Freedom of Trade and Commerce
Gonzalo Villalta Puig
- Commerce and trade — General welfare
Published under the direction of the Max Planck Foundation for International Peace and the Rule of Law.
General Editors: Rainer Grote, Frauke Lachenmann, Rüdiger Wolfrum.
1. The freedom of trade and commerce is a constitutional norm that conceives the sale and purchase of goods and services among or within sovereign states and customs territories as an exchange without government discrimination. As such, it constitutionalizes the political economy of jurisdictions.
2. Economic constitutions (economic constitution) codify this norm either as a right to economic freedom or as a principle of free trade. If the freedom of trade and commerce is in the form of a right, then the right is an individual right of merchants and producers—a fundamental right of the person—to economic freedom. If, alternatively, the freedom of trade and commerce is in the form of a principle, the principle structures the organization of the market—the market of markets—into a free trade area (Free Trade Areas). If the freedom of trade and commerce is neither a right nor a principle in form, then it can only be in the form of a government power. Some constitutions do not give to economic policy the status and force of rights or principles. Those constitutions address the topic of economic policy in terms of government powers, not substantive norms. The main example is the Commerce Clause of the Constitution of the United States: 17 September 1887 (US). Another federal example is Art. 74 of the Federal Constitution of Malaysia: 31 August 1957 (Malay), which empowers ‘Parliament [to] make laws with respect to … [t]rade, commerce and industry’ under the Federal List (Item 8, List I, Ninth Schedule). A reverse example is Art. 139.2 of the Constitution of the Kingdom of Spain: 6 December 1978 (Spain), which bans the exercise of government power against the free movement of goods and freedom of establishment.
3. Depending on whether a right or principle is in question, the interpretative scope and judicial enforceability vary significantly. Ultimately, be it a right or principle, the freedom of trade and commerce depends for its interpretation and enforcement on the constitutional court of the jurisdiction. The freedom has a high political content, which makes the judiciary reluctant to interpret and enforce it. A judicial reluctance to resolve political questions is evident in the common law tradition as Brandeis J observed in Ashwander v Tennessee Valley Authority (1936) (US) (justiciability). That judicial reluctance is evident too in the civil law tradition, where constitutional courts are careful not to meddle in the political process. The decisions of the Federal Constitutional Court of Germany (Bundesverfassungsgericht) in support of the European Stability Mechanism and Fiscal Stability Treaty are but one example. As for scope, that reluctance is greater when the freedom of trade and commerce is in the form of an individual right to economic freedom because, on a literalist interpretation, the right could block any and all proportionate government regulation of the market for legitimate purposes such as protection of the environment and consumer protection. The reluctance is not as great when the freedom of trade and commerce is in the form of a market principle of free trade because, in federations and other non-unitary jurisdictions, the principle could integrate the regional (component) markets into a federal (common) market in the interest of national construction. Unlike unitary jurisdictions, non-unitary jurisdictions rely on a constitutional guarantee of free movement of goods and services among their constituent states as the functional basis of their respective economic and monetary unions. The internal markets and external markets of non-unitary market jurisdictions rely on constitutional provisions. The difficulty is that these constitutional provisions are subject to judicial interpretation, interpretation, that is, by constitutional courts. That interpretation may not always facilitate trade. It may, in fact, impede it. Thus, the freedom of trade and commerce within customs territories depends on a process of constitutionalization by constitutional courts. As for enforcement, provisions for the freedom of trade and commerce are not easily enforceable because, typically, they are little more than aspirational, promotional passages often subject to loopholes and escape clauses. Few provisions incorporate enforcement mechanisms such as penalties and liabilities for default. Again, the enforceability of the right to economic freedom is less than the enforceability of the principle of free trade.
