THE EUROPEAN COURT OF JUSTICE AND DIRECT EFFECT FOR THE GATT:A QUESTION WORTH REVISITING

Judson Osterhoudt Berkey
Harvard Law School
Final Revised Version

ABSTRACT

The European Court of Justice has long been criticized for consistently holding that the General Agreement on Tariffs and Trade (GATT) does not have direct effect.  The end of the GATT Uruguay Round prompted a renewed analysis of direct effect by Kees Jan Kuilwijk.  In his book, The European Court of Justice and the GATT Dilemma, Kuilwijk argues that the continued denial of direct effect not only proves that the ECJ has protectionist motives but also that it is unconcerned with individual rights.
Kuilwijk’s book not only updates the traditional critique of the Court’s doctrine but also illustrates the tendency of the traditional critique to fail to acknowledge the full complexity of the direct effect question.  Thus, a more measured and thorough exploration of the legal, political, and economic issues involved in analyzing the direct effect may prove useful.  This paper attempts such an analysis.  Its purpose is not to advocate a particular position but merely to illustrate the gaps in the traditional critique.

ACKNOWLEDGMENT

As with any accomplishment in my life, tribute must first be paid to my family without whose love and support nothing would be possible.  Beyond that, three individuals must be distinguished in particular.  First, my mother, Dr. Judith O. Berkey, who has always taught me to pursue my dreams wherever they may lead.  Second, Professor Richard Z. Lawrence who taught me international trade theory and provided useful comments on this paper during its progress.  Lastly, and most importantly, a large debt of gratitude is owed to my supervisor, Professor Joseph H. Weiler.  Not only did he help me develop many of the ideas contained in this paper but he also taught me to think like a lawyer and a scholar.

TABLE OF CONTENTS

1. Introduction	1
1.1 Current State of the ECJ Doctrine	2
1.2 Current Criticisms of the ECJ Doctrine	4

2. Doctrinal Analysis	6
2.1 GATT reciprocity may differ from that in the other international agreements	8
2.2 The structure of the GATT safeguards may not contemplate direct effect	12
2.3 The nature of GATT dispute settlement may not require direct effect	16

3. Motive Analysis	23
3.1 Possible non-mercantilist motivations for the ECJ’s doctrine	24
3.2 Implications of the ECJ's method of analysis	33

4. Political Economy Analysis	39
4.1 Differences between GATT and Community fundamental rights	40
4.2 The place of individuals within the GATT	44

5. Conclusion	48

REFERENCES	50

1. Introduction

Whether the European Court of Justice should permit enforcement of provisions of the General Agreement on Tariffs and Trade within the European Community legal system is a difficult question to answer.  In his book, THE EUROPEAN COURT OF JUSTICE AND THE GATT DILEMMA, Kees Jan Kuilwijk concludes that the Court should do so by means of granting direct effect to the GATT.  While Kuilwijk’s book contains a sophisticated legal, political, and economic analysis of the direct effect question and is a worthwhile addition to the prevailing academic view on this issue, its treatment of the relevant concerns does not always fully elucidate their complexity.
For that reason, this paper attempts to illustrate the competing considerations facing the ECJ in deciding whether to grant direct effect to the GATT.  It will be shown that when one thoroughly examines the legal, political, and economic realities of the GATT it is no longer obvious, as Kuilwijk argues it is, that: 1) the ECJ’s jurisprudence requires direct effect, 2) denying direct effect is detrimental to the Community’s interests, and 3) direct effect is necessary to protect individual rights.  After a brief introduction to the current ECJ doctrine and its critics, the paper will pursue the following distinct lines of analysis: 1) doctrinal, 2) motive, and 3) political economy.  While the analysis is motivated by Kuilwijk's book, the discussion will often explore issues beyond the bounds of his critique.      

1.1 Current State of the ECJ Doctrine

Four principles govern the domestic legal effect of international agreements.  These principles are the following: 1) direct application, 2) direct effect, 3) supremacy, and 4) interpretation.  The ECJ developed a common conception for each of these principles except direct effect.  Although the Court granted direct effect to other international agreements, it held in International Fruit Company, an Article 177b preliminary reference decision, that individuals could not enforce GATT 47 provisions because the agreement lacked direct effect.
The Court reached this conclusion based on a consideration of the “spirit, general scheme and the terms of the General Agreement.”  The Court held that, because the GATT 47 “is based on principles of negotiations undertaken on the basis of ‘reciprocal and mutually advantageous arrangements,’ [and] is characterized by the great flexibility of its provisions, in particular those conferring the possibility of derogation, the measures to be taken when confronted with exceptional difficulties, and the settlement of conflicts between the contracting parties,” it did not provide individuals with rights which could be invoked in national courts.

The ECJ also held that member states could not enforce the GATT 47 provisions in Article 173(1) actions before the Court.  The ECJ used International Fruit Company as a precedent in this decision to conclude that “those features of GATT, from which the Court concluded that an individual within the Community cannot invoke it in a court to challenge the lawfulness of a Community act, also preclude the Court from taking provisions of GATT into consideration to assess the lawfulness of a regulation in an action brought by a Member State.”  Thus, the Court consistently held that the nature and structure of the GATT 47 precluded any of its provisions from having direct effect.

Although the ECJ denied direct effect to the GATT 47, it did allow some of the agreement’s provisions to have legal significance within the Community.  The Court held that GATT 47 provisions could be used to interpret the meaning of Community legislation which expressly referred to those provisions.  For example, in FEDIOL III, the ECJ held that the GATT 47 Article III prohibition against discriminatory taxes could be used to interpret the meaning of “illicit commercial practices” under the Community's New Commercial Policy Instrument Regulation because this regulation required the Community to comply with its international obligations.  The Court distinguished its previous direct effect holdings by stating that “the GATT provisions have an independent meaning which, for the purposes of their application in specific cases, is to be determined by way of interpretation.”   In the end, however, the Court found that the contested measures did not constitute an illicit commercial practice.
The Court also held that GATT 47 provisions can be used to interpret Community legislation when that legislation implemented a specific GATT 47 provision.  For example, in Nakajima, the Court held that the GATT 47 Anti-Dumping Code could be used as grounds for reviewing the legality of an anti-dumping margin determined under the Community's Basic Anti-Dumping Regulation.  In a manner similar to its decision in FEDIOL III, the Court held that this was possible because the regulation “was adopted in accordance with existing international obligations, in particular those arising from Article VI of the General Agreement and from the Anti-Dumping Code.”  Again, however, the ECJ found that the substantive provisions of the Anti-Dumping Code had not been violated.
Because the ECJ has not addressed the direct effect question since the signing of the Uruguay Round Agreements, the above decisions constitute the Court’s doctrine towards the new GATT.  Therefore, the current ECJ doctrine continues to hold that the GATT lacks direct effect and only has legal significance when Community legislation expressly refers to, or is intended to implement, specific GATT provisions.
1.2 Current Criticisms of the ECJ Doctrine

