UNITED STATES - DEFINITIVE SAFEGUARD MEASURES
 ON IMPORTS OF CIRCULAR WELDED CARBON QUALITY
 LINE PIPE FROM KOREA


Report of the Panel
 

(Continuation)

5. The exclusion of Canada and Mexico - Articles I, XIII and XIX, and Article 2.2

(a) Arguments by Korea

7.127 Korea claims that the United States violated the MFN principle set forth in Articles I, XIII:1 and XIX and Article 2.2 by excluding Mexico and Canada from the line pipe measure.

7.128 Korea argues that, consistent with the MFN principle, safeguard measures must apply to imports from all sources. Korea asserts that the parallelism between Articles 2.1 and 2.2 of the Agreement on Safeguards also requires that the measure be applied to all imports. The United States could only impose a safeguard remedy on the basis of a serious injury analysis which was based on all imports. Articles 2 and 4 of the Agreement on Safeguards as well as Article XIX of the GATT 1994 speak only in terms of "imports." There is no basis on which certain imports can be excluded. Since all imports must be included in the Article 2.1 determination, parallelism requires that the measure be applied to all imports.

7.129 Korea asserts that the exemption of Mexico was particularly egregious in this case since Mexico was the second largest supplier to the US market during the ITC's period of investigation. Mexico is now the largest supplier to the US market, and Canada has increased its imports three-fold to become the number three supplier to the US market.

7.130 Korea asserts that the United States cannot rely on an Article XXIV defence in respect of the MFN violation because the last sentence of footnote 1 of the Safeguards Agreement does not apply to the line pipe measure. According to Korea, the last sentence of footnote 1 only applies in cases where a safeguard measure is applied by a customs union, either as a single unit or on behalf of a member State. In any event, Korea submits that NAFTA has not been demonstrated to be in compliance with Article XXIV:8.

(b) Arguments by the United States

7.131 The United States asserts that Articles I and XIII:1, and Article 2, do not prohibit a Member from excluding its free-trade agreement partners from a safeguard measure, as a result of the exception to the MFN principle contained in Article XXIV. The United States asserts that no provision of the Safeguards Agreement will nullify the effect of Article XXIV, because of the last sentence of SA footnote 1.

7.132 The United States notes that, by virtue of Article XXIV:5, "the provisions of [the GATT] shall not prevent" the formation of a free-trade area, provided that certain conditions are met. The United States further notes that GATT Article XXIV:8(b) defines a free-trade area as:

a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.

The United States remarks that the list of measures that Article XXIV:8 specifically authorizes free-trade area parties to maintain against each other does not include safeguard measures applied under Article XIX. The United States therefore argues that, by implication, safeguard measures either may or must be made part of the general elimination of "restrictive regulations of commerce" under any free-trade area. The United States argues that, under the express terms of Article XXIV:5, no other provision of the GATT 1994, including Articles I, XIII or XIX, can be read to prevent participants in a free-trade area from carrying out their mutual commitments to exempt each other's trade from trade restrictive measures, including safeguard measures.

7.133 With regard to Korea's Article 2.2 claim, the United States acknowledges that Article 2.2 imposes a non-discrimination requirement. However, the United States argues that this requirement does not supersede the Article XXIV authorization for Members to exclude free trade agreement partners from safeguard measures. In this regard, the United States relies on the last sentence of footnote 1, which states that "[n]othing in this Agreement prejudges the interpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT 1994." Thus, the United States considers that issues related to free-trade area imports are to be addressed exclusively under the relevant GATT 1994 articles. In particular, the "relationship" between Articles XIX and XXIV:8 addresses the application of safeguard measures in the context of a free-trade area that may prohibit or limit safeguard measures as one way to eliminate duties and other restrictive regulations of commerce. According to the United States, the last sentence of SA footnote 1 means that the provisions of the Safeguards Agreement are not intended to disturb the relationship between the GATT 1994 rules addressing safeguard measures on the one hand and the rights and obligations of the participants in a free-trade area on the other.

7.134 In respect of Korea's argument that the NAFTA safeguards exclusion discriminates against it because the safeguard measure has made Korean line pipe less competitive with imports from Canada and Mexico in the United States, the United States argues that the line pipe safeguard operates no differently from any other duty rate that the United States maintains in conformity with the WTO Agreement. NAFTA trading partners receive an advantage as a result of their agreement to remove restrictions from substantially all trade with the United States.