4. As a right, the freedom of trade and commerce has few but notable examples, including Art. 27 of the Swiss Federal Constitution (Federal Constitution of the Swiss Confederation: 18 April 1999 (Switz)) and Art. 5 of the Hong Kong Basic Law (Constitution of the Special Administrative Region of Hong Kong: 4 April 1990 (HK)). As a principle, the freedom of trade and commerce is much more common. The establishment of the World Trade Organization (‘WTO’) suggests that global systems of political economy have the constitutional norm of free trade at their foundation. The European Union (‘EU’), for example, and other regional, sub-regional and cross-regional systems also have that normative foundation. All these systems include preferential trade areas, free trade areas, customs unions, common markets, and other economic unions under the domain of different preferential trade agreements and economic integration agreements. It is an implicit assumption that local systems have that normative foundation too. The assumption holds true for unitary states (unitary state). It also holds true for federal and quasi-federal states such as the United States of America (‘US’), the Commonwealth of Australia (Australia), or the Republic of India (India) (federalism).
5. This essay presents a comparative study on the construction and interpretation of the freedom of trade and commerce under economic constitutions through a selection of non-unitary market jurisdictions: at the external level, the WTO and the EU as model international and supranational market jurisdictions and, at the internal level, the US, Australia, India, and United Arab Emirates (‘UAE’) as model federal market jurisdictions along with the Swiss Confederation (Switzerland) and the Hong Kong Special Administrative Region of the People’s Republic of China (Hong Kong) as model jurisdictions of the individual right to economic freedom.
B. United States of America
6. As the first federation in modern history, the US is the paradigm federal market jurisdiction. Art. I, Section 8, Clause 3 of the United States Constitution—the Commerce Clause—gives the United States Congress the power ‘[t]o regulate Commerce with foreign Nations, and among the several States’. The Commerce Clause has, in the interest of effective government, expanded over time to cover multiple areas of power and, in particular, intrastate trade and commerce. The Supreme Court of the United States has long considered international, interstate, and intrastate trade and commerce to be so economically interdependent as to warrant, by necessity, the same federal legislative power: the commingling doctrine. Thus, in Gibbons v Ogden (1824) (US), Marshall CJ said that the Commerce Clause could extend:
[t]o all the external concerns of the nation, and to those internal concerns which affect the States generally; but not to those which are completely within a particular State, which do not affect other States, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government (Gibbons v Ogden para. 196).
7. Relevant cases—the New Deal trilogy—include National Labour Relations Board v Jones & Laughlin Steel Corporation (1937) (US), United States v Darby (1941) (US), or Wickard v Filburn (1924) (US), in which the US Supreme Court stated:
[E]ven if the appellee’s activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce, and this irrespective of whether such effect is what might at some earlier time have been defined as ‘direct’ or ‘indirect’ (Wickard v Filburn para. 125).
8. The case of Perez v United States (1971) (US) marked the maximum reach of the judicial expansion of the Commerce Clause by the US Supreme Court. In recent years, however, the US Supreme Court has more narrowly interpreted the Commerce Clause. In the last significant decision on the Commerce Clause, United States v Alfonso Lopez Jr (1995) (US), the US Supreme Court reinterpreted the Commerce Court into a legislative power subject to the requirement for a substantial effect on interstate commerce:
First, Congress may regulate the use of the channels of interstate commerce … Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities … Finally, Congress’ commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, … ie, those activities that substantially affect interstate commerce (United States v Alfonso Lopez Jr paras 10–11).
9. The US Supreme Court confirmed United States v Alfonso Lopez Jr in United States v Morrison (2000) (US).
C. Commonwealth of Australia
10. Like the US, Australia is a federal market. Indeed, Section 92 of the Commonwealth of Australia Constitution Act: 9 July 1900 (Austl) (Australian Constitution) is based on the Commerce Clause of the United States Constitution. It is not in the form of a power. It is instead in the form of a principle, a freedom of trade and commerce for Australia: ‘trade [and] commerce … among the States … shall be absolutely free’. The High Court of Australia (‘HCA’) reads this provision to mean not an anti-discrimination norm but an anti-protectionist norm in a test that rules out discriminatory laws and measures of a protectionist kind, a test that the case of Cole v Whitfield Cole v Whitfield (1988) (Austl) introduced after many years of uncertain interpretation. The HCA confirmed the operation of the test in Castlemaine Tooheys Ltd v South Australia (1990) (Austl):
Cole v Whitfield established that a law which imposes a burden on interstate trade and commerce but does not give the domestic product or the intrastate trade in that product a competitive or market advantage over the imported product or the interstate trade in that product, is not a law which discriminates against interstate trade and commerce on protectionist grounds (Castlemaine Tooheys Ltd v South Australia para. 467).