The ECJ’s GATT direct effect doctrine has been criticized on many grounds.   In fact, Kuilwijk claims that it is “one of its [the ECJ’s] most seriously criticized doctrines ever.”  Kuilwijk’s book provides one of the most sophisticated critiques to date.  In the mode of the Court’s other critics, Kuilwijk first argues that the GATT is not significantly different in nature and structure from the other international agreements to which the ECJ has granted direct effect.  Thus, he concludes that it is inconsistent to deny direct effect to the GATT.  Second, he argues that granting direct effect to the GATT would force the Community to adopt a rule-based liberal economic foreign trade policy which would maximize the economic welfare of the Community.  Thus, he concludes that the Court harms the Community by continuing to deny direct effect. 
Kuilwijk arguments, however valid and informative, are often one dimensional and colored by a conspiratorial tone that ultimately weakens his critique.  For example, he states that the ECJ denies direct effect to the GATT in order “to support a ‘secret bond’ between the Commission and the Council, on the one hand, and import-competing Community producers, on the other.”  He argues that the Court’s concern over reciprocity in the GATT reflects a “persistent adherence to the traditionalist mercantilist, negative and defensive view of foreign trade policy.”  Thus, he concludes that the Court should grant direct effect to the GATT in order to provide the “divine guidance...needed to attain economic paradise.”  Given Kuilwijk’s tendency to slip into such one sided advocacy, a more balanced treatment of the direct effect question may be useful. 
2. Doctrinal Analysis

One of the main criticisms of the ECJ’s GATT direct effect doctrine is that it is inconsistent with the Court’s doctrine with regard to other international agreements.  An analysis of the cases in which the ECJ has dealt with these other international agreements reveals that the Court has examined four principle elements when deciding whether such agreements are capable of having direct effect.  These elements are the following: 1) reciprocity in the initial balance of the obligations established by the agreement, 2) reciprocity in the ability to enforce the obligations established by the agreement, 3) the possibility of derogating from the obligations established by the agreement, and 4) the method of dispute settlement established by the agreement.

International Fruit Company and the confirming line of cases show that the ECJ denied direct effect to the GATT 47 based upon a consideration of these same four elements.  Critics of the Court’s doctrine have argued that because the nature and structure of the GATT 47 did not differ appreciably from the other international agreements with respect to these four elements there was no justification for using them as a reason to deny direct effect to the GATT 47.  Kuilwijk attempts to strengthen this criticism by arguing that the existence of the new Uruguay Round Agreement on Safeguards, which limits the ability of the contracting parties to derogate from their GATT obligations, and the increasingly judicial nature of the Agreement on Dispute Settlement Understanding (DSU) mean there is even less of a reason for the Court to deny direct effect to the GATT today.  Indeed, he claims that a continued denial of direct effect shows that “the provisions of GATT are instead treated as the ‘children of a lesser God’, not worthy of the Court’s attention.”
2.1 GATT reciprocity may differ from that in the other international agreements

Although it is certainly true that the GATT 47 and the other international agreements were similar in many important ways, it may not be entirely correct to state that there were no reciprocity differences between them which justified different direct effect doctrines.  While the other international agreements were designed to implement various stages of economic integration between the Community and its treaty partners, the GATT 47 was designed to create a mechanism for negotiating non-discriminatory and reciprocal tariff reductions among its contracting parties.  Thus, the nature of the other international agreements may have been more conducive to direct effect than the GATT 47.
In Kupferberg, for example, the ECJ considered the Free Trade Area Agreement between the Community and Portugal which eliminated all tariffs and other barriers to trade between the two parties.  In Pabst & Richarz and Sevince, the Court considered the Greek and Turkish Association Agreements, respectively, which created customs unions, a higher form of integration than a free trade area, between the parties.  Finally, the Yaounde Convention considered by the ECJ in Bresciani provided for non-reciprocal duty free entry into the Community of goods from the ACP countries.   These agreements, which established rights and obligations similar to those existing between the member states of the Community, all created higher forms of integration than the GATT 47.

The Community and its treaty partners in the other international agreements also had historical ties which did not exist between the contracting parties of the GATT 47.  For example, at the time that the ECJ was considering the free trade area agreement in Kupferberg, Portugal had already applied for membership in the Community.  In Pabst & Richarz, the ECJ made explicit references to the fact that the association agreement was intended to prepare Greece for entry into the Community.  The ACP countries in the Yaounde Convention were by definition those which had historical ties to Community member states.  Even Kuilwijk admits that these historical and potential future relationships between the Community and its treaty partners may have resulted in an “extra-territorial solidarity” or an  “anticipated solidarity” which did not exist between the GATT 47 contracting parties. 

When dealing with the GATT 47, in contrast, the Court always described the agreement’s purpose by referring to its preamble which stated that it was an agreement for “entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce.”  Thus, the Court noted that the GATT 47 contracting parties only agreed to reduce tariffs and to eliminate discrimination between them and not to pursue economic integration.  The GATT 47 did not anticipate the creation of a single market like that of the Community, but rather allowed the contracting parties to preserve a diversity of market structures as long as they did not unfairly differentiate between contracting parties.  Because the GATT 47 did not attempt to integrate disparate legal and economic systems like the other international agreements did, it may not have required the enhanced enforcement and uniform application of its provisions that would have resulted from granting direct effect. 
Finally, one must recognize that the practical position of the Community in the GATT 47 was different than its position in the other international agreements.  The other international agreements involved countries which were in a much weaker bargaining position than the Community.  Because these agreements allowed the parties to withdraw from the agreement if they so desired, the EC could use threats to do so, and the resulting loss of treaty benefits for the other party, as a means of forcing compliance with the agreement’s obligations.  Thus, the Community had a real ability to influence the policies of the other parties to these agreements even when these parties did not grant direct effect to the agreement.
In the GATT 47, however, the Community was not in as strong a position to influence the policies of the other contracting parties.  The United States and Japan, the two other large contracting parties, had an equal amount of bargaining power as the Community.  The Community also could not threaten to withdraw from the system if it felt its rights were not sufficiently respected because such a threat lacked credibility.  Thus, the Community was limited to working within the GATT 47 system in a way that it was not in the other international agreements.  In this case, it may have been appropriate for the Court to insist upon explicit reciprocity from the other contracting parties before granting direct effect to the GATT 47. 

