Article XXIV(3) of the GATT agreement provides that the provisions of the Agreement shall not be interpreted to prevent advantages accorded by any contracting party to adjacent countries in order to facilitate frontier traffic. The GATT interpretive note expands further on the frontier traffic exception.
The wording of the reference to frontier traffic which accords, with a U.S. proposal, was explained by the U.S. representatives as referring to facilities for frontier traffic in cases where a frontier ran through a city. The area affected by this provision is usually limited to a distance of 15 kilometres from the frontier.
In discussions during the Geneva session of the preparatory committee, it was agreed that frontier traffic should not be defined too narrowly as it varied in each case and the organisation (now WTO) would if necessary have to decide.
The article also makes specific reference to Trieste in the context of frontier traffic. It refers to the advantages accorded to the free territory of Yugoslavia by countries contiguous to that territory provided that such advantages are not in conflict with the treaties of peace, arising out of the Second World War.
Trieste became a free territory between Northern Italy and Yugoslavia under the direct responsibility of the United Nations Security Council after World War II. It was intended to reduce tensions over territorial claims between Italy and Yugoslavia. It had a strategic importance for trade with central Europe.
The free territory was effectively given divided between Italy and Yugoslavia under the treaty of Osimo 1975 ratified in 1977. There had been a memorandum of understanding in 1954 in relation to the administration of two zones by Italy and Yugoslavia.
Laterally following the break up of Yugoslavia, the treaty was effectively recognised by Croatia and Slovenia both of whose territory comprises part of the city of Trieste as successors to Yugoslavia.
San Marino & Vatican
The report of the subcommittee on the Havana Conference (which examined article XVI and XLII of the Havana Charter (corresponding to the provisions of the GATT) noted the sub-commissions discussion with the Italian delegates on a proposal to accept the special regime between Italy and San Marino and the Vatican city from the provisions of the charter.
The subcommittee was of the opinion that the special arrangements existing between Italy and those two other territories were not contrary to the charter.
The Havana charter provided for the establishment of the International Trade Organisation which was not ultimately established. Instead, the provisional GATT agreement applied until 1994 until the ultimate establishment of the World Trade Organisation.
A 1951 decision on the accession of Germany provides that the contracting parties agree that notwithstanding Article I of the general agreement, the accession of Germany would not require any modification in the then present arrangements for a status of inter-German goods, originating within Germany.
This matter referred to the frontier prior to hardening partition of Germany. East Germany was not recognised and was formerly part of Germany until 1972. It merged with West Germany and automatically became the member of the European Union on 3rd October 1990.
A report of the review session working for a party on schedules and customs administration noted that a proposal by the German delegation to add to article XXIV (3) a reference to the specific frontier zones, specially designated by treaty was not successful because the parties considered it unnecessary.
It indicated that while the parties would no doubt wish to examine the terms of any particular treaty in the event of a dispute, the working party understood that traffic in zones designated in treaties between adjacent countries designed solely to facilitate clearance at the frontier would normally be covered by the phrase “frontier traffic”.
Effect and Scope
The effect of article XXIV is that the GATT shall not be interpreted so as to prevent advantages afforded by contracting parties and adjacent countries in order to facilitate frontier traffic. Accordingly, the most favoured nation obligations would not apply so that reciprocal trade between the territories would be excepted from customs control and other restrictions on trade.
Frontier traffic is not defined. It is not clear if it would be interpreted to apply to an area as large as a whole of Ireland. This would appear to go further than the traditional notion of local trade at or near a border.