11. The HCA has continued to apply Cole v Whitfield ever since. The judgments of the HCA in Betfair Pty Ltd v Racing New South Wales (2012) (Austl) and Sportsbet Pty Ltd v New South Wales (2012) (Austl), which, together, comprise the most recent interpretation of Section 92 of the Australian Constitution, rule out discriminatory burdens of a protectionist kind.
12. An interpretation of Section 92 as an anti-protectionist norm is inconsistent with the federal purpose of the section to establish a national market for Australia because it can allow laws and measures that discriminate against interstate trade if they are not protectionist. Only a non-discrimination norm can translate the idea of free trade into a principle of market access as in the EU. It is a question of neither form nor substance. Quite simply, a non-discrimination norm is better than an anti-protectionist norm because a non-discrimination norm can better integrate a non-unitary market than an anti-protectionist norm, be it in Australia or in the EU.
13. The difference between the approaches of the European Court of Justice (‘ECJ’) and the HCA to the application of Art. 34 of the Treaty on the Functioning of the European Union (signed 13 December 2007, entered into force 1 December 2009)  OJ C115/47) (‘TFEU’) and Section 92 of the Australian Constitution, respectively, lies in the reluctance of the HCA to do away with the protectionist element of the Cole v Whitfield test of invalidity. The ECJ will hold a national law or measure to contravene Art. 34 so long as it hinders market access in an unjustifiably unreasonable manner. However, the HCA will only invalidate a State law or measure under Section 92 if the law or measure in question imposes an unreasonable burden on interstate trade and, as a result of the burden, local trade obtains a competitive advantage. In most cases, an unreasonable burden on trade will also be protectionist in character. However, no matter how unreasonable it may be, the HCA will not characterize a burden as protectionist if it affects intrastate and interstate trade alike or if local trade has a monopoly free from interstate competition.
14. Questions of interpretation aside, goods and services imports that enter Australia’s customs territory rely on the freedom of interstate trade under Section 92 of the Australian Constitution. Goods and services exports that exit Australia, however, rely on the trade and commerce power under Section 51(i) of the Australian Constitution, which frames the law of the external market for Australia. The power to regulate external trade combines with the power over ‘bounties on the production or export of goods’ in Section 51(iii) and over ‘duties of customs and of excise’ in Section 90 both of the Australian Constitution. Together, these three provisions constitute Australia into a customs union.
15. The problem is that, for the HCA, Section 51(i) of the Australian Constitution does not recognize trade and commerce in Australia to be ‘one indivisible whole’ (Pape v Commissioner of Taxation (2009) para. 150 (Austl)). Such interpretation is not only inconsistent with the traditional jurisprudence of the US Supreme Court but also contrary to economic sense. It gives rise to a legal fiction as the HCA seeks to divide the indivisible. The HCA, therefore, should remove the distinction between international (or interstate) trade and national (intrastate) trade.
D. Republic of India
16. Like the US and Australia, India is a federal market. The freedom of trade and commerce under the Constitution of the Republic of India: 26 January 1950 (India), however, does not rely on the US Constitution but on the Australian Constitution. Thus, Art. 301 of the Constitution of India, which provides that ‘trade, commerce and intercourse throughout the territory of India shall be free’, is based on Section 92 of the Australian Constitution. In Atiabari Tea Co Ltd v The State of Assam and Others (1961) (India), the Supreme Court of India interpreted this provision as a freedom, which the law under challenge can only violate if it directly and immediately restricts interstate trade and commerce:
Thus considered we think it would be reasonable and proper to hold that restrictions freedom from which is guaranteed by Art. 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade (Atiabari Tea Co Ltd v The State of Assam and Others para. 860).
17. The Supreme Court of India further interpreted Art. 301 of the Constitution of India in The Automobile Transport (Rajasthan) Ltd v The State of Rajasthan and Others (1963) (India) as a freedom which permits regulatory or compensatory laws:
The interpretation which was accepted by the majority in the Atiabari Tea Co case is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Art. 301 and such measures need not comply with the requirements of the proviso to Art. 304(b) of the Constitution (The Automobile Transport (Rajasthan) Ltd v The State of Rajasthan and Others (1963) (India)).