The reasons for being cautious about drawing comparisons between the direct effect granted to the other international agreements and direct effect for the GATT 47 apply to the new GATT as well.  The GATT 47 preamble, which is still the preamble to the GATT today, conveys the message that the GATT system is designed merely to provide a forum for engaging in multilateral negotiations directed at trade liberalization.  And while it is true that the GATT system has produced some agreements requiring harmonization, most noticeably the Uruguay Round Agreements on Antidumping, Subsidies, and Trade Related Aspects of Intellectual Property (TRIPS), it is also true that those agreements require national law provisions protecting individual rights.  
It certainly is true that these agreements could be cited as support for the argument that the ECJ should grant a form of conditional direct effect to the GATT whereby direct effect in any specific case would depend on whether the other countries involved had also agreed to grant direct effect.  However, as will be argued in Section 3.1 below, granting even conditional direct effect might deprive the Community of rights which it possesses under the GATT.  Thus, there are still substantial differences between reciprocity in the GATT and the other international agreements which show that the Court may not be deliberately treating the GATT as the child of a lesser God but merely as a different species of international agreement.   

2.2 The structure of the GATT safeguards may not contemplate direct effect
The ECJ always noted the flexibility of the GATT 47 Article XIX safeguard clauses, which allowed contracting parties to suspend GATT concessions in response to increased imports that “cause or threaten serious injury to domestic producers,” among its reasons for denying direct effect.  Critics have claimed that the Court acted inconsistently in its analysis of the GATT 47 because it was not bothered by similar safeguard clauses when granting direct effect to other international agreements.  
Kuilwijk goes further than the Court’s other critics in arguing that the ECJ’s treatment of the GATT 47 safeguard clauses “mistakes GATT law for GATT practice.”  He contends that the safeguard clauses were never really flexible and led the contracting parties to adopt grey area trade measures such as voluntary export restraints (VER’s) and orderly marketing agreements (OMA’s).  He claims that this was a constitutional defect of the GATT 47 which could have been corrected by giving direct effect to the agreement.  Given the new Agreement on Safeguards, he concludes that there is no longer any excuse for denying direct effect for the GATT because it now “explicitly prohibits grey area trade restrictions and forms a true example of the new firm commitment to adherence to the law, subscribed to by the Community.” 

While the ECJ’s critics certainly do have valid criticisms, once again the issue is not nearly as one-sided as presented.  For example, an examination of the cases in which the ECJ considered other international agreements shows that the safeguard clauses in those agreements differed significantly from those found in the GATT 47 and in the new GATT.  In Kupferberg, for instance, the Court stated that the safeguard clauses in the Portugal Free Trade Agreement applied “only in specific circumstances and as a general rule after consideration within the joint committee in the presence of both parties.”  In Sevince, the Court agreed with Advocate General Darmon’s claim that the safeguards in the Turkish Association Agreement could be invoked only in cases where there was a threat of  “disturbances on [the] employment market which might seriously jeopardise the standard of living or level of employment in a particular region, branch of activity or occupation.”  Therefore, the Court appeared to attach importance not only to the fact that the safeguards in the other international agreements were applicable only after political consultation with the other treaty party but also that they could be used in specific circumstances.

Neither of these limitations was found in the GATT 47 nor is found in the GATT today.  Article XIX of the GATT 47 only required notification of contracting parties which would be affected by safeguard measures prior to their implementation in order to afford those parties an opportunity to ask for consultation over compensation.  Articles 12 and 13 of the new Safeguards Agreement do now require notification of the GATT Committee on Safeguards when initiating an investigation, making a finding of injury, or imposing a safeguard measure.  However, nothing in the GATT allows the GATT members or the Committee on Safeguards to prevent the implementation of a safeguard measure by another member.  Thus, it appears that GATT safeguards can be used without the same level of prior consultation as required by the other international agreements.
GATT 47 Article XIX also required a threat of, or the existence of,  “serious injury” before a contracting party could impose a safeguard measure.  However, this determination was left to the discretion of the government imposing the safeguard measure itself.  The new Safeguards Agreement Article 2 does now require a member to conduct an open investigation to prove the existence of injury.  Article 3, however, still leaves the determination of “serious injury” up to the competent authorities of the GATT member imposing the safeguard.  Thus, GATT members can use safeguard measures to remedy a broader range of injuries and have a larger amount of discretion in determining the need for safeguard measures than in the other international agreements.  Given these differences, it may not be entirely fair to the Court to claim that its treatment of the GATT safeguards is inconsistent. 

Because the ECJ could always grant direct effect to the GATT while at the same time holding that the Community had properly invoked a safeguard clause, one must move beyond the doctrinal question of the ECJ’s case law consistency to consider whether the political economy of the GATT safeguard regime really demands direct effect.  It is correct to state that, prior to the new Safeguards Agreement, the flaw in the GATT 47 safeguard regime was not that it was too flexible but rather that it was not flexible enough.  Contracting parties which did not want to pay compensation for, did not want to meet the non-discrimination requirement of, and did not want to conduct an investigation to justify a safeguard measure often adopted grey area trade measures such as VER’s and OMA’s to remedy the injuries caused by increasing imports.  These measures effectively imposed quota systems on international trade and thus were more economically harmful than tariffs.  It is not clear, however, how direct effect could have prevented the use of these measures which were effectively sanctioned under the GATT 47.

The new Agreement on Safeguards does represent a real step forward for the GATT in that it brings grey area trade measures such as VER’s and OMA’s within the discipline of the GATT and effectively bans them with only a few exceptions.  The fact that these measures have been reigned in, however, does not automatically mean that direct effect is now necessary to enforce compliance.  In fact, one could say that the adoption of the new safeguards regime indicates that once the GATT contracting parties recognize that there is a problem with the GATT structure and muster the political consensus to address the problem, they will act to do so.  In this case, it may not be appropriate for the ECJ to grant direct effect to the GATT and force the Community to adopt unilateral positions before a world political consensus exists.  And as will be shown in Section 3.1 below, granting direct effect to the GATT may also deprive the Community of its GATT rights.  Thus, one must be very careful indeed not to confuse GATT law with GATT practice.
2.3 The nature of GATT dispute settlement may not require direct effect 

 	The dispute settlement mechanism of the GATT 47 was heavily criticized because it did not require rule based adjudication to resolve disputes and effectively allowed the contracting parties to engage in power oriented diplomacy.  Despite this, however, the critics of the ECJ’s direct effect doctrine claimed that because the GATT 47 dispute settlement mechanism did not differ appreciably from those found in the other international agreements to which the Court had granted direct effect, it should not have been used as a justification for denying direct effect. 
While the GATT 47 dispute settlement mechanism was rightly criticized for being weak, there still may have been an important distinction between the GATT 47 and the other international agreements which justified the ECJ’s determination that it was part of the reason for different direct effect doctrines.  The GATT 47 was an agreement designed to establish a system of multilateral rounds of reciprocal trade negotiations across multiple sectors.  Thus, the GATT 47 effectively created a continuing relationship of negotiations between the contracting parties designed to propel the process of trade liberalization and resolve lingering disputes by means of cross-sectoral bargaining.  

