Working Paper No. 03-22:
The Arab League Boycott and WTO Accession: Can Foreign Policy Excuse Discriminatory Sanctions?

Author(s):

Eugene Kontorovich

Date Posted: 2003

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Abstract:

The central principle of the General Agreement on Tariffs and Trade, now incorporated into the rules of the World Trade Organization, is the prohibition of discriminatory restrictions on international trade. However, some scholars contend that GATT applies only to trade restrictions adopted to protect domestic industry from foreign competition or for other "economic" purposes, and not to restrictions adopted for non-economic "foreign policy" reasons. While this purported "foreign policy" exception has been endorsed by the Restatement, it has received little critical attention from commentators. Recent developments in the WTO have made the legitimacy of the exception a matter of pressing concern not just to scholars of international trade law but to the free trade system itself. Saudi Arabia is expected to be admitted into the organization in the next few years. However, Saudi Arabia maintains a total boycott of Israel and a secondary and tertiary boycott of firms and individuals in the United States and elsewhere that trade with Israel. The boycott is part of the Arab League Boycott of Israel. This Article uses the occasion of Saudi Arabia's accession bid to examine the unresolved issue of whether GATT applies to trade restrictions imposed for purely foreign policy purposes. It finds that such an exception would be inconsistent with the language, structure, usage, purpose, and history of GATT. This in turn shows that Saudi Arabia's secondary and tertiary boycott violates WTO rules. Thus the accession of nations, like Saudi Arabia, that maintain the secondary and tertiary prongs of the Arab League Boycott would undermine the WTO's commitment to free trade and injure existing members. The Article concludes that these harms could not be redressed within the WTO framework, and thus the best way to avoid them is to condition accession on a termination of the secondary and tertiary boycott.