18. Restrictions obstruct the freedom; regulations facilitate it. This test of invalidity is neither clear in meaning nor certain in operation because it relies on the HCA’s interpretation of Section 92 of the Australian Constitution in Bank of New South Wales v Commonwealth (Bank Nationalization) (1948) (Austl), which Cole v Whitfield declared wrong. In the Bank Nationalization case, the HCA held that only a law that directly and immediately restricts an activity of interstate trade and commerce can breach Section 92 of the Australian Constitution. The Supreme Court of India would give clarity of meaning and certainty of operation to Art. 301 of the Constitution of India if it were to apply the Cole v Whitfield test of invalidity for Section 92 of the Australian Constitution. On the application of that test, a law breaches Section 92 only if it imposes a restriction on interstate trade and commerce and that restriction is discriminatory in a protectionist sense. Ideally, the Supreme Court would perfect this interpretation into the development of a non-discrimination norm as the ECJ does for Art. 34 of the TFEU. Such an interpretation would better support the political unit that India comprises:
When for the first time in the history of India the entire territory within the geographical boundaries of India, minus what became Pakistan, was knit into one political unit, it was necessary to abolish all those trade barriers and custom posts in the interest of national solidarity, economic and cultural unity as also of freedom of trade, commerce and intercourse (Atiabari Tea Co Ltd v The State of Assam and Others para. 823).
E. European Union
20. The EU is an economic union but not a sovereign state (European (Economic) Community; European Union, Historical Evolution). It is not a federation, in other words. As such, the EU is the paradigm supranational market jurisdiction, the political and economic union of 28 European states. The TFEU is the economic constitution of the EU. The aim of the EU, as the Preamble to the TFEU states, is ‘to lay the foundations of an ever closer union among the peoples of Europe … by thus pooling their resources to preserve and strengthen peace and liberty’. Further to that aim, the objective of the EU is the integration of the economies of the Member States into an internal—single—market, about which Art. 26(2) of the TFEU states:
The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.
21. The policies of the EU to achieve this objective and, thereby, establish the internal market are the four freedoms: the free movement of goods, persons, services, and capital. Of the economic freedoms of the internal market, the most relevant for the purposes of the freedom of trade and commerce is the free movement of goods. The freedom functions as a customs union under Art. 28 of the TFEU:
The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.
22. Art. 34 of the TFEU with its prohibition of non-fiscal barriers to trade in goods, be they at the border (quantitative restrictions) or behind the border (measures having equivalent effect to a quantitative restriction (‘MEQRs’)), gives substantive expression to the freedom:
Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.
23. The Court of Justice of the European Union (ECJ) reads this provision to mean a non-discrimination norm in a test that rules out laws and measures that hinder market access to goods that are otherwise lawful. The concern of the ECJ is to safeguard equal market access for all traders within the EU and, therefore, to establish an internal market. Thus, measures that discriminate against imported goods (the trade rules of Case 8/74 Dassonville (1974)), measures that impose dual requirements on imported goods (the product rules of Case 120/78 Cassis de Dijon (1979)), or measures that simply hinder, impede, obstruct, restrict or altogether prevent market access (Case C-110/05 Commission v Italy (Trailers) (2009)) through certain discriminatory (and, perhaps, even non-discriminatory) selling arrangements (the market circumstances rules of Joined Cases C-267/91 and 268/91 Criminal Proceedings against Bernard Keck and Daniel Mithouard (1993) and, in particular, Joined Cases C-34/95, C-35/95 and C-36/95 Konsumentombudsmannen (KO) v De Agostini (Svenska) Forlag AB and TV-Shop i Sverige AB (De Agostini) (1997) and Case C-322/01 Deutscher Apothekerverband eV v 0800 DocMorris NV and Jacques Waterval (DocMorris) (2003)) or use restrictions (Case C-142/05 Åklagaren v Percy Mickelsson and Joakim Roos (Mickelsson) (2009)) are all MEQRs in breach of Art. 34 of the TFEU. In Trailers, the ECJ summarized the case law thus:
It is also apparent from settled case-law that Art. [34 TFEU] reflects the obligation to respect the principles of non-discrimination and of mutual recognition of products lawfully manufactured and marketed in other Member States, as well as the principle of ensuring free access of [Union] products to national markets (at para. 34.)