This was not the case with the other international agreements.  These agreements created static systems that resulted from one time negotiations over the rights and obligations of the parties.  Thus, direct effect may not have been appropriate for the GATT 47 because it would have effectively allowed an individual to interfere with a process of ongoing negotiations between the contracting parties.  That is, direct effect might have prevented contracting parties from blocking panel reports which settled disputes in ways with which they disagreed and hoped to modify through negotiation.  While one may not approve of blocking panel reports in order to force negotiations to resolve policy differences, it cannot be denied that this was a significant right which each contracting party possessed under the GATT 47.
The Uruguay Round Agreement on Dispute Settlement Understanding (DSU) significantly strengthened the GATT 47 dispute settlement mechanism.  The DSU did so by providing deadlines for all procedures, by creating an Appeals Body, and, most importantly, by reversing the consensus-to-adopt-panel-reports approach of the GATT 47 to a consensus-to-block-panel-reports approach.  Given the changes introduced by the DSU, Kuilwijk argues that the dispute settlement mechanism can no longer be characterized as flexible.  He concludes that because “the dispute settlement system matured and now closely resembles an actual judicial system [with a] firm commitment to legalism” it should no longer be used by the ECJ as a justification for denying direct effect to the GATT.

One must carefully examine the actual operation of dispute settlement under the GATT, however, before concluding that the changes introduced by the DSU mean that direct effect is now appropriate.  Dispute settlement systems do not fall into one of two polar categories, i.e. hard legal or soft political systems, but rather lie along a continuum between the two.  Although the DSU has shifted the GATT system towards the legal pole, it is not yet clear where it falls on the continuum.  While it certainly has made GATT dispute settlement more legalistic, the DSU does not appear to have replaced all intergovernmental negotiation with strict precedent based application of GATT law.  Thus, it may be premature to state, as Kuilwijk does, that the GATT should be given direct effect because the DSU is now a true judicial system.  
In fact, the language of the DSU shows that negotiation still plays a large role in the panel procedure.  For example, DSU Article 3(3)’s call for the “prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired” indicates that the adoption of panel reports is not the only means of resolving a dispute.  DSU Article 4 requires consultations between the disputants before one may request the establishment of a panel to hear the dispute and Article 5 offers the use of good offices, conciliation, and mediation as an alternative means of resolving disputes.  
DSU Article 12(7) provides that “where the parties to the dispute have failed to develop a mutually satisfactory solution, the panel shall submit its findings in the form of a written report to the DSB.”  This implies that negotiations between the disputants may take place on a parallel track with a panel procedure.  After the issuance of a panel report, DSU Article 16(1) provides for a 20 day waiting period before the report can be considered for adoption by the DSB.  This provides the disputing parties with another opportunity to settle their dispute by negotiated agreement.  Finally, even after a panel report has been appealed and the Appeals Body has issued an appellate report, there is still a 30 day waiting period before that report can be adopted by the DSB.  This again provides time for the disputing parties to negotiate a settlement of their dispute without the adoption of a panel report.

One should also realize that the DSU procedures are not the only means of settling disputes within the GATT.  It has been noted that there are over thirty different ways to resolve disputes within the GATT.  Many GATT provisions, such as Article VII:1 which requires a GATT member to review the way it values goods for customs purposes when requested to do so by another member, call for consultations between the GATT members.  Other GATT provisions are framed to avoid disputes in the first place, such as Article XXV:5 which allows a GATT member to seek a waiver from its GATT obligations upon approval of the other GATT members.  Thus, one should be careful not to focus solely on the DSU when considering the nature of GATT dispute settlement. 	

The current dispute over the U.S. Helms-Burton Act illustrates some aspects of GATT dispute settlement that may caution against automatically assuming that direct effect is now appropriate for the GATT.  After this act took effect on March 12, 1996, pressure from the Community and Canada forced President Clinton to delay enforcement of its provisions which granted U.S. nationals a private right of action against foreign companies that “traffic” in property confiscated by the Cuban government from U.S. nationals.  When negotiations to resolve the dispute broke down on October 16, 1996, the Community filed a WTO complaint against the U.S. claiming that the act violated both the MFN principle and the prohibition against quantitative restrictions.  The U.S. argued in defense that the act qualified for the GATT Article XXI national security exemption from GATT violations.  Although negotiations between the two sides continued, no compromise was reached by the time a panel was formed.  At that time, the U.S. stated it would boycott any panel because it did not “believe anything the WTO says or does can force the U.S. to change its laws.”
The U.S. stance, which quickly prompted a renewed effort to reach a compromise, illustrates the strengths and limitations of the DSU.  Both the U.S. and the Community realized that a panel resolution of the dispute was a “lose-lose" proposition.  That is, a ruling for the U.S. would threaten the WTO by encouraging other countries to defend questionable trade-related policies under the GATT’s national security exemption while a ruling for the Community would slow momentum for further trade liberalization by weakening domestic political support in the U.S. for the GATT.   This merely intensified the pressure for a political settlement of the dispute.  Thus, the DSU may actually encourage, rather than inhibit, the use of political negotiation to resolve disputes in cases where there is not strong support for the adoption of panel report to settle the dispute.

In fact, negotiations eventually did lead the Community to suspend its WTO complaint for six months on April 11, 1997 and again on October 15, 1997.  The Community agreed to do so in order to allow the Clinton administration time to seek a Congressional change to the Helms-Burton Act.  The Community, however, reserved its right to revive the complaint if no satisfactory result was achieved.  Stuart Eizenstat, the U.S. Under Secretary of Commerce and chief U.S. negotiator, has stated that “this understanding represents a beginning and not an end.  There is absolutely no certainty we will reach an agreement...There is going to be hard bargaining ahead.”  As of the time of this writing the resolution of this dispute is still uncertain.
This dispute shows that a shift towards a more rule based adjudication of disputes requires a change in the attitude of the GATT member governments not just a change in the DSU.   A more legalistic DSU does not change the fact that dispute settlement in the GATT still may involve political negotiations between GATT members.  Where the GATT system has well defined rules and disputes are narrowly focused, the DSU will indeed work well.  However, when there is no consensus on either the substance or the application of the rules, the more legalistic DSU may not be able to save GATT dispute settlement from political negotiation. Thus, one should carefully consider the actual operation of the DSU before claiming that GATT dispute settlement would benefit from the existence of direct effect. 

