CHAPTER 17 INTERPRETATION AND APPLICATION OF EXISTINGWTO RULES

1. INTRODUCTION

In Part II of last year’s report, we included a chapter on “Improving WTO Dispute

Settlement Procedures” in which we examined the agenda for improving the WTO dispute

settlement mechanism. The work of reviewing dispute settlement procedures is now moving

forward at the WTO as called for in the “Decision on the Application and Review of the

Understanding on Rules and Procedures Governing the Settlement of Disputes” that was

adopted in Marrakesh in April 1994. The initial “end of 1998” target for completion has been

exceeded, but WTO Members continue to study the issues involved, and there are still many

issues that are as yet unresolved, including many of the problems we discussed in last year’s

report.

In light of this, our report this year turns the spotlight away from the procedural aspects

of disputes settlement at the WTO in favour of questions of substantive law. Our intention is to

study the cases that have actually come before panels and the Appellate Body and to elucidate

problems in existing rules. It goes without saying that the inadequacies or lacunae in the actual

text of the current WTO rules are an almost daily topic in the discussions of relevant WTO

bodies and committees. They will also be debated in various forms in the next round of

multilateral trade negotiations scheduled to begin in 2000.

Given the basic position that this report has taken of “emphasizing internationally

agreed-upon rules as an objective method for the resolution of trade disputes,” we will

obviously avoid attempts to legislate solutions favouring one side or the other on points which

WTO Members disagree. We also note that it is the Ministerial Conference and the General

Council who have exclusive authority to interpret the WTO Agreement (Agreement

Establishing the World Trade Organization, Article IX:2).

Still, no one would maintain that the current rules are perfect. In our view, there is

some value in showing how, in ruling on individual disputes, panels and the Appellate Body

are often caught between rigid rules on the one hand and the goal of providing an adequate

solution to the case in question on the other. This exercise will, at any rate, illustrate the

realities of the multilateral trading system. In this chapter, we extract some points that have

appeared in panel and the Appellate Body reports that we consider particularly important. This

is by no means, however, a comprehensive study.

2. DEFINITION OF “LIKE PRODUCTS” IN GATT ARTICLE III

(1) Content of Rules (See Chapter 2)

GATT Article III:1 provides:

“The Members 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.”

Paragraph 2 continues:

“The products of the territory of any Member imported into the territory of any other Member

shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind

in excess of those applied, directly or indirectly, to like domestic products. Moreover, no

Member shall otherwise apply internal taxes or other internal charges to imported or domestic

products in a manner contrary to the principles set forth in paragraph 1.”

Annex I to the GATT provides the following interpretative note ad GATT Article III:2:

“A tax conforming to the requirements of the first sentence of paragraph 2 would be

considered to be inconsistent with the provisions of the second sentence only in cases where

competition was involved between, on the one hand, the taxed product and, on the other hand,

a directly competitive or substitutable product which was not similarly taxed.”

(2) The Japan Alcoholic Beverages Case

The interpretation of these provisions was at issue in the Japan Alcoholic Beverages

panel.1 The panel reached the following conclusions in this case: 1) that shochu and vodka

were “like products” and Japan, by taxing the latter in excess of the former was in violation of

its obligation under the first sentence of GATT Article III:2; 2) that shochu, whisky, brandy,

rum, gin, genever, and liqueurs were “directly competitive or substitutable products” and

Japan, by not taxing them similarly, was in violation of its obligations under the second

sentence of GATT Article III:2.

Japan was dissatisfied with this ruling and appealed, and the Appellate Body found the

following “errors” in the panel report and reversed the panel’s findings;

(i) The panel erred in law in its conclusion that “panel reports adopted by the GATT

CONTRACTING PARTIES and the WTO Dispute Settlement Body constitute

subsequent practice in a specific case by virtue of the decision to adopt them.”;

(ii) The panel erred in law in failing to take into account Article III:1 in interpreting Article

III:2, first and second sentences;

(iii) The panel erred in law in limiting its conclusions on “directly competitive or

substitutable products” to “shochu, whisky, brandy, rum gin, genever and liqueurs.”; and

(iv) The panel erred in law in failing to examine “so as to afford protection” in Article III:1

as a separate inquiry from “not similarly taxed” in the Ad Article to Article III:2, second

1 Japan - Taxes on Alcoholic Beverages, Complaints by the European Communities, Canada, and the UnitedStates, (WT/DS8, DS10, DS11), Appellate Body and panel reports adopted on 1 November 1996.

sentence.

