RESTRICTED
PREPARATORY COMMITTEE PC/IPL/W/7
FOR THE 23September 1994
WORLD TRADE ORGANIZATION
(94-1931)
Original: English SUB-COMMITTEE ONINSTITUTIONAL ,
PROCEDURAL AND LEGAL MATTERS
TRANSITIONAL ARRANGEMENTS
Communication from Hong Kong
Thefollowingcommunication,dated22September1994,hasbeenreceivedfromtheHongKong
Economic andTrade Office inGeneva.
________
Introduction
1. Aspartofthepreparatory process fortheimplementation oftheUruguay Round, amechanism
needs tobefound sothatinbetween theentryintoforceoftheWTO andthetimewhen anoverwhelming
majority ofGATT contracting parties areintheWTO, there willbenounintended lossofrights and
obligations andnodisruption tothefunctioning ofthemultinational trading system. Aperfect solution
mayelude usbutasaworking target weshould lookforaformula which isneutral (i.e.without upsetting
therights andobligations negotiated intheUruguay Round), effective andsimple. Overall, itmust
notactasadisincentive toratifying theWTO early. Thispapers laysoutsome ofthemore obvious
problems inthehopethatacareful analysis ofthem willhelptofindthewayforward.
TheProblems
2. IntheUruguay Round wehavedecided thattheagreements under theWTO arenoreplacements
forGATT 47andtheTokyo Round Codes (theentry intoforce ofthenewdoesnotextinguish the
old),which makes itpossible forallagreements toco-exist foranindefinite period oftime. Amongst
them, onlyGATT 47anditsassociated legalinstruments anddecisions arefullyincorporated inGATT
94butbothGATT 47andtheTokyo Round Codes provide forwithdrawal, which isarightnottaken
away asaresult oftheUruguay Round.
3. Given thesituation, some parties maycontemplate withdrawal fromGATT 47and/or theTokyo
Round Codes upon theircoming ontotheWTO. Thereasons canbevarious. Forexample, toavoid
theco-existence oftwoMFN obligations which maygiveriseto"free-riders" andwhich maythus
offeradisincentive forratifying theWTO early; toprevent alegally messy situation created bythe
conflict oflawbetween GATT 47andGATT 94(e.g.tariffication inagriculture); toavoid administrative
burden arising outoftwoseparate butsimilar setsofinstitutional andprocedural obligations, etc.
4. When aparty withdraws from anagreement, itleaves theagreement. Unless withdrawal is
tobeofnolegal consequence, inevitably doubts willariseastothatparty'sobligations under the
agreement, especially inrespect ofitscontinued participation intheinstitutions andprocedures under
theagreement. TruethatArticle 70oftheVienna Convention stipulates thatthetermination ofatreatyPC/IPL/W/7
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"does notaffect anyright, obligation orlegal situation oftheparties created through theexecution
ofthetreaty priortoitstermination"; butatthesame timeitisalsoclearthatthetermination "releases
theparties from anyobligation further toperform thetreaty". Furthermore, inrespect ofdispute
settlement, while Article 3:11oftheUnderstanding onDispute Settlement specifies theprocedures
toapply inrespect ofdisputes forwhich therequest forconsultations wasmade under GATT 47or
anypredecessor agreement, itdoesnotgoontoexplicitly require aparty which haswithdrawn from
anagreement inforce immediately prior totheentry intoforce oftheWTO totakepartinsuch
procedures. Insum, thefirstquestion isthatdoestablished international law(including theVienna
Convention) andArticle 3:11oftheDispute Settlement Understanding provide sufficient guidance as
towhether aparty having withdrawn fromatreaty would stillbebound toattend meetings andrespond
todispute settlement requests arising outofobligations created through theexecution ofthetreaty?
5. Some havesuggested thatawaytoovercome theproblem asdescribed above isforexisting
members ofagreements togetintoacommitment case-by-case under theexisting institutions and
agreements. Thiswould appear tobetheintention behind theMinisterial Decision atMarrakesh which
invites "therelevant Councils andCommittees todecide thattheyshallremain inoperation forthe
purpose ofdealing withanydispute forwhich therequest forconsultation wasmade before thatdate".
Butinorder toachieve adegree oflegalcertainty, which isextremely important intheareaofdispute
settlement, perhaps weneedtobeabundantly clear ontwopoints :
(a) aredecisions made under existing agreements binding onparties which laterwithdraws
and,ifso,howcansuchdecisions beenforced iftheparty refuses toparticipate further
intheinstitutions? Apoint tobearinmind isthatwhen concessions under the
agreement, which canbewithdrawn byothers asthefinal sanction against non-
performance, cease tobeofpractical value toaparty thathaslefttheagreement.
Certainly itwillbefutile totakesomebody todispute settlement fornotresponding
torequests fordispute settlement; andwithdrawal ofvalueless concessions willbeno
deterrent tonon-implementation ofpanel reports.
(b) cansuchdecisions allow theinitiation ofnewdispute settlement cases andcarry with
them auseful obligation onimplementation ofpanel reports? Thisisparticularly
important intwoareas :Anti-dumping andSubsidies &Countervailing Measures.
BothArticle 18:3oftheAnti-dumping Agreement andArticle 32:3oftheAgreement
onSubsidies &Countervailing Measures stipulate thatnewrulesareapplicable only
toinvestigations andreviews initiated pursuant toapplications made aftertheentry
intoforce oftheWTO foramember. Inthesituation, itisclear thatunless some
supplementary andeffective rulesareavailable, cases which started before theWTO
butareofongoing effect willbetotally outside theambit ofdispute settlement.
6. There areother issues suchashowtodealwithunimplemented orunadopted panel reports,
dispute settlement cases inthepipeline, theduration oftransitional arrangements, aswellasthemany
practical problems raised inthepapers fromtheSecretariat, Mexico andAustria. Butbefore westart
developing solutions wehavetoconsider twofundamental questions:
(a) whatapproach totake? Acase-by-case consideration under therespective Councils
andCommittees willanswer theMinisterial Decision butwillbedifficult andmay
result incomplicated ordiverse structures. Ontheother hand, thesolutions so
developed maybemore focused andthusmore effective. Ageneric approach looking
foracross-the-board solutions maybequicker andprobably more appropriate within
thePrepCom process. Also, inawider context perhaps wecanbefreed fromtaking
tooparochial aview, which mayofferabetter chance foracomprehensive solution
withsome internal balance foreverybody.PC/IPL/W/7
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(b) whatshould bethenature ofthedecision? Thiswilldepend onthelegalanalysis of
theissues raised inthispaper andtheothers, butbasically GATT hasthetradition
ofgoing forpragmatic solutions which might notbelegally perfect butaretotally
workable, given good faith.
Conclusion
7. Time isshort andtheproblem complex. Wearenolonger inanegotiating situation andwe
should notaimtoredefine thebalance ofrights andobligations intheFinal Act. What weneednow
isanarrangement which willseeussmoothly andsafely intothenewsituation. Inthisconnection
itisworthwhile toremember thatArticle XIV:1 oftheAgreement Establishing theWTO allows those
eligible tobecome original members twoyears foracceptance. Weneedtoprovide themeans for
thesatisfactory operation ofthisparticular provision.