ENVIRONMENTAL LAW PROJECT PAPER

TOPIC: Trade and Environment: The WTO Regime

PUNEETH GANAPATHY

ID NO: 209056

THIRD YEAR

Environmental Law

TABLE OF CONTENTS

TABLE OF CONTENTS..................................................................................................................1

INTRODUCTION...........................................................................................................................2

1. THE EVOLUTION OF ENVIRONMENTAL PROTECTION UNDER THE WTO................................3

I. Environmental Sensitisation of the GATT.........................................................................3

II. The Tuna Dolphin Dispute (US/Mexico)..........................................................................5

2. THE ARTICLE XX REGIME.....................................................................................................6

I. Protection of Humans, Animals and Plants........................................................................6

II. Protection Exhaustible Natural Resources........................................................................8

CONCLUSION.............................................................................................................................10

BIBLIOGRAPHY.........................................................................................................................11

Cases....................................................................................................................................11

Articles and Reports.............................................................................................................11

Books and Treatises.............................................................................................................12

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INTRODUCTION

The General Agreement on Tariffs and Trade1 was opened for the invitation of signatures of

willing member states on 30th October 1947, with the final entry into force being in January

1948. The present day counterpart of this body is the World Trade Organization (WTO). The

establishment of a uniform international regulatory regime of commercial conduct was the

guiding objective at the time of the drafting of the GATT. The issue of trade and its interplay

with the environment was never a component of the initial rounds of the GATT.2 An equally

notable body, The International Union for the Conservation of Nature and Natural Resources3

was formed in 1947.

Contemporaneous with the genesis of an international body to regulate trade was a shift in the

international legal consciousness to establish a body to regulate the environment. Thus, even

in the absence of direct talks on concomitant issues, the probability of such trade regulating

body being called in for the protection of the environment was clearly plausible. The

allegation that the GATT was formed in an era where environmental consciousness did not

exist is a farce.4

The chance of this probability did later on proceed to a realisation in the present age with

measures being included in the GATT5. The realization that there existed an extremely

relevant and important impact of international trade practices upon the environment thus

came to be. This paper shall first seek to trace historically how the WTO evolved measures to

safeguard the environment, while the second part of this paper will attempt an analysis of the

environmental protection measures enshrined in the WTO as it stands today. This analysis

will be supported by the adoption of relevant case law which has emerged from the decisions

of the Dispute Settlement Body.

1 Hereinafter referred to as the GATT.

2 However, it has to be noted that a number of important environmental treaties were being created during the phase of these discussions. The following are some of the most notable conventions adopted during this time: CONVENTION FOR THE REGULATION OF MESHES IN FISHING NETS, 1946; INTERNATIONAL CONVENTION FOR THE REGULATION OF WHALING, 1946; INTERNATIONAL CONVENTION FOR THE NORTHWEST ATLANTIC FISHERIES, 1949; CONVENTION FOR THE ESTABLISHMENT OF THE TROPICAL TUNA COMMISSION, 1949; INTERNATIONAL CONVENTION FOR THE PROTECTION OF BIRDS, 1950.

3 Hereinafter referred to as the IUCN.

4 Steve Charnovitz, The World Trade Organisation and the Environment, (1998) 8 YIEL 98. Also see Gary Sampson & John Whalley eds., THE WTO, TRADE & ENVIRONMENT, Williston, Elgar, 2005.

5Exceptions contained under Article XX (b), (d), (g) & the Chapeau.

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1. THE HISTORICAL DEVELOPMENT OF AN ENVIRONMENTAL

PROTECTION REGIME UNDER THE WTO

I. EVOLVING ENVIRONMENTAL SENSIBILITIES BY THE GATT

The influence of trade and commerce upon the natural environment, within which it operated,

dates back to the very beginnings of trade. However, the inculcation of environmental

concerns into public policy considerations regarding trade is of relatively modern vintage.