In spite of these “errors”, however, the Appellate Body upheld the general conclusions

of the panel report and recommended that Japan bring the measures into compliance with its

obligation under the GATT.

Nonetheless, the Appellate Body’s conclusions supported the basic findings in the panel

report. Its reversal affected comparatively trivial points.

(3) Panel Precedents

The taxation of alcoholic beverages has been the subject of many GATT panels in the

past. No sooner had this report been issued than the WTO also saw complaints brought before

panels on alcoholic beverage taxation in Korea and Chile. This provides an indication that the

issues involved are not as simple as may first appear.

The most significant development to come out of the case was a rejection of the “aims

and effects test” for like products under GATT Article III. As can be seen from the wording

quoted above, the essence of GATT Article III is to ensure that imported products that have

cleared the customs and entered domestic markets are not given disadvantageous treatment in

relation to like domestic products. This is the concept of “national treatment,” which together

with the principle of most-favoured-nation treatment in GATT Article I forms the chief pillars

of the GATT/WTO doctrine of non-discrimination.

For example, if a country had a system in which domestically-produced good A was

taxed at 5 percent but a “like” foreign-produced good A was taxed at 10 percent, this would be

a clear violation of GATT Article III:2. However, it is rare for WTO Members to have such

blatantly discriminatory measures. In many cases, discrimination exists not on a de jure basis

but on a de facto basis. In other words, a system that appears to be origin-neutral is

administered in a discriminatory fashion.

Returning to alcoholic beverage taxation in Japan, one could argue that “there is

domestic and imported shochu just as there is domestic and imported vodka. Imported shochu

is subject to the same low tax rate as domestic shochu and domestic vodka is subject to the

same high tax rate as imported vodka so there is no discrimination,” but this would be rebutted

by appealing to the “national treatment” doctrine to claim that “shochu and vodka are like

products and the difference in taxation is a de facto discrimination against foreign goods.”

Certainly, one must make provisions for the application of GATT Article III even to

systems that appear to be origin-neutral, or regulators would have far too much room for

discretion, which might render the tight disciplines under the GATT meaningless. Broad

interpretation of the scope of application for Article III is therefore appropriate. The decisive

factor, however, will be the significance of “like products.”

The traditional method used to interpret GATT Article III is the “two-step approach.” In

the case of Article III:2, this involves objectively verifying whether the products are “like” by

considering such factors as their physical properties, the purposes for which they are used, and

the tastes of consumers (step one), and if they are found to be “like,” then determining if the

taxes levied against imports are in excess of the taxes on domestic products (step two).

One could, however, criticize this method as being too mechanical. For example, let us

assume that a country has passed a law exempting recyclable food containers from an excise

tax for the purpose of protecting natural resources. Let us further assume that there are both

domestic and imported recyclable and non-recyclable food containers. Under the “two-step

approach,” one would easily find that the containers were “like products.” One would then go

on to consider taxation, where one would find that the tax on imported non-recyclable food

containers was higher than the tax on domestic recyclable food containers. It would not be

unreasonable, critics maintain, to then find a violation of Article III.

Proponents of the system might respond, “Who cares? GATT Article XX excepts

measures taken for the protection of exhaustible natural resources from the general principles,

so there is no problem.” But Article XX does not provide a comprehensive list of all social

policy objectives, and there were objections from the beginning that there was a danger that

the existence of exceptions would provide a wedge by which to argue for different

interpretations.

An awareness of these issues led to attempts by GATT panels to depart from the simple

“two-step approach” in the early nineties. The first example was the United States Malt

Beverages case.2 The panel for the case found that the setting of different tax rates according

to the alcoholic content of beer was not in violation of the GATT. The panel in this case

concluded that the differentiation of beer into low alcohol and high alcohol beer did not have

the “aim or effect” of protecting domestic production. The ideas first propounded in the Malt

Beverages cases were further refined and perfected into the “aims and effects test” in the

United States Auto Tax case of 1994 (see Chapter 10 under “Regulation on Corporate Average

Fuel Economy”). The panel clearly departed from the two-step approach, using the wording

“so as to afford protection” in Article III:1 as rationale for arguing that the finding of “like

products” should be based on an analyses of the aims and effects of the measure in question. It

then applied this theory to conclude that a luxury tax on automobiles priced in excess of

$30,000 was not protection of domestic production. Rather, automobiles priced over $30,000

were not “like products” with automobiles priced below that threshold.

