Reconciling Environment and Trade, Second Revised Edition

RECONCILING ENVIRONMENT AND TRADE Second Edition

Edited by

Edith Brown Weiss John H. Jackson Nathalie Bernasconi-Osterwalder

Library of Congress Cataloging-in-Publication Data Reconciliing environment and trade / edited by Edith Weiss, John H. Jackson, Nathalie Bernasconi-Osterwalder.—2nd ed. p. cm. Includes bibliographical references and index. ISBN 978-1-57105-370-1 1. Foreign trade regulation—Environmental aspects. 2. Environmental law, International—Economic aspects. I. Weiss, Edith Brown, 1942– . II. Jackson, John Howard, 1932– . III. Bernasconi-Osterwalder, Nathalie. K3943.R43 2008 346.04'4—dc22 2008001621 Copyright © 2008 Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Hotei Publishers, IDC Publishers, Martinus Nijhoff Publishers, and VSP. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Brill provided that the appropriate fees are paid directly to the Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. Manufactured in the United States of America

Contents List of Tables and Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Chapter 1: The Framework for Environment and Trade Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Edith Brown Weiss and John H. Jackson

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PART I Public Health and the Environment: The Case of Tobacco Control . . . . . . . . . . . . . . . . . . . . . .

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Introductory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 2: The Thai Cigarettes Case: A Current Critique . . . . . . . by Young Duk Park Chapter 3: Evolution of the “Necessary Test” of Article XX(b): From Thai Cigarettes to the Present . . . . . . . . . . . . . . . . . . . . . . by Patricio Leyton Chapter 4: Taxation to Control Tobacco in Developing States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Kristyn Noeth Chapter 5: The WHO Framework Convention on Tobacco Control and Trade-Related Protocols . . . . . . . . . . . . . . . . . . . . by Benjamin C. Adams Bibliography Relating to Tobacco Control and the Thai Cigarette Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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PART II Air Pollution: The Reformulated Gasoline Case. . . . . . .

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Introductory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 6: Unsolved Problems and Implications for the Chapeau of GATT Article XX After the Reformulated Gasoline Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Kenichiro Urakami Chapter 7: Reconciling U.S. Regulatory Procedure with the WTO Reformulated Gasoline Case . . . . . . . . . . . . . . . . . . . . . . . . by Christopher John Duncan Chapter 8: Characterizing Air as an Exhaustible Natural Resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Victoria H. Imperiale

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Chapter 9: Conserving “Exhaustible Natural Resources”: The Role of Precedent in the GATT Article XX(g) Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Lewis Briggs Bibliography Relating to the Reformulated Gasoline Case . . . . . . .

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PART III Food Safety: The Beef Hormones Case . . . . . . . . . . . . . .

301

Introductory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 10: The European Union’s Position on Agriculture after the WTO Appellate Body’s Decision in Beef Hormones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Charles F. De Jager Chapter 11: Fine-Tuning WTO Jurisprudence and the SPS Agreement to Improve Trade Integration and Harmonization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Regine Neugebauer Chapter 12: Assessing the Standard of Review for Trade-Restrictive Measures in the Sanitary and Phytosanitary Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Christopher Bisgaard Chapter 13: Food Labeling: Free Trade, Consumer Choice, and Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Katy Eiseman Bibliography Relating to Food Safety and the Beef Hormones Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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PART IV Commercial Fishing and Endangered Species: The Shrimp-Turtle Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Introductory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 14: Complying with the WTO Shrimp-Turtle Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Renata Benedini Chapter 15: Unilateral Environmental Measures After the WTO Appellate Body’s Shrimp-Turtle Decision . . . . . . . . . . . . . by Paul O’Brien Chapter 16: Considering the Biology of the Sea Turtles in the WTO Dispute Settlement Process . . . . . . . . . . . . . . . . . . . . . . . by Hannah Gillelan Chapter 17: Explaining U.S. Policy on Shrimp-Turtle: An International Business Diplomacy Analysis . . . . . . . . . . . . by Peter Chessick

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Chapter 18: Shrimp and Turtles: What About Environmental Embargoes Under NAFTA? . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Andres Rueda Bibliography Relating to the Shrimp-Turtle Case . . . . . . . . . . . . . .

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PART V Environmental Risks and Biosafety: Genetically Modified Organisms—A Future Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Introductory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 19: Compatibility of GMO Import Regulations with WTO Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Vicente Paolo B. Yu III Chapter 20: To Label or Not to Label: Leveling the Trading Field . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by Athita Komindr Chapter 21: The Cartagena Protocol on Biosafety: A Multilateral Approach to Regulate GMOs . . . . . . . . . . . . . . by Nathalie Bernasconi-Osterwalder Bibliography Relating to Genetically Modified Organisms . . . . .

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Web Sites Relating to Environment and Trade . . . . . . . . . . . . . . . . . . . General Bibiliography Relating to Environment and Trade. . . . . . . . . . Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

685 691 703 705

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LIST OF TABLES AND FIGURES* TABLES: 2.1 2.2 2.3 2.4 2.5 2.6

15.1 19.1 19.2 19.3

Positions of the Parties and the Panel on the Thai Ban on Cigarettes Imports . . . . . . . . . . . . . . . . . . . . . . . Panel’s Comparison of Terms and Purposes of Article XX(d) and Article XX(b) . . . . . . . . . . . . . . . . . . . Thai Argument about Health Consequences of Opening Market to U.S. Cigarettes . . . . . . . . . . . . . . . . . . . . WHO’s View on Health Consequences of Opening the Cigarette Market in Asian Countries . . . . . . . Section 301 Initiated Cases Regarding Cigarettes . . . . . . . . The Parties’ Arguments, the WHO’s Opinions, and the Panel’s Findings, by the Main Issues in the Thai Cigarettes Case . . . . . . . . . . . . Checklist for Article XX Consistency Under Shrimp-Turtle Appellate Body Analysis . . . . . . . . . . . . . . . . . . Risk Assessment Requirement for Selected GMO Import Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treatment of Source Countries for GMO Imports . . . . . . . Differential Regulatory Treatment Between Traditional and Modern Genetically Engineered Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53 54 56 62 71

74 477 000 000

000

FIGURES: 2.A U.S. Exports and Imports of Leaf and Tobacco Products: 1985–1989 . . . . . . . . . . . . . . . . . . . . . . . . 19.A Science vs. Non-Science Considerations in GMO Import Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59 000

* The first number indicates the number of the chapter and the second number or letter indicates the order in which the table or figure appear in each chapter.

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PREFACE The UN Millennium Report warns that “[w]e now face an urgent need to secure the freedom of future generations to sustain their lives on this planet—and we are failing to do it.” Today’s world faces two urgent imperatives: to protect the environment globally and to ensure continued economic growth and the eradication of poverty. Two of the bodies of international law most relevant to these goals—international environmental law and international trade law—often appear to clash. Trade law focuses mainly on providing a level trading field for products. Environmental law focuses on the environmental soundness of the process by which resources are harvested and goods produced, as well as on the harmfulness of particular products. The clashes between the two efforts are evident in disputes over such issues as food safety and the presence of hormones in beef, the catching of shrimp by methods that ensnare endangered species of turtles, public health and the limitations on tobacco imports and the advertising of tobacco products, and the reliance on reformulated gasoline to control air pollution. More recently, clashes have become evident in the area of biosafety and genetically modified organisms, as well as with respect to efforts to deal with short-life or recycled products, such as retreaded tires. Yet, many environmentalists and trade specialists believe that environment and trade can, and indeed must, be reconciled in order to achieve sustainable development. These considerations motivated two of the editors of this volume, who are professors of law vitally concerned with these subjects, to conduct, during the fall of 1999, a seminar on this topic for advanced and graduate law students at the Georgetown University Law Center (GULC) in Washington, D.C. We were privileged to be joined also by Prof. (adjunct) Christopher Parlin, who has extensive experience working on General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) cases with the U.S. government and more recently as a law firm partner working on WTO cases for various governments or private clients. The seminar, entitled “International Environment and Trade Law,” was structured to explore in depth the clashes outlined above, particularly by focusing on some of the key WTO Dispute Settlement cases faced by governments and societies around the world. Five cases were chosen as the central focus, namely the GATT case on Thai Cigarettes, the WTO cases on U.S. Reformulated Gasoline, the European Union case on Beef Hormones, the U.S. Regulations regarding Shrimp Imports and Turtle protection, and the case of genetically modified organisms (GMOs), which ix

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was the subject of a WTO panel decision in 2006. At the end of chapter 1, we describe in more detail the reasons for the importance and choice of these cases as the core of the seminar work. Our discussions included invited guests, who participated as advocates or policymakers connected with each of the cases. A team of three to five students produced research papers on each of these cases, and the seminar considered the overall meaning and significance of the evolving WTO jurisprudence dealing with the clash of policies involved. With considerable pride in this student work, the editors as professors present in this volume the papers produced under the supervision of the seminar conductors. We hope that readers will discover information and ideas about these cases, and their relationships to the clashes of policy we were exploring, which will advance their knowledge and appreciation of those policies in the precise and often perplexing context of real cases. All seminar participants found it eye-opening to realize how the members of the WTO dispute panels and appellate bodies had to struggle with the facts and important legal principles involved. As one often hears, “the devil is in the detail.” Broad generalizations and pontificating shibboleths began to retreat under the scrutiny brought to bear by this seminar. The professors learned at least as much as the students! This second edition of the book reflects developments that have occurred since the seminar. Nathalie Bernasconi-Osterwalder, who provided invaluable assistance with the initial book, has joined as a co-editor of the new edition. She has updated the introductions to the five case studies to set the stage and put the individual chapters into context. The editors thank Margaret Prystowsky, Daniel Fromm, Camille Paldi, and E. Rania Rampresad for their excellent research assistance. Many people have helped to make this book possible. We are grateful to the many experts who participated in seminar discussions, and shared their invaluable insights with us. These included Lee Ann Breckenridge, William Busis, Steve Charnovitz, Paul Jaffe, James Lyons, Dale McNeil, Nancy Perkins, Timothy Reif, Paul Rosenthal, Andrew Shoyer, the late Paul Szasz, Allyn Taylor, Charles Weiss, and Steve Wolfson. The seminar also benefitted greatly from the participation of Barbara Eggers, Prof. Tsuyoshi Kawase, Prof. Yohei Matsunobu, and Sylvia Rhodes, all of whom were associated with GULC during fall 1999. Marci Hoffman, then the International Law Librarian at GULC, provided very helpful research assistance throughout the seminar, and Jill Ramsfield, then professor of legal writing, provided essential writing guidance. Cathy Strain, Joanna Sokolow, and Ima Hicks provided expert administrative services in the production of the manuscript. We are indeed grateful to then Dean Judith Areen for her support of this effort. For the second edition, we

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are especially grateful to Dean Alex Aleinikoff for his support, Rania Rampersad for research assistance, and Lydia McDaniel for assistance with the index. To the many other people not mentioned who contributed in a variety of ways, both directly and indirectly, to the seminar and to the publication of this manuscript, we offer our sincerest appreciation. The second edition of this book is published in association with the Institute for International Economic Law at the Georgetown University Law Center. Edith Brown Weiss John H. Jackson Nathalie Bernasconi-Osterwalder

CHAPTER 1

THE FRAMEWORK FOR ENVIRONMENT AND TRADE DISPUTES Edith Brown Weiss and John H. Jackson

We now face an urgent need to secure the freedom of future generations to sustain their lives on this planet—and we are failing to do it. We have been plundering our children’s heritage to pay for unsustainable practices. Changing this is a challenge for rich and poor countries alike. . . . Peoples, as well as Governments, must commit themselves to a new ethic of conservation and stewardship.1 (Kofi A. Annan, former UN Secretary -General). The world’s environment is facing global changes at a pace and on a scale unknown to humankind. The UN Environment Program (UNEP) assessed the state of the world’s environment in 1997.2 The statistics are distressing. Between 1980 and 1990, the world’s forests and wooded land declined by about 2%, with natural forest cover in developing regions declining by 8%. The rate of species extinction increased, even though, of a working figure of 13 million species, only 13% have been scientifically described. Every day, 25,000 people die as a result of poor water quality, and 1.7 billion people are without safe water supply. One quarter of the world’s population is predicted to suffer from chronic water shortages in the beginning of this century. About one-third of the world’s coastal regions are at high risk of degradation, particularly from land-based sources of pollution and infrastructure development. Moreover, over 60% of marine fisheries are heavily exploited worldwide, leading to declining stocks of commercial fish species. Air pollution is a problem in all major cities in the world. Large regions are at risk from the effects of climate change and acidification, with the demand for energy to fuel economic 1 KOFI A. ANNAN, WE THE PEOPLES: THE ROLE OF THE UNITED NATIONS IN THE 21ST CENch. 1, at 4–5 (2000) [hereinafter the Millennium Report]. 2 UNEP Global State of the Environment Report 1997, available at http:// www.unep.org/eia/geo1.

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development rapidly rising. In Asia and the Pacific alone, a 100% increase in energy use is predicted for 1990–2010. Waste generation continues to increase. There is an urgent need for national, international, and local measures to control pollution and to conserve natural resources and ecosystems. The body of both national and international law that has emerged is diffuse and expanding. The focus is as much, or more, on the process by which resources are harvested and goods produced as on the harmfulness of particular products. At the same time that environmental concerns grow, there is an urgent and defined need for continued economic growth worldwide. Poverty continues to pervade many parts of the world and some areas within even the wealthiest countries. The international trading system, which is built upon the principle of comparative advantage, is intended to promote economic growth. It obligates countries to reduce barriers to efficient trading, such as tariffs, import quotas, subsidies, and other non-tariff barriers, so as to enable economies to grow. In contrast to environmental law, trade law is almost exclusively concerned with reducing barriers to trade in products and services and has not often addressed processes by which products are produced or resources harvested. Trade law thus has not been as concerned with whether the processes of production are environmentally sustainable and indeed is worried about environmental regulations directed to process as being barriers to trade. Increasingly, there is disagreement over the values of globalization and open trade. Whether the disagreement mainly reflects anger by some at not receiving a larger share of economic benefits or a deeper unease about globalization is unclear. Not surprisingly, the two efforts—to protect the environment and to promote liberal trade—clash. The intersections between environment and trade provoke clashes among governments, non-governmental organizations, corporations, and other actors, and within each of these communities, e.g., between federal and state or provincial governments, or between different non-governmental organizations. While many environmentalists and proponents of liberalized trade regard environmental protection and trade liberalization as compatible, if not essential to realizing the goals of both in the long term, there are nonetheless important differences in outlook between the environmental and the trade communities. Environmentalists are concerned that the World Trade Organization (WTO) will decide that national (including local) and international measures to protect the environment are inconsistent with the General Agreement on Tarrifs and Trade (GATT) 1994 and other WTO agreements, and will hold them invalid. They fear that liberalized trade will run roughshod over environmental robustness and integrity. Environmental

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protection operates on the time scale of decades, even centuries, whereas open and liberalized trade operates in a much shorter time frame. Environmentalists argue that a century or two from now, when people look back at this time, they will condemn us most for the rapid destruction of the planet’s biological diversity. The renowned biologist Edmund O. Wilson has observed that the loss of the world’s biological diversity would be worse than “energy depletion, economic collapse, limited nuclear war, or conquest by a totalitarian government. As terrible as those catastrophes would be for us, they could be repaired in a few generations. The one process ongoing in the 1980s that will take millions of years to correct is the loss of genetic and species diversity by the destruction of natural habitats. This is the folly our descendants are least likely to forgive us.”3 The proponents of liberalized trade and open markets argue that they produce the economic growth that lets people meet basic economic needs and achieve a decent, even high, standard of living. Only if people are able to meet basic economic needs will they have the economic resources and the will to protect the environment. Many would acknowledge that environmental problems are important but would argue that they should not be solved by distorting the trading system. In this view, distorting the trading system to protect the environment is a practice that is counter-productive both for protecting the environment and for facilitating economic growth. These philosophical clashes play themselves out in concrete disputes: over advertising and sale of tobacco, over the catching of yellowfin tuna that nets dolphins, over the production of reformulated gasoline, over hormones added to beef to promote growth, over requirements that shrimp be caught with turtle exclusion devices to save the endangered sea turtles, and over the new genetically modified seeds, food crops, and derivative products such as soybean oil. In these clashes, trade law has an advantage based on seniority. The body of international trade law is longstanding, well-defined, and backed by a powerful business constituency. By contrast, the large collection of international environmental legal instruments is largely unconnected and has only a diffuse public behind it. Thus, it is not surprising that the issues are normally framed as a discussion of whether efforts to protect the environment are consistent with international trade law. The clash between those in favor of free trade, on the one hand, those concerned with the environment and sustainable development, on the other, was broadcast around the world when, in 1999, at the Third World Trade Organization Ministerial in Seattle, Washington, more than 700 3

Edmund O. Wilson, quoted in ROBERT GOODLAND, C. WATSON & GEORGE LEDEC, ENVIMANAGEMENT IN TROPICAL AGRICULTURE 207 (1984).

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non-governmental organizations pressed for member governments to consider environmental, labor, and social issues. They held their own demonstrations and teach-ins outside the WTO Ministerial building. Two years later, in 2001, at the WTO Ministerial meeting held in Doha, Quatar, WTO member governments launched a new round of negotiations: the Doha Development Round. The Ministers at the Doha Conference agreed, among other things, to negotiations on the the relationship between existing WTO rules and multilateral environmental agreements (MEAs); on procedures for regular information exchange between MEA Secretariats and the relevant WTO committees; on the issue of environmental goods and services;4 and WTO disciplines on fisheries subsidies.5 Unfortunately, these negotiations have been very difficult. It is unlikely that they will yield significant results, at least in the near term, except perhaps in the area of fisheries subsidies where UNEP and environmental groups continue to be particularly active. Given the difficulties in the overall negotiations (which were suspended in July 2006 and revived in November of the same year), it is unclear what will happen to any of the discussions relating to trade and environment, which are part of the so-called “single package” of negotiations.

THE HISTORICAL CONTEXT OF THE LEGAL REGIMES The legal regimes for environmental protection and for liberal trade have developed on separate tracks and at different time periods. Understanding the historical context and the primary characteristics of each body of law makes it easier to reconcile them in addressing specific issues.

Development of International Trade Law6 In 1929, the world suffered an economic depression. As part of the response, the United States passed the 1930 Smoot Hawley Tariff Act,7 which provided for the raising of national tariffs, a form of retaliation for the imposition of rising tariffs by other states. In 1934, the U.S. Congress, responding to the effects of the 1930 Act, enacted the 1934 Reciprocal Trade Agreements Act,8 which delegated to the U.S. president the power to enter into reciprocal agreements to lower tariffs. By 1945, under this authority, as renewed from time to time, the United States had entered

Doha Ministerial Declaration, para. 31, available at http://www.wto.org. Id., para. 28. 6 This section is based on JOHN H. JACKSON, THE WORLD TRADE ORGANIZATION, chs. 2 and 3, at 12–58 (Royal Institute of International Affairs, 1998). 7 Tariff Act of 1930, 46 Stat. 685 (1930). 8 The Reciprocal Trade Agreements Act of 1934, 19 U.S.C. §§ 1351–1354. 4 5

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into 32 bilateral agreements to reduce tariffs. These agreements contained most of the substantive provisions later found in theGATT. 9 During World War II, states looked back at the period between 1920 and 1940 and realized that they had made serious mistakes in their economic policies, which were a major cause of the disasters that led to the war. These included the policies leading to the Great Depression, the harsh reparations policy towards Germany after WW I, and the many protectionist measures that states took, which choked off international trade. Political leaders of the United States and of other countries spoke about the importance of establishing international economic institutions that would prevent these mistakes from happening again. In July 1944, as World War II drew to a close, delegates from many countries met in New Hampshire for The Bretton Woods Conference. At the conference, states established the Charters of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). While the states present at the conference did not address the trade problem explicitly, they recognized the need for a comparable institution for trade to complement the IMF and IBRD. The international efforts to establish a charter for an international organization for trade proceeded on a separate track from that of the IMF and IBRD. In December 1945, the same year the United Nations was established, the United States invited other countries to enter into negotiations for a multilateral agreement to mutually reduce tariffs. Two months later, the UN Economic and Social Council adopted a resolution calling for a conference to draft a charter for an International Trade Organization (ITO). The United States published a draft ITO Charter, which was followed by inter-governmental meetings from 1946 to 1948. While the Havana Conference in 1948 completed the draft ITO Charter, it never came into effect, because the US Congress failed to approve it. Instead, the GATT, the document intended to reduce trade barriers, which was to have been subordinated to the ITO, became the de facto trade regime for the next 50 years. The GATT was completed by October 1947. In the face of pressures to put it into force even before the draft ITO Charter was completed, countries adopted the Protocol of Provisional Application, which brought the GATT into force “provisionally” on and after January 1, 1948, for the 23 original “contracting parties.” Although the GATT served as a forum to handle an increasing number of problems concerning trading relationships, it never formally had the legal status of an international organization, and it had no secretariat of its own. Countries were designated “contracting parties” to indicate that they had not become “members” of 9 The General Agreement on Tariffs and Trade, Oct. 30, 1947, T.I.A.S. No. 1700, 55 U.N.T.S. 187 [hereinafter GATT 1947].

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an organization. The GATT limped along for nearly 50 years with almost no basic “constitutional” provisions regulating its organizational activities and procedures, although through practice and trial and error it evolved fairly elaborate procedures for conducting its business. The basic purpose of the GATT is to liberalize trade so that the market can work to achieve the policy goals established for the system. It does this by constraining governments from imposing or continuing any of a variety of measures that restrain or distort international trade. Such measures include tariffs, quotas, internal taxes and regulations that discriminate against imports, subsidy and dumping practices, and state trading, as well as customs procedures and a variety of other non-tariff measures that serve as barriers to trade. The GATT sets forth several important rules that have become informally known as the principles of trade law. The first principle is the most favored nation (MFN) clause of Article I, which provides that government import or export regulations should not discriminate between other countries’ products. The second is the national treatment obligation in Article III, which provides for non-discrimination for like products against imports. The third, the prohibition of import quotas, Article XI, is well known in environmental cases. If there is a violation of the provisions of the GATT, Article XX(b) provides exceptions for measures necessary to protect human, animal, or plant life or health, and Article XX(g) provides for measures relating to the conservation of exhaustible natural resources. Article XX(a) also provides an exception for measures necessary to protect public morals, and Article XX(f) excepts measures relating to products produced by prison labor. All the exceptions are qualified by the chapeau to Article XX, which requires that “such measures are not applied in a 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.” The GATT operates through a series of negotiations among member states that are called “rounds.” Through these negotiations, states assumed new or revised obligations directed to more open trade. The most significant success of the GATT was in reducing tariff levels among the contracting parties. Between 1947 and 1994, the GATT held eight negotiating rounds, with the result that tariffs on industrial products imported into the industrial countries were reduced to a point where, in the eyes of some economists, they were no longer significant, with a few exceptions. As tariffs were reduced, many domestic producer interests began to turn to a variety of non-tariff barriers to minimize economic competition from imported products. These eventually numbered more than a thousand. The Tokyo Round, in which 99 states participated from 1973–79, made non-tariff barriers its priority objective. The round resulted in nine different special agreements, six or seven of which were sometimes called

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“codes,” as for example, the Subsidies Code or the Standards Code. Contracting parties to the GATT had to indicate their separate agreement to each of the “codes.” Soon after the Tokyo Round finished in 1979, countries began discussing the need for a new round of negotiations. In part this was because of concern that if there were no initiatives on trade policy, national governments might be tempted to backslide. In part it reflected a recognition that the world had become more complex and inter-dependent, and that the GATT rules were not providing the measure of discipline necessary to prevent tensions and damaging national actions. In September 1986, states launched the Uruguay Round of negotiations, which ultimately resulted in 1995 in the establishment of the World Trade Organization. The Punta del Este Declaration of 1986, which launched the round, did not mention a new organization to replace the GATT. By midway through the round, however, some governments recognized the need for a new institutional structure. In early 1990, Canada put forward the first official government proposal for a new organization to be called the “World Trade Organization.” A draft charter was included in the late 1991 rough draft of the Uruguay Round negotiation final text, and it was subsequently extensively revised. The final treaty (April 1994) embodied the new organization as the “World Trade Organization.” The treaty, which is 26,000 pages in length (including extensive annexes), was the single agreement, or package, resulting from the Uruguay Round. The overall treaty is termed the “Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations”; it contains many components. The first element is the WTO Agreement,10 often referred to as the WTO Charter. This charter contains four important annexes, which comprise most of the treaty’s pages and all of the “substance,” as contrasted with the charter clauses, which address institutional and procedural matters. Annex 1 to the WTO Agreement contains the Multilateral Trade Agreements (in three parts), which are mandatory in the sense that they impose binding obligations on all members of the WTO. This reinforces the “single package” notion of the negotiators. The Annex 1A texts include the GATT 1994 (the revised and all-inclusive GATT agreement with related agreements or “codes” and the “schedule of concessions”) and 12 other multilateral agreements, including, inter alia, the Agreement on Sanitary and Phytosanitary Measures, the Agreement on Technical Barriers to Trade, the Agreement on Trade-Related Investment Measures, and the Agreement on Subsidies and Countervailing Measures. Annex 1B is the services agreement, General Agreement on Trade in Services (GATS). Annex IC is the intellectual property agreement, Trade-Related Intellectual 10 The Agreement Establishing the World Trade Organization, opened for signature Apr. 15, 1994, 33 I.L.M. 1144, 11153 (1994) [hereinafter WTO Agreement].

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Property Agreement (TRIPA). Annex 2 contains the Dispute Settlement Understanding (DSU), which provides the rules for dispute settlement. Annex 3 contains the Trade Policy Review Mechanism (TPRM) established in 1988, by which the WTO reviews overall trade policies of member countries, and Annex 4 contains four optional agreements, relating to trade in civil aircraft, government procurement, dairy products, and bovine meat. These are also called “plurilateral” agreements. (The last two of these optional agreements were subsequently terminated.) The governing structure of the WTO follows the GATT 1947 model in part but also departs substantially from it. A Ministerial Conference, which meets at least once every two years, sits at the top. Next, there are four councils. One of these councils, the General Council, has overall supervising authority and can carry out functions between the ministerial meetings. The other three councils exist for the three parts of the Annex 1 Agreements: goods, services, and intellectual property. In addition, there is a Dispute Settlement Body (DSB) to supervise and implement the dispute settlement rules and procedures. The WTO headquarters is in Geneva in the former GATT building. While today’s international trade law is distinguished for having several basic legal principles and one major unifying international institution, regional trade agreements make the picture more complex. The European Community is certainly the most powerful example of a regional integrated trade area. But the 1990s witnessed the rise of several significant regional free trade agreements, most notably the North American Free Trade Agreement (NAFTA), between Canada, the United States, and Mexico,11 and MERCOSUR.12 The trend to bilateral and regional arrangements continues. Industrialized countries such as the United States and Japan are aggressively pursuing bilateral and regional free trade initiatives with a number of countries, including developing countries. While reaffirming their commitment to the multilateral system, they use bilateral and regional free trade deals to achieve goals and cover areas that they were unable to negotiate at the multilateral level, where the bargaining powers are generally different. The European Union is proceeding with negotiations for bilateral trade agreements with various countries, including India, South Korea, ASEAN, Central America, and the Andean Community. If the EU member states agree, this would put an end to the so-called EU “moratorium” on free trade agreements, following the launch of the Doha Round at the WTO. These developments imply that the rel11 North American Free Trade Agreement, Dec. 17, 1992, Canada-Mexico-United States, 32 I.L.M. 289, 605 (1993) [hereinafter NAFTA]. Other countries, such as Chile, have expressed interest in joining. 12 Treaty of Asuncion Establishing a Common Market among Argentina, Brazil, Paraguay, and Uruguay, Mar. 26, 1991, 30 I.L.M. 1041 (1991). For information, see http://www. americasnet.com/mauritz/mercosur.

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evant rules and institutions for given trade issues extend well beyond those of the centralized World Trade Organization.

Development of International and National Environmental Law13 International environmental law is ancient in the sense that there have always been rules that protect the environment. The Old Testament of the Bible, for example, enjoins combatants not to cut down fruit-bearing trees.14 Before 1900, international agreements focused primarily on boundary waters, navigation, and fishing rights along shared waterways, especially the Rhine River and other European rivers. They did not address pollution or other ecological issues.15 In the early 1900s, states negotiated agreements to protect commercially valuable species of animals, such as birds useful to agriculture, migratory birds, and fur seals. Only one convention addressed wildlife more generally: the 1900 London Convention for the Protection of Wild Animals, Birds and Fish in Africa.16 By the 1930s and 1940s, states recognized the importance of conserving natural resources more generally and concluded several agreements to protect fauna and flora, as well as agreements to regulate whaling and ocean fisheries. In 1931, states negotiated the first convention to regulate whaling (directed primarily to ensuring a sustainable supply of whales).17 In the 1950s and 1960s, concern about nuclear damage from civilian use of nuclear energy and about oil pollution in the oceans motivated states to negotiate treaties covering liability for nuclear damage and prevention of oil pollution at sea.18 The contemporary history of national environmental law dates to the late 1960s, and international environmental law dates to the first inter13 This section draws upon Edith Brown Weiss, International Environmental Law: Contemporary Issues and the Emergence of a New World Order, 81 GEO. L.J. 675 (1993). 14 Deutoronomy 20:19–20 (Good News Bible, American Bible Society, 1976); Tanakh, The Holy Scriptures, Jewish Publication Society, 1988). The relevant portion reads as follows: “When in your war against a city you have to besiege it a long time in order to capture it, you must not destroy its trees, wielding the ax against them. You may eat of them, but you must not cut them down. . . . Only trees that you know do not yield food may be destroyed.” Id. 15 The United States-United Kingdom Boundary Waters Treaty in 1909 was an important exception to the prevailing pattern. Article IV provided that water “shall not be polluted on either side to the injury of health or property on the other.” Treaty Relating to Boundary Waters Between the United States and Canada, Jan. 11, 1909, United States-Great Britain, 36 Stat. 2448. 16 London Convention for the Protection of Wild Animals, Birds and Fish in Africa, May 19, 1900, in 4 INTERNATIONAL PROTECTION OF THE ENVIRONMENT: TREATIES AND RELATED DOCUMENTS 1605 (B. Rüster et al. eds., 1983). 17 Convention for the Regulation of Whaling, Sept. 24, 1931, 49 Stat. 3079, 155 L.N.T.S. 349. 18 See, e.g., Convention on Third Party Liability in the Field of Nuclear Energy, July 29, 1960, 956 U.N.T.S. 251; International Convention for the Prevention of Pollution of the Sea by Oil, May 12, 1954, 12 U.S.T. 2989, 327 U.N.T.S. 3.

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national conference on the environment—the historic United Nations Conference on the Human Environment (the Stockholm Conference) in 1972. Not until the 1960s did environmental protection emerge as a significant issue on national agendas and as a new issue on the international agenda. When Rachel Carson published her catalytic book, Silent Spring,19 countries generally did not have national environmental legislation. The United States, for example, adopted its first major federal environmental legislation, the National Environmental Policy Act, in 1969. The U.S. Council on Environmental Quality and the U.S. Environmental Protection Agency were established only in 1971. When countries met in 1972 in Stockholm for the first international conference on the human environment, only a handful of countries had extensive national environmental laws, and there were only about several dozen multilateral environmental agreements.20 The conference was historic in that it brought both developed and developing countries together to address environmental issues. At the time, many developing countries feared that environmental protection and economic development might be incompatible and that environmental protection policies might be an excuse for rich country protectionism, which could be at the expense of economic growth, specifically their own economic growth. This fear was exacerbated by the publication of The Limits to Growth by the Club of Rome, which implied that these limits had already been reached.21 Nonetheless, countries adopted the famous Stockholm Declaration on the Human Environment, 22 which included the often-cited Principle 21, in which states reaffirmed their national sovereignty over their natural resources but also obligated themselves not to harm the environment in areas outside their jurisdiction or control. The Stockholm Conference also led directly to the establishment of the first international intergovernmental organization concerned with the environment—the UN Environment Program—and to the regional seas program under UNEP’s jurisdiction. Since 1972, there have been enormous changes in national, international, and local laws on environmental protection. Already by 1992, more than 1,000 international legal instruments (binding and significant RACHEL CARSON, SILENT SPRING (1963). See United Nations Environment Programme, Selected Multilateral Treaties in the Field of Environment (Alexandre Charles Kiss ed., UNEP Reference Series 3, 1983). The document lists 78 multilateral agreements in the field of environment, although the number of agreements directly addressed to environment in this list is significantly fewer. Many of the environmental agreements were concluded after 1971. 21 CLUB OF ROME, LIMITS TO GROWTH (1972). 22 The Stockholm Declaration on the Human Environment, June 16, 1972. Report of the U.N. Conference on the Human Environment, 11 I.L.M. 1416 (1972). For a descriptive analysis of the drafting of the provisions of the Declaration, see Louis B. Sohn, The Stockholm Declaration on the Human Environment, 14 HARV. INT’L L.J. 423 (1973). 19 20

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non-binding ones) were concerned with the environment. 23 Nearly all countries had at least one major piece of legislation concerned with the environment; most had more. The international agreements and domestic laws and regulations covered both natural resource conservation (the “green” issues) and air, water, and land pollution (the “brown” issues). In addition to these laws and regulations, there were many other national measures concerned almost solely with protecting public health, a separate category in many countries from environmental measures. Recent international environmental agreements cover a broad range of activities: from human-produced chemicals depleting the stratospheric ozone layer, marine pollution, climate change, persistent organic pollutants and heavy metals to biodiversity, fresh water use, desertification, and forests. The scope of obligations has expanded from those requiring (or encouraging) monitoring, research and information exchange to those providing precise quantitative targets and timetables for controlling or eliminating certain pollutants or practices. The agreements have become increasingly detailed and include more emphasis on implementation, compliance, and technical and other assistance to states parties. In contrast to international trade law, there is no unified agreement on environmental protection, but rather many separate and sometimes overlapping ones. The secretariats for the agreements are separate and the monitoring and reporting systems are individualized to each agreement. The funding mechanisms to build national capacity to comply are also generally separate (with the notable exceptions of the Framework Convention on Climate Change 24 and the Convention on Biological Diversity,25 which use the restructured Global Environmental Facility).26 This gap has not been filled by customary international law. States have never agreed upon or accepted an overarching set of legal principles as customary international law applicable to environmental problems, although there have been several efforts by expert groups to draft such principles.27 The Rio Declaration on Environment and Development 23 See EDITH BROWN WEISS, DANIEL BARSTOW MAGRAW & PAUL C. SZASZ, INTERNATIONAL ENVIRONMENTAL LAW: BASIC INSTRUMENTS AND REFERENCES, VOLS. I AND II (1992, 1999). 24 Framework Convention on Climate Change, done at New York on May 9, 1992, U.N. Doc. A/CONF.151/26, reprinted in 31 I.L.M. 849 (1992). 25 Convention on Biological Diversity, done at Rio de Janeiro on June 5, 1992, UNEP/Bio.Div./Conf./L.2, reprinted in 31 I.L.M. 818 (1992). 26 Instrument for the Establishment of the Restructured Global Environmental Facility, done at Geneva on Mar. 31, 1994, reprinted in 33 I.L.M. 1273 (1994). See Shoshana K. Mertens, Towards Accountability in the Restructured Global Environmental Facility, 3 REV. EUR. COMMUNITY & INT’L ENVTL. L. 105 (1994). 27 See Experts Group on Environmental Law of the World Commission on Environment and Development, Legal Principles for Environmental Protection and Sustainable Development, U.N. Doc. WCED/86/23/Add.1(1986), A/42/427, Annex I, reprinted in EXPERTS GROUP ON ENVIRONMENTAL LAW OF THE WORLD COMMISSION ON ENVIRONMENT AND DEVELOPMENT,

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is perhaps the closest inter-governmental instrument that sets forth principles of environmental law, but it is clearly non-binding, and only those provisions that represent customary international law would be regarded as binding. States have never delineated which Rio principles might be regarded as customary international law. The International Court of Justice took an important step in this direction in its 1996 Nuclear Weapons Advisory Opinion. The Court stated that “[t]he existence of the general obligation of States to ensure that activities within their jurisdiction and control respect the environment of other States or of areas beyond national control is now part of the corpus of international law relating to the environment.”28 The Court repeated the statement in its 1997 decision in the case known informally as the Danube Dam case. 29 The language of the Court’s statement reflects, but does not precisely follow, that in Principle 21 of 1972 Stockholm Declaration on the Human Environment.30 In contrast to the WTO, which serves as the home for the trade regime, there is no one organization that serves as the home for international environmental agreements. In good part this is because the various agreements were negotiated under different institutional umbrellas, and there has been no effort to consolidate them within one institution. After UNEP was created in 1972, many environmental agreements have been negotiated under its auspices, but not all. The preexisting agreements had different institutional homes, and these have remained. Thus, the International Maritime Organization (IMO), UNESCO, UNFAO, International Tropical Timber Organization (ITTO), soon the World Health Organization (WHO), as well as others, are home to international environmental agreements. In part, this institutional dispersion exists because the field of environmental protection covers very diverse activities, many different natural resources and environmental media, and has no clear delineation of its outer borders. In a sense, environmental protection is L EGAL P RINCIPLES FOR E NVIRONMENTAL P ROTECTION AND S USTAINABLE D EVELOPMENT (1987); Report of the Expert Group Meeting on Identification of Principles of International Law for Sustainable Development, United Nations Commission on Sustainable Development, 4th Sess., Background Paper #3 (1995); Final Report of the Expert Group Workshop on International Environmental Law Aiming at Sustainable Development, United Nations Environment Programme, UNEP/IEL/WS/3/2 (1996); Commission on Environmental Law of IUCN—The World Conservation Union, International Covenant on Environment and Development (Mar. 1995). 28 Legality of the Treaty or Use of Nuclear Weapons, Advisory Opinion, 1996 I.C.J.66, 82, para. 29. 29 Gabcikovo-Nagymaros Project (Hungary v. Slovakia), 1997 I.C.J.4, 38, para. 53. 30 For analysis, see Edith Brown Weiss, Opening the Door to the Environment and to Future Generations, in INTERNATIONAL LAW, THE INTERNATIONAL COURT OF JUSTICE AND NUCLEAR WEAPONS 338–53 (Laurence Boisson de Chazournes & Philippe Sands eds., 1999). For related analysis of the Court’s Opinion, see Djamchid Momtaz, Le Recours à l’Arme Nucléaire et la Protection de l’Environnement: l’Apport de la Cour Internationale de Justice, id. at 355–74.

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an integral part of all of our activities. Given this dispersion, which some might view as inevitable, it is not surprising that most environmental activities are measured in terms of their compatibility with the trade regime and not vice versa. This is especially the case in light of the seniority of a formal international trade regime. From the beginning, international law related to the environment has been developed at the regional and global levels not just at the bilateral level. Some problems are best handled at the regional level: allocation or pollution of particular watercourses or lakes; certain kinds of transboundary air pollution; regional seas pollution; and regional fisheries. The United Nations Environment Program has been especially successful in its regional seas efforts, where framework agreements coupled with two or more annexes on particular problems have been concluded for close to a dozen regional seas. Other environmental needs can be addressed both by regional agreements and global agreements, such as those to conserve biological diversity and protect ecosystems. In many international environmental agreements that are global in reach, states parties are increasingly turning to regional measures to help implement the agreements.31 Some agreements, such as the Desertification Convention, include separate annexes that are addressed to problems in particular regions, i.e., Africa, Asia, Latin America and the Caribbean, and the Northern Mediterranean.32 The environmental culture contrasts sharply with that prevalent in the trade field. The environmental community is generally an open one that relies on public access to information and is accustomed to demanding public participation (especially by non-governmental organizations (NGOs)) in decisionmaking. Because the public views environment as “their” issue, governments in the democratic tradition necessarily operate to varying degrees in a transparent fish bowl.33 The Rio Declaration on Environment and Development reflects the so-called environmental culture. Principle 10 calls for individuals to have access to environmental information, for states to encourage public awareness and public participation, and for states to provide effective access to judicial and adminis31 See Edith Brown Weiss, The Five International Treaties: A Living History, in ENGAGING COUNTRIES: STRENGTHENING COMPLIANCE WITH INTERNATIONAL ENVIRONMENTAL ACCORDS ch. 5 (Edith Brown Weiss & Harold K. Jacobson eds., 1998). 32 United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa, done at Paris on June 17, 1994, U.N. Doc. A/AC.241/15/Rev.7 (1994), reprinted in 33 I.L.M. 1328 (1994) [hereinafter Desertification Convention]. 33 In some countries, however, such as China, the national government has taken the lead in passing environmental laws and sometimes in pressing for change at the local level, when local communities demonstrated little interest in environmental protection. The top down approach may not necessarily be associated with transparency.

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trative organs. Principle 17 requires environmental impact assessments as national instruments for examining proposed activities likely to have a significant adverse impact on the environment, a procedure that generally involves public participation and access to information. Principles 18 and 19 obligate states to provide notice to other states of natural disasters and other emergencies and “prior and timely” notice of activities that could have a significant adverse transboundary environmental effect. All of these procedural measures are consistent with the premise that addressing environmental problems means providing information to the public and involving relevant stakeholders. NGOs are important players in developing, implementing, and complying with international environmental law and, increasingly, within countries for national, provincial and local laws. NGOs are routinely present at official negotiations of international environmental agreements and meetings of the parties. The process of interaction among NGOs, governments, and inter-governmental organizations is dynamic and complicated. NGOs try to influence national governments directly and indirectly by putting public pressures on national and local legislatures. Governments may use NGOs to convey positions to the public. Ministries or agencies within governments may use NGOS to strengthen their views relative to other parts of the bureaucracy by keeping them well informed about issues and providing venues for them to express their views. NGOs provide intergovernmental organizations with important, independent communication links with national governments, and NGOs rely on them in turn for information and insights with which to influence national governments. Sometimes NGOs are part of the institutional structure for implementing international agreements, such as the World Heritage Convention34 and the Convention on Trade in Endangered Species (CITES).35 NGOs have also been active participants in international meetings concerned with the environment. At the 1992 UNCED conference, NGOs (including business NGOs) were present in the hundreds, even thousands.36 They held their own large non-governmental forum at the same time as the governmental meeting but at a different location. A group of 34 Convention for the Protection of the World Cultural and Natural Heritage, done at Paris on Nov. 16, 1972, 1972 U.N.J.Y.B. 89, 27 U.S.T. 37, T.I.A.S. 8226, reprinted in 11 I.L.M. 1358 (1972). 35 Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington on Mar. 3, 1973, 993 U.N.T.S. 243, 27 U.S.T. 1087, T.I.A.S. 8249, reprinted in 12 I.L.M. 1088 (1973). 36 For analysis of environmental NGOs, see, e.g., THOMAS PRINCEN & MATTHIAS FINGER, ENVIRONMENTAL NGOS IN WORLD POLITICS (1994); Al Raustiala, Note: The “Participatory Revolution” in International Environmental Law, 21 H ARV. E NVTL. L. R EV. 537 (1997); John McCormick, The Role of Environmental NGOs in International Regimes, in THE GLOBAL ENVIRONMENT 53–71 (Norman J. Vig & Regina S. Axelrod eds., 1999); Steve Charnovitz, Two Centuries of Participation: NGOs and International Governance, 18 MICH. J. INT’L L. 183 (1997).

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NGOs also operated within the meeting hall of the governmental delegates, convening regularly to formulate positions and actively dialoguing with delegations. At UNCED, states and NGOs shared a common value: the need to protect the environment. NGOs are also active participants in the judicial system, by bringing citizen suits to force governments to comply with domestic environmental laws and by filing amicus curiae briefs. National environmental legislation, such as the U.S. Clean Water Act, provides for citizen suits to force the federal government to enforce national laws or to perform non-discretionary duties.37 Other statutes provide for public hearings. In the United States, major federal actions significantly affecting the environment require an environmental impact statement;38 concerned parties can bring suit to ensure that the assessments are properly prepared. In the Nordic countries, an international agreement provides access by each country’s concerned citizens to the others’ administrative and judicial bodies to ensure that environmentally harmful effects are appropriately considered and to seek compensation for damage caused by environmentally harmful activities.39 In part, in response to pressures from environmentalists in both Eastern and Western Europe, states concluded under the UN Economic Commission for Europe an agreement in 1998 that provides for public access to information, public participation in decisionmaking relating to the environment, and access to justice in environmental matters.40 37 Federal Water Pollution Control Act, 33 U.S.C.A. § 1365 (authorizing any citizen to commence civil action (1) against any person and governmental instrumentality or agency alleged to be in violation of effluent standard or order issued by the EPA administrator or a state with respect to such a standard or limitation, or (2) against the EPA administrator “where there is alleged a failure of the Administrator to perform any act or duty . . . which is not discretionary with the Administrator).” 38 National Environmental Policy Act of 1969, § 102, 42 U.S.C. § 4332 (1995) (requiring federal agencies to “include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on—(i) the environmental impact of the proposed action, (ii) any adverse environmental effects which cannot be avoided should the proposal be implemented, (iii) alternatives to the proposed action, (iv) the relationship between local short-term uses of man’s environment and the maintenance and enhancement of long-term productivity, and (v) any irreversible and irretrievable commitments of resources which would be involved in the proposed action should it be implemented”); see Economic Commission for Europe Convention on Environmental Impact Assessment in a Transboundary Context, done at Espoo, Finland, on Feb. 25, 1991, E/ECE/1250; reprinted in 30 I.L.M. 800 (1991); IELMT 991; 15, ILWOBD V.B.15, PIE 1.9 (requiring environmental import assessments) The convention was not yet in effect as of August 2000. 39 Convention on the Protection of the Environment Between Denmark, Finland, Norway and Sweden, done at Geneva on Feb. 19, 1974, 1092 U.N.T.S. 279, reprinted in 13 I.L.M. 591 (1974). 40 The ECE Åarhus Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, done at Åarhus, Denmark,

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By contrast, the trade culture is more closed. Trade matters have been viewed by many governments as being within the exclusive competence of governments. There has been very little internal pressure for transparency. Since governments are concerned with ensuring a level trading field for the products produced by their companies, they have had little incentive from clients to carry out their deliberations in public. The companies, who themselves may be pleading special interests with particular political constituencies, have not pushed for public involvement. The culture surrounding much of trade law, especially negotiations, neither promotes public access to information nor invites public participation by NGOs and individuals in its processes. Unlike most government environment officials, most government trade officials have not lived in a socalled goldfish bowl in making and implementing trade policy in which the public can watch and monitor nearly all their activities. Trade statutes do not normally provide for citizens suits to force governments to comply with statutory or regulatory obligations. The WTO meetings are generally not public, nor are the pleadings before the dispute settlement panels. One exception is the second Beef-Hormones case, which was pending as of October 31, 2007. In that case, the parties (European Union, United States, and Canada) agreed to make the hearings in the fall of 2005 and 2006 open to public observation via closed-circuit television broadcast. These open hearings have remained an exception, however, and there is no indication that open hearings will be institutionalized. GATT history and the first years of the WTO have shown great reluctance to have public participation in WTO dispute settlement. The first amicus curiae brief was only accepted in the Shrimp-Turtle dispute. Despite these differences, there are promising signs that the cultures can in fact be reconciled and that the bodies of law can be effectively reconciled without destroying the objectives of either. Indeed it is often the case that promoting the objectives of trade agreements promotes environmental protection, both because countries gain the economic resources needed to enable them to address environmental issues effectively and because green technologies that help the environment and are facilitated by trade agreements also promote economic growth. However, efforts to reconcile environment and trade law still have far to go. Much goodwill is needed by all the players, and the discussion forum will have to be carefully chosen.

THE ROLE OF DISPUTE RESOLUTION Since many of the clashes between environment and trade may need to be resolved through formal or informal dispute resolution procedures, on June 25, 1998, ECE/CEP/43, available at http://www.unece.org/env/ europe/ppconven.htm.

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it is useful to examine the sharply different procedures that have been used in the two bodies of law. Arguably, procedures for resolving disputes have been important for both trade and environmental law. However, formal procedures have been frequently used in the trade field, but rarely used for international environmental disputes, even if they are included in the treaties.

The Resolution of International Trade Disputes There is a long history of formal procedures for resolving trade disputes under the GATT and now the WTO. One of the interesting and more controversial aspects of the GATT as an institution was its mechanism for settling disputes. When the GATT was negotiated, it was intended that it be placed in the institutional setting of the WTO. The draft ITO Charter (which failed to come into force) called for a rigorous dispute settlement procedure that contemplated arbitration and, in some circumstances, appeal to the World Court. However, while the ITO Charter would have established a rather elaborate dispute settlement procedure, the GATT devoted only a few paragraphs to the issue. Article XXIII was the centerpiece for dispute settlement in the GATT. Consultation was a prerequisite for invoking the multilateral GATT processes. These processes had three key features: they were usually invocable on grounds of “nullification and impairment” of benefits expected under the agreement, and did not require breaches of the legal obligations; they established the power of the contracting parties not only to investigate and to recommend action, but to “give a ruling on the matter”; and they gave the power to contracting parties in serious cases to authorize a “contracting party or parties” to suspend the GATT obligations to other contracting parties. The procedures established to implement these principles evolved over time into elaborate dispute settlement measures. Initially, GATT disputes were generally taken up by diplomatic procedures, either at semi-annual meetings of the contracting parties, or later at an intercessional committee, or even later by a working group established to examine such disputes. About 1955, a major shift in the dispute settlement procedure occurred, when it was decided that a dispute should be referred to a panel of three or five experts acting in their own capacities. “This development, it can be argued, represented a shift from a primarily ‘negotiating’ atmosphere of multilateral diplomacy, to a more ‘arbitrational’ or ‘judicial’ procedure designed to arrive impartially at the truth of the facts and the best interpretation of the law. Almost all subsequent dispute procedures in GATT (and the new WTO) have contemplated the use of a panel in this fashion.”41 41

John H. Jackson, Dispute Settlement and the WTO, 1 J. INT’L ECON. L. 329, 333 (1998).

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During the Tokyo Round negotiations, some efforts were made to improve the GATT dispute settlement processes. However, because of strong objections from the European Community to changes in the existing procedures, the initiative did not get very far. The negotiations resulted in a document, adopted in November 1979 and entitled “Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance,” which contained a detailed description of the dispute settlement processes of GATT. As with other “Understandings” from the Tokyo Round, its precise legal status was unclear. However, it formed a sort of “constitutional framework” for these processes after 1974 and prior to the WTO. This understanding described the procedures of the GATT dispute settlement, noting the requirement of consultation as the first step and providing explicit recognition of a conciliation role for the GATT DirectorGeneral, which, however, was almost never utilized. If these steps did not result in a settlement, then there was provision for a panel process (on decision of the contracting parties usually acting through their “Council”), although there was some ambiguity as to whether the complaining party had a right to have the panel set up to hear the dispute. If the panel was established, the disputants could provide oral and written advocacy, and the panel could provide a written report. The understanding reinforced the concept of the prima facie nullification or impairment and permitted the use of non-government persons for panels while stating a preference for government persons. “Under GATT, the procedure was for the panel to make its report and deliver it to the “Council,” the standing body of the GATT, which met regularly and disposed of most of the business of GATT. . . . The practice then became firmly established that if the Council approved the report by consensus, it became ‘binding.’ If it did not approve, then the report would not have a binding status.”42 The problem lay in achieving “consensus.” The almost 50 years of experience with the GATT dispute settlement process reveals that the process changed over time toward a greater orientation toward formal rules rather than informal procedures. The procedures shifted from “working parties” to “panels,” and the substantive focus of the system shifted from general ambiguous ideas about “nullification or impairment” to more analytical or “legalistic” approaches to interpreting rules of treaty obligation. But “birth defects” of the GATT dispute settlement system remained. The Uruguay Round, in which the World Trade Organization was negotiated, resulted in a new Dispute Settlement Understanding (DSU). The DSU established a unified dispute settlement system for all parts of the GATT/WTO system, clarified that all relevant parts of the Uruguay 42

Id. at 335.

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Round legal text that were argued by the parties could be considered in a dispute case, clarified the right of a complaining government to have a panel process initiated, and established a unique new appellate procedure in which a panel report is deemed adopted unless appealed by the parties and, if appealed, the report of the Appellate Body will be deemed adopted, unless there is a consensus against adoption. The procedures reverse the previous presumption under GATT, with the result that the appellate report will likely come into force as a matter of international law in virtually every case. The losing party must implement the recommendations and inform the Dispute Settlement Body (DSB). The DSB monitors implementation and, in the event the recommendations are not implemented, may authorize the withdrawal of trade concessions. Before a panel is established, however, the parties must consult to attempt to resolve their differences and have the option to use the GATT conciliation or mediation services. Between the WTO’s creation in January 1995 and October 31, 2007, 369 cases have been initiated according to the WTO Secretariat.43 Environmentalists continue to raise complaints about WTO dispute settlement. First, although the DSU gives third parties who have a “substantial interest” in a dispute the right to make a presentation to the deciding panel, this right extends only to WTO members, all of whom are governments of states. While non-governmental environmental groups are now able to present their views directly to a dispute settlement panel through amicus curiae briefs, these briefs have been explicitly considered only when they were attached or integrated into one of the parties’ submissions. Moreover, parties are under no obligation to publish their submissions, making it difficult or impossible for amici to know about the details of the case in order to ensure that a brief is useful or to know whether it would add new information to the process. Some WTO members, such as the United States and Canada, and most recently Brazil, do make their submissions public immediately after filing. Other members, such as the European Community, make their submission public only after the panel hearings. Given that amicus briefs generally need to be submitted before panel hearings, amici will not be able to consider the submissions when preparing their briefs. Still other members do not make their submissions public at all. Another concern is that the panel proceedings are typically secret. Thus, the public learns what is happening during a panel proceeding only if informed by an official from one of the parties to the dispute or through leaks to the media. The only open panel hearings that have been held so far via closed-circuit broadcasting took place in the second Beef Hormones decision. This experiment was very successful and gave the public a glimpse 43

See http://www.wto.org.

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at how the WTO panel discussions function. There were no delays or problems caused by the opening of the hearings. A problem that remains with open hearings at the WTO premises, however, is that it is expensive for non-parties to travel to Geneva. This is a special concern when the citizens of a developing country disputing member are interested in having access to hearings. Other options, such as webcasting the hearings have not yet been tested. Members do not seem eager to institutionalize open hearings in any format. Finally, environmentalists complain that the panels are composed of trade experts, who do not have environmental or scientific orientation or expertise and thus will not be able to consider these aspects carefully in the deliberations. They fear that decisions that have critical implications for environmental protection may be inspired solely by narrow interpretations of the legal obligations of trade agreements. While the WTO Agreement provides for the use of subgroups of scientific experts or other expert assistance, the decision-making power rests with members of the panel. Members of the Appellate Body are elected by the WTO and often have broader backgrounds.

Resolution of International Environmental Disputes Formal dispute resolution has assumed far less importance in international environmental law than in international trade law. While many international environmental agreements contain formal dispute settlement provisions, they have rarely been used, with the notable exception of the International Tribunal for the Law of the Sea.44 The provisions for dispute settlement usually provide for consultation, negotiation, and/or mediation, followed by arbitration or, if the parties agree, international judicial settlement, as by the World Court. Many of the treaties incorporate the same language for dispute resolution that is found in an earlier agreement. In part, this is because it is easier to gain approval of language from the domestic governments of negotiating states if they have already approved the language in the past. There is a long history of countries ignoring the formal dispute resolution provisions contained in international environment agreements. For example, the 1909 Boundary Waters Treaty between the United States and Canada provides in Article X for formal dispute resolution procedures, which require the advice and consent of the U.S. Senate to invoke.45 44 The International Tribunal for the Law of the Sea was created as part of the Convention of the Law of the Sea, done Dec. 10, 1982, U.N. Doc. A/CONF.62/122, reprinted in 21 I.L.M. 1261 (1982), Annex VI, Statute of the International Tribunal for the Law of the Sea. 45 Washington Treaty Relating to the Boundary Waters and Questions Arising Along the Boundary Between the United States and Canada, Jan. 11, 1909, 36 Stat. 2448, T.S. No. 548, 12 Bevans 319.

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The parties have never used this provision, but rather have relied on the informal reference procedure of Article IX, in which a panel of experts gathers information, determines the facts, and makes recommendations to the parties. Similarly, under the 1987 Montreal Protocol on Substances That Deplete the Ozone Layer,46 states parties can invoke the formal dispute resolution procedures contained in the Vienna Convention on the Protection of the Ozone Layer47 to settle their disputes. As of February 2007, they have never done so. Rather, they have relied upon the implementation committee and the non-compliance procedures established under the protocol to manage disputes. This approach is appropriate, because, in international environmental agreements, many obligations are owed to all parties to the agreement. Their breach is a breach between the violating party and the other parties to the agreement, not just between one or two specific parties. In such cases, the implementation committee, non-compliance procedures, and procedures that involve discussion among member states or a subgroup of them may be especially useful. They enable parties to consider the violations and to develop compliance strategies appropriate for the conditions of the particular violating country. As environmental disputes move into areas that involve bilateral relationships, as for example emission trading, more formal dispute resolution procedures may become appropriate. Even where informal procedures for resolving environmental disputes are customary, the existence of formal dispute resolution provisions in international environmental agreements may be useful. Arguably the existence of these formal procedures encourages more informal settlement of the dispute. While this hypothesis is easy to state, it is difficult to prove empirically. Many environmental agreements, especially earlier ones, do not contain any formal dispute settlement procedures. These include the World Heritage Convention, 48 the London Convention of 1972,49 and the Convention on International Trade in Endangered Species (CITES). 50 However, the 1996 Protocol to the London Convention of 46 Montreal Protocol on Substances That Deplete the Ozone Layer, done at Montreal on Sept. 16, 1987, reprinted in 26 I.L.M. 1550 (1987). 47 Vienna Convention for the Protection of the Ozone Layer, done at Vienna on Mar. 22, 1985, reprinted in 26 I.L.M. 1529 (1987). 48 Convention for the Protection of the World Cultural and Natural Heritage, done at Paris on Nov. 16,1972, 1972 U.N.J.Y.B. 89, 27 U.S.T. 37, T.I.A.S. 8226, reprinted in 11 I.L.M. 1358 (1972). 49 Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, done at London, Mexico City, Moscow, and Washington on Dec. 29, 1972, 1046 U.N.T.S.120, 26 U.S.T. 2403, T.I.A.S. 8165, reprinted in 11 I.L.M. 1294 (1972). 50 Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington on Mar. 3, 1973, 993 U.N.T.S. 243, 27 U.S.T. 1087, T.I.A.S. 8249, reprinted in 12 I.L.M. 1088 (1973).

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1972,51 which replaced the earlier agreement after it entered into force on March 24, 2006, contains a dispute settlement provision setting forth formal procedures. Moreover, the international agreements negotiated within the last 15 years increasingly contain dispute settlement provisions, despite the fact that they are not used. This suggests implicitly that states believe that the existence of the formal option may at least promote resolution by informal means.