(c) Evaluation by the Panel

7.135 We shall begin our evaluation by focusing on Korea's claims regarding Articles I, XIII and XIX. We shall then address Korea's claim under Article 2.2. Before turning to the substance, however, we consider it appropriate to clarify the factual basis of Korea's claims.

7.136 Korea's claims rest on the exclusion of imports from Canada and Mexico, i.e., NAFTA imports, from the line pipe measure. Korea asserts that the inclusion of non-NAFTA imports, but the exclusion of NAFTA imports, is discriminatory, and therefore contrary to the MFN requirement set forth in GATT 1994 and the Safeguards Agreement. In other words, Korea's claims of discrimination arise from the fact that the United States accorded more favourable treatment - in respect of the line pipe measure - to its NAFTA partners than to its non-NAFTA partners.

(i) Articles I, XIII and XIX

7.137 Korea asserts that the non-discriminatory application of safeguard measures is required by Articles I, XIII:1 and XIX.¹²⁶ To the extent that these provisions impose an MFN requirement, the United States relies on the "limited exception" set forth in Article XXIV. We must decide to what extent, if at all, any such Article XXIV defence is available to the United States.

7.138 We begin our analysis with Article XXIV:5, which provides in relevant part:

Accordingly, the provisions of this Agreement shall not prevent, as between the territories of Members, the formation of � a free-trade area �; Provided that: �

By virtue of Article XXIV:5, therefore, Members are entitled to form free-trade areas (provided the conditions set forth in sub-paragraphs (b) and (c) of that provision are met).

7.139 Article XXIV:8(b) defines a free-trade area as:

a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.

7.140 In light of this definition of a free-trade area, we understand Article XXIV:5 to mean that Members are authorised, under certain prescribed circumstances, to eliminate "duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) � on substantially all the trade" between them and their free-trade area partners. This authorisation exists, despite the fact that the formation of a free-trade area will necessarily result in more favourable treatment for free-trade area partners than for non-free-trade area partners (in respect of whom "duties and other restrictive regulations of commerce" are not eliminated).

7.141 As noted above, the alleged violation of GATT 1994 arises from the exemption of imports from Canada and Mexico from the scope of the line pipe safeguard measure. Since the line pipe measure introduces a tariff quota, we consider that the line pipe measure constitutes a "dut[y] [or] other restrictive regulation[] of commerce" within the meaning of Article XXIV:8(b). As the exclusion of imports from Canada and Mexico therefore forms part of the elimination of "duties and other restrictive regulations of commerce" between NAFTA members,¹²⁷ it is in principle authorised by Article XXIV:5, provided the relevant conditions are fulfilled. Having regard to paragraphs 5 and 8 of Article XXIV, the relevant conditions are that NAFTA must (1) comply with Article XXIV:5(b) and (c),¹²⁸ and (2) eliminate duties and other restrictive regulations of commerce on "substantially all" intra-NAFTA trade.

7.142 As the party seeking to rely on an Article XXIV defence (or "limited exception"), the onus is on the United States to demonstrate compliance with these conditions.¹²⁹ In this regard, the United States has argued that:

NAFTA provided for the elimination within ten years of all duties on 97 per cent of the Parties' tariff lines, representing more than 99 per cent of the trade among them in terms of volume. This is the basis for our belief that, wherever the threshold established under Article XXIV:8 for elimination of duties on substantially all trade, NAFTA exceeds that threshold.

With regard to eliminating other restrictive regulations of commerce, NAFTA applies the principles of national treatment, transparency, and a variety of other market access rules to trade among the Parties. The NAFTA Parties also eliminated the application of global safeguard measures among themselves under certain conditions. There is also no question of NAFTA raising barriers to third countries, since none of the NAFTA Parties increased tariffs on trade with non-NAFTA measures. The NAFTA Parties also did not place other restrictive regulations of commerce on other WTO Members upon formation of the free-trade area.

