Morality and Culture in International Trade Law

Defining the Scope of Article XX lit a) GATT

Bachelor Thesis, 2010

47 Pages, Grade: 1,0



I Abstract

1. Introduction
1.1 Research Problem
1.2 Relevance of the Topic
1.3 Scope of the Study

2. China-Audiovisual Products (WT/DS363)
2.1 The Dispute
2.2 China’s Legalization under Article XX lit a) GATT

3. Content and Scope of Article XX lit a) GATT
3.1 Vienna Convention on the Interpretation of Treaties
3.1.1 Ordinary Meaning
3.1.2 Object and Purpose
3.1.3 Context Preparatory Work Prior Treaties Perceived Need Moral Trade Restrictions in Enforcement Scholarly Research
3.2 The Question of Extraterritoriality
3.3 Summary

4. Boundaries to the Application of the Public Morals Clause
4.1 Burden of Proof
4.2 Means of Evidence
4.2.1 Originalism
4.2.2 Universalism
4.2.3 Moral Majority
4.2.4 Unilateralism
4.3 Necessity Test
4.4 Chapeau Clause of Article XX GATT

5. Conclusion
5.1 Summary
5.2 Outlook

III List of References
a. WTO Legislation
b. Literature

IV Annex

a. Article 26 of the Publications Regulation

b. Article 27 of the Publications Regulation

c. Accession Protocol of the People’s Republic of China

V Acknowledgements

I Abstract

In 2009 the WTO Panel China-Audiovisual Products was the first to rule on an Article XX lit a) GATT defence used to legitimize trade restrictions on moral grounds. So far countries have been reluctant to employ the vaguely defined public morals clause, but trends suggest that an augmented use is to be expected. The WTO has provided little indication as to which and whose morals are covered by the exception which has led to the widespread fear that the public morals clause might be abused to enforce unilateral policies against the principles of free trade.

This paper takes an abstract approach to the scope and content of the public morals exception of the GATT. Critically examining the drafting history, legal practice and current scholarly research the note concludes that a large variety of different values are covered by the concept of public morality. However the note suggests that an abuse of the exception is not to be expected as the high boundaries set by the WTO to the application of the exception render the legalization of most policy objectives highly unlikely.

1. Introduction

“ Free trade will always generate powerful enemies. ” (Peter Fuhrman)

1.1 Research Problem

Any free trade system must decide on the degree of regulatory autonomy nation states retain despite their commitment to a free flow of goods and services. A recent dispute at the World Trade Organization (hereinafter WTO) shows how fragile the world’s biggest trade organization can be when it comes to testing the sovereignty of states against the principles of free trade.

On the 10th of April 2007 the United States requested consultations with China concerning measures restricting trading rights and market access for films, sound recordings, books, newspapers, magazines and other entertainment products. China failed to fulfil its WTO obligations by reserving the right to import the above mentioned products to wholly or partially state-owned enterprises.

In the dispute China invoked the defence that the publications and audiovisuals are so-called “cultural goods” that have a potentially serious negative impact on public morality. With reference to Article XX lit a) of the General Agreement on Tariffs and Trade 19941 (hereinafter GATT) China claimed that these cultural goods must be reviewed before they are imported into China to protect their own citizens from wrongful values.

This case hits the WTO at its weakest point as the supremacy of individual states is tested against the principles of free trade and non-discrimination. If future dispute settlement decisions on Article XX GATT measures are too weak, countries may start to abuse the article whereas imposing a very strict reading to facilitate international trade might lead to countries viewing the WTO as a threat to their national sovereignty. This might be the reason why the WTO has so far been reluctant in defining Article XX lit a) GATT further and drawing a line on what measures are covered by the exception.