INTER-GOVERNMENTAL EFFORTS TO ADDRESS ENVIRONMENT AND TRADE The initial interest of the international trade community in environmental issues coincides with the preparations for the 1972 UN Stockholm Conference on the Human Environment. The GATT prepared a study on the effects of different national standards for controlling pollution on trade, which it submitted to the conference.52 In 1971, the GATT Council Meeting decided to establish a Working Group on Trade and Environment, whose function would be “to examine, upon request, any specific matters relevant to the trade policy aspects of measures to control pollution and protect the human environment especially with regard to the application of the provisions of the General Agreement taking into account the particular problems of developing countries.” 53 The UN Stockholm Conference in turn adopted several recommendations addressing environment and trade concerns, primarily from the perspective of the effects of environmental policies and practices upon trade.54 It recommended, for example, that the GATT and other trade-related bodies “consider undertaking to monitor, assess, and regularly report the emergence of tariff and non-tariff barriers to trade as a result of environmental policies.”55 While the decision to establish the GATT Working Group was made in 1971, it did not function during the next two decades. In 1991, in the midst of separate preparations for the 1992 UN Conference on Environment and Development, the Organization for Economic Cooperation and Development (OECD) provided the forum in which the environment and trade communities began to converse about 51 London Protocol to the International Maritime Organization Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, done at London on Nov. 7, 1996, IMO LC/SM1/6, reprinted in 36 I.L.M. 1 (1997). 52 GATT, Industrial Pollution Control and International Trade, L/3538 (9 June 1971) (GATT Studies in International Trade No. 1). 53 GATT Council Meeting on Nov. 9, 1971, C/M/74 (Nov. 17, 1971). For commentary, see Jeanne J. Grimmett, Environmental Regulation and the GATT, Congressional Research Service, Report for Congress, Mar. 27, 1991 at 1. 54 Recommendations 103–105, United Nations Conference on Human Environment, Stockholm, Sweden, June 5–16, 1972, A/CONF.48/14 (July 3, 1972). 55 Recommendation 105, supra note 54.

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the issues. Initially, the trade committee met with the environment committee meeting immediately thereafter. But in subsequent meetings, the trade and the environment committees met jointly to identify the important issues and to allocate responsibility among the countries for providing papers to address the issues. The delegations from the countries to the first meetings were heavily weighted with trade officials; the United States delegation was alone in having a team co-chaired by trade and environment specialists. The OECD produced a series of position papers regarding the effects of trade on environment and those of environmental regulation on trade. These led to agreement on a set of procedural guidelines on integrating trade and environment policies.56 These guidelines provided for transparency and consultation in developing and implementing trade and environmental polices with potentially significant effects on each other, for governments to “examine or review trade and environmental policies and agreements with potentially significant effects on the other policy areas early in their development” to assess implications and identify alternatives for addressing concerns, for governments to cooperate on international environmental policies and agreements to make them more effective and “avoid undue effects” on trade, and for countries party to trade or environmental disputes with dimensions of the other to recognize the importance of considering relevant expertise and develop appropriate means to achieve transparency. In the past few years environmental assessments of trade agreements have become a critical tool for anticipating and managing the environmental impacts associated with increases in the volume of trade and other changes in trade and investment. Undertaking an environmental assessment or review provides an effective way of addressing environmental problems by improving overall policy coherence at the national level and by assisting decisionmakers to understand environmental implications of trade policy. Some countries have made it mandatory to consider environmental concerns in trade negotiations. Canada and the United States, for instance, have adopted legislation in the form of executive orders, ministerial directives, and guidelines. The European Union (EU) is also carrying out Sustainability Impact Assessments (SIAs) for the negotiations of its major multilateral and bilateral trade agreements. They aim at identifying the economic, social, and environmental impacts of those agreements. At the same time that the OECD became interested in environment and trade issues in 1991, the GATT decided to convene a meeting of its

56 OECD, Procedural Guidelines on Integrating Trade and Environment Policies, June 1993. INSIDE U.S. TRADE, June 11, 1993, at 18–20.

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1971 Working Group on Trade and the Environment. 57 The initial meeting was held in November 1991. While regular meetings were held thereafter, no significant progress was made. The Working Group served as the predecessor for the Committee on Trade and Environment under the World Trade Organization. The 1992 UN Conference on Environment and Development in Rio de Janeiro included environment and trade issues in its deliberations. Agenda 21, the 850-plus page planning program for countries to work towards sustainable development, contains a section on environment and trade concerns, which sets forth 12 actions relating to environment and trade for the GATT and trade-related organizations to examine.58 The document has served as the basis for the subsequent environment and trade programs developed by the UN Environment Programme in collaboration with other international organizations, such as the UN Committee on Trade and Development (UNCTAD). These programs encompass research on environment and trade issues, capacity building in countries to enhance their ability to develop “mutually supportive environment and trade policies,” and activities to promote dialogues on the issues.59 UNEP and UNCTAD signed a Memorandum of Understanding in July 1997 that established a joint Capacity Building Task Force on Trade, Environment and Development (CBTF), which provided a unique and flexible framework to implement a coordinated and comprehensive set of participatory activities to respond to capacity building needs.60 On April 14, 1994, almost two years after the UNCED, countries concluded the Marrakesh Agreement Establishing the World Trade Organization. Notably, the Preamble to the agreement refers explicitly to the objective of sustainable development and the importance of environmental protection. The Preamble provides: “Recognizing that their relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living . . . while allowing for the opti57 GATT Council Meeting held in the Center William Rappard on Oct. 8, 1991, C/M/252 (Nov. 4, 1991), at 24. Although the Working Group was established as early as 1971, there was a lack of activity during two decades, until the Council decided in 1991 to convene the Working Group. 58 Art. 2.19–2.22, Making Trade and Environment Mutually Supportive, Agenda 21, U.N. Doc. A/CONF.151/4 (1992). Article 2.19 opens by noting that “[e]nvironment and trade policies should be mutually supportive.” The actions include such measures as ensuring “public input in the formation, negotiation and implementation of trade policies as a means of fostering increased transparency in the light of country-specific conditions” and ensuring “that environment-related regulations or standards . . . do not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade.” Id. at art. 2.22. 59 UN Environment Program, Economics and Trade Program: Priorities and Activities, July 2000. 60 See The UNEP-UNCTAD Capacity Building Task Force on Trade, Environment and Development, CBTF description at http://www.unep-unctad.org/cbtf/.

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mal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment. . .” This language, which did not appear in the prior GATT, has been cited as delineating the context in which the WTO Agreements are to be interpreted. In the Marrakesh Final Act embodying the results of the Uruguay Round of Multilateral Trade Negotiations, the ministers directed the first meeting of the General Council of the WTO to establish a Committee on Trade and Environment, which would be open to all members of the WTO.61 The committee was charged initially with addressing seven issues: • the relationship between the provisions of the multilateral trading system and trade measures for environmental purposes, including those pursuant to multilateral environmental agreements; • the relationship between environmental policies relevant to trade and environmental measures with significant trade effects and the provisions of the multilateral trading system; • the relationship between the provisions of the multilateral trading system and (a) charges and taxes for environmental purposes, and (b) requirements for environmental purposes relating to products, including standards and technical regulations, packaging, labeling, and recycling; • the relationship between the provisions of the multilateral trading system with respect to the transparency of trade measures used for environmental purposes and environmental measures and requirements that have significant trade effects; • the relationship between the dispute settlement mechanisms in the multilateral trading system and those found in multilateral environmental agreements; • the effect of environmental measures on market access, especially in relation to developing countries, in particular to the least developed among them, and environmental benefits of removing trade restrictions and distortions; and • the issue of exports of domestically prohibited goods. The committee has met regularly and studied the issues, but it has made little progress toward specific resolution of the issues. At the Doha Ministerial Conference in 2001 the CTE was mandated to launch negotiations on trade and environment focusing on specific issues. These issues include the relationship between existing WTO rules and Multilateral Environmental Agreements (MEAs) and the issue of environmental goods 61 WTO General Council Meeting held in the Center William Rappard on Jan. 31, 1995, WT/GC/M/1, at 11 (Feb. 28, 1995).

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and services. As of October 31, 2007, the negotiations were still ongoing as part of the overall Doha negotiations. The North American Free Trade Agreement (NAFTA)62 between Canada, Mexico, and the United States, and the North American Agreement for Environmental Cooperation (NAAEC)63 between the same countries, are significant regional efforts to address environment and trade concerns. From the beginning of the NAFTA negotiations, there were concerns within the countries about environmental implications.64 The September 1991 Tuna-Dolphin GATT Panel Report, which found U.S. regulations restricting imports of tuna caught with methods that endangered dolphins to be contrary to GATT 1947, fueled this concern. The resulting text of the NAFTA contains provisions that were intended to make it more environmentally sensitive. These provisions were said to be more environmentally protective than the equivalent provisions then circulating in the “Dunkel text” for the forthcoming WTO.65 Article 104 of NAFTA is especially noteworthy because it permits trade-related obligations contained in specified international environmental agreements to “trump” the NAFTA obligations in certain circumstances.66 Among the parties to NAFTA, however, only Canada has continued introducing this type of “savings clauses” in its trade agreements. In response to concerns about the need for additional protection for the environment and for labor and in order to get congressional approval of NAFTA, the three governments began in April 1993 to negotiate the environmental and labor “side” agreements. They were agreed to four months later, in August 1993. The environmental agreement establishes the Commission for Environmental Cooperation (CEC), which has three institutional components: a Council, a Secretariat, and a Joint Public Advisory Committee. The NAAEC obligates each country to “effectively enforce its environmental laws and regulations.”67 It provides a unique procedure by which individuals and NGOs may file a complaint with the commission alleging that a member country is not enforcing its environ-

NAFTA, supra note 11. North American Agreement on Environmental Cooperation, Sept. 14, 1993, United States, Canada-Mexico., 32 I.L.M. 1480 [hereinafter NAAEC]. 64 Within the United States, the working groups on investment, dispute settlement, phytosanitary standards, and others included representatives from the U.S. Environmental Protection Agency. 65 See DANIEL MAGRAW, NAFTA AND THE ENVIRONMENT: SUBSTANCE AND PROCESS 12–13 (1995). 66 The MEAs mentioned in Article 104 are the Convention on International Trade in Endangered Species (CITES), the Montreal Protocol on Substances that Deplete the Ozone Layer, and the Basel Convention on the Control of Transboundary Movement of Hazardous Wastes. 67 NAAEC, supra note 63, art. 5. 62 63

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mental laws effectively.68 This triggers procedures by which the Secretariat may ask countries to reply, and the Council can ask the Secretariat to prepare a factual record on the submission, which can be made public by a two-thirds vote of the Council. There have been 63 submissions to the CEC from 1995 through October 31, 2007, of which 12 are active. Factual records were prepared for 13 submissions and made publicly available.69 The NAAEC was conceived both as a way of ensuring a level playing field on environmental law enforcement and as a means to prevent a country from reducing its level of environmental protection. Environment and trade issues are now on many other agendas, both public and private. Some of these efforts start from an environmental perspective, others from a trade perspective, and still others from the primary perspective of economic development or private market growth. There have also been scholarly symposia and writings.

CLASHES BETWEEN ENVIRONMENT AND TRADE Laws and regulations promoting environmental protection clash with those promoting liberalized trading among countries in many arenas. These include the following: national measures that restrict imports to protect the domestic health and environment; unilateral national measures that restrict imports to protect the environment or human health outside the country’s national jurisdiction; national measures restricting exports because the products are harmful to the environment or to human health; international agreements that contain measures restricting international trade; national subsidies that either subsidize exports or subsidize domestic products to promote the use of environmentally sound technologies; and national and international measures that are directed to the process by which something is produced rather than to the product. There are also potential clashes over actions that have discriminatory economic effects, such as failure to enforce environmental laws but that may not have legally actionable effects under international trade law. The clashes can be difficult to resolve in part because two legitimate purposes collide: to protect the environment and to protect against economic protectionist measures. The challenge is to distinguish between those environmental measures that are needed to protect the environment and those that are a disguised restriction on trade, to determine whether there are alternative environmental protection measures that 68 NAAE, supra note 63, Articles 14 and 15 set forth the details of these procedures. See David L. Markell, The Commission for Environmental Cooperation’s Citizen Submission Process, 12 GEO. INT’L ENVTL. L. REV. 1 (Spring 2000) (providing thorough analysis of the procedure and developing jurisprudence). 69 See http://www.cec.org/citizen/status/index.cfm?varlan=english. Factual records may be viewed and downloaded from the CEC Web site. Hard copies of factual records may be obtained from the CEC offices in Montreal, Canada.

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can protect the environment equally effectively but are less trade restrictive, and to determine when obligations in trade law may have the effect of forcing countries to degrade the environment against their will, sometimes irreversibly. The chapters in this book focus on four kinds of clashes: national measures affecting trade to protect the domestic environment; unilateral national measures restricting imports to protect the environment outside the national jurisdiction; international agreements (or multilateral environmental agreements) to protect the environment that include provisions restricting trade; and the use of environmental protection measures that are directed to the process by which something is produced rather than to the product.

National Measures to Protect the Domestic Environment States adopt most environmental and health measures to protect their citizens and their domestic environment. They may, for example, set pesticide residues or radiation level standards, or they may ban the import of certain types of products. The WTO requires that these measures be consistent with the GATT 1994 and the other WTO agreements, most notably the SPS and TBT Agreements. The GATT 1994 requires, for example, under Article III that these measures accord imports of like products non-discriminatory national treatment and under Article XI that they not constitute a quantitative import or export restriction. If the measure violates one of these GATT provisions, the Article XX(b) exception “to protect human, animal or plant life or health” and the Article XX(g) exception “relating to the conservation of exhaustible natural resources” may still render the measure valid provided it satisfies the chapeau language in Article XX. Measures to protect human, animal, or plant life or health primarily for food safety reasons and pests, on the other hand, fall under the scope of the SPS Agreement, which includes rigorous provisions requiring the scientific justification of such measures. In Thai Cigarettes (a pre-WTO case), Reformulated Gasoline, and ShrimpTurtle, the regulations at issue were alleged by proponents to be measures to protect the environment and human health and by opponents to be economic protectionism in conflict with the GATT. In the Beef Hormones case, which was assessed under the SPS Agreement, the proponents argued that scientific evidence showed that the measures were justified, and opponents came to the opposite conclusion.

Unilateral National Measures to Protect the Environment Outside National Jurisdiction National measures may restrict imports on the basis of environmental harm either to areas of the so-called global commons or to areas under

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the jurisdiction of other countries. The central characteristic of the measures is that they are unilateral; they are not taken pursuant to implementing an international (or multilateral) agreement. The rationale for such measures varies. A country may not want to watch helplessly as a species identified as endangered by an international agreement is forced to extinction by fishing methods that destroy the animals as by-catch. Or a country that has scientifically identified a global problem, such as ozone depletion, may not want to continue to accept imports of products that contain chemicals that would deplete the ozone layer. Or a country may not want to accept import of products composed of natural resources that are essentially irreplaceable, such as some species of tropical timber. The 1992 Rio Declaration on Environment and Development addressed the issue of unilateral actions relating to extraterritorial environmental problems that affect trade. Principle 12 provides: “Unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided. Environmental measures addressing transboundary or global environmental problems should, as far as possible, be based on an international consensus.”70 Unilateral actions are in theory anathema to the trade community. The Panel Report in the Shrimp-Turtle case declared that unilateral actions would lead to the ruin of the international trading system: “We are of the view that a type of measure adopted by a Member which, on its own, may appear to have a relatively minor impact on the multilateral trading system, may nonetheless raise a serious threat to that system if similar measures are adopted by the same or other Members. Thus, by allowing such type of measures even though their individual impact may not appear to be such as to threaten the multilateral trading system, one would affect the security and predictability of the multilateral trading system.” This language was overruled by the WTO Appellate Body. The language in the Rio Declaration on Environment and Development leaves the door open a crack to the possibility that unilateral actions might be needed under some circumstances to protect the environment outside national jurisdiction, particularly in the absence of an international consensus. The WTO Appellate Body appeared (ambiguously) to agree. The challenge is to meet the environmentalist concern that a country not be forced to sit by and contribute to worsening, possibly irreversible, environmental degradation in areas of global responsibility, and the trading community’s concern that such measures would disrupt the open flow of trade and produce economically harmful distortions in the market and possibly undermine the whole trading system.

70 The Rio Declaration on Environment and Development, June 14, 1992, U.N. Doc. A/CONF.151/26/Rev.1 (Vol.I), at 3–8, reprinted in 31 I.L.M. 874 (1992).

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The Tuna-Dolphin I and Tuna-Dolphin II cases addressed these issues in considering the consistency of the U.S. measures to protect the Eastern Spinner Dolphin from fishing by purse seine nets and concluded that the measures were inconsistent with the GATT. While the Tuna-Dolphin I Panel Report explicitly rejected the U.S. argument for extraterritorial application of the Article XX(b) and (g) exceptions, the Tuna-Dolphin II Panel Report noted that Article XX(g) on conserving exhaustible natural resources does not limit the location of the sources that must be conserved, thus allowing for the possibility of extraterritorial jurisdiction under this exception.71 In the period after the WTO was established, the Shrimp-Turtle case, studied below, poignantly raised these issues. The Appellate Body in the Shrimp-Turtle report did not exclude the possibility of unilateral action to protect the global environment that would be consistent with the WTO. However, it is noteworthy that the Appellate Body explicitly stated that the turtle species aimed at being protected was a migratory species that was also present in U.S. waters. Thus, jurisprudence has not yet provided an unambiguous answer.

International (Multilateral) Environmental Agreements and the WTO Since the environment is oblivious to political boundaries, multilateral environmental agreements are increasingly needed to protect shared environments and natural resources. Sometimes the agreements prohibit import and export of products, unless the exporting and importing countries are parties to the agreement or are complying with it. Such provisions provide incentives both to join the agreement and, in certain cases, to comply with its obligations. From the environmental perspective, it is important to include measures that are effective in encouraging states to join the agreement, or at least to abide by its obligations, in order to avoid non-member states becoming “havens” that undermine or even destroy the agreement’s effectiveness. Similarly, such provisions preclude nonmember states from obtaining the benefits of the agreement while avoiding the costs—a free ride. These provisions are especially relevant for issues pertaining to the global commons, such as depletion of the stratospheric ozone layer by certain chemicals or climate change. There are several significant environmental agreements that restrict trade in controlled items, including: The Montreal Protocol on Substances

71 For insightful analysis of unilateral measures and the Tuna-Dolphin conflict, see, e.g., Richard W. Parker, The Use and Abuse of Trade Leverage to Protect the Global Commons: What Can We Learn from the Tuna-Dolphin Conflict, 12 GEO. INT’L ENVTL. L. REV. 1 (Fall 1999); see also Shinya Murase, Unilateral Measures and the Concept of Opposability in International Law, in MIGHT AND RIGHT IN INTERNATIONAL RELATIONS, XXVIII THESAURUS ACROASIUM 401, 414–29 (1999).

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that Deplete the Ozone Layer,72 which requires countries to limit and/or phase-out production and consumption of listed chemicals that deplete the ozone layer; the Convention on International Trade in Endangered Species (CITES),73 which controls trade in endangered species; the Basel Convention on the Transboundary Movement of Hazardous Wastes,74 which controls trade in hazardous wastes; the Cartagena Protocol on Biosafety, 75 which controls trade in living modified organisms; the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade,76 which enables the governments to monitor and control the trade in certain hazardous chemicals; and the Stockholm Convention on Persistent Organic Pollutants (POPs),77 which aims at the elimination or reduction of POPs into the environment, thereby affecting trade flows. The first three agreements ban trade with countries not party to the agreement, but they also contain an “escape hatch” from a complete ban on trade with non-parties. The Montreal Protocol permits imports from non-parties, if a meeting of the parties determines that the state is in full compliance with the control measures and the reporting of data. CITES permits exports and imports with a non-party state, if that state provides comparable documentation which “substantially conforms” with the CITES requirements. The Basel Convention permits trade in hazardous wastes with non-party states, if there is an agreement or an arrangement between the countries that is consistent with the convention. From the trade perspective, the issue is whether these agreements lead to violations of Articles I (Most-Favored-Nation Treatment), III (National Treatment) and XI (Prohibition of Quantitative Restrictions) of GATT 1994, and, if so, whether the Article XX exceptions apply to make them nonetheless GATT consistent.

72 Montreal Protocol on Substances That Deplete the Ozone Layer, done at Montreal on Sept. 16, 1987, reprinted in 26 I.L.M. 1550 (1987). 73 Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington on Mar. 3, 1973, 993 U.N.T.S. 243, 27 U.S.T. 1087, T.I.A.S. 8249, reprinted in 12 I.L.M.1088 (1973). 74 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, done at Basel on Mar. 22, 1989, U.N. Doc. UNEP/WG.190/4, UNEP/IG.80/3 (1989), reprinted in 28 I.L.M. 657 (1989). 75 The Cartagena Protocol of Biosafety to the Convention on Biological Diversity, done at Montreal on Jan. 29, 2000, U.N. Doc. UNEP/CBD/ExCOP/1/3 (2000) reprinted in 39 I.L.M. 1027 (2000). 76 Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, Sept. 10, 1998, reprinted in 38 I.L.M. 1 (1999). 77 Stockholm Convention on Persistent Organic Pollutants, May 22, 2001, U.N. Doc. UNEP/POPS/CONF/4, App. II (2001), reprinted in 40 I.L.M. 532 (2001).

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The Biosafety Protocol and the Rotterdam Convention, on the other hand, simply set out a process that makes it possible for parties to make informed decisions about importing certain products into their territory. The 1997 Kyoto Protocol to the UN Framework Convention on Climate Change is also an important instrument for issues of environment and trade.78 The agreement commits certain parties to the protocol to individual, legally binding targets to limit or reduce their greenhouse gas emissions. The implementing measures to achieve these targets can have significant trade effects. The North American Free Trade Agreement tries to reconcile the policies and regulations under certain MEAs with the rules under NAFTA. It includes a provision by which the trade obligations in specific international environment and conservation agreements “trump” the NAFTA provisions to the extent of any inconsistency. Under Article 104, the states party to NAFTA have identified the first three multilateral conventions discussed above and four bilateral agreements as receiving this treatment. The trumping provision is qualified by the state’s obligation that when it “has a choice among equally effective and reasonably available means of complying with such obligations, the Party chooses the alternative that is the least inconsistent with the other provisions of this Agreement.” While the WTO, to date, does not include a similar provision, its Committee on Trade and Environment in Special Session (CTESS), is examining the relationship between multilateral environmental agreements (MEAs) and international trade law and how these two bodies of law might be reconciled. The negotiations, however, are difficult, partly because the members cannot agree on the scope of the negotiating mandate relating to the MEA-WTO relationship contained in paragraph 31(i) of the Doha Ministerial Declaration. The minutes of the CTESS indicate that, broadly speaking, two groups of WTO members have been active in the paragraph 31(i) negotiations. One group, which includes the United States, Canada, Australia New Zealand, and most developing countries, supports the adoption of a narrow approach to the paragraph 31(i) mandate. For these countries, the mandate should focus on a limited number of MEAs and on mandatory and explicit specific trade obligations contained in the specified MEAs. They also favor an experience-based, analytical approach, with discussions focusing on national experiences in negotiating and implementing MEAs. The other group consists of members, such as the European Community, Switzerland, Japan, and Norway. As principal initiators of the trade and environment negotiations within the WTO, they support an adoption of a broader, conceptual approach to the paragraph 31(i) mandate. These countries appear to perceive a 78 Kyoto Protocol to the U.N. Framework Convention on Climate Change, Dec. 10, 1997, U.N. Doc. FCCC/CP/1997/7/Add.2, Dec. 10, 1997, reprinted in 37 I.L.M. 22 (1998).

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real potential for legal conflict, and they believe that the only certain way to avoid such conflict is to define clearly the respective responsibilities of the WTO and MEAs in dispute settlement. This approach emphasizes the need for political consensus on general principles to govern the WTOMEA relationship.

The Product/Process Distinction An important and puzzling concept for the relationship of environmental and trade policies is the distinction between product characteristics and process characteristics. From the environmental perspective, the process for producing a product is very often more important than the product. Products that are produced by processes that pollute the air, water, or land, or that destroy living natural resources and their habitats may be far more destructive of sustainable development than the products themselves. The GATT (and WTO) treaty text has many important clauses focusing on “products,” such as the phrase “like product,” which occurs often. There have been GATT cases that say, therefore, that such principles as national treatment and most-favored nation must consider the characteristics of products themselves and not get into questions of “process” relating to how the product is produced. An early GATT case, Belgian Family Allowances,79 took this approach, because it recognized that if governments were allowed under the GATT to have different treatment for importing products from country A compared to country B, based on the type of labor laws (and government family allowances) that B has compared to A, this would open up the potential of thousands of societal and process differences being used to undermine the logic and principles of non-discrimination. In short, the case worried about the “slippery slope.” Yet in cases of the last decade or so, both in GATT and the WTO, it is becoming more apparent that processes can pose real dangers to the environment and can also create possibilities of unfair trade actions called subsidies, if, for example, lax regulations in one producing country seem to give producers there a competitive advantage of lower production costs. Concrete cases used to illustrate this problem include the catching of tuna by methods that kill dolphins; the harvesting of shrimp by methods that kill turtles (especially those that are endangered species); the use of processes in production of chemicals that harm the atmosphere and the ozone layer, even though those chemicals do not result in any difference in the product characteristics themselves; or production processes that result in releasing large amounts of CO2, thereby contributing to global warming. 79

Belgian Family Allowances, BISD 2S/18 (adopted Nov. 7, 1952).

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For these reasons, some have called for allowing government actions to ban or tax product imports that have been produced by such environmentally damaging processes. Indeed, these views have a good point. But there is also the slippery slope danger that to do this will open up possibilities of using a large variety of societal, cultural, and regulatory differences to pose barriers to trade, seriously undermining the principles of trade liberalization. There is merit in the older GATT idea of avoiding this slope by using the bright line criterion of focusing only on “product characteristics.” But the more recent experiences suggest a need to look at least at some processes. Thus, the real problem is not whether to adhere rigidly to the product-process distinction, but how to develop “hand holds” on the slippery slope, i.e., how to develop criteria by which to judge whether trade barriers based on processes are an appropriate accommodation of the competing trade and environment policies or whether, on the contrary, the barriers are really protectionist measures in the guise of environmental (or other process) considerations. This is not an easy task, and it in turn raises the question as to what type of decision-making authority should make the judgments required to solve the problem. The 1991 GATT case on Tuna-Dolphin80 had the view that a dispute panel (i.e., a tribunal-type body) should not perform this function, because it was essentially a law-making function that the diplomat-negotiators should resolve, preferably with new treaty text or other measures that could be carefully calibrated to resolve the apparent dilemma. A problem with this approach, which has become more apparent, is that the negotiation and decision-making (law-making) institutions of the trade system are very weak and often paralyzed with procedures, such as the “consensus” rule. Thus, there is the temptation to bring these issues into the present dispute settlement mechanism, because that institution is turning out to be more successful in resolving questions. The danger, (a new dilemma!), however, is that this approach nudges the tribunal-type institutions toward the function of lawmaking, rather than law applying, and thus risks undermining credibility and respect for the tribunal institution.81 The Shrimp-Turtle case,82 explored in depth in Part V of this book, faced this question but ducked some of the troublesome issues. The ShrimpTurtle case reveals that the GATT does not per se prohibit distinguishing products based on their production or harvesting method. The Appellate Body, however, seemed to take this as a given without explaining why. 80 United States—Restrictions on Imports of Tuna, BISD 39S/155, paras. 6.3 and 6.4 (not adopted, circulated on Sept. 3, 1991); see United States—Restrictions on Imports of Tuna, DS29/R (not adopted, circulated on June 16, 1994) (involving secondary boycott). 81 Jackson, supra note 41 at 1–3. 82 United States—Import Prohibition of Certain Shrimp and Shrimp Products, WTO Panel and Appellate Body Reports, WT/DS58 (adopted on Nov. 6, 1998).

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THE CASE STUDIES IN THIS BOOK The seminar for which the papers for this volume were written explored in depth five specific cases that are central to the trade and environment debate. For each of these cases, a team of three to five students wrote papers on various aspects of the subjects relating to their case. In addition, the seminar invited government officials, private practitioners, and other experts who had actually worked on the case to attend the seminar discussion, which included the student papers and comments and critiques by the experts. By this means, the seminar was able to get considerably “under the skin” of the five important cases selected. Of course, there are more cases than these that could be studied, and our selection may, in some cases, be challenged. However, our rationale was as follows: We chose one GATT case, partly to set the stage. Although the two Tuna-Dolphin cases of GATT 83 are very prominent and well known, we chose the Thai Cigarettes case,84 partly because of some of the specific conceptual issues, including the relationship to other international organizations and expertise of such organizations. In addition, there is ongoing attention to the Thai Cigarettes case, because of the multilateral negotiations that were in process for a World Health Organization Convention to control tobacco at the time of the seminar and that led to the Framework Convention on Tobacco Control, which entered into force in February 2005.85 We felt that the Tuna-Dolphin cases would be part of the jurisprudence considered in relation to other cases, particularly the Shrimp-Turtle case, as will be seen below. Then we chose what we considered to be the three most prominent and fundamental WTO cases on the subject of environment and trade. These are: Reformulated Gasoline, 86 Beef Hormones, 87 and Shrimp83 United States—Restrictions on Imports of Tuna, BISD 39S/155 (not adopted, circulated on Sept. 3, 1991); United States—Restrictions on Imports of Tuna, DS29/R (not adopted, circulated on June 16, 1994) (involving secondary boycott). 84 Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, BISD 37S/200 (adopted Nov. 7, 1990). 85 World Health Organization, Towards A WHO Framework Convention on Tobacco Control, WHA52.18 (adopted by the World Health Assembly, May 24, 1999); WHO, Framework Convention on Tobacco Control, WHA53.16 (adopted by the World Health Assembly, May 20, 2000); Provisional Texts of Proposed Draft Elements for a WHO Framework Convention on Tobacco Control with Comments of the Working Group, WHO Framework Convention on Tobacco Control: Report of the Working Group, A53/12, Annex (Apr. 26, 2000); WHO, Subjects of Possible Protocols and Their Relation to the Framework Convention on Tobacco Control, A/FCTC/WG1/3 (Sept. 3, 1999). The first inter-governmental negotiating session for the Framework Convention occurred in October 2000. 86 United States—Standards for Reformulated and Conventional Gasoline, WTO Panel and Appellate Body Reports, WT/DS2/9 (adopted on May 20, 1996). 87 European Communities—Measures Affecting Meat and Meat Products (Hormones), WTO Panel and Appellate Body Reports, WT/DS26, and WT/DS48 (adopted on Feb. 13, 1998).

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Turtle. 88 The Gasoline case was the first case to go all the way through the appeal process. It laid down some fundamental jurisprudential ideas, including reference to general international law, and comments about deference to national regulatory decisions. The Beef Hormones case and the Shrimp-Turtle case are the two most important cases for the jurisprudence of the WTO so far, not just for environment and trade, but for the whole fundamental legal structure or “constitution,” of the WTO and its operation. As of February 2007, Beef Hormones remains the cornerstone case for understanding the SPS Agreement. Beef Hormones involves a food safety issue of considerable importance and has generated high political visibility. The issues in that case are very perplexing, and they are issues that are fundamental to the future of the jurisprudence, addressing tensions between intervention rules and national “sovereignty.” Likewise, the Shrimp-Turtle case is a case of great significance for WTO jurisprudence. It remains the foundation for the discussion of the tradeenvironment linkage, including the relationship between multilateral environmental agreements and WTO rules. Among other things, it has a number of fundamental approaches embedded in the facts of the case, relating to environment and endangered species, or to some extent, what some might call the “global commons.” The Appellate Body report strongly overturned the more trade-oriented first-level panel report, and its reasons for doing so are very important. The Appellate Report went on to introduce the important jurisprudence that indicates that the WTO/GATT system must weigh competing policies to those of trade liberalization in interpreting some of the crucial clauses of the GATT and other WTO texts. In this particular case, the most crucial clause being interpreted was the “chapeau” of Article XX, General Exceptions, of the GATT. The fifth case we chose for an in-depth look was the case that was “yet to come” at the time of the seminar: Genetically Modified Organisms (GMOs). Indeed, a few year later, in 2003, the United States, Canada, and Argentina challenged the EC measures regulating GMOs at the WTO (ECBiotech). That dispute resulted in a panel report that was adopted in 2006, which did little to clarify the main questions relating to GMOs, such as the issue of labeling or whether GMO and conventional products are “like” products that must be treated similarly or the same. The United States has already indicated that it might initiate another proceeding against the European Community that would address these issues. The GMO case study in this volume addresses these aspects. The relevance of the discussion on GMOs in the trade context goes well beyond GMOs, as it will likely extend to other new technologies, such as nano-technololgy. 88 United States—Import Prohibition of Certain Shrimp and Shrimp Products, WTO Panel and Appellate Body Reports, WT/DS58 (adopted on Nov. 6, 1998).

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During the seminar, we explored five themes that cut across all the case studies. The five were the following: the treatment of scientific evidence and scientific uncertainty; the need for environmental conservation; the possibilities for economic protectionism; the significance of domestic politics and domestic institutions in understanding environment and trade disputes; and the role of civil society. The first theme—scientific uncertainty and scientific evidence—raises issues under the GATT 1994, SPS and TBT Agreements, as well as under various international environmental agreements. We explored issues, such as the following: What use is made of scientific understanding in determining whether a measure constitutes legitimate environmental protection or economic protectionism? What is the role of risk assessment and of the precautionary principle or approach? What scientific evidence is required to sustain a measure as an environmental protection measure? What is the role of scientific experts? How have the answers to these issues changed over time? With regard to environmental conservation, we asked about the extent to which the measures called for by the various laws and regulations were needed to protect the environment. Were there economically feasible measures that could accomplish the same level of environmental protection with less impact on trade? What were the long-term implications for environmental protection if the measures were not adopted or were not implemented? Were the effects irreversible or reversible only with unacceptable economic costs? To explore the theme of economic protectionism, the seminar looked at the effects of the targeted measures on a level playing field among companies and among countries. How would exceptions based on Article XX(b) and (g) or on the SPS Agreement to protect public health or the environment affect a level playing field? How could we determine whether a measure wearing the garb of environmental protection was in fact a disguised restriction on trade? How did the concern about possible economic protectionism affect efforts (sometimes urgent efforts) to protect the environment? Domestic politics was a central theme in the seminar. By bringing in experts, we tried to get beneath the veil of state sovereignty to explore the politics underlying environment and trade disputes. How do domestic politics affect the bringing by states of claims against other states, the resolution of disputes, and compliance with WTO reports. Robert Putnam’s theoretical work on two (and three or more) level games being played internationally and within countries is highly relevant.89 What were the domestic coalitions in particular cases? What were the transboundary coali89 Robert D. Putnam, Diplomacy and Domestic Politics: The Logic of Two-level Games, 42 INT’L ORG. 427 (1988).

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tions, and how did they affect the dispute? How do domestic regulatory institutions and judicial bodies affect the course of disputes? Finally, we explored the theme of civil society. This is a theme that has become increasingly important since 1994. Is there a special role for civil society in the resolution of environment and trade disputes? How can we accommodate the demands of NGOs to participate in the resolution of these disputes? How should we handle NGO demands for transparency and for access to information? With each theme, we attempted to explore changes over time. There have been both sharp and incremental changes in the treatment of environment and trade issues since the UN Conference of Environment and Development in Rio de Janeiro in 1992 and the establishment of the World Trade Organization in 1994. More have followed since the seminar was conducted, and we anticipate more in the decade to come. Some experts may even now argue that the legal frameworks for the two sets of issues may be emerging as sufficiently flexible to deal with the competing needs of the other. The chapters that follow are arranged in five groups: one for each of the five case studies. For each case study, there is a basic introduction to the dispute, followed by the chapters analyzing various aspects of the dispute and a selective bibliography. The material is designed to stimulate further discussion and reflection on the environment and trade nexus, in the hope that this will lead to new ways to reconcile the two issues.

PART I

PUBLIC HEALTH AND THE ENVIRONMENT: THE CASE OF TOBACCO CONTROL

PUBLIC HEALTH AND THE ENVIRONMENT: THE CASE OF TOBACCO CONTROL According to the estimates of the World Health Organization (WHO), Tobacco is the leading preventable cause of death in the world with currently 5 million deaths a year from tobacco use. This figure is projected to double by 2020. By 2030, 70% of tobacco-caused deaths are predicted to occur in developing countries according to The First Conference of the Parties to the WHO Framework Convention on Tobacco Control. While the adverse health effects of tobacco use have long been disputed by tobacco companies, today science has clearly established that tobacco use has very negative health effects and is among the largest causes of preventable illness and mortality on a global scale. Different countries have addressed the public health issue in different ways. In the United States, for example, the Surgeon General’s Office issued its first official report on the harmful effects of tobacco in 1964. In 1978, the U.S. Congress established the Department of Health and Human Services Office on Smoking and Health, which assists U.S. states in developing anti-smoking programs and education. Federal law has banned the advertisement of cigarettes on radio and television and has mandated the use of specific warning labels on packaging and on print advertisements for tobacco products. In August 1996, the U.S. Food and Drug Administration (FDA) published a final rule restricting the sale and distribution of cigarettes and smokeless tobacco to minors and further limiting advertising and promotion of tobacco products. However, manufacturers, retailers, and advertisers challenged the FDA’s jurisdiction to regulate tobacco products. In Food and Drug Admin. v. Brown & Williamson Tobacco Corp. (529 U.S. 120 (2000)), the U.S. Supreme Court on March 21, 2000, ruled 5–4 against U.S. Food and Drug Administration (FDA) authority to regulate tobacco products under the Federal Food, Drug, and Cosmetic Act (FDCA). In October 2004, the House rejected a Senate amendment that would have given the FDA new authority to regulate cigarettes and smokeless tobacco products. The new legislation would have created a new Chapter IX in the Federal Food, Drug, and Cosmetic Act with provisions authorizing the FDA, among other things, to restrict tobacco advertising and promotions and develop standards for tobacco product composition and design. (See FDA Regulation of Tobacco Products: A Policy and Legal Analysis, RL32619, Dec. 3, 2004.) With respect to the United States, it is also interesting to note that on November 23, 1998, U.S. tobacco companies and attorneys general 41

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from 46 U.S. states, five U.S. territories and the District of Columbia finalized a settlement requiring U.S. $206 billion in payments to the states through the year 2025. The settlement also contains provisions regulating, among other things, advertising practices that target children and limiting each tobacco company to only one name-sponsored program or sporting event per year. Prior to the national tobacco settlement, more than 40 states had sued the tobacco industry to recover money spent by states for smoking-related illnesses. Four states—Mississippi, Florida, Texas, and Minnesota—had already settled their lawsuits with the industry and were thus not part of the national tobacco settlement. The settlement does not protect the tobacco industry from class actions, individual lawsuits, or punitive damages. On July 14, 2000, a Miami jury handed down the largest punitive damage award in U.S. history when it ordered the U.S. tobacco industry to pay U.S. $145 billion to hundreds of thousands of Florida smokers suffering from disease caused by cigarettes. (By comparison, the next largest punitive damage award handed down was U.S. $5 billion for the Exxon Valdez oil spill, which was most recently reduced to U.S. $2.5 billion. (In re Exxon Valdez, 472 F.3d 600 (9th Cir. 2006).) However, in May 2003, on appeal, the Third District Court reversed the tobacco punitive damages award and remanded with instructions to decertify the class. (See Liggett Group Inc. v. Engle, 853 So. 2d 434, 470 (Fla. Dist. Ct. App. 2003).) The outcome of this appeal was upheld by the Florida Supreme Court on July 6, 2006. On the issue of punitive damages, the District Court of Appeal held that the trial court erred in awarding class-wide punitive damages without making necessary findings of liability and compensatory damages. At the time that the jury calculated the punitive damage award, the case had only completed phase two of three and had only assessed liability and compensatory damages with regard to three plaintiffs. Liability and compensatory damages had yet to be determined for any of the 700,000 or more class members, which was to be established in phase three. The Florida Supreme Court reached the same outcome, but ruled that the Third District Court erred in finding compensatory damages must be determined before a jury can consider entitlement to punitive damages. (See Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006).) The court, instead, held that the punitive damages award must be vacated because it violates due process and was excessive as a matter of law. On the issue of class decertification, the District Court of Appeal found the prevalence of individual issues rendered a class action suit infeasible. (See Liggett Group Inc. v. Engle, 853 So. 2d 434, 449 (Fla. Dist. Ct. App. 2003).) Because the main issues of the case required individual determinations for each plaintiff, common issues did not predominate, rendering a class action suit uneconomical and inefficient. Although the Florida Supreme Court concluded that the District Court of Appeal erred

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in nullifying its previous affirmance of the trial court’s certification order, the Florida Supreme Court agreed that individualized issues, such as legal causation, comparative fault, and damages predominated over common issues rendering continued class action treatment for phase three of the trial infeasible. Thus, the only recourse left for class members is to initiate individual damages actions based on the phase one common core findings on liability. Despite the world trend to attempt to raise awareness on the adverse public health affects of tobacco, tobacco companies, according to a 2006 report by the Massachusetts Department of Public Health, have increased the “addictiveness” of cigarettes within the last eight years. That report revealed that manufacturers increased the amount of addictive nicotine delivered to the average smoker by 10% from 1998–2004. Furthermore, of 179 cigarette brands tested in 2004, an astonishing 166 brands fell into the state’s highest nicotine yield range, including 59 brands that the manufacturer’s labeled “light” and 14 described as “ultra light.” Virtually all brands were found to deliver a high enough nicotine dose to cause heavy dependence. Leading tobacco firms in the United States face a class action lawsuit seeking punitive damages of up to U.S. $200 billion relating to the alleged fraudulent promotions suggesting “light” branded cigarettes are safer, or less addictive, than regular ones, after a New York district court, certified the claim as a class action in September 2006. (See Schwab v. Philip Morris USA, Inc. et al., 449 F. Supp. 2d 992 (E.D.N.Y. 2006)). U.S. tobacco companies have not only concentrated on the U.S. market. They have also heavily increased their cigarette exports in recent decades. In 1950, the U.S. tobacco industry exported 20.2 billion cigarettes; in 1970, 29.2 billion; in 1980, 82 billion; and in 1990, 164.3 billion. By 1996, U.S. cigarette exports soared up to 243.9 billion. Not all countries opened their markets to the increased exports from the United States, however. Thailand, for example, adopted measures limiting cigarette imports from abroad. This led to a dispute under the “old” GATT. The main issue was the question whether or not the Thai restrictions on the import of tobacco and tobacco products were legitimate measures to protect public health. On the basis of Section 27 of the Thai Tobacco Act of 1966, Thailand granted only three import licenses for cigarettes in the period between 1966 and the late 1980s. As a response, on December 22, 1989, the United States requested consultations with Thailand concerning restrictions on imports and internal taxes on cigarettes maintained by Thailand. The consultations were held on February 5, 1990, and did not lead to a solution. On April 3, 1990, the council agreed to the U.S. request to establish a panel. The United States alleged that the restrictions on imports of cigarettes by Thailand were inconsistent with Article XI of the General Agreement on Tariffs and Trade (GATT) 1947, which prohibits the use

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of quantitative restrictions on imports, and were not justified by the exceptions contained in Article XI:2(c) or Article XX(b), nor were they covered by Thailand’s Protocol of Accession. Article XI:2(c) exempts certain agricultural products from the prohibition on the use of quantitative restrictions, and Article XX(b) generally allows the use of measures necessary to protect human health. The United States also alleged that Thailand’s excise tax, as well as its business and municipal taxes on cigarettes, were inconsistent with GATT Articles III:1 and III:2, which require national treatment of internal taxation. The panel held meetings with the parties to the dispute and consulted with the World Health Organization in July 1990. The panel submitted its report to the parties in September 1990, and the report was adopted on November 7, 1990. In its report, the panel held that the quantitative restrictions on the importation of cigarettes under Thailand’s Tobacco Act of 1966 were contrary to Article XI:1 and not justified by Article XI:2(c)(i), Article XX(b), or paragraph 1(b) of Thailand’s Protocol of Accession. It concluded that Thailand’s practice of permitting the sale of domestic cigarettes while not allowing the importation of foreign cigarettes could not be considered as “necessary” within the meaning of Article XX(b). With respect to Thailand’s regulations on domestic taxes on cigarettes, the panel found that these were consistent with Thailand’s obligations under Article III of GATT 1947. On World No-Tobacco Day on May 31, 2000, ten years after Thailand’s “defeat” before the GATT panel, WHO’s director-general paid tribute to the Thai activists who won a nationwide ban on tobacco advertising in 1992 and praised Thailand for creating momentum for the anti-tobacco campaign. Thailand’s health minister said Thailand’s action had left it “loser in trade, but winner in health.” In July 1998, the Director-General of the WHO responded to the epidemic resulting from tobacco use by creating a Cabinet project called the Tobacco Free Initiative with the view to coordinate an improved global strategy on tobacco control. In June 1999, the WHO launched negotiations for an international Framework Convention on Tobacco Control (FCTC). The convention was adopted during the 56th World Health Assembly in May 2003, opened for signature in June 2004 and entered into force in February 2005. As of October 31, 2007, there were 157 signatories and 131 parties, making this one of the most widely accepted treaties in the history of the United Nations. The FCTC represents the first legally binding international legal instrument aimed at reducing the global spread of tobacco and tobacco products. Unlike previous regulatory mechanisms and treaties targeting supply-side issues of addictive substances, the FCTC includes demand reduction strategies in addition to addressing supply issues. The demand reduction provisions are contained in Articles 6-14 and focus on both

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price and tax measures and non-price measures to reduce the demand for tobacco. Articles 15-17 contain the supply reduction provisions targeting illicit trade in tobacco products and sales to and by minors, in addition to supporting economically viable alternatives for tobacco workers, growers, and, in some cases, sellers. In February 2006, the WHO hosted the first session of the Conference of the Parties (COP) to the FCTC. All parties and regional economic integration organizations that deposited a formal instrument of confirmation or accession participated with voting rights, while other states, including signatories to the treaty, non-governmental organizations (NGOs) in official relations with the WHO and international inter-governmental organizations participated as observers. The COP addressed technical, procedural and financial matters relating to the implementation of the treaty. The conference concluded with the decision to establish the permanent Secretariat of the treaty within the WHO; to create working groups that will begin developing legally binding instruments in the areas of crossborder advertising and illicit trade; to allow the COP to assess progress made by countries through a pilot reporting questionnaire; and to establish an ad hoc group of experts to study economically viable alternatives to tobacco growing and production. As illustrated in the Thai Cigarettes case, domestic and international efforts aimed at reducing tobacco consumption are likely to have trade restrictive effects and, therefore, might be subject to new challenges under World Trade Organization (WTO) rules. However, it is noteworthy that, since the Thai Cigarettes case, new case law regarding domestic regulation to protect public health has developed. In EC-Asbestos, a dispute involving a French ban on chrysotile asbestos, a three-member WTO dispute settlement panel, later confirmed by the Appellate Body, concluded that the measure was justified under GATT Article XX(b). This decision was the first in GATT/WTO history to find all the conditions under Article XX(b) fulfilled, including the requirement that the measure at issue be “necessary” for the protection of the environment, health, human, or animal life. In doing so, the Appellate Body rejected Canada’s argument that “controlled use” was a reasonable alternative to the outright ban and allowed France to impose the trade-restrictive measure to protect the health of workers and consumers from the carcinogenicity of asbestos fibers. The pre-WTO GATT ruling in the Thai Cigarettes case, interpreted the requirement under GATT Article XX(b) that a measure be “necessary to protect human, animal or plant life or health” to mean that a party could only justify a violation of GATT rules if there were no alternative GATT-consistent measures available that the party could reasonably be expected to employ. In cases where no other GATT-consistent measures were available, the party would have to apply the reasonably available measure that was least inconsistent with other GATT provisions.

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This became known as the “least-trade-restrictive-approach.” Later, in Korea-Beef, the WTO Appellate Body reaffirmed the approach taken in Thailand—Cigarettes, but added new factors to the traditional necessity test, suggesting that a “necessary” measure lay somewhere between an “indispensable” measure and a measure “making a contribution to” a goal, “albeit significantly closer to the pole of “indispensable.” The Appellate Body also explained that to determine whether or not a measure at issue is “necessary,” panels needed to consider the following three factors: the contribution of the measure to achieve the policy objective, the importance of the common interests or values protected, and the impact of the law on imports or exports. In its decision in EC—Asbestos, the Appellate Body relied on the same factors, also referred to as a “weighing and balancing process,” to determine that “controlled use” was not a reasonable alternative. The Appellate Body also reiterated that WTO members have the right to determine their own levels of health protection. In the 2007 Brazil—Retreaded Tyres decision, the Appellate Body added yet a new element to the necessity test: the “material contribution” requirement, stating that the “contribution [of the measure] to the achievement of the objective must be material, not merely marginal or insignificant, especially if the measure at issue is as trade restrictive as an import ban.” In this context, the Appellate Body specified that either a qualitative or quantitative analysis would be acceptable. The Thai Cigarettes case remains an interesting and important element in the history and evolution of both the necessity requirement and the issue of tobacco control. The case study on tobacco control begins with Chapter 2 by Young Duk Park, which gives a detailed insight into the reasoning of the GATT Panel in the Thai Cigarettes case. It is followed by an analysis by Patricio E. Leyton of the evolution of GATT Article XX(b), concentrating particularly on the term “necessary.” Chapter 4, by Krystin Noeth, explores economic measures designed for tobacco control, focusing on domestic tobacco tax programs and their consistency with the provisions under the World Trade Organization. Finally, Chapter 5, by Benjamin C. Adams, introduces the Framework Convention on Tobacco Control (FCTC) and related protocols and examines potential conflicts with the world trading system.

CHAPTER 2 THE THAI CIGARETTES CASE: A CURRENT CRITIQUE Young Duk Park

INTRODUCTION On May 17, 1990, the chairman of the Subcommittee on Health and the Environment of the House Committee on Energy and Commerce articulated a serious conflict for U.S. policy between international trade and public health: On the one hand, public health officials are urging Americans not to smoke. On the other hand, U.S. trade officials are urging foreign citizens to please smoke. The Surgeon General advises that cigarettes are responsible for 400,000 deaths in the United States and 2.5 million worldwide. . . . Cigarettes are also a profitable export for the United States. Last year, tobacco exports were responsible for an over $4 billion trade surplus. The efforts of the U.S. Trade Representative and various programs of the U.S. Department of Agriculture worked to promote the sale of tobacco in foreign markets. Their efforts, particularly those of the U.S. Trade Representative, have been successful in eliminating trade barriers to U.S. tobacco, increasing the market share of U.S. companies and increasing the consumption of cigarettes generally.1

Tobacco Control and Marketing: Hearings on U.S. Tobacco Export and Marketing Practices on May 17, 1990 Before the Subcomm. on Health and the Environment of the House Comm. on Energy and Commerce, 101st Cong. in H.R. REP. No. 101–171, at 1 (1990) (opening remarks of Henry A. Waxman, chairman of the Subcommittee on Health and the Environment, Committee on Energy and Commerce, U.S. House of Representatives). 1

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In recent years, the dispute settlement mechanism of the General Agreement on Tariffs and Trade 2 and the World Trade Organization 3 (GATT/WTO) has created substantial jurisprudence interpreting GATT Article XX, which provides for general exceptions to GATT rules. Many previous Article XX cases have involved domestic trade-related health or environmental measures that might be justified by Article XX(b) or XX(g), which permit the adoption of governmental measures that would otherwise constitute violations of the GATT where “necessary to protect human, animal or plant life or health” or “relating to the conservation of exhaustible natural resources,” respectively. 4 On November 7, 1990, a GATT panel report addressed a challenge by the United States to Thai restrictions on importing and taxing cigarettes that was alleged to be imposed to protect public health in Thailand.5 The Thai Cigarettes case applied the “least-inconsistent test” of Article XX(d) in interpreting the “necessary” term of Article XX(b) and deemed the Thai restrictions problematic. However, U.S. trade policy goals seem to have conflicted with health policy objectives.6 In addition, international efforts to reduce health risks from smoking were under way, particularly under the auspices of the World Heath Organization (WHO). This paper first provides a brief overview of the factual background and the GATT proceedings of the Thai Cigarettes case and introduces the main issues raised by the case. Next, the paper discusses the panel’s two analytical approaches with regard to Thai health objectives and trade measures and reviews the U.S. approach on trade policy and health policy on tobacco in the late 1980s. Finally, the paper critiques the Thai Cigarettes case on several points: (1) whether the panel’s efforts to seek the opinion of a neutral outside expert were successful; (2) whether the panel legitimately applied the Section 337 “least-inconsistent test” to a health policy case; (3) whether the “reasonably available” standard should be applied to all countries in the same way; (4) whether the panel would have reached a different conclusion if Thailand had introduced regulaGeneral Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-11, T.I.A.S. 1700, 55 U.N.T.S. 194, art. XX [hereinafter GATT 1947]. 3 See Marrakech Agreement Establishing the World Trade Organization, Apr. 15, 1994, Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, in RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS: THE LEGAL TEXTS 6–18 (1994) [hereinafter WTO Agreement]. 4 As of November 1999, there have been three adopted GATT panel reports, three unadopted GATT panel reports, and four adopted WTO panel reports involving cases concerned with interpreting Article XX(b) and/or XX(g). 5 Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, adopted on Nov. 7, 1990, GATT B.I.S.D. (37th Supp.), at 200 (1991) [hereinafter Thai Cigarettes case]. 6 See discussion infra p. 57–61. 2

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tions governing cigarette manufacturing techniques concerning tobacco reconstitution; and (5) whether this case illustrated any limits on supplyside tobacco control under international economic law.

FACTUAL BACKGROUND AND PROCEDURE Thai Ban on Cigarette Imports Thailand restricted the importation of cigarettes under Section 27 of the Tobacco Act of 19667 in the form of non-automatic import licenses combined with special import authorization by the Director-General of the Excise Department or a competent officer authorized by him.8 As a result of Thai trade control policy on imported cigarettes, the proportion of imported tobacco in Thai cigarettes fell to less than 23% in 1988, compared with 51% in 1973.9 Because Thailand did not grant import licenses for cigarettes from 1966 to the late 1980s, the United States repeatedly requested that Thailand eliminate its licensing restrictions and permit imports of cigarettes from other contracting parties. Those requests were denied.10

Steady Decline in U.S. Cigarette Consumption Since 1981 U.S. cigarette consumption has declined significantly and steadily since 1981.11 Concurrently, U.S. cigarette companies have tried to expand their sales to Japan, South Korea, Taiwan, and Thailand. The prevalence

7 Section 4 of the Act defined tobacco as “cigarettes, cigars, other tobacco rolled for smoking, prepared shredded tobacco including chewing tobacco.” 8 Thai Cigarettes case, supra note 5, para. 6. 9 USTR, 1990 NATIONAL TRADE ESTIMATES REPORT ON FOREIGN TRADE BARRIERS 192 (1990). 10 On the other hand, the Tobacco Act enabled the Thai government to impose a maximum excise tax of 60% on domestic cigarettes and the higher of 80% or 0.60 baht/gram on imported cigarettes. This taxation raised another legal issue of whether Thailand violated its national treatment obligation through a discriminatory internal taxation policy between domestic and imported cigarettes. Thai Cigarettes case, supra note 5, paras. 7–11. However, I have chosen not to address this issue in order to focus solely upon health-related issues. 11 Since 1981, U.S. domestic consumption of cigarettes has fallen by 17% and in 1989 alone there was a 5% decline. Tobacco Control and Marketing: Hearings on U.S. Tobacco Export and Marketing Practices on May 17, 1990 Before the Subcomm. on Health and the Environment of the House Comm. on Energy and Commerce, 101st Cong., in H.R. REP. No. 101–171, at 125 (1990) (statement of Allan I. Mendelowitz, Director, Trade, Energy, and Finance Issues, National Security and International Affairs Division, GAO) [hereinafter Mendelowitz].

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of smoking in these countries was higher than in the United States and presented great sales growth potential.12 Efforts to gain access to these markets were unsuccessful due to the satisfaction of domestic demand by national monopolies and import control measures, such as high tariffs, discriminatory taxes, and discriminatory marketing. U.S. cigarette companies sought assistance from the U.S. Trade Representative (USTR) under Section 301 of the Trade Act of 1974, as amended.13

Section 301 Investigations and GATT Proceedings On April 10, 1989, the U.S. Cigarette Export Association (USCEA)14 filed a petition with the USTR pursuant to Section 301 alleging that the Royal Thai government and its instrumentality, the Thailand Tobacco Monopoly (TTM), engaged in practices that were unreasonable or discriminated against imports and burdened and restricted U.S. commerce.15 The USTR initiated an investigation on May 25, 1989.16 On December 22, 1989, the United States requested consultations with Thailand under Article XXIII:1 concerning restrictions on imports and internal taxes maintained by the Royal Thai government on cigarettes.17 Because those consultations failed to result in a satisfactory solution, the United States requested that the contracting parties establish a panel under Article XXIII:2 to examine the matter.18 The panel, established on April 3, 1990, 19 heard from an outside WHO expert and issued its report on 12

Id. 19 U.S.C. § 2411 (1999). Since 1979, the USTR has commenced five Section 301 investigations regarding foreign governments’ practices on imported tobacco or cigarettes. See Table 2.5 of the Appendix of this chapter. 14 At that time, the USCEA comprised Philip Morris Inc., R.J. Reynolds Tobacco Co., and Brown & Williamson Tobacco Corp., who jointly produced 98% of all U.Smade cigarettes. Trade Policy: Rep. Waxman Criticizes Sullivan’s Decision to Block his Testimony on Tobacco Exports, 7 INT’L TRADE REP. (BNA) 725, May 23, 1990. 15 Id. In its petition, the USCEA charged, inter alia, that the Thai ban on imported cigarettes cost U.S. exporters potential sales of over $166 million annually, and the practice of granting the state-owned Thai Tobacco Monopoly exclusive production and distribution rights in Thai markets violated international trade laws. 16 Initiation of Section 302 Investigation: Thailand’s Restrictions on Access to Its Cigarette Market, 54 Fed. Reg. 23,724 (1989). Consultations with Thai government officials began on July 31, 1989. A public hearing was held on September 19, 1989. Notice of Public Hearing: Thailand’s Restrictions on Access to Its Cigarette Market, 54 Fed. Reg. 32,731 (1989). Further consultations were held in October 1989. 17 Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, GATT Doc. DS10/1 (Jan. 3, 1990) (communication from U.S. delegation). 18 Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, GATT Doc. DS10/2 (Feb. 8, 1990) (communication from U.S. delegation). 19 See GATT Doc. C/M/240 (Apr. 3, 1990). 13

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September 21, 1990. The report concluded that Thailand’s import restrictions on cigarettes were contrary to the provisions of GATT Article XI. On November 7, 1992, the GATT Council adopted the report. Pursuant to Section 304 of the Trade Act, the deadline for determining actionability under Section 301 in this case was November 25, 1990. 20 On November 23, 1990, the USTR determined that U.S. rights under the GATT 1947 were violated by Thailand’s restrictions on cigarette imports. In light of subsequent actions and commitments of the Royal Thai government, however, the USTR decided to terminate the investigation on the same date and to monitor Thai implementation under Section 306(a) of the Trade Act. 21

Thai Implementation of the Panel Report In July 1990, during the panel review, the Thai government introduced a measure to eliminate business and municipal taxes on cigarettes and to remove internal taxes imposed on imported cigarettes that exceeded taxes applied to domestic cigarettes.22 With regard to the import ban on cigarettes, the Thai government lifted the ban and revised its laws and regulations in accordance with the national treatment principle.23

MAIN ISSUES AND THE LEAST-INCONSISTENT TEST Overview of Each Party’s Main Arguments with Respect to Article XX(b)24 The United States claimed that the Thai de facto ban on cigarette imports was inconsistent with GATT 1947 Article XI:1 and was not justified by any of the exceptions in the GATT, in particular Articles XI:2(c)(i) 20 On October 15, public comment was requested on the Section 304 determinations. Notice of Proposed Determination under Section 304 of the Trade Act of 1974, as Amended, Regarding Thailand’s Restrictions on Access to its Cigarette Market, 55 Fed. Reg. 41,781 (1990). 21 Termination of Section 302 Investigation Regarding Thailand’s Restrictions on Access to Its Cigarette Market, 55 Fed. Reg. 49,724 (1990). 22 Thai Cigarettes case, supra note 5, para. 86. 23 USTR, 1991 NATIONAL TRADE ESTIMATES REPORT ON FOREIGN TRADE BARRIERS 214 (Washington D.C., 1991). However, in the November 1990 GATT Council discussion preceding the adoption of this panel report, the representative of Thailand stated that it was clear from the present panel report that Thailand’s cigarette regime was based on public health policy considerations. WORLD TRADE ORGANIZATION, ANALYTICAL INDEX— GUIDE TO GATT LAW AND PRACTICE 569 (6th ed., WTO, Geneva, 1995). See also GATT Doc. C/M/246 (Nov. 23, 1990). 24 Table 2.6 in the Appendix of this paper summarizes the main issues with respect to Article XX(b) and provides the parties’ arguments, the WHO’s technical opinions, and the panel’s findings.