Nevertheless, this trend too can be traced back to the trade related provisions contained in

THE CONVENTION OF FLORA AND FAUNA, 1933.6

The Stockholm Conference formed a watershed moment in the introduction of concerns for

the environment as affected by trade in an international forum7 and continued to be

deliberated upon as the effect of environmental policies upon trade became more and more

apparent.8 The period extending from 1971 to 1991 witnessed the nurturing of this debate on

the international stage.9

In November, 1971, a meeting of the GATT Council of Representatives was convened. At

this meeting it was decided that the Group on Environmental Measures and International

Trade will be set up.10 This group was supposed to convene upon the request of the

contracting parties with participation being open to all. The unfortunate reality was that this

body was not convened till the year 1991.. This is suspected to be a procedural attempt to

sideline environmental impositions on trade.11

6 Gary Sampson & John Whalley eds., THE WTO, TRADE & ENVIRONMENT, Williston, Elgar, 2005 at p. 19.

7 In 1972, the United Nations had held the CONFERENCE ON HUMAN ENVIRONMENT in Stockholm. The Secretariat of the GATT had presented a study entitled Industrial Pollution Control and International Trade. The purpose of the study was to focus on the probable impact of environmental control measures on trade liberalisation. The view was that the implementation of environmental protection measures would give birth to a new form of trade protectionism i.e. green protectionism. See Urs P. Thomas, Trade and Environment: Stuck in a Political Impasse at the WTO after Doha and Cancun Ministerial Conferences, (2004) 9 Glo.Env.Pol. 10.

8 It can be presumed that the rather complex relationship between trade and environment had not emerged before the nineties because the relevant international regimes had not matured sufficiently to allude to this debate as being unavoidable. See

9 Oran R. Young, Global Governance: Drawing Insights from the Environment Experience, Massachusetts, MIT, 1997.

10 This group later came to known as the EMIT Group and was subsequently replaced by the Special Sessions of the Committee on Trade & Environment (CTE).

11 Duncan French, INTERNATIONAL LAW & POLICY OF SUSTAINABLE DEVELOPMENT, Manchester, Juris/Manchester Press, 2005.

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Subsequently, during the Tokyo Round discussions the primal question regarding this issue

which came up for discussion was the determination of the level of impositions that could be

levied by environmental trade restriction measures.12 The Tokyo Round Agreement on

Technical Barriers to Trade, also known as the Standards Code was negotiated at the same

time. The primary thrust of this code was to ensure non-discrimination and transparency in

imposing technical barriers to trade.13

The GATT Uruguay Round marked the start of the second phase in this evolution which

lasted from 1984 to 1994.14 This phase is the most prominent and important in the

development of the subject of trade and environment. It was during the sessions in this round

that environmental measures were seriously discussed in the General Agreement on Trade in

Services (GATS), the diverse Agreement on Agricultures (AoA), Sanitary and Phytosanitary

Measures (SPM), Subsidies and Countervailing Measures and the Trade Related Aspects of

Intellectual Property Rights (TRIPS).15

II. THE UNITED STATES EMBARGO ON THE ISSUE OF DOLPHIN DEATHS

The very first test to the various attempts at tuning the GATT to accommodate environmental

sensitivities came about to shake the foundations of the international trading community in

12 The Tokyo Round marked the change in focus of the GATT to those issues which involved serious questions on implementation and subsequent realisation of principal goals of the body. Issues concerning dispute resolution and the adoption of reservations by member states were discussed to prevent fragmentation of the GATT. Importance was also accorded to accusations of unilateral action being undertaken by the more influential member states.

13 In the preamble to the Agreement, it was recognised that countries have a right to adopt such measures to the extent they consider it to be appropriate. However, such measures must be in accordance with the standard of protection laid down by the code. This was known as the conformity assessment procedures. The Agreement placed special importance on the fact that the adoption of such measures should not create unnecessary barriers to trade. See Andreas F. Lowenfeld, INTERNATIONAL ECONOMIC LAW, Oxford, Oxford University Press, 2003.