Further explanation of the US views on NAFTA and its compliance with Article XXIV appear in the following documents: L/7176, WT/REG4/1 & Corr.1-2, WT/REG4/1/Add.1 & Corr.1, WT/REG4/5, and WT/REG4/6/Add.1. Since these are voluminous materials, we will not append them, but incorporate them into this submission by reference.¹³⁰

7.143 Korea, on the other hand, has argued that NAFTA is "not in compliance Article XXIV:8 of the GATT 1994".¹³¹  In response to a question from the Panel on this issue, Korea asserted:

Korea's position that NAFTA has not been demonstrated to be in compliance with Article XXIV:8 is based on the preliminary analysis of the Committee on Regional Trade Agreements which is still considering the question and has not yet issued a final decision on the matter.¹³²

We understand Korea to argue that NAFTA is not in compliance with Article XXIV:8 because the Committee on Regional Trade Agreements has not yet issued a final decision that NAFTA is in compliance with Article XXIV:8.

7.144 In our view, the information provided by the United States in these proceedings, the information submitted by the NAFTA parties to the Committee on Regional Trade Agreements ("CRTA") (which the United States has incorporated into its submissions to the Panel by reference), and the absence of effective refutation by Korea, establishes a prima facie case that NAFTA is in conformity with Article XXIV:5(b) and (c), and with Article XXIV:8(b). Concerning Article XXIV:8(b), we do not consider that the fact that the CRTA has not yet issued a final decision that NAFTA is in compliance with Article XXIV:8 is sufficient to rebut the prima facie case established by the United States. Korea's argument is based on the premise that a regional trade arrangement is presumed inconsistent with Article XXIV until the CRTA makes a determination to the contrary. We see no basis for such a premise in the relevant provisions of the Agreement Establishing the WTO (including, in particular, the Understanding on the Interpretation of Article XXIV of the GATT 1994).¹³³ Nor has Korea pointed to any provision that might support such a premise.

7.145 Concerning Article XXIV:5(b) and (c), Korea has not even argued that NAFTA is not in conformity with these provisions. While the United States has placed on the record extensive evidence¹³⁴ supporting its right to rely on Article XXIV as a defence, Korea has not disputed any of this evidence, either in terms of its accuracy or its sufficiency. On balance, therefore, there is no basis for us to find that Korea has rebutted the prima facie case established by the United States that NAFTA is in compliance with Article XXIV:5(b) and (c).¹³⁵

7.146 In light of the above, we find that the United States is entitled to rely on an Article XXIV defence against Korea's claims under Articles I, XIII and XIX regarding the exclusion of imports from Canada and Mexico from the scope of the line pipe measure.

7.147 We note that the Appellate Body considered the availability of Article XXIV as a defence in Turkey - Textiles. The Appellate Body found that

58. (�) Article XXIV may justify a measure which is inconsistent with certain other GATT provisions. However, in a case involving the formation of a customs union, this "defence" is available only when two conditions are fulfilled. First, the party claiming the benefit of this defence must demonstrate that the measure at issue is introduced upon the formation of a customs union that fully meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV. And, second, that party must demonstrate that the formation of that customs union would be prevented if it were not allowed to introduce the measure at issue. Again, both these conditions must be met to have the benefit of the defence under Article XXIV.¹³⁶ (emphasis in original)

7.148 Thus, in addition to the conditions set forth above, the Appellate Body conditioned the availability of Article XXIV as a defence on a necessity test ("[a] party must demonstrate that the formation of a customs union would be prevented if it were not allowed to introduce the measure at issue"). In our view, the Appellate Body's findings in Turkey - Textiles were conditioned by the facts of that case. In particular, Turkey - Textiles concerned the imposition by a member of a customs union of restrictive measures against imports from a third country, upon the formation of that customs union. Clearly, if members of a customs union seek to introduce restrictive measures against imports from third countries, contrary to GATT 1994, it is entirely appropriate that they should be required to demonstrate the necessity of such measures. That being said, we are not at all convinced that an identical approach should be taken in cases where the alleged violation of GATT 1994 arises from the elimination of "duties and other restrictive regulations of commerce" between parties to a free-trade area, which is the very raison d'�tre of any free-trade area. If the alleged violation of GATT 1994 forms part of the elimination of "duties and other restrictive regulations of commerce", there can be no question of whether it is necessary for the elimination of "duties and other restrictive regulations of commerce".¹³⁷

(ii) Article 2.2 of the Safeguards Agreement

7.149 Korea claims that the exclusion of imports from Canada and Mexico from the line pipe measure violates Article 2.2, which provides:

Safeguard measures shall be applied to a product being imported irrespective of its source.