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and XX(b), or by the provisions of Thailand’s Protocol of Accession.25 Thailand’s response centered primarily on the justification issue under Article XX(b). In addition, Thailand requested that the panel consult with the WHO about technical aspects of the case, such as the health effects of cigarette use and consumption, and on related issues within the WHO’s expertise.26

Thai Objective of Public Health Policy and the Scope of Article XX(b) The United States contended that the Thai import ban did not serve the purpose of protecting public health but rather the objective of protecting domestic cigarette production and, therefore, did not fall within the scope of Article XX(b).27 Thailand denied this contention and argued that the Thai government determined that health concerns overrode any other policy objectives, thereby foregoing tariff revenue from the importation of cigarettes.28 The panel accepted that smoking constituted a serious risk to human health and that, consequently, measures designed to reduce the consumption of cigarettes fell within the scope of Article XX(b).29 The following Table 2.1 illustrates the different positions of each party and the panel on the Thai cigarette ban.

“Necessary” Term of Article XX(b) and the Least-Inconsistent Test The panel adopted the so-called “least-inconsistent test” or “necessary test” in interpreting the term “necessary” in Article XX(b). Following precedent set in the Section 337 case, an EC-U.S. dispute over patent infringement,30 the panel found no justification for a different The panel, without any modification, accepted the U.S. arguments. Thai Cigarettes case, supra note 5, para. 87. However, the panel rejected the U.S. argument that the excise, business, and municipal taxes on cigarettes were inconsistent with Article III. Id., para. 88. 26 Id., paras. 3 and 50. 27 Id., para. 29. 28 Id., para. 33. 29 Id., para. 73. Recently, this finding was cited in the dispute between the European Community and the United States about hormone-treated meat. The European Community pointed out that governments all over the world had been taking measures to prevent or reduce smoking, even in the absence of clear scientific evidence that smoking can cause cancer, and underscored the Thai Cigarette case panel’s finding on the relationship between smoking and serious risk to human health. EC Measures Concerning Meat and Meat Products (Hormones), panel report adopted on Feb. 13, 1998, WT/DS26/R/USA (Aug. 18, 1997), para. 4.43 and n.51 [hereinafter EC-Hormones case]. 30 United States—Section 337 of the Tariff Act of 1930, Nov. 7, 1989, GATT, B.I.S.D. (36th Supp.) at 345–46, para. 5.26 (1990) [hereinafter Section 337 case]. 25

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Table 2.1 Positions of the Parties and the Panel on the Thai Ban on Cigarettes Imports Objective: Protection of Domestic Production measures unjustified because of the objective to protect domestic production of cigarettes [29]

Objective: Public Health Protection falling within Article XX(b) Necessary measures

Unnecessary measures

measures justified because necessary to reduce the consumption of tobacco and protect the public from harmful ingredients in imported cigarettes [21] measures unjustified because of the existence of the alternatives consistent with the GATT [U.S.: 30 / panel: 77, 79]

Note: Each bracket indicates the relevant paragraphs of the panel report of the Thai Cigarettes case.

interpretation of the term “necessary” because the same term was used and the same objective was intended.31 The Thai ban on cigarette imports could be considered to be “necessary” in terms of Article XX(b) “only if there were no alternative measure consistent with the GATT, or less inconsistent with it, which Thailand could reasonably be expected to employ to achieve its health policy objectives.”32 Table 2.2 summarizes the panel’s reasoning in comparing Article XX(d) and XX(b).

THE PANEL’S TWO ANALYTICAL APPROACHES ON THAI ANTI-CIGARETTE POLICY OBJECTIVES AND MEASURES TAKEN Thai Premises on Health Consequences of the Opening of Cigarette Markets Thailand focused its arguments on the health consequences of opening its cigarette market. Thailand stated that opening the market to U.S. exports would have two negative effects: a quantity-related adverse effect and a quality-related adverse effect. First, Thailand argued that competition to supply cigarettes would be promoted and would lead to U.S. cigarette companies using better marketing techniques, including advertising, a wider availability of cigarettes, and a possible reduction in prices. This activity might have the unde-

31 32

Thai Cigarettes case, supra note 5, para. 74. Id., para. 75. As for the U.S. argument upheld by the panel, see id., para. 23.

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Reconciling Environment and Trade Table 2.2 Panel’s Comparison of Terms and Purposes of Article XX(d) and Article XX(b)

Factors

XX(d)

same term

. . . necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including . . . (emphasis added)

XX(b) . . . necessary to protect human, animal or plant life or health (emphasis added)

same objective

Permitting contracting parties to impose trade-restrictive measures inconsistent with the GATT to pursue “overriding public policy goals” to the extent that such inconsistencies were unavoidable

covered measures

trade-restrictive measures resulting from the enforcement of GATT-consistent laws andregulations

comparison

Trade-restrictive measures resulting from health-related policies

no justification for different interpretation of the term “necessary” because same term used and same objective intended.

sirable effect of increasing total consumption, especially among women and the young, which would run contrary to public health objectives. 33 Second, with regard to a quality-related adverse effect, Thailand argued that U.S. cigarettes may be more harmful than Thai cigarettes because of the health risks of unknown chemicals and certain additives used in U.S. cigarettes, as well as the detrimental effects of using reconstituted tobacco in U.S. cigarettes.34 Thailand stated that it had no option but to prohibit cigarette imports. Opening its market would necessarily result in an increase in total cigarette sales and in health risks from smoking, which would contradict Thai health policies of reducing cigarette consumption and protecting the public from harmful ingredients in imported cigarettes. Thailand’s two-prong argument is illustrated in Table 2.3 below.

WHO’s Criticism of Opening Cigarette Markets in Asian Countries The panel consulted with experts from the WHO on recent experiences in countries that had opened their cigarette markets.35 The experts 33 34 35

Id., para. 27. Id. As to intervention of the WHO in this case, see discussion infra p. 61-63.

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pointed out adverse aspects of opening markets in Asian countries and deemed the state-owned monopoly on cigarette production and distribution in Thailand, and other developing countries, an effective means to minimize smoking. 36 Furthermore, the experts warned that poorly financed public health programs would be unable to compete with marketing budgets of multinational companies, and, as a result, cigarette consumption and, in turn, death and disease attributable to smoking would increase.37 They also presented empirical evidence that the opening of closed cigarette markets in Latin America and Asia, also dominated by state tobacco monopolies, resulted in an increase in smoking, because multinational tobacco companies had routinely circumvented national restrictions on advertising through indirect advertising and a variety of other techniques.38 The panel did not directly address the Thai argument and the WHO opinions on the health consequences of opening cigarette markets. Instead, the panel noted that the principal health objectives advanced by Thailand to justify its import restrictions were the protection of the public from harmful ingredients in imported cigarettes and the reduction of the consumption of cigarettes in Thailand. The panel then proceeded to review the two-part analytical approach.

Quantity-Related Health Objectives and Thai Ban on Cigarette Imports The United States refuted the Thai view that the import ban on cigarettes was justified because of the lack of an alternative tool to effectively implement public health policy and contended that the national treatment principle should apply to any measures taken in pursuance of such health objectives. The panel concurred with this argument. Applying the least-inconsistent test, the panel suggested an alternative consistent with Article XX(b). Namely, it found that the Thai government could use the Thai Tobacco Monopoly to regulate the overall supply of cigarettes, their prices, and their retail availability, provided that it thereby accorded imported cigarettes no less favorable treatment than it granted to domestic cigarettes.39 The panel also mentioned the availability of a price-raising policy recommended by the WHO as a means of reducing cigarette consumption in Thailand. Finally, the panel rejected the Thai argument about potential quantity-related adverse effects arising from opening its cigarette market.

36 37 38 39

Thai Cigarettes case, supra note 5, para. 52. Id., para. 52. Id., para. 55. Id., para. 79.

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Reconciling Environment and Trade Table 2.3 Thai Argument About Health Consequences of Opening Market to U.S. Cigarettes

Opening the Cigarette Market to U.S. Tobacco Companies

Quantity-Related Adverse Effect

Quality-Related Adverse Effect

U.S. companies’ predominance in marketing budgets and marketing techniques (including direct or indirect advertising)

Increased health risks of smoking because of . . . 1) unknown chemicals used in U.S. cigarettes, partly to compensate for lower tar and nicotine levels; 2) some additives used in U.S. cigarettes increasing health risks (cancer); 3) nicotine extracted from reconstituted tobacco in U.S. cigarettes.

wider availability of U.S. cigarettes and a possible reduction of their prices

increase in cigarette consumption, especially among women and the young

increase in death and disease attributable to smoking, which would run contrary to Thai public health objectives Note: The shadowed portion of the figure indicates the opinion of the representatives of the WHO about the health consequences of opening Asian cigarette markets to multinational tobacco companies.

Quality-Related Health Objectives and Thai Ban on Cigarette Imports The United States denied that scientific evidence showed an increase in health risks arising from unknown chemicals placed in U.S. cigarettes, certain additives used in U.S. cigarettes, and nicotine extracted from reconstituted tobacco in U.S. cigarettes. First, with respect to unknown chemicals, none of the other Western countries that also required disclosure of ingredients had raised prob-

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lems with ingredients in U.S. cigarettes. Moreover, Thailand had no regulations or restrictions on ingredients or flavorings used in cigarettes until the filing of the U.S complaint in this case.40 With regard to certain additives, such as cocoa, the United States contended, inter alia, that there was no evidence of adverse effects, and that U.S. cigarette manufacturers complied with U.S. requirements for labeling and disclosure.41 Although WHO experts recognized that the use of additives in U.S. cigarettes had increased greatly during the 1970s, with the introduction of low-yield cigarettes, and were used to restore flavor lost by the reduction in tar and nicotine, the experts supported the U.S. argument that scientific evidence was lacking.42 Lastly, concerning nicotine issues, the United States argued that U.S. reconstituted tobacco had less nicotine than Thai full leaf tobacco. The United States also pointed out that the Thai Tobacco Monopoly intended to use the reconstitution technique in the future.43 The panel did not answer any scientific questions about harmful ingredients in U.S. cigarettes. Instead, applying the least-inconsistent test again, the panel suggested an alternative consistent with Article XX(b) with respect to quality-related health policies. The panel stated that a nondiscriminatory regulation requiring complete disclosure of ingredients, coupled with a ban on unhealthy substances, would be an alternative consistent with the GATT 1947.44 In conclusion, the panel found that various measures consistent with the GATT 1947 were reasonably available to Thailand to achieve quantityrelated and quality-related health policy goals. Accordingly, the Thai ban on cigarette imports was inconsistent with the GATT 1947 and was not “necessary” within the meaning of Article XX(b). 45

CONTRADICTION BETWEEN U.S. TRADE POLICY AND U.S. HEALTH POLICY U.S. Trade Policy on Tobacco in the Late 1980s The U.S. Administration’s trade strategy in the 1980s was to open markets, so trade could expand, and to negotiate a clear set of enforceable rules to curb unfair trade practices that inevitably would lead to controversy and a disruption of trade.46 With regard to tobacco exports, the Id., para. 31. Id., para. 35. 42 Id., para. 53. 43 Id., para. 31. 44 Id., para. 77. 45 Id., para. 81. 46 Tobacco Control and Marketing: Hearings on U.S. Tobacco Export and Marketing Practices on May 17, 1990 Before the Subcomm. on Health and the Environment of the House 40 41

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USTR took a firm stand that, because cigarettes were legally sold in the United States and abroad, they should be treated no differently than other products in trade negotiation, according to the national treatment principle.47 The USTR actively worked to open foreign markets to U.S. cigarette exports in the 1980s. Cigarette exports were very important to U.S. farmers, because tobacco was their sixth largest cash crop, and 85 percent of the tobacco grown was used in the manufacture of cigarettes. In addition, U.S. cigarette companies sought USTR support to expand sales to Japan, South Korea, Taiwan, and Thailand because of reduced domestic cigarette consumption.48 U.S. trade strategy for opening foreign markets to U.S. tobacco exports was very successful. Figure 2A shows that the U.S. tobacco and tobacco product trade surplus in 1989 was $4.3 billion, up from $2 billion in 1986.49

Dichotomy Between Trade Policy and Public Health Policy on Tobacco Exports After removing trade restrictions on the importation, distribution, and sales of U.S. tobacco products in Japan and Taiwan in 1986 and Korea in 1988,50 Asia became increasingly aware of the health consequences of smoking and experienced the growth of anti-smoking groups.51 At the same time, the United States faced a policy-level conflict between U.S. trade goals and health policy objectives concerning the export of tobacco products. While the U.S. Administration negotiated with foreign countries to open their markets to U.S. cigarette exports, U.S. health agencies supported programs with the objective of reducing smoking. The Public Health Service of the Department of Health and Human Services (HHS) issued several Surgeon General’s reports warning about the harmful effects of smoking. The United States also participated on a multilateral level with the WHO to support smoking

Comm. on Energy and Commerce, 101st Cong. in H.R. REP. No. 101–171, at 112 (1990) (statement of Sandra Kristoff, Director, Assistant U.S. Trade Representative for Asia and the Pacific Region). 47 Id., at 113. 48 Mendelowitz, supra note 11, at 125–6. 49 This figure is based upon three graphs in H.R. REP. No. 101–171, at 168–73 (1990). At that time, U.S. tobacco exports were provided with support by three federally funded market development programs: the Cooperator Market Development Program, the Targeted Export Assistance Program, and the Export Credit Guarantee programs. Mendelowitz, supra note 11, at 127. 50 With regard to the change in total cigarette consumption of these countries after the market opening, see H.R. REP. No. 101–171, at 155–160. 51 Mendelowitz, supra note 11, at 126.

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Figure 2.A U.S. Exports and Imports of Leaf and Tobacco Products: 1985–1989

4973

5000 4500 4153 4000

Import 3400

Millions of Dollars

3500

Export

3000 2767

2732

2500 2000 1500 1000 622

683

691

754 546

500 0 1985

1986

1987

1988

1989

prevention and health awareness programs throughout the world.52 In addition, the Overseas Private Investment Corporation, a government agency, made a policy decision to deny assistance to U.S. cigarette companies wishing to promote their enterprises overseas because of the adverse health effects of smoking. Despite the U.S. government’s active involvement in anti-smoking efforts, health issues were not considered during trade negotiations for the removal of foreign trade barriers to the export of U.S. cigarettes. More specifically, during a hearing held on May 17, 1990, before the House Energy and Commerce Subcommittee on Health and the Environment, the director of trade energy and finance issues at the Government Accounting Office (GAO) testified: 52

Id.

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Reconciling Environment and Trade [U]ntil recently, the Department of Health and Human Services has been discouraged from activities that linked health issues with U.S. cigarette exports. For example, in February 1988, the Interagency Committee on Smoking and Health attempted to hold an interagency meeting entitled “Tobacco Trade Policies.” The Surgeon General, the chairman of the committee, invited representatives from the Departments of State, Commerce, and Agriculture to speak on the health implications of recent U.S. efforts to open foreign markets to U.S. cigarettes. However, White House officials, some members of Congress, and USTR officials objected to the meeting, claiming that the Committee had no authorization to analyze a trade issue. Consequently, the meeting title was changed to “Tobacco and Health Internationally,” and the representatives from State, Commerce, and Agriculture did not attend. In September 1989, the former Surgeon General testified at a USTR hearing on the Thailand cigarette petition, and was critical of U.S. tobacco trade policy because it does not include consideration of the health impact of that policy.53

The GAO official requested that the U.S. Congress decide which takes precedence—trade concerns or health concerns—in addressing unfair trade practices cases involving U.S. tobacco exports.

Recent Trend in U.S. Domestic Tobacco Policy In recent years, Philip Morris, the largest U.S. tobacco company, has faced increasing pressure from smoking-related lawsuits and from Congress. Moreover, the U.S. Department of Justice (DOJ) has announced that it will bring a large civil lawsuit against the major tobacco companies. The suit will allege that cigarette smoking costs the federal government billions of dollars annually in health-related costs and that the companies engaged in consumer fraud by conspiring to conceal the risks of cigarette smoking.54 A few weeks after the DOJ announcement, Philip Morris formally acknowledged that scientific evidence shows that smoking causes lung cancer and other deadly diseases—after decades of disputing the findings of the U.S. Surgeon General and other medical authorities.55 This acknowledgement is particularly noteworthy, because lung cancer, among several

Id. at 130 (emphasis added). David A. Vise & Lorraine Adams, U.S. Plans Massive Tobacco Civil Suit, WASH. POST, Sept. 22, 1999, at A1. 55 Barry Meier, Philip Morris Acknowledges Smoking’s Link to Cancer, N.Y. T IMES, Oct. 13, 1999, at A1 and A15. 53 54

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other harmful effects of smoking, was one of the main health issues discussed in the Thai Cigarettes case about a decade ago.56

CRITICAL REVIEW OF THE THAI CIGARETTES CASE Seeking the Opinion of a Neutral Outside Expert The Thai Cigarettes case is the only GATT 1947 dispute settlement panel proceeding in which the opinion of a neutral outside expert from the WHO was sought.57

The Basis and the Terms of Reference for Seeking the Opinion of the WHO Thailand requested that the panel consult with the WHO to prove the quality-related adverse effects of U.S. cigarettes and seek to justify an import ban. The panel asked the WHO to present its conclusions on technical aspects of the case, such as the health effects of cigarette use and consumption, on the basis of the Memorandum of Understanding (MOU) between the parties and in response to Thailand’s request.58 The United States, however, did not believe that the WHO was particularly competent to address the “health consequences of the opening of the market for cigarettes” and urged the panel to limit the issues presented to the WHO to those aspects referred to in the MOU between the parties.59 Although the panel did not respond to the U.S. objection, it seems that the panel accepted the objection because it did not mention the WHO opinion about potential health consequences.

Submissions of WHO to the Panel The WHO addressed adverse health effects from smoking, the differences between Western and Thai cigarettes with respect to end-users and advertising techniques, the effects of opening closed cigarette markets in other countries in Asia and Latin America, and appropriate tobacco control strategies to reduce smoking.60 Thailand generally supported the WHO submissions.61 In particular, the WHO position was very similar to that of Thailand with respect to the health consequences of opening the cigarette market, as illustrated in Table 2.4 below. However, the United States took issue with some of the Thai Cigarettes case, supra note 5, paras. 27 and 51. David A. Wirth, SYMPOSIUM: The Role of Science in the Uruguay Round and NAFTA Trade Disciplines, 27 C ORNELL I NT’L L J . 817, 849 (Summer 1994). 58 Thai Cigarettes case, supra note 5, para. 50. 59 Id., para. 58. 60 Id., paras. 51–57. 61 Id., para. 51. 56

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WHO conclusions on the effect of lifting the import ban on cigarettes in Thailand, as well as with the factual basis for these conclusions, such as the differences between U.S. and Thai cigarettes. The panel did not respond to each WHO opinion but specifically considered two points made by the WHO. First, the panel considered the view that the initial demand for cigarettes by the young was influenced in particular by cigarette advertisements and that bans on advertisement could therefore curb such demand.62 This view played a role in supporting the panel’s conclusion that a ban on advertising cigarettes of both domestic and foreign origin would have to be regarded as unavoidable and therefore necessary within the meaning of Article XX(b), because additional advertising would risk stimulating demand for cigarettes.63 The panel also considered the WHO opinion that raising the price of cigarettes, for instance through taxation, could result in a reduction in smoking in developing countries more effectively than in developed countries due to higher price elasticity of smoking.64

Table 2.4 WHO’s Views on Health Consequences of Opening the Cigarette Market in Asian Countries

opening the cigarette market to multinational tobacco companies

multinational tobacco companies’ predominance in marketing budgets and marketing techniques

increase in cigarette consumption

increase in death and disease attributable to smoking

62 63 64

Id., para. 78. Id. Id., para. 57.

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In considering the WHO submission, as well as a WHO resolution at the Forty-Third World Health Assembly,65 the panel rejected the Thai argument that competition between imported and domestic cigarettes would necessarily result in an increase in total cigarette sales and that Thailand therefore had no option but to prohibit cigarette imports.66 In addition, although Thailand attempted to justify health measures based on science, it was unable to demonstrate a health-risk differential between Thai cigarettes and imported ones.67 Had the panel properly evaluated the WHO submissions that stressed the adverse effects of smoking, as well as the underlying facts, the panel might have reached a different conclusion. In particular, a WHO representative referred the different production methods or techniques used in Thai and U.S. cigarettes, suggesting that these differences were of public health concern to women and adolescents and could create a false illusion about the safety of Western cigarettes. 68

Right to Seek Advisory Opinion Under the WTO Agreements The right to seek an advisory opinion in certain disputes was formally granted to the panel under the WTO dispute settlement understanding.69 Under DSU 13.2, a WTO panel may consult experts to obtain their opinion on certain aspects of a matter and request an advisory report in writing from an “expert review group” with respect to a factual issue concerning scientific or other technical matters.70 Moreover, under the Agreement on Technical Barriers to Trade71 and Agreement on the Application of Sanitary and Phytosanitary Measures,72 a WTO panel may establish a tech-

65 When it comes to the effectiveness of tobacco control strategies, the resolution urged all member states of the WHO to consider progressive financial measures aimed at discouraging the use of tobacco. 43rd World Health Assembly, 14th plen. mgt., Agenda Item 10, A43/VR/14; WHA43.16 (May 17, 1990). 66 Thai Cigarettes case, supra note 5, para. 79. 67 Jeffery Atik, SYMPOSIUM: Institutions for International Economic Integration: Science and International Regulatory Convergence, 17 J. INT’L L. & BUS. 736, 749 and n.55 (Winter, 1996 / Spring 1997). 68 Thai Cigarettes case, supra note 5, para. 52. 69 Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2 of the WTO Agreement, in RESULTS OF THE URUGUAY ROUND 353–78 [hereinafter DSU]. 70 The panel should decide the terms of reference of expert review groups, and the groups shall report to the panel. See Appendix 4 of the DSU, supra note 69. 71 Agreement on Technical Barriers to Trade, Annex 1A of the WTO Agreement, in RESULTS OF THE URUGUAY ROUND 117–37 [hereinafter TBT Agreement]. 72 Agreement on the Application of Sanitary and Phytosanitary Measure, Annex 1A of the WTO Agreement, in RESULTS OF THE URUGUAY ROUND 69–83 [hereinafter SPS Agreement].

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nical expert group to assist in scientific or technical questions, at the request of a dispute party or at its own initiative.73

Draconian “Least-Inconsistent Test” Applied to a Developing Country: Is It Legitimate to Apply the Section 337 Least-Inconsistent Test to a Health Policy Case? As shown in Table 2.2, the panel adopted the Section 337 necessary test on the ground that there was no justification for a different interpretation of the term “necessary” under Paragraphs (d) or (b) of Article XX, because each section used the same term and had the same objective.74 This reasoning by simple comparison, however, seems somewhat unsatisfactory, because a country may pursue “overriding public policy goals” of varying significance. These policy objectives might be of different value in each country and therefore should not be evaluated the same way. In the matter at issue here, Thailand may have chosen to place more significance on protecting itself from the potential risks arising from the harmful cigarette products of multinational tobacco companies than securing compliance with its monopoly or patent laws. According to the WHO submissions, smoking-related cancer in Thailand at that time was not as high as in many other developing countries and was relatively low in comparison to more affluent countries.75 In addition, per capita consumption of cigarettes in Thailand was declining due to the adoption of recommended WHO smoking control policies and the prohibition of all forms of tobacco advertising, including a ban on event sponsorship and forceful warning labels on packages.76 These facts imply that, in the 1980s, the Thai government put more emphasis on this health-related policy through a series of tobacco control measures than on other national policies. However, the panel did not consider the priority of the health policy or special circumstances that may have differentiated Thailand from other countries.

73 TBT Agreement art. 14.2 and SPS Agreement art. 11.2. The panel should decide the terms of reference of expert review groups. and the groups shall report to the panel. 74 This approach can be viewed as reasoning based on a teleological interpretation of Article XX. Aaditya Mattoo & Petros C. Mavroidis, Trade, Environment and the WTO: The Dispute Settlement Practice Relating to Article XX of GATT, in INTERNATIONAL TRADE LAW AND THE GATT/WTO DISPUTE SETTLEMENT SYSTEM 327, 336 (Ernst-Ulrich Petersmann ed., 1997) [hereinafter Mattoo & Mavroidis]. 75 Thai Cigarettes case, supra note 5, para. 51. 76 Id., para. 52. The male adult smoking rates in Thailand had declined by 6% since 1981, and adult per capita consumption had declined from 1,100 cigarettes per person in the late 1970s to 900 in 1985. This per capita rate was far lower than in the United States, where it stood at 3,200 per person per year. Id.

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Should the Reasonably Available Standard Be Applied to All Countries in the Same Way? The panel in the Thai Cigarettes case established persuasive precedent, which imported the Article XX(d) analysis from the Section 337 case into an Article XX(b) analysis.77 The panel’s reasoning has had an impact on subsequent panels’ narrow reading of Article XX(b).78 In particular, the panel in the Tuna-Dolphin I case reiterated that Article XX permitted measures inconsistent with the GATT 1947 only “to pursue overriding public policy goals to the extent that such inconsistencies were unavoidable” and stated that, rather than imposing import restrictions, the United States should have sought to negotiate international cooperative arrangements.79 This finding meant that, when a GATT contracting party invoked an Article XX exception in panel proceedings, the country was required to have exhausted all options reasonably available to it to pursue its legitimate objective, such as human health and safety, through measures consistent with the GATT 1947. 80 The precedent established by the Thai Cigarettes case is especially noteworthy, because the options “reasonably available” to a poor contracting party are directly related to the feasibility of implementing the options in that particular country. With respect to Thai quality-related health policies, the panel suggested to Thailand that a non-discriminatory regulation requiring complete disclosure of ingredients, coupled with a ban on unhealthy substances, would be an alternative consistent with the GATT 1947.81 However, if an enormous budget and well-trained human resources were needed to institute and maintain the regulatory system requiring this “complete” disclosure of cigarette ingredients, it would be very difficult for a developing country facing fiscal constraints to implement that alternative effectively and completely. That is, the panel simply ignored the possibility that the alternative measures might involve high regulatory and compliance costs or might be impracticable to implement effectively in a developing country. 82 Robert Weissman, A Long, Strange TRIPS: The Pharmaceutical Industry Drive to Harmonize Global Intellectual Property Rules, and The Remaining WTO Legal Alternatives Available to Third World Countries, 17 U. PA. J. INT’L ECON. L. 1069, 1104–05 (Winter 1996). 78 See, e.g., United States—Restrictions on Imports of Tuna from Mexico, not adopted, Aug. 16, 1991, GATT, B.I.S.D. (39th Supp.) at 155, para. 5.27 (1993) [hereinafter Tuna-Dolphin I case]; United States—Standards for Reformulated and Conventional Gasoline, Panel and Appellate Body Report adopted on May 20,1996, WT/DS2/9 (May 20, 1996), paras. 6.24–6.25. 79 Tuna-Dolphin I case, supra note 78, para. 5.27. 80 Id., para. 5.28. 81 Thai Cigarettes case, supra note 5, para. 77. 82 MICHAEL J. TREBILCOCK & ROBERT HOWSE, THE REGULATION OF INTERNATIONAL TRADE: POLITICAL ECONOMY AND LEGAL ORDER 337 (1995) [hereinafter TREBILCOCK & HOWSE]. 77

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Arguably, the options reasonably available to developing countries are much narrower than those available to developed countries. In this regard, the panel should have considered the financial burden and lack of human resources in developing countries when it determined whether or not options were “reasonably available” to Thailand through measures “least inconsistent” with the GATT 1947. The “least-inconsistent” test proposed by the Thai Cigarettes case panel is unworkable, because the test does not address the issues of feasibility and efficiency in implementing measures in a particular country.83

Like Product and PPMs: What if Thailand Had Introduced Regulations Governing Cigarette Manufacturing Techniques Concerning the Reconstitution of Tobacco? With regard to the similarity of imported and domestic cigarettes, the United States contended that imported U.S. cigarettes and Thai domestic cigarettes were “like products” within the meaning of the national treatment requirement of Article III of the GATT 1947. Manufactured cigarettes share the same general characteristics and many specific characteristics, although consumers may have different preferences and therefore may choose among a number of different brands being offered in a particular market.84 On the other hand, Thailand contended that cigarettes exported from the United States were not the same product as those sold on Thailand’s domestic market, because studies had shown that some foreign cigarettes sold in Asia contained a higher tar level than the same brands sold in Australia, Europe, or the United States.85 Thailand also argued that some U.S. cigarettes contained nicotine that was extracted from tobacco leaf and resprayed on the leaf as part of a “process” called “reconstituting” the tobacco. Replacing nicotine in chemical form may make U.S. cigarettes different than Thai cigarettes and make them more addictive, since the reconstitution process could make inhalation easier and absorption of nicotine by the bloodstream and the brain more efficient.86 An interesting question would have arisen if Thailand had introduced regulations governing cigarette manufacturing techniques concerning tobacco reconstitution before this dispute emerged. The panel might have been required to indirectly address the concept of trade-based production and process methods (PPMs). PPM standards specify criteria for how

83 84 85 86

Mattoo & Mavroidis, supra note 74, at 338–39. Id., para. 42. Id., para. 32. Id., para. 27.

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a product is manufactured, harvested, produced, or processed. 87 Some PPM standards relate directly to the product itself (where the country of consumption directly feels the environmental consequence of a product), and other PPM standards do not directly relate to the product (where an environmental externality occurs at the production site). 88 In general, this distinction indicates that the production process affecting the “product,”89 as well as the product’s production itself, might be meaningful and influential in analyzing a national-treatment violation case where exceptions to Articles XX(b) or XX(g) are sought.90 In this regard, the panel in the Thai Cigarettes case might have reached a different conclusion if the Thai government had contended that U.S. cigarette products were inconsistent with Thai technical regulations designed to protect Thailand from harmful foreign tobacco processes. Also, given that both parties to the dispute were parties to the Tokyo Round Standards Code at that time, the case would have been much more complicated if the United States had filed a complaint against Thailand under the Standards Code, alleging 87 Typology of Trade Measures Based on Environmental Product Standards and PPM Standards: Note by the Secretariat, Joint Session of Trade and Environment Experts, Organization for Economic Cooperation and Development (OECD) Environment Directorate and Trade Directorate, OECD Doc. COM/ENV/TD(93)89 (Sept. 28–30, 1993). 88 William J. Snape, III & Naomi B. Lefkovitz, Searching for GATT’s Environmental Miranda: Are “Process Standards” Getting “Due Process?,” 27 CORNELL INT’L L.J. 777, 779 (Summer 1994). See generally Interim Conceptual Framework for PPM Measures, OECD Doc. COM/TD/ENV(94)39 (Apr. 6–7, 1994); J OHN H. JACKSON, THE WORLD TRADING SYSTEM: LAW AND POLICY OF INTERNATIONAL RELATIONS 235–38 (2d ed. 1997) [hereinafter JACKSON]. 89 The Agreement on Technical Barriers to Trade of the Tokyo Round 1979 dealt only with technical specifications relating to products. Agreement on Technical Barriers to Trade, para. 1 of Annex 1, GATT B.I.S.D. (26th Supp.), at 8 (1980) [hereinafter Tokyo Round Standard Code]. However, the WTO Standards Code contains the concept of PPMs affecting the product by, inter alia, defining “the technical regulations” as “documents laying down product characteristics or their related processes and production methods.” TBT Agreement, para. 1 of Annex 1. See also SPS Agreement, para. 1 of Annex A. 90 JACKSON, supra note 88, at 236. In the Tuna-Dolphin I case, supra note 78, the panel accepted the Mexican argument that its tuna, was a like-product to U.S. domestically produced tuna because the panel determined that the United States was incorrectly trying to distinguish between identical products (tuna caught by U.S. fishing boats and tuna caught by Mexican fishing boats) on the basis of the production process not affecting the characteristics of the product. Therefore, the note to Article III was not applicable, and the United States was violating Article XI with its import ban on Mexican tuna. JOHN H. JACKSON, WILLIAM J. DAVEY & ALAN O. SYKES, JR., LEGAL PROBLEMS OF INTERNATIONAL ECONOMIC RELATIONS—CASES, MATERIALS AND TEXT ON THE NATIONAL AND INTERNATIONAL R EGULATION OF T RANSNATIONAL E CONOMIC R ELATIONS 585 (3d ed. 1995); TunaDolphin I case, supra note 78, para. 5.14.

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that Thai ban on reconstituted cigarettes had no basis in scientific evidence of a health danger from smoking the cigarettes.91

Limits on Supply-Side Tobacco Control Under International Economic Law The Thai Cigarettes case examined the justification of “supply-side measures” used to reduce cigarette consumption under Article XX(b) and showed the limits on supply-side tobacco control under international economic law. The case also suggested that a set of GATT-consistent measures could be taken to control both the supply and demand for cigarettes, as long as the measures were applied to both domestic and imported cigarettes consistent with national-treatment requirements. In addition, the case acknowledged demand-side tobacco control by accepting justifications of the Thai ban on cigarette advertisement.92 A recent study conducted by the World Bank93 supports U.S. arguments on this particular issue. The study found that reducing the supply of tobacco is not an effective way to reduce tobacco consumption, because banning tobacco or restricting its trade are unrealistic and likely to have undesirable consequences. 94 On the contrary, the study suggested various measures to reduce demand, such as raising taxes on cigarettes, banning the advertising and promotion of tobacco, and increasing access to nicotine replacement therapy to help people who are ready to quit smoking. In its submissions to the Thai Cigarettes case panel, the United States similarly contended that decreases in the level of smoking resulted from diminished demand achieved through education and

91 In this case, the Thai PPMs could have been covered by the Tokyo Round Standards Code if the United States had claimed that the PPMs circumvented Thai primary obligations of the Code not to create “unnecessary obstacles to trade” under Article 14.25 of the Standard Code. In fact, in European Economic Community—Animal Hormones Directive case, the United States contended that the EEC’s proposed ban on sale of beef from hormone-treated cattle lacked any scientific basis and thus violated Article 7.1 and 7.2 of the Standard Code, and anti-hormone requirement was a PPM requirement covered by the Standard Code on ground that it was circumventing the obligations of the provisions within the meaning of Code Article 14.25. ROBERT E. HUDEC, ENFORCING INTERNATIONAL TRADE LAW: THE EVOLUTION OF THE MODERN GATT LEGAL SYSTEM 545 (1993); GATT Doc. TBT/Spec/18 (Mar. 9, 1987); TREBILCOCK & HOWSE, supra note 82, at 197. 92 Thai Cigarettes case, supra note 5, para. 78. 93 WORLD BANK, CURBING THE EPIDEMIC: GOVERNMENTS AND THE ECONOMICS OF TOBACCO CONTROL (World Bank, 1999). 94 In this regard, the report pointed out that attempts to restrict cigarette sales to minors have been largely unsuccessful, even in developed countries with substantial enforcement capacity.

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the recognition of the effects of smoking, rather than restraints on the availability of cigarettes.95

CONCLUSION The Thai Cigarettes case unfolded against a background of controversy between U.S. trade goals and health policy objectives concerning the export of tobacco products. Despite health concerns, the U.S. Administration promoted negotiations with foreign countries to encourage them to open their markets to U.S. cigarette exports. The Thai Cigarettes case illustrates the tension between successfully exporting tobacco products and addressing the potential health effects of smoking. Future tobacco export policy should take into careful account the impact of that policy on public health. The Thai Cigarettes case correctly questions the legitimacy of extreme measures, such as an import ban as an appropriate means to accomplish public health objectives and illustrates some limits on supply-side tobacco control under international economic law. The panel’s reasoning, however, is flawed in several respects. First, the panel should have addressed several arguments presented by the Thai government and by the WHO in its submissions. The panel did not satisfactorily address, inter alia, arguments relating to: (1) the health consequences of opening the cigarette market; (2) some scientific questions about harmful ingredients in U.S. cigarettes; (3) some statistics concerning the relatively low rate of smoking-related cancer in Thailand; (4) whether U.S. and Thai cigarettes truly were “like products;” and (5) arguments regarding the tobacco reconstitution process. In particular, the panel’s seemingly selective responses to opinions of the WHO do not seem easily reconciled with the original spirit of using neutral outside experts under GATT 1947, although perhaps the panel may have believed it was exercising legitimate judicial restraint. For example, the panel neglected to address the finding that smoking-related cancer in Thailand was not as prevalent as in many other developing countries and was relatively low in comparison to more affluent countries.96 Second, the panel’s application of the Section 337 “least-inconsistent” test to the Thai Cigarettes case, which involved a simplistic comparison of Articles XX(d) and XX(b), was unrealistic and unreasonable. Furthermore, the “reasonably available” standard is inappropriate when applied to a poor contracting party that has fiscal constraints and inadequate human resources and consequently is unable to implement all of the options suggested by the panel. The “least-inconsistent” test is unworkable in this context. 95 96

Thai Cigarettes case, supra note 5, para. 23. See id., para. 51.

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On the other hand, if a cigarette-importing country introduces technical regulations to protect its nationals from harmful foreign cigarettemanufacturing techniques, some disputes about tobacco-related PPMs will be covered by the TBT Agreement, as well as the GATT 1994.97 In this context, the working group on the WHO Framework Convention on Tobacco Control should recognize the significance of technical and scientific cooperation among its member countries and seek to include the following factors or areas in the Convention: (1) research on ways in which product modifications in nicotine, tar content, additives, etc. can change use patterns; (2) research on the international role of transnational tobacco companies, including representations about the health consequences of smoking and addiction; (3) cigarette production as an international trade issue in terms of country imports and exports; and (4) important research topics such as the relationship of tobacco production to the ecosystem and the economic impact of tobacco control on developing countries that grow tobacco or manufacture tobacco products for domestic markets.98

97 Applicability of the SPS Agreement to such tobacco-related PPMs would be controversial due to definitions of SPS measures. See SPS Agreement, para. 1(c) of Annex A. 98 See Elements of a WHO Framework Convention on Tobacco Control, First Meeting of the Working Group on the WHO Framework Convention on Tobacco Control, Provisional Agenda Item 7, at 16–17, WHO Doc. A/FCTC/WG1/6 (Sept. 8, 1999); Subjects of Possible Protocols and Their Relation to the Framework Convention on Tobacco Control, First Meeting of the Working Group on the WHO Framework Convention on Tobacco Control, Provisional Agenda Item 8, at 13, WHO Doc. A/FCTC/WG1/3 (Sept. 3, 1999).

Complaint

The Cigar Association of America, Inc. filed a petition on March 14, 1979, alleging that Japan imposes unreasonable import restrictions, internal taxes or charges on imports in excess of those placed on domestic products, and discriminatory restrictions on the marketing, advertising, and distribution of imported cigars (44 FR 19083).

The Associated Tobacco Manufacturers filed a petition on Oct. 22, 1979, alleging that Japan set unreasonable prices for imported pipe tobacco and restricted its distribution and advertising (44 FR 64938).

Japan Cigars (301_17)

Japan Pipe Tobacco (301_19)

In November 1979, USTR consolidated this case with 301-17 alleging identical practices with respect to cigars. USTR terminated the investigation on Jan. 6, 1981 (46 FR 1388).

During panel deliberations under GATT Art. XXIII:2 in March 1980, Japan repealed its internal tax on imported cigars and applied an import duty of 60% ad valorem. Prior to completion of panel action, the U.S. and Japan reached agreement that liberalized market restrictions and reduced the import duty. USTR terminated the investigation on Jan. 6, 1981 (46 FR 1389). • Consultation Request (8-Nov-79, L/4871) • Panel Establishment Request (8-Nov-79, L/4871) • Panel Establishment (16-Nov-79, C/M/136) • Circulation of the Panel Report (15-May-81, L/5140, BISD 28S/100) • Adoption of the Panel Report (11-Jun-81, C/M/148)

Disposition

Table 2.5 Section 301 Initiated Cases Regarding Cigarettes

Country

APPENDICES

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Korea Cigarettes (301_64)

On Jan. 22, 1988, the U.S. Cigarette Export Association filed a petition complaining that the policies and practices of the Korean Government and its instrumentality the Korean Monopoly Corporation unreasonably denied access to the Korean cigarette market and were a burden or restriction on U.S. commerce.

On Sept. 16, 1985, at the President’s direction, USTR selfinitiated an investigation of Japanese practices (including high tariffs, Japan Tobacco Institute’s manufacturing monopoly, and distribution restrictions) that act as a barrier to U.S. cigarette exports (50 FR 37609).

Japan Tobacco Products (301_50)

President

Complaint

Country

On Feb. 16, 1988, USTR initiated an investigation and requested consultations with the Government of Korea (53 FR 4926). The USTR signed an agreement with Korea on May 27, 1988, providing open, non-discriminatory access to the Korean cigarette market. Based on this agreement, the investigation was terminated on May 31, 1988.

After discussions with U.S. industry, on Feb. 3, 1986, USTR requested consultations with Japan. The U.S. presented a lengthy questionnaire on Feb. 11, and held technical discussions Feb. 21. The U.S. raised this case during Sub-Cabinet meetings on Feb. 28, and consulted in Tokyo on March 4 and on April 16–17. The U.S. received answers to its questionnaire on March 21. The U.S. consulted with Japan on May 27–28; August 13, 18, and 28–29; Sept. 8, 9, 11, 25, 26 and 29; and Oct. 1–3. On Oct. 3, the U.S. and Japan concluded an agreement under which Japan would reduce its tariff on cigarettes to zero, eliminate the discriminatory deferral in excise tax payment, and terminate discriminatory distribution practices. On Oct. 6, 1986, the approved this agreement and suspended the investigation, directing that it be terminated when Japan fully implements the agreement (51 FR 35995).

Disposition

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On April 10, 1989, the U.S. Cigarette Export Association (CEA) filed a petition alleging that the Royal Thai Government and its instrumentality, the Thailand Tobacco Monopoly (TTM) engaged inpractices that are unreasonable or discriminate against imports and burden and restrict U.S. commerce.

USTR initiated an investigation on May 25, 1989 (54 FR 23724), and requested public comment. Consultations with Thai government officials began July 31. A public hearing was held September 19, 1989 (54 FR 32731). Further consultations were held in October 1989. On December 22, the United States requested consultations under Article XXIII:1 of the GATT. Since those consultations failed to result in a satisfactory solution, the United States requested the establishment of a panel under GATT Article XXIII:2. The panel was established on April 3, 1990, and issued its report on September 21, 1990, concluding that Thailand’s import restrictions on cigarettes are contrary to the provisions of GATT Article XI. On November 7, 1992, the GATT Council adopted this report pursuant to section 304 of the Trade Act. The deadline for determining actionability under section 301 in this case was November 25, 1990. On October 15, public comment was requested on the section 304 determinations (55 FR 41781). On November 23, 1990, the USTR determined that U.S. rights under the GATT were violated by Thailand’s restrictions on imports of cigarettes, but in light of subsequent actions and commitments of the Royal Thai Government, the USTR decided to terminate the investigation on the same date, and to monitor Thai implementation under section 306(a) of the Trade Act (55 FR 49724).

Sources: United States Trade Representative, Section of 301 Cases Table (last modified Aug. 9, 1999) http://www.ustr.gov/reports/301report/act301.htm; GREG MASTEL, AMERICAN TRADE LAWS AFTER THE URUGUAY ROUND 158–168 (M.E. Sharpe, Inc., New York, 1996) 207 pp.; Search of the WELRC GATT/WTO Dispute Cases Database (Microsoft Excel & Access files, written in English), World Economic Law Research Center of Korea University (Dec. 12, 1999)

Thailand Cigarettes (301_72)

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Reconciling Environment and Trade Table 2.6 The Parties’ Arguments, the WHO’s Opinions, and the Panel’s Findings, by the Main Issues in the Thai Cigarettes Case Main Issues

US

Thai

WHO

Panel

Did the Thai “objective” of public health policy designed to reduce the consumption of cigarettes fall within the scope of Article XX(b)?

No Yes [29] [33]

–

Yes [73]

Was the Thai ban on imports of cigarettes “necessary” to protect human life or health?

No Yes [23] [21]

–

No [79]

A

B

Quantity-related policy objectives [reduction of the cigarettes consumption] 1

Was the Thai ban on imports of cigarettes “necessary” to reduce the consumption in Thailand, although domestic production, sales and exports of cigarettes and tobacco remained at high levels?

No Yes [23] [26]

–

–

2

Would competition between imported and domestic cigarettes lead to an increase in the total sales of cigarettes? (health consequences of the opening of the market for cigarettes)

No Yes [30] [27]

Yes [52, 55]

–

3

Was the Thai ban on imports of cigarettes “the only measure” to reduce the consumption in Thailand?

No Yes [30] [27]

Yes [57]

No [79]

–

No [77]

–

–

Quality-related policy objectives [protection of the public from harmful ingredients in imported cigarettes] 1

Was the Thai ban on imports of cigarettes “the only measure” to protect the public from alleged harmful ingredients in imported cigarettes?

No

Yes

2

Was there any scientific evidence that US cigarettes might be more harmful than Thai cigarettes because of unknown chemicals in U.S. cigarettes, partly to compensate for lower tar and nicotine levels?

No Yes [31] [27]

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3

Was there any scientific evidence that the additives used in the US cigarettes were so harmful as to increase health risks of smoking, like the risk of cancer?

No Yes [35] [27]

No [53]

–

4

Was there any scientific evidence that the “reconstituted” tobacco used in some US cigarettes would make them more addictive since it could make inhalation easier and enhance absorption of nicotine by the blood?

No Yes [31] [27]

–

–

5

Were the cigarettes exported from the US a “dissimilar” product from those sold on the domestic market, because the imports in Thailand contained a higher tar level than the same brands sold in the US?

–

Yes

–

–

Would the Thai general ban on all cigarette advertising be “necessary” to protect human life or health, even if it created unequal competitive opportunities between the existing Thai supplier and new foreign suppliers?

No [62

–

–

Yes [78]

Did the US request Thailand to grant the advertising right for foreign cigarettes companies, as well as to apply national treatment during the bilateral consultations under the Section 301?

No Yes [35] [34]

* Each bracket indicates the relevant paragraphs of the panel report of the Thai Cigarettes case.

CHAPTER 3

EVOLUTION OF THE “NECESSARY TEST” OF ARTICLE XX(b): FROM THAI CIGARETTES TO THE PRESENT Patricio Leyton

INTRODUCTION The World Trade Organization (WTO) has among its objectives the establishment of clear and effective rules that regulate trade conflicts between its members.1 Parts of these legal rules, however, are set out intentionally indeterminate, so that they may be defined in concreto, in each specific case, and in accordance with circumstances. In particular, concepts such as “exhaustible natural resources,” “public morals,” and “sovereignty,” have been objects of debate in regard to their content and meaning. The same applies to concepts, such as “health and animal life,” “environment,” and, specifically, the word “necessary” in Article XX(b) of the General Agreement on Tariffs and Trade (GATT or General Agreement). This means that WTO members reserve a certain definitional right to themselves, through which they can determine their goals and define the best alternatives to fulfill these ends. Consequently, tribunals interpreting such issues have to defer to the government concerned in that regard. Nevertheless, the reach of this prerogative is limited by the concepts themselves. They are broad and in need of further definition but are clearly not unlimited. The world trading system’s policies of security and predictability demand that some controls be placed on such discretion. Accordingly, WTO panels and Appellate Bodies have the task to review state members’ interpretations and modify them when they violate 1 Understanding on Rules and Procedures Governing the Settlement of Disputes. Article 3(2) provides that the dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. J OHN J ACKSON , W ILLIAM D AVEY & A LAN S YKES , 1995 D OCUMENTS S UPPLEMENT TO L EGAL P ROBLEMS OF I NTERNATIONAL E CONOMIC L AW , at 366 (3d ed. 1996) [hereinafter Document Supplement].

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in an unjustifiable manner the provisions of the General Agreement. This raises the following questions: Will the trading system override national autonomy in choosing environmental and health policy? Or, on the contrary, will the trading system be bound to respect the decisions of the states? I will try to answer these questions from the perspective that the exceptions of Article XX are designed to allow a nation to participate in the international trading regime under the WTO while preserving certain aspects of its national sovereignty over its domestic political and legal order. I will analyze the interpretation of the word “necessary” of Article XX(b)—the so called “necessary test”—from its origin in the Thai Cigarettes case, through the variation introduced by the Sanitary and Phytosanitary Measures Agreement (SPS Agreement), to its current development based in the latest cases decided by the WTO Appellate Body. In the first section of this chapter, I describe the facts that gave rise to the dispute in the Thai Cigarettes case, centering specifically on those relevant for the analysis of the “necessary test.” Then I address the main issues alleged by the parties and the final decision of the panel. Secondly, I analyze the origins of the “necessary test” in the Thai Cigarettes case. I follow the reasoning and the elements taken into consideration by the panel in order to interpret the “necessary test” as the least trade-restrictive measure reasonably available to the invoking country in order to achieve its goals. Then, in the third section, I describe the development of GATT jurisprudence concerning the “necessary test” prior to the creation of the WTO and the enactment of the SPS Agreement. In the fourth section, I examine the jurisprudence after the creation of the WTO. As an introduction, I briefly analyze the new objectives and values of the WTO, as reflected by its Preamble, and I present an overview of the enactment of the SPS Agreement and its main norms. All this is to set the foundations for a complete understanding of the difference between the “least trade restrictive” approach of the “necessary test” and the “not more trade restrictive than required” approach of the SPS Agreement. In the fifth section, the core of this chapter, I focus on the “necessary test” under its current interpretation. I sketch a comparative analysis between the least trade restrictive approach of the “necessary test” and the “not more trade restrictive than required” approach from the SPS Agreement. I also circumscribe the sphere of application of Article XX(b), the SPS, and the Technical Barriers to Trade (TBT) Agreements. Finally, in the last section, I present the conclusions to this analysis. There are several aspects of the “necessary test” that are still unclear. In this sense, the practice developed through the SPS Agreement will be fundamental to illustrate how WTO tribunals should interpret “necessary test” in the future, in order to permit a balanced co-existence of members’ national sovereignty and the goals of the international trading system.

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THE THAI CIGARETTES CASE In Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, (Thai Cigarettes case) the United States brought a complaint against Thailand alleging that Thailand’s Tobacco Act of 1966 was inconsistent with its obligation under the GATT.2 The two aspects of Thailand’s Tobacco Act which, the panel was called upon to decide, involved the GATT consistency of: (1) Thailand’s application of its excise, business and municipal tax (Article III:1 and Article III:2 of the GATT); and (2) Thailand’s restriction on the import of tobacco products (Article XI:1 of the GATT). 3 On the tax issue, while the GATT process was in motion, the Thai government enacted a regulation that explicitly eliminated the discriminatory measures in question. In accordance with this, the panel held that the mere possibility that the Tobacco Act might be applied in a manner contrary to Article III:2 was not sufficient to make it inconsistent with the General Agreement and consequently held that there was no violation of Article III.4 On the import restriction issue, cigarettes could not be imported into Thailand except under an import license. Only on three occasions in 25 years had an import license been issued.5 Thailand did not contest this, arguing that these actions were justified under the exceptions established by GATT. Specifically, Thailand’s arguments were based on: (1) GATT Article XI(2)(c), which permits import restrictions to enforce domestic marketing or product restrictions for agricultural products;6 (2) Thailand’s 1982 Protocol of Accession to the GATT,7 which grandfathered legislation of a mandatory nature inconsistent with the GATT; and (3) GATT Article XX(b), which allows derogation from GATT rules when the measures are necessary to protect human life or health.8 The panel rejected all three of the justifications put forward by Thailand. First, the panel concluded that Article XI(2)(c)’s exemption refers only to fresh agricultural products, e.g., tobacco leaf, or “leaf tobacco in an early stage of processing.” Hence, cigarettes could not be among the products eligible for import restriction under this article.9 Second, concerning Thailand’s Protocol of Accession, the panel stated that in order to qualify under the existing legislation clause, Thailand’s legislation had to meet the following three criteria: 2 Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, GATT B.I.S.D. (37th Supp.), at 200 (1990) [hereinafter Thai Cigarettes case]. 3 Id. at paras. 15–21. 4 Id. at paras. 85–86. 5 Id. at paras. 6. 6 Id. at para. 17. 7 Id. at para. 36. 8 Id. at para. 21. 9 Id. at paras. 70–71.

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The panel noted that while the Tobacco Act was legislation in the formal sense and pre-dated the Protocol of Accession of Thailand, it did not, by its terms or expressed intent, impose on the Thai executive authorities a requirement to restrict imports. On the contrary, Section 27 of the Act explicitly gave the Thai executive authorities the power to grant import licenses. Therefore, the panel found that Thailand’s Protocol of Accession did not exempt it from its obligations under the General Agreement.11 Finally, the panel concluded that Thailand’s measures were not necessary in the meaning of Article XX(b), as will be analyzed in depth below. In the end, Thailand decided not to delay or veto the panel report that was adopted by the GATT Council in November 1990. 12 In fact, in October 1990, the Thai Cabinet announced that it would lift the import ban on cigarettes.13

THE ORIGIN OF THE “NECESSARY TEST” IN THE TOBACCO CASE As stated above, the panel rejected all of Thailand’s arguments. In relation to Article XX(b), the panel decided that the import prohibition was not necessary to achieve Thailand’s objectives. The panel noted that a previous panel in the U.S.—Section 337 case14 had discussed the meaning of the term “necessary” in the context of Article XX(d), which provides an exemption for measures that are “necessary to secure compliance with laws or regulations that are not inconsistent” with the provisions of the General Agreement.15 10 Id. at para. para. 83 citing “Norway—Restrictions on Imports of Apples and Pears,” L/6474, Panel Report, adopted on June 21, 1989, para. 5.7. 11 Id. at para. 83. 12 US-Thailand: Thai Restrictions on Importation of and Internal Taxes on Cigarettes, 76 FOCUS: GATT NEWSLETTER 7 (1990). 13 Ted L. McDorman, U.S.-Thailand Trade Disputes: Applying Section 301 to Cigarettes and Intellectual Property, 14 MICH. J. INT’L L. 90 (1992). 14 Thai Cigarettes case, supra note 2, at para. 74. 15 See Report of the Panel on “United States—Section 337 of the Tariff Act of 1930” (US Section 337) L/6439, para. 5.26, adopted on Nov. 7, 1989. The panel concluded that “a contracting party cannot justify a measure inconsistent with other GATT provisions as “necessary” in terms of Article XX(d) if an alternative measure which it could reasonably be expected to employ and which is not inconsistent with other GATT provisions is available to it. By the same token, in cases where a measure consistent with other GATT provisions is not reasonably available, a contracting party is bound to use, among the measures reasonably available to it, that which entails the least degree of inconsistency with other GATT provisions.”

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The panel stated that it “could see no reason why, under Article XX, the meaning of the term ‘necessary’ under paragraph (d) should not be the same as in paragraph (b).” 16 In order to justify this reasoning, it concluded that both paragraphs use the same term and intend the same objective: to allow contracting parties to impose trade restrictive measures inconsistent with the General Agreement to pursue overriding public policy goals to the extent that such inconsistencies were unavoidable. 17 Up to this point, the reasoning of the panel is fine: states may take measures to carry out their own policy goals, avoiding, as far as possible, any effect on GATT’s purposes of trade liberalization. From this first premise, however, the panel concluded that the import restrictions imposed by Thailand could only be considered to be “necessary,” in terms of Article XX(b), if there were no alternative measures consistent with the General Agreement, or less inconsistent with it, which Thailand could reasonably be expected to employ to achieve its health policy objectives” [emphasis added].18 This conclusion is perplexing, as it absolutely limits the sovereignty of states to take measures with respect to their specific problems. This interpretation is what has been called the “least trade restrictive” approach. This approach requires states that intend to protect human, animal, or plant life or health to look for the least trade restrictive measure in order to excuse its GATT obligation under Article XX(b). The panel then proceeded with a determination of other potential alternatives less inconsistent with the agreement that would achieve Thailand’s objectives. Two aspects were relevant for the panel: the quality and the quantity of the tobacco. Concerning the quality of the tobacco, the panel considered that Thailand could reasonably be expected to take measures (concerning labeling and ingredient disclosure regulations) to address the quality-related policy objectives it pursued through an import ban on all cigarettes whatever their ingredients.19 Concerning the quantity of tobacco, the panel suggested that a ban on the advertisement of cigarettes of both domestic and foreign origin would normally meet the requirements of Article III:4.20 It added that this ban would have to be regarded as unavoidable and, therefore, necessary within the meaning of Article XX(b), because additional advertising rights would risk stimulating the demand for cigarettes.21 This reasoning from the panel has been the object of several comments in the sense that it would allow states to 16 17 18 19 20 21

Thai Cigarettes case, supra note 2, at para. 74. Id. at para. 75. Id. at para. 74. Id. at para. 77. Id. at para. 78. Id.

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impose a general ban on cigarette advertising.22 However, it must be stressed that the panel considered that only in this particular case was this measure a reasonably available alternative. Therefore, some other alternatives might be less inconsistent with the GATT under other circumstances. In the end, the panel considered that there were various measures consistent with the General Agreement, which were reasonably available to Thailand to control the quality and quantity of cigarettes smoked and which, taken together, could achieve the health policy goals that the Thai government pursued. The panel found, therefore, that Thailand’s practice of permitting the sale of domestic cigarettes, while not permitting the importation of foreign cigarettes, was an inconsistency with the General Agreement and not “necessary” within the meaning of Article XX(b). 23

DEVELOPMENT OF THE “NECESSARY TEST” THROUGH GATT PANELS After the Thai Cigarettes case, two important cases dealt with Article XX(b) and the “necessary test.” In these cases—and notwithstanding that under international law, prior panel decisions do not have stare decisis effect—subsequent panels tended to give application to the least trade restrictive interpretation developed in the Thai Cigarettes case.

Tuna I The first of these cases was United States—Restrictions on Imports of Tuna (Tuna I) developed between Mexico and the United States over the implementation of the U.S. Marine Mammal Protection Act of 1972 (MMPA).24 This act banned the import of tuna caught outside the United States through technologies that resulted in higher rates of dolphin mortality than allowed by U.S. laws to domestic producers.25 The panel held that the U.S. measure violated Article III of GATT, because it discriminated against tuna products from other countries based on their fishing methods, and that the measure could not be justified under Article XX(b).26 One of the main issues at stake was the possibility of states to take measures to protect dolphins located outside the jurisdiction of the United States.27 The panel considered that even if Article XX(b) was interpreted 22 Padideh Ala’i, Free Trade or Sustainable Development? An Analysis of the WTO Appellate Body’s Shift to a More Balanced Approach to Trade Liberalization, 14 AM. U. INT’L L. REV. 1129, 1141 (1999). 23 Thai Cigarettes case, supra note 2, at para. 81. 24 United States—Restrictions on Imports of Tuna, Apr. 30, 1992, GATT B.I.S.D. (39th Supp.), at 155 (19930 [hereinafter Tuna I]. 25 Id. at para. 2.21. 26 Id. at para. 5.32. 27 Id. at para. 5.25.