14 It has to be noted that the additions of sustainable development and environmental protection to the preamble of the round was attained later. Initially, member states had wanted to shift discussions on these issues at a delayed stage. See Duncan French, INTERNATIONAL LAW & POLICY OF SUSTAINABLE DEVELOPMENT, Manchester, Juris/Manchester Press, 2005 at p. 203.

15 Article XIV of the GATS was designed upon similar lines of Article XX of the GATT to contain a general chapeau and provisions allowing member states to adopt restrictions necessary to protect human animal and plant life. This is absolutely identical to the mandate of Article XX(b) of the GATT. The WTO Agriculture Agreement adopted at the same time reiterated the commitment of the members to reform agricultural practices so as to protect the environment. Environmental concerns arising with regard to food safety, animal and plant health were addressed in the SPM Agreement, with similar restrictions based on non-discrimination and necessity. The SCM Agreement was suitably modified to allow member states to address environment externalities as when they occurred, rather than to obligate member states issues unnecessary subsidies when they were not required. The TRIPS was modified to allow member states to refuse patentability to products which may harm animal or plant life, or pose threats to humans and the environment.

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their vociferous commitment towards saving the environment in a non-discriminatory

manner.

The facts of the dispute were as follows: In 1991, the United States of America placed an

embargo on tuna caught in Mexican waters, alleging that the nets used to catch tuna resulted

in the accidental deaths of dolphins. The US took a hard line stance on the conservation of

dolphins. Mexico disputed this embargo by contending that the embargo was in violation of

GATT articles III, XI and XIII. The US embargo directly affected the countries of Mexico,

Venezuela and Vanuatu. The embargo was also expanded to ban importation of tuna from

countries that supported the international sale of tuna by the directly affected countries. This

directly harmed the trade interests of Costa Rica, France, Italy, Japan and Panama.

The United States had sought to justify the embargo upon application Article XX (b) (d) and

(g).16 The panel, whilst considering the arguments tendered, referred to the drafting history of

Article XX (b). It subsequently determined that the scope of application of the provision was

not intended to grant to state actors extra-territorial jurisdiction over the other member states.

Since the embargo’s intended effect was beyond US territory, such a restriction could not be

allowed.17 The panel disregarded the justification under Article XX (g) stating that the

embargo was based upon the unpredictable criteria of comparing of the taking of death rates

on US vessels. This according to them could not possibly foster dolphin protection. Further,

the panel nullified the effect of the embargo on intermediary nations as a consequence of the

direct embargo.

2. ARTICLE XX AND ENVIRONMENTAL RESPONSIBILITY

Articles XX (b) and (g) of the GATT have been specifically formulated to achieve a

reconciliation between trade interests and the need for protection of the environment. These

provisions are in the nature of exceptions. These exceptions permit member states to

16 The US had contended the embargo on the directly affected nations was justified by Article III of the GATT, and subsequently covered for under Articles XX (b) and (g). It had further argued that the extension of the embargo to intermediary nations was also correct in accordance with Articles XX (b), (d) and (g) of the GATT.

17 The panel also took cognizance of the fact that the US had failed to establish the fact that it had exhausted all reasonable measures to further dolphin protection objectives before opting for the exercise of this trade embargo. The panel was of the opinion that the adoption of international arrangements on this issue, given the fact that dolphins are found in the territorial waters of several member states should have been exploited before resorting to anti-GATT measures under Article XX.

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prioritise environmental policies ahead of trade obligations under certain specific

circumstances.18

When member states act in pursuance of the provisions contained in this Article, the measure

is labelled as a GATT – inconsistent measure.19 The panels and the Appellate Body have

devised a certain manner of implementing the provisions of Article XX.20 Further it has been

specifically established that the party responsible for invoking the exception has to establish

that it falls under any of the exceptional situations under the Article.21

I. PROTECTION OF HUMANS, ANIMALS AND PLANTS

The application of Article XX (b) is evaluated against the necessity test. This test has been

developed for the purpose of determining whether a patently GATT – inconsistent measure

would continue to be justified under the exception prescribed in Article XX (b).22

The necessity test is supposed to consist of two parts, namely:

1. The objective of the policy being pursued by the GATT – inconsistent

measure must directed towards the protection of the life or health of humans,

animals or plants.