1.2 Relevance of the Topic

Trends suggest that the public morals exception will become increasingly important in the following years. This is in part due to the continuing growth of the WTO. At its foundation the WTO had only 23 members. ( 2010: The GATT Years: From Havana to Marrakesh) Today it has 153 member states with very different cultural backgrounds triggering a variety of disputes. ( 2010: Members and Observers) The growing diversity coincides with the increased importance of international trade also to minor economies. (Marwell 2006: 809) Trade restrictions have a growing influence on the gross domestic product (GDP) of nations leading to a higher willingness of bringing a dispute in front of the WTO. (Marwell 2006: 809) Furthermore WTO regulations have become stricter in recent years imposing tighter environmental and human health standards on member countries. ( 2010: Trade and Environment) The increased pressure might prompt nations to find another way out by using the public morals exception. Moreover the public morals clause has been viewed as a vehicle to incorporate human, women’s and labour rights into the WTO in recent years. (Wu 2008: 224; Marwell 2006: 805) Respective organizations might take the repeated application of Article XX lit a) GATT as an invitation to try to rectify trade barriers against countries restricting these rights.

1.3 Scope of the Study

This paper takes an abstract approach on establishing the scope and the content of the so-called public morals exception of Article XX lit a) GATT. The scope of the similar and closely linked “morals and order exception” of Article XIV General Agreement on Trade in Services (GATS) is not part of the analysis, although most of the findings can be applied to both clauses.

Chapter 2 provides important background to the investigation by examining the recent WTO dispute WT/DS363 China-Audiovisual Products. The approach of the WTO dispute settlement body to the public morals exception is discussed and relevant findings of the Panel are highlighted.

A theoretical discussion to establishing the content and scope of Article XX lit a) GATT follows in chapter 3. Public morals could comprehend anything from religious views on pork meat towards pornography, corruption, child labour, women’s rights and general views on education. The definition from policy and textual perspective is highly difficult. By referring to the Vienna Convention on the Interpretation of Treaties the magnitude of the exception is systematically examined, taking into account sources from the drafting years as well as recent contextual documents.

In sequence to defining the values covered by the moral exception Chapter 4 defines the boundaries to the clause. Concepts such as Burden of Proof, Means of Evidence, the Necessity Test and the requirements of the Chapeau Clause of Article XX GATT are investigated and evaluated. Solutions to a prevention of abuse of the exception are presented.

The conclusion provides a summary and an outlook. The current status of scientific research is summarized and further areas of work are identified.

2. China-Audiovisual Products (WT/DS363)

2.1 The Dispute

On April 10th 2007 the United States requested consultations with China regarding trading rights for publications and audiovisual products. (WT/DS363/1) Trading rights describe the right to export and import; they are not included in the Uruguay Round Agreements and thus only apply to members that joined the WTO after its foundation in 1995. (McGivern 2009: 1) These so-called “WTO-Plus” obligations are included in the Accession Protocol of China and impose stricter obligations on the country than on WTO founding members. (McGivern 2009: 1) At the same time the provisions of the Accession Protocol are “without prejudice to China’s right to regulate trade in a manner consistent with the WTO agreement”. (WT/L/431 2001: 5.1) China claimed that it made use of this right by introducing content review mechanisms for audiovisual products. (WT/DS363/R 2009: 6.146)

The United States argued that China’s content review mechanisms are inconsistent with paragraphs 1.2, 5.1 and 5.2 of Part I of its Accession Protocol (See Annex c.) as well as Article III:4 of the GATT 1994. (WT/DS363/1 2007: I) The mentioned paragraphs of the Accession Protocol oblige the Chinese government to ensure that ]“all enterprises in China”2 have the right to import all goods into China. (WT/L/432 2001: 5.1) The Panel found that the import regulations on audiovisual products are inconsistent with China’s obligations under the Accession Protocol. (WT/DS363/R 2009: 7.1707) Article III:4 of the GATT states that imported products should be treated “no less favourably than [...] like products of national origin”. (GATT 1994: Article III) As the distribution of certain imported audiovisuals was restricted to wholly state-owned enterprises and imports were subject to stricter content review requirements than was the case for domestic products the Panel ruled on a breach of Article III GATT. (WT/DS363/R 2009: 7.1695) Not discussed in this paper are claims of the United States under Article XVI and XVII GATS dealing with market access and national treatment.