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to permit extrajurisdictional protection of life and health, the measure would not meet the requirement of necessity. 28 The panel required that the United States demonstrate “that it had exhausted all options reasonably available to pursue its dolphin protection objectives through measures consistent with the General Agreement,” e.g., an international dolphin conservation agreement. 29 This is a clear application of the “least trade restrictive” approach. Yet, the panel went even further stating that, even assuming that an import prohibition was the only resort reasonably available to the United States, the particular measure chosen by the United States could not be considered to be necessary within the meaning of Article XX(b). The United States linked the maximum incidental dolphin taking rate, which Mexico had to meet during a particular period in order to be able to export tuna to the United States, to the taking rate actually recorded for U.S. fishermen during the same period.30 As a result of this, Mexican authorities could never know whether, at a given time, their policies conformed to the U.S. dolphin protection standards, because they would have to wait until the information of U.S. vessels was available. On the basis of the above considerations, the panel found that the United States’ direct import prohibition imposed on certain yellowfin tuna and certain yellowfin tuna products of Mexico, and the provisions of the MMPA under which it was imposed, could not be justified under the exception allowed by Article XX(b).31 The Tuna I report was never adopted by the GATT Council, and some of its pronouncements, especially the one related to the territorial limitation, were modified in United States—Restrictions on Imports of Tuna (Tuna II).32

Tuna II Three years later, in “United States—Restrictions on Imports of Tuna,” a second GATT panel heard a challenge brought by the European Economic Community (EEC) against the secondary embargo provision of the MMPA.33 In this provision, any nation that exported yellowfin tuna or yellowfin tuna products to the Unites States, and that imported yellowfin tuna or yellowfin tuna products that were subject to a direct prohibition on import into the United States, had to certify, with reasonable Id. at para. 5.28. Id. 30 Id. 31 Id. at para. 5.29. 32 Warren H. Maruyama, A New Pillar of the WTO: Sound Science, 32 INT’L LAW., at 651 (1998). 33 United States—Restrictions on Imports of Tuna, June 1994, 33 I.L.M. 839 (1994) [hereinafter Tuna II]. 28 29

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proof provided, that it had not imported products subject to the direct prohibition within the preceding six months.34 Once the panel established that the measure infringed GATT’s provisions, it proceeded to analyze the measure under the exceptions of Article XX and, in particular, subsection (b). Here, the panel introduced a new development in the interpretation of Article XX(b). It observed that the text of this article suggested a three-step analysis: • First, it had to be determined whether the policy of the measure invoked was within the policies covered by the provision; • Second, it had to be determined whether the measure was necessary to fulfil the policy aforementioned; • Third, it had to be determined if the measure complied with the requirements of the chapeau (Article’s XX introductory clause or chapeau).35 Concerning the second of these elements, that is the “necessary test,” the United States argued that its measures met this requirement, since “necessary,” in this sense, simply meant “needed.” The EEC disagreed, stating that the normal meaning of the term “necessary “ was “ indispensable “ or unavoidable.”36 The panel noted that, in the ordinary meaning of the term, “necessary” meant that no alternative existed.37 The panel stated, based on the U.S.—Section 337 case and on the Thai Cigarettes case, that the “necessary test” obliges member states to find the least degree of inconsistency with other GATT provisions. 38 The panel did not analyze the availability of alternative measures. However, it did deeply examine the effectiveness of the U.S. measures for the purposes alleged. The panel observed that the intermediary nation embargo could not, by itself, further the U.S. conservation objectives. It would only achieve its intended effect if it were followed by changes in policies or practices, not in the country exporting tuna to the United States, but in third countries from which the exporting country imported the tuna.39 The panel concluded that measures taken so as to force other countries to change their polices, and that were effective only if such changes occurred, could not be considered “necessary” for the protection of animal life or health in the sense of Article XX(b).40 Finally, the panel noted that since an essential condition of Article XX(b) had not been met, it 34 35 36 37 38 39 40

Id. at para. 5.5. Id. at para. 5.29. Id. at para. 5.34. Id. at para. 5.35. Id. Id. at para. 5.36. Id. at para. 5.39.

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was not necessary to examine the further issues of whether the U.S. measures had also met the other requirements of Article XX.41

DEVELOPMENT OF THE “NECESSARY TEST” THROUGH THE WTO DISPUTE SETTLEMENT BODY The New World Trade Organization The creation of the WTO began a new era in the relationship between trade and environment. Now, the trading system has expressly included within its considerations the protection of the environment. The Preamble of the WTO provides that relations between the members should be conducted with a view to “raising standards of living, ensuring full employment and a large and steadily growing volume of real income” by “entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction on tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.”42 These goals of trade liberalization should be pursued, “while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.”43 This section shows how the WTO tribunals have expressly recognized this goal.

The Sanitary and Phytosanitary Measures Agreement: Introduction Once the basic goals of international trade had been achieved, e.g., the generalized reduction of tariffs and general promotion of trade, the main concern of GATT members was to eliminate the utilization of measures that, even though legal on their face, involved a disguised restriction of trade. To fulfill this goal, the Uruguay Round directed its attention to the application of sanitary and phytosanitary (SPS) measures. Governments routinely adopt SPS measures to protect human, animal, or plant life or health. However, these measures can easily be transformed into disguised trade restrictions. It is not uncommon for countries to prohibit agricultural imports on the basis of spurious and scientifically unfounded concerns about pests or disease in order to protect local farmers from competition.44 The negotiators sought to create binding rules and disci41

Id. Preamble of the Final Act Embodying the Result of the Uruguay Round of Multilateral Trade Negotiations, Apr. 15, 1994, 33 I.L.M. 1125 (1994), Document Supplement, supra note 1, at 3. 43 Id. See also Benjamin Simmons, In Search of Balance: An Analysis of the WTO Shrimp/Turtle Appellate Body Report, 24 COLUM. J. ENVTL. L. 413, at 418 (1999). 44 Maruyama, supra note 32, at 662. 42

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plines in order to avoid the use of SPS measures as disguised barriers to trade, by requiring them to be justified by scientific evidence, and to promote the harmonization of SPS measures, by stipulating that they be based on relevant international standards. 45 In addition to these goals, they intended to provide an authoritative interpretation for the invocation of the provisions of Article XX(b).46 Therefore, they tried to legitimize and supplement the existing precedent and to establish rules for the adoption and enforcement of sanitary and phytosanitary measures.47 They were attempting to convert GATT practice into hard law that would impose limitations on SPS measures that restrict international trade.48 However, even though this was the explicit purpose, the SPS Agreement went further, developing a variation of the “necessary test” and its “least trade restrictive” approach: the “not more trade restrictive than required” approach. As I will explain in detail below, the SPS Agreement elaborates Article XX(b). Sanitary and phytosanitary protection is now covered by this new “not more trade restrictive than required” approach, an issue that must be analyzed in detail to determine the possible consequences of such modification. Consequently, I will present in this section an analysis of the SPS Agreement and the interpretation given to its norms by WTO jurisprudence. The purpose of this is to illustrate how future tribunals might interpret the “least trade restrictive” approach of Article XX(b), considering the practice that has been collected by the “not more trade restrictive than required” approach and its differences and similarities.

Basic Rights and Obligations of the SPS Agreement The SPS Agreement expressly affirms that WTO members have the right to enact and maintain SPS measures necessary to protect the life and health of humans, animals, and plants. They must be adopted, however, based on scientific evidence and to the extent necessary to fulfill the goals aforementioned.49 In addition to this, WTO members shall not arbitrarily or unjustifiably discriminate against other members where identical or similar conditions prevail” in each member’s territory and shall not use SPS measures as disguised barriers to trade.50 These obligations con45

Preamble of the SPS Agreement, Document Supplement, supra note 1, paras.

4 and 6. Id. at para. 8. Id. at para. 4. 48 Dale E. McNiel, The First Case Under The WTO’s Sanitary and Phytosanitary Agreement: The European Union’s Hormone Ban, 39 VA. J. INT’L L. 89 (1998). 49 Agreement on the Application of Sanitary and Phytosanitary Measures, Document Supplement, supra note 1, arts. 2.1 and 2.2. 50 Id. art. 2. 46 47

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stitute a refinement of the interpretation that previous panels have given to Article XX(b), including the requirements established in the chapeau. Accordingly, and with the purpose of keeping the due coherence with GATT, the last paragraph of Article 2 of the SPS Agreement provides that the measures in conformance with the provisions of this agreement “shall be presumed” to be in accordance with Article XX(b) of the GATT. 51

Definition of SPS Measure In order to clarify the sphere of application of the SPS Agreement and Article XX(b), it is necessary to examine the definition of SPS measures. Annex A of the SPS Agreement defines sanitary and phytosanitary measures as those applied: • to protect animal or plant life or health within the territory of a member country from risks arising from the entry, establishment or spread of pests, diseases, or disease-carrying or disease-causing organisms; • to protect human or animal life or health within the territory of the member from risks arising from additives, contaminants, toxins or disease-carrying organisms in foods, beverages, or feedstuffs; • to protect human life or health within the territory of the member from risks arising from diseases carried by animals, plants, or products thereof, or from the entry, establishment, or spread of pests; or • to prevent or limit other damage within the territory of the member from the entry, establishment, or spread of pests. Therefore, in order to qualify as an SPS measure, a regulation must be intended to protect a state against at least one of the risks listed in the SPS measure definition. Otherwise, the measure exceeds the scope of the SPS Agreement.52 In addition to this, it should be pointed out that these measures must be directed to have effect only within the territory of the invoking member, hence forbidding its extraterritorial application.

The “Not More Trade Restrictive than Required” Approach As stated above, a WTO member must ensure that any SPS measure “is applied only to the extent necessary to protect human, animal or plant life, or health.”53 Complementing this provision, Article 5.6 of the SPS Agreement states that “Members shall ensure that [their] measures are not more trade-restrictive than required to achieve their appropriate level 51 52 53

Id. at para. 4. Maruyama, supra note 32, at 651. SPS Agreement, supra note 49, art. 2.2.

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of sanitary or phytosanitary protection, taking into account technical and economic feasibility.” A footnote to Article 5.6 explains that “a measure is not more traderestrictive than required unless there is another measure, reasonably available taking into account technical and economic feasibility, that achieves the appropriate level of sanitary or phytosanitary protection and is significantly less restrictive to trade.” Therefore, in order to consider that a measure is “not more trade restrictive than required,” there must not be another measure that complies with the following cumulative conditions: 1. is “reasonably available taking into account technical and economic feasibility”; 2. “achieves [Country’s] appropriate level of sanitary . . . protection”; and 3. is “significantly less restrictive to trade” than the sanitary measure contested. Following are the most recent interpretations of the “least trade restrictive” approach of Article XX(b) and the “not more trade restrictive” approach of the SPS Agreement. First, I will address the Reformulated Gasoline and the Shrimp-Turtle cases that dealt with Article XX(b), and secondly, the Australia Salmon and Japan Varietal cases that dealt with the SPS.

DEVELOPMENT OF THE JURISPRUDENCE AFTER THE CREATION OF THE WTO Reformulated Gasoline The United States—Standards for Reformulated and Conventional Gasoline case (Reformulated Gasoline) was the first one to be considered by a WTO Appellate Body. It involved a complaint concerning gasoline import standards imposed by the U.S. Environmental Protection Agency (EPA) pursuant to the U.S. Clean Air Act. Through this regulation, EPA attempted to control the amount of toxic pollution released from the combustion of gasoline.54 The problem was that while EPA required that imported gasoline meet statutorily determined baselines, it allowed certain domestic refiners to use their own baselines.55 Venezuela, Brazil, and other countries challenged this provision. The panel held that EPA’s refusal to recognize foreign refinery baselines was discriminatory and, therefore, a violation of GATT Article III.56 40 C. F. R. § 80 (1994). Id. 56 United States—Standards for Reformulated Gasoline and Conventional Gasoline, Panel Report, WT/DS2/R (Jan. 29, 1996). 54 55

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Then, it proceeded to analyze the measure in light of the requirements under Article XX(b) so as to determine if it could be justified under this exception. The panel required that United States prove three elements to meet the Article XX(b) exception for measures necessary to protect human health: 1. that the policy in respect of the measures for which the provision was invoked fell within the range of policies designed to protect human, animal, or plant life or health; 2. that the inconsistent measures for which the exception was being invoked were necessary to fulfil the policy objective; and 3. that the measures were applied in conformity with the requirements of the introductory clause of Article XX [or chapeau].57 The panel agreed with the United States that “a policy to reduce air pollution resulting from the consumption of gasoline was a policy within the range of those concerning the protection of human, animal and plant life or health.”58 Then the panel asked whether alternative measures were reasonably available that were either GATT-consistent or less inconsistent with it than the existing U.S. regulations.59 The panel disregarded EPA’s argument concerning verification, auditing, monitoring, and enforcement relative to foreign refiners and simply held that the United States had not shouldered its burden.60 Since the United States failed to prove that there was no other way to achieve its statutory goals, the panel determined that the U.S. regulations were not necessary.61 After ruling against the United States, however, the panel in its concluding remarks made an interesting statement. It pointed out that it did not pass upon the desirability or necessity of the environmental objectives of the Clean Air Act or the Gasoline Rule. 62 Specifically, it stated that “WTO members . . . [are] free to set their own environmental objectives, but they . . . [are] bound to implement these objectives through measures consistent with . . . [GATT’s provisions], notably those on the relative treatment of domestic and imported products.”63 Herewith, the panel expressly recognized the importance of environmental protection and the relative autonomy of states to take measures to pursue this goal. This idea was more clearly expressed in the Shrimp-Turtle case. 57 58 59 60 61 62 63

Id. at para. 6.20. Id. at para. 6.21. Id. at para. 6.24. Id. at para. 6.28. Id. at para. 6.29. Id. at para. 7.1. Id.

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The general understanding of Article XX was that governments were entitled to justify a measure, otherwise in violation of GATT obligations, only in cases where the inconsistent aspects of the measure were necessary for the attainment of one of the important social policy objectives there listed. Consequently, in early GATT decisions, panels had applied substantively the same standard of review under Article XX(b) and Article XX(g).64 It was not until the Reformulated Gasoline case that a dispute resolution body made the explicit distinction between Article XXb) and Article XX(g). 65 In this case, the Appellate Body stated that the panel appeared to have applied the “necessary test” not only under Article XX(b), but also in the course of applying Article XX(g).66 Citing Article 31 of the Vienna Convention, it held that the use of different introductory words for each of the Article XX paragraphs called for different standards of review.67 The Appellate Body explained that the phrase “relating to” under Article XX(g) called for a different standard.68 Based on this, the Appellate Body upheld EPA’s regulation under Article XX (g), even though later it rejected it under the chapeau. Therefore, while the Appellate Body signaled a shift away from the “least trade restrictive” approach to a more liberal and deferential standard of review under Article XX(g), it implied that the Article XX(b) “necessary” language retained the least trade restrictive test.69

Shrimp-Turtle Case The next major interpretation by a WTO tribunal of Article XX was the United States—Import Prohibition of Certain Shrimp and Shrimp Products (Shrimp-Turtle case). This case arose from an objection to the U.S. Section 609 enacted pursuant to the Endangered Species Act of 1973. This section required all shrimp trawl vessels to use approved turtle excluder devices (TEDs) or tow-time restrictions in specified areas where there was a significant mortality of sea turtles in shrimp harvesting.70 The main argument made by the United States was that, even if Section 609 was inconsistent with Article XI:1 of GATT 1994, it was justified under Article XX(b) and Article XX(g).71 The complainants argued that Article XX(b) and 64 Tuna I, supra note 24, and Tuna II, supra note 33, applied the same standard for Article XX(b) and Article XX(g). 65 United States—Standards for Reformulated Gasoline and Conventional Gasoline, Appellate Body Report, WT/DS2/9 (May 29, 1996), 35 I.L.M. 603 [hereinafter Reformulated Gasoline Appellate Body Report]. 66 Id. at 11. 67 Id. 68 Id. 69 Id. at 12. 70 52 Fed. Reg. 24244 (June 29, 1987). 71 United States—Import Prohibitions of Certain Shrimp and Shrimp Products, Panel Report, WT/DS58/R (May 15, 1998).

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Article XX(g) could not be invoked to justify a measure that applied to the protection of animals located outside the jurisdiction of the member enacting the measure.72 Referring to Article XX, the panel recognized that previous panels had applied a two-tiered analysis. In accordance with this, once a particular measure has been granted provisional justification, the panel then considers whether the measure meets the requirements of Article XX’s chapeau, which imposes limits on how these national policies may be pursued.73 Nevertheless, the panel found that in this case the chapeau determined, to a large extent, the context of the specific exception contained in Article XX. Hence, the panel deemed necessary to first examine whether the measure at issue satisfied the introductory norm of Article XX. 74 Unfortunately, the panel concluded that Section 609 was inconsistent with the chapeau, so it did not deemed necessary to analyze Article XX’s exceptions. Therefore, the panel decided that the import ban as applied by the United States pursuant to Section 609 was inconsistent with Article XI:1 of GATT 1994 and could not be justified under the chapeau of Article XX.75 The Appellate Body rejected the panel’s “Chapeau down” analysis and noted that the two-tiered system used in the past represented the “fundamental structure and logic of Article XX.” The appropriate analysis is “two-tiered: first, provisional justification by reason of characterization of the measure under XX(g); second, further appraisal of the same measure under the introductory clauses of Article XX.”76 The United States argued as a primary defense the exception of Article XX(g), and only in case this exception was rejected, the use of Article XX(b). The Appellate Body, following in many aspects Reformulated Gasoline, concluded that Section 609 was justified under Article XX(g).77 Accordingly, Article XX(b) retained its restrictive interpretation.

Australia Salmon Case This was the first case presented under the SPS Agreement that expressly addressed the “not more trade restrictive than required” approach of Article 5.6. On October 5, 1995, Canada requested consultations with Australia regarding Australia’s ban on the importation of certain fresh, 72

Id. Id. at para. 7.25. 74 Id. at para. 7.26. 75 Id. at para. 7.61. 76 United States—Import Prohibitions of Certain Shrimp and Shrimp Products, Appellate Body Report, WT/DS58/AB/R, at para. 116 (1998). [hereinafter Shrimp Turtle]. See also Susan L. Sakmar, Free Trade and Sea Turtles: The International and Domestic Implications of the Shrimp-Turtles Case, 10 COLO. J. INT’L ENVTL. L. & POL’Y 345, 374 (1999). 77 Shrimp-Turtle, supra note 76, at para.136. 73

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chilled, and frozen salmon.78 Australia contended that its prohibition of such imports79 was necessary to protect Australian fish from diseases that could enter the country through imported salmon from Canada.80 The establishment of these diseases could have damaging economic and biological consequences for Australia’s fisheries. 81 Canada claimed that Australia’s policy was not founded on science, it was a disguised restriction to international trade, and it was more trade restrictive than required.82 The panel found that Australia was in violation of the SPS Agreement, as it did not base its salmon import regulation on a risk assessment. In addition, it stated that Australia was in violation of Articles 5.1 and 2.2, which require that SPS measures be based on scientific principles.83 The panel also determined that Australia was applying arbitrary or unjustifiable distinctions in the levels of SPS protection for measures for different situations, i.e., it was applying more restrictive measures to imports of salmon than to imports of ornamental live fish, although the latter posed higher risks,84 which resulted in a disguised restriction on international trade (in violation of Articles 5.5 and 2.3). Concerning Article 5.6, the panel stated that Australia’s measure was “more trade-restrictive than required to achieve [Australia’s] appropriate level of sanitary . . . protection, taking into account technical and economic feasibility.” Based on the footnote to Article 5.6, the panel concluded that a measure shall be considered to be “more trade-restrictive than required” if there is another sanitary measure which complies with these three cumulative requirements: 1. It is “reasonably available taking into account technical and economic feasibility”; 2. It “achieves [Australia’s] appropriate level of sanitary . . . protection”; and 3. It is “significantly less restrictive to trade” than the sanitary measure contested.85 Concerning the first element that requires that the alternative measure be “reasonably available taking into account technical and economic

78 Australia—Measures Affecting Importation of Salmon, Panel Report, WT/DS18/R paras. 6.3, 8.2 (June 12, 1998) [hereinafter Australia Salmon]. 79 Id. at paras. 2.14, 2.15. 80 Id. at paras. 4.34, 4.35. 81 Id. at para. 4.35. 82 Id. at paras. 4.52, 4.209. 83 Id. at para. 9.1. 84 Id. at paras. 8.137, 8.160. 85 Id. at para. 8.167.

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feasibility,” the panel stated that Australia’s 1996 Final Report86—which evaluated the risk analysis on ocean-caught Pacific salmon—recognized that there were four different alternatives available to Australia.87 Based on this report, the panel concluded that each of these alternatives were reasonably available to Australia. Thus, the first element was complied with. In regard to the second element, the alternative measure needs to achieve Australia’s appropriate level of sanitary protection. This element was the core of the panel’s analysis, and most probably will be the focus of future conflicts between member states. The panel stated that it had to determine Australia’s level of protection. In order to do so, it stated that the level implied or reflected in a sanitary measure or regime imposed by a WTO member can be presumed to be at least as high as the level of protection considered to be appropriate by that member. Therefore, the level of protection implied in the measure currently imposed (heat treatment) could be presumed to be at least as high as Australia’s appropriate level of protection.88 Once the level was determined, the panel went on to examine if there were alternatives measures that achieve Australia’s appropriate level of sanitary protection. 89 The panel took into consideration four factors. First, Australia itself, in the 1996 Final Report, acknowledged that the risk of disease entry, and the establishment that would follow adoption of any of the four options, appears to be small.90 Second, none of the evidence before the panel established that Australia’s measure actually reduced the risk to the greatest extent. Thus, the panel concluded (1) that the level of protection currently achieved was unclear and possibly not as high or conservative as Australia submitted, and (2) that its level of protection could be met, and even exceeded, by two of the alternatives contained in the Final Report.91 Third, the panel noticed that Australia confirmed that its level of protection for the salmon products remained unchanged. Moreover, the panel explained that the experts advising them unanimously stated that there was no relevant new scientific evidence that could explain a modification. 92 Fourth, the panel considered that what Australia identified as the most liberal option, i.e., the one that would “[p]ermit importation of prod86 Department of Primary Industries and Energy, Salmon Import Risk Analysis: An assessment by the Australian Government of quarantine controls on uncooked, wild, adult, ocean-caught Pacific salmonid product sourced from the United States of America and Canada, Final Report, Dec. 1996. 87 Australia Salmon, supra note 78, at para. 8.171. 88 Id. at para. 8.163. 89 Id. at para. 8.177. 90 Id. 91 Id. at para. 8.178. 92 Id. at para. 8.179.

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uct that complies with current international standards,” namely evisceration, should be given weight, even though it did not “endorse evisceration as a measure which would meet Australia’s level of protection.” 93 Even though the panel was not very clear in the determination of Australia’s level of protection, nor in the determination of the availability of alternatives measures that would achieve Australia’s level of protection, it found that these four factors, considered cumulatively, showed that Canada had raised a presumption that there are other measures available which would “achieve [Australia’s] appropriate level of sanitary . . . protection” and that Australia had not provided sufficient evidence to rebut that presumption.94 Finally the panel addressed the third element, that the alternative measure needs to be “significantly less restrictive to trade” than the measure contested. The panel considered that even imposing the most stringent of these specific conditions would still be significantly less restrictive to trade than an outright prohibition.95 Accordingly, the panel found that all three elements were present in this dispute and thus found that Australia, by maintaining the measure at issue, acted inconsistently with Article 5.6.96 Australia and Canada appealed on different grounds. The Appellate Body upheld the panel’s decision that Australia’s policy contravened Australia’s obligations under Article 5.1, because the relevant measure was not based on a risk assessment, and therefore Australia’s policy also violated Article 2.2, which requires that SPS measures be based on scientific evidence.97 The Appellate Body also upheld the panel’s determination that by maintaining unjustifiable distinctions in levels of SPS protection in different situations, Australia was imposing a disguised restriction on international trade in violation of Articles 5.5 and 2.3.98 Concerning Article 5.6, the Appellate Body clarified that the SPS measure at issue was not the heat-treatment requirement, but rather the import prohibition on fresh, chilled or frozen salmon.99 Under Article 5.6, the panel had to determine whether the import prohibition was “not more trade-restrictive than required” to achieve Australia’s appropriate level of protection. Instead, the Appellate Body pointed out that the Panel had examined whether the heat-treatment requirement was “not more trade-restrictive than required.” Hence, the Appellate Body reversed the panel’s finding that Australia, by maintaining the SPS measure at issue, Id. at para. 8.180. Id. at para. 8.181. 95 Id. at para. 8.182. 96 Id. at para. 8.183. 97 Australia—Measures Affecting Importation of Salmon, Appellate Body Report, AB-1998–5, WT/DS18/AB/R, at paras. 123–124 )Oct. 20, 1998). 98 Id. at paras. 85–86, 93, 124. 99 Id. at para. 105. 93 94

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acted inconsistently with Article 5.6.100 Then the Appellate Body moved on to complete the panel’s legal analysis and determined whether the proper SPS measure at issue (e.g. the ban) was “not more trade-restrictive than required” to achieve Australia’s appropriate level of protection.101 While agreeing with the three-pronged test established by the panel, the Appellate Body focused on the panel’s analysis with regard to the second element, i.e., whether the available alternative SPS measures met the appropriate level of protection. The Appellate Body disagreed with the statement of the panel that “the level of protection implied or reflected in a sanitary measure or regime imposed by a WTO Member can be presumed to be at least as high as the level of protection considered to be appropriate by that Member.” 102 It noted that the level of protection reflected in the SPS measure at issue was undisputedly a “zero-risk level” of protection. However, Australia had explicitly determined that its appropriate level of protection is a high or “very conservative” level of sanitary protection aimed at reducing risk to “very low levels,” “while not based on a zero-risk approach.”103 Thus, the Appellate Body found that the appropriate level of protection as determined by Australia was definitely not as high as the level of protection reflected in the SPS measure at issue.104 As a result of this, it concluded that what was required under Article 5.6 was an examination of whether possible alternative SPS measures met the appropriate level of protection as determined by the member concerned.105 Thus, in order to examine whether any of the possible alternative SPS measures would achieve a member’s appropriate level of protection, it is necessary to know what level of protection could be achieved by each of these alternative SPS measures.106 The Appellate Body, however, stated—citing the panel—that “as the 1996 Final Report did not, in any substantial way, evaluate or assess their relative effectiveness in reducing the overall disease risk,” it was impossible to verify in an objective manner whether any of the alternative policy options discussed in this report would achieve Australia’s appropriate level of protection for ocean-caught Pacific salmon.107 In addition, the Appellate Body noted that the panel report did not contain any other factual element that would allow them to examine the alternative options. 108 Therefore, the Appellate Body stated that because of the panel’s error of 100 101 102 103 104 105 106 107 108

Id. at para. 191. Id. at para. 193. Id. at para. 196. Id. at para. 197, citing Australia Salmon Panel Report. Id. at para. 197. Id. at para. 204. Id. at para. 208. Id. at para. 210. Id. at para. 211.

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examining whether the heat-treatment requirement, rather than the proper SPS measure at issue, i.e., the import prohibition, is “not more trade-restrictive than required,” it was compelled to reverse the panel’s finding that Australia acted inconsistently with Article 5.6.109 It is interesting to point out the importance that the member’s level of protection, and its determination, has gained in the SPS Agreement. It will be fundamental to see how future WTO tribunals analyze this issue.

The Japan—Agricultural Products Dispute (Japan Varietal) On April 7, 1997, the United States requested consultations with Japan regarding Japan’s approval process for the importation of certain agricultural products.110 Japan prohibited the importation of individual varieties of some agricultural products until each variety had been tested with the required quarantine treatment.111 The United States claimed that it took from two to four years to conduct the necessary tests, that these tests were expensive, and that Japan’s policy adversely impacted U.S. agricultural exports and, consequently, violated Japan’s obligations under the SPS Agreement.112 The WTO panel determined that Japan’s policy contravened its obligations under the SPS Agreement, because Japan’s measure, as applied to apples, cherries, nectarines, and walnuts, was not based on scientific evidence, thus violating Article 2.2 of the SPS. It also stated that this measure was more trade restrictive than necessary, violating also Article 5.6 of the same agreement.113 I will address the panel’s analysis focusing on the achievement of the member’s level of protection, that has been the more controversial element in the “not more trade restrictive than required” approach. The panel considered that the level of mortality chosen by Japan (complete mortality in large-scale tests on a minimum of 30,000 codling moths) could be regarded as Japan’s appropriate level of protection. Thus, Japan would lift the import prohibition if it could be replaced by a measure that would achieve the same level of protection as that reached by the import prohibition. 114 The panel stated that—to date and on the basis of the evidence before the panel—it is not possible to state with an appropriate degree of certainty that one and the same treatment would be effective for all varieties of a product. In the view of the experts advising the panel, Id. at para. 213. Japan—Measures Affecting Agricultural Products, Panel Report, WT/DS76/R (Oct. 27, 1998) [hereinafter Japan Varietal Panel Report].. 111 Id. at para. 1.2. 112 Id. at paras. 1.2, 4.23 113 Id. at para. 9.1. 114 Id. at para. 8.882. 109 110

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there was no evidence before them to establish a causal link between divergent efficacy and the presence of varietal differences (i.e., evidence that could justify Japan’s varietal testing requirement).115 Therefore, the panel concluded that, after having carefully examined all the evidence, there was not sufficient evidence to find that testing by product would achieve Japan’s appropriate level of protection for any of the products at issue. Then the panel moved on to analyze the alternative of determining the sorption level of additional varieties. However, without a detailed analysis (an issue that was appealed by the United States), the panel concluded that it could be presumed that an alternative measure existed that meets all of the elements under Article 5.6.116 This conclusion presents an interesting jurisprudential question concerning the availability of alternatives measures. Do alternatives have to be just technically and reasonably available to the party? Or in addition to this, must they be brought to the attention by the complaining party? In this case, it seems that they also have to be argued by the parties. Japan and the United States appealed certain issues of law and legal interpretations in the panel report.117 The United States submitted that the Panel erred in law in failing to find that “testing by product” did not achieve Japan’s appropriate level of protection. According to the United States, the panel adopted a “no hypothetical risk” standard: a standard that erects an insurmountable hurdle for parties seeking to demonstrate that an alternative measure achieves a member’s appropriate level of protection.118 Japan contended that the conclusion reached by the panel— that the determination of sorption levels is an alternative measure within the meaning of Article 5.6—was based on a factual finding that was neither argued nor proven by the party that bore the burden of proof. 119 Addressing the U.S. argument, the Appellate Body established that the panel explicitly stated that it had carefully examined “all the evidence before it” in light of the opinions received from its experts. Then, citing the Australia Salmon case, the Appellate Body held that it could not revise the panel’s consideration and weighing of the evidence, because it related to the assessment of the facts and, therefore, fell outside the scope of appellate review.120 The Appellate Body then turned its attention to Japan’s allegation that the determination of sorption levels was an alternative measure that Id. at para. 8.83. Id. at para. 8.103. 117 Japan—Measures Affecting Agricultural Products, Appellate Body Report, WT/DS76/AB/R (Feb. 1999) [hereinafter Japan Varietal Appellate Report]. 118 Id. at para. 35. 119 Id. at para. 16. 120 Id. at para. 98. 115 116

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would achieve Japan’s level of protection.121 The Appellate Body noted that the panel explicitly stated that the United States, as complaining party, did not specifically argue that the “determination of sorption levels” met any of the three elements under Article 5.6.122 But, on the basis of the evidence before it, the panel had come to the conclusion that it could be presumed that the “determination of sorption levels was an alternative measure which would meet all of the elements under Article 5.6.”123 The Appellate Body stated that pursuant to the rules on burden of proof, the United States was obliged to establish a prima facie case showing that there was an alternative measure that met all three elements under Article 5.6. Since the United States did not even claim before the panel that the “determination of sorption levels” was an alternative measure that met the three elements under Article 5.6, the United States did not satisfy this burden.124 The Appellate Body, therefore, reversed the panel’s finding that the “determination of sorption levels” was an alternative SPS measure which met the three elements under Article 5.6.125 Nevertheless, the Appellate Body upheld the panel’s finding that the varietal testing requirement was maintained without sufficient scientific evidence, and it recommended that the Dispute Settlement Body request that Japan bring its varietal testing requirement into conformity with its obligations under the SPS Agreement.126 Consequently, this element has proven to be highly controversial. There are no clear rules, and varietal testing is sure to be the object of future litigation.

THE CURRENT “NECESSARY TEST” Since the Thai Cigarettes case at the beginning of the 1990s until the Reformulated Gasoline case—the last case that expressly addressed Article XX(b)—the “necessary test” has been defined as the “least trade-restrictive” approach. As explained before, once the SPS Agreement was enacted, Article XX(b) was deprived of part of its content. Today all matters referring to SPS measures are specifically regulated by the SPS Agreement and are governed by the “not more trade restrictive than required” approach. In addition to this, the Technical Barriers to Trade Agreement (TBT) might also have some jurisdiction over matters related to human, animal, and plant life or health. Article 2.2 of the TBT prescribes legitimate objectives covered by this agreement, inter alia, the “protection of human health or safety, animal or plant life or health, or the environment.” This agree121 122 123 124 125 126

Japan Varietal Panel Report, supra note 110, at para. 8.74. Id. Japan Varietal Appellate Report, supra note 117, at paras. 130 and 131. Id. at para. 126. Id. at para. 131. Id. at para. 144.

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ment requires a similar “not more trade restrictive than necessary” approach in order to establish TBT measures.127 Unfortunately, no WTO tribunal has interpreted this article. In Reformulated Gasoline, the panel concluded that in view of its findings under the General Agreement (declaring EPA’s regulation inconsistent with GATT), it was not necessary to decide on issues raised under the TBT Agreement.128 Although Article 2.2 of the TBT does not have a footnote similar to Article 5.6 of the SPS, it seems that the threepronged test of this article may be analogized in order to interpret the TBT Agreement. Future tribunals will have to definitely decide the matter.

Content of Article XX(b) As stated above,129 Annex A of the SPS Agreement defines a territorial principle of application of SPS measures, i.e., they are only intended to produce effects within the territory of the invoking member. In addition, SPS measures must be directed to avoid one of the specific risks expressly established in the SPS Agreement. Therefore, in light of the above-mentioned considerations, Article XX(b) still applies to the protection of: • “human, animal or plant life or health” outside a member’s territory; and • “human, animal or plant life or health” within a member’s territory with the object of avoiding risks that arise from other circumstances than the ones specifically provided in the SPS, and that do not fall within the TBT Agreement. The Tuna II panel stated that “the text of Article XX(b) does not spell out any limitation on the location of the living things to be protected.”130 Moreover, in the Shrimp-Turtle case, the Appellate Body sustained “a sufficient nexus between the migratory and endangered marine population involved and the United States for the purpose of Article XX(g),” therefore recognizing the ability of a state to take measures outside its territory.131 It will be for future tribunals to decide what “nexus” allows a country to impose measures outside its jurisdiction and to what extent a country may be able to do so. The problem is how to determine the sphere of application of each of these agreements. As mentioned above, Article 2.2 of the TBT considers, 127

Technical Barriers to Trade Agreement, Document Supplement, supra note

1, at 149. 128 129 130 131

Reformulated Gasoline Appellate Body report, supra note 65, at para. 6.43. Supra p. 87. Tuna II, supra note 33, at para. 5.31. Shrimp-Turtle, supra note 76, at para. 133.

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within the legitimate objectives covered by it, human health or safety, animal or plant life or health, and the environment, and thus overlaps with the scope of the SPS Agreement. However, between the TBT and the SPS this limit is clear: Article 1.5 of the TBT states that its provisions do not apply to SPS measures. The SPS Agreement prevails. While the relationship between Article XX(b) and the SPS, and the limit between the TBT and the SPS Agreements, are sufficiently clear, the issue remains to determine the sphere of application between the TBT and Article XX(b). It is hard to establish clear distinctions, and it is not the purpose of this chapter to do so, but most of the time (as in Reformulated Gasoline and Hormones) the parties will argue two or more agreements together. Therefore, it is relevant to determine if there are any differences between these approaches that would justify the preference of one over the other.

Differences Between the “Least Trade Restrictive” and the “Not More Trade Restrictive Than Required” Approach The least trade restrictive approach provides that a measure can be considered “necessary” only if there is no alternative measure consistent with the General Agreement, or less inconsistent with it, which could reasonably be expected to be employed to achieve the member’s objectives. Hence, a country is obliged to use the least trade restrictive measure reasonably available to achieve its goals when it intends to excuse it obligations based on this exception. Similar to the “not more trade restrictive than required” approach, the least trade restrictive approach can be divided into three cumulative requirements: • The measure is least trade restrictive; • The measure is reasonably available to the member; and • It achieves the country’s goals. The first element shows that there is a fundamental difference between this approach and the “not more trade restrictive than required” approach. In this case, the measure must be the “least” trade restrictive, e.g., there must be no other measure that can impair to a lesser degree international trade. In the “not more trade restrictive than required” approach, the challenged measure does not have to be the least trade restrictive, and the alternative measure must be “significantly” less trade restrictive. There is no jurisprudence on the matter mainly because the measures that have been challenged so far have imposed prohibitions or bans, that is, the most trade restrictive measure. The difference is very important and should be considered by future WTO tribunals applying Article XX(b). It must be kept in mind that the “least trade restrictive” approach is just a jurispru-

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dential interpretation with no binding effect on future cases. Even though the practice of WTO tribunals has not been in total accordance with this rule, tribunals must consider that the SPS Agreement is a further practice by the members of the WTO and therefore should be valued in their decisions. Concerning the availability of alternative measures, no panels have expressly discussed the issue. In general, they tend to suggest that this availability refers to technical or economical feasibility, but they have not given guidelines on the matter. In contrast, the “not more trade restrictive than required” approach expressly states that the availability refers to these conditions. There have been no cases addressing issues such as political, religious, or cultural unavailability. However, I believe that these objectives should not be considered as part of the availability standard. The object of protection in Article XX(b) is life and health, and this exception must be interpreted with that aim in mind, avoiding the inclusion of other values that have not been expressly recognized in it.132 The availability test must be done case by case, especially considering the specific economic conditions and technical capability of the country involved. The third cumulative requirement is the effectiveness of the suggested measure to achieve the members’ goals. Except for the Tuna II case, there is no specific discussion in the matter. Generally, panels center their analyses on the availability of a measure that would fulfill the general objective of the invoking country. There has been no specific discussion of the extent to which a measure accomplishes its goals. In this respect, the developments and interpretations of the WTO tribunals concerning the SPS Agreement are extremely interesting. The core of the “not more trade restrictive than required” standard is the fulfillment of the members’ goals by the alternative measure, while in the “least trade restrictive” standard, it is to avoid the interference of the trading system.

CONCLUSION Article XX of the GATT was created with the purpose of balancing different conflicting values: on the one hand, the development of the trading system and, on the other, the respect of some essential national policy goals. Within this context, it seems inexplicable that the concept “necessary” of Article XX(b) has been interpreted as the “least trade restrictive” approach. This approach strongly limits the maneuverability that member states require to normally conduct their internal affairs. It cannot be denied that, with the current process of globalization, it is hard to distinguish between national and international affairs; but it is exactly because of this development that the trading system must be tremendously 132

(a).

They could be incorporated in other exceptions of Article XX, such as subsection

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careful to avoid stepping on areas that are more appropriately handled by national governments. It seems that the “necessary test” requires a balancing approach instead of the stiff “least trade restrictive” approach. The development of the SPS Agreement, with its “not more trade restrictive than required” approach, shows interesting progress in this direction. But this is clearly not enough, especially in areas like the protection of the environment and health where higher consideration is demanded. In the short term, it appears that WTO tribunals will have to face many definitions and adjustments. The “necessary test” is one of them, and it is likely that the SPS Agreement, through the “not more trade restrictive than required” standard, will be of much help.

CHAPTER 4

TAXATION TO CONTROL TOBACCO IN DEVELOPING STATES Kristyn Noeth

INTRODUCTION As the World Health Organization (WHO) continues to formulate the Framework Convention on Tobacco Control (FCTC) with adoption projected in May 2003, it is imperative that guidance as to what constitutes a legal fiscal measure under international trade law is available to states, particularly those in the developing realm. Developing states represent the most exigent challenge to combat the global tobacco epidemic. Tobacco markets are expanding in developing states, and statistics show that the populations of low-income states will suffer the most significant increases in tobacco-related disease and illness if usage levels are not mitigated. The WHO identifies one of the two most important components to tobacco control in low-income states as increased taxation.1 The scope of this paper includes analysis of the validity of a domestic tax system designed to control tobacco consumption and assessment of tax mechanisms that may be employed by developing states in the wake of the Thai Cigarettes General Agreement on Tariffs and Trade (GATT) panel decision. Broadly, this paper is organized to first provide a scientific evaluation of tobacco use, with emphasis on predictions for developing states of disproportionate impacts from tobacco-related illness. The paper then discusses the structure of the FCTC and the policy reasoning for promoting tobacco control. Lastly, the paper presents legal analysis of tax measures challenged under GATT Article III provisions, with applications for valid tax regimes that may be implemented in developing states.

1 See W ORLD H EALTH O RGANIZATION [hereinafter WHO], T HE W ORLD H EALTH REPORT 1999, MAKING A DIFFERENCE [hereinafter World Health Report], tbl. 5.4, at 73.

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THE SCOPE OF THE TOBACCO PANDEMIC The Economics of the Trade in Tobacco The World Bank has assessed the economics of tobacco control and found that the concerns voiced by the tobacco industry regarding lost jobs and decline in the wealth-producing aspects of the tobacco trade are largely unfounded. Analysis indicates that there are strong fiscal reasons for intervening in the tobacco trade (e.g., recaptured health care costs), and that “even a modest tax increase of 10% would prevent 7 million deaths, including those of people in productive middle age, in low income States.”2 Tobacco consistently is one of the most profitable agricultural crops. Ninety percent of world tobacco production occurs in 25 states, 3 and tobacco is cultivated in over 100 states.4 Cigarettes are the leading manufactured form of tobacco consumed in the global marketplace.5 World exports of unmanufactured tobacco totaled over 1.9 million metric tons in 1996.6 The export market is dominated by a small group of states as the combined exports of six states (Brazil, United States, Zimbabwe, Turkey, India, and Malawi) accounted for more than one million metric tons of that 1.9 million total.7 In 1997, the top six tobacco-producing countries in the world (China, United States, India, Brazil, Turkey, and Zimbabwe) produced over 4.6 million metric tons of tobacco.8 Indeed, it is estimated that one-third of the world’s population regularly smokes cigarettes, 9 consuming 6 trillion cigarettes per year. 10 Although the United States lags behind Brazil in the export of unmanufactured tobacco, the United States is the world’s largest exporter of cigarettes.11 Figures from 1996 show that 34% of the estimated 760 billion cigarettes produced by U.S. manufacturers were exported.12 Id. at 68 (citing The World Bank, Curbing the Epidemic: Governments and the Economics of Tobacco Control (1999). 3 WHO, Fifty Facts from the World Health Report 1997, at 2 (1997). 4 WHO, The Smoking Epidemic—“A Fire in the Global Village,” Press Release WHO/61, at http://www.who.org/inf/pr/1997/pr97-61.html (last visited Sept. 11, 1999) [hereinafter WHO Press Release WHO/61]. 5 WHO, The Tobacco Epidemic: A Global Public Health Emergency, Fact Sheet FN118, at http://www.who.org/fs/fact118.html (last visited Sept. 11, 1999) [hereinafter WHO Fact Sheet FN118]. 6 See id. 7 U.S. Department of Agriculture, Foreign Agric. Serv., Tobacco: World Markets and Trade, tbl. 1 (1997). 8 Id. 9 See WHO Fact Sheet FN118, supra note 5. 10 See Bruce van Voorst, Exporting Death, TIME, at 63 (Apr. 13, 1998). 11 See WHO, Fact Sheet FN118, supra note 5. 12 See id. 2

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Tobacco companies make considerable profits, and the world retail market in cigarettes is worth approximately U.S. $300 billion.13 Developing states’ tobacco markets are expanding. These markets are ideal opportunities for the tobacco industry because of a general lack of national provisions regulating tobacco consumption. The tobacco industry is able to capitalize on the opportunities for market expansion in low-income states primarily because tobacco control is not a priority on the national agendas. Information on the health risks of smoking and domestic regulation have led to decreases in tobacco use among developed states. At the same time, the tobacco industry has targeted and developed markets in Africa, Asia, Eastern Europe, and Latin America.14

Tobacco Use and Related Illness The challenge of global solutions to the problems of tobacco consumption cuts across national boundaries, cultures, communities, and socio-economic levels. Global tobacco control is necessary to achieve goals of sustainable development, as tobacco use incurs public health hazards and related health care costs. The predictions of mortality due to tobacco-related disease with figures based on current usage trends are grim.

Global Statistics & Predictions The WHO estimates that smoking causes approximately 4 million deaths annually worldwide.15 Statistics show that tobacco use and related disease are increasing on a global scale, particularly in developing states. Tobacco presents an imposing epidemic to the world’s poor, as consumption inhibits economic productivity and social potential.16 The general science of tobacco use is clearly established: tobacco is among the largest global causes of preventable illness and mortality.17 In 1990, worldwide mortality associated with tobacco consumption was 3 million people. Figures for the same year indicate that, globally, 2.6% of all disease was caused by tobacco.18 See World Health Report, supre note 1, at 70. See id. at 71. 15 See id. at 66 (noting source as Background: Future World Tobacco Deaths. Clinical Trial Service Unit and Epidemiological Studies Unit, University of Oxford, 1998). 16 The WHO considers debilitating diseases as directly in opposition to sustainable development, particularly in developing states. See WHO, Primary Health Care: Report of the International Conference on Primary Health Care, Alma-Ata, Union of Soviet Socialist Republics, 6–12, Geneva (Sept. 1978). 17 See WHO, Facts and Figures: World No-Tobacco Day 1 (1994); see generally RICHARD PETO ET AL., MORTALITY FROM SMOKING IN DEVELOPED STATES 1950–2000 (1994). 18 See Bruce van Voorst, Exporting Death, TIME (Apr. 13, 1998). 13 14

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The World Bank estimates that annual deaths from tobacco are expected to reach ten million people by 2030—a level roughly equal to the combined mortality rate from malaria, tuberculosis, diarrhea disease, and pneumonia.19 Unmitigated, tobacco use will cause about 150 million deaths in the first quarter of the century and 300 million in the second quarter.20 Based on current trends, about 500 million people alive today will be killed by tobacco-related illness.21 Worldwide, one in two persistent cigarette smokers eventually dies from tobacco-related illness.22 Approximately 3.5 million deaths are attributed annually to tobacco, primarily as a result of lung cancer and circulatory diseases. 23 The risk that smoking incurs to human health has been documented and publicly remarked upon since the release of the U.S. Surgeon General’s 1964 Report identifying smoking as a significant health hazard.24 Statistics reveal that smoking has been responsible for approximately 60 million premature deaths in developed states between the years 1950 and 2000, with 37.8 million of the victims aged 35 to 69 years.25

Case Study: Health Effects The first nationwide investigation of tobacco effects was conducted recently in China.26 The study was partly financed by The World Bank, with researchers from the Chinese Academies of Preventive Medicine and Medical Sciences collaborating with Oxford University and Cornell University to interview 1 million families of people who had died from tobacco-related disease and one-quarter million other people with tobaccorelated illnesses. The Chinese population accounts for approximately onefourth of all world smokers. In fact, one in three cigarettes smoked in the world today is smoked in China. The report of the usage trends alone is 19 See The World Bank, Curbing the Epidemic: Government and the Economics of Tobacco Control (1999) [hereinafter The World Bank Report]. 20 See id. 21 See id. 22 See id. 23 See WHO, 50 Facts from the World Health Report 1997, at 2 (1997). 24 See U.S. Department of Health, Education & Welfare, Smoking and Health: Report of the Advisory Committee to the Surgeon General of the Public Health Service (1964) (subsequent reports on the health consequences associated with tobacco were issued by the Surgeon General in 1974, 1979, and 1980). 25 PETO ET AL., supra note 17, at A8; WHO, Tobacco: The Twentieth Century’s Epidemic, in Tobacco Alert, World No-Tobacco Day 1995 Special Issue 4, at 4. 26 See Bo-Qi Liu et al. Emerging Tobacco hazards in China: Part 1, Proportional Mortality Study of One Million Deaths, B RIT. M ED. J . (Nov. 21, 1998). Shi-Ru Niu et al. Emerging Tobacco Hazards in China: Part 2, Early Mortality Results from a Prospective Study, BRIT. MED. J. (Nov. 21, 1998).

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staggering: annual Chinese cigarette consumption grew from about 100 billion in the early 1950s to 500 billion in 1980, and is now 1,800 billion.27 By the mid-1990s smoking was responsible for approximately 12% (0.7 million) of all adult male deaths in China, and 3% of all adult female deaths (0.1 million).28 Smoking kills 2,000 persons per day in China, and by 2050, deaths will number well over 8,000 per day.29 Of those tobaccorelated deaths in China, 45% die from chronic lung disease, 15% from lung cancer, and 5–8% from each of esophagus cancer, stomach cancer, liver cancer, stroke, heart disease, and tuberculosis. 30 The study predicts annual tobacco deaths will reach 1 million just after the year 2010, and 2 million by 2025, almost all male.31 By 2050, two out of three Chinese males will become a smoker before age 35; few quit, and those who persist die in middle or old age.32 Trend analysis predicts that based on current usage, at least 100 million of the 340 million males below age 29 will eventually die from tobacco-related illness.33

The Social Cost of Tobacco Use The true cost of tobacco production must account for the social costs associated with consumption. These include, in addition to exorbitant human productivity and health care costs, the costs of environmental pollution and deforestation and other resource allocation and use devoted toward tobacco farming.34 Short-term fiscal gains often are considered before long-term costs to health, environment, and development.

Accounting for Externalities A regime of increased tobacco taxes would function to more fully capture the externalities imposed upon the general population by the smoking population. Smokers impose physical costs upon the general population that include health damage, nuisance, and irritation.35 Under a well-designed tax regime, government revenues could be directed to health care, research, and other aspects in the public health arena geared towards combating smoking-related social costs. The welfare-promoting function of a tobacco tax is particularly useful in the context 27

See id. See id. 29 See id. 30 See id. 31 See id. 32 See id. 33 See id. 34 See generally, Simon Chapman, Tobacco and Deforestation in the Developing World, 3 TOBACCO CONTROL, 191, 193 (1994). 35 See The World Bank Report, supra note 19, at 3. 28

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of developing states, which often lack the infrastructure, as well as the financial and other resources to study and improve related health care provisions. The WHO notes that “the extent to which smokers impose their costs on others will depend on many factors, such as from the existing level of cigarettes taxes, and how much health care is provided by the public sector” and that in low-income states, “there have been no reliable studies on these issues.”36

Health Care and Related Costs The economic cost of health care directed toward treatment of tobacco-related disease is a quantifiable section of the range of costs imposed by tobacco use. Of the 3.5 million deaths associated with tobacco use annually, 50% occurs between the ages of 35 and 69, which results in the loss of 20 years of life expectancy for each individual.37 Unless these trends are reversed, the costs associated with treatment, mortality, and disability as a result of tobacco use will exceed the global economic benefits associated with tobacco production by an estimated U.S. $200 billion annually.38 It is helpful for perspective to note that global tobacco sales generated U.S. $262 billion in revenues in 1997.39 By way of illustration, tobacco-related disease costs the United States economy U.S. $50 billion in medical expenses and U.S. $73 billion in lost productivity on an annual basis.40 Estimates place these costs at U.S. $3 trillion over the course of the next 25 years.41 The WHO has estimated that this rate will grow to 9% by 2020.42 Furthermore, exposure to tobacco smoke is dangerous to the health of non-smokers; for instance, sustained exposure causes a significantly higher rate of lung cancer and heart disease than is experienced by the population unexposed to smoke.43 In high-income states, smoking-related health care accounts for between six and 15% of all annual health care costs. Figures are not available for developing states, where epidemics of smoking-induced diseases begin at earlier stages.44 As populations in developing states begin smok36 37 38 39 40

See The World Bank Report, , supra note 19, at 4. See WHO Press Release WHO/61, supra note 4. See WHO, Fact Sheet N175. See van Voorst, supra note 10, at 63. See Joel M. Moskowitz, Snuff Out Tobacco Altogether, S.F. CHRON., Mar. 20, 1998,

at A25. See id. at A25. For information on costs, see World Health Report, supra note 1, at 68. 43 See David M. Burns, Environmental Tobacco Smoke: The Price of Scientific Certainty, 84 J. NAT’L CANCER INST. 1387, 1387 (1992); Elizabeth T.H. Fontham et al., Environmental Tobacco Smoke and Lung Cancer in Nonsmoking Women, 271 J.A.M.A. 1752, 1752–59 (1994). See Carl E. Bartecchi et al., The Global Tobacco Epidemic, S CI. A M., 44, 49 (May 1995). 44 See The World Bank Report, supra note 19, at 3. 41 42

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ing at earlier ages, and the rates of tobacco-related disease are higher among younger populations than those of developed states, this lack of statistics and information on health care costs in the developing world presents an obstacle toward global tobacco control. National policymaking is undertaken often in response to observed and researched social problems. The reactionary nature of government action is problematic, as national health care information and cost data associated with tobacco use is not available in many developing states. The issue of lack of information on heath effects and related costs must be reconciled with the need for preventive measures to be taken toward tobacco illness.

GLOBAL TOBACCO CONTROL Why Control Tobacco Use on the Global Scale? The scope of the tobacco epidemic and the ominous future predictions of disease and associated social costs have prompted the formulation of an international agreement on tobacco control. The examples of states that have benefited from implementation of tobacco control measures illustrate the positive outcomes associated with an international agreement that will facilitate the promulgation of measures on a global scale. The successes of states with tobacco control on their agendas, as well as the lessons learned from tax laws subsequently found invalid under GATT/WTO (World Trade Organization) review, will benefit lower-income states by their experience. The benefits of tobacco control are evident. For instance, Britain is experiencing the most rapid decrease in the world in premature deaths from tobacco, demonstrating that large improvements are possible over a few decades. From 1965 to 1995, annual U.K. cigarette sales fell from 150 billion to 80 billion, annual United Kingdom deaths in middle-age (35–69 years) decreased from 400,000 to 80,000, and mortality in old age should decrease substantially as the current middle-aged population grows older.45

Developing States: Hotbeds of Tobacco Consumption and Disproportionate Health Impacts By the year 2000, tobacco consumption is expected to be the leading cause of death in developing states. 46 Of the 4 million deaths predicted to be attributed to tobacco worldwide in 2000, half will occur in 45

See id. See Smoking and World Health: Hearing Before the Senate Committee on Labor and Human Resources, 101st Cong., 2d Sess. 3 (1990) (statement by William H. Foege, Executive Director, The Carter Center), at 4. 46

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developing states.47 The WHO predicts that, unless tobacco consumption is curbed, progress made in the developing world in combating death resulting from malnutrition and infectious disease will be lost due to deaths caused by smoking.48 Statistics show that the poor are more likely to smoke than rich populations, which results in higher risk of smoking-related and premature deaths.49 This prediction calls for implementation of tobacco control measures in developing states. The FCTC will provide analysis of various control measures that developing states may implement to curb tobacco use, a key element of which should be guidance for national tax regimes designed to generate government revenue directed toward tobacco control and the protection of human health.

THE FRAMEWORK CONVENTION ON TOBACCO CONTROL Background: WHO Initiatives on Tobacco Control The WHO is the primary multilateral organization charged with addressing the world health implications of tobacco use. With this charge, the WHO has promoted tobacco control legislation for more than 25 years through its Tobacco or Health Program. The Program facilitates collaboration with member states to form policies and develop strategies for national tobacco control programs, and provides the requisite technical assistance.50 In May 1995, the legislative arm of the WHO, the World Health Assembly (WHA), requested, via resolution, that the Director-General of the WHO report on the “feasibility of developing an international instrument such as guidelines, a declaration, or an International Convention on Tobacco Control.”51 A comprehensive approach is necessary because, as Director-General Brundtland stated, “[t]obacco control cannot succeed solely through the efforts of individual governments, national [NGOs] and media advocates. . . . We need an international response to an international problem.”52

See generally The World Bank Report, supra note 19. See Smoking and World Health: Hearing Before the Senate Committee on Labor and Human Resources, 101st Cong., 2d Sess. 29 (1990) (statement of Gregory N. Connolly, D.M.D., M.P.N., on behalf of the Coalition on Smoking and Health, comprised of the American Cancer Society, the American Heart Association, and the American Lung Association), at 27 [hereinafter Connolly Statement]. 49 See The World Bank Report, at 7. 50 See WHO Doc. EB89/INF.DOC/5, supra note19, at 5 (1991). 51 An International Strategy for Tobacco Control, WHA Res. 48.11, 48th Assembly, 12th plenary meeting, Annex 1, Agenda Item 19, WHO Doc. A48/VR/12 (1995). 52 Besty Pisik, WHO Leader Seeks Treaty in Tobacco Fight. Wants Controls on Ads, Taxes, Sales. WASH. TIMES, Oct. 21, 1998. 47 48

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The planned Framework Convention on Tobacco Control is the first instance in which the WHO has initiated an international convention on a health problem.53 The WHO has the public health expertise along with the institutional and legal capacity to promote international tobacco control regulations.54 Through the development of such instruments, the WHO is positioned to have a focused and profound effect on the international tobacco problem. It is exigent that the role of the WHO expand from encouraging national-level programs to developing model legislative platforms of comprehensive design to promote public health. The WHO has the expertise and the level of independence to circumvent the predicted political clashes over obstacles to tobacco production and trade. The agenda to define the Framework Convention is on course to enable the WHO to enlist international cooperation in structuring and coordinating implementation of comprehensive regulatory programs.

