2.

Exceptions

General horizontal exceptions and protective measures which also constitute a derogation to other rules are
examined in Modules 4 and 5.

Specific exceptions to the Principle of Prohibition of Quantitative Restrictions are allowed to :

Prevent critical shortage of foodstuffs or other essential products (GATT Art. XI:2a)

Remove temporary surpluses of a like domestic product for which the imported product is a direct
substitute (GATT Art. XI:2b)

Uphold import restrictions on agricultural and fisheries products (GATT Art. XI:2c)

The drafters of the GATT Agreement realized that in specific circumstances (shortages or surplus of products
domestically produced) one could derogate from the "no QRs" principles to prevent or deal with critical
situations.

The exception contained in GATT Art. XI:2c and which creates a quasi-general derogation for agricultural
policies and measures relating to fishery products constituted the essential provision which led to "special
treatment" for agriculture. The "agricultural exception" ended when the WTO Agreement on Agriculture entered
into force. The WTO Agreement on Agriculture superseded GATT Art. XI:2c. Art. 4 of the Agreement on
Agriculture provides, among other things, that quotas must be transformed into tariffs ("tariffication").

Consequently, under the WTO, quantitative restrictions remain possible only on fishery products.

It may be useful here to distinguish between Quotas – which are generally prohibited – and Tariff-Rate Quotas
(TRQs). TRQs are predetermined quantities of products which can be imported at a "preferential" rate of
customs duty ("in-quota Tariff Rate"). Once the TRQ has been filled, one can continue to import the product
without limitation – so it is not a quantitative restriction in the sense of GATT Art. XI – but at a higher tariff
rate ("out-of-quota Tariff Rate"). The "out-of-quota Tariff Rate" is generally the MFN rate. In a tariff-quota,
specific quantities of products may be imported at different tariff levels.

The allocation of the TRQ should obey disciplines in GATT Art. XIII (Non-discriminatory Administration of
Quantitative Restrictions) which provides that TRQs should be applied similarly to products from all origins, but
allocations should also respond as closely as possible to the expected markets share that would have existed in
the absence of TRQs. Agreements with principal suppliers are also possible.

ILLUSTRATION

Prohibition of Quantitative Restrictions (for Goods)

Let us assume that Alba and Vanin are WTO Members.

GATT Article XI:1 requires Members to eliminate quantitative restrictions in the form of quotas, import or
export licenses, or other measures. Therefore, a violation of the GATT can take several forms.

A typical violation occurs where an importing Member seeks to limit the amount of a good imported into the
country, usually to protect a competing domestic industry. For example, if Alba determined that the potential
market for watches in Alba was 1 million per year and decided that in order to ensure dominance of the
domestic industry it will limit the number of Vanin watches imported to 400,000, this would be a violation of
Article XI:1.
However, a distinction can be made between prohibited quotas and Tariff-Rate Quotas (TRQs). Alba could
instead allow 400,000 Vanin watches to be imported at a preferential tariff rate and collect a higher rate of
duties on watches exceeding the 400,000 limit (though not higher than Alba's bound rate). This policy would
be permitted under Article XI, because, in the example, there are no numerical limitation on the amount of
watches that can be imported. The Government of Alba is simply providing better market access through a
preferential duty for imported watches up to a certain quantity (from 1 to 400,000 watches). They applied the
regular duty after the quota is filled i.e. starting on the 400,001st watch imported in the country. There was
therefore no trade restriction.

Nevertheless, Quantitative Restrictions can be applied to fisheries products. Therefore, Alba could impose a
quota on how many salmons Alba import. For example, the Government of Alba could introduce a quota
of 10MT of salmons. In such circumstances, importers cannot import more than 10MT of salmons per year into
the country.

Members are also allowed to derogate from the elimination of quantitative restrictions when they take
"safeguard measures". Safeguard measures will be discussed in more details in Module 5.