24. For the purposes of external trade, the economic freedoms of the internal market rely on Art. 28 of the TFEU for goods and Art. 56 of the TFEU for services. The Common Commercial Policy (‘CCP’) in Art. 207(1) of the TFEU empowers the EU as a customs union:
The common commercial policy shall be based on uniform principles, particularly with regard to changes in tariff rates, the conclusion of tariff and trade agreements relating to trade in goods and services, and the commercial aspects of intellectual property, foreign direct investment, the achievement of uniformity in measures of liberalization, export policy and measures to protect trade such as those to be taken in the event of dumping or subsidies. The common commercial policy shall be conducted in the context of the principles and objectives of the Union’s external action.
25. Many decisions of the ECJ have upheld the primacy of uniformity as a principle of the CCP. Cases such as Case 41/76 Suzanne Criel, née Donckerwolcke and Henri Schou v Procureur de la République (1976), Case 174/84 Bulk Oil v Sun International (1986), and Case 59/84 Tezi v Commission (1986) as well as Case 242/84 Tezi v Minister for Economic Affairs (1986) are in support of and correspond with the recognition of exclusivity for the CCP in Opinion 1/75 Local Cost Standard (1975). The rationale is that the efficient functioning of the internal and external markets requires the kind of uniformity of regulation that can only come from exclusivity of competence. The EU, then, is both a single internal market and a customs union with a single external tariff. The economic constitution of its internal market informs the law of its external market.
F. World Trade Organization
26. The World Trade Organization (WTO) is an international market jurisdiction. At one level, the WTO merely institutionalizes and regulates the multilateral trading system. At another though possibly contestable level, the WTO constitutionalizes the freedom of trade and commerce among its 164 members—almost the entirety of the world’s economies—at a multilateral near global level. The WTO does so through the norm of non-discrimination, which is at the core of the General Agreement on Tariffs and Trade (1947 and 1994) (‘GATT’) and the General Agreement on Trade in Services (1994) (‘GATS’). The norm of non-discrimination relies on two principles. First is the principle of most-favoured-nation (MFN), the idea that WTO members should not have any favourite trading partners among themselves (Most-Favoured-Nation Clause). This principle is so important as to comprise the first provision of the GATT, Art. I:1, which states:
With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, … any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.
27. In Canada—Certain Measures Affecting the Automotive Industry, the Appellate Body—the highest adjudicative body in the dispute settlement system of the WTO—explained that the purpose of Art. I.1 of the GATT ‘is to prohibit discrimination among like products originating in or destined for different countries’ (WTO Canada—Certain Measures Affecting the Automotive Industry—Report of the Appellate Body (31 May 2000) para. 84). The counterpart to Art. I.1 of the GATT in the GATS is Art. II:
With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.
28. Second is the principle of national treatment, the idea that WTO Members should treat the goods and services of other WTO Members like they treat their own goods and services once the former enter the market of the latter (National Treatment, Principle). The GATT restates the principle in Art. III:
1. The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production. …
4. The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.
29. In Japan—Taxes on Alcoholic Beverages, the Appellate Body explained that the purpose of Art. III of the GATT is the avoidance of protectionism in the application of internal measures:
The broad and fundamental purpose of Art. III is to avoid protectionism … More specifically, the purpose of Art. III ‘is to ensure that internal measures “not be applied to imported or domestic products so as to afford protection to domestic production”‘. Toward this end, Art. III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products. ‘[T]he intention of the drafters of the Agreement was clearly to treat the imported products in the same way as the like domestic products once they had been cleared through customs. Otherwise indirect protection could be given’ (WTO Japan—Taxes on Alcoholic Beverages—Report of the Appellate Body (4 October 1996) para. 16).