The Legal Instrument The WHO is one of the largest specialized arms of the United Nations, and its duties and capacities are articulated in the UN Charter and the WHO Constitution.55 The WHO Constitution confers authority on the WHA to design three types of instruments: conventions under Article 19; regulations under Article 21; and non-binding recommendations under Article 23.56 The FCTC will serve as an international legal instrument structured to promote public health and decrease the use of tobacco worldwide. This is the first instance in which the WHO has employed Article 19 of the WHO Constitution, enabling the WHO to form and adopt a convention.57 53 Martin Khor, Health/Tobacco Control: A New Global Deal on Smoking? BANGKOK POST, June 4, 1999; Reuter’s, Treaty Looks to Control the Effects of Tobacco, WINNIPEG FREE PRESS, June 17, 1999 (“[t]his is the first example for the WHO to use its mandate and constitution to develop an international convention”) (quoting WHO Director-General Gro Harlem Brundtland). 54 WHO Constitution, Article 19, World Health Organizations, Basic Documents 1, 6 (40th ed. 1994) [hereinafter WHO Const.]. 55 U.N. Charter arts. 1, para. 3; 55–59; 63–64. See WHO Const. art. 2(a), (providing the primary directive of “directing and co-ordinating authority on international health work”). 56 WHO Const. arts. 19, 23, 21. 57 It is useful to review the strategies that international environmental organizations have used successfully to work towards defining effective protocol agreements. Environmental framework conventions and protocols call for contributions of science, reporting and monitoring, and regular meetings among parties. For example, reporting, review and assessment are critical to the Vienna Convention on the

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While framework conventions obligate states to cooperate across certain areas, they can participate in the convention although not formally making a decision on participation in protocol. The WHO launched negotiations in June 1999 for an international Framework Convention on Tobacco Control. A resolution passed by the WHA calls for the WHO to produce a framework convention by 2003, which will be the first multinational legally binding agreement on tobacco use.58 Discussions to create the Framework Convention for Tobacco Control began in October 1999, in a WHO working committee at the organization’s Geneva headquarters, 59 with initial discussions between governments slated to begin in May 2000.60 The FCTC will structure the basic principles, and a subsequent protocol will outline the issues in detail. Agenda items for the framework convention include: “confirming the significant dangers to health caused by tobacco; using part of revenues from cigarette taxes to cover expenses for tobacco control; raising tobacco prices at rates higher than those for inflation; supporting tobacco farmers so they can switch to other crops; and regulating tobacco advertising.”61 Some non-governmental organizations and other commentators note that mechanisms to decrease international trade in tobacco are notably absent from the convention agenda. Under the FCTC, states will be encouraged to take coordinated actions to attain the convention’s goals. These objectives should include curbing the international trade in tobacco as fundamental to decreasing tobacco-related disease. The FCTC will be developed through the participation of all WHO member states. It is important that the proposal outlines the domestic measures that states can directly implement to curb tobacco use and provides a role for the WHO to assist in facilitating such state programs. While the plan for the FCTC is on an accelerated agenda, with adoption of the framework convention scheduled for May 2003, the WHO should begin Protection of the Ozone Layer and the associated Montreal Protocol, as well as the Framework Convention on Climate Change. See Vienna Convention for the Protection of the Ozone Layer 26 I.L.M. 1516, art. 6 (Mar. 22, 1985); Montreal Protocol on Substances that Deplete the Ozone Layer, art. 6 (Sept. 16, 1987); Intergovernmental Negotiating Committee for a Framework Convention on Climate Change, U.N. Doc. A/AC.237/18 (Part II)/Add.1, art. 7(a) (1992). Such provisions are examples of the stick approach to protocol implementation—public attention is drawn to the meetings and debates, and they provide a means for national accountability in the public forum. 58 Khor, supra note 53. 59 Asahi Shimbun, WHO Plans Treaty to Control Tobacco, ASIA INTELLIGENCE WIRE, Aug. 17, 1999. 60 Id. 61 Id.

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to establish its role as an information resource and source of assistance for States to consult in designing feasible tobacco control programs.

Goals Promoted by the FCTC The FCTC and related protocols will promote public health through global tobacco control by incorporating both national and transnational measures to achieve the goals set out in the convention. Those goals include: 1. protecting children and adolescents from exposure to and use of tobacco products and their promotion; 2. preventing and treating tobacco dependence; 3. promoting smoke-free environments; 4. promoting healthy tobacco-free economies, especially stopping smuggling; 5. strengthening women’s leadership role in tobacco control; 6. enhancing the capacity of all member states in tobacco control and improving knowledge and exchange of information at national and international levels; and 7. protecting vulnerable communities, including indigenous peoples.62 Under the FCTC, parties must take appropriate steps to fulfill these general objectives. The protocols could include specific obligations to implement tools relating to: (1) prices; (2) smuggling; (3) tax-free tobacco products; (4) advertising/sponsorships; (5) Internet advertising/trade; (6) testing methods; (7) package design/labeling; (8) information sharing; and (9) agricultural diversification.63

ECONOMIC MEASURES DESIGNED FOR TOBACCO CONTROL Control Mechanisms The export of tobacco may be viewed as a simple trade issue, putting aside the evident health concerns. The ability to export into developing states incurs various trade difficulties. Many states restrict tobacco imports through high tariffs, import quotas, and distribution and advertising restrictions on foreign brands.64 One option after the Thai Cigarettes panel decision is to privatize the tobacco industry.65 Some Eastern European states have privatized their WHO, Press Release WHO/61, supra note 4. Id. 64 See Chi Camody, When “Cultural Identity was not an Issue”: Thinking about Canada—Certain Measures Concerning Periodicals, 30 L AW & P OL’Y I NT’L B US. 231, n.45 (Winter 1999). 65 See generally Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, DS10/R-37S/200 [hereinafter Thai Cigarettes]. 62 63

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tobacco industries, which provides opportunities for foreign companies to benefit economically through investment in local tobacco manufacturing plants.66 Foreign companies have also been able to penetrate markets of s joint ventures with local manufacturers.67 However, the most feasible control tools, particularly for developing states, are in the areas of advertising and promotion and taxation. These mechanisms are the most adaptable for low-income states to implement and a well-designed tax program will generate revenue to facilitate tobacco control.68 Price mechanisms, such as product excise taxes, yield optimal results in terms of market response.

Market Response to Tobacco Regulation Industrialized states recently have employed public health campaigns, including tobacco control legislation, to combat tobacco consumption. This has contributed to a decline in tobacco consumption within these states.69 This incited the transnational tobacco industry, with companies among the largest private enterprises in the world, to focus on developing and expanding markets in Africa, Asia, Latin America, Eastern Europe, and the former Soviet Union, where tobacco regulation is limited.70 Market expansion began in developing states in the mid-1960s, coincidental with the U.S. government’s initial reporting of the health hazards of smoking. In response, many developing states operated closed cigarette markets and restricted the sale of cigarettes to those produced by national firms.71 Many states also employed protective trade measures, which included import bans, high tariffs, and import quotas, to protect their populations from exposure to foreign tobacco and to protect their national monopolies.72 The tobacco industry has been successful in opening formerly closed tobacco markets in developing states by enlisting the assistance of their domestic governments to break down barriers. Governmental support for the industry has largely come in the form of subsidized domestic production of tobacco.

See Camody, supra note 64, at n. 46. See id. at n.47. 68 See GATT Thai Cigarettes Report, at para. 78 (noting that an advertising ban would be valid under Article III:4 and the Article XX(b) “necessary” requirement). 69 John P. Pierce, Progress and Problems in International Public Health Efforts to Reduce Tobacco Usage, 12 ANN. REV. PUB. HEALTH 383, 393–97 (1991). 70 PHILIP L. SHEPHERD, TRANSNATIONAL CORPORATIONS AND THE INTERNATIONAL CIGARETTE INDUSTRY, IN PROFITS, PROGRESS AND POVERTY: CASE STUDIES OF INTERNATIONAL INDUSTRIES IN LATIN AMERICA 63, 79–84 (R.S. Newfarmer ed., 1985). 71 See Connolly Statement, supra note 48, at 31. 72 See id. 66 67

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In fact, the U.S. government has been the most significant Western governmental factor leading the expansion of tobacco sales to developing states. Cigarette exports trimmed the trade deficit by $23.5 billion over the five years between 1991 and 1996 alone.73 Between 1986 and 1990, the U.S. government successfully convinced Japan, Taiwan, and South Korea to open their closed markets to American cigarettes.74 Thailand resisted the pressure of the U.S. government to open national markets. In response, the United States filed a complaint under the GATT, in which the Thai Cigarettes panel found in favor of the United States. American cigarette exports alone trebled between 1986 and 1996.75 During the last few decades, global cigarette consumption has increased 75%.76 By the end of the current decade, total tobacco consumption is expected to fall by 17% in developed states and to rise by 12% in developing states and Eastern Europe.77 This phenomenon alerts to the fact that transnational tobacco conglomerates employ large scale cigarette promotion in the developing world.78 In states where public knowledge of the health hazards is limited and the tobacco control regulation is lacking (e.g., only about eight developing states have advertising bans79), marketing efforts of the tobacco industry have been highly successful (e.g., the United States does not require that cigarettes for export contain a health warning or a tar and nicotine statement on the packaging80). From the current state of affairs, it is evident that tobacco use in developing states must be curbed. Price mechanisms are likely a most effective method to discourage consumption, as demand in the less-developed economies of these states will fall with product price increases.

Fiscal Policy Components In order to employ the mechanisms devised under the FCTC successfully, an integrated and cooperative effort among parties will be 73 Council on Scientific Affairs, The Worldwide Smoking Epidemic: Tobacco Trade, Use, and Control, 263 J.A.M.A. 3312, 3312 (1990) [hereinafter Council Report]. See Myron Levin, Targeting Foreign Smokers, L.A. TIMES, Nov. 17, 1994, at A1, A15. 74 See Paula C. Johnson, Regulation, Remedy and Exported Tobacco Products: The Need for a Response from the United States Government, 25 SUFFOLK UNIV. L. REV. 1, 43–44 (1991); Kenyon R. Stebbins, Tobacco or Health in the Third World: A Political Economy Perspective with Emphasis on Mexico, 17 INT’L L. J. HEALTH SERVS. 521, 524–27 (1987). 75 See Levin, supra note 73, at A1, A15. 76 Council Report, supra note 73, at 3312–13. 77 Ronald M. Davis, Slowing the March of the Marlboro Man, 309 BRIT. MED. J. 889 (1994). 78 Connolly Statement supra note 48, at 33. 79 Emma Must, Tobacco’s Latest Killing Fields, GUARDIAN, Nov. 18, 1998. 80 Council Report, supra note 73, at 3312–13.

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necessary. The WHO should define and monitor the technical standards by which the above measures will be defined. Domestic fiscal policies must be adjusted through national legislation in order to achieve the goals of the worldwide tobacco control initiatives. WHA resolutions highlight the need to increase the price of tobacco products and devote a portion of the tax revenue for tobacco control and related domestic programs in integral fiscal policy. Ensuring comprehensive application of framework tools—price and non-price measures—is critical. A major U.K. study identifies the need for a comprehensive approach to tobacco regulation as a best mix of tools and policies designed on a country-specific basis.81 For instance, “[i]f used in South Asia . . . [control] measures could persuade some [four] million smokers alive in 1995 to quit smoking and therefore avert 700,000 tobaccoattributable deaths, according to conservative estimates.”82 It is estimated that a comprehensive approach—a combination of price and non-price methods—would reduce the demand for cigarettes by about 8% in lowto middle-income states in South Asia, as well as in other regions and 4% in high-income states.

Taxation Is it possible to think of global taxation? Think of what developing States could do if they generated revenue from tobacco taxes instead of growing tobacco.83 Domestic tax programs have the potential to be the most formidable regulatory mechanisms in the charge against tobacco consumption, particularly in developing states. Regulation of tobacco consumption is directly within national interest, and may be achieved through application of general excise taxes (such as commodity and services, and goods and services taxes), and perhaps through content differential tobacco taxes. WTO member governments have the ability to adopt fiscal and economic measures designed to protect public health that conform with principles of international trade codified in the GATT. Taxes perform two functions: (1) taxes increase government revenue; and (2) taxes decrease tobacco consumption. Increased government fiscal resources garnered through tax collection, coupled with decreased 81 See J. Townsend, US Smoking Targets: Policies to Attain Them and Effects on Premature Mortality 185–98. (I. Abedian, R. van der Merwe, N. Wilkins & P. Jha eds., 1998). 82 Statement by Richard Skolnik, Sector Manager for Health, Nutrition, and Population for South Asia, World Bank. 83 Dr. William H. Foege, The “So-What” Factor: How Will New and Emerging Tobacco Regulation Strategies Influence Public Health Here and Abroad?, 25 WM. MITCHELL L. REV. 471, 474 (1999).

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health care costs and overall tobacco consumption, is an appealing winwin prospect for developing states that lack fiscal resources to combat tobacco demand and use. Jurisprudence of the GATT/WTO has developed a test for the validity of internal taxes, and the WTO clarified the margins of legitimate tobacco tax programs in the Thai Cigarettes decision, which will be discussed further in a later section. The WHO considers that price increases, through excise taxes on tobacco products, “constitute by far the most important policy tool available.”84 Domestic fiscal regulation designed to discourage the production and usage of tobacco is critical to reducing public health risks associated with smoking.85 Studies have found that increased cigarette prices discourage consumption in both developed and developing states.86 The WHO states that a price rise of 10% on a pack of cigarettes would reduce demand by approximately 4% in high-income states and by an estimated 8% in low- and middle-income states, where populations are more responsive in spending to price changes. 87 WHO models calibrated at 1995 levels reveal that tax increases that would raise the real price of cigarettes worldwide by 10% globally would directly cause 40 million smokers to quit smoking and would prevent a minimum of 10 million tobacco-related deaths.88 Prabhat Jha, a Health Specialist in the Human Development Network, reports on the benefits of price effects: Conservative analyses state that a 10% increase in the real price of cigarettes in Latin America and the Caribbean would cause [four] million smokers alive in 1995 to quit and prevent a minimum of [one] million tobacco-related deaths. The price rise would also deter others from taking up smoking in the first place. The price effect is particularly evident in reviewing purchasing trends among young populations—the higher price functions as a disincentive to smoking.89

84 WHO, Tobacco Free Initiative, at http://www.who.int/toh/TFI/whyfti.htm (last visited Sept. 7, 1999). 85 Ruth Roemer, Legislation to Control Smoking: Leverage for Effective Policy, 9 CANCER DETECTION & PREVENTION 99, 105 (1986). 86 See id. 87 See The World Bank Report, supra note 19, at 4. 88 See id. 89 See John P. Pierce, Progress and Problems in International Public Health Efforts to Reduce Tobacco Usage, 12 ANN. REV. PUB. HEALTH 383, 396 (1991).

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Higher tobacco prices will result in lower consumption, particularly among youth and poor populations. 90 The WHO states that primary research on causes, consequences, and costs of tobacco use is lacking in most low-income states. 91 The lack of information on the tobacco use trends in developing states, combined with the expansion of tobacco markets, creates an ominous situation for low-income states.

Legality of a Tax Regime: Governing Provisions There are international legal considerations that WTO member states must be cognizant of in enacting domestic regulations.92 The GATT prohibits any use of certain kinds of quantitative restrictions. In addition to the most-favored-nation practice under Article I and the national treatment obligations under Article III, Article XI of GATT prohibits the use of other “prohibitions or restrictions” on imports from members and specifically prohibits the use of “quotas, import or export licenses or other measures” to restrict imports from members.93 Similarly, members cannot employ discriminatory quantitative trade restrictions, as they are barred from applying any prohibitions or restrictions to the products of another members, “unless the importation of the like products of all third States . . . is similarly prohibited or restricted.”94 The primary GATT provision invoked in cases challenging public health and environmental protection measures is the national treatment requirement of Article III that governs domestic taxes.

GATT Article III: National Treatment Article III:2 is the primary provision addressing internal taxes, with application to regulations that may appear neutral on their face but are a form of disguised discrimination because their effect is to adversely affect imports. Article III:2 provides: The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to See The World Health Report, supra note 1, at 73. See id. 92 Presently, as of November 24, 1999, the membership of the WTO numbers 135 states. See http://www.wto.org/about/organsn6.htm (last visited Nov. 24, 1999). 93 General Agreement on Tariffs and Trade [hereinafter GATT] art. XI (1947, as amended 1994). 94 GATT art. XIII. 90 91

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imported or domestic products in a manner contrary to the principles set forth in paragraph 1.95 Article III:1, which is read as incorporated into Article III:2, provides: 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. The first sentence of Article III:2 establishes a per se rule that imported goods may not be subjected to taxes in excess of those applied to domestic like products. The second sentence provides that imports may not be taxed in a different or less favorable manner that has the effect of according protection to domestic products.96 Non-discriminatory treatment requires that imports “shall not be subject, directly or indirectly, to internal taxes, or other internal charges of any kind in excess of those applied directly or indirectly, to like domestic products.”97 The supplementary provision reads: A tax conforming to the requirements of the first sentence of paragraph 2 would be considered to be inconsistent with the provisions of the second sentence only in cases where competition was involved between, on the one hand, the taxed product, and on the other hand, a directly competitive or substitutable product which was not similarly taxed.98 Article III:2 can be applied in two manners to attack the legality of internal taxes operating as disguised discrimination. First, it can be asserted that the domestic and foreign products are all like products and therefore only one tax rate should be applied. The second sentence of Article III:2 obviates the need for a broad definition of the term “like products” as any regulation that affords protection will be scrutinized if the products are directly competitive or substitutable. GATT art. III:2. See United States—Taxes on Automobiles, DS31/R, 1994 WL 910937, at *22 (Oct. 11, 1994). 97 GATT art. III:2. 98 GATT Supplementary Provisions, Ad Article III, para. 2. 95 96

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Second, even if the products are not found to be like products, the “affords protection” language of Article III:1 may be incorporated into the second sentence of Article III:2, to analyze whether the tax regulation grants a degree of protectionism to the domestic product.

GATT Article XX: Exceptions The Article XX general exceptions provisions have been invoked to rebut national treatment challenges, albeit unsuccessfully. The exception that applies to human and environmental health is Article XX(b). Article XX(b) provides an exception for measures “necessary to protect human, animal or plant life or health.” GATT/WTO jurisprudence instructs that the burden to meet the general exceptions is high—a measure must first come under the purview of an exception and will then be analyzed under the umbrella chapeau language which provides: Subject to the requirement that such measures are not applied in a 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 of any contracting party of measures [provided as subsections (a)–(j)].99 The Appellate Body has emphasized strict construction in interpretation of Article XX, relying on the plain meaning of both WTO texts and provisions for construction and interpretation of treaties under the Vienna Convention on the Law of Treaties.100

WTO Agreements: Agreement on Technical Barriers to Trade and Agreement on Sanitary and Phytosanitary Measures In the Uruguay Round of Multilateral Trade Negotiations, two side agreements codify trends in GATT/WTO review and treatment of exceptions under Article XX. Under the WTO Agreement on Technical Barriers to Trade (TBT), technical regulations, which by their nature differentiate among like products, are permitted where they fulfill “legitimate objectives.” “Legitimate objectives” are not exhaustively defined in the TBT, but Article 2.2 provides a partial list, such as national security, protection of human health and safety, and the environment. GATT art. XX pmbl. See, e.g., United States—Standards for Reformulated and Conventional Gasoline (making clear that Article XX interpretation is bound by the four corners of the WTO and GATT texts on review). 99

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While regulations of a WTO member that come within the purview of the TBT are not automatically exempted from the requirements of compliance with GATT, WTO members are permitted to make regulatory distinctions among products otherwise considered to be “like products” as part of a “legitimate objective.”101 The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) began as an attempt to clarify the scope of the Article XX exceptions, and evolved into a “comprehensive set of rights and disciplines governing sanitary and phytosanitary regulations designed to protect human, animal, or plant life or health.”102 The rule of law of the SPS will become more clarified as it is further refined in practice, and there is potential for its application to tobacco regulation. The WTO recently issued a major decision regarding the SPS in EC— Measures Concerning Meat and Meat Products (Hormones).103 The Hormones case is instructive as to the WTO interpretation of the SPS and as to how the Appellate Body may review future scientific disputes. Specifically, the Appellate Body upheld the integrity of the SPS in its function as a premise for an exception to trade requirements and ruled that SPS measures must be based on risk assessment and an objective relationship to sound science. The state of the science on health effects from hormones is in the developmental stages, which is characteristically similar to the less developed science of the health effects from tobacco use. Interpreting the language of the SPS and the holding of the Hormones case, it is evident that measures necessary to protect human health must be based on significant scientific evidence and risk assessment, which must be generally accepted as providing international standards of health protection. Because of the arduous nature of researching tobacco-related disease and prolonged use and effects relationships, the science and assessment of human health risks and care costs associated with tobacco use has only recently begun to become established in the international scientific community.

101 See Japan—Taxes on Alcoholic Beverages, as modified by the Appellate Body Report, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, paras. 4.25, 4.26 (Nov. 1, 1996) [hereinafter Japan—Taxes on Alcoholic Beverages II]. 102 Warren H. Maruyama, A New Pillar of the WTO: Sound Science, 32 INT’L LAW. 651, 651 (Fall 1998). 103 See EC—Measures Concerning Meat and Meat Products (Hormones), Panel Report, WT/DS26/USA (Aug. 18, 1997); EC—Measures Concerning Meat and Meat Products (Hormones), Appellate Body Report, AB-1997–4, WT/DS26/AB/R, WT/DS48/AB/R (Jan. 16, 1998) [hereinafter Hormones] (holding that EC ban on imports of meat and meat products from cattle treated with growth hormones a GATT violation, not saved by application of SPS provisions, as there was a lack of scientific evidence and research and related risk assessment studies of impacts to human health).

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As the application of the SPS continues to be defined and the science of the health impact of tobacco use is more widely documented, particularly in developing states, it is logical that advancements may be made in the realm of trade measures aimed at tobacco imports geared toward human health protection. As clarification of the SPS continues, tax measures to protect human health from tobacco-related harm will be analyzed under GATT Article III:2.

Summary: The Standard for Valid Tax Measures Under GATT/WTO Analysis Challenges to domestic taxation programs continue to come within the ambit of the Article III:2 national treatment provisions of GATT, which in principle encourages an open rule-based trading system designed with “transparent, non-discriminatory and less distortive trade policy instruments.”104 The analysis developed by the Appellate Body under Article III:2 applies a three-part test: (1) whether imported products and domestic products are directly competitive or substitutable products; (2) whether the directly competitive or substitutable imported and domestic products are not similarly taxed; and (3) whether the dissimilar taxation of the directly competitive or substitutable imported products is applied so as to afford protection to domestic production.105

Case Study: United States—Taxes on Petroleum and Certain Imported Substances In United States—Taxes on Petroleum and Certain Imported Substances (Superfund), Canada and the European Union challenged tax provisions of the U.S. “Superfund” law, which applied differentially to like domestic and imported products.106 The U.S. Superfund law levied an excise tax, as well as related corporate income taxes and appropriations, on petroleum to pay for the cost of federal funds appropriated from the U.S. General Treasury to pay for the cost of running federal government Superfund programs.107 The excise tax applied to imported petroleum products was 11.7 cents per barrel, while the excise tax assessed to crude oil from U.S. refineries 104 Ernst-Ulrich Petersmann, Strengthening the Domestic Legal Framework of the GATT Multilateral Trade System: Possibilities and Problems of Making GATT Rules Effective in Domestic Legal Systems, in THE NEW ROUND OF MULTILATERAL TRADE NEGOTIATION: LEGAL AND ECONOMIC PROBLEMS 33, 48–49 (Ernst-Ulrich Petersmann & Meinhard Hilf eds., 1988). 105 Japan—Taxes on Alcoholic Beverages II (cited as controlling test in Chile— Taxes on Alcoholic Beverages), WT/DS87/R, 1999 WL 391366, at *12 (WTO June 15, 1999). 106 United States—Taxes on Petroleum and Certain Imported Substances, L/6175–34S/136, at para. 1.1 (GATT June 17, 1987) [hereinafter U.S.—Taxes on Petroleum]. 107 See id. at para. 2.1.

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was 8.2 cents per barrel.108 The United States did not counter the challengers’ assertion that this 3.5 cents differential was on its face inconsistent with the Article III:2 national treatment provisions; rather, the United States argued that the effect should be controlling, as the tax differential was negligible, and its commercial effects were insignificant.109 Furthermore, the United States argued that the tax differential basically had very limited influence on the overall demand for imported petroleum.110 The panel rejected these contentions and held that Article III:2 is to be strictly construed and applied regardless of whether adverse trade effects occur as a result of implication of a measure found to be inconsistent with the language of the provision.111 The second measure reviewed by the panel was the tax on certain imported substances produced or manufactured from taxable feedstock chemicals.112 This tax was geared towards creating revenue to finance environmental programs benefiting domestic U.S. producers and was applied as a border adjustment tax.113 The panel found that this tax, by design, was a valid border adjustment tax and was consistent with Article III:2, because it was capable of being levied on both domestic and imported products.114

Application to a Tobacco Tax Program The Superfund decision gives insight into the validity of border tax adjustments. From this holding, it is evident that taxes applied directly to products, even if geared more towards foreign products but that could be applied to domestic products, are eligible for border tax adjustment. The Superfund Report indicates that differential taxes may not be applied to domestic and imported products, regardless of the economic or demand effects associated with implementation of the tax. Therefore, a tax provision must be structured to apply uniformly to products regardless of their origin in order to pass scrutiny under Article III:2 analysis. A state could therefore promulgate a tax system geared towards generating revenue for researching and remedying its internal tobacco use problems in a manner consistent with Article III:2 as long as it applied equally and non-discriminatorily to like domestic and imported products.

108 109 110 111 112 113 114

See id. at para. 2.2. See id. at para. 3.1.2. See id. at para. 3.1.3. See id. at para. 5.1.1. See id. at paras. 2.2, 5.2. See id. at para. 5.2.3. See id. at paras. 5.2.5–5.2.8.

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Case Study: Japan—Taxes on Alcoholic Beverages Japan had maintained a tax system that favored a domestic product, shochu, a traditional Japanese spirit, over similar domestic and imported products. Japan’s various internal taxes were challenged in two complaints before the GATT/WTO, with similar findings. The two decisions are: (1) Japan—Custom Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages;115 and (2) Japan—Taxes on Alcoholic Beverages, as modified by the Appellate Body (Japan—Taxes on Alcoholic Beverages II).116 In 1940, Japan enacted a liquor tax law that classified alcoholic beverages into nine categories and established tax rates based on those classifications.117 Subsequent amendments were made to the law that preserved the classification system but added subcategories to those categories, and in the case of sake and whiskey/brandy, added three additional grades.118 Tax levels were adjusted to apply higher taxes to the higher grades of liquor.119 The distilled liquors were classified based on criteria, such as raw materials, and manufacturing method applied.120 It is important to highlight that the government revenue from liquor taxes was the third largest source after the income and corporation tax and amounted to 4.9% of total tax revenue (based on 1985 figures).121 The Japanese taxation system bore a preference for alcoholic beverages pre-mixed with sugared non-alcoholic beverages, produced almost exclusively in Japan, over undiluted alcoholic beverages of the same alcohol content.122 The regulation was based on content and the differential tax was levied based upon the level of raw materials in the product.123 This method of taxation based on content and product differentiation was problematic under GATT Article III because of its economic effects on like imported products. Japan’s internal taxation rule was facially neutral but has the effect of treating domestic Japanese and imported alcoholic beverages unevenly. The United States and the European Communities filed a complaint asserting that the liquor tax law was a violation of GATT, in Japan—Taxes on Alcoholic Beverages II.

115 See Japan—Custom Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, L/6216–34S/83, 1987 WL 421964, at *1 (GATT Nov. 10, 1987) [hereinafter Japan—Taxes I]. 116 See Japan—Taxes on Alcoholic Beverages II, supra note 105. 117 See Japan—Taxes I, supra note 115, para. 2.1. 118 See id. 119 See id. at para. 2.2. 120 See id. 121 See id. at para. 2.1. 122 See Japan—Taxes on Alcoholic Beverages II, supra note 105, at para. 4.45. 123 See Japan—Taxes I, supra note 115, at *29.

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On appeal, Japan argued that the degree of “likeness” or “direct competitiveness” or “substitutability” was not relevant under Article III:2 if imports and domestic goods in the same category were taxed in a facially discriminatory manner, and there was importation and domestic production in the product category. The panel had rejected that contention, viewing the aim of Article III as ensuring that internal regulations do not adversely affect the competitive position of imports in relation to domestic products. The Appellate Body confirmed the panel’s rejection of the notion that Japanese habits could be used as a reason for treating the products as unlike, because consumer habits could change if equal treatment were given to both products; differential taxes cannot be used to crystallize consumer preferences for domestic goods. The panel had applied the aim and effects test to analyze whether products were like products, and this test was rejected by the Appellate Body. In Japan—Taxes on Alcoholic Beverages II, the Appellate Body reviewed the complaint and decided that the panel erred in failing to incorporate the Article III:1 provision that internal measures should not have an effect “so as to afford protection” into the Article III:2 “not similarly taxed” provision. The aim and effects test of the panel, challenged by Japan on appeal, was not utilized by the Appellate Body in concluding that shochu and vodka were like products—in the sense that they were “directly competitive or substitutable”—which were not similarly taxed by Japan, the effect of which was to afford protection to the domestic Japanese product.

Application to a Tobacco Tax Program Japan—Taxes on Alocholic Beverages II established that a tax system, which was on its face neutral, could be a form of disguised discrimination, and, by its effects, violates Article III:2. This opinion provides guidance as to the definition of “like products” for tax purposes (e.g., different forms of smoking tobacco products). From this decision, it is also evident that review of the discriminatory effects of a tax on domestic products vis-à-vis imported products is required to withstand scrutiny under GATT. The Appellate Body employed an objective test under Article III:2, which is similar to that applied in Hormones, requiring an “objective relationship” between measures and the science and risks to be prevented by the measure. The three-part continuum of analysis articulated by the Appellate Body in this case is: (1) whether the imported and domestic products are directly competitive or substitutable; (2) whether the products are not similarly taxed (there must be more than a de minimis differential taxation to find that the products are not similarly taxed); and (3) whether the dissimilar taxation is applied so as to afford protection to domestic products.

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Case Study: United States—Measures Affecting Alcoholic and Malt Beverages Canada challenged U.S. domestic taxes applied to imported beer, wine, and cider.124 The tax system for alcoholic beverages provided for federal and state excise taxes, with offsets for domestically produced products.125 The panel considered the provision of a lower federal excise tax rate on domestic alcohol for qualifying U.S. producers, without a comparable application to foreign producers, constituted less favorable treatment to the imported product and was therefore inconsistent with the national treatment principle and a violation of Article III:2.126 The panel asserted that the prohibition on discriminatory taxes contained in Article III is reviewed under an absolute standard—it “is not conditional on a “trade effects test” nor is it qualified by a de minimis standard.”127

Application to a Tobacco Tax Program The panel found that various federal and state excise taxes violated GATT Article III:2. Among the tax provisions found inconsistent with GATT that are applicable to a cigarette taxation regime are: excise tax rates based on local or domestic origin; preferential excise taxes for products with ingredients of local origin; and lower excise tax rates for a special variety of ingredients.128 Review of the illegality of these measures is critical in assessing the bases of a cigarette tax system. It follows from the United States—Measures Affecting Alcoholic and Malt Beverages Panel Report that taxes based on origin or ingredients will not withstand scrutiny under GATT Article III:2. This is of particular importance as an option for tobacco regulation and is one based on ingredients, such as a graduated tax system based on nicotine content and on levels of other ingredients. This decision asserts that, as will be discussed later in this part, taxes based on ingredients of specific origin that have discriminatory effect on imported products are inconsistent with Article III:2. It remains to be determined whether these measures designed specifically to protect human health may remedy an Article III:2 violation as an exception under Article XX(b) or the evolving interpretation of the SPS provisions.

124 See United States—Measures Affecting Alcoholic and Malt Beverages, DS23/R— 39S/206 (June 19, 1992). 125 See id. at para. 2, 3. 126 See id. at para. 5.5. 127 See id. at para. 5.6 (emphasis in original). 128 See id. at para. 6.1.

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Case Study: Canada—Certain Measures Concerning Periodicals The United States challenged three Canadian measures regulating the content of imported periodicals as a violation of the national treatment provisions of Article II:2 and Article III:4, as well as a general prohibition of quotas under Article XI of GATT. Pertinent to this paper is the national treatment challenge brought to Canada’s Excise Tax Act, which levied an 80% tax on the revenue from all advertisements contained in “split-run” language edition periodicals. Canada asserted that its domestic regulation was necessary to promote Canadian culture in the national economy. The claim was originally before the Dispute Settlement Body of the WTO and was appealed by both the United States and Canada, and subsequently it was reviewed by the Appellate Body. 129 The panel and the Appellate Body found in favor of the United States on the national treatment issue, holding that Canada’s excise tax on advertisements in splitrun periodicals violated the provisions of Article III:2 of the GATT. 130 Canada argued that the imported products were not directly competitive or substitutable with domestic periodicals.131 The Appellate Body looked to the provisions of the Canadian Excise Tax Act, particularly at the fact that excise tax was only levied on one class of periodicals.132 The Appellate Body cited the Japan—Alcoholic Beverages II panel’s analysis in stating that “[i]t is a well-established principle that the trade effects of a difference in tax treatment between imported and domestic products do not have to be demonstrated for a measure to be found to be inconsistent with Article III.”133 In reaching its decision, the Appellate Body confirmed the lower panel’s finding that imported split-run periodicals and domestic non-splitrun periodicals were like products within the meaning of the first sentence of Article III:2.134 Furthermore, the Appellate Body noted that the fundamental purpose of Article III is to “ensure equality of competitive conditions between imported and like domestic products.”135

129 See Canada—Certain Measures Concerning Periodicals, Appellate Body Report, WT/DS31/AB/R, 1997 W.L. 398913, *1 (WTO June 30, 1997) [hereinafter Canada Periodicals]. 130 See id. 131 See id. at *5. 132 See Aaron Scow, Note, The Sports Illustrated Canada Controversy: Canada “Strikes Out” in Its Bid to Support Its Periodical Industry from U.S. Split-Run Periodicals, 7 MINN. J. GLOBAL TRADE 245, 268 (Winter 1998). 133 See Canada Periodicals, supra note 129, at *13 (citing Japan—Taxes on Alcoholic Beverages II, at *16). 134 See Canada Periodicals, supra note 129, at *4. 135 See id. at *13 (noting Thai Cigarettes, para. 99).

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The Appellate Body held, therefore, that any measure that directly or indirectly interferes with competition between imported and like domestic products comes within the purview of Article III,136 and it found that if the taxes on imported periodicals are “in excess of” those applied to domestic products, then the tax is inconsistent with sentence two of Article III:2.137 In its analysis, the Appellate Body stated that any measure that indirectly affects the conditions of competition between imported and like products would come within the provisions of Article III:2, first sentence, or by implication, second sentence, given the broader application of the latter. The appellate decision held that by Canada’s own admission, because imported and domestic products compete for the same advertising revenues, that they are “directly competitive or substitutable products” under Article III:2. The Appellate Body found that imported split-run and domestic splitrun periodicals were not similarly taxed, and that this factor is assessed on a case-by-case basis and is controlling per the finding in Japan—Alcoholic Beverages II 138 and United States—Section 337.139 The Appellate Body also found that the tax measure was designed to afford protection to domestic products, in violation of GATT Article III.

Application to a Tobacco Tax Program It appears that the Appellate Body will continue to limit its analysis to economic effects and assess regulations on an effects-specific case-bycase basis. The Japan—Alcoholic Beverages II decision similarly addressed the issue of cultural aspects associated with domestic products and competing foreign products. Canada attempted to distinguish the Japan— Alcoholic Beverages II holding by arguing that the excise tax on periodicals did not limit the origin of the product, but merely the origin of its content, that there was no discrimination.140 This proposition was not ultimately influential and, per the Japan—Alcoholic Beverages II decision, the GATT/WTO reviews in Canada Periodicals did not find the cultural protection aspect critical enough to remedy a violation of GATT Article III. See Canada Periodicals, supra note 129, at *13. See id. at *14 (quoting Japan—Taxes on Alcoholic Beverages II, at *18–19). 138 See Canada Periodicals, supra note 129, at *20 (citing Japan—Taxes on Alcoholic Beverages II, at *27 (noting dissimilar taxation of even a portion of imported products is inconsistent with GATT)). 139 See Canada Periodicals, supra note 129, at *21 (citing United States—Section 337, BISD 36S/345, para. 5.14 (Nov. 7, 1989) (rejecting any notion of balancing more favorable treatment of some products against less favorable treatment of other imported products)). 140 See generally Camody, supra note 64. 136 137

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Therefore, a tax may not discriminate against like products, even though the tax measure may benefit the national culture or other intrinsic aspects of the implementing state. In formulating its opinion as to the characteristic of the imported product relative to the domestic product, the Appellate Body reviewed the legitimacy of an exception based on the product’s end use, consumer tastes and habits, and the composition of the product. The effects analysis employed in Japan—Alcoholic Beverages II and in this decision is instructive to the formulation of a tobacco tax, as states may design to regulate based on type of product (i.e., a state may assess its national consumption trends and decide to tax cigarettes more heavily than cigars and pipe tobacco, which could be analyzed as like products under these decisions).

Case Study: Indonesia—Local Content Regulation Japan, the European Communities, and the United States claimed that various sales tax benefits of the Indonesian automobile programs violated Article III:2. Of particular significance is the challenge to two national programs that provided for a level of tax applicable on a finished product. This was a function of the product’s local content level, and therefore imported parts and components were subjected “indirectly” to a tax in excess of that indirectly applied to like domestic parts and components.141 The differential taxation based on local content provided, in one specific 1996 program, that national cars were completely exempt from a sales tax applied to imported cars, and, under an earlier 1993 regulation, that domestic passenger cars with greater than 60% local content were exempted from sales tax, while imported sedans or domestic sedans with less than 60% local content were subject to a sales tax of 35% of their value.142 In assessing the tax programs validity under Article III:2, the panel noted the two standards contained in the GATT provision: “whether the imported and domestic goods are considered to be ‘like products’ subject to the requirements of the first sentence of Article III:2, or rather, whether the imported and domestic goods are considered as being ‘directly competitive or substitutable goods’ subject to the requirements of the second sentence of Article III:2.”143 As employed in other decisions, the panel explained that, to be successful, the complainant must establish either: (1) in challenging the measure under the first sentence, that imported products are taxed “in excess” 141 See Indonesia—Certain Measures Affecting the Automobile Industry, WT/DS54/15, 1998 WL 840935, para. 14.94 (Dec. 7, 1998) [hereinafter Indonesia]. 142 See id., para. 14.107. 143 See id. at para. 14.103.

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of any domestic like products; or (2) in challenging the measure under the second sentence, that the imported products are “not similarly taxed” to the domestic “directly competitive or substitutable goods” and that the dissimilar taxation is “applied . . . so as to afford protection to domestic production.”144 The panel imported language from the Japan—Alcoholic Beverages II Report and mirrored analysis used in the United States—Taxes on Petroleum and Certain Imported Substances decision, stating that under the Article III like products provision, it is irrelevant that trade effects are insignificant, because the national treatment provisions “protects expectations not of any particular trade volume but rather of the equal competitive relationship between imported and domestic products.”145 The panel noted that the two previous GATT panels146 on the Japanese shochu tax issue found that the application of a lower excise tax to local shochu than to imported whiskey—identified as a competing product—afforded protection to domestic industry, thereby infringing the second sentence of GATT Article III:2. The panel noted that in Japan—Alcoholic Beverages II and Canada Periodicals, the Appellate Body endorsed the basic approach established in the 1970 Report of the Working Party on Border Tax Adjustment in assessing consistency with the GATT: [T]he interpretation of the term “like product” should be examined on a case-by-case basis. This would allow a fair assessment in each case of the different elements that constitute a similar product. Some criteria were suggested for determining, on a case-by-case basis, whether a product is “similar”: the product’s end uses in a given market; consumers’ tastes and habits, which change from country to country, the products properties, nature and quality.147 The panel assessed the differences and likenesses of domestic and imported cars within these categories, with particular emphasis on the fact that the cars all were within the same market segment and had the same end use and the same relative basic properties.

144 145

See id. See id. at para. 14.108 (quoting Appellate Body Report on Alcoholic Beverages,

at 20). 146 See generally Japan—Taxes I, supra note 115. Japan—Taxes on Alcoholic Beverages II, supra note 105. 147 Report of the Working Party on Border Tax Adjustments, B.I.S.D. 18S/97, para. 18.

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Application to a Tobacco Tax Program The Indonesia—Local Content Regulation provides that taxes based on local content are invalid under the national treatment provisions of GATT Article III:2. This is a critical distinction in defining a system for tobacco taxation as it is presumed that local content cannot be a basis for differential taxes on imported and domestic products. This affects the tobacco paradigm, as states have incentive to protect domestic tobacco industry and to tax imports at a higher rate. This would be an invalid measure under GATT/WTO analysis. Tobacco products must be taxed consistently—a fact that may impede development of across-the-board taxation in developing states that have invested in a domestic tobacco manufacturing industry. This limitation highlights the necessity of designing tobacco tax systems to effectively integrate existing market aspects and take into account economic considerations of particular states.

Case Study: Thai Cigarettes Thailand has a comprehensive tobacco control program. In the 1970s, the government banned smoking in cinemas and buses in Bangkok.148 The government proceeded to implement national advertising bans and related measures.149 The country invoked a cigarette tax and later raised it on health grounds.150 With implementation of this program, smoking dropped by 4% among males and by almost 3% among 15–19 year olds.151 The tax was the subject of a challenge by the United States brought before a GATT panel.152 The United States complaint against Thailand claimed that Thailand’s Tobacco Act of 1966 was inconsistent with the nation’s obligation under Article XI:I of the GATT.153 The Thai Act prohibited the import of tobacco except by designation of the Director-General.154 The Director-General had not granted any import licenses for cigarettes in the past ten years.155 The United States asserted that the purpose of the Thai Tobacco Act was to protect the Thai domestic tobacco industry, which is a prohibited measure under the chapeau provision that, even considering an Article XX exception, a “measure must not be disguised restrictions on See The World Health Report, supra note 1, at 75. See id. 150 See id. 151 See id. 152 See generally Thai Cigarettes, supra note 65. 153 See id. at paras. 1, 16. 154 See Tobacco Act of 1966 (Thailand), DS10/1 (quoted in Thai Cigarettes Report, para. 63). 155 See Thai Cigarettes, supra note 65, para. 6. 148 149

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international trade.” 156 A critical factor was that, as the United States argued, Article XX does not cover the tax measure, because there were no comparable safeguards in the domestic cigarette industry. The United States urged the panel to find the tax a protectionist measure, as Thailand denied this assertion.157 Thailand claimed an exception under Article XX(b), arguing that smoking tobacco lowered the standard of living, increased illness, and caused an outlay of exorbitant medical costs, all of which decreased real income.158 Thailand reinforced its assertion that the measures were introduced to promote and protect public health by noting that the Tobacco Act was one piece in a comprehensive program to control tobacco use developed in compliance with WHO resolutions.159 Thailand distinguished imported cigarettes from domestic ones on three grounds. First, Thailand argued that cigarettes imported from U.S. manufacturers are specifically targeted at women, while domestic cigarettes are not. Second, Thailand noted that the Asian and Latin American experiences illustrate that once a market is open, the U.S. cigarette industry exerts great efforts to force governments to accept its terms and conditions and uses marketing techniques to boost sales through marketing campaigns and to undermine public health concerns. Third, Thailand argued that U.S. cigarettes are more harmful than Thai cigarettes because U.S. manufacturers use unknown chemicals in cigarettes.160 The panel’s decision in favor of the United States hinged on interpretation of the term “necessary” under Article XX(b). The panel accepted that tobacco products are dangerous to health but interpreted the term “necessary” as used in Article XX(b) as giving no consideration to the subject matter.161 The panel did not reference the chapeau language, a keystone in Thailand’s argument in support of the import prohibition.162 The panel’s exacting decision gave no indication as to whether the analysis would be adjusted if another product with more studied and serious human health harms was involved. In finding that the import prohibition was not “necessary” under Article XX(b), the panel adopted the least-GATT-inconsistent test and applied the least-trade-restrictive-alternative-test of “necessary” previously adopted in the Section 337 case to interpret the term under Article XX(b).163 The panel explained its interpretation by stating: 156 157 158 159 160 161 162 163

See id., para. 22; GATT art. XX pmbl. See Thai Cigarettes, supra note 65, para. 33. See id., para. 21. See id., paras. 54–56. See id., paras. 27, 28, 34. See GATT art. XX(b). See generally Thai Cigarettes, supra note 65. See id., para. 74; 337; United States—Restrictions on Imports of Tuna from

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[I]mport restrictions imposed by Thailand could be considered to be “necessary” in terms of Article XX(b) only if there were no alternative measures consistent with the General Agreement, or less inconsistent with it, which Thailand could reasonably be expected to employ to achieve its health policy objectives.164 The panel commented on mechanisms by which the Thai government could have achieved its stated public health policy purpose in a GATT-consistent manner.165 The starting point from this holding is that regulation of tobacco products does come within the confines of the Article XX exceptions, but measures to protect public health must meet the GATT panel’s interpretation of the pivotal term “necessary” to achieve that goal.

Application to a Tobacco Tax Program The decision actually endorsed limits on advertising, a less restrictive means of regulation with the same public health objectives of an import ban, as a potentially valid measure in the domestic fight against tobacco consumption. This suggests that the WTO may give greater deference and tolerance for less intrusive means to regulate the tobacco trade. The panel gave significant consideration to whether there were other less restrictive means to achieve the legitimate goals of public health associated with tobacco regulation. From this holding, it is evident that, short of sound scientific evidence on the relative harms of Thai versus American cigarettes containing high nicotine levels and chemical additives, all cigarettes are considered like products regardless of their health harms or addictive qualities. The panel declined to consider Thailand’s arguments that the different nicotine and additive composition of cigarettes justified discriminatory trade practices. The question that remains is whether a graduated differential tax, based on sound science and risk assessment of the health effects from different chemical make-up of tobacco products, will pass muster under WTO review. Although the variable health risks associated with adjusted chemical levels have not yet been established soundly as internationally accepted principles, the panel noted that cigarette smoking is dangerous to health and is a valid arena for governmental regulation. As the state of the science on effects continues to develop, it may become acceptable for a tax regime to be based on the level of nicotine Mexico, Report not adopted by Contracting Parties, 39th Supp. B.I.S.D. 155 (GATT 1993) (applying the least-restrictive test under the “necessary” analysis in stating that the United States had not exhausted all its options reasonably available in pursuing specific natural resource protection measures). 164 See Thai Cigarettes, supra note 65, para. 75. 165 See id., paras. 77–81 (including labeling methods, advertising restrictions, and even designing government monopolies to regulate cigarette supply).

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and additives. In essence, over time, it may become feasible to apply an adapted “polluter pays” principle to the tobacco trade in taxing products according to the associated level of harm to human health. Until the science is accepted on a broader basis, the guidance from the Thai Cigarettes decision is that non-discriminatory measures short of import prohibition with and equal application and non-discriminatory effects, such as a tax on like tobacco products geared towards protection of human health, will be presumed to be valid under national treatment scrutiny.

CONCLUSION: THE CONSTRUCT OF A TAX SYSTEM FOR DEVELOPING STATES GATT Article III:2 imposes the strictest limits on product-based taxes. Article III also functions to eliminate disguised discrimination in tax laws, whether discriminatory or protectionist effects are intentional or not, and encourages transparent, non-discriminatory, and less-distortive trade policy instruments. States must be cognizant of the effects-based test under Article III:2 in designing tax systems, particularly if based on product type or ingredients, such as nicotine content. A foundation for legal tobacco policy can be developed from the series of GATT/WTO decisions. There are a variety of methods that appear to be consistent with GATT/WTO law, which states may elect to use to decrease tobacco consumption. The basic considerations of a tax regime are that the measures apply to and effect both imported and domestic products, and that those measures cannot be discriminatory in purpose or in effect. Furthermore, laws promulgated in the public interest, for valid reasons, such as protection of public health, that disproportionately impact imported products or favor domestic products will likely not be saved by an Article XX exception and will likely be found inconsistent with Article III. It is of particular importance that national tax programs be structured to tax domestic and foreign like products in a like manner. The ongoing FCTC process presents an opportunity for the WHO to facilitate development of state internal measures to combat the tobacco epidemic while continuing to formulate the formal FCTC. As the general science of tobacco use predicts imposing health care statistics and costs, there is a definite exigency for developing states, most adversely affected by tobacco consumption, to begin to regulate tobacco consumption. Taxation is the most effective means available to reduce demand, which, with time, will begin to directly benefit public health. It may be necessary that developing states assess the benefits of a revenue-promoting tax measure to offset not only the astronomical health care and social costs associated with tobacco consumption but also with the impact on local tobacco industry with the onset of a tax regime. The

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design of tax regimes to be implemented on the national level in developing states should be developed on a state-specific basis—taking into account national economies and tobacco consumption trends—with assistance from states that have adopted cogent practices.

CHAPTER 5

THE WHO FRAMEWORK CONVENTION ON TOBACCO CONTROL AND TRADERELATED PROTOCOLS Benjamin C. Adams

INTRODUCTION: AN OVERVIEW OF THE GLOBAL TOBACCO EPIDEMIC AND THE RESPONSE OF THE WHO Globalization of marketing and trade in tobacco products means that all countries need to take strong action individually and together if their populations are to become tobacco-free in the long-term. —Dr. Gro Harlem Brundtland Director-General of the WHO October 19, 1998 In tobacco, the world faces a public health crisis of epidemic proportions. This crisis is partially due to the ongoing economic transformation that is rapidly turning our globe into a single, homogenous trading body. Tobacco is at the forefront of market globalization. As the World Trade Organization (WTO) continues to ease restrictions on international trade—reducing tariffs and eliminating barriers to trade—multinational tobacco companies are able to peddle their wares to the global market with increasing ease. And while smoking in the United States is under ever-increasing attack from public health groups, regulators, and the judicial system, statistics show that for every person in the United States who quits smoking, three people in other countries light up.1 The result is that, although tobacco companies are embroiled in U.S. litigation and under U.S. regulatory attack, their retreat from the U.S. market is a hollow victory in light of their simultaneous expansion into foreign markets. 2 1 Barry S. Levy, Twenty-First Century Challenges for Law and Public Health, 32 IND. L. REV. 1149, 1155 (1999). 2 WORLD HEALTH ORGANIZATION, Combating the Tobacco Epidemic, in THE WORLD

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The Economics of Tobacco: A Losing Economic Proposition Admittedly, producers profit from tobacco sales and consumers willingly pay for tobacco products; however, there are significant social costs that result in tobacco being a losing economic proposition. It has been estimated that factoring in mortality, morbidity, and health care costs, for every additional 1,000 metric tons of tobacco produced per year, there is a net economic loss of $13.6 million per year. 3 Quite simply, “Tobacco is a poor investment if the objective is to enhance the future welfare of the globe.”4

The Health Effects It is presently estimated that 1.1 billion people smoke worldwide, and by 2025 the number of smokers is expected to rise to 1.6 billion.5 In highincome countries, the number of smokers has been declining for decades; however, in low- and middle-income countries, cigarette consumption continues to rise.6 Tobacco presently accounts for the death of more than 4 million persons per year.7 WHO’s tobacco control program, the Tobacco Free Initiative, estimates that by 2025 tobacco consumption will result in the deaths of 10 million people per year, with over 70% of all tobaccorelated fatalities occurring in the developing world.8 Proportionally, smoking presently kills one in ten adults worldwide, and with 10 million deaths per year in the 21st century, that proportion will increase to one in six adults—more than any other single cause.9

Tobacco Industry Practices: Encouraging the Public Health Disaster The economic and health costs of the tobacco trade leave but one conclusion: tobacco use is not simply a debilitating personal habit, it is a public health disaster. Facilitating this disaster is the aggressive behavior of the tobacco companies, which continue to seek out new markets and HEALTH REPORT 1999, at 67 (noting that consumption in developing countries is currently increasing at 3.4% per year) [hereinafter The World Health Report 1999]. 3 Id. 4 Id. at 68. 5 See World Health Organization, Tobacco Free Initiative: Introduction to the Framework Convention on Tobacco Control, at http://www.who. int/toh/FCTC/fctcintro.htm (last visited Dec. 18, 1999). 6 See id. 7 See World Health Organization, World Health Assembly Paves Way for Framework Convention on Tobacco Control, Press Release WHA/14 (May 24, 1999); The World Bank, Governments and the Economics of Tobacco Control. 8 See id. 9 WORLD BANK, CURBING THE EPIDEMIC: GOVERMENTS AND THE ECONOMICS OF TOBACCO CONTROL, (1999) [hereinafter World Bank Report].

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therefore new victims for these deadly and addictive products.10 Tobacco companies recognize that strict regulations and consumer demand are driving them out of the developed nations, but while profits in the United States are shrinking, they are growing at an average of 20% a year in the rest of the world.11 These new markets, such as Asia, Africa, Latin America and Eastern Europe, are ideal grounds for the marketing of tobacco, because few of these countries have implemented restrictive tobacco legislation,12 and the people of these countries are largely unaware of the health effects of tobacco consumption.

The WHO Has Responded to the Public Health Disaster In light of the deadly health effects associated with the consumption of tobacco products, the public outcry of anti-tobacco groups, the worldwide nature of tobacco marketing, and the apparent inability of many countries to adequately address tobacco issues, the WHO has been spurred to formally recognize that tobacco consumption is not merely a debilitating personal habit, but rather a public health disaster of pandemic proportions. On May 24, 1999, the World Health Assembly (WHA), the governing body of the WHO, unanimously backed a resolution calling for work to begin on the Framework Convention on Tobacco Control (FCTC).13 A record 50 states took the floor to pledge financial and political support for the FCTC.14 The WHA established a timeline for the creation of the FCTC, calling for an initial meeting of a working group, which occurred during the week of October 25, 1999, and was opened by Dr. Gro Harlem Brundtland, Director-General of WHO. There will likely be an additional meeting of the working group in March 2000 and formal negotiations are expected to begin by May 2000. The WHA has indicated that a complete convention is scheduled to be ready for ratification by 2003.

World Bank Report supra note 9. PR Newswire Assoc., Inc., New Report Exposes International Tobacco Promotion & Influence Peddling by Phillip Morris and RJR Nabisco, Apr. 22, 1998 (noting that overseas tobacco sales are much more lucrative than the U.S. market; for example Phillip Morris’s international tobacco sales are up 146% since 1990). 12 Allyn L. Taylor, An International Regulatory Strategy For Global Tobacco Control, 21 YALE J. INT’L L. 257, 258 (Summer 1996). 13 See Press Release WHA/14, supra note 7 (May 24, 1999); see also World Health Assembly, International Framework Convention for Tobacco Control, Res. WHA49.17 (May 26, 1996). 14 See id. 10 11

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THE WHO’S AUTHORITY TO CREATE A FRAMEWORK CONVENTION The FCTC is intended to be an international legal instrument designed to circumscribe the global spread of tobacco and tobacco products. WHO recognizes that the worldwide spread of tobacco consumption requires a set of rules and regulations that cut across “national boundaries, cultures, economies and social-economic strata. The unique and massive public health impact of tobacco provides the WHO an opportunity to propose to the world a . . . comprehensive response to . . . the silent epidemic as the tobacco menace has often been called.”15

The FCTC Will Be a Global Solution to a Global Problem Recognizing the adverse public health effects of tobacco consumption is only the first step. It is also important to understand that the nature of tobacco production, manufacturing, and consumption is such that appropriate controls escape individual nation-states.16 The tobacco trade takes place in a global market, and, since the advent of the WTO, crossborder trade is increasingly the norm. The net effect of the WTO has been to significantly expand the global tobacco trade by generally facilitating the reduction of tariffs and elimination of barriers to trade.17

The Role of the WHO in International Law and Its Authority to Create the FCTC Historically, “once public health problems entered the realm of the international system, states turned to international law as a tool to develop common rules, institutions, and values.”18 In the past, the WHO has been accused of failing to utilize and incorporate international law in achieving its mandate.19 At the time of the creation of the WHO, international law was the driving force behind the international application of public health law.20 See Tobacco Free Initiative supra note 5. David P. Fidler, The Future of the World Health Organization: What Role for International Law, 31 VAND. J. TRANSNAT’L L. 1079, 1082 (Nov., 1998). 17 Allyn L. Taylor et al., The Impact of Trade Liberalization on Tobacco Consumption, in TOBACCO CONTROL IN DEVELOPING COUNTRIES, (Frank J. Chaloupka et al. eds., 2000). 18 Fidler, supra note 16. 19 See id. (providing an analysis of WHO’s approach to international health law, arguably not incorporating international law, and the approach taken immediately after World War II, which the author contends was an era of “too much international health law.”). 20 See id. (discussing the period after WWII, which manifested a dependence on international law for health issues). 15 16

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As evidenced by the WHO Constitution, the creators of the WHO clearly envisioned that international law would continue to be the primary engine for driving international public health law. The WHO Constitution empowers the WHA with the ability to promote and adopt treaties, as well as the authority to create binding legal obligations on member states.21 Articles 19 and 21 indisputably provide the WHO with broad authority to create international law. Article 19 of the WHO Constitution provides the WHA with the authority “to adopt conventions and agreements with respect to any matter within the competence of the Organization.”22 The broad mandate of the WHO, “the attainment by all peoples of the highest possible level of health,” suggests that the WHA’s Article 19 powers are broad in scope. In addition, Article 21 specifically empowers the WHA to adopt regulations which are binding on the WHO members, in relation to standards for the safety, purity, and potency of biological, pharmaceutical, and similar products moving in international commerce, as well as advertising and labeling requirements for such products.23 Although Articles 19 and 21 do in fact provide the WHO with the authority to create international law, in practice the WHO has never utilized its Article 19 powers and only twice adopted regulations under Article 21.24 It is telling that the WHO has chosen to invoke its Article 19 powers—for the first time in its 50-plus years of existence—in response to the tobacco epidemic. On May 26, 1996, the WHA invoked Article 19 and began the process of creating an international framework convention on tobacco control,25 recognizing that the unique nature of the tobacco pandemic requires a global regulatory approach to combat the powers of the large tobacco companies, which have taken an equally global approach to the marketing, production, and distribution of their products.26

The General Goals and Structure of the FCTC The WHO’s member states will act in concert to establish the legal parameters and structures of the convention as a public health tool, i.e., develop the framework convention, and subsequently create protocols—separate agreements—that will make up the substantive parts of the agreement.27 The WHO Const. arts. 19 and 21. Id. at art. 19. 23 Id. at art. 21. 24 Fidler, supra note 16 (noting that Article 22 provides member states with the ability to opt out of regulations created under Article 21). 25 Res. WHA49.17 supra note 13. 26 Fidler, supra note 16 at 1092–93; Taylor, supra note 12. 27 See Tobacco Free Initiative supra note 5. 21 22

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WHO has indicated that the FCTC will operate to improve transnational tobacco controls by three avenues.28 First, the FCTC will establish the guiding principles of the convention. This includes recognizing that tobacco is an important contributor to health inequities in all societies and that due to the addictive nature and public health consequences of tobacco use, it must be considered a harmful commodity. And by viewing tobacco as a harmful commodity, it is imperative that the public is fully informed about the health consequences of the consumption of tobacco products, both with respect to their individual person and the larger effects on society. Second, under the FCTC, the individual member states must agree to take appropriate measures to fulfill the general objectives to which they have agreed. The WHO has specifically identified nine general objectives, including: (1) the protection of children and adolescents from exposure to the use and promotion of tobacco; (2) the prevention and treatment of tobacco dependence; (3) the promotion of smoke-free environments; (4) the promotion of strong economies independent of tobacco; (5) the prevention of tobacco smuggling; (6) strengthening women’s leadership in tobacco control; (7) enhancing the capacity of member states to control tobacco; (8) improving knowledge and information exchange at national and international levels; and (9) the protection of vulnerable communities, including indigenous populations. Lastly, in addition to the guiding principles and the general objectives, the convention will lead to the development of specific obligations by the member states, termed “protocols.” The Working Group on the FCTC has identified nine potential subjects for protocols, to address such concerns as: 1. Stabilizing Tobacco Prices—The harmonization of taxes on tobacco products at the international level is required to avoid excessive price differences among neighboring countries; 2. Deterring Smuggling—At present nearly one-third of all global tobacco exports are traded as contraband, and worldwide controls are needed to address a problem of such proportions; 3. Consistent Taxation—Internationally consistent levels of taxation are required in order to eliminate tax-free, i.e., “duty-free” sales of tobacco products; 4. Advertising and Sponsorship Restrictions—The advertising and sponsorship of tobacco products requires a worldwide ban, because the cross-border nature of print and broadcast media defeats the efforts of any single state;

28

See id.

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5. Restricting Internet Advertising and Trade—Similar to advertising and sponsorship restriction, the global reach of the Internet requires that tobacco companies be prevented from utilizing on-line advertising and trade; 6. Uniform Product Testing Methods—The procedures for testing ingredients in tobacco products should be based on internationally accepted methods designed to provide consumers with meaningful measures of what they will ingest from tobacco products; 7. Package Design and Labeling Requirements—Internationally standardized packaging and labeling will help to improve trade relations and promote public health by educating consumers; 8. Information Sharing—States need to share testing and monitoring information in order to facilitate the development of standardized approaches to monitoring and controlling the tobacco epidemic; and, lastly, 9. Agricultural Restrictions—States must reduce or eliminate subsidies to tobacco producers, because subsidies act to distort markets and encourage consumption of tobacco in low-income countries due to the dumping of cheap tobacco.29 Such protocols are at the heart of the FCTC and may be developed either in conjunction with the FCTC or as separate treaties at a later date.