3. Motive Analysis

A second line of criticism of the ECJ’s GATT direct effect doctrine attempts to impugn the Court’s motive for denying direct effect.  This criticism has largely been based upon an analysis of the ECJ’s treatment of the second element of reciprocity found in international agreements- i.e., reciprocity in the enforcement of obligations.  The ECJ’s critics have argued that it was improper for the Court to use the lack of absolute reciprocity in the GATT 47 as a reason for denying direct effect because unilaterally granting direct effect would have ensured that at least the Community strictly adhered to its GATT 47 obligations.  The critics have claimed that this would be beneficial because it would have prevented the Community institutions from acting arbitrarily in the context of foreign trade policy.

 	Kuilwijk attempts to extend this critique by endowing it with moral significance.  He states that the ECJ’s doctrine shows that it maintains a “persistent adherence to the traditional mercantilist, negative and defensive view of foreign trade policy.”  He argues that the ECJ focuses on the reciprocity of enforcement in order to disguise a desire to allow the Community institutions maximum flexibility in creating foreign trade policy.  He concludes that this harms the Community because “the true reason that the political institutions do not want to have their hands tied is that they wish to retain the freedom to confer special favors on specific industries, not because they are convinced that they are capable of better serving the public interest by retaining such freedom.”  
3.1 Possible non-mercantilist motivations for the ECJ’s doctrine

Before accusing the Court of undue protectionism, one must determine if there are any valid legal reasons for denying direct effect to the GATT.  First, it must be acknowledged that the reciprocity of enforcement in the GATT is much different from that in the Community or the other international agreements to which the Court has granted direct effect.  The U.S. has explicitly stated that the GATT will not have direct effect in U.S. courts.  It also appears that direct effect for the GATT does not exist in Japan.  Because both the U.S. and Japan, the two other large players in GATT dispute settlement besides the Community , explicitly deny direct effect to the GATT, this position may represent the common understanding of the GATT members about the nature of the agreement.
Second, it should be acknowledged that the GATT dispute settlement mechanism actually utilizes the lack of direct effect to help resolve disputes.  As previously noted, the lack of direct effect allows GATT members to settle a dispute by means of a negotiated agreement prior to a formal ruling on the GATT validity of trade measures.  This is useful because it allows member-to-member tradeoffs and cross-sectoral bargaining over concessions which would not occur if the dispute were resolved by means of a panel report or by national courts applying GATT law.  Thus, direct effect might actually inhibit the operation of the GATT by denying GATT members some of the flexibility contained in the DSU.  

Third, one must recognize that direct effect may actually deprive the Community of rights which it possesses under the GATT after the issuance of an adverse panel report.  If the ECJ required the withdrawal of a Community measure because it violated the GATT before a GATT panel had even decided that the measure actually did violate the agreement, then the Community would be deprived of the right to choose the method of remedying the injury caused by the measure.  That is, a Court ruling by means of direct effect would mandate specific performance as the only remedy for all GATT violations and deny the Community the ability to offer compensation as a remedy for its GATT violations.  This limitation on the policy discretion of the Community might be particularly harmful in the context of the GATT because the agreement has such broad economic consequences.

There is some debate over whether a GATT member which has been found to be in violation of a GATT obligation actually may choose the method of remedying its violation.   Judith H. Bello has argued that the new GATT preserves the GATT 47 principle that “the only sacred, inviolable aspect of the GATT [is] the overall balance of rights and obligations of benefits and burdens, achieved among members through negotiations...[so that]...a government could renege on its negotiated commitment not to exceed a specified tariff on an item, provided it restored the overall balance of GATT concessions through compensatory reductions in tariffs on other items.”  Therefore, she concludes that a GATT member found to be violating the GATT may do one of the following: 1) withdraw the offending measure, 2) maintain the measure but provide compensatory benefits, or 3) decline to withdraw the measure or provide compensation and instead allow the injured member to retaliate.

In response, John H. Jackson has argued that the withdrawal of the offending measure is the proper method of remedying GATT violations.  He notes the historical practice of  “the GATT contracting parties [to treat] the results of an adopted panel report as legally binding” and argues that eleven clauses of the DSU support the notion that a GATT panel report imposes an international law obligation on the member to which it is directed to perform the recommendations of the panel.  Thus, he concludes that the GATT “clearly establishes a preference for an obligation to perform the recommendation...and provides that in nonviolation cases, there is no obligation to withdraw an offending measure, which strongly implies that in violation cases there is an obligation to perform.”
While the language of the Dispute Settlement Understanding does establish a preference for specific performance, it also supports the notion that compensation is a possible remedy.  DSU Article 22(1) states that “compensation and the suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings [of the panel] are not implemented within a reasonable time” and that “neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a [panel] recommendation.”  DSU Article 21(3)-(4) establishes the reasonable period of time for implementation as 15 months from the date of adoption of a panel or Appellate Body report.  Thus, full compliance is indeed the preferred remedy for a GATT violation.  

But, DSU Article 22(2) states that if a GATT member “fails to bring the measure found to be inconsistent with a covered agreement into compliance...within the reasonable period of time..such member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation.”  Thus, the DSU clearly states that compensation is a possible, even if not a preferred, remedy for a GATT violation.  The fact that the GATT members may agree on compensation during the reasonable period of time given for the implementation of panel decision suggests that compensation may be used as the final means of remedying a GATT violation.  
This idea is further supported by the DSU language pertaining to retaliation.  DSU Article 22(2) also states that if an agreement on compensation is not reached, the invoking GATT member may request authorization from the DSB to suspend GATT concessions granted to the violating member.  DSU Article 22(8) states, however, that “the suspension of concessions...shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits.”  Under the language of DSU Article 22(2) cited above, one possible solution would be compensation.  Thus, while retaliation is truly temporary, it may be the case that compensation can be a permanent remedy to a violation.  This may make sense within the context of the GATT because retaliation would in effect counter one GATT violation with another GATT violation while compensation counters a violation with monetary payments.

Thus, the GATT may actually be a unique international agreement in that it attempts to utilize the “realpolitik” of the environment in which it operates to its benefit by providing methods of remedying GATT violations which are flexible enough to maintain the functioning of the agreement.  That is, the GATT may provide a choice of remedy precisely because allowing such a choice helps preserve momentum for the trade liberalization process which is the ultimate purpose of the agreement.  Permitting GATT members to preserve domestic legislation that arguably violates GATT provisions, as long as they are willing to pay for them in the form of compensation, may help convince those members to accept other restrictions upon their foreign trade policy autonomy.
 This possible function of GATT dispute settlement can be illustrated using the recent Beef Hormones GATT decisions.  In this case, both a GATT panel and a WTO Appeals Body have ruled that the Community’s non-discriminatory ban on the sale of hormone-treated beef violated the GATT because it was not supported by sufficiently strong scientific evidence.  However, both of these bodies upheld the right of the Community to set the level of consumer protection it deemed appropriate under the 1994 Sanitary and Phytosanitary Agreement.  Thus, the Community was allowed to keep the ban in place until April 1999 while it attempted to produce stronger evidence for the scientific validity of its ban.