We must determine whether, given the non-discrimination requirement in Article 2.2, the United States should have included imports from Canada and Mexico in the scope of the line pipe measure.

7.150 Having found that the United States is entitled to rely on the Article XXIV defence in respect of a violation of the non-discrimination requirement in inter alia Article XIX, we consider it would be incongruous if the United States were precluded from relying on the Article XXIV defence in respect of a violation of the non-discrimination requirement in Article 2.2. A contrary interpretation would ignore the close interrelation between Article XIX and the Safeguards Agreement. This interrelation is evidenced in particular by Article 1, whereby the Safeguards Agreement

� establishes rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.

By virtue of this provision, therefore, safeguard measures subject to the provisions of the Safeguards Agreement are understood to be Article XIX measures. Thus, if an Article XXIV defence is available for Article XIX measures, by definition it must also be available for measures covered by the disciplines of the Safeguards Agreement. To deny this is to deny the fact that, by virtue of Article 1, measures covered by the Safeguards Agreement and measures provided for in Article XIX are essentially one and the same thing. Thus, to the extent that an Article XXIV defence is available against claims brought under Article XIX, it must necessarily also be available against claims brought under the provisions of the Safeguards Agreement.

7.151 We consider that the availability of the Article XXIV defence against claims brought under the provisions of the Safeguards Agreement is also confirmed by the last sentence of footnote 1 of the Safeguards Agreement. Footnote 1 provides

A customs union may apply a safeguard measure as a single unit or on behalf of a member State. When a customs union applies a safeguard measure as a single unit, all the requirements for the determination of serious injury or threat thereof under this Agreement shall be based on the conditions existing in the customs union as a whole. When a safeguard measure is applied on behalf of a member State, all the requirements for the determination of serious injury or threat thereof shall be based on the conditions existing in that member State and the measure shall be limited to that member State. Nothing in this Agreement prejudges the interpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT 1994. (emphasis supplied)

7.152 We note that the Appellate Body stated in Argentina - Footwear Safeguard (a case concerning the imposition of a safeguard measure by a member of a customs union) that "the ordinary meaning of the first sentence of footnote 1 appears to us to be that the footnote only applies when a customs union applies a safeguard measure 'as a single unit or on behalf of a member State'". Korea relies on this finding to argue that the last sentence of footnote 1 does not apply in the present case, which concerns a free-trade area. The United States submits that the Appellate Body "reached [its] conclusion in response to a panel's analysis based on the first and third sentences of footnote 1. At no point did either the panel or the Appellate Body address the fourth (and last) sentence of the footnote, or how that sentence might affect the meaning of the entire footnote. Consequently, the Appellate Body's finding does not provide any guidance for the Panel's interpretation of the last sentence".¹³⁸

7.153 We agree with the United States regarding the status of the Appellate Body's findings in Argentina - Footwear Safeguard. In that case, the Appellate Body did not base its finding regarding the exclusion of customs union members from a safeguard measure on the last sentence of footnote 1. Nor was the Appellate Body called on to address the application of footnote 1 in the context of free trade areas. For these reasons, we do not consider that the Appellate Body's finding that "the footnote only applies when a customs union applies a safeguard measure 'as a single unit or on behalf of a member State'" pertains to the application of the last sentence of footnote 1 in the context of free trade areas, which is the issue before us in this case. Indeed, the last sentence of footnote 1 itself indicates that it is not restricted to cases in which a safeguard measure is imposed by a customs union (either "as a single unit or on behalf of a member State"). In particular, the last sentence of footnote 1 refers to paragraph 8 of Article XXIV. Paragraph 8 of Article XXIV has two sub-paragraphs. Sub-paragraph (a) relates to customs unions, whereas sub-paragraph (b) relates to free-trade areas. By referring to paragraph 8 of Article XXIV as a whole, rather than sub-paragraph 8(a) exclusively, the last sentence of footnote 1 clearly also refers to Article XXIV:8(b), i.e., free-trade areas. Thus, even though the first three sentences of footnote 1 address the application of safeguard measures in the context of a customs union, the broader reference in the last sentence to paragraph 8 extends the coverage of that last sentence to include the application of safeguard measures in the context of free trade areas, as defined by Article XXIV:8(b).