The theoretical constructs in the report were welcomed by the respondent, the United

States (even though it lost a part of the suit), but were not accepted by the complainant, the EU.

The report was ultimately not adopted by the GATT Council.

(4) The Significance of This Case

As can be seen from the discussion above, at the time the Japan Alcoholic Beverages

2 United States - Measures Affecting Alcoholic and Malt Beverages, Complaint by Canada, adopted on 19 June1992, BISD 392/206

case was brought before the WTO in 1995, panel precedents had been fluid. The case was

closely watched to see whether the WTO would further develop the “aims and effects test” to

establish it as a precedent in the new automated procedures or would return to the traditional

“two-step approach.” In arguing the case, Japan took the “aims and effects” position, claiming

that the Liquor Tax Law had neither the aim nor the effect of protecting domestic industry.

Shochu and other distilled alcoholic beverages were neither like products nor directly

competitive products, and there was therefore no violation of GATT Article III:2. The EU

argued from the “two-step” position, maintaining that shochu and other distilled alcoholic

beverages were like products (as an alternative argument, it also claimed that they were

directly competitive) and that different tax rates were contrary to the first sentence of GATT

Article III:2 (or alternatively to the second sentence). Canada took the same position as the EC

and argued that the tax violated GATT Article III:2. Unlike the other complainants, the United

States argued from the “aims and effects” position, but claimed that the Japanese Liquor Tax

Law had both the aim and the effect of protecting domestic industry and that it essentially

changed the competitive conditions between shochu and other alcoholic beverages, which

constituted a violation of GATT Article III:2. The panel’s conclusions are described above. In

the process of arriving at the conclusions, however, it should be noted that the panel explicitly

rejected the “aims and effects test” and elected instead for a theoretical construct based on the

“two-step approach.” The panel said that it did not find the “aims and effects test” appropriate

for the following reasons. 1) It departed from the wording of GATT Article III and was

inconsistent with the general interpretative principles for international law established in

Article 31(1) of the Vienna Convention, which 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 the light of its object and purpose.” 2) The list of exceptions contained in

Article XX of the GATT could become redundant or useless because the “aims and effects

test” does not contain a definitive list of grounds justifying departure from the obligations that

are otherwise incorporated in Article III.

The Appellate Body upheld the structure of this panel report. Its differences with the

panel were that it thought there should be a separate consideration of the “so as to afford

protection” requirement in the second sentence of GATT Article III:2. In this limited sense,

one could argue that the Appellate Body allowed the examination of “aims” of the regulatory

regime at issue. Like the panel, however, it generally rejected the “aims and effects test.”

The case more or less established an interpretation for GATT Article III:2 in the WTO

disputes-settlement procedures. Both the panel and the Appellate Body rejected the

teleological interpretation and emphasized interpretation of the original text. Despite Japan’s

defeat in the case, we understand that the panel and the Appellate Body had to avoid the

impression of excessive judicial activism in a nascent period of the new WTO dispute

settlement mechanism. The purpose of the panel and the Appellate Body are not to make law

but to provide appropriate interpretations for specific cases, and we applaud them for their

prudence and caution.

On the other hand, the “two-step approach” does not necessarily provide predictable

conclusions, and one could argue that it provides too much room for arbitrary decisions. If the

panel or Appellate Body intuitively feels there to be “discrimination” in a particular measure,

they will find the products in question “like” or “directly competitive,” if not, they will not.

(Instructive in this regard is the comment in the Appellate Body report on the case that the

scope of like products should stretch and squeeze, evoking “the image of an accordion”

depending on the issues before the panel.) We must also note that the finding in this case does

not directly address the issues that led to the emergence of the “aims and effects test” in the

first place--the limits to the scope of general exceptions under GATT Article XX. Some

commentators therefore expect that the “aims and effects test” will be resurrected in some

form sooner or later.3 Regardless, this case has not provided a complete resolution to the

problem. One will have to wait and see how the panel and Appellate Body rule in similar cases,

such as the Korean and Chilean alcohol taxation cases already in progress.