30. The counterpart to Art. III of the GATT in the GATS is Art. XVII:1:
In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers.
31. On the external relations of WTO Members, Art. XXIV:8 of the GATT states that bilateral or regional trade agreements must eliminate tariffs and other restrictions ‘with respect to substantially all the trade’ in goods among the member territories:
For the purposes of this Agreement:
(a) A customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories, so that
(i) duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with respect to substantially all the trade between the constituent territories of the union or at least with respect to substantially all the trade in products originating in such territories, and,
(ii) … substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union;
(b) A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.
32. The language of this paragraph is hardly precise but the Understanding on the Interpretation of Art. XXIV of the GATT 1994 does not refer to a single undertaking either. Its Preamble only recognizes that the expansion of world trade is ‘increased if the elimination between the constituent territories of duties and other restrictive regulations of commerce extends to all trade, and diminished if any major sector of trade is excluded’. In Turkey—Restrictions on Imports of Textile and Clothing Products, the Appellate Body considered the internal trade aspect of a customs union under Art. XXIV:8(a)(i) of the GATT:
Sub-paragraph 8(a)(i) of Art. XXIV establishes the standard for the internal trade between constituent members in order to satisfy the definition of a ‘customs union’. It requires the constituent members of a customs union to eliminate ‘duties and other restrictive regulations of commerce’ with respect to ‘substantially all the trade’ between them. Neither the GATT Contracting Parties nor the WTO Members have ever reached an agreement on the interpretation of the term ‘substantially’ in this provision. It is clear, though, that ‘substantially all the trade’ is not the same as all the trade, and also that ‘substantially all the trade’ is something considerably more than merely some of the trade. We note also that the terms of sub-paragraph 8(a)(i) provide that members of a customs union may maintain, where necessary, in their internal trade, certain restrictive regulations of commerce that are otherwise permitted under Articles XI through XV and under Art. XX of the GATT 1994. Thus, we agree with the Panel that the terms of sub-paragraph 8(a)(i) offer ‘some flexibility’ to the constituent members of a customs union when liberalizing their internal trade in accordance with this sub-paragraph. Yet we caution that the degree of ‘flexibility’ that sub-paragraph 8(a)(i) allows is limited by the requirement that ‘duties and other restrictive regulations of commerce’ be ‘eliminated with respect to substantially all’ internal trade (WTO Turkey—Restrictions on Imports of Textile and Clothing Products—Report of the Appellate Body (22 October 1999) para. 48).
33. Whatever interpretation applies, the only discernible requirement under Art. XXIV: 4 of the GATT is ‘to facilitate trade’. The counterpart to Art. XXIV:8 of the GATT in the GATS is Art. V, which not only requires the agreement to ‘facilitate trade between the parties’ but also imposes a ‘substantial sectoral coverage’ requirement:
1. This Agreement shall not prevent any of its Members from being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement, provided that such an agreement:
(a) has substantial sectoral coverage, (1) and
1 This condition is understood in terms of number of sectors, volume of trade affected and modes of supply. In order to meet this condition, agreements should not provide for the a priori exclusion of any mode of supply.
(b) provides for the absence or elimination of substantially all discrimination, in the sense of Art. XVII, between or among the parties, in the sectors covered under subparagraph (a), through:
(i) elimination of existing discriminatory measures, and/or
(ii) prohibition of new or more discriminatory measures,
either at the entry into force of that agreement or on the basis of a reasonable time-frame, except for measures permitted under Articles XI, XII, XIV and XIV bis.
34. The Panel on Canada—Certain Measures Affecting the Automotive Industry interpreted Art. V:1 of the GATS as a non-discrimination provision applicable to bilateral or regional agreements with respect to trade in services:
[I]t is worth recalling that Art. V provides legal coverage for measures taken pursuant to economic integration agreements, which would otherwise be inconsistent with the MFN obligation in Art. II. Paragraph 1 of Art. V refers to ‘an agreement liberalizing trade in services’. Such economic integration agreements typically aim at achieving higher levels of liberalization between or among their parties than that achieved among WTO Members. Art. V:1 further prescribes a certain minimum level of liberalization which such agreements must attain in order to qualify for the exemption from the general MFN obligation of Art. II. In this respect, the purpose of Art. V is to allow for ambitious liberalization to take place at a regional level, while at the same time guarding against undermining the MFN obligation by engaging in minor preferential arrangements. However, in our view, it is not within the object and purpose of Art. V to provide legal coverage for the extension of more favourable treatment only to a few service suppliers of parties to an economic integration agreement on a selective basis, even in situations where the maintenance of such measures may explicitly be provided for in the agreement itself (WTO Canada—Certain Measures Affecting the Automotive Industry—Report of the Panel (11 February 2000) para. 10.271).
