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Article XX of GATT and Article XIV of GATS state that the contracting states are not prevented from adopting the measures necessary to protect public morals, life or health of humans, animals or plants, and to provide the compliance with laws and regulations, which are consistent with the GATT. The Appellate Body considered the term “necessary” in the context of Article XX on several occasions. Thus, in EC Tariff Preferences, the Appellate Body held that the term necessary refers to “a range of degrees of necessity”. According to the Appellate Body, the term necessary may, on the one hand, mean indispensable; on the other hand, it may be taken to mean as “making a contribution to”. Furthermore, in this case, the Appellate Body held that necessary measure is closer to indispensable measure, rather than to the measure that is necessary to contribute to. In EC Tariff Preferences, the Appellate Body found out that the Drug Arrangements taken by EU, which significantly restricted the import of drugs, did not make a considerable contribution to protection of human life and health. The Appellate Body drew attention that the benefits of the measure actually decreased. Thus, the Body concluded that the measure was close to indispensable. At the same time, in EC Asbestos, the Appellate Body held that necessity did not exclude an alternative. The same approach was then adopted in Argentina Hides and Leather: the Appellate Body rejected the EU claim that the measure was necessary only when there was no alternative. On several occasions, as in EC Asbestos and Argentina Hides and Leather, the Appellate Body ruled in favor of restrictive measures taken by states for the sake of necessity. This gave a rise to the argument that “the Appellate Body is simply fearful of interfering with national sovereignty, and hence rarely scrutinizes national policies”. What is true in this argument is that the Appellate Body rarely scrutinizes national policies indeed. However, it does so not because of fearing to interfere with national sovereignty, but because the wording in chapeau of Article XX prescribes to do so. Thus, in US-Shrimp, the Appellate Body explained that the chapeau of Article XX “by its express terms, addresses, not so much the questioned measure or its specific contents as such, but rather the manner in which the measure is applied”. Therefore, the main reason why the Appellate Body does not scrutinize national policies is the wording of Article XX rather than fear to interfere with sovereignty. Finally, in the light of some cases, it is hard to state that the Appellate Body has any fear to interfere with sovereignty. Thus, in Chile — Alcoholic Beverages, the Body rejected the Chile’s policy to impose additional taxes on alcohol so as to reduce alcohol consumption in the country, notwithstanding that it is the Chile’s sovereign right to take care of health and morals of its citizens.
The US-Gambling involved the restrictions imposed by the United States on cross-border supply of betting and gambling services. In particular, the United States restricted the supply of gambling and betting services to the country through various federal and state laws. The United States justified such measures by public morals considerations relying on Article XIV (a) of GATS. The Appellate Body held this measure as consistent with GATS. Pauwelyn (2005) argues that in this case the Panel and the Appellate Body disregarded the distinction between domestic regulation and market access. Pauwelyn (2005) explains that the GATT and GATS regime measures imposed at the border or on importation are considered to be as market access restrictions. Market access restrictions cover custom duties and charges imposed on imported goods or in connection with importation, and quantitative import limitations (Pauwelyn, 2005). There are also measures that affect import after the customs have been cleared. These measures are referred to as “behind border measures” or “domestic regulations” (Pauwelyn, 2005). These measures cover internal taxation and other internal regulations (Pauwelyn, 2005). Pauwelyn (2005) further argues that, while market access restrictions are prohibited, the domestic regulation remains legitimate. According to Pauwelyn (2005), the Panel and the Appellate Body failed in finding out that the US gambling laws represent prohibited market access restrictions. Pauwelyn is right in pointing out that the US gambling regulations were regarded primarily in the context of market access. The Appellate Body indeed tests the US gambling regulations against Article XVI, which concerns market access. However, one should bear in mind that the US gambling regulations were not purely domestic regulations in terms described by Pauwelyn (2005). According to the description of domestic regulations provided by Pauwelyn (2005), they do not cover quantitative limitations on import. The US gambling regulations, in fact, put a zero quota on importation of gambling services. This is not a purely domestic regulation since it affects import of goods which have not even reached the border. Therefore, Pauwelyn’s argument has a significant drawback. In a word, the Appellate Body indeed tested the US gambling regulation against market access restrictions, but it did so only because these regulations contained “at the border” provisions which affect market access.
There is an opinion that the TRIPS Agreement is the only WTO covered agreement the purpose of which is to restrict international trade. TRIPS requires each contracting state to provide minimum standards of protecting geographical indications, author’s rights, intellectual property, trade-marks, patents, industrial design rights, the layout-designs of integrated circuits, and undisclosed information. One may observe that such an approach is quite a departure from the spirit of other WTO treaties. In general, WTO treaties, except TRIPS, require member states to remove or at least to simplify the regulations. The question is whether standards required by TRIPS may potentially restrict international trade. As far as standards are concerned, TRIPS put no restrictions which are different from restrictions in other WTO treaties. For instance, Article 3 (2) of the TRIPS states that a member may not accord the national treatment with another member if it is justified by necessity to ensure concurrence with regulations and laws which are not incompatible with the TRIPS ordinance, provided that such practices are not employed in a way that would appear to be a concealed restriction on trade. One may observe that such wording is quite similar to the wording of Article III of the GATT. Apart from standards, the TRIPS provides for domestic procedures and remedies for the enforcement of intellectual property. TRIPS sets forth certain general principles applicable to all IPR enforcement procedures. The general overview of TRIPS at this point does not allow to state that TRIPS restricts international trade. By contrast, TRIPS is aimed to provide the uniform treatment of IP rights in all contracting states. However, it is true that there exist concerns that TRIPS makes it harder for developing countries to access technologies: with such increased protection these technologies become more expensive. In this sense, TRIPS can be regarded as constraining international trade to a certain extent: the exporters cannot sell their technologies in developing countries because of the increased price of technologies.