We would note as a postscript that in the Bananas case, the Appellate Body clearly

specified that the “two-step approach” should be applied rather than the “aims and effects test”

in cases brought under GATT Article III:4 involving national treatment under non-tax

regulation.

3. INTERPRETATION OF THE CHAPEAU OF GATT ARTICLE XX

(1) Content of the Rules

The introductory paragraph (also known as “chapeau”) to GATT Article XX erects limits

to the scope of general exceptions. It provides: “Subject to the requirement that such

measures are not applied in a manner which would constitute a means of arbitrary or

unjustifiable discrimination between countries where the same conditions prevail, or a

disguised restriction on international trade, nothing in this Agreement shall be construed to

prevent the adoption or enforcement by any Member of measures” [identified in

subparagraphs (a) through (j)].

Among the exceptions listed in this article, the one that has most commonly sparked

WTO panels has been subparagraph (g): “relating to the conservation of exhaustible natural

resources if such measures are made effective in conjunction with restrictions on domestic

production or consumption.” There have also been cases in which the disputing parties brought

complaints under subparagraph (b) (“necessary to protect human, animal or plant life or

health”) and subparagraph (d) (“necessary to secure compliance with laws or regulations

which are not inconsistent with the provisions of this Agreement”), but these have not been

3 Hudec, Robert E., “GATT/WTO Constraints on National Regulation: Requiem for an 'Aim and Effects' Test,”The International Lawyer, Fall 1998, Vol. 32, No. 3.

major points of dispute in the cases under the WTO and the Appellate Body has not yet ruled

on them, so we will omit them from our analysis here.

(2) The Gasoline Case

The first ruling by a WTO panel on GATT Article XX(g) was the United States Gasoline

case.4 The panel found that regulations on the cleanliness of gasoline under the US Clean Air

Act were for the conservation of exhaustible natural resources, but it followed the precedent

set by earlier GATT panels in interpreting measures “relating to the conservation of

exhaustible natural resources” in the narrow sense of “primarily aimed at conservation” and

therefore rejected US claims that regulations were consistent with GATT Article XX(g).

Dissatisfied with this panel report, the United States appealed to the Appellate Body. The

Appellate Body, citing Article 31 of the Vienna Convention on the Law of Treaties found the

panel report to be in error because of differences in wording between subparagraph (b) and

subparagraph (g), and therefore concluded that the US regulations were within the scope of

GATT Article XX(g).

The Appellate Body then went on to consider whether the regulations fulfilled the

requirements set forth in the chapeau of GATT Article XX. Here the Appellate Body found

that the United States could have resorted to less discriminatory methods to achieve the

purposes of the Clean Air Act. It therefore ruled that the gasoline regulations constituted a

“means of unjustifiable discrimination,” which was also a “disguised restriction on

international trade” and not justified under GATT Article XX.

The methods by which the Appellate Body reached its conclusions differ somewhat from

GATT precedent. It relaxed the standards by which it determined consistency with

subparagraph (g), in effect pulling back its line of defence, but then applied rigorous standards

to judge compliance with the chapeau. Like the interpretation of GATT Article III:2 discussed

above, this methodology is a manifestation of the Appellate Body’s emphasis on the textual

interpretation of the agreements.

(3) The Shrimp Case

Interpretation of GATT Article XX(g) was also an issue in the United States Shrimp

case.5 In this case, the aim of the US legislation was to protect sea turtles by prohibiting

importation of shrimp and shrimp products from countries from which it could not obtain a

certificate of obligations to harvest wild shrimp with nets equipped with turtle excluder

devices (TED) comparable to the obligations placed on domestic US shrimp fishers (see

4United States - Standards for Reformulated and Conventional Gasoline, Complaints by Venezuela and Brazil(WT/DS2, DS4), Appellate Body and panel reports adopted on 20 May 1996.5 United States - Import Prohibition of Certain Shrimp and Shrimp Products, Complaints by India, Malaysia,Pakistan, and Thailand (WT/DS58), Appellate Body and panel reports adopted on 6 November 1998.

Chapter 3 for a fuller discussion). The United States did not contest the claim that this measure

was in contravention of GATT Article XI, so the focus of the dispute moved to whether the

measure was justified under GATT Article XX.

