RESTRICTED
WORLD TRADE WT/REG/W/24
26February 1998
ORGANIZATION(98-0778)
Original: English Committee onRegional Trade Agreements
COMMUNICATION FROM HONG KONG, CHINA
AnAnalysis oftheTerm "Substantially AlltheTrade" (SAT) Pursuant to
theCustomary Rules ofInterpretation ofPublic International Law(VCLT Article 31)
Analysis ismade through anexamination ofthefollowing interpretative means:
(i) Ordinary Meaning oftheTerm
Theword "substantially" unambiguously indicates thatnotalltrade between members ofa
customs union orafree-trade areahastobecovered bytheregional tradeagreement, soastobejudged
compatible withArticle XXIV:8.
Theaccent is,inprinciple, onastrict approach whereby, inquantitative terms, averyhigh
percentage ofthetradebetween theconstituents ofacustoms union orfreetradeareashould becovered.
(ii) Context
(a) Inthecontext ofArticle XXIV
Nothing intheother paragraphs ofArticle XXIV canbefound toshedanylighttomake the
term"SAT" more precise.
(b) Article XXIV intheContext oftheGATT
Anexamination ofArticle XXIV inthecontext oftheGATT doesnotshedanylighttowards
arriving atamore precise meaning oftheterm"SAT".
(iii) Purpose andObject oftheAgreement
[Purpose andobject oftheGATT: liberalization ofinternational trade.]
Ananalysis ofthepurpose andobject oftheGATT again doesnotleadustoaprecise meaning
oftheterm"SAT". However, theterm"SAT" should beinterpreted ascovering asmuch aspossible
ofalltrade between theconstituent members ofaregional trade agreement, inorder tobeconsistent
withthepurpose andobject oftheGATT.
(iv) Subsequent Decisions
ThroughoutthehistoryoftheGATT/WTO,neverhasaninterpretationofthistermbeenadopted.
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(v) Subsequent Practice
[Awiderange ofopinions havebeenadvanced inpastworking parties. Arepresentative view
which cansumuppastpractice isoffered bytheWorking Party onEuropean Communities (EC) -
AgreementswithPortugal(BISD20S/171,para.16)wheretheECnotedthat"thereisnoexactdefinition
oftheexpression", referring totheterm"SAT".]
Thetermof"SAT" which isthesubject ofouranalysis hasnotbeenclearly defined byany
working party.
Conclusion
- Noprecise definition oftheterm"SAT".
- SAT should mean covering aslarge aspossible aproportion ofthetrade between the
constituencies ofaregional trade agreement.
- Amore precise interpretation ofthisterm willenable theCommittee onRegional Trade
Agreements tomore effectively discharge itsfunctions; andwillprovide clearer guidance to
potential members ofaregional trade agreement.
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