Rather than forcing the Community to produce evidence for the scientific validity of its ban, perhaps it would be best to allow the Community merely to pay compensation to the U.S. producers of hormone treated beef in order to keep its ban in place.  This would avoid the need for a ruling on debatable scientific evidence and give expression to the desires of Community consumers.  In fact, during the dispute, Community officials admitted that the beef hormones ban was specifically designed to placate consumer suspicions about chemical additives in food.  After the initial panel ruling, some Community officials also suggested that they would prefer to pay compensation than to remove the ban.  Thus, it may be the case that the welfare which consumers in the Community derive from knowing that their beef has not been treated with hormones exceeds the compensation which the Community will have to pay to maintain the beef ban in the face of the panel ruling.  

By allowing the Community the flexibility to pay compensation, the GATT would help to ensure its own survival and reconcile domestic political interests with the requirements of the world trade regime.  For example, one should consider what would happen if it were not the U.S., but instead a single small country, that was the sole producer of hormone treated beef.  In this case, it seems entirely disproportionate and unfair to require the Community to abolish a complex domestic policy regime when it could easily pay compensation instead.  Direct effect becomes a very troublesome proposition in such a situation because the ECJ could not realistically do anything other than order specific performance for a GATT violation.  Thus, direct effect would deny the Community the ability to choose the compensation remedy under the GATT.
Finally, one should consider the possible outcomes for the Community if the ECJ actually did begin to rule on the GATT compatibility of Community measures.  If the ECJ correctly held that a Community measure violated the GATT, then the Community could be deprived of its ability to choose the method of remedying the violation.  Thus, the Community would be worse off than if a GATT panel had decided that the Community measure violated the GATT.  If the ECJ incorrectly held that a Community measure violated GATT, then the ECJ would also be worse off because it would be forced to repeal a measure which did not really violate the GATT.  

If the ECJ held that a Community measure was compatible with the GATT, then the Community would remain in the same position as when direct effect did not exist because either the ECJ’s decision would be correct, in which case there would never be an adverse GATT panel decision, or the ECJ’s decision would be incorrect, in which case it could be overturned by a future GATT panel.  Therefore, it is not clear that the Community would ever be placed in a better position within the GATT framework by granting direct effect to the GATT.  Given all of the foregoing, it may be the case that the Court has only denied direct effect to the GATT out of a desire to preserve the best possible legal position for the Community within the GATT system rather than to satisfy a mercantilist agenda for the benefit of specific traders.
3.2 Implications of the ECJ's method of analysis

Having recognized the possibility of non-mercantilist motives for denying direct effect to the GATT, it is necessary to examine the ECJ’s method of analysis to determine if it proves that the Court’s direct effect doctrine is motivated by a protectionist agenda.  Kuilwijk attempts to do this by noting that the ECJ’s method of analysis has been inconsistent.  He argues that while the Court has considered the direct effect of individual provisions of the other international agreements “in the case of GATT the Court has unequivocally denied direct effect of the whole agreement as such.”  He claims that the Court has done this in order to cloak its true protectionist motives for denying direct effect to the GATT.  Thus, he concludes that the Court’s inconsistency is proof of its mercantilist agenda.

This criticism misconstrues the ECJ’s method of analysis.  The Court has considered the direct effect of all international agreements, including the GATT, by means of a two level inquiry.  First, the Court determines if the nature and purpose of the agreement precludes all provisions from having direct effect.  If that threshold inquiry is met, then the Court examines a particular provision of the agreement to determine if it has direct effect.  This second level inquiry necessarily involves a second consideration of the nature and purpose of the agreement as the Court must establish the role of the particular provision within the framework of the agreement.  
A close examination of the ECJ case law clearly shows consistency in the Court’s method of analysis.  In Recital 21 of Kupferberg, the Court stated that “neither the nature nor the structure of the Agreement concluded with Portugal may prevent a trader from relying on the provisions of the said Agreement before a court in the Community.”  Thus, direct effect is possible.  In Recital 22, the ECJ stated that the  “question whether such a stipulation is unconditional and sufficiently precise to have direct effect must be considered in the context of the Agreement of which it forms part...[and]...it is necessary to analyse the provision in the light of both the object and purpose of the Agreement and of its context.”  Thus, the Court must examine the specific provision in the context of treaty to determine if it has direct effect.  In Recital 26, the Court held that the particular provision did have direct effect.  Therefore, the references to the nature and purpose of the agreement not only establish that the agreement passes the first level inquiry but also relate to the second level inquiry as well.

International Fruit Company shows the ECJ using this same method of analysis with respect to the GATT 47.  In its decision, the Court stated that it in order to determine “whether the provisions of the General Agreement confer rights on citizens of the Community on which they can rely before the courts in contesting the validity of a Community measure...the spirit, the general scheme and the terms of the General Agreement must be considered.”  Thus, the Court must engage in the first level inquiry.  The ECJ never got to the second level inquiry, however, because “those factors [spirit, general scheme and terms of the GATT 47] are sufficient to show that, when examined in such a context, Article XI of the General Agreement is not capable of conferring on citizens of the Community rights which they can invoke before the courts.”  Therefore, it held that Article XI, and all other provisions of the GATT 47, could not have direct effect.  Thus, the ECJ’s different direct effect doctrines may be due to differences between the other international agreements and the GATT 47 rather than to a deliberate policy of trade protectionism.
The Court’s treatment of direct effect for the GATT 47 may have been not only consistent with its prior jurisprudence but also logical given the structure of the GATT 47.  The GATT 47 did not contain any references to the possibility of direct effect for its provisions and, as a result, the U.S. and Japan denied direct effect.  This left the Court with a policy choice.  It could hold, as it had with the other international agreements, that because the GATT 47 did not preclude direct effect and because it was desirable to enhance enforcement of the agreement in the Community, the GATT 47 was directly effective.  Alternatively, the Court could hold that direct effect was not appropriate for the GATT 47.

It is true, that the ECJ deferred to the wishes of the Community institutions in making this policy choice.  For example, in FEDIOL III, Advocate General van Gerven noted that while Articles 1 and 2 of the New Commercial Policy Instrument “confine themselves to making a general reference to international law and to generally accepted rules...the background to Regulation 2641/84 leaves no doubt that the reference to ‘international law’ is a reference to GATT.”  Likewise, in Nakajima, the ECJ stated that New Basic Anti-Dumping Regulation “was adopted in accordance with existing international obligations, in particular those arising from Article VI of the General Agreement and from the Anti-Dumping Code”  Thus, the Court did allow the Community institutions to determine when they wished to be explicitly bound to the GATT 47 obligations in the Community legal setting.