A WTO member can legitimate the breach of a clause under his “right to regulate trade” provided that an exception of Article XX GATT is met. (WT/DS363/R 2009: 4.112) To facilitate the task of weighting different interests at stake, the general exceptions clause provides for an exhaustive list of public interests which are deemed to be of sufficient importance to justify trade restrictions that would otherwise violate WTO obligations. (Diebold 2007: 44) Valid reasons for deviation are among others human, animal or plant life or health (lit b)), prison labour (lit e)), protection of exhaustible natural resources (lit g)) and public morals (lit a)). (GATT 1994, Article XX)

Consultations between the United States and China held on the 5th and 6th of June did not resolve the dispute. (WT/DS363/R 2009: 1.3) In consequence a Panel was established by the Dispute Settlement Body (hereinafter DSB) on November 27th 2007. (WT/DS363/R 2009: 1.6) This Panel is the first in the history of the WTO to rule on trading rights. (McGivern 2009: 1) Founded in 1995 the WTO dispute settlement system is there to resolve all cases of commercial tension between governments worldwide. If one country contravenes WTO treaty commitments one or more members (complainants) can challenge a trade policy set up by another member state (defendant). (Busch et al 2006: 446) The DSB possesses strong economic weapons such as retaliatory tariffs to enforce its jurisprudence. (Eres 2004: 601)

In its Panel request the United States complained that China only allows “state- designated and wholly or partially state-owned enterprises” to import “films for theatrical release, publications (e.g. books, magazines, newspapers, and electronic publications), audiovisual home entertainment products (e.g. video cassettes and DVDs), and sound recordings” and that thereby Chinese law restrains foreign companies unfairly from engaging in distribution activities for these goods and discriminates between foreign and domestic distributors. (WT/DS363/5 2007) The Chinese agencies reviewed the entertainment products and provided pi zhun (approval) based on the criteria stated in Annex a. and b. (Wang 2008: 7). The Panel found the restrictions to be inconsistent with China’s WTO obligations. It issued its final report on the 23rd of June 2009. (WT/DS363/R 2009: 1.11) On the 21st of December 2009 the DSB adopted the Panel report with small modifications. (WT/DS363/AB/R 2009)

2.2 China’s Legalization under Article XX lit a) GATT

In the course of the dispute China attempted to legalize their content review mechanisms by claiming that these fall under the scope of its “right to regulate trade” and are fully justified under Article XX lit a) GATT.3 (WT/DS363/R 2009: 272)

Article XX lit a) GATT 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 contracting party of measures:

(a) necessary to protect public morals; (GATT 1994: Article XX)

In their line of argument China claimed that the content review mechanisms were directed at protecting Chinese public morals, as the imported “cultural goods […] may have [had] a potentially serious impact on societal and individual morals”. (WT/DS363/R 2009: 7.712) China claimed that “imported cultural goods, because they are vectors of different cultural values, may collide with standards of right and wrong conduct which are specific to China.” (WT/DS363/R 2009: 7.712)

In order to successfully justify an otherwise unlawful restriction on trade in goods a responding member must prove the fulfilment of the Two-Tier Test. (WT/DS2/AB/R 1996: 22) Firstly it has to show that the measure is designed to pursue a policy objective that falls within the scope of one of the public interests of Article XX GATT. (WT/DS2/AB/R 1996: 22) In this case China had to prove that the audiovisuals in question in fact endanger Chinese public morality. The second step consists of proving the required degree of connection between the measure and the policy objective. (WT/DS2/AB/R 1996: 22) The Chinese government had to show that the content review mechanisms are the least-restrictive measure to protect public morals. This second step is commonly referred to as the Necessity Test. Tier two is the proof that the measure satisfies the good faith requirements set forth by the Chapeau of the general exceptions clause, that is the measure neither arbitrarily and unjustifiably discriminates between countries where like conditions prevail nor constitutes a disguised restriction on trade. (GATT 1994: Article XX) The Two-Tier Test, that appeared first in U.S.-Gasoline, can be summarized to the three conditions (1) the measure advances a policy goal that fits within the scope of Article XX lit a) GATT, (2) the measure is “necessary” to protect public morals; (3) the measure is not a violation of the Chapeau Clause of Article XX GATT. (WT/DS2/AB/R 1996: 17-18.22)