The panel took the methodology used by the Appellate Body in the Gasoline case a step

further by not making any judgement about whether the US import ban was justified under

GATT Article XX(b) or (g), and instead looking only at its compliance to the chapeau of

Article XX. The panel concluded that the US measures constituted a “means of unjustifiable

discrimination” that was not justified under GATT Article XX. Its rationale for this was that it

would impair the stability and predictability of the multilateral trading system were WTO

Members to make the importation of goods conditional upon the adoption of specific policies

by exporting countries. The Appellate Body overturned the panel’s reasoning on this point,

ruling that when examining Article XX there must first be a consideration of the applicability

of the individual exceptions. The Appellate Body’s ruling was similar to that in the Gasoline

case in that it found the “sea turtle” to be an “exhaustible natural resource” and affirmed that

the US import ban was “relating to the conservation.” Having done so, it went on to do a

detailed analysis of the content of the US measure and found “unjustifiable discrimination”

because even in countries that had failed to provide the certificate required, there could be

individual concerns that did use TEDs in harvesting shrimp, but importation of their shrimp

would still be prohibited. The Appellate Body also found the way in which countries were

identified for the import ban to be “arbitrary,” and for that reason as well rejected the Article

XX defense.

(4) The Significance of These Cases

The Gasoline and Shrimp cases together established a judgement methodology for the

Appellate Body in cases disputed on grounds of GATT Article XX.

Traditionally, GATT panels have taken the position that GATT Article XX constitutes

permission to depart from free trade principles and therefore all exceptions should be subject

to rigorous judgement. As a result, they have shown a pronounced reluctance to permit

justification under Article XX. Were it easy to justify protectionist trade measures under

Article XX, it could undermine the entire basis for the multilateral free trading system. This is

a threat that was noted in the panel report for the Shrimp case and also in the panel report for

an earlier Tuna (II) case (unadopted, see Chapter 3). As a general principle, we welcome the

caution and prudence that panels have exercised in this regard. However, GATT Article XX is

often discussed in the context of “trade and environment,” and if one takes the position that

there is a conflict of values between environmental conservation and free trade, then the

posture adopted by the panels could be criticized as being too “profit oriented” and indeed

potentially destructive to the environment. Those who emphasize a dialogue between the

WTO and civil society, might conclude that the WTO would do well to pay such criticisms

more heed, and therefore that GATT Article XX should be restudied from a more neutral

standpoint (more specifically, in a form that more closely emphasizes the wording of the

agreement). Indeed, it would not be at all strange to see pressure for this mounted in the future.

Nor is it difficult to imagine that such considerations formed the backdrop for the Appellate

Body’s ruling. If this methodology is able to bring more flexibility to the interpretation of

GATT Article XX, then there may be reason to also expect a lessening (if only partial) of the

rigidity of the “two-step approach” to GATT Article III discussed in the preceding section. On

the other hand, any relaxation of the conditions for justification under GATT Article XX still

carries the potential to undermine the stability and predictability of the multilateral free trading

system. It might be possible to argue that in point of fact there is no reason to fear this because

the Appellate Body has only relaxed the conditions to be met for falling under measures listed

in Article XX (and really, only subparagraph (g)), and if anything has brought new strictness

to the interpretation of the chapeau. If that is the case, then the Appellate Body has effectively

equipped itself with a general condition that can be expanded or contracted as necessary to

arrive at a reasonable conclusion for the case in question, a “second accordion” as it were. This

could threaten the stability and predictability of the multilateral free trading system in a

different sense.

One can only hope that the accumulation of precedent will bring more clarity to the

interpretation of GATT Article XX.

4. RELATIONSHIP OF GATT 1994 TO OTHER AGREEMENTS ON GOODS

(1) Content of Rules

It is well known that the WTO Agreement (including its Annexes) is a compilation of

legal documents agreed upon in the Uruguay Round negotiations. The decision to implement

the results of negotiations as a “single undertaking” had already been made by the Punta Del

Este Declaration of September 1986 that marked the launching of the round. The actual

negotiations, however, were conducted by individual negotiating groups (initially fifteen, but

later integrated into seven), so it was impossible to achieve full consistency among the

individual agreements during the negotiation period. This was not particularly problematic for

the TRIPS and GATS, which were new treaties that started from zero, but problems were

identified during the negotiations for agreements on goods, which were negotiated based on

the existing GATT and the Tokyo Round agreements. At the final stage of negotiation, a “legal

drafting group” was organized to provide a minimum of consistency in terminology, but time

constraints did not make it possible to rewrite the existing GATT into a form consistent with

the WTO Agreement. Because of this, the Multilateral Agreements on Trade in Goods (Annex

1A) are prefaced with a “General Interpretative Note to Annex 1A,” which reads: “In the event

of conflict between a provision of the [GATT] and a provision of another agreement in Annex

1A to the …WTO Agreement…, the provision of the other agreement shall prevail to the

extent of the conflict.”