This position may have been entirely appropriate, however, given the structure of the GATT 47.  If the GATT 47 contracting parties had truly wished to have private rights of action for the agreement then they would have negotiated provisions guaranteeing such rights or at least would have provided greater specificity with respect to the domestic implementation of the agreement’s provisions.  As Hudec has noted, while courts can certainly aid in the furtherance of an existing trade policy, governments must actually fully commit themselves to a policy before courts can perform the substantive function of judicial review.  Because the GATT 47 contracting parties had not committed themselves to direct effect, the ECJ’s hands were not tied.  In this situation, it may have been entirely appropriate for the Court not to require direct effect but instead to leave the policy choice to the Community institutions. 
This situation has not changed with respect to the new GATT.  The GATT still does not require direct effect and the U.S. and Japan continue to deny the agreement direct effect.  The Community institutions also continue to make their opposition to direct effect clear.  The Commission proposal concerning the implementation of the Uruguay Round agreements stated that “it is important for the WTO Agreement and its annexes not to have direct effect [because] without an express stipulation of such exclusion in the Community instrument of adoption, a major imbalance would arise in the actual management of the obligations of the Community and other countries.”  The Council endorsed this proposal in its decision approving the conclusion of the WTO agreement and its annexes.  Thus, the Community institutions continue to express a desire for the GATT not to have direct effect except in the specific instances in which they declare that they do desire direct effect.

The Court’s policy position does not necessarily lead to a situation in which the Community institutions have completely unfettered discretion in the exercise of foreign trade policy.  The ECJ can still hold that direct effect does exist after GATT panel and WTO Appeals Body rulings.  This would allow individuals and member states to enforce the Community’s GATT obligations as determined by the WTO while preventing them from denying the Community of its rights under the GATT.  Thus, the Court would be responsible for ensuring that the Community does either alter its law, or provide compensation if permissible, after the WTO ruled that the Community was in violation of GATT law.

The banana case, which led to the Court’s denial of direct effect for the GATT in Germany v. Council, demonstrates the Community’s desire to comply with its GATT obligations once they are firmly established by the WTO.  On September 5, 1997, the Community lost its appeal of the GATT panel ruling which held that the Community’s banana regime violated the GATT.  At this time, Community officials stated that the Community would abide by the WTO Appeals Body ruling.  However, the Community was not able to develop a new banana regime which was GATT compatible by the October 16, 1997 deadline for submitting a proposal to implement the WTO ruling.  At this time, the Community cited the complexity of the banana regime for its failure to implement the WTO ruling and stated that it might decide to pay compensation instead.  In either case, though, the Community clearly expressed a desire to remedy its GATT violation.    
On January 14, 1998, the Community did propose a new banana regime which it claimed satisfied all of its GATT obligations.  On February 13, 1998, however, the six original plaintiffs in the GATT panel ruling issued a declaration stating that this proposed regime still violated the GATT.  Given the complexity of implementing GATT panel rulings by means of specific performance, which is illustrated by the banana case, it may well be wise for the Court to deny direct effect for the GATT until after GATT panel and WTO Appeals Body rulings.  This would not necessarily prevent individuals or member states from suing the Community to enforce compliance with GATT rulings.  It would only appropriately leave the possible choice of remedy up to the Community.  Thus, it is not clear that the Court’s denial of direct effect for the GATT prior to a WTO ruling necessarily proves that the Court acts with protectionist motives.  
4. Political Economy Analysis

According to the GATT preamble, the GATT members agreed to the formation of “reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce.”  The principles of reciprocity and non-discrimination are operationalized by means of the Most Favored Nation (MFN) and the National Treatment (NT) requirements of GATT Articles I and III.  Substantial reductions in tariffs and other trade barriers are achieved through the periodic rounds of negotiation required by Article XXVIIIbis and are recorded in binding schedules under Article II.  Finally, WTO Agreement Article II(1) provides a “common institutional framework” for the management of trade and commercial relations among the GATT members.  Thus, the GATT created the structure necessary to facilitate and operate a liberalizing multilateral world trading regime.
Given these purposes of the GATT, the ECJ’s critics have complained that denying direct effect to the GATT has both prevented the Community from obtaining the full economic welfare benefits possible under the agreement and denied individuals the protection of the fundamental rights provided by the agreement.  Kuilwijk extends this critique by arguing that the Court “for the sake of the sacred political balance, has failed to strike an acceptable balance between protection of individual rights and protection of the public interest” in the area of foreign trade policy while it has not done so with respect to the Community’s internal market.  Thus, Kuilwijk concludes that direct effect is necessary “not only [as] a matter of sound economics but also, and first and foremost, [as] a matter of justice.”   
4.1 Differences between GATT and Community fundamental rights

One must carefully consider the nature of individual rights in the GATT before drawing comparisons with the Community internal market.  First, whether the GATT protects individual rights depends on the extent to which national implementing legislation provides individuals with the ability to claim rights under the agreement.  Since the GATT does not provide for direct effect and most GATT members deny direct effect, it may be assuming what one wants to prove to claim that direct effect is necessary to protect individual rights.  It is the very existence of direct effect itself which determines whether individual rights actually exist within the GATT.  Thus, the proper inquiry is to determine whether the GATT itself is an agreement establishing mutual promises among states to respect the rules of GATT or whether it is an agreement creating rights for individuals as the EC Treaty does.

Second, it is not entirely clear that the GATT even embodies individual rights in the same form as they exist within the Community’s internal market.  For example, the Community right to non-discrimination requires the equal treatment of all traders unless discriminatory treatment is objectively justified.  Although GATT Article XIII prohibits discriminatory treatment of like products, the GATT allows several exceptions to this general principle.  Most noticeable are the GATT anti-dumping and countervailing duty regimes.  Article XXIV also permits an exception to the MFN principle for regional trade blocs.  Because these exceptions effectively allow GATT members to distinguish between traders, the GATT may sanction instances of discrimination which would not be permitted within the Community.

The principle of proportionality is used within the Community to analyze the efficiency and effects of Community regulations when determining their validity under the EC Treaties.  While the GATT generally imposes stricter limitations on the use of trade policy instruments as they become less economically efficient, it is not clear that this is based on as rigid a principle of proportionality as is observed in the Community.  For example, although Article XI of the GATT outlaws the quota form of protectionism in favor of the less distorting and more transparent tariff form, the GATT provides several exceptions to this requirement.  Article XII permits quantitative restrictions in response to a serious balance of payment problem and Article XVIII allow LDC’s to impose quantitative restrictions for infant industry reasons.  Thus, it appears that the GATT permits inefficiencies which would not be allowed within the Community. 
Finally, the Community and the GATT principles of undistorted competition may not be equivalent.  While the Community is intended to create a single unified market, the GATT merely attempts to create a multilateral trading system based on the principle of reciprocity.  The GATT members do not have to adopt harmonized trade rules but merely must exchange what they view to be equal trade benefits.  As noted above, there are several instances in which the GATT allows unilateral and discriminatory trade actions.  And one of the largest problems with the GATT today is that there is no competition policy regime.  Thus, the GATT members retain a measure of national control which allows them to affect competitive conditions to a greater extent than the Community member states can.

