(b) Article XXIV:4

41. The Philippines noted that Members had established a standard, separate and distinct from the standard imposed under Article XXIV:5, for the implementation of the phrase "not to raise barriers to the trade of other contracting parties" in Article XXIV:4, since the preamble of the Understanding on Article XXIV provided, among others, that in the formation or enlargement of RTAs "the parties to them should to the greatest possible extent avoid creating adverse effects on the trade of other Members".
42. The Philippines considered that, as a general rule, parties were free to establish the conditions under which harmonization under Article XXIV:8(a)(ii) was to be achieved. In this instance, Turkey and the European Communities opted to impose the same restrictions subsisting in the European Communities to achieve harmonization, at least in respect of textile and clothing products. In the process of harmonization, Turkey and the European Communities had opted for the most restrictive and discriminatory option when other less restrictive and discriminatory options were equally available. Among other ways to achieve harmonization, the Philippines noted (i) the possibility of the European Communities maintaining or imposing QRs against Turkey, as expressly allowed by Article XXIV:8, without adversely affecting the status of the Turkey-EC relationship as that of a customs union; or (ii) the harmonization of EC policies to those of Turkey, by abolishing its global QRs altogether. Turkey was therefore in violation of Article XXIV:4 of GATT, in relation to the Understanding on Article XXIV.

(c) Article XXIV:5

43. The Philippines noted that the word "[a]ccordingly" at the start of Article XXIV:5 related and linked such paragraph to Article XXIV:4. As to the phrase "the provisions of this Agreement shall not prevent" in Article XXIV:5, it could not be interpreted to mean that Members becoming parties to a customs union were absolved from all of their obligations under the WTO Agreement and that the only provision thereunder which governed their conduct as Members was Article XXIV. If interpreted in the proper context, "the provisions of this Agreement" would exclusively refer to those provisions in GATT which otherwise would have prohibited the formation of a customs union. Derogation therefrom was a matter of necessity, but did not imply that derogation might also exist in respect of other provisions, based solely on the convenience of the parties.
44. The Philippines also noted that in the standard imposed under Article XXIV:5(a), which seemed less stringent than that under Article XXIV:5(b), the key phrases were "general incidence", "not on the whole higher or more restrictive" and "applicable in the constituent territories".
45. In the Philippines view, paragraph 2 of the Understanding on Article XXIV was determinative of the issue underlying Turkey's arguments in support of its alleged compliance with Article XXIV:5 (i.e. that the effects of the QRs imposed were balanced by and more than compensated for by its lower tariffs now applicable to imports as a result of the formation of the customs union), by its separate treatment of (i) duties and other charges, and (ii) other regulations of commerce for which quantification and aggregation were difficult. ¹⁸⁶ This view was further supported by the context of other relevant provisions:

1. According to paragraph 6 of the Understanding on Article XXIV, Turkey had no right to demand or to expect compensatory adjustment from other Members as a result of the "reduction of duties consequent upon the formation of a customs union". There was thus no basis whatsoever for Turkey to demand or to impose compensatory adjustment on other Members by way of the sufferance of the restrictions imposed.
2. As provided in Article XXIV:6, compensatory adjustment applied only to increases in rates of duties, and was likewise in the form of the reduction of duties. There was no basis for a compensatory adjustment for QRs and other regulations of commerce for which quantification or aggregation was difficult.
46. The Philippines considered that at issue in the present dispute was whether or not the general incidence of the "other regulations of commerce" was "more restrictive", in the sense of Article XXIV:5(a). Properly assessed as an individual measure pursuant to paragraph 2 of the Understanding on Article XXIV, the option chosen by Turkey and the European Communities was the most restrictive and discriminatory of the options available, since it had resulted in the extension to Turkey of the territorial application of QRs previously imposed solely in the territory of the European Communities. The reduction in the general incidence of some or even all duties which might result from the Turkey-EC customs union was irrelevant for purposes of the dispute.
47. The Philippines, noting that the import statistics presented by Turkey in an attempt to establish that its present regime was less restrictive were irrelevant, argued that nullification or impairment sufficed. ¹⁸⁷
48. The Philippines also submitted that, for purposes of determining the adverse (more restrictive) effects of Turkey's restrictions, the relevant market was that of Turkey and the European Communities. Turkey's restrictions were imposed purportedly as a necessary element in the formation of a customs union with the European Communities. As a result of the alleged customs union, Turkey's competitive advantage as a major exporter of textile and clothing products ¹⁸⁸ had been unduly enhanced vis-�-vis other Members: while Turkey's textile and clothing products entered the European Communities duty-free and without the burden of QRs, other Members, including India and the Philippines, now had to compete with Turkey in the EC market bearing the dual burden of both duties and QRs. While the relatively lower EC tariffs for such products (independently of the customs union with Turkey) might have improved the ability of other Members to compete with EC domestic producers, the alleged customs union placed them at a disadvantage vis-�-vis Turkey. In the Philippines' view, such potential benefits had therefore been nullified or impaired and EC commitments in its Schedules under Article II were rendered academic vis-�-vis other Members, at least in respect of textile and clothing products and in light of Turkey's discriminatory advantage.
49. The Philippines concluded that the promulgation of the Turkish measure and imposition of the restrictions were in violation of Article XXIV:5(a) because, as a result thereof, the general incidence of regulations of commerce were on the whole more restrictive.

(d) Article XXIV:8