Theoretically, the agreement should be a “single undertaking,” and the above-mentioned

rules of conflict should guarantee a coherent interpretation of differing rules in different

agreements contained in Annex 1A. In reality, however, the application of the conflict rules

is extremely difficult, a point we would like to underscore in this section.

(2) The Coconut Case

The relative priority of individual agreements on trade in goods was contested in an

abstract form in the WTO’s first panel, the Gasoline case, as a question of the relative priority

of GATT Article III versus the TBT Agreement. The Coconut case6 brought this problem into

even sharper relief.

The case occurred when the government of Brazil imposed countervailing duties on

subsidies paid by the government of the Philippines for the production of desiccated coconut.

The Philippines requested the establishment of a panel, arguing violations of GATT Article I,

Article II, Article VI:3 and 6(a), and the Agreement on Agriculture Article XIII (consultations

requested in November 1995, panel established in March 1996). Brazil responded by citing

Article 32.3 of the WTO Subsidies Agreement, which states, “... the provisions of this

Agreement shall apply to investigations and reviews of existing measures, initiated pursuant to

applications which have been made on or after the date of entry into force for a Member of the

WTO Agreement.” The application for investigation of the case was made in January 1994,

which was prior to the entry into force of the WTO Agreement, and therefore only the Tokyo

Round Subsidies Code was applicable. It then submitted a preliminary objection that the

Philippines application was illegal on this specific point.

We will omit the details of the case but note that both the panel and the Appellate Body

accepted the “preliminary objection” made by Brazil and found that the Philippines could not

claim violations only of the GATT because GATT Article VI and the Subsidies Agreement

were inseparable.

This was a rather peculiar case, but it is worth noting that the panel and Appellate Body

were able to set forth a relationship between GATT Article VI and the Subsidies Agreement

without needing to undertake any detailed analysis of the problem of conflicting rules only

because there was a clear intertemporal provision included in the Subsidies Agreement. A

major factor in this was also the fact that the case occurred at a rather unique time, the period

directly following the entry into force of the WTO in which, as a transition measure, GATT

1947, the Tokyo Round Agreements, and the WTO Agreement all were in force side by side. It

is highly unlikely that a similar case will be seen in the future.

Nonetheless, this case is significant for highlighting the locus of problems inherent in the

interpretation of agreements on trade in goods at a very early stage after the WTO disputes-

6 Brazil - Measures affecting Desiccated Coconut (WT/DS22), Appellate Body and panel reports adopted on 20March 1997

settlement procedures took effect.

(3) The Indonesia Auto case

The relative priorities of the GATT and the Subsidies Agreement were also a point of

contention in the Indonesia Auto case (see Chapter 2). The main argument made in the panel

by the respondent Indonesia, was that the Subsidies Agreement was in the position of a lex

specialis vis-à-vis the GATT, and that the provisions of the Subsidies Agreement apply to the

extent of any conflict, so the developing country exceptions in that Agreement justify

favourable treatment for Indonesia’s “national car.” The panel report rejected the notion that

there was a conflict between the GATT and the Subsidies Agreement in this case and found

violations of the GATT in both national treatment and most-favoured-nation status.

(4) Evaluation of the cases

We consider the conclusions to both cases to be appropriate, but we do note that in the

Coconut case the panel and Appellate Body emphasized the “single undertaking” aspect of the

entire WTO Agreement to reach the conclusion that the Subsidies Agreement prevailed over

the GATT (obviously in this case there was no judgement on the merits of the case, so there

was no decision made on relative priority in substantive law terms), while in the Indonesia

Auto case, the panel and Appellate Body essentially studied the alleged conflicts between the

two, found there to be none, and concluded that obligations were cumulative.

There is not necessarily any logical conflict between the two cases, but one might well

anticipate that there will come a time when there is an issue of the relative priority of the

GATT and the agreements on trade in goods that forces a panel or the Appellate Body to

render a clear interpretation regarding the general interpretation of Annex 1A agreements.