In China-Audiovisual Products the defendant claimed that the filtered contents cover a range of topics from violence to pornography and serve the protection of traditional Chinese values. (WT/DS363/R 2009: 7.714) They meet prerequisite (1) as they are solely designed to protect public morals. Moreover the applied content review system is “necessary” to protect public morals (prerequisite 2) as it effectively and efficiently fulfils the aim of prohibiting cultural goods with inappropriate content. (WT/DS363/R 2009: 7.715) Lastly China claimed that their restrictions have minimal impact on international trade and are not imposed arbitrarily as domestic producers face comparable limitations (prerequisite 3). (WT/DS363/R 2009: 7.716) Following this line of argument the Chinese import restrictions would pass the Two-Tier Test as described above.

The United States did not challenge China’s list of prohibited content (see Annex a. and b.) to have a negative impact on public morals. (WT/DS363/R 2009: 7.762) In consequence the Panel did not discuss whether the mentioned products fall under the concept of public morality either. (WT/DS363/R 2009: 7.763) Still the US claimed that China’s measures did not comply with the requirements of Article XX lit a) GATT. They argued that the “measures are neither necessary to protect public morals, nor are they consistent with the Chapeau of Article XX.” (WT/DS363/R 2009: 7.717) In order to pass the Necessity Test, no “reasonably available WTO-consistent alternative” has to exist that is less restrictive to trade. (WT/DS285/AB/R 2005: 309- 310) The United States suggest that content review could also be held by foreign enterprises and private companies in China and thus the measure is not “necessary” but arbitrarily discriminates against all but a small group of state-owned Chinese enterprises. (WT/DS363/R 2009: 7.718)

The WTO Panel was the first to rule on the public morals defence of Article XX lit a) GATT. (McGivern 2009: 2) The Panel discussed whether the measures found to be inconsistent with China’s obligations to facilitate trade may be maintained if they fall under China’s right to regulate trade. It is the Panel’s view that if the restricting measures are consistent with Article XX lit a) GATT the Chinese government would have the full right to regulate importers of audiovisual materials. (WT/DS363/R 2009: 7.722) Neither the Panel nor the Appellate Body discussed whether audiovisuals were a matter of public morality. They decided that China did not meet the requirements of the Necessity Test as the United States identified a less-restrictive measure to reach the objective. (WT/DS363/R 2009: 7.909-7.9011)

3. Content and Scope of Article XX lit a) GATT

3.1 Vienna Convention on the Interpretation of Treaties

In China-Audiovisual Products the Panel has refrained to discuss if the protection of Chinese citizens from foreign values could fall under the moral exceptions clause. (WT/DS363/R 2009: 7.763) Until today no comprehensive list exists as to which and whose values are covered by Article XX lit a) GATT. In principle a vague provision can be clarified by either the drafting institutions revisiting the clause or judicial bodies ruling on the text. (Wu 2008: 219) Neither happened with Article XX lit a) GATT in over 60 years. The Dispute Settlement Understanding established that ambiguities in existing GATT provisions have to be clarified "in accordance with customary rules of interpretation of public international law”. (Dispute Settlement Understanding 1994: Article 3.2) In WTO law these principles of treaty interpretations are codified in Article 31 of the Vienna Convention on the Law of Treaties (hereinafter Vienna Convention). The Vienna Convention was adopted to settle disputes peacefully and “in conformity with the principles of justice and international law”. (Vienna Convention 1969: Preamble)

The provisions read as follows:

Article 31: General rule of interpretation

1. 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. (Vienna Convention 1969: Article 31)

The three steps in treaty interpretation are thus the definition of the ordinary meaning of a clause, the examination of the object and purpose pursued by the drafting parties and the context in which the clause was in former times applied and is applied today.