50. The Philippines noted that there were only two essential requirements in Article XXIV:8(a), to characterize an arrangement between two or more customs territories as that of being a customs union. In respect of the requirement in Article XXIV:8(a)(i), derogation from the MFN obligation under Article I was needed to allow parties to eliminate duties and other restrictive regulations of commerce among themselves without according the same treatment to third parties. In respect of the requirement in Article XXIV:8(a)(ii), derogation from the obligations under Article II was necessary to allow parties to harmonize duties and charges, subject to the provisions of Article XXIV:(6) in relation to Article XXVIII and of Article XXIV:(5)(a) in relation to paragraph 2 of the Understanding on Article XXIV.
51. The Philippines argued that, however, in respect of the requirement of harmonization of other regulations of commerce, derogation from Articles XI and XIII, among others, was not necessary. Even the parties, as among themselves, could impose measures authorized under the Articles bracketed in Article XXIV:8(a)(i), among which were Articles XI and XIII. If the parties could impose such measures among themselves, their imposition towards third parties in the guise of harmonization was likewise not necessary.
52. The Philippines therefore submitted that the phrase "the provisions of this Agreement shall not prevent" in Article XXIV:5 did not exempt parties from complying with all other relevant provisions of the WTO Agreement, including GATT, and more particularly the provisions of the Articles bracketed in Article XXIV:8(a)(i), including Articles XI and XIII.
53. The Philippines considered that the formation of a customs union did not per se result in the merger of the legal personalities of the parties; it did not create a successor entity assuming the rights and obligations of the parties as Members. Members maintained their standing as such and retained their corresponding rights and obligations.
54. The Philippines argued that the measures permitted under the bracketed Articles disclosed at least a common feature in that the grounds upon which the imposition of the measures was permitted were specific to the Member concerned. It illustrated its argument recalling the texts of Articles XI, XII and XX. ¹⁸⁹ It noted, for instance, that there was no basis, in fact and in law (positive law under the WTO Agreement), for a party to a customs union to claim that, for example, the existence of a critical food shortage or a state of serious decline in monetary reserves in one of the parties likewise constituted its own critical food shortage or monetary reserves crisis. The grounds were specific to the party concerned, and the corresponding right to impose a measure permitted under the bracketed Articles, including Articles XI and XIII, likewise pertained exclusively to such party.
55. The Philippines therefore submitted that neither the grounds upon which the European Communities had relied in justifying its QRs, ¹⁹⁰ nor the corresponding right to impose QRs were assignable to Turkey, whether voluntarily or by operation of law. While it might be convenient for parties (whether for procedural reasons or, more substantively, for purposes of securing undue advantage in competition) to adopt the same measures permitted under the bracketed Articles (including Articles XI and XIII) towards the trade of third parties, such convenience could not prevail over the specific requirements under those Articles.
56. The Philippines considered that, in accordance with the ordinary meaning of Article XXIV:8 (a)(i), all duties and other restrictive regulations of commerce (except those authorized under the Articles specified within brackets) should have been eliminated with respect to substantially all trade between Turkey and the European Communities. It noted, however, the following:

1. Paragraph 2 of Article 44 of Decision 1/95 provided, among others, that "[t]he modalities of implementation of anti-dumping measures set out in Article 47 of the Additional Protocol remain in force". Thus, Turkey might impose anti-dumping measures against the European Communities, and vice versa. ¹⁹¹ Article VI of GATT, governing anti-dumping measures (i.e. restrictive regulations of commerce) was not one of the bracketed Articles.
2. Article 34 of Decision 1/95 in relation to Article 38 effectively allowed Turkey and the European Communities to impose countervailing measures against each other. Article VI of GATT, governing countervailing measures (i.e. restrictive regulations of commerce) was not one of the bracketed Articles. ¹⁹²
3. Articles 32 and 33 of Decision 1/95, in relation to Article 38, effectively allowed Turkey and the European Communities to impose "appropriate measures" vis-�-vis each other on the basis of practices which "causes or threatens to cause serious prejudice to the interest of the other Party or material injury to its domestic industry". ¹⁹³ "Appropriate measures" was broad enough as to cover any measure, including other restrictive regulations of commerce (in addition to anti-dumping and countervailing measures). It could thus include "emergency action" under Article XIX of GATT, likewise based on injury to domestic industry. Article XIX, authorizing such action (i.e. a restrictive regulation of commerce) was not one of the bracketed Articles.
4. In Article 63 of Decision 1/95, the parties confirmed "that the mechanism and modalities of safeguard measures provided for in Article 60 of the Additional Protocol remain[ed] valid". Turkey and the European Communities thus retained the right to impose such "safeguard measures" against each other on the grounds of serious disturbances occurring in a sector of economic activity; threat to external financial stability; or difficulties which had the effect of altering the economic situation of any of their respective areas. Such grounds were much broader than those upon which measures under the bracketed Articles might be imposed. Moreover, such "safeguard measures" were likewise broad enough to cover every conceivable restrictive regulation of commerce.
5. According to paragraph 1 of Article 8 of Decision 1/95, Turkey should incorporate into its internal legal order the Community instruments relating to the removal of technical barriers to trade. As of 1 January 1996 therefore, Turkey had not eliminated regulations relative to technical barriers to trade vis-�-vis the European Communities. Regulations relative to technical barriers to trade were not among those contemplated in the bracketed Articles, but such regulations could have the effect of being restrictive regulations of commerce.
6. According to Article 7 of Decision 1/95, Turkey and the European Communities retained the right to impose QRs (i.e. restrictive regulations of commerce) on each other on the ground of "public security", among others. Article XXI of GATT, governing the so-called "security exemptions" was not one of the bracketed Articles.
57. The Philippines submitted that the arrangement between Turkey and the European Communities did not qualify as a customs union under Article XXIV:8(a)(i) because, among others, all restrictive regulations of commerce had not been eliminated with respect to substantially all the trade between Turkey and the European Communities. Therefore, the promulgation of the measure by Turkey and the imposition of the restrictions could not be justified because the Turkey-EC arrangement had not resulted in the formation of a customs union.
58. The Philippines submitted further that the arrangement between Turkey and the European Communities did not qualify as a customs union under Article XXIV:8(a)(i) because, among others, duties had not been eliminated with respect to substantially all the trade between Turkey and the European Communities.
59. The Philippines considered that, in interpreting the phrase "substantially all" in Article XXIV:8 (a)(i), the "ordinary meaning � in their context and in the light of its object and purpose" was determinative, as the basic rule of treaty interpretation contained in Article 31.1 of the VCLT. It therefore noted that "substantially" was defined as "1. in a substantial manner; solidly; firmly; with strength. 2. to a substantial degree; specifically, (a) truly; really; actually; (b) largely; essentially; in the main". ¹⁹⁴ "Substantially" thus meant "essentially" and its context was better understood in light of the object and purpose of:

1. Article XXIV:8(a), which commenced by stating that a customs union should "be understood to mean the substitution of a single customs territory for two or more customs territories, so that �"; and
2. the preamble of the Understanding on Article XXIV, which contained the recognition that "� the contribution to the expansion of world trade that may be made by closer integration between the economies of the parties to such agreements � is increased if the elimination between the constituent territories of duties and other restrictive regulations of commerce extends to all trade, and diminished if any major sector of trade is excluded".
60. Thus, in the Philippines view, in applying the "substantially all" requirement, the focus should be more on what was excluded, since what was included should have been included as a matter of course. As to the exclusion, the Philippines proposed to at least test it against the criterion that it should not be indicative of the absence of the existence of a genuine substitution of a single customs territory for two or more customs territories. Otherwise, the possible contribution to the expansion of world trade that may be made by the closer integration between the economies of the parties would diminished, contrary to the underlying rationale for allowing, in this instance, exception from compliance with the MFN core principle. ¹⁹⁵
61. The Philippines also considered that, in applying the "substantially all" requirement, the meaning of the word "trade" in the phrase "the trade of the constituent territories ... all the trade in products....in such territories" was also germane. "Trade" was defined as "the act or business of exchanging commodities for other commodities or for money; the business of buying and selling; commerce; barter". ¹⁹⁶ The synonyms of "trade" were: "business, traffic, sale, exchange". ¹⁹⁷ "Trade" was thus used in the phrase in the broad generic sense, and there was no basis in qualifying it with "actual". This was the ordinary meaning in context, and in light of the object and purpose of Article XXIV (a single customs territory as trade-off for allowing exceptions from compliance with MFN obligations). Trade therefore included all potential trade, and was not confined to actual trade. Otherwise, the arrangement would not be that of a customs union; rather, it would be a classic discriminatory arrangement.
62. The Philippines then recalled that the European Communities was composed of three communities, namely: the ECSC, the EEC and the European Atomic Energy Community (EURATOM), each dealing with certain specific products and matters. The Treaties establishing the ECSC ¹⁹⁸ and EURATOM ¹⁹⁹ dealt with, among others, duties and other regulations of commerce applicable to the products they respectively covered. Turkey claimed to have entered into a customs union with the European Communities, whose Member States were, at the same time, parties to the ECSC and EURATOM. However, the ECSC and EURATOM respectively covered trade in products which were excluded from the coverage of the Turkey-EC arrangement under Decision 1/95, as the parties themselves disclosed. ²⁰⁰ The Philippines further noted that Decision 1/95 itself excluded agricultural products and the agricultural component of processed agricultural products from its coverage. ²⁰¹
63. The Philippines considered that it was unquestionable that agriculture was a major sector, ²⁰² that the ECSC also covered a major sector, ²⁰³ and that products covered by the EURATOM Treaty also comprised a major sector.
64. The Philippines therefore submitted that the arrangement between Turkey and the European Communities did not qualify as a customs union under Article XXIV:8(a)(i) because, among others, all duties had not been eliminated with respect to substantially all the trade between Turkey and the European Communities.
65. It also submitted that the arrangement between Turkey and the European Communities did not qualify as a customs union under Article XXIV:8(a)(ii) because, among others, Turkey and the European Communities did not apply "substantially the same duties and regulations of commerce" to the trade of third parties in the categories of products covered by the ECSC and the EURATOM Treaties, and in agricultural products.
66. The Philippines added that even with respect to products which were supposedly part of the customs union, Turkey and the European Communities did not apply "substantially the same duties and regulations of commerce" to third parties' trade in certain products, i.e. 290 items. ²⁰⁴ In addition, under Article 15 of Decision 1/95, Turkey (in agreement with the European Communities) retained the right to impose higher duties on third parties' trade and in respect of potentially all products covered by the alleged customs union.
67. The Philippines submitted that, therefore, the promulgation of Turkey's measures and the imposition of the restrictions could not be justified because the Turkey-EC arrangement had not resulted in the formation of a customs union.
68. On the question whether the territory of Turkey and the territory of the European Communities constituted a single customs territory, as provided for in Article XXIV:8(a), the Philippines noted that "single customs territory" implied genuine economic integration. It was only under this circumstance when exception from compliance with the MFN obligation was permissible. In the absence of genuine economic integration, an arrangement characterized by the elimination of some but less than all or substantially all duties and regulations of commerce on trade between the parties and/or harmonization in respect to some but less than all or substantially all of their trade regimes vis-�-vis third parties was merely a preferential trading arrangement in violation of MFN, regardless of the manifested intention of the parties. ²⁰⁵
69. In regarding the Turkey-EC arrangement in perspective, the Philippines noted that Turkey and the European Communities had maintained the right to impose restrictive regulations of commerce on each other beyond the measures authorized under Article XXIV:8(i), including anti-dumping, countervailing, and safeguard measures, which were similarly based on the concept of injury to domestic industry (or serious injury in the case of safeguard measures). However, not a single measure permissible under any of the bracketed Articles was based on such concept. ²⁰⁶ It was thus conceptually irreconcilable that a part of a single customs territory could impose restrictive regulations of commerce on other parts on that basis, since a single customs territory could not impose anti-dumping duties, countervailing measures, and safeguard measures on its own self.
70. The Philippines noted further that, while the reasons why the products covered by the ECSC and EURATOM Treaties were not covered by the alleged customs union between Turkey and the European Communities were not material in this dispute, perhaps more revealing was the reason cited by Turkey and the European Communities for the non-inclusion of agricultural products in the alleged customs union, that is:

"The Decision envisages an additional period for the achievement of free movement of agricultural products between the Parties, on account of the different policies and trade regimes pursued by each. The adoption of the Common Agricultural Policy measures of the EC by Turkey was determined as a prerequisite condition for the establishment of free movement of such products�"²⁰⁷

71. The Philippines was of the view that the formation of a customs union between two sovereign states certainly did have economic consequences, the parties usually expecting that it would likewise be of benefit to their respective economies. However, compliance with Article XXIV was inextricably based on the political will to establish a genuine single customs territory, regardless of the economic consequences. However, in this regard, the Philippines submitted that the attendant circumstances analyzed in the preceding paragraphs and the joint Turkey-EC declaration just quoted above were (perhaps) indicative of the deficiency of genuine political will to establish a likewise genuine single customs territory between Turkey and the European Communities, notwithstanding manifested intentions.

To continue with Conclusions

¹⁸⁶ Paragraph 2 of the Understanding on Article XXIV distinguished the assessment of the general incidence of the duties from that of the general incidence of other regulations of commerce. In its first sentence, the first part ("The evaluation....customs union") pertained to the evaluation of the "general incidence of the duties and other regulations of commerce" (emphasis added), with reference to the corresponding condition in Article XXIV:5(a); the second part ("shall in respect of duties and charges"), in relation to its first part, qualified the phrase thereafter as relating exclusively to the evaluation of "duties and charges"; the last part, in relation to the first two parts, prescribed the basis for the evaluation of the general incidence of duties. The second, third and fourth sentences ("This assessment ... applied rates of duty") specified detailed rules for the "overall assessment" sought. The last sentence ("It is recognized that for ... may be required") referred solely to "other regulations of commerce for which quantification and aggregation are difficult" as a category distinct from objectively quantifiable "duties and charges", and provided that in respect of such regulations, the "examination of individual measures � may be required". Ordinarily, the word "may" denoted being permissive, but when qualified by a situation or condition (in this instance, "regulations of commerce �") and that situation or condition obtained, it could acquire a mandatory tenor; in this instance, particularly more so in light of the other provisions of paragraph 2 of the Understanding on Article XXIV.

¹⁸⁷ "In general international law, material damage is neither a constitutive element of an internationally wrongful act nor a requirement of state responsibility. GATT dispute settlement practice likewise recognizes that the GATT inconsistency of a trade measure, and nullification or impairment in terms of GATT Article XXIII, do not depend on damage" (E.U. Petersmann, The GATT/WTO Dispute Settlement System: International Law, International Organizations and Dispute Settlement, 1997, p. 136). While this is in the chapter entitled "Non-Violation and Situation Complaints in GATT/WTO Law", the quotation relative to material damage as a (non-)constitutive element of an internationally wrongful act and a non-requirement of state responsibility is nevertheless appropriate.

Prof. Petersmann further states: "As stated in the GATT panel report adopted by the GATT Council on 17 June 1987 concerning 'US Taxes on Petroleum', 'the impact of a measure inconsistent with the General Agreement is not relevant for a determination of nullification or impairment' because the function of most GATT rules (such as Article I-III and XI) is to establish conditions of competition and to protect trading opportunities, and violations of GATT rules are presumed to adversely affect these conditions of competition." The footnote to the above statement reads as follows: "See the GATT panel report in BISD 34S/135, 156, 158. See also the GATT panel report adopted on 25 January 1990, on EEC Subsidies Paid to Processors of Oilseeds � (BISD 37/S86, 125) [the] panel report emphasizes 'that the CONTRACTING PARTIES have consistently interpreted the basic provisions of the General Agreement on restrictive trade measures as provisions establishing conditions of competition', and that 'nullification or impairment of benefits' depends therefore on adverse changes in competitive conditions and not on an actual decline in volumes of trade" (emphasis added).

¹⁸⁸ In 1997, textile and clothing products constituted 41.4 per cent of Turkey's entire manufacturing exports. See the TPR Secretariat Report on Turkey, p. 117.

¹⁸⁹ Article XI referred to "Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party"; Article XII dealt with "Import restrictions instituted, maintained or intensified � by a contracting party ... to forestall the imminent threat of, or to stop, as serious decline in its monetary reserves �"; and Article XX stated: "� nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures � relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption �" (emphasis added).

¹⁹⁰ Since QRs imposed by the EC were not at issue in this dispute, it could only be presumed that they were based on grounds specified under relevant provisions of the WTO Agreement, or at least were in force on the basis of the tolerance of Members. In any event, the grounds and the corresponding right to impose the appropriate measure(s) were specific to each Member. As such, they were beyond the commerce of Members, not assignable, not capable of being appropriated by others. Neither was the tolerance of Members.

¹⁹¹ This was confirmed in the TPR Secretariat Report on Turkey (para. 11, p. xii) and in Annex II of the Communications from the Parties to the Customs Union, WT/REG22/5, dated 30 October 1996, containing a list of "Anti-Dumping and Countervailing Measures applied by the European Union on Turkish Products" and "Anti-Dumping Duties applied by Turkey" on products of some EC Member States (see also in p. 4 of that same document, reference by the parties to Article 44 of the Decision).

¹⁹² Article 37 of Decision 1/95 provided that in the absence of rules which are to be adopted by Turkey and the EC for the implementation of Articles 32, 33 and 34 and related parts of Article 35, "the provisions of the GATT Subsidies Code shall be applied as the rules for the implementation of Article 34" (see WT/REG22/1).

