin in respect of all laws, regulationsand requirements affecting their internal sale etc. It is evidentthat rules on sale, offering, purchase, transportation, distribution or use can root in economic as well as in non-economicinterests. Hence the question arises as to whether par. 4 can beunderstood as prohibiting national rules, which restrict marketaccess independent from their purpose and also independentfrom explicit discrimination, or whether par. 4 is restricted toopen protectionist measures. In view of the overall objective ofthe GATT to reduce trade barriers to tariffs, only an interpretation either of Article III:4 GATT or of Article XI GATTwould be consequent, which includes any national measure capable to restrict the market access of goods from anothercountry in the sense of the Dassonville-formula.Some elements in the application of Article III:4 GATTpoint in this direction. In 1989 in the case dealing with USsection 337, article III:4 GATT was held to require effectiveequality of opportunities for imported products and, thus, canbe violated if national law – even though neutral on the outset
As examples see, e.g., Senti (2000), para. 534, 549.For a distinction between article III GATT as a prohibition ofdiscriminating measures concerning the product itself and its marketing on the one side and article XI GATT as a prohibition of restrictions concerning process and production methods on the otherWeiß / Herrmann (2003), 187 para. 475.
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– puts illegitimate burdens on imported products.39 In the Korean Beef Case, the question arose as to whether a so-calleddual-retail system – in which imported and domestic beefproducts had to be sold in separate shops – constituted a violation of the national treatment principle.40 Contrary to the viewof the Korean government, the formal differentiation on thebasis of the origin of beef itself was a distinguishing treatmentas the Panel convincingly recognised.41 In EC law this would,in principle, suffice to brand such a rule as a measure havingan equivalent effect, since it would be assumed that the resultof a split of distribution in an EC Member State would usuallyforce retailers to make a choice between domestic and imported products at the disadvantage of the latter, although inany given case this should be dependent upon the country andthe type of product. The Appellate Body gave a more refinedreasoning when maintaining that a formal discrimination isneither necessary nor sufficient to constitute a violation of article III:4 GATT and emphasized as the decisive aspect the impact of a rule on competition.42 It can be drawn from this thatarticle III:4 GATT is violated if the national measure modifiesthe conditions of competitors between domestic and importedproducts to the detriment of the latter. In its core, this reasoning is not far from the Dassonville-criterion of a trade-hindering effect, because impediments to trade can obviously flowfrom disadvantageously distorted conditions of competitioncaused by national rules. In the Korean Beef Case, this distortion was clearly shown by the fact that the split system of distribution led to a considerable reduction in the number of outlets for imported beef.43Substantial differences to the Dassonville-formula canemerge from a protectionist ‘aims or effect” criterion which
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Panel Report, United States – Section 337 of the Tariff Act of 1930,L/6439-36S/345, para. 5.11.Panel Report, Korea – Measures affecting imports of fresh, chilledand frozen beef, WT/DS161/R, para. 488 et seq.Ibidem, para. 504.Appelate Body Report, Korea – Measures affecting imports of fresh,chilled and frozen beef, WT/DS161/AB/R, para. 137.Ibidem, para. 145.
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arises from an interpretation of article III:2 and III:4 GATT inthe light of article III:1 GATT,44 in short, from the inclusion ofthe principle that the application of national rules on importedgoods should not lead to the protection of similar domesticgoods. The specific question of whether the protectionist criterion of article III:1 GATT can be generalised beyond the scopeof article III:2 GATT, second sentence, at all, has not to be discussed here. But it has to be emphasized that the criterion ofprotectionism has its flaws. It has never been taken up as a limiting criterion in article 28 TEC45 and has even been factuallyabandoned by the European Court in favour of a competitionoriented approach in the interpretation of article 90 para. 2TEC despite46 its explicit inclusion in this provision. The flawsstem from the risk created by the word ‘protectionist” whichenables to mix objectives and effects and even the criterion of‘similar” products and, as a result, excludes any predictability.The ‘protectionist aims or effects” approach led the Panel inthe US-Automobile-Tax-Case to the conclusion that the zerotax-rate on domestic light trucks with low fuel economy didnot violate article III:2 GATT, although imported automobileswith the same fuel economy were subjected to a high tax rate.47A protectionist aim was not found and a protectionist effectwas denied because of lack of similarity of light trucks andregular automobiles.48 It is doubtful whether under EC law theapplicability of article 90 TEC could be denied by the Court ofJustice in such a case. First, the objective of a measure is notdecisive for defining a trade restriction. Second, the similaritycriterion has sharpened in favour of the competition-orientatedcriterion of whether a product is a substitute to the product
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Panel Report, United States – Measures affecting alcoholic and maltbeverages, DS23/R, para. 5.25; Panel Report, United States – Taxeson automobiles, DS31/R, para. 5.7.Due to the broad concept of capability of measure to hinder trade aslaid down in the Dassonville-formula.See ECJ, case 168/78, Commission v France [1980] ECR 347, para.6.See supra note 44, para. 5.35, 5.36 and 5.37.Ibidem, para. 5.35.