18 ARTICLE XX:Subject to the requirement that such measures are not applied in manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures.……..(b) necessary to protect human, animal, plant life or health;……..(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

19 Article XX of the GATT states specific instances when member states may be exempted from liability to protect international trade under GATT rules. Of these instances, two are of particular significance. Articles XX (b) and (g) permit member states to justify their actions as being GATT – inconsistent measures if these are either necessary to ensure protection of human, animal and plant life or if these measures aimed directly at the conservation of exhaustible natural resources.

20See Michael J. Trebilcock & Robert Howse, THE REGULATION OF INTERNATIONAL TRADE, London, Routledge, 2005.

21 Report of the Appellate Body in US – Gasoline Case. Also see NOTE BY THE SECRETARIAT OF WTO, WT/CTE/203, 8 MARCH, 2002.

22 See Bernasconi – Osterwalder et al., ENVIRONMENT AND TRADE: A GUIDE TO WTO JURISPRUDENCE, London, Earthscan, 2006.

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2. There must be a degree of necessity justifying the adoption of such

measure.23

There have been instances where the first part of the necessity test was adhered to. Some of

the most notable instances are policies against the consumption of cigarettes,24 protection of

dolphin life,25 reduction of air pollution due to gasoline,26 exposure to asbestos fibres27 and

the accumulation of tire wastes.28Notwithstanding these permissions, the WTO has remained

steadfast in its position; it will not in any event interfere with the environmental policy or the

level of environmental protection accorded by member states through anti – GATT measures.

It is simply concerned with the level of trade restriction that such measures entail. It is often

on the extent of restrictions caused to trade, that most environmental policies are denied

recognition as a valid exception under Article XX.

II. PROTECTION OF EXHAUSTIBLE NATURAL RESOURCES

23 This was observed for the first time by the Panel in the US – Gasoline Case. See Peter van den Bossche, THE LAW OF WORLD TRADE ORGANISATION, Cambridge, Cambridge University Press, 2006.

24 In the Thailand – Cigarettes Case, the Panel noted the harmful consequences of smoking and stated that member states reserved the right to enact environmental policies to foster protection against such harm. In such cases member states could be permitted to prioritise environmental protection at the cost of trade liberalisation.

25 There were two disputes concerning tuna fishing on this point involving the European Community and the Mexico against trade embargos imposed by the US. The Mexican Tuna dispute has been discussed earlier in this paper. In US – Tuna (EEC) Case, it was noted by the panel that policies for the protection of dolphin life could be brought within the ambit of Article XX.

26 In the US – Gasoline Case, it was determined by the Panel that a policy for the protection of the ozone layer over the cities and other urban areas was a definitely indicative of the addressing of a pressing environmental concern. The disintegration of the ozone layer was a reality and one of the major reasons attributed to such depletion was indeed pollution caused by gasoline fumes.

27 In the EEC – Asbestos Case, the Dispute Settlement Body agreed with the observation of the Panel that lung cancer was caused by exposure to asbestos fibres. Therefore, member states were permitted to implement environmental safety standards to reduce this definite risk to human life.

28 In the Brazil – Retreaded Tyres Case, it was observed by the Dispute Settlement Body that accumulation of waste tyres often led to the nesting of mosquitoes in tropical conditions as water collects in the tubes of the discarded tyres. This instance of nesting of mosquitoes does pose a threat of causing widespread attacks of dengue and malaria fever.

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The applicability of the provisions of Article XX (g), concerning non renewable natural

resources is governed by a three step process called the relation test. This test involves the

following:

1. The measure must involve the conservation of exhaustible natural resources

2. The measure must relate to the conservation of exhaustible natural

resources.