7.154 Having found that the last sentence of footnote 1 applies in the context of free trade areas, we must now resolve the disagreement between the parties as to the impact, if any, of the last sentence of footnote 1 on the application of the Article 2.2 non-discrimination requirement. In this regard, Korea argues that footnote 1 addresses the term "Member", and notes that it is included in Article 2.1, rather than 2.2. According to Korea, therefore, the last sentence of footnote 1 does not qualify the application of the Article 2.2 non-discrimination requirement.

7.155 We note that the Argentina - Footwear Safeguard panel was

mindful of the fact that the footnote was inserted after the word "Member" in the first paragraph of Article 2. It therefore clearly refers solely to the question of who can impose a measure, and not to the supplier countries that might be affected by it. For the footnote to have a broader meaning, the drafters would have had to place it after the title of Article 2, or in both paragraphs of that article. The fact that they did not do so must have meaning and has to be taken into account in our interpretation.¹³⁹

7.156 The Argentina - Footwear Safeguard Appellate Body also stated that "footnote 1 relates to the word 'Member' in Article 2.1, which is commonly understood to mean a Member of the WTO". However, we note that neither the panel nor the Appellate Body in that case was called on to examine the last sentence of footnote 1. Their findings, therefore, provide no guidance as to whether the last sentence of footnote 1 extends beyond the word "Member" in Article 2.1.

7.157 The last sentence of footnote 1 begins with the phrase "[n]othing in this Agreement". The ordinary meaning of this phrase indicates that the last sentence of footnote 1 concerns the Safeguards Agreement as a whole, and not only Article 2.1 thereof. Indeed, a finding that the last sentence only applies in respect of the word "Member" in Article 2.1, rather than the Agreement as a whole, would render the phrase "[n]othing in this Agreement" meaningless, contrary to the principle of effective treaty interpretation.¹⁴⁰ Such a finding would essentially replace the phrase "[n]othing in this Agreement" with the phrase "[n]othing in the word Member". Accordingly, we find that the last sentence of footnote 1 means that nothing in any provision of the Safeguards Agreement, including Article 2.2 thereof, "prejudges the interpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT 1994".

7.158 We have already found that Article XXIV can provide a defence against claims brought under Article XIX. In effect, this finding touches on "the interpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT 1994", since it means that Article XXIV may in certain circumstances prevail over Article XIX. We have also found that, consistent with the last sentence of footnote 1 of the Safeguards Agreement, Article 2.2 does not prejudge the interpretation of the relationship between Articles XIX and XXIV:8. Taken together, these findings lead us to conclude that Article XXIV can provide a defence against claims of discrimination brought under Article 2.2. Any other conclusion would mean that 2.2 disturbs the relationship we have identified between Articles XIX and XXIV, as it would effectively mean that an Article XXIV defence against a claim of discrimination resulting from the exclusion by a Member of its free-trade area partners from its safeguard measure would no longer be available, as a result of Article 2.2. As noted above, the last sentence of footnote 1 excludes the possibility of Article 2.2 having this effect. Thus, just as we found that the United States is entitled to rely on Article XXIV as a defence against Korea's claims under inter alia Article XIX, so too the United States is entitled to rely on Article XXIV as a defence against Korea's claim under Article 2.2 of the Safeguards Agreement.¹⁴¹

7.159 Korea also asserts that Article XXIV cannot operate as a defence to a claim under Article 2.2 as a result of the conflict provision contained in the general interpretative note to Annex 1A:

In the event of a conflict between the provisions of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A to the Agreement Establishing the World Trade Organization �, the provision of the other agreement shall prevail to the extent of the conflict.

7.160 To the extent that Article 2.2 could be perceived to be in conflict with the availability of an Article XXIV defence against claims of non-discrimination, that conflict is resolved through the last sentence of footnote 1 of the Safeguards Agreement (whereby Article 2.2 shall not disturb the fact that Article XXIV may in certain circumstances provide a defence to claims under Article XIX).