G. Other Jurisdictions
35. The freedom of trade and commerce is not exclusive to these jurisdictions. Economic constitutions abound. For example, the UAE also constitutionalizes the principle of free trade into a federal market. Art. 11 of the Constitution of the United Arab Emirates: 18 July 1971 (UAE) states:
1. The Emirates of the Union shall form an economic and customs union and Union Laws shall regulate the progressive stages appropriate to the achievement of this Union.
2. Freedom of transfer of capital and of movement of all goods between the Emirates of the Union is guaranteed and may not be restricted except by a Union Law.
3. All taxes, fees, duties and tolls imposed on the movement of goods from one member Emirate to the others shall be abolished.
36. A less obvious example is the Republic of Indonesia (Indonesia), which, unlike the examples above, is not a federal jurisdiction. It is a unitary state, albeit fragmented into thousands of islands, Art. 33.4 of the Constitution of the Republic of Indonesia: 18 August 1945 (Indon) speaks of ‘the unity of the national economy’:
The organization of the national economy shall be based on economic democracy that upholds the principles of solidarity, efficiency along with fairness, sustainability, keeping the environment in perspective, self-sufficiency, and that is concerned as well with balanced progress and with the unity of the national economy.
37. These two provisions like the various other provisions above are all statements of the principle of free trade. The freedom of trade and commerce, however, does not only come in the form of a principle. It also comes in the form of a right, an individual right to economic freedom. An example of that expression is Art. 27 of the Federal Constitution of the Swiss Confederation: 18 April 1999 (Switz), which states, simply but unequivocally:
1. Economic freedom is guaranteed.
2. Economic freedom includes in particular the freedom to choose an occupation as well as the freedom to pursue a private economic activity.
38. This provision constitutionalizes the individual though not absolute right to freely choose and pursue an economic activity together with a right of market access (SUI-2003-1-001 Association Suisse des Annonceurs et al v Grand Council of the Canton of Geneva (28 March 2002) (Switz)). Perhaps not as overtly an express guarantee of economic freedom, the economic constitution in the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China: 1 July 1997 (HK), does, as a whole, represent the highest constitutional expression of economic liberty anywhere. It is a charter of economic rights and freedoms, including the right to property (Arts 6, 105); Hong Kong’s status as an international financial centre (Art. 109); the free operation of financial business and financial markets (Art. 110); a freely convertible currency (Art. 112); the free flow of capital within, into, and out of Hong Kong (Art. 112); Hong Kong’s status as a free port (Art. 114); the pursuit of the policy of free trade (Art. 115); and, the creation of an economic and legal environment for encouraging investments (Art. 118). Among those provisions, the most important is Art. 5, which states:
The socialist system and policies shall not be practised in the Hong Kong Special Administrative Region, and the previous capitalist system and way of life shall remain unchanged for 50 years.
40. If not in the form of a government power, constitutions present the freedom of trade and commerce either as an individual right to economic freedom or as a market principle of free trade. Regardless of form, three are its common characteristics: one, the freedom is extensive to internal and external trade alike; two, the freedom is from discrimination in market access; and, three, the freedom is subject to appropriate and adapted regulation in the pursuit of legitimate public policy objectives. To illustrate those characteristics, this essay has comparatively studied the construction and interpretation of the freedom of trade and commerce under economic constitutions through a selection of non-unitary market jurisdictions, from an economic union as the EU to a federal market as Australia, in addition to unitary market jurisdictions like Switzerland and Hong Kong sensitive to economic freedom as an individual right. As a right, it concludes that the freedom of trade and commerce is a freedom of the market. And as a principle, it concludes that, on an interpretation as a norm of non-discrimination, the freedom of trade and commerce can implement a scheme of political economy to integrate separate market jurisdictions for the greater equity of all market actors. Thus, the constitutionalization of the freedom of trade and commerce in the process of economic integration informs all governance levels of political economy. The free trade jurisprudence of supranational and international, regional and cross-regional non-unitary market jurisdictions is significant to the constitutional development of the political economy of domestic non-unitary market jurisdictions as the free trade jurisprudence of domestic non-unitary market jurisdictions is significant to the constitutional development of the political economy of supranational and international, regional and cross-regional non-unitary market jurisdictions.