THE FRAMEWORK CONVENTION APPROACH AND THE WTO The Framework Convention Approach: An Overview The primary purpose of a framework convention is not to regulate the behavior of states. Rather “its function is to establish a general system of governance for an issue area, in order to facilitate the development of consensus about the relevant facts and the appropriate international response.”30 The “convention” acts to identify the subject matter at issue and the scope of the discussions and to create the administrative and procedural machinery to guide future action.31 Either simultaneous or subsequent to the development of the convention, member states will enter into separate treaties, the protocols, which supplement 29 World Health Organization, Subjects of Possible Protocols and Their Relation to the Framework Convention on Tobacco Control, WHO A/FCTC/WG1/3, (Sept. 3, 1999). 30 Daniel Bodansky, Framework Convention on Tobacco Control, Technical Briefing Series: What Makes International Agreements Effective? Some Pointers for the WHO Framework Convention on Tobacco Control, at http://www.who. int/toh/docs/4.pdf (last visited Dec. 18, 1999). 31 John K. Setear, An Iterative Perspective on Treaties: A Synthesis of International Relations Theory and International Law, 37 HARV. INT’L L.J. 139, 217 (Winter 1996).

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the original framework convention and require states to undertake specific legal obligations. Framework conventions are regularly used in the international environmental and human rights arenas. This is because framework conventions are particularly useful when countries are reluctant to commit to specific obligations due to scientific, political, and/or economic uncertainty. The framework/protocol approach allows countries to establish a discourse, define the general objectives, and establish a mechanism for future obligations, without necessarily committing to immediate obligations. One example is the 1979 Convention on Long-Range Transboundary Air Pollution (LRTAP) developed by the United Nations.32 The structure of the original LRTAP Convention does little more than identify the general subject matter, and create an international organization. 33 Although the LRTAP Convention only provided a limited structure, since its entry into force it has facilitated the adoption of a number of regulatory protocols involving obligations to significantly reduce the emission of pollutants. 34 Similarly, in 1992, the United Nations adopted the Framework Convention on Climate Change (UNFCCC)35 under which member states agreed upon a common but very general approach to the problems associated with global climate change.36 The UNFCCC defined the goal of the UNFCCC as the stabilization of greenhouse gases to prevent dangerous human interference with our climate;37 recognized that countries have varying degrees of responsibility, as well as capability; 38 and instituted reporting requirements.39 Although the UNFCCC involved more extensive commitments than the LRTAP Convention, it was similar because the UNFCCC did not provide for a single obligation to reduce the emissions Convention on Long-Range Transboundary Air Pollution (LRTAP), Nov. 13, 1979, T.I.A.S. 10541, 18 I.L.M. 1442, 1302 U.N.T.S. 217, 1983 (entered into force Mar. 16, 1983). 33 See id. at arts. 2 and 10 (LRTAP provides that the parties “shall endeavor to limit and, as far as possible, gradually reduce and prevent air pollution including long-rang transboundary air pollution.” In addition, LRTAP creates an administrative body.). 34 1991 Protocol to LRTAP Concerning the Control of Volatile Organic Compounds or their Transboundary Fluxes, 31 I.L.M. 568 (Nov. 18, 1991); 1994 Protocol to LRTAP on Further Reductions of Sulphur Emissions, 33 I.L.M. 1542 (June 14, 1994). 35 United Nations Framework Convention on Climate Change, 31 I.L.M. 849 (May 9, 1992) (entered into force Mar. 21, 1994). 36 See id. at arts. 2–4. 37 See id. 38 Id. 39 See id. at art. 12(1)–(2) (requiring countries to submit detailed reports on their greenhouse gas emissions, as well as their policies and measures to address climate change). 32

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of greenhouse gases. Instead, specific emission targets and reduction quotas were negotiated five years later during the 1997 Kyoto Protocol.40 The obvious benefit of the framework convention/protocol approach is that it enables countries to collaborate to define the problem, identify general goals, and institute a structure for discourse well before they are prepared or able to commit to a specific course of action. Similar to environmental issues, such as long-range transboundary pollutants and global warming, the tobacco issue is well suited to the framework convention/protocol approach. Because even though the science is relatively undisputed,41 the economic consequence of eliminating the tobacco trade remains hotly contested, and countries—specifically those with a substantial economic interest in tobacco production, manufacture, or trade— may be hesitant to enter into binding obligations to address the global tobacco epidemic at this time.

The Framework Convention Approach and Conflict with the WTO The limited nature of obligations incurred by signatories to the initial framework convention means that there is little or no chance for conflict between the general commitments of the framework convention and prior commitments made under the WTO. The framework convention, while critical to developing the solution, is only intended to identify the subject matter at issue, define the scope of the discussions, and establish the administrative and procedural machinery to develop subsequent protocols.42 It is in these protocols that the potential for conflict will arise. These later treaties will supplement the original framework convention and involve states submitting to undertake specific actions that may prove to be in conflict with WTO obligations. It is this conflict that will be explored in the following section.

COMPATIBILITY OF FUTURE FCTC PROTOCOLS WITH THE WTO The global tobacco epidemic has arisen, in part, because of the liberalizing of trade under the General Agreement on Tariffs and Trade (GATT) and more recently the WTO. It will therefore be necessary for the FCTC to contain measures that incorporate trade restrictions. It is these restrictions, developed as protocols to the FCTC that need to be examined within the context of the obligations that states have entered into under the WTO.43 40 Kyoto Protocol to the United Nations Framework Convention on Climate Change (Dec. 11, 1997). 41 See The World Health Report 1999 supra note 2 (noting that over 70,000 scientific articles have been published on the health effects of tobacco). 42 Setear, supra note 31, at 217. 43 For an analysis of the relevant provisions of the WTO, see below “GATT 1994— The Core Obligations.”

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The analysis requires a two-stage examination. First, it is necessary to examine the interplay of successive treaties in international law, specifically the WTO and the FCTC. Second, one must examine the specific protocols likely to be developed under the FCTC in light of the WTO. Note that this examination is not based on the protocols in abstract, but it is instead an attempt to view the protocols as implemented through each member’s domestic legislation, because it is this domestic implementing legislation which has the potential to give rise to conflict.

An Understanding of the WTO Structure The WTO system adopted as its core the GATT 1994, which establishes the structure for trade under international law. 44 The GATT 1994 is of central importance to the regulation of trade under the WTO. The GATT 1994 establishes the normative rules of international trade, which are designed to eliminate quantitative restrictions, reduce tariff barriers, and ensure close scrutiny of non-tariff barriers, in order to achieve “free trade.” In addition to GATT 1994, the WTO has additional measures to expand the scope and application of the WTO. These will be addressed below. However, it is important to note that these additional measures act to build on the norms of GATT 1994.

GATT 1994—The Core Obligations First, one must understand what obligations parties to the WTO have committed to undertake. There are three primary obligations under the GATT 1994 provisions of the WTO. The first two obligations are designed to facilitate non-discriminatory treatment for the products of member states. The first obligation is Article I, the most-favored-nation (MFN) principle, which requires members to treat goods of all other Member states in the same way.45 MFN status requires that any favor, advantage, privilege, or immunity granted to a product must be extended equally to all other like products, regardless of the country of origin. 46 Quite simply, similar products from member states must be treated equally, so that any advantage bestowed on one member must be bestowed on all other members. The second obligation is embodied in GATT Article III, the national treatment provision, which applies broadly to all internal regulations of any member state concerning imported products. Generally, national treatment requires that internal regulations treat foreign products the same as “like” domestic products.47 Although the underlying premise of Article III is the liberalization of trade, it is important to note that the national 44 45 46 47

General Agreement on Tariffs and Trade ([hereinafter GATT 1994]). Id., art. I. Id., art. I(1). Id., art. III.

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treatment provision does not prevent states from placing restrictions on imported products at the point of entry. But it does require that those restrictions are applied equally to domestic products as well. In addition to the principles promoting non-discriminatory treatment, a third core obligation of GATT is found in Article XI. This provision restricts the use of quantitative restrictions, such as quotas, bans, and licenses, on imported and exported products.48 For our purposes, Article XI can be viewed as largely redundant of Article III’s prohibitions on discriminatory treatment, and if a measure fails under Article III, it will more than likely fail under Article XI as well.49

Article XX Exceptions When examining the compatibility of an FCTC Protocol with these “core obligations,” it is imperative to note that Article XX(b) of GATT 1994 creates a conditional exception for measures that are inconsistent with GATT 1994 but are shown to be based on an overriding policy concern deemed “necessary to protect human . . . life or health.”50 The burden of showing that Article XX(b) applies rests on the party asserting it as an affirmative defense. History shows us that this is a heavy burden, as “necessary” has been interpreted narrowly to mean something akin to a “no less-trade restrictive alternative.”51 In addition to the narrow application of “necessary,” Article XX also includes the chapeau which provides that Article XX’s application is “[s]ubject to the requirement that such measures are not applied in a 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.”52 The WTO Appellate Body has interpreted the chapeau to require that even if a measure qualifies under the enumerated exception, for instance Article XX(b)’s public health and safety exception, it may nonetheless fail if the measure amounts to an arbitrary or unjustified discrimination between countries where the same conditions prevail, or it is merely a disguised restriction on international trade.53 Id. at art. XI. See Thomas J. Schoenbaum, International Trade and Protection of the Environment: The Continuing Search for Reconciliation, 91 AM. J. INT’L L. 268, 273 (Apr. 1997) (discussing the Tuna/Dolphin case as an example of a GATT panel finding a measure inconsistent with Article III, which also triggered application of Article XI). 50 GATT 1994 supra note 44, art. XX(b) (emphasis added). 51 Thailand-Restrictions on Importation of and Internal Taxes on Cigarettes, Nov. 7, 1990, GATT B.I.S.D. (37th Supp.) 200 (1991) [hereinafter Thai Cigarettes Panel Report]. 52 GATT 1994 supra note 44, art. XX. 53 See the decision in United States—Standards for Reformulated and Conventional Gasoline, Appellate Body Report, 35 I.L.M. 603 (1996). 48 49

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The end result is that a member asserting Article XX(b)’s public health exception must meet a heavy burden, requiring that the measure: (1) is based on substantive policy concerns involving the protection of human, animal, or plant, life or health; (2) is necessary to protect human, animal, or plant, life or health; and (3) is applied consistently with the chapeau, so as to avoid arbitrary or unjustified discrimination between countries where the same conditions prevail, and is not merely a disguised restriction on international trade.54

Additional WTO Measures In addition to these core obligations of GATT 1994, which were directly incorporated into the WTO at Article II,55 there are additional measures that were adopted during the Uruguay Round. These additional obligations include the Understanding on Rules and Procedures Governing the Settlement of Disputes, a formal structure for dispute settlement, 56 as well as rules regarding the use of subsidies,57 consumer standards,58 and health and safety measures.59 For this analysis, the aforementioned “core obligations” of GATT 1994, the agreements related to consumer standards and health and safety measures are the most applicable to FCTC protocols intended to regulate tobacco. The agreement related to consumer standards is the Technical Barriers to Trade Agreement (TBT Agreement) and the agreement involving health and safety measures is the agreement on Sanitary and Phytosanitary Measures (SPS Agreement), both of which are explained further in the following sections.

The Technical Barriers to Trade Agreement The TBT Agreement establishes a means to regulate technical barriers to trade that relate to product characteristics and production methods (PPMs). The TBT Agreement was created largely in response to creative WTO members who devised barriers to trade that were nonetheless compliant with the core obligations of GATT.60 The TBT Agreement requires 54 See Schoenbaum, supra note 49, at 276 (discussing Article XX(b)’s development, definition and application by the GATT & WTO panels). 55 The original GATT 1947 was wholly adopted under the WTO Agreement. See WTO Agreement supra note 4, at art. II & Annex 1A. 56 See id. at Annex 2, the Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2 [hereinafter DSU]. 57 See id. at Annex 1A, the Agreement on Subsidies and Countervailing Measures [hereinafter SCM Agreement]. 58 See id. at Annex 1A, the Agreement on Technical Barriers to Trade [hereinafter TBT Agreement]. 59 See id. at Annex 1A, Agreement on the Application of Sanitary and Phytosanitary Measures, [hereinafter SPS Agreement]. 60 Chris Wold, Multilateral Environmental Agreements and The GATT: Conflict and

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member states to apply MFN and national treatment obligations to their application of technical regulations. In addition, parties must ensure that their technical regulations and product standards do not create unnecessary obstacles to trade.61 Under the TBT Agreement “technical regulations” are defined as any “document which lays down product characteristics or their related process or production methods, including the applicable administrative provisions, with which compliance is mandatory.” 62 And standards are defined as “a document approved by a recognized body, that provides for common and repeated use, rules, guidelines or characteristics for products or related process and production methods, with which compliance is not mandatory.” 63 It is important to note that the TBT Agreement specifically lists the protection of human health or safety as a legitimate objective.64

The Sanitary and Phytosanitary Agreement The SPS Agreement creates a framework for addressing the use of sanitary and phytosanitary measures, i.e., health and safety measures, as scientifically unfounded barriers to trade in food and agricultural products. The SPS Agreement recognizes that countries have a right to protect the health and safety of their populations;65 however, it also recognizes that SPS measures may be used to unfairly advantage domestic producers. For these reasons, the SPS Agreement relies on the aforementioned core obligations of GATT 1994, as well as specifically requiring that SPS measures meet certain criteria. These criteria require that: • All measures are based on scientific evidence, and risk assessment; • The measures must recognize the equivalency of alternative measures utilized by other countries to guard against similar risks; • The measures must be transparent; and • Measures may not involve control, inspection, and/or approval procedures which act as unjustified barriers to imports.66 In addition, the SPS Agreement creates a presumption that SPS measures, which are in conformity with an international standard are consistent Resolution? 26 ENVTL. L. 841, 864 (Fall 1996) (noting one country that required products to be labelled in its own language and no other). 61 TBT Agreement supra note 58, art. 2.2. 62 Id. 63 Id. 64 Id. 65 SPS Agreement, supra note 59, art. 2.2 66 Id; see also Terence P. Stewart & David S. Johanson, The SPS Agreement of the World Trade Organization and the International Trade of Dairy Products, 54 FOOD & DRUG L. J. 55, 56–57 (1999).

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with this agreement, so as to encourage members to rely on international standards “on as wide a basis as possible.”67 Lastly, it is important to note that if the SPS Agreement is applicable, it trumps all other provisions of the WTO Agreement.68

Treaty Conflicts Under International Law: The Vienna Convention on the Law of Treaties In the event that WTO member states also become members to the FCTC, there is a possible conflict between obligations owed under the WTO and the FCTC. The principle authoritative source for this subject matter is the Vienna Convention on the Law of Treaties.69 Commentators have suggested that the simplest answer to questions concerning conflicts of successive treaties is that under Article 30 of the Vienna Convention, the treaty that is the latter in time will control.70 In this instance, the proposed entry into force for the FCTC is 2003, and it would therefore control any prior treaty, including the WTO. Sadly, Article 30 does not operate so neatly; rather its rules will only apply in instances where the successive treaties relate to the same subject matter and the parties to the conflict are members of both treaties. Thus, should WTO members A & B become members to the FCTC, then Article 30 would govern a conflict between these countries involving the WTO and FCTC. However, we are still left with the significant problem of determining if the FCTC and WTO relate to the same subject matter. The history of the Vienna Convention suggests that Article 30 was intended to govern successive treaties, such as GATT 1947 and GATT 1994,71 rather than treaties that only minimally overlap. It is arguable whether or not the WTO and the FCTC or its protocols can be characterized as involving the same subject matter. While there would certainly be overlapping and conflicting provisions, this may not SPS Agreement, supra note 59, art. 3.3. Id. 69 Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331, art. 30 (entered into force Jan. 1, 1988) [hereinafter Vienna Convention]. 70 See Shannon Hudnall, Towards a Greener International Trade System: Multilateral Environmental Agreements and the World Trade Organization, 29 COLUM. J. L. & SOC. PROBS. 175, 192–93 (Winter 1996); see also Wold supra note 60, at 910–13; but see Jill Lynn Nissen, Achieving A Balance Between Trade and the Environment; The Need to Amend the WTO/GATT to include Multilateral Environmental Agreements, 28 LAW & POL’Y INT’L BUS. 901, 916–17 (Spring 1997). 71 Wold supra note 60, at 910–13 (citing SIR IAN M. SINCLAIR, THE VIENNA CONVENTION ON THE LAW OF TREATIES 98 (2d ed. 1984) (strictly construing the phrase “relating to the same subject matter” and suggesting that the proper rule to apply for treaties with conflicting provisions that are not substantially related is the maxim generalia specialibus non derogant (general words do not derogate from special words)). 67 68

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be sufficient to apply Article 30. However, if it were determined that the treaties involve the same subject matter, then Article 30’s system of priorities would govern, and in instances where all parties are members to both treaties, the FCTC would govern.72 Lastly, it is informative to note that as between a conflict between parties who are not party to both agreements, the agreement to which both are parties will govern.73

Lex Specialis Derogat Generali In the event that Article 30 does not apply, there are other rules of customary international law that might govern. The first to be considered is the maxim, lex specialis derogat generali,74 which provides that the specific prevails over the general. In this instance, the WTO governs the entire universe of trade regulation, whereas the FCTC’s trade-related protocols are designed to specifically address public health issues related to tobacco consumption. Lex specialis would require that the FCTC’s trade protocols would govern over the broader provisions of the WTO. Note that, similar to the Vienna Convention, lex specialis derogat generali is only applicable in situations involving parties who are members to both treaties.

Consensual Derogation by Parties The concept of consensual derogation by parties is similar to the treatment afforded successive treaties under Article 30 of the Vienna Convention and under lex specialis. Underpinning all these tools of treaty interpretation is the belief that parties to the later treaty have entered into a new obligation that alters related preexisting obligations. The prior methods of treaty interpretation have rested on the timing of the obligations, as well as the specificity of the obligations, whereas consensual derogation incorporates all of these factors by inquiring into what the parties themselves have agreed to. In instances where a subsequent treaty has been entered into by parties bound by an earlier treaty, any conflicts between obligations and rights are deemed to have been waived as to the earlier treaty and will be drawn in favor of the later agreement. Because the traditional rules of treaty interpretation do not provide us with an obvious answer, it is necessary to examine potentially trade restrictive protocols of the FCTC in contrast with any potentially conflicting rules under the WTO. This analysis follows.

72 73 74

Vienna Convention supra note 69, at art. 30, para. 3. Vienna Convention supra note 69, at art. 30, para. 4. LOUIS HENKIN ET AL., INTERNATIONAL LAW: CASES AND MATERIALS 95 (3d ed. 1993).

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Trade Restrictive Protocols to the Framework Convention on Tobacco Control Of the nine protocols that have been identified by the Working Group of the FCTC, there are two protocols containing measures that are particularly likely to fall within the scope of WTO obligations: the Testing and Reporting of Toxic and other Constituents and Tobacco Package Design and Labeling. Admittedly, the protocol concerning Testing and Reporting of Toxic and other Constituents appears facially trade neutral. However, in addition to requiring member states to test and report toxic and other constituents in tobacco products, the Working Group has also indicated that the protocol would include obligations to establish content restrictions on toxic ingredients, nicotine, and other agents involved in nicotine delivery in tobacco products.75 Such product restrictions may fall into conflict with the GATT 1994’s “core obligations” as well as the SPS and TBT Agreements, and will be examined accordingly. The second protocol at issue is the Tobacco Package Design and Labeling Protocol. This protocol is perhaps the most complicated of all the proposed FCTC protocols in terms of potential conflict with the WTO’s trade rules. The Tobacco Package Design and Labeling Protocol will likely involve at least three specific provisions, including (1) minimum package size requirements,76 (2) product labeling requirements,77 and (3) regulation of product claims. In addition to the specific guidelines of the protocol, implementation of the protocol will also involve establishing international standards that will explicitly provide what may and may not appear on tobacco product packaging.78 Similar to the protocol on Testing and Reporting of Toxic and other Constituents, there is potential for conflict with GATT 1994’s “core obligations,” as well as the TBT Agreement. However, there is little or no potential for conflict with the SPS Agreement, as the restrictions under the Tobacco Package Design and Labeling Protocol will not involve any SPS measures.

75 World Health Organization, Subjects of Possible Protocols and Their Relation to the Framework Convention on Tobacco Control, WHO A/FCTC/WG1/3, 19–22 (Sept. 3, 1999). 76 Id. at 22 (smaller packages with fewer cigarettes seem to attract poor and young consumers, because the cash outlay is of greater concern than the price per cigarette). 77 WHO A/FCTC/WG1/3, supra note 75, at 22–23 (noting that labeling provides additional information to motivate persons not to smoke or to give up smoking and educative labeling is generally recognized as an important element in smoking prevention policies). 78 Id.

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Because of the potential conflict of both protocols with the GATT 1994’s “core obligations” and the TBT Agreement, as well as the Testing and Reporting of Toxic and other Constituents Protocol’s conflict with the SPS Agreement, it is necessary to analyze both protocols in relation to a potential challenge under the WTO regime.

POTENTIAL CONFLICTS OF THE PROTOCOLS WITH THE WTO GATT 1994’s “Core Obligations” Compliance with GATT 1994’s “core obligations” can be easily achieved, provided legislation implementing the Testing and Reporting of Toxic and other Constituents and Tobacco Package Design and Labeling Protocols embodies the principles of MFN and national treatment. In order to comply with Article I, the MFN clause, the protocols should ensure that implementing legislation by member states provides unconditional equality of treatment for “like product[s] originating or destined for the territories of all other contracting parties.”79 Additionally this equality of treatment must extend to (1) customs charges and duties; (2) all regulations connected to importation or exportation; and (3) all internal taxes, charges and domestic regulations of product distribution, sale and use.80 Similarly, Article III, the national treatment provision, requires equality of treatment. But unlike MFN, its focus is to ensure equality of treatment between domestic and imported products with respect to all “internal” regulations, taxes, and charges. Therefore, all implementing legislation for trade restrictive protocols should accord “treatment no less favorable than that accorded to like products of national origin”81 and should not be applied in a manner that protects domestic producers. With respect to internal taxes and charges for imported products, Article III again prohibits protectionist measures and additionally requires that such charges may not be “in excess of those applied, directly or indirectly, to like domestic [products].”82 Lastly, under Article XI:1, contracting parties have agreed to the general elimination of quantitative restrictions, such as quotas, bans, and licensing restrictions, on imports and exports. Although both package design and labeling, as well as content restrictions, could involve licensing restrictions or bans on products that fall outside the accepted standards, the protocols should direct domestic implementing legislation to instead utilize Article III:4, which allows a country to “impose laws, regu79 80 81 82

See GATT 1994 supra note 44, art. I. See id. See id. at art. III. See id.

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lations and requirements affecting the internal sales, offering for sale, purchase, transportation, distribution, or use of imported products provided they do not thereby accord treatment to imported products less favorable than that accorded to “like” products of national origin.” 83 Provided that domestic legislation implementing the protocols is carefully drafted, there is little opportunity for conflict with the “core obligations” of GATT 1994. However, if by chance, a FCTC member state’s laws do not comply with these provisions, it may resort to arguing that the legislation is protected under Article XX(b).

The Article XX(b) Exception Article XX(b) provides that discriminatory trade measures that are in violation of GATT 1994’s core obligations may be excepted from WTO enforcement provided the measures are “necessary to protect human . . . health.” Commentators have interpreted the drafting history of Article XX(b) to directly target health and safety measures, such as those devised under the FCTC protocols.84 Further support for the applicability of Article XX(b) can be found in the Thai Cigarettes Panel Report, wherein the panel noted “that smoking constituted a serious risk to human health and that consequently measures designed to reduce the consumption of cigarettes fell within the scope of Article XX(b).”85 Simply falling within the coverage of Article XX(b), however, does not automatically mean that the exception will save a measure that violates GATT 1994. This is because GATT and WTO panels have strictly interpreted the “necessary” requirement of Article XX(b), such that the exception only applies to measures for which there are no other available measures that are more consistent with the GATT and still achieve the desired ends.86 In this instance, it appears that the trade-related protocols to the FCTC can be drafted to ensure equal treatment to the products of all member states, as well as between domestic and imported products. So, even though the subject matter of the protocols will bring it within Article XX(b), the safe harbor will not apply because the measures fail under the “necessary” examination, because there are available methods to achieve the same beneficial ends without violating GATT 1994. This should not alter the FCTC’s effectiveness, because, as previously discussed, member states will not need to resort to Article XX(b) if the domestic implementing legislation is drafted in accordance with GATT 1994’s core obligations. Thai Cigarettes Panel Report, supra note 51, at para. 75. Mark E. Foster, Trade and Environment: Making Room for Environmental Trade Measures Within the GATT, 71 S. CAL. L. REV. 393, 427 (Jan. 1998). 85 Thai Cigarettes Panel Report, supra note 51, at para. 73. 86 Id. at para. 74. 83 84

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In addition to examining the protocols in accordance with GATT 1994, it is necessary to analyze the protocols in light of any other relevant WTO provisions. This analysis follows.

The Tobacco Package Design and Labeling Protocol and the TBT Agreement Under the Tobacco Package Design and Labeling Protocol, the Working Group has specifically identified three areas for regulation.87 These include: (1) minimum package size requirements;88 (2) labeling requirements;89 and (3) regulation of product claims.90 The Preamble to the TBT Agreement specifically states that the purpose of the agreement is “to ensure that technical regulations and standards, including packaging, marking and labeling requirements, and procedures for assessment of conformity with technical regulations and standards do not create unnecessary obstacles to trade.” 91 The TBT Agreement governs technical regulations, such as those proposed under the protocol, establishing “product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory . . . [as well as regulations which] include or deal exclusively with terminology, symbols, packaging, marking or labeling requirements as they apply to product, process or production methods.”92 Under Article 2, the TBT Agreement requires that members apply GATT 1994’s principles of MFN and national treatment, in addition to which the TBT requires that members “ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.” 93 This requires that technical regulations are not “more trade-restrictive than necessary 87 Note that the Tobacco Package Design and Labeling Protocol does not appear to involve regulations that would bring it under the SPS Agreement. The SPS Agreement applies to any “measure applied: (b) to protect human . . . health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs.” Arguably measures intended to regulate (1) minimum package size requirements, (2) labeling requirements, and (3) regulation of product claims might fall under the SPS Agreement (making the TBT Agreement inapplicable, because of the SPS Agreements exclusivity clause). However, the SPS Agreement is more likely limited to specific measures such as content restrictions on toxins, rather than extended measures to protect health and safety such as labeling restrictions. 88 See WHO A/FCTC/WG1/3 supra note 29, at 22–23. 89 See id. 90 See id. 91 TBT Agreement, supra note 58, pmbl. 92 Id. at Annex 1:1. 93 Id. at art. 2.1 and 2.2.

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to fulfill a legitimate objective, taking account of the risks non-fulfillment would create.”94 The TBT Agreement specifically identifies the protection of human health or safety as a legitimate objective.95 Under the least-traderestrictive analysis, similar to that which has been developed under Article XX, a challenge to a regulation under the TBT Agreement would require that the challenging member “demonstrate that there was another measure that is reasonably available, fulfills the legitimate objective of the government, and is significantly less restrictive to trade.” 96 Arguably the multilateral nature of the FCTC and its purpose (to establish international rules for the regulation of tobacco) will raise the bar to any member attempting to challenge measures taken in accordance with the protocol. Additionally, the TBT Agreement specifically directs members to rely on relevant international standards as a basis for their technical regulations.97 Although the protocols of the FCTC might not technically qualify as international standards, implementing legislation designed to track the Tobacco Package Design and Labeling Protocol’s mandatory labeling laws and restrictions on product claims and package size should be treated similarly to regulations based on an international standard. In addition, the WHO can lend further support for tobacco control by establishing binding regulations under its Article 21 authority, which tracks the language of the protocol.98 The final requirements of the TBT Agreement involve the notice and transparency provisions of the TBT Agreement.99 The notice provision will only apply if a “relevant international standard does not exist, or the technical content of a proposed regulation is not in accordance with the technical content of relevant international standards, and if the technical regulation may have a significant effect on trade or other members.”100 The transparency provisions require only that all technical regulations adopted are published promptly or otherwise made available, as well as ensuring that there is a reasonable interval of time between the publication of the technical regulations and their entry into force. 101 Id. at art. 2.2. Id. 96 Elliot B. Staffin, Trade Barrier or Trade Boon? A Critical Evaluation of Environmental Labeling and its Role in the “Greening” of World Trade, 21 C OLUM. J. E NVTL. L. 205, 239 (1996). 97 TBT Agreement, supra note 58, at art. 2.4. 98 WHO action under Article 21 is suggested, because Article 21 allows the WHO to develop regulations related to: “(4) standards for the safety, purity, and potency of biological, pharmaceutical, and similar products moving in international commerce; and (5) advertising and labeling requirements for such products”. See WHO Constitution, art. 21. 99 TBT Agreement, supra note 58, at art. 2.9. 100 Id. at art. 2.9. 101 Id. at arts. 2.11 and 2.12. 94 95

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Provided that an FCTC member state implements legislation, which does not diverge from the language of the protocol and which complies with all notice and transparency provisions that are applicable, it appears unlikely that a WTO member state could mount a successful challenge under the TBT Agreement.

The Testing and Reporting of Toxic and Other Constituents and the SPS and TBT Agreements The FCTC protocol on Testing and Reporting of Toxic and other Constituents will likely require member states to implement procedures for testing and reporting toxic and other constituents, such as nicotine and agents involved in nicotine delivery. Standardized record keeping and testing requirements are facially trade neutral; however, the Working Group on the FCTC has also indicated that the protocol would establish content restrictions, including limitations on certain toxic ingredients, including nicotine and other agents involved in nicotine delivery in tobacco products.102 Such measures arguably fall into conflict with the SPS and TBT Agreements. Similar to the analysis in the prior section, a protocol establishing content restrictions based on the FCTC protocol would likely pass muster under the TBT Agreement. Specifically this would require that the implementing legislation complies with GATT 1994’s “core obligations.” In addition, the legislation could not be a disguised barrier to trade, and it must meet the least-trade-restrictive alternative test, as well as complying with all relevant notice and transparency provisions. A content restriction developed under the Testing and Reporting of Toxic and other Constituents Protocol might also conflict with the SPS Agreement. The SPS Agreement is intended to govern the application of health and safety measures in order to ensure that such measures are not disguised barriers to trade. The SPS Agreement places a heavy emphasis on international standards in an effort to encourage WTO members to rely on internationally adopted health standards rather than unilaterally developed internal standards that may involve protectionist motivations. Specifically, the SPS Agreement requires that members: base their health and safety regulations on science; refrain from using such measures as disguised barriers to trade; recognize the equivalency of differing procedures employed by other countries for protecting against similar risks; utilize risk assessments in designing health and safety measures; ensure that such regulations are transparent; and refrain from using control, inspection, and approval procedures as trade barriers.103 102 103

See WHO A/FCTC/WG1/3 supra note 29, at 19–22. SPS Agreement, supra note 59, at art. 2

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Provided that the protocol is drafted in a manner consistent with the requirements of the SPS Agreement, domestic legislation implementing the protocol should also comply with the SPS Agreement. By design, the FCTC and its protocols are intended to be constructed on a scientific basis and are not intended to be a disguised barrier to trade. The FCTC and the protocols will be further strengthened if the WHO also undertakes a comprehensive risk assessment of tobacco and the proposed tobacco controls. Such a risk assessment is mandated by the SPS Agreement and would help to legitimize domestic implementing legislation and insulate the measures from challenges by WTO members. Lastly, member states creating implementing legislation should be encouraged to comply with all transparency requirements, as well as avoid creating control, inspection, and approval procedures as trade barriers.104

CONCLUSION The FCTC and its subsequent protocols are intended to protect the world’s population from the recognized dangers of smoking. Provided the drafters of the FCTC are mindful of the basic requirements of the WTO, specifically the “core obligations” of GATT 1994, it will be possible to create obligations under the FCTC that are consistent with the FCTC’s underlying purpose and are also WTO compliant. The FCTC will be a multilateral instrument intended to promote health and safety and simultaneously empower individual states to combat the tobacco epidemic. By relying on science, and devising measures that have as their foundation the proven debilitating health effects of tobacco consumption, it will be possible to create measures whose sole focus is the protection of human health without constructing unnecessary obstacles to trade.

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Id.

BIBLIOGRAPHY RELATING TO TOBACCO CONTROL AND THE THAI CIGARETTES CASE Books and Monographs AGINAM, OBIJIOFOR. (2005). GLOBAL HEALTH GOVERNANCE: INTERNATIONAL LAW AND PUBLIC HEALTH IN A DIVIDED WORLD. B ERMANN , G EORGE A. & P ETROS C. M AVROIDIS EDS. (2006). T RADE AND HUMAN HEALTH AND SAFETY. WORLD TRADE ORGANIZATION. BRIGDEN, LINDA W. & JOY DE MEYER (2003). TOBACCO CONTROL POLICY: STRATEGIES, SUCCESSES, AND SETBACKS. PETO, RICHARD ET AL. (1994). MORTALITY FROM SMOKING IN DEVELOPED COUNTIRES 1950–2000. RABIN, ROBERT L. & STEPHAN D. SUGARMAN. (2001). REGULATING TOBACCO. ROEMER, RUTH. (1982). LEGISLATIVE ACTION TO COMBAT THE WORLD SMOKING EPIDEMIC. ROEMERD, RUTH ET AL. (1993). LEGISLATIVE ACTION TO COMBAT THE WORLD TOBACCO EPIDEMIC. WORLD HEALTH ORGANIZATION (2d ed.). S HEPHERD , P HILIP L. (1985). T RANSNATIONAL C ORPORATIONS AND THE I NTERNATIONAL C IGARETTE I NDUSTRY, IN P ROFITS , P ROGRESS AND POVERTY: CASE STUDIES OF INTERNATIONAL INDUSTRIES IN LATIN AMERICA (R.S. Newfarmer ed.). S MITH, R ICHARD. (2003). G LOBAL P UBLIC G OODS FOR H EALTH: H EALTH ECONOMIC AND PUBLIC HEALTH PERSPECTIVES. STUDLAR, DONLEY T. (2002). TOBACCO CONTROL: COMPARATIVE POLITICS IN THE UNITED STATES AND CANADA.

Articles Ala’I, Padideh, Free Trade or Sustainable Development? An Analysis of the WTO Appellate Body’s Shift to a More Balanced Approach to Trade Liberalization, 14 AM. U. INT’L L. REV. 1129 (1999). Afilalo, Ari & Sheila Foster. The World Trade Organization’s Anti-Discrimination Jurisprudence: Free Trade, National Sovereignty, and Environmental Health in the Balance, 15 GEO. INT’L ENVTL. L. REV. 633 (2003). Appel, Brian S., The Developing World Takes on the Tobacco Industry: An Analysis of Recent Litigation and its Future Implications, 16 AM. U. INT’L L. REV. 809 (2001).

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Appleberry, Robin, Breaking the Camel’s Back: Bringing Women’s Human Rights to Bear on Tobacco Control, 13 YALE J.L. & FEMINISM 71 (2001). Atik, Jeffrey, Identifying Antidemocratic Outcomes: Authenticity, Self-Sacrifice, and International Trade, 19 U. PA. J. INT’L ECON. L. 229 (1998). Bartecchi, Carl E. et al., The Global Tobacco Epidemic, SCI. AM. (May 1995). Bartkowski, Alicia M., The World Health Organization’s Framework Convention on Tobacco Control, Free Trade and the American Example, 2 J. INT’L BUS. & L. 146 (2003). Bloche, Gregg, WTO Deference to National Health Policy: Toward An Interpretive Principle, 5 J. INT’L ECON. L. 825 (2002). Bump, Christine P., Close But No Cigar: The WHO Framework Convention on Tobacco Control’s Futile Ban on Tobacco Advertising, 17 EMORY INT’L L. REV. 1251 (2003). Burns, David M., Environmental Tobacco Smoke: The Price of Scientific Certainty, 84 J. NAT’L CANCER INST. 1387 (1992). Carmody, Chi, When “Cultural Identity was not an Issue”: Thinking about Canada—Certain Measures Concerning Periodicals, 30 LAW & POL’Y INT’L BUS. 231 (1999). Chapman, Simon, Tobacco and Deforestation in the Developing World, 3 TOBACCO CONTROL 191(1994). Charnovitz, Steve, Environment and Health Under WTO Dispute Settlement, 32 INT’L LAW. 901 (1998). Charnovitz, Steve, A Taxonomy of Environmental Trade Measures, 6 GEO. INT’L ENVTL. L. REV. 1 (1993). Charnovitz, Steve, Exploring the Environmental Exceptions in GATT Article XX, 25 J. WORLD TRADE 37 (1991). Crow, Melissa E., Smokescreens and State Responsibility: Using Human Rights Strategies to Promote Global Tobacco Control, 29 YALE J. INT’L L. 209 (2004). Davis, Ronald M., Slowing the March of the Marlboro Man, 309 BRIT. MED. J. 889 (1994). Dhooge, Lucien J., Smoke Across the Waters: Tobacco Production and Exportation as International Human Rights Violations, 22 FORDHAM INT’L L.J. 355 (1998). Fidler, David P., The Future of the World Health Organization: What Role for International Law?, 31 VAND. J. TRANSNAT’L L. 1079 (1998). Fidler, David P., Public Health and International Law: Introduction to Written Symposium on Public Health and International Law, 3 CHI. J. INT’L L. 1 (2002). Eckhardt, Joseph N., Balancing Interests in Free Trade and Health: How the WHO’s Framework Convention on Tobacco Control Can Withstand WTO Scrutiny, 12 DUKE J. COMP. & INT’L L. 197 (2002). Foege, William H., Essay: The “So-What” Factor: How Will New and Emerging Tobacco Regulation Strategies Influence Public Health Here and Abroad?, 25 WM. MITCHELL. L. REV. 471 (1999).

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Fontham, Elizabeth T.H. et al., Environmental Tobacco Smoke and Lung Cancer in Nonsmoking Women: A Multicenter Study, 271 J.A.M.A. 1752 (1994). Forrest, Michelle, Using the Power of the World Health Organization: The International Health Regulations and the Future of International Health Law, 33 COLUM. J.L. & SOC. PROBS. 153 (2000). Gruner, Heidi, Note: The Export of U.S. Tobacco Products to Developing Countries and Previously Closed Markets, 28 LAW & POL’Y INT’L BUS. 217 (1996). Hageman, Andrea J., U.S. Tobacco Exports: The Dichotomy Between Trade and Health Policies, 1 MINN. J. GLOBAL TRADE 175 (1992). Johnson, Paula C., Regulation, Remedy and Exported Tobacco Products: The Need for a Response from the United States Government, 25 SUFFOLK UNIV. L. REV. 1 (1991). Kushner, James A., Tobacco Regulation, Litigation, and the Proposed MegaSettlement: America’s Policy of Ethnic Cleansing, 27 SW. U. L. REV. 673 (1998). LaFrance, Arthur B., Tobacco Litigation: Smoke, Mirrors and Public Policy, 26 AM. J.L. & MED. 187 (2000). Liu, Bo-Qi et al., Emerging Tobacco Hazards in China: Part 1, Perspective Proportional Mortality Study of One Million Deaths, 317 BRIT. MED. J. 1411 (Nov. 21, 1998), available at http://www.bmj.cgi.content/full/317/ 7170/1411 (last visited Sept. 17, 1999). Malcolm, David, Tobacco, Global Public Health, and Non-Governmental Organizations: An Eminent Pandemic or Just Another Legal Product? 28 DENV. J. INT’L L. & POL’Y 1 (1999). Marsh, Susan W., U.S. Tobacco Exports: Toward Monitoring and Regulation Consistent with Acknowledged Health Risks, 15 W IS. I NT’L L.J. 29 (1996). Maruyama, Warren H., A New Pillar of the WTO: Sound Science, 32 INT’L LAW. 651 (1998). Matheny III, Richard L., In the Wake of the Flood: “Like Products” and Cultural Products After the World Trade Organization’s Decision in Canada Certain Measures Concerning Periodicals, 147 U. PA. L. REV. 245 (1998). McDorman, Ted L., U.S.-Thailand Trade Disputes: Applying Section 301 to Cigarettes and Intellectual Property, 14 MICH. J. INT’L L. 90 (1992). Meier, Benjamin M. & Larisa M. Mori, The Highest Attainable Standard: Advancing A Collective Human Right to Public Health, 37 COLUM. HUM. RTS. L. REV. 101 (2005). Niu, Shi-Ru et al. Emerging Tobacco Hazards in China: Part 2, Early Mortality Results from a Prospective Study, 317 BRIT. MED. J. 1423 (Nov. 21, 1998). Onzivu, William, Public Health and the Tobacco Problem: International Legal Implications for Africa, 29 GA. J. INT’L & COMP. L. 223 (2001). Paltrowitz, Julie H., Note and Comment, A “Greening” of the World Trade Organization? A Case Comment on the Asbestos Report, 26 BROOK. J. INT’L L. 1789 (2001).

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Parker, Matt, Blowing Smoke? A Reappraisal of U.S. Tobacco Policy in China, 21 U. PA. J. INT’L ECON. L. 211 (2000). Pierce, John P., Progress and Problems in International Public Health Efforts to Reduce Tobacco Usage, 12 ANN. REV. PUB. HEALTH 383 (1991). Roemer, Ruth, Legislation to Control Smoking: Leverage for Effective Policy, 9 CANCER DETECTION AND PREVENTION 99 (1986). Schmertz, John R. & Mike Meier, Before Dispute Settlement Panel of W.T.O, U.S. Prevails Over Canada Regarding its Imposition of Discriminatory Taxes and Postal Rates on U.S. Magazine Imports, 3 INT’L L. UPDATE 44 (1997). Stebbins, Kenyon R., Tobacco or Health in the Third World: A Political Economy Perspective with Emphasis on Mexico, 17 INT’L L.J. HEALTH SERVS. 521 (1987). Taylor, Allyn L., An International Regulatory Strategy for Global Tobacco Control, 21 YALE J. INT’L L. 257 (1996). Volansky, Mark J., Achieving Global Health: A Review of the World Health Organization’s Response, 10 TULSA J. COMP. & INT’L L. 223 (2002). Weissman, Robert, A Long, Strange TRIPS: The Pharmaceutical Industry Drive to Harmonize Global Intellectual Property Rules, and The Remaining WTO Legal Alternatives Available to Third World Countries, 17 U. PA. J. INT’L ECON. L. 1069 (1996). Williamson, Crystal H., Comment, Clearing the Smoke: Addressing the Tobacco Issue as an International Body, 20 PENN. ST. INT’L L. REV. 587 (2002). Wirth, David A., The Role of Science in the Uruguay Round and NAFTA Trade Disciplines, 27 CORNELL INT’L L.J. 817 (1994). Woo, Alyssa, Note, Health Versus Trade: The Future of the WHO’s Framework Convention on Tobacco Control, 35 VAND. J. TRANSNAT’L L. 1731 (2002).

Selected Materials World Health Assembly, An International Strategy for Tobacco Control, WHA Res. 48.11, 48th Assembly, 12th plenary meeting, Annex 1, Agenda Item 19, WHO Doc. A48/VR/12 (1995). World Health Organization, An International Treaty for Tobacco Control, at http://www.who.int/features/2003/08/en/ (last visited Oct. 30, 2007). World Health Organization, Framework Convention on Tobacco Control, May 21, 2003, World Health Assembly Resolution 56.1, Forward, at v, WHA56.1, HD 9130.6, available at http://www.who.int/tobacco/ framework/WHO_FCTC_english.pdf (last visited Oct. 30, 2007). World Health Organization, Primary Health Care: Report of the International Conference on Primary Health Care, Alma-Ata, Union of Soviet Socialist Republics, 6–12, Geneva (Sept. 1978). World Health Organization, Subjects of Possible Protocols and Their Relation to the Framework Convention on Tobacco Control, produced by the First

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Meeting of the World Health Organization, T HE W ORLD H EALTH R EPORT 1999: M AKING A D IFFERENCE (Geneva, 1999), available at http://www.who.int/gb/fctc/PDF/Wg1/e1t3.pdf (last visited Oct. 30, 2007). World Health Organization, The First Conference of the Parties to the WHO Framework Convention on Tobacco Control, available at http://www. who.int/tobacco/fctc/tobacco%20factsheet%20for%20COP4.pdf. The World Bank, Curbing the Epidemic: Governments and the Economics of Tobacco Control, at http://www.worldbank.org/tobacco/reports.htm (last visited Oct. 30, 2007).

U.S. Decisions and Other Materials Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006). Federal Cigarette Labeling and Advertising Act, Pub. L. No. 89-92, 79 Stat. 282 (1965) (codified as amended at 15 U.S.C. §§ 1331–1340 (2000)). Liggett Group Inc. v. Engle, 853 So. 2d 434 (Fla. Dist. Ct. App. 2003). Master Settlement Agreement, at http://www.naag.org/backpages/naag/ tobacco/msa/msa-pdf/1109185724_1032468605_cigmsa.pdf (last visited Oct. 30, 2007). Congressional Research Reports for the People, FDA Regulation of Tobacco Products: A Policy and Legal Analysis, RL32619, Dec. 3, 2004, at http://opencrs.cdt.org/document/RL32619/2004-12-03%2000:00:00. U.S. Department of Health, Education & Welfare, Smoking and Health: Report of the Advisory Committee to the Surgeon General of the Public Health Service (1964). Connolly, Gregory N., Statement, Smoking and World Health: Hearing Before the Senate Committee on Labor and Human Resources, 101st Cong., 2d Sess. 29 (1990). Foege, William H. Executive Director, The Carter Center. Statement, Smoking and World Health: Hearing Before the Senate Committee on Labor and Human Resources, 101st Cong., 2d Sess. 3 (1990).

PART II

AIR POLLUTION: THE REFORMULATED GASOLINE CASE

AIR POLLUTION: THE REFORMULATED GASOLINE CASE The first case decided by the World Trade Organization (WTO) Dispute Settlement Body (DSB) created in the Uruguay Round in 1994 involved a dispute between the United States and Venezuela/ Brazil over the implementation of the U.S. Clean Air Act. The U.S. Clean Air Act (CAA) was originally enacted in 1963 and aims at preventing and controlling air pollution in the United States. In 1990, the U.S. Congress amended the U.S. Clean Air Act to instruct the U.S. Environmental Protection Agency (EPA) to issue regulations on the composition and emissions effects of gasoline in order to improve air quality in the most polluted areas of the country by reducing vehicle emissions of toxic air pollutants and ozone-forming volatile compounds. The amended CAA divides the market for the sale of gasoline in the United States into two areas. One area comprises parts of the United States that are considered more polluted. Here, only reformulated gasoline is allowed to be sold. In other, less polluted areas, the sale of conventional gasoline is permitted. The CAA sets out compositional and performance specifications for reformulated and conventional gasoline. Conventional gasoline was permitted to have emission levels no higher than those in 1990. With respect to reformulated gasoline, performance specifications required a 15% reduction of emissions of toxic air pollutants (toxics) and volatile organic compounds (VOCs). In addition, the NOx emissions levels of reformulated gasoline were not permitted to be higher than those in 1990. The CAA instructed the EPA to determine the quality of gasoline in 1990. Reformulated and conventional gasoline would be compared to this quality in the future. These determinations are known as “baselines.” Subsequently, the EPA distinguished between two types of baselines: “individual baselines,” which represent the quality of gasoline produced by a specific refiner, and a “statutory baseline,” intended to reflect average U.S. 1990 gasoline quality. According to EPA’s final 1994 rule, domestic refiners in operation for at least six months in 1990 had the choice of using one of several methods to determine their baseline, including an “individual baseline.” The regulations did not provide for the possibility of using individual baselines for other domestic or foreign refiners. These were required to use a “statutory baseline.” In some cases, the “individual baselines” were more advantageous than the statutory baseline. After the adoption of the EPA regulation, Venezuela

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protested the disparate treatment of domestic and foreign refiners and threatened to bring a complaint under the General Agreement on Tariffs and Trade (GATT). In 1994, the United States agreed to amend its regulation. Subsequently, the EPA issued proposed regulations that permitted foreign refiners to use individual baselines. However, the U.S. Congress, under pressure from domestic oil producers and some environmental groups, prevented EPA from implementing the proposed regulations. As a consequence, on January 23, 1995, Venezuela requested WTO consultations with the United States. These were held on February 24, 1995, but did not lead to a solution. On March 25, 1995, Venezuela requested the establishment of a panel. The Dispute Settlement Body established a panel on April 10, 1995. On April 10, 1995, Brazil also requested consultations in the same matter. After consultations held on May 1, 1995, did not lead to a satisfactory solution, Brazil also requested the establishment of a panel. The panel was established on May 31, 1995. Both complaints were examined by the same panel. Australia, Canada, the European Communities, and Norway reserved their third-party rights. Any WTO member having a substantial interest in a matter before a panel is permitted to be heard by the panel and to make written submissions. The complainants alleged violations of Articles I:1 (General Most-FavoredNation Treatment), III:1, III:4 (National Treatment on Internal Taxation and Regulation) of the GATT, Articles 2.1 and 2.2 of the Agreement on Technical Barriers to Trade (TBT) (on the preparation, adoption and application of technical regulations), as well as nullification and impairment of benefits. On January 17, 1996, the panel issued its final report in which it concluded that the gasoline regulations were inconsistent with Article III:4 GATT, which requires that imported like products must be treated no less favorably than like domestic products with respect to laws and regulations. Moreover, the panel held that the gasoline regulations were not justified under GATT Article XX(g) as a measure relating to the conservation of exhaustible natural resources. On February 21, 1996, the United States notified its decision to appeal the Panel Report and filed its submission on March 4, 1996. In its report, issued, April 29, 1996, the Appellate Body reversed the panel’s finding that the U.S. measure did not fall within the scope of Article XX(g) of GATT 1994. It concluded that the U.S. measure qualified for provisional justification under Article XX(g) but failed to meet the requirements of the introductory clause (chapeau) of Article XX, which provides that measures may not be applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised barrier to trade. The United States announced implementation of the recommendations of the DSB as of August 19, 1997.

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The first chapter of this case study, Chapter 6, by Kenichiro Urakami, explores the function of the chapeau of GATT Article XX in the Reformulated Gasoline, as well as in the later Shrimp-Turtle, decision. The following chapter by Christopher John Duncan examines the development of the U.S. gasoline rule leading to the WTO dispute and the deficiencies of the U.S. regulatory process in coordinating and appreciating the interests of foreign countries. Chapter 8, by Victoria H. Imperiale, analyzes the term “exhaustible natural resource” used in GATT Article XX(g). Finally, Lewis Briggs, in the last chapter of this case study, focuses on the interpretation and application of Article XX(g) by the Appellate Body and the role of precedent.

CHAPTER 6

UNSOLVED PROBLEMS AND IMPLICATIONS FOR THE CHAPEAU OF GATT ARTICLE XX AFTER THE REFORMULATED GASOLINE CASE Kenichiro Urakami

INTRODUCTION Five years have passed since the World Trade Organization (WTO) was founded. The dispute settlement system of the WTO has been working well so far. The fact that a large number of cases have been brought shows the credibility with which members view the WTO dispute settlement system.1 Ironically, however, this success has given rise to a new type of criticism. Recent critics have attacked the “powerful WTO.”2 The point is not the way the panels and the Appellate Body have dealt with disputes, but the extent of the discretion allocated to them.3 More or less, judicial lawmaking is unavoidable, once a judicial body is created.4 However, the discretionary power of panels and the Appellate Body makes the situation very problematic in the context of trade and the environment. It seems that the WTO was designed to be a forum of promoting free trade and not equipped with resources necessary to reconcile As of March 23 of 2000, 191 complaints were brought before the WTO dispute settlement. WTO Secretariat, Overview of the State-of-play of WTO Dispute, at http://www.wto.org/wto/dispute/bulletin.htm (last visited Apr. 11, 2000). 2 See, e.g., WTO Secretariat, Criticism, Yes . . . Misinformation, No, at http://www. wto.org/wto/seattle/english/misinf_e/00list_e.htm (last visited Apr. 11, 2000). 3 For example, the Appellate Body itself described its discretional power in interpreting treaty language with “the image of accordion.” Japan—Taxes on Alcoholic Beverages, Appellate Body Report, WT/DS8/AB/R, at 23 (Oct. 4, 1996). 4 HERSCH LAUTERPACHT, THE DEVELOPMENT OF INTERNATIONAL LAW BY THE INTERNATIONAL COURT 155 (1982). 1

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two values that come from completely different perspectives. Panel resolutions of those issues might threaten to delegitimize the WTO dispute settlement system.5 Based on this background, this chapter focuses on the introductory clause (also called “the chapeau”) of Article XX of the General Agreement of Tariffs and Trade (GATT), which has come to play a critical role in deciding the relationship between trade and the environment. The first section of this chapter briefly reviews the basic structure of GATT and prior practices including the facts of the Gasoline case and the ShrimpTurtle case. The second section discusses interpretative problems raised in the Gasoline case and further evolution of the law in the Shrimp-Turtle case. Finally, the third section discusses the limitation of the chapeau.

FRAMEWORK OF THE CHAPEAU OF GATT ARTICLE XX Text of GATT Article XX of GATT constitutes a conditional exception to GATT obligations. Although the word “environment” is not used, Article XX may be applied to justify environmentally inspired rules that conflict with other provisions of GATT.6 The relevant provision reads: Subject to the requirement that such measures are not applied in a 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 contracting party of measures: ... (b) necessary to protect human, animal or 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; Thus, even if a measure satisfies the test of these subparagraphs of Article XX, it would not be justified if the measure constitutes (1) arbitrary or unjustifiable discrimination between the countries where the same Jeffery L. Dunoff, The Death of the Trade Regime, 10 EUR. J. INT’L. L., 733, 754 (1999). Thomas J. Schoenbaum, International Trade and Protection of the Environment: The Continuing Search for Reconciliation, 91 AM. J. INT’L L. 268, 273(1997); See also Steve Charnovitz, Exploring the Environmental Exceptions in GATT Article XX, 25 J. WORLD TRADE 37, 38–47 (1991) (analyzing “legislative history” of Article XX). 5 6

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conditions prevail; or (2) a disguised restriction on international trade. The introductory clause of Article XX is usually called “the chapeau.”

Prior Practice Under GATT/WTO Dispute Settlement Although the chapeau has frequently been cited by member states, it has rarely been applied.7 This is explained by the fact that panels developed the practice of examining first whether the measure at issue fell under one of the subparagraphs in Article XX.8 Initially, no measure passed this first step. Consequently, panels saw no need to proceed to the chapeau.9 After the creation of the WTO, however, the chapeau was “discovered” by the Appellate Body. 10 Both in United States—Standards for Reformulated and Conventional Gasoline11 (the Gasoline case) and United States—Import Prohibition of Certain Shrimp and shrimp Products12 (the ShrimpTurtle case), the chapeau played a significant role in the Appellate Body’s decision. The next part will briefly review factual aspects of the two cases, leaving further analysis for the following section.

The Gasoline Case The dispute related to the Gasoline Rule enacted by the U.S. Environmental Protection Agency (EPA) pursuant to the Clean Air Act of 1990. Beginning in January 1995, the Gasoline Rule permitted only gasoline of a specified cleanliness (“reformulated gasoline”) to be sold to consumers in the most polluted areas. In the rest of the country, only gasoline no dirtier than that sold in the base year of 1990 (“conventional gasoline”) could be sold.13 The Gasoline Rule was equally applied to all the refiners, blenders, and importers of gasoline in the United States. However, with regard to the more detailed baseline-establishment rule 7 There were only two cases that applied the chapeau, the two panels putting emphasis on the publicity of the measure. See United States—Prohibition of Imports of Tuna Products From Canada, Panel Report, Feb. 22, 1982, GATT B.I.S.D. (29th Supp.), at 91 (1982); United States—Imports of Certain Automotive Spring Assemblies, Panel reported May 26, 1983, GATT B.I.S.D. (30th Supp.), at 107 (1983). 8 WTO Secretariat, GATT/WTO Dispute Settlement Practice Relating to Article XX, Paragraph (b), (d), and (g) of GATT, WT/CTE/W/53/Rev.1, at 4 (Oct. 26, 1998). 9 Id. 10 Schoenbaum, supra note 6, at 274. 11 United States—Standards for Reformulated and Conventional Gasoline: Appellate Body Report, WT/DS2/AB/R (Apr. 29, 1996) [hereinafter Gasoline AB Report]. 12 United States—Import Prohibition of Certain Shrimp and Shrimp Products: Appellate Body Report, WT/DS58/AB/R (Oct. 12, 1998) [hereinafter, Shrimp-Turtle AB Report]. 13 Gasoline AB Report, supra note 11, at 4.