7.161 Korea also argues that the exclusion of imports from Canada and Mexico from the line pipe measure has made Korean line pipe less competitive with imports from Canada and Mexico in the United States. This may be so. However, this is the very essence of a free-trade area. By virtue of Article XXIV:8(b), a free-trade area will always result in positive discrimination in favour of the members of that free-trade area in respect of "duties and other restrictive regulations of commerce � on substantially all the trade" between them. Other WTO Members are taken to accept such positive discrimination, provided all the relevant conditions of Article XXIV are met.

7.162 Korea has further argued that "[t]he parallelism between Articles 2.1 and 2.2 of the Agreement on Safeguards also requires that the measure be applied to all imports. � Therefore, since all imports must be included in the Article 2.1 determination, parallelism requires that the measure be applied to all imports".¹⁴² In light of our findings above regarding the ability of the United States to exclude imports from Canada and Mexico from the line pipe measure, we are unable to accept Korea's argument that, on the basis of parallelism, Article 2.1 requires all imports to be included in the determination, and that any resultant measure must also cover all imports. Our understanding of the principle of parallelism is that if the United States were, on the basis of Article XXIV, to exclude imports from Canada and/or Mexico from the scope of its safeguard measures, the United States must establish explicitly that imports from sources other than Canada and/or Mexico satisfied the Article 2.1 conditions for the application of a safeguard measure.¹⁴³ In other words, while there must be a parallelism between the scope of the investigation and the scope of any resultant measure, the principle of parallelism does not determine the scope of the investigation.

 

126 The United States does not dispute that Article XIX dictates MFN treatment.

127 Imports from Canada and Mexico were excluded from the line pipe measure on the basis of Article 802 of NAFTA, which provides for the elimination of safeguard measures between NAFTA members in certain circumstances. Accordingly, the application of that provision in a given case (through the NAFTA Implementation Act) should also be treated as the elimination of safeguard measures between NAFTA members.

128 Article XXIV:5 specifies that the "formation" of a free-trade area shall not be prevented. We do not consider that this necessarily restricts the Article XXIV defence to safeguard measures (excluding free-trade area partners) introduced upon formation of a free-trade area. In our view, it is sufficient that the mechanism providing for the exclusion of free-trade area partners from safeguard measures (i.e., providing for the MFN violation for which the defence is required) is established upon formation of the free-trade area. In this regard, we note that imports from Canada and Mexico were excluded from the line pipe measure on the basis of Article 802 of NAFTA, and that this provision was included upon the formation of NAFTA.

129 In Turkey - Textiles, the Appellate Body found that the party claiming the benefit of the Article XXIV defence must demonstrate that the conditions governing the application of that defence are met (paras 58-59).

130 Response to Panel Question 2 to the United States at the second substantive meeting (see Annex B-8).

131 Korea's oral statement at the first substantive meeting, note 21.

132 Response to Panel Question 1 to Korea at the second substantive meeting (see Annex B-7).

133 We would also note that Article XXIV:7 does not require the CRTA to approve regional trade arrangements, or issue formal decisions on their conformity with the WTO Agreement.

134 See para. 7.144 supra.

135 This does not mean that the Panel has found NAFTA to be in conformity with Article XXIV:5(b) and 8(b). We simply find that the United States has established a prima facie that NAFTA is in conformity with Article XXIV:5(b) and 8(b), and that Korea has failed to rebut that prima facie case.

136 Turkey - Textiles (AB) at para. 58.

137 Indeed, the application of a necessity test in such circumstances would give rise to absurd results. For example, assume that an FTA eliminates duties on peanuts, but not cars. In the context of a necessity test, third countries could claim that it was not necessary to eliminate duties on peanuts to meet the "substantially all the trade" threshold of Article XXIV:8(b), as that threshold could have been met by eliminating duties on cars. In such cases, it is difficult to imagine how a necessity requirement could ever be fulfilled.

138 Response to Question 20 from the Panel at the first substantive meeting (see Annex B-2).

139 Argentina - Footwear Safeguard at para. 8.84.

140 As the Appellate Body found in Argentina - Footwear Safeguard, "[a]n interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility." (footnote 76)

141 In making this finding, we express no view as to whether Article XXIV is available as a defence to claims under Multilateral Agreements on Trade in Goods more generally.

142 Korea's first written submission, paras 172 and 173.

143 See US - Wheat Gluten (AB) at para. 98.

Continuation: (iii) Conclusion

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