Article XXVIII, ad Art. XXVIII,GATT, Understanding on the Interpretation of Art. XXVIII of the GATT 1994

Although the GATT is emblematic among multilateral agreements in pursuing the removal of trade restrictions, it includes a considerable number of exceptions that allow the WTO Members to impose new ones. Art. XXVIII permits the WTO Members, upon negotiations with specified categories of other Members, to withdraw or increase the binding tariff rates on certain products listed in their Schedules of concessions. As these new arrangements are conducted outside a Round of multilateral negotiations, which is the traditional context for reciprocation of tariff concessions, they are called “renegotiations”. Art. XXVIII is thus prominent among the GATT exceptions, since it is designed to counteract what is considered as the core of the GATT obligations, notably the commitment under Art. II not to increase tariffs listed in the Schedules of concessions. GATS Art. XXI is analogous to Art. XXVIII, though it differs from the GATT provision in some procedural respects. Clearly enough, the rationale underlying Art. XXVIII is to provide the WTO Members with some flexibility in their liberalisation commitments. Tariff concessions made in the course of multilateral Rounds might become unexpectedly burdensome after consolidation. Some mechanisms for the adjustment of tariff commitments were thus introduced in the GATT to relieve the WTO Members from import surpluses. The renegotiation procedure envisaged in Art. XXVIII is perhaps the principal of these mechanisms but not the exclusive one. The “emergency action on imports of particular products” provided for in Art. XIX and the additional tariff flexibilities to be granted to developing countries in order to protect infant industries according to Art. XVIII are other relevant examples of adjustments of tariff commitments in the interval between two Rounds of multilateral negotiations. Unlike Articles XVIII and XIX, Art. XXVIII does not require the WTO Member willing to withdraw or increase its tariff rates to produce evidence of the negative effects of the existent rates on its domestic market. Art. XXVIII was conceived as a tool to be used by the WTO Members in the ordinary run of multilateral trade and not under the pressure of special or emergency domestic circumstances, such as a crisis of production or the establishment of an infant industry. In order to discourage WTO Members from recurring to renegotiations routinely – an occurrence which would seriously undermine the GATT predictability –, the drafters of Art. XXVIII assigned to the major trading partners of the Member seeking modification or withdrawal with respect to the product concerned a right to compensation or, as a last resort, a right to counter-retaliate. Most of Art. XXVIII provisions are procedural. According to Art. XXIV:6, these same procedures are to be followed by those WTO Members which raise their binding tariffs as a result of their entrance into, or implementation of, a regional trade agreement creating a customs union. The establishment of a common external tariff on certain products, which is intrinsic to the economic pattern of a customs union, is indeed likely to lead one or more of the separate customs territories forming a customs union to raise their tariffs with a view to make them uniform to the common external tariff. Regional Trade Agreements (RTAs) usually do not have a provision similar to GATT Art. XXVIII, while, for example, all of them contain a safeguard clause such as the one provided in GATT Art. XIX. In general, instances of recourse to Art. XXVIII have considerably decreased in number over the years. As from 1958, renegotiations started to be predominantly conducted under Art. XXVIII: 5. The gradual shift to this modality of renegotiations is easy to understand: under this provision, the WTO Members can act with a relative freedom, since they have neither to respect the time-limit of Art. XXVIII:1 neither to obtain the authorization prescribed by Art. XXVIII:4. As in practice the right of retaliation has been exercised very rarely, it is to be presumed that the negotiations on compensation have been successful on average. However, there could have been other reasons which might have deterred the WTO Members from resorting to retaliations. Principally, they might have feared that third WTO Members, i.e. Members other than the Member having originally withdrawn or modified its concessions, could at their turn counter-counter-retaliate, withdrawing or modifying concessions of exporting interest for the Members having taken retaliatory actions first. Since, as illustrated above, a concession must be withdrawn or modified on a MFN basis, there is, as a result, an inherent difficulty in effectively implementing the retaliation provision of Art. XXVIII:3.