3. The measure must impose restrictions on domestic production and

consumption of the natural resource concerned.

Therefore, in order to be granted the status of an exception under Article XX (g), the measure

must satisfy the contents of the relation test, following which it has to be in adherence with

the requirements of the chapeau of Article XX. Therefore, there is a marked similarity in the

implementation of Articles XX (b) and (g).29

On a parallel comparison with Article XX (b), there have been instances, where trade

restrictions have been placed to protect exhaustible natural resources. Some of the most

notable instances are conservation of tuna stocks,30 protection of herring and salmon

population,31 petroleum conservation,32 protection of clean air33 and the conservation of sea

turtles.34

29 P.W. Birnie & A.E. Boyle, INTERNATIONAL LAW AND THE ENVIRONMENT, 2nd ed., Oxford, Oxford University Press, 2002. Also see, Elli Louka, INTERNATIONAL ENVIRONMENTAL LAW: FAIRNESS, EFFECTIVENESS & WORLD ORDER, Cambridge, Cambridge University Press, 2006.

30 In the US – Canadian Tuna Case, the panel observed policies directed toward the protection of tuna stocks in the maritime waters of states were indeed in consonance with the need to preserve marine natural resources, and member states could seek protection of Article XX (g) of this point, provided they fulfilled the necessary tests for relevance and adherence to the chapeau.

31 In Canada – Salmon and Herring Case, the panel adjudicating in the dispute agreed that salmon and herring population constituted natural resources which were exhaustible in nature, and therefore, policies for there conservation could be undertaken.

32 In US – Automobiles Case, the panel was required to consider whether a certain regulation to conserve gasoline was relevant under Article XX (g). The Panel noted that gasoline was a product derived from petroleum. Petroleum was undoubtedly an exhaustible natural resource and therefore, such policy fell within range of Article XX (g).

33 In the US – Gasoline Case, it was argued by the United States that clean air was an exhaustible natural resource. However, Venezuela contended that clean air was only a condition in which air could exist and not an independent resource in itself. The Panel, interestingly, rejected Venezuela’s contention and observed that clean air was indeed a resource and it could be depleted.

34 In the US – Shrimp Case, the Appellate Body noted that the scope of Article XX (g) was not limited to the conservation of mineral and non – living resources only. It also extended to living species. It was noted that

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Thus the conclusion may be reached that the Dispute Settlement Body is agreeable to

according a broad interpretation to the text of Article XX (g), so as to include living resources

also within its ambit. Therefore, measures to conserve living resources deemed to be

exhaustible are justified under GATT.35

Despite the wide amplitude of application evidenced above, the caveat must always be borne

in mind that no legally binding guarantee may be culled out stating that such environmental

policies will always be regarded as exceptions. Even if the first part i.e. measure concerning

an exhaustible natural resource is indeed fulfilled, it has to be noted that the level of

restrictions placed by the measure on imports and produces for domestic consumption are of

primal importance in determining the legality of the measure. Furthermore, the application of

chapeau with specific regard for non discrimination, often disallow the passage of such

environmental policies.36

CONCLUSION

though such species are in principle renewable, certain circumstances make them susceptible to depletion.

35 Holder and Lee, ENVIRONMENTAL PROTECTION, LAW AND POLICY, Cambridge, Cambridge University Press, 2007. Also see Jake Caldwell, Multilateral Environmental Agreements and the GATT/WTO Regime, Washington Heinrich Boll Foundation, 2001.

36 Stuart Bell & Donald McGillivray, THE LAW RELATING TO PROTECTION OF ENVIRONMENT, Oxford, Oxford University Press, 2000. Also see Lavanya Rajamani, DIFFERENTIAL TREATMENT IN INTERNATIONAL ENVIRONMENTAL LAW, Oxford, Oxford University Press, 2003.

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After having reviewed in substantial detail the contents of two of the most significant

environmental protection clauses of the GATT/WTO Regime, it can be stated that there has

been a considerable effort by the Dispute Settlement Body to effect reconciliation between

the conflicting issues of trade interests and environmental degradation.