The foregoing arguments are not meant to deny that the GATT has significant effects on individuals.  They are merely intended to show that the nature of individual rights in the GATT may differ from that in the EC Treaty.  After all, the ECJ has never held that the GATT “is more than an agreement which creates mutual obligations between the contracting states” as it has for the EC Treaty.  Thus, one should be careful about assuming that the Community concept of direct effect should automatically be extended to the GATT in order to protect individual rights.  Instead, one should engage in a thorough analysis of the actual nature of the obligations contained within the GATT to determine the appropriateness of direct effect.
4.2 The place of individuals within the GATT

When considering the nature of the GATT obligations in relation to direct effect, it is important to make explicit the political economy view of international trade from which one is operating.  Kuilwijk and the Court’s other critics generally work from the classical trade theory view which emphasizes the benefits of unilateral trade liberalization.  Under this view, unilaterally granting direct effect to the GATT may indeed be beneficial and necessary because it would produce welfare benefits for individuals in the Community and help protect the individual rights of both Community consumers and traders.
The GATT, however, ultimately is an agreement regulating the rights and obligations of its members not individuals.  The preamble to the GATT states that the members, as sovereign states, recognize “that their relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods.”  These are goals which can only be achieved and evaluated on a macroeconomic basis with respect to the members themselves and not on a microeconomic basis with respect to individuals. 

The concluding remarks contained in the second GATT panel decision concerning the Community banana regime are revealing.  The panel stated that it “wishes to point out, however, that the Contracting Parties have at their disposal other procedures under the General Agreement...that are designed to allow Contracting Parties to take into account, in the view of the Panel, economic and social considerations.  The adoption of this report would not prevent the Contracting Parties from taking action under any of these Articles.”  Thus, the panel made its ruling on the GATT validity of the Community’s regime without regard to the economic and social consequences on individuals. 
This emphasis on the GATT members as opposed to individuals is inherent in several of the GATT’s founding principles.  For example, non-discrimination within the GATT means non-discrimination between members and not non-discrimination between individual traders in different members.  In fact, it would be impossible to ensure that discrimination did not occur between individual traders across GATT members because natural differences in the factor endowments and technology of the different members automatically produce differences in the competitive positions of these traders. Without these differences in factor endowments and technology, international trade would not produce economic welfare gains at all. 

The Uruguay Round of GATT negotiations confirmed that reciprocal and multilateral negotiations between sovereign members form the basis for all GATT agreements.  This emphasis on reciprocity in the GATT has been severely criticized for the negative effects it may have on trade liberalization efforts.  One should realize, however, that the GATT does attempt to mitigate these effects with the MFN principle.  That is, the combination of reciprocity and MFN provides an incentive for the exporters in any given member to lobby their government for further tariff reductions on imports.  The exporters have an incentive to do this because they know that any reductions in their domestic import tariffs will be matched on a reciprocal basis by not just some, but all, the other GATT members.  Thus, exporters are harnessed as a trade liberalizing lobbying force to counteract the protectionist lobbying of domestic import-competing firms.

The reciprocal method of negotiation is used, even though non-reciprocal trade liberalization is in the self-interest of each member, because individual members may not be willing to liberalize trade on a non-reciprocal basis.  That is, it may be necessary for each member to provide some tangible benefit to the others in order for each member to accept the entire package of trade liberalization measures.  The reciprocity principle helps ensure that these beneficial trades actually do occur by requiring each member to grant a trade concession in order to attain a concession.  Given this design, direct effect might actually inhibit further worldwide trade liberalization by allowing an individual to require its member state to unilaterally liberalize its trade measures without forcing other GATT members to do the same.  That is, direct effect may result in concessions which do not have to be matched by the other GATT members.
In fact, granting direct effect to the GATT may even allow individuals within a GATT member to directly harm others.  The welfare gains which result from free trade occur on an aggregate level for a GATT member as a whole.  However, distributive effects occur on an individual level due to labor dislocations resulting from free trade.  While it is theoretically possible to offset these effects with a portion of the overall welfare benefits resulting from a shift to free trade, this is a political decision.  Since there is no guarantee that this decision will actually be made, it is possible that direct effect would allow individuals to use courts to force their government to adopt trade policies which harm other individuals without a consideration of the domestic distributive effects.  

Given these considerations, it is clear that one should be cautious about automatically assuming that the GATT is an agreement which should be viewed as a source of individual rights.  Much of the language and structure of the agreement is designed with the intent of regulating trade relations between sovereign members which retain the freedom to control their domestic economies.  Therefore, it may be appropriate for the Court to refuse to grant legal effect to the GATT unless the Community institutions have expressly declared a desire for such effect and/or until the Community’s GATT obligations have been determined by the WTO.  In the end, the Court has left the question of enforceability of the GATT to the institutions capable of dealing with their distributive effects and reconciling individual rights with the public interest.  It is far from obvious that this a rejection of sound economics or principles of justice.
5. Conclusion

In this paper, I have attempted to show that the question of whether the GATT should have direct effect is very complex.  The GATT is a Constitutional agreement like the Treaty.  However, it adopts a different set of economic goals than the Treaty.  The GATT is also an international agreement.  However, it establishes a regulatory structure which is different from that established by the other international agreements of the Community.  
It is also far from obvious that the GATT is intended to protect individuals rights.  The agreement seems to be specifically designed to manage trade relations between sovereign entities.  Thus, perhaps the concept of direct effect which exists for the Treaty and the other international agreements should not apply to the GATT.  After all, one may still respect the rule of GATT law and individual rights domestically without granting direct effect to the agreement prior to a WTO ruling.  

On the other hand, it is true that the effects of the GATT are ultimately felt by individuals.  The GATT does contain clear and precise obligations to which the GATT members have agreed.  The GATT also has established a dispute resolution system to resolve conflicts between the contracting parties in a rule based manner.  Thus, there is reason for believing that individuals should be able to claim rights under the GATT after a WTO determination of the Community’s obligations under the GATT.  
In the end, the reader must decide whether direct effect for the GATT is appropriate.  That is, should the ECJ grant direct effect to the GATT because no other country has done so or should it deny direct effect because this would deny the Community of its rights under the GATT.  Direct effect is a complex question which must be approached in a complex manner.  I do not claim to have resolved the dispute, but do hope to have further illuminated the issues.

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