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to assess the cleanness of the gasoline, the EPA treated domestic gasoline and foreign gasoline differently. It required importers to use a rigid statutory baseline, while it allowed domestic refiners to use a flexible individual baseline.14 Venezuela made an initial claim under the GATT 1947 against the United States, alleging that the baseline establishment rule contained in the Gasoline Rule was inconsistent with national treatment under Article III of GATT.15 However, at that time, the complaint was subsequently withdrawn as part of a negotiated settlement between the two governments.16 Consequently, in March 1994, the EPA offered to change the Gasoline Rule in exchange for Venezuela’s promise to drop its complaint. The details of this negotiated settlement evolved during a secret meeting between Venezuela and the United States. 17 Nevertheless, when the U.S. Congress became aware of this deal, it blocked the proposed rule change.18 Subsequently, Venezuela filed its complaint in January 1995 before the WTO.19 The panel admitted that the Gasoline Rule was inconsistent with Article III and could not be justified under paragraphs (b), (d), or (g) of Article XX.20 It did not proceed to the examination of the chapeau. The United States appealed the panel’s finding on Article XX(g). The Appellate Body found that the baseline establishment rules fell within the terms of Article XX(g), but failed to meet the requirements of the chapeau. 21

The Shrimp-Turtle Case The dispute related to the Endangered Species Act of 1973 (ESA), which lists five species of sea turtles and prohibits their capture within the United States or on the high seas. Pursuant to the ESA, the United States requires shrimp trawlers to use turtle excluder devices (TEDs) in their nets when fishing in areas where there is a significant likelihood of encoun14

Id. Jennifer Schultz, The Demise of “Green” Protectionism: The WTO Decision on the US Gasoline Rule, 25 DENV. J. INT’L L. & POL’Y 1, 12 (1996). 16 Id. 17 Id. 18 Congress denied the funding necessary for the implementation of the changed rule. See Aubry D. Smith, Executive Branch Rulemaking and Dispute Settlement in the World Trade Organization: A Proposal to Increase Public Participation, 94 MICH. L. REV. 1267, 1268 (1996). 19 Schultz, supra note 15, at 12. 20 United States—Standards for Reformulated and Conventional Gasoline: Panel Report, WT/DS2/R, at paras. 6.1–6.42 (Jan. 29, 1996) [hereinafter Gasoline Panel Report]. 21 Gasoline AB Report, supra note 11, at 13–30. 15

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tering sea turtles.22 The United States did not allow the importation of shrimp unless the harvesting nation was certified to have a regulatory program and an incidental take rate comparable to that of the United States (the “Nation-by-Nation” approach).23 In practice, countries that had any of the five species of sea turtles within their territory were obliged to impose the use of TEDs on their fishermen, if they want to be certified and export shrimp products to the United States.24 In October 1996, India, Malaysia, Pakistan, and Thailand, acting jointly, requested consultations with the United States. In January 1997, they requested the establishment of a WTO panel, alleging the United States violated, inter alia, Article XI of GATT.25 The panel found the ban imposed by the United States inconsistent with GATT Article XI and held that it could not be justified under GATT XX.26 In determining the applicability of Article XX, the panel examined the chapeau first, instead of applying the subparagraphs of Article XX.27 The panel concluded that the regulation was not justified under the chapeau of Article XX, because the unilateral measure adopted by the United States would undermine the multilateral trading system.28 The Appellate Body criticized, inter alia, the way the panel applied Article XX,29 and found that the measure met the requirements of Article XX(g) but failed to meet the requirements of the chapeau.30

THE CHAPEAU: INTERPRETIVE PROBLEMS RAISED IN THE GASOLINE CASE AND FURTHER EVOLUTION IN THE SHRIMP-TURTLE CASE Meaning of “Good Faith” In the Gasoline case, the basic function of the chapeau was understood as “to prevent abuse of the exceptions of Article [XX].” 31 The Appellate Body stated: The chapeau is animated by the principle that while the exceptions of Article XX may be invoked as a matter of legal right, Shrimp-Turtle AB Report, supra note 12, at para. 2. Id., paras. 4–5. 24 Id., para. 5. 25 United States—Import Prohibition of Certain Shrimp and Shrimp Products, Panel Report, WT/DS58/R, paras. 1.1–1.2 (May 15, 1998). 26 Id., para. 8.1. 27 Id. paras. 7.44–49. 28 Id. 29 Shrimp-Turtle AB Report, supra note 12, at para. 119. 30 Id. paras. 111–186. 31 Gasoline AB Report, supra note 11, at 22. 22 23

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they should not be so applied as to frustrate or defeat the legal obligations of the holder of the right under the substantive rules of the General Agreement. If those exceptions are not to be abused or misused, in other words, the measures falling within the particular exceptions must be applied reasonably, with due regard both to the legal duties of the party claiming the exception and the legal rights of the other parties concerned32 [emphasis added]. The Appellate Body in the Shrimp Turtle case generally followed the decision in the Gasoline case and characterized the chapeau more clearly as “but one expression of the principle of good faith.”33 The principle of good faith, which owes its present authoritative status to the natural law foundations of general international law, has several dimensions.34 First, it is a principle of interpreting treaties articulated in Article 31(1) of the Vienna Convention on the Law of Treaties, which states that a treaty “shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty.”35 Second, it expresses a duty of signatories to a treaty prior to ratification.36 Third, it is applied to the general performance of a state’s obligations under international law apart from treaties or other agreements, which is typically reflected in the Declaration on Principles of International Law Concerning Friendly Relations and Co-operation Among States, passed by the UN General Assembly in 1970.37 It seems evident that the introduction of the notion of good faith by the Appellate Body is the first one above. This is affirmed by the Appellate Body’s statement that: [O]ur task here is to interpret the language of the chapeau, seeking additional interpretive guidance, as appropriate, from the general international law38 [emphasis added].

32

Id. Shrimp-Turtle AB Report, supra note 12, at para. 158. 34 Anthony D’Amato, Good Faith, in 2 ENCYCLOPEDIA OF PUBLIC INTERNATIONAL LAW 599, 600 (R. Bernhardt ed., 1992). 35 Vienna Convention on the Law of Treaties, May 23, 1969, U.N. Doc. A/CONF. 39/27, art. 31(1). 36 Id., art. 18. 37 The Declaration provides that “[e]very State has the duty to fulfill in good faith its obligations under the generally recognized principles and rules of international law.” Declaration on Principles of International Law Concerning Friendly Relations and Co-operation Among States, GA Res. 2625 (XXV), U.N. GAOR, 25th Sess., Supp. No. 28, at 121, U.N. Doc. A/8028 (1970). 38 Shrimp-Turtle AB Report, supra note 12, at para. 158. 33

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The principle of good faith is always applicable even if there is no explicit treaty language (like the chapeau), because Article 31 of the Vienna Convention is considered a “customary rule of interpretation of public international law.”39 Thus, to mention good faith is nothing more than an affirmation of the preexisting norm. Although it does not provide us any further guidance in interpreting the chapeau, it seems safe to say that the Appellate Body’s mention of the notion of good faith does not indicate an introduction of “equity contra legen”40 or justice outside of the treaty norm.

Flexibility of the Standard In Shrimp-Turtle, the Appellate Body also emphasized the flexibility of the standard set forth in the chapeau. It stated: The task of interpreting and applying the chapeau is . . . essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement. The location of the line of equilibrium . . . is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ41 [emphasis added]. [T]he standards established in the chapeau are . . . necessarily broad in scope and reach . . . When applied in a particular case, the actual contours and contents of these standards will vary as the kind of measure under examination varies42 [emphasis added]. In interpreting subparagraph (g) of Article XX, the Appellate Body stated the term “natural resources” is not static, but “evolutionary.”43 The excerpts above reflect a case-by-case approach by the Appellate Body and Gasoline AB Report, supra note 11, at 17. Equity in general international law can perform three functions: (1) it can be used to adapt the law to the facts of individual cases (equity infra legen); (2) it can be used to fill gaps in the law (equity praeter legen); and (3) it can be used as a reason for refusing to apply unjust laws (equity contra legen). Michael Akehurst, Equity and General Principles of Law, 25 INT’L & COMP.L.Q. 801, 801 (1976). 41 Shrimp-Turtle AB Report, supra note 12, at para. 159. 42 Id., para. 120. 43 Id., para. 130. 39 40

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imply that the interpretation of the chapeau would also “evolve” as time goes by. It is also important to point out that the line between permissible measures and prohibited ones moves, depending on what specific subparagraph is invoked. In this way, the Appellate Body will likely make distinctions among the policy values specified in the subparagraphs of Article XX. However, it is not clear how the differences in the subparagraphs will affect the Appellate Body’s interpretation of the chapeau.

The Effect of the Preamble of the WTO: An Attempt to Incorporate Environmental Values into the Chapeau One of the differences between Gasoline and Shrimp-Turtle is that the latter mentioned, in interpreting the chapeau, the “objective of sustainable development” prescribed in the Preamble of the WTO Agreement. The Appellate Body stated that: It is proper for us to take into account, as part of the context of the chapeau, the specific language of the preamble to the WTO Agreement, which, we have said, gives colour, texture and shading to the rights and obligations of Members under the WTO Agreement, generally, and under the GATT 1994, in particular44 [emphasis added]. This excerpt arguably reflects the effort of the Appellate Body to incorporate the values of the environment into the framework of the GATT in the context of Article XX. It is true that past panel reports, including the Appellate Body’s report in Gasoline, contained similar efforts. Those tribunals, however, considered environmental values only in determining that they were not at issue, and proceeded to decide the cases on their trade aspects. By contrast, the Appellate Body in ShrimpTurtle seems to have dealt squarely with the environment via the Preamble of the WTO Charter. In short, the Appellate Body has made it clear so far that the chapeau (1) reflects the notion of good faith in general international law as a treaty interpretation rule, (2) provides a flexible standard for making decisions, depending on the specific case and the provision of the subparagraph invoked, and (3) allows environmental values to be considered via the Preamble of the WTO Charter.

44

Id., para. 155.

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Distinctions Between Arbitrary Discrimination, Unjustifiable Discrimination, and Disguised Restriction The substance of the chapeau lies in its provisions referring to “arbitrary or unjustifiable discrimination” and “disguised restriction on international trade.” While it was possible to look at each of these individually, the Appellate Body in the Gasoline case chose another approach. 45 It avoided defining the terms “arbitrary discrimination,” “unjustifiable discrimination,” and “disguised trade restriction,” and looked at them in the light of their object and purpose. It stated that: “Arbitrary discrimination,” “unjustifiable discrimination” and “disguised restriction” on international trade may, accordingly, be read side-by-side; they impart meaning to one another . . . The fundamental theme is to be found in the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules available in Article XX.46 It can be argued that this interpretation seems contrary to the textoriented approach of the Appellate Body. In Shrimp-Turtle, however, the Appellate Body distinguished and decided individually the requirements of arbitrary discrimination and disguised discrimination, though it did not consider “disguised restriction on trade.” It is probable that the treatment in the Gasoline case is based on the special situation of the case47 and that these three elements would be interpreted individually in future cases.

Arbitrary or Unjustifiable Discrimination Prior to the Gasoline case, the term “unjustifiable” or “arbitrary” had never been subject to any precise interpretation and was susceptible to both narrow and broad interpretation. Comparing Gasoline and ShrimpTurtle seems to give some future guidance.

Unjustifiable Discrimination In the Gasoline case, in determining whether there is arbitrary or unjustifiable discrimination, the Appellate Body quoted from the panel’s reasonableness test to determine if the measure was “necessary” under

David Palmeter, The WTO Appellate Body’s First Decision, 9 LEIDEN J. INT’L LAW 337, 348 (1996). 46 Gasoline AB Report, supra note 11, at 25. 47 For example, the interpretation of the chapeau was a de novo issue. See Palmeter, supra note 45, at 352. 45

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Article XX(b).48 After pointing out that there was “more than one alternative course of action” available to the United States in promulgating regulations,49 the Appellate Body identified two omissions by the United States. First, the Appellate Body held that the United States failed “to explore adequately means, including in particular cooperation with the governments of Venezuela and Brazil, of mitigating the administrative problems relied on as justification by the United States for rejecting individual baseline for foreign refiners.” 50 Second, the Appellate Body held that the United States failed “to count the cost for foreign refiners that would result from the imposition of statutory baselines.”51 The Appellate Body concluded that the baseline establishment rules constitute “unjustifiable discrimination.” It stated that: [T]hese two omissions go well beyond what was necessary for the Panel to determine that a violation of Article III:4 had occurred in the first place. The resulting discrimination must have been foreseen, and was not merely inadvertent or unavoidable52 [emphasis added]. As a result, the Appellate Body adopted a very narrow interpretation of the chapeau by interpreting an anti-abuse test as some form of “reasonableness” test.53 In the Shrimp-Turtle case, the Appellate Body found that various cumulative factors in the U.S. application of its statute constituted “unjustifiable discrimination.” The Appellate Body referred to an “intended and actual coercive effect on the specific policy decisions made by a foreign government.”54 It stated: [I]t is not acceptable, in international trade relations, for one WTO Member to use an economic embargo to require other 48 Gasoline AB Report, supra note 11, at 25–28. Some authors argued that the Appellate Body applied a version of the “least trade restrictive” approach, which has been adopted in interpreting subparagraph (b) or (d) of Article XX. See Maury D. Shenk, WTO Dispute Settlement Body—Article XX Exceptions to GATT—Stateal Treatment— Consistency with GATT of U.S. Rules Regarding Imports of Reformulated Gasoline, 90 AM. J. INT’L L. 669, 672 (1996). 49 Gasoline AB Report, supra note 11, 25. 50 Id. at 28. 51 Id. 52 Id. 53 J. Waincymer, Commentary Reformulated Gasoline under Reformulated WTO Dispute Settlement Proceedings: Pulling Pandora out of a Chapeau, 18 M ICH. J. I NT’L L. 141, 174 (1997). 54 Shrimp-Turtle AB Report, supra note 12, at para. 161.

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Members to adopt essentially the same comprehensive regulatory program, to achieve a certain policy goal, as that in force within that Member’s territory, without taking into consideration different conditions, which may occur in the territories of those other Members55 [emphasis added]. The reasoning of the Appellate Body was not clear. It only stated abruptly that the U.S. embargo was “not acceptable” and did not indicate its reasoning. It invoked some international agreements, such as the Rio Declaration on Environment and Development, Agenda 21, and the Convention on Biological Diversity, to support its reasoning,56 but its argument remains unclear. Additionally, the Appellate Body emphasized the importance of international cooperation to protect migratory species, such as sea turtles, and pointed out several instances of discrimination by the United States. First, the Appellate Body noted that the United States failed to engage in “serious, across-the-board negotiations with the objective of concluding bilateral or multilateral agreements for the protection and conservation of sea turtles before enforcing the import prohibition.”57 Second, it noted that there was discrimination in the time period for phasing in the requirements of the statute.58 Third, it pointed out discrimination in transferring TED technology among countries.59 Based on Gasoline and Shrimp-Turtle, it can be concluded that: (1) discrimination can occur either between importing and exporting states (Gasoline case), or between exporting states (Shrimp-Turtle case); (2) lack of prior international cooperation including bilateral (Gasoline case) or multilateral (Shrimp-Turtle case) negotiation can constitute discrimination; (3) forcing other Member states to adopt “essentially the same comprehensive regulatory program” is not permissible (Shrimp-Turtle case).

Arbitrary Discrimination In the Shrimp-Turtle case, the Appellate Body proceeded to distinguish between unjustified and arbitrary discrimination. First, it noted that rigidity and inflexibility in the application of the U.S. embargo, which the Appellate Body had held to be “unjustifiable discrimination,” also constituted “arbitrary discrimination.”60 Second, the Appellate Body pointed

55 56 57 58 59 60

Id., para. 164. Id., para. 168. Id., para. 166. Id., paras. 173, 174. Id., para. 175. Id., para. 177.

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out that the certification process denied applicants “basic fairness and due process.”61 It held this denial “contrary to the spirit . . . of Article X:3 of the GATT 1994.”62 Thus, arbitrary discrimination includes procedural aspects of domestic regulations, not limited to due process. Furthermore, arbitrary discrimination overlaps unjustifiable discrimination. The Appellate Body did not indicate the standard by which to distinguish them.

Obligation of Prior Negotiation The Appellate Body in Gasoline and Shrimp-Turtle emphasized the importance of prior international negotiation as a requirement for avoiding a judgment of unjustifiable discrimination.63 However, the Appellate Body did not make clear how much negotiation is sufficient to pass this test. Would superficial negotiation with other countries cure the defect in the U.S. regulation? Or is a more sincere offer required, such as an offer of transfer of technology or financial support to developing countries? What if the parties started negotiations, but did not reach an agreement? At the same time, it is very interesting that the Appellate Body requires “negotiation” in its decision, because the disputing states are supposed to hold consultations, that is a sort of negotiation, before moving on to the panel proceeding pursuant to Article XXIII of the GATT. Especially in the Gasoline case, the governments of the United States and Venezuela conducted secret negotiations during which the United States offered to change the regulation.64 It seems that the Appellate Body requires, at least, something beyond “sympathetic consideration” under Article XXIII.

Problem of Implementation: Which Hoop Has Priority? In the Gasoline case, the Appellate Body did not state that the baseline standard should be amended in a particular way. Thus, it is uncertain what is required to implement its recommendation. Would a U.S. effort to cooperate with the Venezuelan and Brazil governments be sufficient? Or was the United States required to amend the Gasoline Rule so as not to discriminate against foreigners? The United States seemed to believe that the report of the Appellate Body required a public comment process that was open to related foreign governments and firms, although the EPA finally altered the rule to permit foreign refiners to use an “individual baseline.”65 Id., para. 181. Id., para. 183. 63 See supra notes 50 and 57 and the accompanying texts. 64 Schultz, supra note 15; Smith supra note 18. 65 United States—Standards for Reformulated and Conventional Gasoline, Status Report by the United States, WT/DS2/10 (Jan. 10, 1997). 61 62

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The problem is more serious in the Shrimp-Turtle case, in which the Appellate Body pointed out four different types of omissions made by the United States. These include: (1) rigid and inflexible policy coercion, (2) discrimination deriving from the failure to negotiate, (3) discrimination on the time period for phasing in the requirement of Section 609, and (4) discrimination in the transfer of TED technology. However, it remains ambiguous which and how many factors—one of four or all—should be amended in order to avoid unjustifiable discrimination. This uncertainty brings about another difficult problem: can unilateral measures or regulations based on PPMs be justifiable after the hoops created by the Appellate Body, such as prior negotiations, are cleared?

Unilateral Measures Prior international environment-related trade disputes arose mainly due to the “unilateral measures” of certain states. The Shrimp-Turtle case is a typical example. Principle 12 of the Rio Declaration states that “unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided.”66 However, even though this principle reflects the views of the majority of signatory nations, it is not legally binding. In addition, the declaration does not define “unilateral actions” precisely. With regard to the admissibility of unilateral measures, the panel in Shrimp-Turtle clearly stated that: [O]ur findings regarding Article XX do not imply that recourse to unilateral measures is always excluded, particularly after serious attempts have been made to negotiate; nor do they imply that, in any given case, they would be permitted67 [emphasis added]. However, the Appellate Body’s stance toward unilateral measures was not clear, especially with respect to cases where sincere negotiations and the removal of other procedural obstacles have been undertaken.

Regulation Based on PPMs States involved in trade negotiations tend to concern themselves with how a product is produced, manufactured, or obtained. This issue is com-

66 Rio Declaration on Environment and Development, Principle 12, U.N. Doc. A/CONF. 151/5/Rev.1 (1992), reprinted in 31 I.L.M. 874, 878 (1992). 67 Shrimp-Turtle Panel Report, supra note 25, para. 7.61.

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monly referred to as process and production methods (PPMs). 68 The acceptability of regulations governing PPMs has been mainly discussed in the context of Article III. Two GATT dispute settlement panels declared import prohibition based on PPMs inconsistent with GATT on the ground that it discriminated between “like products.”69 The Appellate Body’s stance in Shrimp-Turtle on the acceptability of discrimination against products based on PPMs under Article XX is not clear. However, the reasoning on its face strongly implies that the Appellate Body would allow regulation of PPMs through “non-rigid” and “flexible” methods.70

IMPLIED LIMIT OF THE CHAPEAU AND ANOTHER EQUITABLE SOLUTION: NO-DECISION/NEGOTIATING-ORDER TECHNIQUE Limits of Balancing Two Different Values: Free Trade and the Environment Prior panels and Appellate Body decisions have stressed that none of them has questioned the environmental policy choice underlying the measure at issue.71 The Appellate Body particularly mentioned, in the last paragraph of the decision in the Gasoline case, its intention not to prevent member states from taking measures to protect the environment. It stated: It does not mean, or imply, that the ability of any WTO Member to take measures to control air pollution or, more generally, to protect the environment, is at issue. That would be to ignore the fact that Article XX of the General Agreement contains provisions designed to permit important state interests—including the protection of human health, as well as the conservation of exhaustible natural resources—to find expression . . . WTO Members have a large measure of autonomy to determine their own policies on the environment (including its relationship with trade), their environmental

Schoenbaum, supra note 6, at 288. United States—Restriction on Imports of Tuna, Panel Report, 30 I.L.M. 1594 (1991); United States—Restriction on Imports of Tuna, Panel Report, 33 I.L.M. 839 (1994). 70 Nancy L. Perkins, Introductory Note on World Trade Organization: United States— Import Prohibition of Certain Shrimp and Shrimp Products, 38 I.L.M. 118, 118–19 (1998). 71 For example, the panel in the Gasoline case stated that “it was not its task to examine generally the desirability or necessity of the environmental objectives of the Clean Air Act or the Gasoline Rule. Its examination was confined to those aspects of the Gasoline Rule that had been raised by the complaints under specific provisions of the General Agreement . . .” Gasoline Panel Report, supra note 20, para. 7.1. 68 69

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objectives and the environmental legislation they enact and implement72 [emphasis added]. As these words indicate, the Appellate Body in the Gasoline case explicitly recognized its duty to balance Article XX interests with the trade liberalization goals of the GATT in each case that comes before it. 73 It is true that the issues raised in Gasoline and Shrimp-Turtle are not environmental policies as a whole, but rather some discriminatory aspects of the regulations. Indeed, the Gasoline case was decided based on very unusual circumstances. The Appellate Body’s approach reflects the specific facts of the Gasoline case. In particular, the decision reflects an awareness of the fact that the U.S. Congress had passed legislation to deny the EPA funding to implement a version of the Gasoline Rule that would have reduced discrimination against foreign refiners.74 The Gasoline Rule was “a poorly drafted regulation” and a clear example of “green protectionism.”75 In the Shrimp-Turtle case, the conflict between trade and the environment was arguably not so sharp. The Appellate Body has some maneuvering room, for the United States had a feasible policy option—the change from a nation-by-nation approach to a shipment-by-shipment approach. Consequently, the Appellate Body was able to state that the environmental policy choice underlying the measure was not at issue.76 However, more difficult cases in which the integral parts of an environmental policy will be contested seem likely in the future.77 The Appellate Body already has passed the point of no return. The critical point was that “sustainable development” was incorporated in Article XX.78 Once an environmental value can be read into GATT Article XX, it can be weighed against free trade concerns. However, it is unclear whether it is always possible to balance the two without giving priority to one or the other. The mandate to WTO dispute resolution panels/the Appellate Body is to apply only WTO agreements,79 Gasoline AB Report, supra note 11, at 28. Padideh Ala’I, Critical Essay: Free Trade or Substantive Development? An Analysis of the WTO Appellate Body’s Shift to a More Balanced Approach to Trade Liberalization, 14 AM. U. INT’L L. REV. 1129, 1161 (1999). 74 Shenck, supra note 48, at 673. 75 Schlutz, supra note 15, at 21. 76 Shrimp-Turtle AB Report, supra note 12, at paras. 185, 186. 77 For example, disputes regarding the labeling of genetically modified foods, if introduced after some sincere negotiations between relating states, seems to be one of the potential candidates. 78 See supra note 44 and accompanying text. 79 See Understanding on Rules and Procedures Governing the Settlement of Disputes, arts. 7 and 11, 33 I.L.M. 1144, 1227 (1994) (Function of the panel is limited to examine “covered agreements”). 72 73

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as opposed to other international tribunals that can apply general international law including international environmental law. Article 3(2) of the Dispute Settlement Understanding provides that “recommendations and rulings of the Dispute Settlement Body (DSB) cannot add to or diminish the rights and obligations provided in the covered agreement.”80 That is to say, the WTO is not a general court, dealing with every aspect of a certain dispute, but an adjudicative body dealing exclusively with the trade aspects of the dispute. Thus, what is required in the legal adjudicative process of the WTO is not incorporating or making substantial rules to decide which value prevails without explicit authorization of the member states. The chapeau is not a tool for lawmaking but only a tool for interpreting treaty language. In this sense, there should be a limit to the application of balancing tests of the chapeau, despite its apparent wide range of discretion.

A Proposal Giving Panels the Option of Issuing No-Decision/ Negotiating-Order Ruling in Future Difficult Cases In the future, panels or the Appellate Body would be caught in a serious dilemma if they were required to decide squarely, for example, the legality of PPMs. Not allowing regulations based on PPMs would displease environmental communities, but allowing them might change the GATT structure fundamentally and incur the strong concern of developing countries.81 Deciding highly contested issues would highlight the lack of legitimacy of panels or the Appellate Body. 82 The most appropriate way to avoid the legitimacy concern might be legislative action83 by member states. The WTO Committee on Trade and the Environment (CTE) is preparing to issue guidance on trade and the environment. However, it will be difficult to reach a consensus between member states to alter the treaty language in this contested area at this time. The CTE is not expected to finish soon mainly due to the NorthSouth problem.84 What should panels or the Appellate Body do when they encounter more difficult cases under the current scheme? One possible answer is to abstain from deciding the merit of the cases. Under any legal system, courts are limited in the exercise of their judicial

Id. art. 3(2). See Perkins, supra note 70, at 119. 82 Dunoff, supra note 5, at 758. 83 “Legislative action” here means amendment of the treaty or authoritative interpretation of the treaty language. See Agreement Establishing World Trade Organization, arts. X and IX:2, 33 I.L.M. 1143 (1994). 84 See Report (1996) of the Committee on Trade and Environment, PRESS/TE014 (Nov. 14, 1996). 80 81

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power.85 Not only domestic courts,86 but also the International Court of Justice (ICJ), have refrained from ruling in several situations, even when they had jurisdiction to decide the merits of the cases.87 Even under the GATT/WTO dispute system, some prior cases under the GATT 1947 show that panels or the Working Group have used the no-decision technique, that is, abstention from delivering a legal conclusion.88 The decision of the ICJ in the North Sea Continental Shelf case89 was a suggestive example. In that case, the court refused to deliver the normal type of judgment and ordered the parties to “negotiate meaningfully” within certain concrete criteria and standards. The Court stated that: The parties are under an obligation to enter into negotiations with a view to arriving at an agreement . . . [T]hey are under an obligation so to conduct themselves that the negotiations are meaningful, which will not be the case when either of the parties insists upon its own position without contemplating any modification of it.90 This indicated that the law of the sea regarding the continental shelf was in the process of evolving.91 As long as no clear rule has emerged from the norm-creating process, there is simply no legal truth.92 The rights and interests of the disputing states were legally equal, and equitable adjustment was required. The decision in the North Sea Continental Shelf case is understood as applying good faith by the court.93 Case Concerning the Northern Cameroons (Cameroon v. United Kingdom), 1963 I.C.J. 15, 29. 86 “Political question doctrine” is a famous example under the U.S. legal system. See, e.g., WILLIAM BURNHAM, INTRODUCTION TO THE LAW AND LEGAL SYSTEM OF THE UNITED STATES 313 (2d ed., 1999). 87 See Antonio F. Perez, The Passive Virtues and the World Court: Pro-Dialogic Abstention by the International Court of Justice, 18 MICH. J. INT’L L. 401 (1997). 88 See, e.g., Uruguay Recourse to Article XXIII, Panel Report, 1962, GATT B.I.S.D. (11th Supp.) 95 (1963); Canadian Import Quotas on Eggs, Working Party Report, 1976, B.I.S.D. (23d Supp.) 91 (1976); EEC’s Subsidy of Wheat Flour, 18 U.S. E XPORT WEEKLY (BNA) No. 25, at 1047 (Mar. 29, 1983). See also Robert E. Hudec, GATT Dispute Settlement After the Tokyo Round: An Unfinished Business, 13 CORNELL INT’L L.J. 145 (1980)(suggesting no-decision technique to cope with “wrong cases”). But see ROBERT E. HUDEC, ENFORCING INTERNATIONAL TRADE LAW: THE EVOLUTION OF MODERN GATT LEGAL SYSTEM 75 (1993) (Professor Hudec seems to change his opinion after the 1980 article). 89 North Sea Continental Shelf (F.R.G v. Den.; F.R.G. v. Neth.) 1969 I.C.J. 3. 90 Id. at 47–48. 91 See, e.g., Statement of Mr. Lauterpacht, 1 Y.B. I NT’L L. C OMM’N 194 (1952). 92 Prosper Weil, “The Court Cannot Conclude Definitively . . .”: Non-Liquet Revisited, 36 COLUM. J. TRANSNAT’L L. 109, 119 (1997). 93 D’Amato, supra note 34, at 600. 85

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When we think about applying the chapeau—an expression of the good faith principle94—in more difficult cases, it must be worth considering the method adopted by the ICJ. Ordering sincere negotiation without deciding the merit of the case can ease the burden of balancing two different, sometimes sharply conflicting, values under the framework of the WTO. It would, at the same time, preserve the legitimacy of the WTO dispute settlement system in rather than undermining it.95

CONCLUSION The chapeau of Article XX has come to play an important role in deciding trade disputes relating to domestic environmental regulations. As the Appellate Body has admitted, the application of the chapeau is delicate, and there is a broad area of discretion for panels and the Appellate Body. Two prior cases have helped formulate the way of applying the chapeau, but much ambiguity still remains, such as acceptability of PPMs or unilateral measures. In addition, the experience of the prior two cases indicates that other big cases will arise, in which the conflict of trade and the environment is directly at issue. If the Appellate Body faces this difficulty, one way to tackle the problem is to abstain from the decision of the merit of the case and to order the parties to further negotiate, as the ICJ did in North Sea Continental Shelf. After all, the most effective way to solve the problem seems to be sincere international cooperation, rather than rigid litigation between countries.

See supra note 33 and accompanying text. Professor Dunoff also suggests avoiding the merit in trade and the environment cases. Dunoff, supra note 5, at 757–79. 94 95

CHAPTER 7

RECONCILING U.S. REGULATORY PROCEDURE WITH THE WTO REFORMULATED GASOLINE DECISION Christopher John Duncan

INTRODUCTION Picture the classic dilemma in which a tired traveler comes to a fork in the road. A sign at the fork describes one path as short and in good condition, but it warns of a deep chasm blocking passage, the bridge across which is commonly down. The other path is portrayed as longer and more arduous to negotiate, but it is billed as the preferable means of safe travel. This untenable position is symbolic of where the United States has found itself in the wake of the 1996 Reformulated Gasoline decision (RFG decision) 1 by the World Trade Organization (WTO) Dispute Settlement Appellate Body. While common sense dictates that the traveler take the safer, more reliable path, it is difficult to resist the human instinct to boldly challenge warning signs and try to succeed against what may be deemed certain adversity. Indeed, such bold actions commonly allow one to achieve to a higher standard. The dilemma would not be so universally recognized were the traveler not to take the more challenging path in a great number of instances. In most instances, however, the safer path is the more preferable one and leads to less hardship in the future. The United States has an opportunity to choose the safer path, with regard to WTO Dispute Settlement Body decisions, by carefully reading the “sign” at the fork left by the WTO Appellate Body in the Reformulated Gasoline case (RFG Appellate Body), and following its guidance. In doing so, the United States may avoid the certain perils that exist along the more 1 See World Trade Organization Appellate Body, Report of the Appellate Body in United States—Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R (May 20, 1996) [hereinafter RFG AB Decision].

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enticing, dangerous path, including increased litigation, strained international relations, and ultimately, a weakening of both domestic trade and environmental prowess. This new methodology, the longer though preferable legal path, may be dubbed the “Sensitivity Projection.” In 1996, in a case brought by Venezuela and Brazil, the RFG Appellate Body found the U.S. Reformulated Gasoline rule (RFG rule), 2 a newly enacted provision of the Clean Air Act (CAA), to be in violation of U.S. obligations under the General Agreement on Tariffs and Trade (GATT). The specific offense was the less favorable treatment of foreign gasoline refiners, in comparison to that of domestic refiners, regarding the sale of reformulated and conventional gasoline within the United States. While the RFG rule was certainly linked to a legitimate environmental cause,3 the manner in which the United States promulgated the rule had a discriminatory effect on foreign refiners, and the rule was deemed a “disguised restriction on international trade” by the RFG Appellate Body. The RFG Appellate Body found two key omissions by the United States that directly influenced its decision. The RFG Appellate Body admonished the United States for (1) not taking further measures to work cooperatively with the foreign parties most directly affected, Venezuela and Brazil, and (2) failing to take into account the negative economic effects that the RFG rule would have outside of U.S. borders. This chapter concludes that the United States will have a better chance of prevailing in WTO DSB decisions in future matters where legitimate environmental policy clashes with liberal trade if the United States heeds this message and augments regulatory procedures that reflect the international interests noted by the RFG Appellate Body. The first section of this chapter examines the development of the RFG rule and the events leading up to the dispute before the WTO. The second section describes the arguments posed before the WTO RFG panel and Appellate Bodies, and evaluates the Appellate Body’s final decision. The third section looks at the deficiencies of the U.S. regulatory process in coordinating and appreciating the interests of foreign countries, especially developing countries. The fourth section suggests a four-part strategy by which the United States can adjust its administrative procedures to be in accordance with the mandate of the WTO. The final section pro-

See Reformulated Gasoline Final rule, 59 Fed. Reg. 7716 (1994) [hereinafter RFG rule]. The EPA completed their final decision on the rule on December 15, 1993. See id. 3 See Arnold W. Reitze Jr., The Regulation of Fuels and Fuel Additives Under Section 211 of the Clean Air Act, 29 TULSA L. J. 485, 523–24 (1994). “Reformulated gasoline is gasoline that has been blended to reduce both exhaust and evaporative air pollution and to reduce the photochemical reactivity of the emissions that are produced. This fuel has lower vapor pressure than standard gasoline because the more volatile hydrocarbons have been removed.” Id. 2

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vides a conclusion, including predictions on future developments in the “trade and environment” debate.

BACKGROUND The Beginnings of EPA Regulation of Reformulated Gasoline In 1970, Congress passed the initial Clean Air Act (CAA)4 in response to mounting scientific evidence linking air pollution to health hazards.5 Later that same year, President Richard Nixon created the Environmental Protection Agency (EPA) and conferred authority on it over the new air pollution Act, which was previously exercised by the Health, Education, and Welfare Agency (HEW).6 The EPA was empowered to control or prohibit fuels or fuel additives, under CAA § 211(c), if health or welfare was endangered or if an automotive emission control system was impaired.7 In addition, the EPA was authorized to set specified standards for the chemical composition of gasoline, most notably lead.8 Due to the extreme hardship that immediate compliance with the CAA would impose on the domestic gasoline industry, however, the EPA did not immediately enforce many CAA requirements.9 Nevertheless, in 1977, in the midst of the “oil crisis,” Congress enhanced the EPA Administrator’s authority over air pollution control with amended CAA § 211.10 CAA § 211 authorized the EPA Administrator to control or prohibit the introduction into commerce of any fuel or fuel additive for use in motor vehicles that would cause or contribute to air pollution that could reasonably be anticipated to endanger the public health.11 In 1990, the CAA was amended again, allowing further regulation through § 211(m), which mandated oxygenated fuels in carbon dioxide non-attainment areas, and § 211(k), which established a new reformulated gasoline program for light-duty vehicles.12 These provisions set the stage for the EPA’s 1994 reformulated gasoline rule. 4 See Clean Air Act of 1970, Pub. L. No. 91–604, 84 Stat. 1676, 1694 (1970) [hereinafter 1970 CAA]. 5 See id. 6 Reitze, supra note 3, at 486. 7 See 1970 CAA, supra note 4, at 1698–99. In addition, the EPA was authorized to test vehicles for emission compliance or even require the manufacturer to test the vehicles. See id. 8 See Martin A McCrory & Eric L. Richards, Clearing the Air: The Clean Air Act, GATT and the WTO’s Reformulated Gasoline Decision, 17 UCLA J. ENVTL. L. & POL’Y 1, 6 (1999). 9 See Paul G. Rogers, The Clean Air Act of 1970, EPA J., Jan./Feb. 1990, at 21, 23. 10 See David T. Deal, Motor Fuel Regulations in the 1990’s, NAT. RESOURCES & ENV’T, Fall 1992, at 17. 11 See id. 12 See Pub. L. No. 101–549, 104 Stat. 2399, 2488 (1990) (current version at 42

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The RFG rule13 was officially promulgated on February 16, 1994. The RFG rule regulated the sale of conventional and reformulated gasoline in certain metropolitan areas within the United States that were found to be in non-attainment of National Ambient Air Quality Standards (NAAQS).14 Companies had two methods by which to certify that their gasoline complied with RFG rule standards: (1) a “quick and dirty” “simple model,” which contained few parameters, and (2) a more elaborate “complex model,” which resulted in greater effectiveness.15 In order to assist companies in making a clean transition to clean air emissions, the EPA established individual baselines based on a refinery’s actual 1990 chemical composition data.16 Significantly, the accuracy of a refinery’s baseline, which ensures the RFG rule’s integrity, relies completely on the accuracy the 1990 data. 17 Because many foreign refiners lacked incontrovertible 1990 data, however, these companies were required to use a more rigorous and costly general statutory baseline. 18

The May 4th Proposal In response to the RFG rule, Venezuela, a major exporter of gasoline to the United States, sent a communiqué on January 14, 1994, to U.S. Trade Representative Mickey Kantor requesting consultations with the government of the United States under Article XXII: 1 of the General Agreement on Tariffs and Trade (GATT).19 In order to divert further dissension from other GATT members, Secretary of State Warren Christopher U.S.C. § 7545(m), (k) (Supp. II 1991)). The 1990 statute essentially functioned as a catalyst assisting states to attain the National Ambient Air Standards set down by the EPA in order to ensure ozone protection and toxic air pollutants. See McCrory & Richards, supra note 8, at 8. 13 See RFG rule, supra note 2. 14 See id. 15 See McCrory & Richards, supra note 8, at 10. Complaints from the oil industry concerning the validity of the “simple model” led the EPA to grant companies the option of using either. See id. n. 73. This incidence could display the EPA’s willingness to work with domestic business. 16 See id. at 11. The Act provided that if that data was not complete, the party would use a more stringent method 2, and failing this method, an even more stringent method 3. See id. at 12–13. 17 See id. at 13. As such the EPA reserved the right to do its own audits in relation to data provided. See id. 18 See id. at 14 n.94. Most refineries, both domestic and foreign, will not have the explicit data required by method 1 of the Act. See id. As a result most would rely on using method 2 or 3 in combination to set an appropriate baseline. See id. The Act explicitly prohibited, however, the use of these methods by foreign refineries. See id. 19 See January 14 Communiqué from Venezuelan Minister of State Miguel Rodriguez Mendoza to United States Trade Representative Michael Kantor, WTO Docs.,

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quickly used private channels to contact the Venezuelan government. 20 Over the course of several relatively covert meetings between PDVSA (Venezuela’s national oil refinery contingent), the U.S. Secretary of State, the U.S. Trade Representative, and the EPA, culminating on February 11, 1994, a settlement was reached by which Venezuelan oil refineries would be subject to essentially the same regulations as U.S. refineries.21 The settlement agreement was to be announced on March 23, 1994. Prior to that date, however, a confidential cable from Secretary of State Christopher to the Venezuelan Ambassador to the United States was intercepted and leaked, apprising Congress and the press of the proposed compromise.22 As a result, when the proposal was officially announced on May 4, 1994,23 it met with strong opposition, particularly by Congress members with strong ties to the oil industry. 24 In spite of spirited testimony Ref: PRE-110/0006 (Jan. 14, 1994) [hereinafter January 14 Communiqué]. Among other claims, the Venezuelan government claimed that the act “infringed” on its rights under GATT, would “negatively affect the Venezuelan economy,” and would “impact” Venezuelan gasoline exports to the United States, estimated in the communiqué to be U.S. $478 million during 1993. Id. Venezuela also sent an accompanying communiqué dated January 17, 1994, to the GATT Dispute Settlement rules and Procedures Body (BISD 36S/62) reiterating its call for consultation with the United States, and asking that the communiqué be circulated among the other GATT members. See January 17 Communiqué from Permanent Mission of Venezuela to the GATT Secretariat. WTO Docs. DS47/1 (94–0179) (received Jan. 31 1994) [hereinafter January 17 Communiqué]. Even here, Venezuela may have been apprised of the mass support that its position would receive before other GATT members, even stating that they were “pleased” to inform the Secretariat of their concerns. 20 See Aubry D. Smith, Executive-Branch Rulemaking and Dispute Settlement in the World Trade Organization: A Proposal to Increase Public Participation, 94 MICH. L. REV. 1267, 1268 (1996). 21 See Scott Daniel McBride, Reformulating Executive and Legislative Relationships After Reformulated Gasoline: What’s Best For Trade and the Environment?, 23 WM. & MARY ENVTL. L. & POL’Y REV. 299, 312. See also Smith, supra note 20, at 1268. Specifically, the proposed rule allowed the use of methods 2 and 3, though it did require foreign refineries to establish additional information not required of U.S. companies, such as “refinery-of-origin.” See McCrory & Richards, supra note 8, at 26–27. Steve Charnovitz claims that the U.S. contingent was also able to obtain, from the Venezuelans, a quota on the sale of gasoline in the United States at current levels. See Steve Charnovitz, Free Trade, Fair Trade, Green Trade: Defogging the Debate, 27 CORNELL INT’L L.J. 459, 522 (1994). 22 See Smith, supra note 20, at 1268; see also McBride, supra note 21, at 312. 23 See Regulation of Fuels and Fuel Additives: Individual Foreign Refinery Baseline Requirements for Reformulated Gasoline, 40 C.F.R. pt. 80, 59 Fed. Reg. 22800 (May 3, 1994) [hereinafter May 4th Amendments]. 24 See, e.g., Lawmaker Rips Gasoline rules’ Delay, HOUS. CHRON., June 23, 1994, available at 1994 WL 4212640, at 1 (explaining that John Gingell, House Energy and Commerce Committee Chairman, “blasted the administration for backing off a plan

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before Congress from U.S. Trade Representative Ira Shapiro, who argued that, in the absence of the proposed rule, the United States stood little chance of prevailing before the GATT,25 the House of Representatives inserted a “rider” in the EPA appropriations bill that precluded the rule change.26

Venezuelia Files Complaint Following the settlement negotiations, Venezuela had initially dropped its GATT complaint,27 relying on the efficacy of the proposed rule and the promises of the U.S. negotiators to implement it.28 In response to the actions of the U.S. House of Representatives, however, Venezuela relodged its GATT complaint, and sent a communiqué dated September 23, 1994, calling for the establishment of a panel under GATT Article XXIII: 2.29 The GATT Council of Representatives convened a three-person panel on November 17, 1994,30 but in early 1995 Venezuela chose to suspend31 and then withdraw 32 its claim under GATT so that it could pursue a claim under the newly formed WTO. to hold foreign refiners to strict standards for the clean gas, and said it appeared the administration cut a deal with Venezuela to avert a trade fight.”) Well known, as well, is a vigorously argued statement by Senator Barbara Mikulski (D-Md.) on the Senate floor in opposition to the proposed rule. Senator Mikulski’s motivation is widely perceived to be strong pressure from certain oil industry interests in her home state. 25 See Venezuela Vows GATT Challenge Following House Vote on Gas Rules, INSIDE U.S. TRADE, Sept. 16, 1994, at 6. Mr. Shapiro stated that he believed the burden to justify discrimination under the CAA as “necessary” was too great on the U.S. See id. 26 See Pub. L. No. 103–327, 108 Stat. 2298, 2319 (1994). Aubry Smith has stated that at least one administration official believed that the great opposition to the rule at its announcement would have precluded adoption anyway. See Smith, supra note 20, at 1268 n.7. 27 See March 11 Communiqué from Permanent Mission of Venezuela to GATT, WTO Docs., DS47/2, (94–0472) (received Mar. 23, 1994). [hereinafter March 11 Communiqué] This communiqué expressed concern that consultations to that point were “unsatisfactory.” See id. The later success (in a very limited timetable) may exemplify the potential that such non-public negotiations can have in quickly resolving disputes. 28 See EPA Announces Fuel Plan For Venezuela; Threatened GATT Complaint Is Shelved, 11 INT’L TRADE REP. (BNA) 504 (1994). 29 See September 22 Communiqué from the Permanent Mission of Venezuela to GATT, WTO Docs., DS47/3, (94–1924) (received Oct. 4, 1994) [hereinafter September 22 Communiqué]. 30 See November 17 Note by Chairman of Council, WTO Docs. DS46/1, (94–2449) (Nov. 17, 1994) [hereinafter November 17 Chairman’s Note]. 31 See January 9 Communiqué from the Permanent Mission of Venezuela to GATT, WTO Docs., DS47/5, (95–0064) (received Jan. 19, 1995) [hereinafter January 9 Communiqué]. 32 See January 25 Communiqué from the Permanent Mission of Venezuela to GATT, WTO Docs., DS47/6, (95–0180) (received Jan. 31, 1995) [hereinafter January 25 Communiqué].

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Venezuela filed its WTO complaint on January 20, 1995, with the newly established dispute settlement mechanism (DSU) of the WTO, alleging U.S. violation of the national treatment principle of GATT Article III.33 This was the first case brought against the United States in the WTO.34 In accordance with the DSU, the two parties met beginning February 24, 1995, for preliminary negotiations.35 After 60 days, however, the negotiations had proven unfruitful, and Venezuela exercised its right under the WTO DSU to request that a dispute resolution panel be convened. 36 Venezuela was subsequently joined in its claim by Brazil, as a party, and the European Union, as a third party. On April 28, 1995, the parties agreed upon the same three-person panel (RFG panel) that had previously been recommended by the GATT Council of Representatives. 37

BEFORE THE WTO DISPUTE SETTLEMENT BODY U.S. Arguments The RFG panel agreed with Venezuela’s assertion that the baseline establishment methods violated the national treatment principle embodied in Article III: 4 of the GATT. 38 The RFG panel found that: 33 See Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Apr. 15, 1994, 33 I.L.M. 1143 [hereinafter Uruguay Round Final Act]; Agreement Establishing the World Trade Organization, done on Apr. 15, 1994, 33 I.L.M. 1144 [hereinafter WTO Agreement]; Understanding on Rules and Procedures Governing the Settlement of Disputes, annexed to WTO Agreement, WT/DS2/6, 33 I.L.M. at 1226 [hereinafter Dispute Settlement Understanding, or DSU]. 34 See Venezuela Moves Toward WTO Case in Reformulated Gas Dispute, INSIDE U.S. TRADE, Feb. 3, 1995, at 4. 35 See World Trade Organization, Report of the Panel in United States—Standards for Reformulated and Conventional Gasoline, 35 I.L.M. 274, 277 (Jan. 29, 1996) [hereinafter RFG Panel Report]. 36 See id. 37 See McCrory & Richards, supra note 8, at 28. The panel consisted of three highly qualified officials with long, outstanding records in international trade. See Telisa Webb Schelin, United States—Standards for Reformulated and Conventional Gasoline: The Effect of the World Trade Organization Decision on the U.S. and Is Administrative Agencies, 33 TULSA L.J. 421, 426 (1997). Joseph Wong from Hong Kong acted as the Chairman. See id. He had previously acted as the Hong Kong representative to GATT. See id. Crawford Falconer from New Zealand was the second panelist. See id. He had previously acted as the director of his country’s trade negotiation sector and is currently in charge of the Trade Directorate of the Organization for Economic Cooperation and Development (OECD). See id. Kim Luotonen was the third panelist, from Finland. See id. He had also previously served his country as representative to GATT. See id. 38 See generally RFG Panel Report, supra note 35. For example, fully 97% of U.S. companies did not comply with the statutory baseline, yet 98.5% of these companies had their individual baselines approved by the EPA. See McCrory & Richards, supra note 8, at 32–33. Foreign refineries not complying with the statutory baseline (nearly 100%) but having individual baselines approved would of course be 0%. See id.

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Imported and domestic gasoline were like products, and that since, under the baseline establishment methods, imported gasoline was effectively prevented from benefiting from as favorable sales conditions as were afforded domestic gasoline tied to the producer of a product, imported gasoline was treated less favorably than domestic gasoline.39 The RFG panel did not examine the Article XX exceptions to Article III because the panel found that the United States had not even met the threshold standard embodied in Article XX’s initial or “chapeau” paragraph.40 The RFG Appellate Body, however, was more persuaded by U.S. arguments. The United States conceded that EPA enforcement powers over foreign refiners were “debatable,” and that there was “a question” as to what extent a U.S. court could exercise jurisdiction over foreign refineries in the event of potential litigation. The primary rationale for the RFG rule’s apparent mistreatment of foreign refiners, however, was the accuracy of their baseline setting data.41 Not only is the verification of foreign 1990 data very arduous, stated the United States, but even verifying that the gasoline is from the refinery, or even country, claimed is a tremendous challenge.42 The United States claimed that if it could not reliably determine which refinery or which country a shipment of gasoline had arrived from, the EPA could not be expected to set a verifiable baseline, to which imperative the CAA is irrevocably tied.43 A statutory baseline for foreign refiners, argued the United States, would eliminate this scenario. The principle EPA argument thus became that Article III had not been violated because similar parties were treated the same; identifiable RFG Panel Report, supra note 35, at 295. See id. The RFG Appellate Body subsequently employed a much different analytical framework to the facts, overruling the RFG panel in doing so. As such, the intricacies of the panel’s decision have little to offer in the way of jurisprudential guidance regarding the future use Article XX exceptions. For this reason and because this work is principally concerned with the “message” and essential meaning of the RFG Appellate Body’s decision, an in-depth discussion of the RFG panel’s decision is beyond the scope of this work. For further discussion of the RFG panel’s decision, see generally McCrory & Richards, supra note 8. 41 See id. at 14–15. See generally 59 Fed. Reg. 7787. 42 See McCrory & Richards, supra note 8, at 15. As McCrory & Richards note, “The primary difference [from the EPA’s] perspective between the regulation of domestic and foreign gasoline is that EPA primarily regulates domestic gasoline at the refinery; however, it regulates foreign gasoline at the port.” Id. The EPA thus claims that it is virtually impossible to regulate foreign refineries until their product reaches the shores of the U.S. See id. 43 See id. at 14–15. This difficulty is made worse by the fact that foreign gasoline inevitably changes hands many times and often is mixed with other gasoline prior to reaching the United States. See id. 39 40

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domestic refineries had one rule, and less reliable foreign refiners had another. The United States claimed that invalidation of the RFG rule would cause different and harmful treatment rather than prevent it. The U.S. position was that the ultimate victims of RFG rule invalidation would be the domestic gasoline industry and the environment because foreign refineries would easily be able to fabricate gasoline content data.44

The RFG Appellate Body Decision The RFG Appellate Body took a different legal posture than the RFG panel.45 Rather than use the Article XX chapeau as a threshold barrier to non-Article III compliant policies, as the RFG panel had, the Appellate Body looked first to whether the questionable environmental policy fit one of the Article XX exceptions. 46 This position may have been taken because of greater sympathy for the environmental cause of the United States, or simply because the RFG Appellate Body had a more lucid understanding of the GATT provisions in question. The RFG Appellate Body may also have considered the fact that some Venezuelan refiners benefited from the RFG rule while others were harmed, which created an intricate question as to whether the national treatment principle had actually been violated. In any event, the RFG Appellate Body’s interpretation of the Article XX exceptions certainly improved the future utility and availability of the exceptions, and may have enhanced WTO members’ ability to implement seemingly non-compliant domestic laws with truly environmental objectives. The RFG Appellate Body found the exception in Article XX(g) to be the most applicable exception to the RFG rule. 47 Article XX(g) excepts those regulations “relating to the conservation of exhaustible natural resources if such measures are made in conjunction with restric44 See id. at 32. The harm would originate from the cheaper and thus economically advantageous production methods used for “dirty” gas on the one hand, and continued air pollution in major cities on the other. See id. 45 See A. JAMES BARNES ET AL., LAW FOR GLOBAL BUSINESS, at 232(6) (Irwin Professional Publishing, 7th ed. 1994). While at the same time of course conceding like the panel that measures such as the Reformulated Gasoline rule, which hold imported products to a higher standard than domestic, are generally offensive to the GATT absent an exception. See id. 46 See RFG AB Decision, supra note 1, at 8–11. In doing so, the RFG Appellate Body noted that “[t]here is of course no textual basis for requiring identical treatment of domestic and imported products.” Id at 13. Were there, the RFG Appellate Body said, there would be a need to have Article XX exceptions. See id. 47 See RFG AB Decision, supra note 1, at 11–12. It may not be coincidental that XX(g) is one of the few exceptions not including the word “necessary.” WTO dispute settlement jurisprudence has hung a heavy burden on parties attempting to demonstrate policy as “necessary.”

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tions on domestic production and consumption.”48 The RFG Appellate Body then turned to the chapeau paragraph to determine if, despite conformity with an Article XX exception, the RFG rule was still noncompliant with Article III. The Appellate Body used the chapeau as the second tier of a two-part test. The first part was the evaluation discussed above concerning whether the objective language and meaning of a domestic regulation allowed the regulation to fit within one of Article XX’s exceptions. The second part was an evaluation of whether the motivation behind, and effect of, a regulation were in violation of the national treatment principle found in Article III. Specifically, the chapeau states that a regulation must not be: applied in such a 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.49 The RFG Appellate Body ultimately held that the RFG rule, and specifically its baseline setting methods, was “unjustifiable discrimination and a disguised restriction on international trade” as applied.50 In making this determination, the RFG Appellate Body focussed largely on U.S. actions, during the RFG rule’s formulation and adoption, and less so on the specific language of the rule itself. 51 The RFG Appellate Body specifically stated that the United States had omitted to: [1] explore adequately means, including in particular cooperation with the governments of Venezuela and Brazil, of mitigating the administrative problems relied on as justification by the Id. at 9. GATT Art. XX. A basic reading of this paragraph thus finds three disqualifications: (1) arbitrary discrimination, involving a sense of randomness, (2) unjustifiable discrimination, involving a sense of illegal cause, and (3) a disguised restriction on international trade, involving a sense of protectionist tendencies. 50 RFG AB Decision, supra note 1, at 19. This conclusion has prompted as least one scholar to claim that there are not really three standards but merely one. See T. Alana Deere, Balancing Free Trade and the Environment: A Proposed Interpretation of GATT Article XX’s Preamble, 10 INT’L LEGAL PERSP. 1, 3 (1998) (stating that the consideration by the Appellate Body of whether a measure is arbitrary or unjustifiable discrimination in determining a disguised restriction on trade indicates a convergence of standards); see also Maury D. Shenk, United States—Standards For Reformulated and Conventional Gasoline, World Trade Organization Appellate Body, April 29, 1996, 90 A M. J. INT’L L. 669, 671 (1996). 51 See RFG AB Decision, supra note 1, at 19. Specifically, the RFG Appellate Body used “in light of the foregoing,” referring to its earlier description of U.S. omissions. Id. 48 49

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United States for rejecting individual baselines for foreign refineries; and [2] count the costs for foreign refineries that would result from the imposition of statutory baselines. 52 The omissions listed by the RFG Appellate Body had several similar characteristics. The two omissions both occurred well before the actual promulgation of the rule, concerned inadequate U.S. attempts at collaboration with foreign countries, and seemed to impose a duty of effort rather than of success.53 The RFG Appellate Body ultimately decided that these procedural omissions violated Article XX’s chapeau because they had a discriminatory effect on fellow WTO members and must have been “foreseen” by the United States. Thus, the RFG rule was a violation of U.S. obligations under GATT.54 The RFG Appellate Body’s characterization of the failure to coordinate domestic policy with international obligations under GATT was an “admonishment,” rather than a “condemnation,” of U.S. omissions during the formulation and adoption of the RFG rule. 55 According to the RFG Appellate Body, the United States should have known that efforts at multilateral coordination were the most prudent method by which to solve the administrative dilemmas caused by the RFG rule’s discriminatory effects.56 The RFG Appellate Body also noted that difficulties at achieving such coordination, such as Congress’s denial of funding through the rider, would serve as no excuse for the U.S. omissions because “the United

52

Id. See id. The RFG Appellate Body does not fault the implementation of the rule, per se, but rather the conduct of the United States in preparing its preliminary justification. See id. Of obvious importance in the RFG Appellate Body’s statement is the failure of the United States to work cooperatively with the other governments such that their interests might have been appreciated. See id. Finally, the RFG Appellate Body uses “explore” in the first omission rather than perhaps “discover,” and emphasizes the counting of costs rather than the actual balancing of them. See id. 54 See id. Jeffrey Waincymer argues that the Appellate Body applied both a foreseeability and reasonableness test and concludes that as such, the chapeau applies only to intentional effects. See Jeffrey Waincymer, Reformulated Gasoline Under Reformulated WTO Dispute Settlement Procedures: Pulling Pandora Out of a Chapeau?, 18 MICH. J. INT’L L. 141, 174–75 (1996). In addition, Waincymer argues that the Appellate Body’s test draws attention away from the text of the questionable measure, and toward the expectations of the parties involved. See id. 55 See McCrory & Richards, supra note 8, at 41. 56 See Waincymer, supra note 54, at 174; see also McCrory & Richards, supra note 8, at 41 n.290. 53

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States . . . carries responsibility for actions of both the executive and legislative departments of government.”57 The RFG Appellate Body was also “not impressed” by the U.S. failure to take foreign refinery costs into question.58 The RFG Appellate Body scathingly contrasted the EPA’s assistance of domestic refineries, in light of RFG rule’s potential financial burden, with the EPA’s failure to fully investigate the hardship of foreign refiners.59 The RFG Appellate Body failed, however, to suggest in what detail or to what extent such accounting procedures are to be properly carried out.60

The Reasoning Behind the RFG Appellate Body Decision Some scholars have commented that the RFG Appellate Body applied “a version of the ‘least trade-restrictive’ approach that has characterized GATT jurisprudence under Article XX.” 61 This approach, however, “can be very strict in practice”62 and grants “nearly unlimited discretion to overrule national approaches to environmental matters.”63 Indeed, most legal principles that authorize a decisionmaker to make definitive judgments concerning what is the “least” or what is “necessary” implicate subjective analyses that are ultimately flawed by the fallibility of humankind. It is not clear that a strict approach, such as this, was taken in the RFG case, however.64 The RFG Appellate Body’s decision did not weigh the RFG rule on a scale of trade restrictiveness, but rather focused on the failure of the United States to reach an open, informed, multilateral understanding as it crafted the RFG rule.65 In other words, it was not the RFG 57 Id. at 41. This apparent disparate link between the executive and legislative branches will be revisited later in this work. Indeed, one of the greatest challenges facing U.S. proactive compliance with WTO mandates is “checks and balances” itself. 58 See id. at 41–42. 59 See id. McCrory and Richards make the important point that this policy no doubt “constituted sound domestic policy from the viewpoint of the EPA.” Id. It is this very scenario that illustrates the “tripping point” to proactive U.S. WTO compliance and the need for modification of U.S. administrative rule-making procedures. See id. 60 See Deere, supra note 50, at 4. As Deere claims, “[t]he Appellate Body did not suggest how costs are to be accounted and why this is necessary to determine arbitrary or unjustified discrimination is unclear.” Id. 61 Shenk, supra note 50, at 672. 62 Id. 63 Id. at 673. See also World Trade Organization: Report of the Panel on United States—Restrictions on Imports of Tuna, BISD, 39th Supp. 155, 199 (1992), reprinted in 30 I.L.M. 1594, 1620, para. 5.28 (1991) [hereinafter Tuna-Dolphin]. 64 See DANIEL C. ESTY, GREENING THE GATT, 48 n.15 (1994). A complete evaluation of the “least trade-restrictive” approach is beyond the scope of this work. For further discussion, see id. 65 See RFG AB Decision, supra note 1, at 629. Admittedly, the panel did state that

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rule itself that came under the greatest scrutiny by the RFG appellate Body, but the methodology through which the rule’s provisions came into being. Commentators on the RFG case have paid significant attention to how the United States can litigate more successfully before the WTO in the wake of the RFG decision. These reviews tend to focus specifically on how environmental provisions can be argued as compliant using the language of Article XX exceptions. This legalistic approach will not be the focus of this comment, however. Instead, this comment will suggest strategies for proactive compliance with WTO obligations, which may make litigation over legitimate environmental measures unnecessary in the future. The potential effectiveness of such strategies is based on a belief that the RFG Appellate Body’s decision arose within a mostly procedural analytical framework, rather than a substantive one.

CHANGING THE MENTALITY BEHIND U.S. REGULATORY PROCEDURES U.S. Actions Appear Protectionist and Discriminatory It is imperative that U.S. omissions, or the defects in the RFG rule’s formulation, be examined prior to suggesting modifications of the U.S. administrative process. According to the RFG Appellate Body, two basic conditions resulted in the U.S. omissions: (1) the RFG rule’s protectionist elements, and (2) the fact that there was no good reason to discriminate against foreign gasoline producers. Examining these defects should provide a better understanding of the international obligations mandated by the RFG Appellate Body, particularly those obligations involving the interaction between developed and developing nations. Once these obligations are fully understood, proactive strategies for modifying U.S. administrative procedure can be effectively evaluated. The gist of the RFG Appellate Body’s criticism of the United States was that the RFG rule’s formulation showed that it was essentially protectionist. Protectionism involves using discriminatory trade measures to assist domestic industry. Protectionist measures are often donned in the garb of environmental regulations, a practice known as “green protectionism.”66 Most commentators agree that if U.S. actions in promulgating the RFG rule were not “green protectionism,” they were at least

there were less restrictive alternatives such as an overall statutory baseline for all producers. See id.; see also McCrory & Richards, supra note 8, at 40–41. The theory, however, is not laudable because of its incompatibility with the realities of converting entire industry standards in a short period of time without bankrupting a majority. See id. 66 See Jennifer Schultz, The Demise of “Green Protectionism”: The WTO Decision on the U.S. Gasoline Rule, 25 DENV. J. INT’L L. & POL’Y 1, 19 (1996).