3.1.1 Ordinary Meaning

Article XX lit a) GATT was drafted by the government of the United States in 1946. (Charnovitz 1999: 6) When defining the public morals exception for the first time the Panel referred to the Shorter Oxford English Dictionary of the time and held that the Content and Scope of Article XX lit a) GATT term public morals “denotes standards of right and wrong conduct maintained by or on behalf of a community or nation”. (WT/DS285/R 2004: 6.465) This definition helps little in determining whether a specific policy objective invoked by a nation is covered by the moral exception. (Diebold 2007: 49)

Other definitions can be found in a variety of scientific papers as the definition of morality has intrigued philosophers, theologians, ethicists, anthropologists and other scientists since the ancient Greeks.4 The term “morals” comes from the Latin “mos/moris” and means convention, tradition and habit. (Horster 2009: 7) While in traditional spheres morality can be limited to the members of the own group (so- called tribalism) (Fromm 1997: 62) in developed societies the concept of the categorical imperative5 by Kant is widely known as describing the concept of morality. (Kant 1785: 30) Still, neither of these definitions provides a list of which values fall under the scope of public morality.

Important in the discussion of providing evidence for the predominance of certain values is the theory of moral relativism. The Stanford Encyclopedia of Philosophy states that “moral truth or justification is relative to a culture or society.” (Gowans 2008: Moral Relativism) Morals are passed on by the older generation and differ based on cultural imprint, historical and personal experiences and are also influenced by the genetic material. (Hauskeller 2001: 12) Furthermore a certain set of moral beliefs are only valid for a certain period of time and a certain civilization, as with evolution also the fundamental notions of a society change. (Duprat 2009: 20) The theory of moral relativism states that morality can only be judged with respect to specific situations and in the context of a socio-historical and religious context. (Gowans 2008: Moral Relativism) In US-Gambling the Panel follows the theory of moral relativism stating that “the content of these concepts [of public morality] for Members can vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical, and religious values”. (WT/DS285/R 2004: 6.461) This definition shows that the scope of the moral exception might differ from country to country which is why a definition following the Ordinary Meaning will always fail its purpose.


1 The GATT is an international agreement establishing rules for trade in goods. For further information see Macrory et al. 2005

2 According to the broad interpretation of the Panel this includes foreign-invested enterprises registered in China such as wholly foreign-owned enterprises, Chinese-foreign equity joint ventures and Chinese-foreign contractual joint-ventures.

3 China invoked this defense only for reading materials (books, newspapers,…) and audiovisual products. Films for theatrical release are not part of the analysis as they are not included in China’s trading rights commitments of the Accession Protocol. (WT/DS363/R 2009: 7.725)

4 The first known philosophers to deal with morality were Socrates (469 BC - 399 BC) and Plato (384 BC - 322 BC). Socrates believed that knowledge was the basis for correct moral behavior (See “Apology” by Plato), while Aristotle claimed that happiness is the ultimate aim of mankind that can only be achieved by virtue. (See “Nicomachean Ethics” by Aristotle)

5 „Act in such a way that the maxim of your will could always hold at the same time as the principle of a universal legislation“ (Kant 1785)

Excerpt out of 47 pages


Morality and Culture in International Trade Law
Defining the Scope of Article XX lit a) GATT
Hamburg University of Applied Sciences
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
593 KB
GATT, Article XX, moral exception, morality, article xx lit a, china-audiovisual products, public morals clause, wt/ds363
Quote paper
Thea Freese (Author), 2010, Morality and Culture in International Trade Law, Munich, GRIN Verlag,


  • No comments yet.
Read the ebook
Title: Morality and Culture in International Trade Law

Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free