However, more often than not the Panel and the Appellate Body have recognised the

importance or pertinence of the issue, but has failed to subsequently act upon such

recognition to enact an environmental policy to address the same. A majority of the

environmental policies have been sacrificed at the altar of trade on the grounds that they

imposed unreasonable restrictions on trade. Even, if this were the case, it is simply not

enough to recognise a problem and then nullify a proposed solution. An alternate solution has

to evolved, otherwise the problem though accorded recognition will never be resolved and as

a result environment will continue down its path of destruction by unscrupulous trade

practices.

BIBLIOGRAPHY

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CASES

Brazil – Retreaded Tyres Case...................................................................................................8

Canada – Salmon and Herring Case.........................................................................................9

EEC – Asbestos Case.................................................................................................................8

Thailand – Cigarettes Case........................................................................................................7

US – Automobiles Case..............................................................................................................9

US – Canadian Tuna Case.........................................................................................................9

US – Gasoline Case...........................................................................................................7, 8, 9

US – Shrimp Case......................................................................................................................9

US – Tuna (EEC) Case..............................................................................................................8

ARTICLES AND REPORTS

Jake Caldwell, Multilateral Environmental Agreements and the GATT/WTO Regime,

Washington Heinrich Boll Foundation, 2001........................................................................9

NOTE BY THE SECRETARIAT OF WTO, WT/CTE/203, 8 MARCH, 2002....................................6

Oran R. Young, Global Governance: Drawing Insights from the Environment Experience,

Massachusetts, MIT, 1997.....................................................................................................3

Steve Charnovitz, The World Trade Organisation and the Environment, (1998) 8 YIEL 98...2

Urs P. Thomas, Trade and Environment: Stuck in a Political Impasse at the WTO after Doha

and Cancun Ministerial Conferences, (2004) 9 Glo.Env.Pol. 10..........................................3

BOOKS AND TREATISES

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Andreas F. Lowenfeld, INTERNATIONAL ECONOMIC LAW, Oxford, Oxford University Press,

2003........................................................................................................................................4

Bernasconi – Osterwalder et al., ENVIRONMENT AND TRADE: A GUIDE TO WTO

JURISPRUDENCE, London, Earthscan, 2006............................................................................6

Duncan French, INTERNATIONAL LAW & POLICY OF SUSTAINABLE DEVELOPMENT,

Manchester, Juris/Manchester Press, 2005............................................................................4

Elli Louka, INTERNATIONAL ENVIRONMENTAL LAW: FAIRNESS, EFFECTIVENESS & WORLD

ORDER, Cambridge, Cambridge University Press, 2006.......................................................8

Gary Sampson & John Whalley eds., THE WTO, TRADE & ENVIRONMENT, Williston, Elgar,

2005....................................................................................................................................2, 3

Holder and Lee, ENVIRONMENTAL PROTECTION, LAW AND POLICY, Cambridge, Cambridge

University Press, 2007...........................................................................................................9

Lavanya Rajamani, DIFFERENTIAL TREATMENT IN INTERNATIONAL ENVIRONMENTAL LAW,

Oxford, Oxford University Press, 2003.................................................................................9

Michael J. Trebilcock & Robert Howse, THE REGULATION OF INTERNATIONAL TRADE,

London, Routledge, 2005.......................................................................................................6

P.W. Birnie & A.E. Boyle, INTERNATIONAL LAW AND THE ENVIRONMENT, 2nd ed., Oxford,

Oxford University Press, 2002...............................................................................................8

Peter van den Bossche, THE LAW OF WORLD TRADE ORGANISATION, Cambridge, Cambridge

University Press, 2006...........................................................................................................7

Stuart Bell & Donald McGillivray, THE LAW RELATING TO PROTECTION OF ENVIRONMENT,

Oxford, Oxford University Press, 2000.................................................................................9

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