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- Ashwander v Tennessee Valley Authority (1936) 297 US 288 (US).
- Atiabari Tea Co Ltd v The State of Assam and Others (1961) 1 SCR 809 (India).
- The Automobile Transport (Rajasthan) Ltd v The State of Rajasthan and Others (1963) 1 SCR 491 (India).
- Bank of New South Wales v Commonwealth (Bank Nationalization)  76 CLR 1 (Austl).
- Betfair Pty Ltd v Racing New South Wales  HCA 12 (Austl).
- Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein  ECR 649 (Cassis de Dijon).
- Case 174/84 Bulk Oil v Sun International  ECR 559.
- Case 242/84 Tezi v Minister for Economic Affairs  ECR 933.
- Case 41/76 Suzanne Criel, née Donckerwolcke and Henri Schou v Procureur de la République  ECR 1921.
- Case 59/84 Tezi v Commission  ECR 887.
- Case 8/74 Procureur du Roi v Benoît and Gustave Dassonville  ECR 837.
- Case C-110/05 Commission v Italy (Trailers)  ECR I-519.
- Case C-142/05 Åklagaren v Percy Mickelsson and Joakim Roos (Mickelsson)  ECR I-4273.
- Case C-322/01 Deutscher Apothekerverband eV v 0800 DocMorris NV and Jacques Waterval (DocMorris)  ECR I-14887.
- Castlemaine Tooheys Ltd v South Australia  169 CLR 436 (Austl).
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- Gibbons v Ogden (1824) 22 US 1 (US).
- Joined Cases C-267/91 and 268/91 Criminal Proceedings against Bernard Keck and Daniel Mithouard  ECR 6097.
- Joined Cases C-34/95, C-35/95 and C-36/95 Konsumentombudsmannen (KO) v De Agostini (Svenska) Forlag AB and TV-Shop i Sverige AB (De Agostini)  ECR I-3843.
- National Labour Relations Board v Jones & Laughlin Steel Corporation (1937) 301 US 1 (US).
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- Pape v Commissioner of Taxation  238 CLR 1 (Austl).
- Perez v United States (1971) 402 US 146 (US).
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- United States v Alfonso Lopez Jr (1995) 514 US 549 (US).
- United States v Darby (1941) 312 US 100 (US).
- United States v Morrison (2000) 529 US 598 (US).
- Wickard v Filburn (1942) 317 US 111 (US).
- WTO Canada—Certain Measures Affecting the Automotive Industry—Report of the Appellate Body (31 May 2000) WT/DS139/AB/R and WT/DS142/AB/R, AB-2000-2.
- WTO Canada—Certain Measures Affecting the Automotive Industry—Report of the Panel (11 February 2000) WT/DS139/R and WT/DS142/R.
- WTO Japan—Taxes on Alcoholic Beverages—Report of the Appellate Body (4 October 1996) WT/DS8/AB/R, AB-1996-2.
- WTO Turkey—Restrictions on Imports of Textile and Clothing Products—Report of the Appellate Body (22 October 1999) WT/DS34/AB/R, AB-1998-5.
- General Agreement on Tariffs and Trade (adopted 15 April 1994, entered into force 1 January 1995) 1867 UNTS 187.
- General Agreement on Trade in Services (adopted 15 April 1994, entered into force 1 January 1995) 1869 UNTS 183.
- Treaty on the Functioning of the European Union (signed 13 December 2007, entered into force 1 December 2009)  OJ C115/47.