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from the viewpoint of the buyer.49 In this aspect, the Court ofJustice follows a broad concept of potential competition asshown, for example, in cases concerning different taxation oflow-powered cars and high-powered cars in France50 or of beerand wine in Britain.51 In view of the purpose of article III:4GATT and in the interest of a clear doctrinal approach, it ispreferable to abandon the test of protectionist aims or effectson like products as done by the Panel in the case of Japanesetaxes on alcoholic beverages.52On the assumption that either article III:4 GATT or article XIGATT or both seen together can be understood in the sense ofthe Dassonville-formula,53 the Cassis-question54 could alsoarise, i.e. the question whether an immanent restriction of theprohibition in the case of the legitimate pursuit of mandatorynon-economic requirements is necessary. However, such a necessity is limited since article XX GATT offers a broad arrayof non-economic reasons for justifying trade barriers. It can beadded that the development of the Cassis-restriction was not anecessity either, but an escape from the strict interpretationgiven to the GATT-inspired article 30 TEC exception-clauseby the Court of Justice.55 Be it as it is, the aspect of avoidingthe prime labelling of a national measure adapted for non-economic purposes as being incompatible with the law (notwithstanding a justification), seems to be a common concern bothon the European level and on the world trade level. It somehow
See, e.g., supra note 46, para. 5: Interpretation of the concept of‘similar products’ with ‘sufficient flexibility’ including meeting ‘thesame needs from the point of view of consumers’ and ‘comparableuse’.See ECJ, case 112/84, Humblot v Directeur des Services Fiscaux[1985] ECR 1367.See ECJ, case 170/78, Commission v United Kingdom [1983] ECR2265.Panel Report, Japan – Taxes on alcoholic beverages, WT/DS8/R,para. 6.16, 6.17 and 6.18.See supra note 24.See supra note 29.See Müller-Graff (2003a), Art. 28 EG, para. 184; Art. 30 EG, para.28.
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resembles the uneasiness of doctors with tort law in Germany,which is interpreted by courts in the way that any vaccinationby a needle or any surgery constitutes a tort (violation ofphysical integrity),56 although it is justified when applied forhealing purposes with the consent of the patient and in compliance with the state of art in medical practice. After the Panelreport in the case of Japanese taxes on alcoholic beverages57(in which the protectionist test was set aside58), some environmentalists feared that reasonable taxes and regulations for theprotection of the environment could be assessed as violatingarticle III GATT, e.g., by stating that a non-refillable containeris a like product to a refillable container, or a biodegradablepackage is a like product to a non-biodegradable package. Thequestion of restricting the prohibition in cases of the legitimatepursuit of non-economic interests seems to be treated sometimes in a disguised form under article III:4 GATT, namelyunder the heading of the likeness or similarity criterion. In theAsbestos Case59 the question arose as to whether a completeban on the manufacture and the sale of asbestos-based fibres(for the purpose of protecting the health of workers and consumers) violated article III:4 GATT insofar as non-asbestosbased fibres remained admitted on the French market.60 Underarticle 28 TEC, such a ban could loose its character as a traderestriction if it fulfilled the mandatory requirement of publichealth protection (as long as this is part of the Cassis-jurisprudence, which is doubtful in view of the system of article 30TEC61). In the Asbestos Case this question took the formwhether asbestos fibres and non-asbestos fibres were like56575859
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§ 823 para. 1 BGB.Panel Report, Japan – Taxes on alcoholic beverages, WT/DS8/R.