¹⁹³ See para. 1 of Article 32 and para. 1 of Article 33 of Decision 1/95 (WT/REG22/1).

¹⁹⁴ Websters, New Twentieth Century Dictionary, unabridged, 2nd edition.

¹⁹⁵ In this regard, "substantially all" could not necessarily be assessed quantitatively, i.e.: 100*

where x =product lines on which duties and other restrictive regulations were eliminated in intra-trade, y=product lines in potential intra- trade, and z=resulting percentage

If z equalled 100%, it could of course be concluded that the "substantially all" requirement had been more than fully complied with. If z was less than 100%, regardless of how close it might be to 100%, it would nevertheless be proper to apply the criterion on what is excluded.

y was a sensitive factor. In the context of a genuine customs union, y was the totality of products which could potentially be traded between the parties, not actual products traded. The latter construction would perpetuate discrimination. For example, assuming that Member A produced and traded in products A-1 to A-10, and party B in products B-1 to B-10; assuming further that Member A exported only product A-1 to Member B, and that Member B exported only product B-1 to party A, if both parties were to eliminate duties and other restrictive regulations of commerce in trade between them in respect of products A-1 and B-1, the arrangement could not be characterized as a customs union; instead, it would be a "classic" discriminatory arrangement .

¹⁹⁶ Websters, New Twentieth Century Dictionary, unabridged, 2nd edition.

¹⁹⁷ Ibid..

¹⁹⁸ The ECSC Treaty was signed in Paris on 18 April 1951 (Paris Treaty establishing the European Coal and Steel Community). Its Article 4 provided, among others: "The following are recognized as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community, as provided in this Treaty: (a) import and export duties, or charges having equivalent effect, and QRs on the movement of products; �".

¹⁹⁹ Article 93 of the EURATOM Treaty provided, among others, for the abolishment of "all customs duties on imports and exports or charges having equivalent effect, and all QRs on imports and exports" in respect of selected listed products.

²⁰⁰ See WT/REG/22/5, para. I:3. A Free Trade Agreement between Turkey and the ECSC entered into force on 1 August 1996 (WT/REG22/1/Add.1).

²⁰¹ The provisions of Decision 1/95 on the elimination of customs duties and charges and the elimination of QRs or measures having equivalent effect apply only to goods in Chapter I. Agricultural products were dealt with in Chapter II (see WT/REG22/1). In this regard, the TPR Secretariat Report on Turkey (para. II(I) 1., p. 16) confirmed that "there is no firm timetable of the integration of agriculture" in the Turkey-EC arrangement.

²⁰² "The agriculture sector accounts for 14% of GDP and employs about half of the labour force" of Turkey (TPR Secretariat Report on Turkey, para. 17, p. xiii).

²⁰³ See Annex I of WT/REG22/1/Add.1, for the list of products covered. See also paras. 42, 44, 45, 76 and 77 of the TPR Secretariat Report on Turkey, as illustrative of the product coverage.

²⁰⁴ This was confirmed by the TPR Secretariat Report on Turkey, para. 22.

²⁰⁵ "The pivotal requirement of Article XXIV is that the union be complete, freeing substantially all internal trade. The main reason for that requirement is non-economic. The requirement exists primarily to discourage governments from using 'customs unions' as an excuse to engage in ad hoc discriminations for short-run advantage. It also seeks to create a stable end situation upon which other governments can plan, and can negotiate." (emphasis added), in Robert E. Hudec, GATT Legal System and World Trade Diplomacy, (Butterworth Legal Publishers), 2nd edition, p. 221.

²⁰⁶ This is but a logical and necessary consequence of the formation of a customs union. In a genuine customs union, there is only one domestic industry - that of the Parties', collectively.

²⁰⁷ WT/REG/22/5, para. 8.