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something very akin to it.67 As one scholar has opined, “[t]he decision provides a very lucid example of how environmental measures can function as disguised non-tariff barriers to trade.”68 Several aspects of the EPA’s rulemaking and rule-promulgating process display the RFG rule’s protectionist overtones. First, an importer was allowed to use individual baselines if at least 75% of its foreign-produced gasoline was imported into the United States from a specific refinery in 1990. Although this provision seemed to connote assistance to importers, “virtually none could have complied” because most importers acquire gasoline from a variety of foreign refineries.69 Second, the statutory baseline had the effect of requiring all importers to have cleaner gasoline than “roughly half of the domestic producers.” 70 Thus, the RFG rule disadvantaged importers to the point that, ironically, foreign gasoline not complying with the statutory baseline could not be sold in the United States “whereas gasoline with these same qualifications produced in a U.S. refinery could be freely sold on the U.S. market.”71 The U.S. oil industry had much to gain from denying foreign producers equal treatment. In the words of William Shakespeare, “herein lies the rub.” U.S. gasoline producers carry tremendous political clout in the formulation of EPA air pollution regulations.72 This political clout is especially strong in Congress, where many members have received significant campaign contributions from the American gasoline lobby.73 American 67 See, e.g., id. (“It was a clear Case of green protectionism.”); Francesca Macchiaverna, The Reformulated Gasoline Case: International Trade’s Impact on U.S. Environmental Policy, 7 S.C ENVTL. L.J. 129, 134 (1998) (“The United States RFG regulation is simple protectionism and can be compared to the phenomenon of states attempting to protect in-state business by taxing out-of-state businesses at a higher rate.”) 68 Schultz, supra note 66, at 19. It may be relevant, or at least interesting, that the author of this piece, Professor Jennifer Schultz of the University of Monash, is not from the United States but from Australia, a major oil producing country. Professor Schultz goes on to state that the “right party” was successful in the RFG case in part because the rule did little to encourage domestic refiners to improve the quality of their gasoline, and thus did little to satisfy its objectives of lowering air pollution. See id. n. 99. 69 See Waincymer, supra note 54, at 147. 70 David M. Parks, GATT and the Environment: Reconciling Liberal Trade Policies with Environmental Preservation, 15 UCLA J. ENVTL. L. & POL’Y 151, 175 (1997). 71 McCrory & Richards, supra note 8, at 28–29. 72 See Schultz, supra note 66, at 3. As Schultz notes, “[t]he regulation appears to have been a political response to pressure applied by an influential lobby group (American gasoline refineries).” Id. 73 Further examination of congressional tendency to succumb to protectionist political pressure will be made infra, pp. 206–208. At this point, suffice it to say that the EPA is generally not as swayed by such pressure and carries on a more mutually assistive relationship with U.S. Gasoline refineries.

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gasoline companies lobbied for favorable treatment by the RFG rule on the basis that the new regulations would be extremely costly and disadvantage them in foreign markets and that they therefore needed protection within the domestic market.74 A 1991 independent contractor study by the Department of Energy, however, revealed that the U.S. gasoline industry routinely and materially overestimates the difficulty of compliance in its own studies.75 Although much of the reason for the differential treatment within the RFG rule was the result of powerful domestic pressure to advantage American gasoline producers in light of more stringent environmental standards, the RFG rule did have a legitimate environmental purpose that would be served by disparate treatment of producers. In spite of the RFG Appellate Body’s decision, RFG rule baseline-setting regulations cannot be properly regulated in the absence of reliable data, and the EPA was not able to determine a way in which to ensure the accuracy of foreign refinery data. Thus, the RFG rule, though overtly protectionist and certainly discriminatory, nevertheless presents a marginal case for the sort of legitimate environmental measure that may satisfy GATT obligations. Therefore, discussion of the RFG Appellate Body’s decision should focus on remedying the aspects of the U.S. administrative regime that make legitimate U.S. environmental regulations seemingly protectionist to commentators, other nations, and the WTO DSU, so that they are deemed improperly discriminatory.

Improving Relations with the South: Developing Country Concern over Protectionism One reason that the RFG Appellate Body considered the RFG rule protectionist was a lack of international coordination and cooperation during the rule’s formulation. Cooperation during the formulation of environmental regulations is especially important when dealing with developing countries, which are collectively known as the “South.” The South has long been wary of the trade restrictive practices of developed countries, the “North,” especially those measures concerning environmental measures. The South considers many Northern environmental measures to be hidden non-tariff barriers (NTBs).76 Venezuela’s arguments in the In addition, Venezuela did not fail to make light, in its arguments before the panel and Appellate Body, that that high ranking U.S. government officials had publicly acknowledged that the RFG rule was an attempt to aid U.S. gasoline refiners. See McCrory & Richards, supra note 8, at 29. 74 See ESTY, supra note 64, at 23; see also Schultz, supra note 66, at 3. 75 See New DOE Study Said to Refute Earlier Negative Report on Refiners’ Supply, CLEAN AIR REPORT, Sept. 26, 1991, at 9. 76 See ESTY, supra note 64, at 238.

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RFG case echoed this wariness.77 As trade barriers have continued to fall with WTO expansion, Southern anxiety over expanding restrictions on trade liberalization has only grown more acute.78 This is not to say, however, that the South has no interest in environmental protection. In fact, many developing country leaders foresee the South taking an active role in support of continued augmentation of global environmental standards.79 These leaders condition the support of “greening” trade rules on assistance from the North in providing “additional financing, technology transfer, increased commitments to overseas development assistance, and other initiatives to promote sustainable development.”80 Although environmentalists and diplomats of the North may disagree with these conditions, the conditions are based on serious economic concerns and cannot be ignored. Before the South can be expected to agree on environmental exceptions to free trade, developing countries must feel that they are not, as a result of their lowered economic bargaining power, being unilaterally forced to submit to stringent environmental standards. One method of securing Southern confidence in the legitimacy of Northern environmental causes would be to follow through on financial obligations previously made through multilateral discourse.81

Developing Countries Look to the WTO Assuming that continued trade between the North and the South is mutually desirable, the North should attempt to understand the South’s reliance on multilateral consensus as a tool for gaining trade leverage. See McCrory & Richards, supra note 8, at 25. See Scott Vaughan, Trade and Environment: Some North-South Considerations, 27 CORNELL INT’L L J. 591, 594 (1994). Vaughan notes that in a speech to the United Nations in late 1993 on behalf of the G-77, Ambassador Fernando Jarmillo of Colombia warned of the growing offensive in developed countries against trade liberalization. See id. Vaughan goes on to say that concern is perhaps highest in relation to environmental production process methods, which developing countries view as eroding traditional distinctions between product and production method. See id. 79 See, e.g., Magda Shahin, Minister Plenipotentiary of the Mission of Egypt to the WTO, Trade and Environment in the WTO: Achievements and Future Prospects, Third World Network Web page, at http://www.twnside.org.sg/souths/twn/title/ach-cn.htm (last visited Oct. 27, 1999) (stating that the South should take an active role within the WTO Committee on Trade and the Environment in promoting sustainable environmental protection while maintaining the classic wariness that the environment could be used as a protectionist device to legitimize inconsistent trade measures). 80 Vaughan, supra note 78, at 591. 81 See id. at 591–92. Vaughan argues that a key factor in breaking the North-South impasse would be the fulfillment of commitments made by the North to the South at the UN Conference on Environment and Trade (UNCED), also know as the Earth Summit. See id. As the RFG Appellate Body seemed to hold, simple respect and acknowledgement may go a long way in easing international relations. 77 78

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Developing countries are committed to the formation of multilateral agreements because they provide a means of ensuring that Southern interests are protected against unforeseen economic and security situations. In this regard, the South has been particularly attracted to the WTO’s standardized rules and balanced commitment to free trade.82 The WTO’s dispute settlement procedures are perceived as being particularly useful in preventing the monopolization and domination of trade by wealthy Northern states.83 These Southern perspectives are broadly reflected in WTO Appellate Body decisions such as the RFG case. The South, in turn, has good cause to be wary of the North’s allegiance to the WTO. At the concluding negotiations of the Uruguay Round, the birthplace of the WTO, the South found itself “sidelined” as the United States and the European Union bantered back and forth over European agricultural subsidies and the access of U.S. motion pictures in France.84 Additionally, although the South was confident that developing countries would experience the greatest economic growth from WTO membership, estimates have put fully 70% of total WTO financial gains within Europe and North America.85 As a result of these realities, developing countries are hesitant to accept the integration of environmental issues within purely trade-related agreements such as the GATT. Such an inclusion would represent the further domination of the WTO by developed country priorities.86 Some RFG case critics have intimated that one ingredient in the RFG Appellate Body’s decision was solidifying its own legitimacy before the South. If this is the case, then so be it. Is long-term economic and political stability not more valuable than a single, arguably protectionist U.S. regulation?

82 See Gerald K. Helleiner, Considering U.S.-Mexico Free Trade, in RICARDO GRINPUN MAXWELL A. CAMERON, THE POLITICAL ECONOMY OF NORTH AMERICAN FREE TRADE 45, 53 (1993). According to Helleiner, “[t]he protection offered to smaller countries by a multilateral rules system is far from perfect, but it is certainly greater than that available from the interplay among more powerful international actors pursuing their own interests in a world without rules.” Id. 83 See Ernst-Ulrich Petersmann, International Trade Law and International Environmental Law, Prevention and Settlement of International Environmental Disputes in GATT, 27 J. WORLD TRADE 43, 79 (1993). As Petersmann has stated, “GATT dispute settlement proceedings offer an effective means, at low transaction cost, for defending weaker countries against unilateral power politics and for clarifying and adjudicating market access rights under GATT law.” Id. 84 See Vaughan, supra note 78, at 599. 85 See id. at 600. 86 See id. at 593.

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U.S. Use of Economic Pressure to Impose Social Standards The United States has long been a champion of free and uninhibited global trade. Following World War II, the U.S. government and private business sector interests demanded entry into protected markets under the auspices of fair competition. Only in the 1970s, with increased foreign competition, did the United States back off from this position.87 Now that the developing countries of the world are the largest proponents of liberal trade, the United States has been criticized for similar trade restrictions to that which it sought to abolish 50 years ago in order to advance its social policies abroad. The South has accused developed countries like the United States of practicing a form of environmental imperialism; using trade pressure to impose environmental policies, and thereby deny developing countries the sovereign right to decide their own domestic policies.88 This theory, commonly known as “eco-imperialism,” states the belief that developed countries often pressure developing countries into environmental laws that their economies cannot sustain.89 This eventuality took on real proportions in the RFG case. Venezuelan gasoline producer Petroleous de Venezuela, S.A. (PDVSA), faced with the fact that it could not have complied with the threshold set by the RFG rule, would have had to curtail or redirect a large amount of its exports away from the United States.90 In recent WTO disputes, such as Shrimp-Turtle, the United States has been scrutinized for imposing its domestic social prerogatives on an international scale through unilateral environmental measures that affect U.S. imports. These regulations govern conduct that occurs outside of U.S. territory.91 Such regulations have a “natural tendency to favor those inter-

87 See Robert E. Hudec, Differences in National Environmental Standards, 5 MINN. J. GLOBAL TRADE 1, 9 (1996). 88 See Schultz, supra note 66, at 10. There is still a question as to whether the Appellate Body’s decision in RFG widened or narrowed the gap between North and South. There certainly is no question, however, that the South participates in the WTO precisely in the hope of such an outcome. 89 See ESTY, supra note 64, at 25. In essence, developing countries claim that ecoimperialism denies them the opportunity to grow to the same economic level that the United States has achieved over hundreds of years of development. See McBride, supra note 21, at 335. The spread and withdrawal of colonial powers may have played a large role in creating the harsh economic realities of these nations and fostering continued negative sentiment. An overwhelmingly large number of developing states were at one period in the relatively recent past colonial possessions. 90 See Smith, supra note 20, at 1267. The olefin (regulated ozone pollutant) content of Venezuelan gasoline was three times higher than the then U.S. refinery-industry average. See McBride, supra note 21, at 312 n.71. 91 See generally World Trade Organization: Report of the Appellate Body, in United

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ests associated with the domestic decision-making body,” and may be “injurious to the natural progress of free trade and its inherent benefits.”92 The South agrees and has determined that maverick unilateral environmental measures of the United States threaten not only the domestic sovereignty of developing countries, but also the appropriate legal posture of the WTO DSB.93 Some scholars argue, however, that unilateral decisionmaking on the environmental front is justified and can have a positive effect in influencing proper global transition to higher environmental standards.94 In the past, they claim, unilateral trade measures have preceded important and widely accepted international environmental agreements, such as those regarding whaling, hazardous waste, and driftnet fishing.95 It may also be true that “[e]ven when unilateral action does not engender multilateral agreements, it may be constructive in promoting other unilateral action.”96 Ultimately, an endorsement of the continued growth of global environmental regulations does not rely on a determination of whether unilateral measures evoke positive or negative consequences in the long run. As the RFG Appellate Body has indicated, the WTO is not so concerned with whether a measure is unilateral or not, but rather with the lengths to which a member country goes in coordinating the measure’s implementation with affected member countries. In short, the United States States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R, (Apr. 6, 1998) [hereinafter Shrimp-Turtle]. The RFG case does not involve a unilateral measure as the U.S. regulation only concerned the constitution of gasoline products to be marketed within the United States (product) and not the details of how that gasoline was actually refined (process). However, after the Shrimp-Turtle case, the Appellate Body does not seem inclined to treat unilateral regulations any more harsh ly than non-unilateral ones. 92 Parks, supra note 70, at 175. 93 See, e.g., Chakravarthi Raghavan, U.S. vs. Rest on Unilateralism at WTO, Third World Network Web page, at http://www.twnside.org.sg/souths/twn/title/unilatecn.htm (last visited Oct. 27, 1999) (the United States has argued that among other unilateral rights, it reserves the right to take retaliatory action under Article XXII for non-compliance prior to a multilateral determination). 94 See generally Rio Declaration on Environment and Development, U.N. Doc. A/CONF.151/5/Rev.1(June 14, 1992), reprinted in 31 I.L.M. 874 (1992) [hereinafter Rio Declaration]. It is of consequence that the recent Rio Declaration failed to foreclose on the use of unilateral environmental measures, instead using language that merely discouraged them. See id. 95 See Charnovitz, supra note 21, at 495. 96 Id. at 496. Charnovitz goes on to claim that the real danger of eco-imperialism comes not from passive unilateral trade measures, but from WTO dispute settlement itself, in which wide discretion is granted authorizing sanctions if another country does not modify a non-GATT compliant health requirement. See id. at 493.

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must avoid the blind imposition of American social norms on countries that are not economically equipped to accept them. A thorough evaluation and understanding of the effects of a potential environmental regulation on foreign countries is therefore a necessity for success before the WTO DSB. As the world’s sole superpower, the urge to ignore the views of other countries in promulgating regulations is powerful within the United States.97 As one scholar points out, however, “[h]istory has shown that neither protectionism (e.g. the Smoot-Hawley Act) nor forced morality98 (e.g. colonialism) will reap any long-term benefits.” 99 Moreover, the heavyhanded enforcement of environmental restrictions on a developing country may weaken bilateral and multilateral relations and ultimately harm U.S. business interests who wish to pursue budding economic opportunities in these resource-rich states.

Letting the “Playing Field” Level Itself Many scholars believe that discord between the North and South arises from an inherent disagreement over the relative value and importance of increased trade versus environmental protection. This inherent disagreement may be due to the divergent economic abilities of the two political regimes, whereby developed countries possess greater independence through which to pursue such economic goals. North-South contrariety may also be due, however, to a basic conflict between the trade movement and the environmental movement themselves. The two movements “come from extremely different paradigms—one based upon the idea of unlimited ideas and resources, where less governance is the best governance, the other based upon an opposite foundation that resources are limited and government regulation is a necessity.”100 Although conflict between the trade movement and the environmental movement is objectively reasonable, it is often clouded by national economic propaganda. One example of how the conflict may become clouded can be seen when developed countries complain that exports from countries with low environmental standards are “unfair.” 101 This See McBride, supra note 21, at 338. See, e.g., Christopher J. Duncan, Comment, The 1998 Foreign Corrupt Practices Act Amendments: Moral Empiricism or Moral Imperialism?, 2 ASIAN-PAC. L. & POL’ Y J. 1 (2000). 99 McBride, supra note 21, at 338. As McBride points out additionally, the converse result may also occur. See id. Overly aggressive domestic environmental regulation may encourage a “race to the bottom” in developing countries whereby direct economic investment is sought through the lowering of environmental standards there. See id. In the end, neither result is truly desirable, and a solution that prevents both ends must be found. 100 McBride, supra note 21, at 352. 101 See Hudec, supra note 87, at 1. 97 98

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argument follows the logic that producers in developing countries obtain an unfair cost advantage because they do not have to comply with the higher environmental standards of foreign producers.102 What is lost in this generalization, however, is that these relaxed environmental standards are necessary for developing country producers to remain solvent. The reason for the South’s lower environmental standards is a commercial one. Lower standards mean lower costs, and lower costs allow productive business enterprises with marginal bottom-lines to extend their “useful economic activity,” thus enhancing the global financial marketplace through competition and liquid capital flow.103 Thus, although pressure from Northern domestic interests acts to ease the economic “unfairness” that results from the South’s low environmental standards, developed countries should restrain themselves from advancing such a position. Three central strategies may be employed by developed countries in order to “level the playing field” and equalize the cost advantage function that aids Southern producers. First, a government can lower its own environmental standards, thus eliminating a cost disadvantage to its domestic producers.104 Second, a government can provide domestic producers with a cash subsidy to cover the costs of higher environmental compliance.105 Third, the government could tax foreign producers by imposing “eco-duties” on imports from countries with low environmental standards, thus taxing down their cost advantage.106 None of these methods serves the long-term goals of free trade and environmental protection, however. The first method disregards environmental concerns altogether, and the second and third disregard the benefits of competition and uninhibited trade.107

102

See id. See id. at 24. In a global environment where many of the economic players are barely above the “water-line,” it does not make sense to enforce transnational environmental policies to the point where such players sink and drown, or in the alternative, are saved. In other words, it is in the long-term interest of every country to maintain a diverse and productive collection of national entities; not only for economic stability and the continued feasibility of environmental regulation, but for political, and ultimately strategic, reasons, as well. 104 See id. at 1. 105 See id. 106 See id. 107 Some environmental scholars, however, believe that such subsidies and taxes promote better environmental policies. See id. at 5. They hold that “protected” domestic producers are less likely to oppose higher domestic environmental standards in the future, and that eco-duties create pressure for higher environmental standards in other countries. See id. 103

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Furthermore, “in most discourse about international trade . . . experts agree that some differences in competitive conditions between countries are both natural and proper, and that trade outcomes determined by these differences are consequently ‘legitimate.’”108 Competitive differences arise because economic differences inevitably lead to value differences. In countries with precariously weak financial markets, it is unlikely that national interests will forego monetary gain in favor of environmental protection. As one scholar has opined, “the thought that poor countries in particular can adopt environmental policies absent any competitive motivation seems particularly fanciful.”109 From a realpolitik perspective, no developing country leader would dare impose unnecessarily stringent environmental laws on domestic producers for fear of losing all legitimacy before the populace. Indeed, where economic circumstances render values such as steady employment and subsistence-level food supplies, aspirations toward heightened environmental standards find little support. Therefore, in order to ensure that environmental regulations expand in the years to come, developed countries, within which economic success has engendered a value system in favor environmental protection, must continue to engage developing countries through consensus-based economic organizations, such as the WTO. The WTO is successful because it assures Southern governmental leaders that no improved environmental measures will be mandated in the absence of corresponding economic incentives.110 Such a mechanism, by which economic incentives drive environmental assimilation, allows for both basic international environmental standards and, with the maintenance of domestic political support, for developing country leaders. 111 Thus, the “playing field” must be given time and allowed to “level” itself through liberal trading forces. The impossibility of developing countries immediately adhering to Northern environmental standards has been actively voiced by repreId. at 21. Id. at 23. 110 This may be accomplished in a number of ways, not the least of which include technology transfer and reduced trading barriers. 111 This is not to say that the protection of the environment should not be at the forefront of global discourse and concern. Indeed, continued environmental degradation would render such political and diplomatic issues entirely moot. In the realpolitik of the modern world, however, there is no indication that developing countries would ever consent to strict environmental standards in the absence of economic incentives. This is true even if, as noted scholars such as Professor Edith Brown Weiss of Georgetown University Law Center have pointed out, the peoples of the developing world, who live in the areas where environmental degradation most occurs, “are most to benefit from such increased regulation.” Interview with Edith Brown Weiss, Professor of Law, Georgetown University Law Center (Nov. 16, 1999). 108 109

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sentatives of “Third World” interests.112 One developing country spokesman believes that the level playing field argument, while championed as a fight for the rights of Southern workers, is a “subtle argument for shutting off Northern markets to the so-called cheap goods from the South.”113 This idea, that “social groups have overlapping but still varying value systems,” has gained support even within the U.S. political structure. The Clinton Administration’s environmental review of the North American Free Trade Agreement (NAFTA) 114 points out that “the choice of the appropriate level of protection is a social value judgement” and that “there is no requirement for a scientific basis for the level of protection, because it is not a scientific judgement.”115 Many trade/environment conflicts arise from differences in values, and not from differences between the two movements themselves. 116 Understanding the legitimacy and impetus of variant values, and maintaining a willingness to use cooperative techniques to achieve compromise in spite of these differences, can reduce trade/environment conflicts. Even universal principles, such as a faith in science, however, are valid only to the point at which value-based national standards are created. Thus, debates concerning level playing field claims will continue as long as “disadvantaged” Northern producers command political leverage.117 Reconciling these inherent differences into an effective technique for political cooperation requires that those who continue to defend trade with the developing countries seek a normative justification for differences in national standards.118 Even in the absence of such a widely acknowledged justification,119 however, it is imperative that the United States and

112 See Dr. Julius K Nyerere, Speech before the North-South Conference for Sustainable Development in Berne, Switzerland (26 May 1998), available at Third World Network http://www.twnside.org.sg/souths/twn/title/juli1-cn.htm. (stating that while universal social principles are possible, universal social standards based on those principles are not). 113 Id. 114 See North American Free Trade Agreement (NAFTA), Dec. 17, 1992, Can.Mex.-U.S., 32 I.L.M. 289 (entered into force Jan. 1,1994) [hereinafter NAFTA]. 115 Office of the U.S. Trade Representative, The NAFTA: Expanding U.S. Exports, Jobs and Growth: Report on Environmental Issues 8 (1993). This view, applied specifically to sanitary policies but made in a broad sense, emphasizes that while principles, such as the validity of science are accepted, the corresponding national standards implemented may not be normative. See id. 116 See Charnovitz, supra note 21, at 491–92. 117 See Hudec, supra note 87, at 28. 118 See id. 119 It is the opinion of the author that in light of these arguments made above, these differences should be perceived as valid to the extent they represent genuine national economic position and reflect the social judgment of the populace.

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other developed countries attempt to balance their own values with those of the developing countries with whom they interact.120

A Convergence of Trade and Environmental Interests? In recent years, scholars have begun to argue that a new formulaic response to the North/South conflict may have arisen beyond the mere acceptance that differing national standards naturally occur. Pivotal to this perspective is the belief that the political problems caused by both the trade movement and the environmental movement, are virtually alike. This theory rests on the premise that both free trade and environmental policies ultimately injure domestic producers by imposing an additional cost, on the one hand, and eliminating a protectionist benefit, on the other.121 Under this theory, “the sharp political conflicts between [the two movements’] supporters mask a deep underlying structural unity.” 122 Linkages between trade policy and environmental regulation do exist. In general, three types of environmental measures affect trade: (1) measures designed to reduce the comparative advantage gained by lax environmental laws in a foreign nation, (2) measures designed to protect the domestic environment, and (3) measures designed to protect global resources. 123 “[W]hen nations exchange goods and services, they also exchange trade, environmental and health risks.”124 Put more specifically, “[e]nvironmental issues affect the world economy through the movement of polluted products in international trade, the differences in national rules governing (or ignoring) the pollution content of production processes, and activities of industrial countries which affect other countries through altering the environment itself.”125 The potential for a reconciliation of trade and environmental interests, however, may distort efforts at cooperation in the present. Indeed, in 120 Such a balance was missing in the RFG case, whereby the United States balanced the needs of its domestic producers with the effectiveness of its environmental reform but took little heed of the values and the necessities underlying those values of producers beyond its borders. 121 See Daniel A. Farber, The Allocation of Government Authority: Environmental Federalism in a Global Economy, 83 VA. L. REV. 1283, 1319 (1997). 122 Id. The irony of this union is perhaps best illustrated in the RFG case itself. Faced with the realization that foreign producers could potentially be allowed to export dirty gas at cheaper costs into the U.S., environmentalists and the U.S. gasoline industry found themselves strange, though powerfully united, bedfellows in opposing the May 4 Amendments. 123 See Parks, supra note 70, at 170–71. 124 C. FORD RUNGE, FREER TRADE, PROTECTED ENVIRONMENT: BALANCING TRADE LIBERALIZATION AND ENVIRONMENTAL INTERESTS 5–6 (Council on Foreign Relations, June 1994). 125 C. FRED BERGSTEN, THE FUTURE OF THE INTERNATIONAL ECONOMIC ORDER: AN AGENDA FOR RESEARCH 42 (1973).

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spite of the obvious similarities between the two motivations, their inherent divisiveness still leads to transnational conflicts arising from varying national standards.126 Thus, investigation and comprehension of varying international standards and values, rather than a reliance on converging theoretical interests, seems the most effective method by which to alleviate outright conflict on trade and environmental issues.127 Although the two movements do share the fact that “today, both the economy and ecosystem increasingly must be seen as global,”128 efforts at international cooperation within the controversial realms of free trade and environmental regulation must continue to work towards a still elusive reconciliation.

The United States Must Act with a Greater Global Understanding Due to “globalization,” or the diffusion of political sovereignty on a global scale, “global interdependence”129 has become the norm. Countries must act on a more global scale in modern times, a reality that has drastically affected the manner in which national actors must view themselves and the world they function in. This change in perspective takes form in two modes of understanding, which follow trade and environmental paradigms. The first concerns the levels to which a government may ensure national economic success while maintaining a productive relationship with its fellow states, upon which it increasingly relies. The second involves the effect that an acknowledgement of the global nature of environmental concerns has on national sovereignty. 126 See RUNGE, supra note 124, at 5–6. As Runge points out, though “[a]dvocates of more open trade and environmentalists alike share concerns over how [the two] . . . are to be linked . . . [t]he conflict of cultures and collision of interests, far from being over, has really only begun.” Id. 127 It is the theory of this comment that such cooperative discussion must be held within trade-based organizations, such as the WTO. The basis for this belief is that such organizations appeal to developing countries because of their obvious economic benefits and thus may then openly engage such countries in discourse on the methods and degrees to which corollary topics, such as environmental and labor standards, should affect the trading structure. It is by galvanizing a roundtable discussion of these issues that the WTO ensures that such dilemmas are efficiently dealt with early on. For this reason, the WTO seems the most effective forum in which to air these global concerns. 128 Farber, supra note 121, at 1285. 129 Global interdependence, or the development by which nations must act in the context of global states rather than independent domestic actors in a vacuum, has been brought on by a number of factors. These include: technology and information transfer, greater international mobility, a global exchange of goods, and scientific advancements. While not exhaustive in the least, this list of factors indicates that the advent of globalization has affected two fronts: the first being the practical methods by which governments must modify their sovereignty, and the second being an understanding that actions beyond one’s borders can have a profound effect within them.

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In the modern political dynamic, “fewer matters of policy can be determined solely by reference to domestic preferences” because “an increasing range of national policies derive not from internal government but from government’s interaction with foreign powers.” 130 This relationship is of utmost concern to developed countries, which view such a transition as the dissipation of immediate national prominence in favor of more long-term national and international goals.131 It is the opinion of one commentator that the consequence of a more global outlook has, for the United States, resulted in a second consequence regarding the nature of government.132 Specifically, as national affairs have become more global, the executive branch, which has authority over foreign policy issues and functions behind twin goals of national integrity and supranational coordination, has not only dominated discussion on purely foreign policy, but usurped control of domestic policy issues in which international relations may be implicated.133 Executive authority played a major role in the RFG case in particular. Therefore, examining the executive branch’s role in the RFG case, in light of modern global pressures, can assist in arriving at the appropriate balance of political power during the promulgation of regulations that are WTO sensitive. In regard to global environmental effects, many environmentalists counter the argument that transnational environmental regulations are the imposition of Northern values with the logic that “foreign conservation practices can effect one’s own environment.”134 These statements are of obvious concern to developing countries, who fear that Northern countries may use environmental justification to impinge on their national sovereignty, and thereby limit the competitive advantages resulting from less stringent environmental standards.135 Developing countries claim that 130 Smith, supra note 20, at 1269. Smith notes that the RFG case itself exemplifies this occurrence. See id. 131 Suffice it to say that, though international labor and environmental standards certainly benefit those in foreign states, at the root of such pursuits by Americans is the righteous belief that these developments will ensure their own viability and that of their descendents to come. 132 See HAROLD HONGJU KOH, THE NATIONAL SECURITY CONSTITUTION 117–49 (1990). 133 See id. Koh explains this continual monopolization of power as the result of executive initiative, congressional acquiescence and judicial tolerance. See id. 134 Charnovitz, supra note 21, at 492; see also, Lynton K. Caldwell, Concepts in Development of International Environmental Policies, in Int’l Union for Conservation of Nature and Natural Resources (IUCN), Twelfth Technical Meeting, Papers and Proceedings 98 (No. 28, 1972) (stating that as ecological interrelationships are better understood people will become aware that they may be suffering from environmental damage originating in the territory of other nations). 135 While environmental concerns mirror those involved with maintaining a “cheap” labor force, this note will limit discussion to strictly environmental conflicts in accordance with those issues implicated by the RFG case.

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their competitive advantages are temporary modes of their progression toward economic stability.136 They call on the regulating agencies of the United States and other Northern countries to understand that, while they may embrace the theory of global environmentalism, economic conditions dictate that they refuse to act substantively on that basis alone. As U.S. agencies seek to employ the more international perspective promoted by the WTO, they must temper their “global theories” with these “global realities.” In light of the consequences of global interdependence, and the effects that it may have on state political mechanics and national sovereignty, the WTO seems the optimal mode of ensuring that U.S. regulatory action is upheld. WTO DSB decisions provide legitimacy to international legal rights.137 In addition, the WTO presents an opportunity for the United States to solidify its role as the most powerful nation in a highly globalized world, and allows the United States to better coordinate its domestic policy with its international obligations.

Recognizing Past Mistakes: The NAFTA-Chile Negotiations In evaluating the proper posture of the United States in relation to the WTO, it is helpful to briefly examine U.S. shortcomings in its dealings concerning the NAFTA, which, in a regional context, embodies many of the same precepts held by the WTO. The United States has received much praise, both domestically and abroad, for its role in bringing NAFTA to fruition. Negotiations regarding NAFTA’s potential expansion into Latin America, however, exemplify the inadequacy of U.S. diplomatic relations with developing nations. At NAFTA’s inception, many expected that the agreement would soon expand southward into Latin America and ultimately culminate in a hemispheric free trade agreement.138 Soon after NAFTA went into effect, however, discussion began concerning the inclusion of Chile, one of Latin America’s most economically successful countries, within the agreement. These unsuccessful negotiations highlight U.S. insensitivity to developing country positions and demonstrate the need for augmented techniques of coordinating transnational agreements. The United States initially bolstered hopes for NAFTA expansion by displaying a commitment to helping Latin American countries comport 136 As Patricio Leyton, a friend of mine hailing from Chile, once said, “for developing countries, the choice is not between environmental protection and economic riches, it is between environmental protection and starvation.” Interview with Patricio Leyton, Student, Georgetown University Law Center (Nov. 16, 1999). 137 See Schultz, supra note 66, at 19. 138 See Lisa Anderson, The Future of Hemispheric Free Trade: Towards a Unified Hemisphere?, 20 HOUS. J. INT’L L. 635, 636 (1998).

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with basic NAFTA requirements.139 In turn, the United States set up four macroeconomic building blocks that Latin American countries seeking inclusion in NAFTA should work towards. 140 These were (1) entry into framework agreements coordinating macroeconomic principles, 141 (2) the development of harmonization plans for specific sectors of their economies,142 (3) compliance with criteria set by and for existing NAFTA countries,143 and (4) formal union with NAFTA under one of two yet to be developed procedures.144 Thus, it appeared that the stage had been duly set for the relatively smooth entry into NAFTA of at least Latin America’s most economically sound countries. 145 Chile, however, perhaps Latin America’s most economically stable country, experienced anything but “smooth entry” during its bid to join NAFTA. Despite a strong commitment toward Chilean inclusion on the part of President Clinton, both of Clinton’s presidential administrations failed to acquire congressional approval for the executive fast-track negotiating power necessary to carry such a deal through the Congress.146 The 139 See id. at 649–50. Associate U.S. Trade Representative Peter Allegeire claimed that the United States employed a dual-tracked approach to advancing economic expansion: the first track being the expansion of NAFTA, and the second track being the pursuit of “pan-American talks on trade liberalization and harmonization of regulatory policy.” Gerard Aziakou, U.S. Committed to Two-Track Approach for Americas’ Economic Integration, AGENCE FRANCE-PRESSE, Nov. 16, 1996, available at 1996 WL 12181840. 140 See Anderson, supra note 138, at 643. 141 See Paul A. O’Hop, Jr., Hemispheric Integration and the Elimination of Legal Obstacles Under a NAFTA-Based System, 36 HARV. INT’L L.J. 127, 149 (1995). Although most Latin American agreements are bilateral, framework agreements such as the one the United States has with MERCOSUR are growing in number. See id. 142 See id. at 152. The theory is that economic harmonization will bring greater political cohesiveness. See id. 143 See id. These may include investment and intellectual property rights. See id. 144 See id. Evaluation would include both economic and non-economic criteria. See id. 145 See Anderson, supra note 138, at 639. It should be noted that many scholars hold that supraregional trading structures, such as that proposed, are not all that desirable in the end. Anderson has argued that “freer trade and hemispheric integration” may best be accomplished as it has in the past, “at a slower pace through bilateral and multilateral trade agreements between nations.” Id. Such a process may allow for more equal bargaining positions as more extensive trading alliances are negotiated. 146 See Economic Research Service: International Agriculture and Trade, M2 PRESSWIRE, Sept. 26, 1996, available at 1996 WL 11275401. Interestingly, a central source of difficulty for the Clinton Administration in securing fast-track authority was its commitment to include environment and labor side agreements in the negotiations with Chile. See James Stamps, Free Trade Area for the Americas: Chile is the Linchpin, MEX. TRADE & L. REP., Oct. 1995, at 9 (1995). Congress wanted negotiations limited to more traditional trade and investment issues and felt that extended negotiations “could impede trade and lead to tougher regulations on U.S. businesses abroad.” Id.

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resulting delay caused the March 1996 deadline for NAFTA-Chile negotiations to pass without agreement, ending hopes that an accession would occur in the immediate future.147 Some domestic interests have openly questioned the U.S. government’s lack of resolve in the NAFTA-Chile negotiations.148 The most damning criticism of U.S. diplomatic efforts in the NAFTA-Chile negotiations, however, has come from Chile and other Latin American countries themselves. To Latin American countries, which anxiously watched to see how the U.S. government would deal with the negotiations in light of internal political division, the end result of the negotiations was certainly not promising.149 Chilean President Frei stated that Chile was no longer interested in a quick entry into NAFTA under any conditions. 150 Additionally, a November 1996 trip to Brazil, Argentina, and Uruguay in which Senior Clinton advisor Thomas McLarty attempted to reinstate faith in the U.S. President’s commitment to a hemispheric free trade agreement was met with open pessimism.151 The most damaging fallout from the NAFTA-Chile negotiations may have come when Chile, in the wake of the U.S. failure, opted to join MERCOSUR,152 the fledgling Latin American equivalent of NAFTA. The pres-

See Anderson, supra note 138, at 647–48. See, e.g., Howard LaFranchi, Latin America Sambas at Christopher’s Visit: U.S. Secretary in Five-Nation Tour Talks About Trade, Drugs, CHRISTIAN SCI. MONITOR, Feb. 29, 1996, at 6 (stating that the United States had “dropped the ball” on its membership negotiations with Chile); Anderson, supra note 138, at 638 (relating the fear that the action could leave the United States as the only major player in the Western Hemisphere without preferential access to the Chilean market). 149 See id. at 647–48. According to one scholar, the conflict between the executive and legislative branches and resulting failure of Chilean accession “exibit[ed] to Latin American spectators a lack of unity on the trade liberalization agenda.” Stamps, supra note 146, at 9. 150 See Wisconsin Governor Supports Chile’s Entry Into NAFTA, ASSOC. PRESS, Dec. 4, 1996, available at 1996 WL 5426005. In the alternative, Chile has bypassed U.S. involvement and entered into a five-year bilateral free trade accord with Mexico as well as a bilateral agreement with Canada. See id. 151 See Latin Americans Say U.S. Ignores Region; Area Among Clinton’s Priorities, Aide Says, DALLAS MORNING NEWS, Nov. 23, 1996, at A25. 152 The Treaty of Asuncion, signed on March 26, 1991 by Argentina, Brazil, Paraguay, and Uruguay created MERCOSUR. See Treaty Establishing a Common Market Between the Argentine Republic, the Federal Republic of Brazil, the Republic of Paraguay and the Republic of Uruguay, Mar. 26, 1991, 30 I.L.M. 1041 [hereinafter MERCOSUR Treaty]. After approval by the Chilean Congress in June 1996, Chilean President Eduardo Frei signed an accord with MERCOSUR establishing Chile as an associate member of the trade bloc. See Chile Joins South American Common Market, AGENCE FRANCE-PRESSE, Oct. 2, 1996, available at 1996 WL 12150134. 147 148

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ence of Chile in MERCOSUR greatly strengthens the trading bloc,153 making it a “potentially powerful counterpoint to NAFTA” and promoting it as the most ambitious mechanism of hemispheric unification, a role that NAFTA, under U.S. leadership, appears to have abandoned.154 Moreover, the inability of the United States to effectively negotiate with one of Latin America’s most prolific countries may have inhibited economic and political reform in those Latin American countries leery of free trade.155 Almost paradoxically, U.S. actions seem to have both discouraged liberal hemispherical economic progress, on the one hand, and encouraged Latin American solidarity in free trade, absent U.S. involvement, on the other.156 After the NAFTA-Chile negotiations, the endgame of the present U.S. approach to multilateral trade negotiations with developing countries seems to be an alienation of U.S. involvement combined with a coalescence of developing country resources adverse to U.S. interests.157 As such, the United States not only forfeits potential economic opportunities, but makes enemies in the process. Experiences such as the NAFTAChile negotiations are oracles of an ominous diplomatic future. In preventing the continuation of this unsuccessful process, it is imperative that the United States rethink the nature of its relationship with developing countries, especially in the contexts of global interdependence and dispute settlement before the WTO. Such a change requires the vast American governmental machine to incorporate a more globally sensitive analytical methodology into political and legislative processes that 153 See id. MERCOSUR is the fourth largest trading bloc in the world, with a population of 210 million people. See id. 154 See Anderson, supra note 138, at 638. Former U.S. Secretary of State Henry Kissinger has reportedly said that “MERCOSUR will develop faster than NAFTA in the next few years.” Riordan Roett, Trends of the Trade: Free Trade Agreements Signal Economic Integration for Latin America, LATIN FINANCE, Sept. 1995, at TF32. 155 See Ricardo Matte Equiguren, NAFTA: Chile Should Join NAFTA, MEX. TRADE & L. REP., Aug. 1995, at 9, 10. 156 A collateral example of such a phenomenon is, interestingly enough, the experience of Venezuela, the key U.S. opponent in the RFG case. Since an April 1993 agreement with its relatively well off neighbor Chile, tariffs on over 300 select goods have gradually decreased, culminating in a complete elimination of tariffs on these goods by the end of 1999. See Anderson, supra note 138, at 660. See also, Chile: Officials Predict 100% Increase in Trade with Venezuela Under New Free Trade Accord, CHRON. LATIN AM. ECON. AFF., June 17, 1993, available at 1993 WL 2512302. At the same time, Venezuela has made little progress in negotiating bilateral free trade agreements with the U.S., with a direct result of this negotiating chasm being the dispute over reformulated gasoline. See id. 157 See Anderson, supra note 138, at 652. As Anderson puts it, “the most probable consequence of the United States’ inattentiveness towards Latin American trade seems to be that the region is in fact continuing its march towards free trade and hemispheric economic integration, but without U.S. leadership.” Id.

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may profoundly affect foreign states, such as the promulgation of transboundary environmental regulations that inhibit trade.

A Return to the RFG Decision: Who Are the Victors After All? Many commentators have hailed the RFG decision a triumph for the developing South against Northern protectionist aggression. 158 Other commentators have criticized the decision as the “death knell” for legitimate U.S. environmental laws.159 Still others, such as those representing the U.S. oil industry and U.S. farm groups, opposed the decision as cultivating a seizure of U.S. sovereignty over its own industries.160 Although neither those in favor of developing country interests, nor those in favor of high environmental standards, nor those in favor of domestic U.S. industry were totally correct in their analyses of the RFG case, one interpretation of the RFG decision should please them all.161 The RFG decision is most aptly considered an attempt to balance competing interests within a legal framework emphasizing cooperation and the exchange of ideas as the best means of fostering a mutually beneficial resolution. The decision is a realistic appraisal of the modern global community, and its language advocates positive actions instead of condemning negative ones. The decision protects the interests of developing countries by disallowing unfair domestic policy while simultaneously warning them that there are justifications for discriminatory treatment in the Article XX exceptions. The decision acknowledges the importance and legitimacy of environmental regulations while laying the groundwork for occasions when such measures will be deemed protectionist.162 The decision expresses the understanding that domestic industry may need some governmental assistance while pointing out that developed countries must account for the interests of developing countries as well when formulating their national policies.163 158 See Humberto Marquez, Trade-Commodities: South Triumphs in WTO’s First Flight, INT’L PRESS SERV., Jan. 19, 1996. 159 See Evelyn Iritani, First WTO Ruling Provides Grist for Opponents Citing Threat to U.S. Law, L.A. TIMES, Jan. 19, 1996, at D-1. 160 See ACGA Responds to WTO Importing Decision, Clean Air Network Online Today, Sept. 26, 1996, available at Westlaw Canot database. 161 See Schultz, supra note 66, at 20. According to Schultz, neither praise nor criticism of the decision on these fronts is justified. Schultz argues that while the decision may be a small moral victory for the developing South, it is not a “death warrant” for tough environmental laws, nor a “relinquishment of U.S. sovereignty.” Id. 162 See id. at 21. According to Schultz, the fate of the RFG case “should not be used by trade advocates as an excuse to stop assessing the relationship between trade and the environment. It is essential to the long term future of this planet that only those environmental regulations that are truly discriminatory are found to be GATT illegal.” Id. 163 See Schelin, supra note 37, at 439.

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The RFG decision has a more practical value for U.S. administrative agencies. Governmental agencies certainly do not enjoy having their regulations openly criticized in a global forum. Nor do they likely appreciate continually defending their policies before a supranational body. No administrative agency would find solace in redrafting extensive regulatory programs at the whim of a three-person foreign judicial body. To U.S. administrative agencies, and specifically to the EPA, the decision can be interpreted as an educational experience. The lesson should be clear: either U.S. agencies must learn to coordinate the values and interests of affected WTO members within national environmental measures that may unevenly affect free international trade, or the WTO DSB will mandate their elimination. Although meeting these procedural considerations is not the only ingredient to a successful defense of domestic policy before the WTO, the RFG decision certainly considers a coordinated, transnational rule implementation process a necessity.

PROACTIVE STRATEGIES FOR ADMINISTRATIVE PROCEDURAL COMPLIANCE WITH THE WTO U.S. Reaction to the RFG Decision Before examining the methods by which the United States can integrate more coordinated efforts within the agency regulatory process, it is instructive to briefly review U.S. actions in the wake of the RFG decision. Following the RFG Appellate Body decision, the U.S. Congress initially ordered the EPA to “stand firm” in regards to modifying the RFG rule, just as it had following the RFG panel’s ruling.164 Congress justified this position by noting that WTO settlement procedure does not specifically command violating member countries to implement changes to WTOinvalidated law. Articles 21 and 22 of the WTO DSU, however, do provide for trade sanctions against countries whose laws do not comply with WTO protocol.165 When sanctions became a real possibility, Congress allowed the EPA to proceed in modifying the RFG rule in accordance with the RFG Appellate Body decision.166 164 See id. at 432–433. This decision hinged chiefly on congressional concerns that immediate compliance could “open up issues with other U.S. environmental laws.” Id. 165 See WTO DSU, supra note 33. 166 See Martin Crusinger, U.S. to Abide by WTO Ruling on Imported Gasoline, ASSOC. PRESS, June 19, 1996, available at Westlaw Assocpr. database. Under WTO regulations, the United States had only 60 days in which to decide whether to comply with the ruling or pay compensation damages. See id. In essence, the United States was forced to decide which was more important, global trade efforts or the administration’s environmental efforts. See Schelin, supra note 37, at 432–33. Ultimately, the U.S. Congress acquiesced to pressure in favor of maintaining hospitable international trading conditions. See id. After all, the law was

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The U.S. decision to abide by the WTO’s ruling was formally made on June 19, 1996, in an announcement by then acting U.S. Trade Representative (USTR) Charlene Barshefsky.167 While reiterating American commitment to environmental preservation, 168 the USTR solidified its intent to meet U.S. obligations under the WTO. In addition, the USTR openly solicited public comment on possible options through which the RFG rule could be brought into compliance. 169 After weighing several viable solutions, the EPA decided to modify the RFG rule into a form similar to that proposed by the earlier May 1994 Amendments.170 The U.S. government’s response was, by most accounts, an intelligent one.171 For a number of economic and political reasons, the United

blatantly discriminatory and had truly been formulated under at least “semi-protectionist” auspices. The decision to comply was chosen over the more questionable approach of recompensation to the aggrieved countries by lowering tariffs only in their particular cases. See id. 167 See United States Invites Public Comment on Next Step in WTO Dispute on EPA Rules for Imported Gasoline, Office of the United States Trade Representative, Wednesday, June 19, 1996, U.S. Trade Representative, at http://www.ustr.gov/releases/1996/06/9654.html (last visited Oct. 28, 1999) [hereinafter USTR Release]. Barshefsky had warned Congress that a failure to comply would almost certainly result in trade sanctions, not only from Venezuela and Brazil, but also from the European Union and Norway, which had submitted briefs during the appellate stage in opposition to the U.S. position and purported to support retaliation in response to a stagnant U.S. response. See Schelin, supra note 37, at 432–34. 168 See USTR Release, supra note 167. Interestingly, in regards to topics discussed infra, the USTR Release made specific mention of the WTO Appellate Body’s apparent willingness to allow a certain measure of flexibility in its interpretation of GATT law in order to “recognize the freedom of its members to protect the environment and conserve natural resources.” Id. 169 See id. The USTR made clear that it sought “possible options, rather than proposing any particular change in the EPA’s rule.” Id. At the risk of sounding overzealous, it appears that certain elements within the U.S. governmental apparatus had come to understand that the deficiencies in the RFG rule ran beyond merely those substantively present on the printed page. Whether those deficiencies were related to the procedural suggestions presented in this note, or whether broad options were sought in favor of particular rule changes simply because it was clear what modifications would suffice (in light of the May 1994 Amendments), is admittedly unclear. 170 See May 4th Amendments, supra note 23. A slight variance is that foreign producers are simply given a choice of methods by which to authenticate their gasoline, one of which is similar to the lenient method employed by U.S. refiners. See id. As such, the onus is still on the foreign company to decide which method works best for its particular circumstances. 171 See, e.g., Shenk, supra note 50, at 674 (stating that because United States is the world’s leading exporter and because United States markets are already relatively open, the United States stands most to gain from a continual lowering of international trade barriers through the WTO process, and thus its decision following the RFG case was wise).

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States has more to gain than to lose by following the WTO mandate.172 In addition, the RFG Appellate Body’s decision provides meaningful guidance on how the United States can implement legitimate environmental policies that negatively affect trade within the framework of the WTO.

A Primer: Integrating an Enlightened Perspective Within a New Administrative Procedural Framework The U.S. government places great emphasis on environmental protection. In turn, the EPA, as the U.S. administrative agency that functions to ensure such protection, receives much attention. The U.S. government seems fully aware of the tenuous, though important, relationship that such an agency may have on international trade obligations through its promulgation of environmental regulations. 173 What remains unclear is the extent of the U.S. government’s commitment to making substantial modifications to regulatory procedure in order to bring it into compliance with the WTO’s directive in the RFG case. In the wake of the RFG decision, U.S. environmental policy affecting transnational trade can no longer be formulated without recognition of the interests of the WTO and its 135 member states.174 As a result, environmental measures addressing global environmental problems should be based on an international consensus.175 Failure by the United States to “participate in the collaborative process” could result in greater 172 A key facet of the cost-benefit analysis that must be involved in such a decision is the relative value of a multilateral consensus-based organization bonding both developed and developing countries. This value includes not only the economic incentives implicated when new international markets are opened to domestically produced goods, but perhaps more importantly, the potential for negotiating global agreements related to labor and environmental standards. It is likely that as the financial structures of developing countries are enhanced to levels more equitable to those in developed countries, these countries will be more open, both ideologically and feasibly, to advancements on more socially conscious fronts. 173 See Linda Langhorst Raclin, Clean Trade, GOV’T EXEC., Jan. 1994, at 36. As he announced the opening of new office space for the EPA within the new Ronald Reagan International Trade Center in downtown Washington, DC, Vice President Al Gore stated that “it is important that EPA be consolidated into a prominent location that demonstrates the importance that this nation places on linking sound trade policy with sound environmental policy.” Id. It is interesting to note, however, the common irony present in such a proclamation by the U.S. government as it relates to U.S. dealings with troubled developing countries. In spite of Vice President Gore’s apparent devotion to linking Southern economic progress to augmented global environmental protection, even as he made this speech the Clinton Administration was refusing public sentiment in favor of linking the lifting of a trade embargo against Vietnam to environmental improvements. See Charnovitz, supra note 21, at 520. 174 See Macchiaverna, supra note 67, at 129. 175 See Rio Declaration, supra note 94, at 878.

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intrusions into U.S. sovereignty because developing countries, with WTO approval, may attempt to unitarily coerce U.S. actions through multilateral trade sanctions or otherwise.176 The presence of externally applied limitations does not, however, mean the end of proactive U.S. environmental measures.177 Rather, these forces dictate the use of a rule promulgation process that looks beyond U.S. borders and is more sensitive to the economic realities and resulting social values present in developing countries.178 The RFG decision is a coalescence of the global forces that may affect U.S. environmental policy. The decision contains procedural suggestions for lessening the friction between external pressures and the U.S. regulatory process and thus improving the chances of prevailing before the WTO DSB. These suggestions can be synthesized into a four-step model of environmental rule promulgation that can help the United States succeed in future WTO disputes.179

The Sensitivity Projection: A Four-Step Model for Proactive Procedural EPA Compliance with the WTO 1.

Recognition

Close attention was paid during RFG rule formulation to the economic situations of domestic gasoline refiners. The mildly complex triple method baseline system contained in the RFG rule provided U.S. producers the ability to bring their operations into compliance with the rule in a gradual, individually tailored manner that would preserve their financial viability. Similar sensitivity was not displayed, however, in regard to foreign refiners.180 See Macchiaverna, supra note 67, at 134. The Rio Declaration for example, while strongly suggesting a global consensus on environmental issues, does not foreclose on the idea of unilateral action, and openly advocates the use of the precautionary principle. See Rio Declaration, supra note 94, Principle 15, at 879. Adopted in the Rio Declaration of the 1992 UN Conference on Environment and Development (UNCED), the Precautionary Principle states that “where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing effective measures to prevent environmental degradation.” Id. 178 See, e.g., Jagdish Bhagwati, Trade and the Environment: The False Conflict?, in TRADE AND THE ENVIRONMENT: LAW, ECONOMICS AND POLICY 159–90 (stating that trade-environment issues often revolve around who selects and prioritizes environmental problems, and which forms of risk-assessment data and prevailing social values created this prioritization). 179 For the purposes of this comment, the four-step model, along with a number of suggestions on how to better manage the new procedure, will be dubbed “The Sensitivity Projection.” While it is necessarily targeted at the EPA, which was the principle player in the RFG case, the framework is designed to be applied to all U.S. agencies acting in a similar manner. 180 For example, the U.S. Congress’s decision to withhold EPA funding in order 176 177

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This obvious dichotomy played an important role in determining the outcome of the RFG decision. The RFG Appellate Body stated as the second U.S. omission the failure “to count the costs for foreign refineries that would result from the imposition of statutory baselines.”181 By directly linking this omission to its overall invalidation of the RFG rule, the RFG Appellate Body illustrated the WTO’s interest in ensuring the recognition and appreciation, by member states, of the international implications of domestic regulations. Thus, the RFG Appellate Body sought to compel the United States and other developed countries to engage in broad-based investigative actions during the promulgation of environmental measures that contain a potentially transnational element. Close examination of the particular circumstances present in developing countries before the promulgation of environmental regulations that negatively affect trade is not new to the United States and other developed countries. The Trade and Environmental Guidelines of the OECD182 specifically state that: When developing and implementing their trade and environmental policies, OECD governments should give particular attention, consistent with their international obligations, to the needs and concerns of countries at different levels of economic development183 (emphasis added). “Sustainable yield” standards are one example of such an effort. Sustainable yield standards are the result of collaborative efforts between developed and developing nations to analyze the extent to which, based on relevant financial and environmental data, developing countries can progress economically without permanently damaging the environment.184 Theories, such as sustainable yield, emphasize the raison d’être of the OECD Guidelines; the free flow of information between affected parties proto preclude the weighing of such concerns within the May 4th Amendments, supra note 23. 181 RFG AB Decision, supra note 1, at 19. 182 See OECD Trade and Environmental Guidelines; Section II. Procedural Guidelines for Integrating Trade and Environmental Policies; The Concerns of Non-OECD Countries, reprinted from INSIDE U.S. TRADE, June 11, 1993. 183 Id. 184 See id. Vaughan claims that integrated responses to global environmental problems, such as sustainable development, help to shift the trade/environmental debate from an “environmental-protection-versus-development” context to one that contemplates a more “win-win” situation. See Vaughan, supra note 78, at 605–606. Although Vaughan acknowledges the “uncertainty of quantifying sustainable development,” he points out that the exchange of information it requires, and the enlightened collaboration that it promotes, are precursors to meaningful international agreement. Id.

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motes the greatest likelihood for compromise. In light of this international acknowledgement of an obligation to examine foreign circumstances, and to come to an understanding of how those circumstances may be affected by American regulations, the United States should willingly follow through on such commitments. Developing countries are also highly cognizant of the impact that U.S. environmental measures can have on their economies, and should be equally willing to provide the information desired during rule formulation in an organized and efficient manner. The WTO, which developing countries rely on for preventing and mitigating the economic damage caused by transnational environmental measures, will continue to require a high level of recognition by rule-implementing countries.185 This is especially true where, due to their potentially harmful economic effects, U.S. regulations have an ultimately coercive effect. The 1998 WTO Import Prohibition of Certain Shrimp and Shrimp Products case (Shrimp-Turtle)186 involved a U.S. regulation that would have serious negative economic effects on several developing countries.187 The WTO responded with an emphatic directive requiring recognition. In the Shrimp-Turtle case, the U.S. State Department promulgated a regulation that prohibited the import of shrimp caught without the use of a U.S.approved turtle excluder device (TED), a device that allowed sea turtles, which are on the endangered species list, to escape from shrimping nets and thus survive. 188 The regulation, however, required that foreign shrimpers use only a certain type of TED.189 The Shrimp-Turtle Appellate Body found that this strict policy had a coercive effect in that it required foreign countries to essentially adopt the same policy as that held by the United States, regardless of their individual situations.190 The Shrimp-Turtle Appellate Body further criticized the United States for failing to take “into

While the theory of sustainable development is very exciting in that it provides a possible convergence of developed and developing country interests, a full examination of its conceptual basis and potential to harmonize global trade and environmental standards is beyond the scope of this comment. That being said, such an analysis of sustainable development in light of recent WTO jurisprudence would certainly be a worthwhile endeavor. 185 As discussed above, a major aspect of the WTO’s legitimacy comes from the inclusion of developing countries within its trading regime. A loss of respect from these countries, or an all-out withdrawal, would be ruinous to the future of the WTO. For this reason, the WTO will rarely take a position that may be viewed as trivializing an honest appraisal of the concerns of its “less wealthy” members. 186 See Shrimp-Turtle, supra note 91. 187 See generally id. 188 See generally id. 189 See generally id. 190 See generally id.

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consideration different considerations which may occur in the territories of . . . other Members.”191 The Shrimp-Turtle Appellate Body, reminiscent of the RFG Appellate Body, was amenable to potentially allowing trade-infringing environmental measures if a concerted recognition and appreciation of foreign interests was initially accomplished.192 In light of the importance of global trade to the United States, this reaffirmation should inspire the U.S. government to modify its regulatory framework to reflect international recognition during the rule-making process. An investigation of the economic, environmental, and social data of a potentially affected foreign nation should therefore be included within the procedural guidelines of the implementing U.S. agency. The pre-WTO 1970 CAA contained no provisions empowering the EPA to consider the economic interests of foreign states during the EPA’s initial formulation of potential rules.193 In addition, international considerations considered on an informal basis have likely focused on prominent U.S. trading partners, such as developed European countries like Great Britain, West Germany, and France. Due to the complexity of the globalized modern world, the EPA needs a standard, compulsory mechanism through which EPA administrators can determine (1) what countries may be affected by a potential rule, (2) what data or other information would be assistive in demonstrating key interests and potential affects, and (3) how to best acquire this information.194 Such a mechanism should come early in the rule formulation process and should occur contemporaneously with an examination of domestic interests and concerns. In 191 Id. para. 164. This failure to recognize the realistic circumstances and limitations of the countries most affected by the new law made the United States “unable to assure that its policies were appropriate for the local conditions prevailing” in these countries. See Gregory Shaffer & Bernard H. Oxman, United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, World Trade Organization, Appellate Body, October 12, 1998, 93 A M. J. INT’L L. 507, 511 (1998). 192 See McBride, supra note 21, at 350–51 (“The [Shrimp-Turtle] decision affirmed the premise . . . that the WTO is conscious of the environmental needs of Member countries and is willing to accept environmental regulations under the Article XX list of exceptions, as long as the rational concerns of international importers are honestly taken into consideration.”); see also Shaffer & Oxman, supra note 191, at 513 (“Rather than uphold a bright-line rule against all trade restrictions based on foreign production methods, the [Shrimp-Turtle] Appellate Body has attempted to foster a process of taking foreign interests into account when domestic regulations addressing environmental issues affect international trade.”) 193 See generally 1970 CAA, supra note 4. 194 Interview with anonymous EPA Attorney (Oct. 14, 1999). While, according to EPA attorney who will remain anonymous, an informal checklist for examining international effects is in place, its effectiveness in satisfying the demands set by the WTO seems low in light of the continued WTO litigation involving the United States. See id.

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addition, documentation of the acquired information should be accumulated and included in rule promulgation records. This would indicate the balancing analysis that resulted in the specific contours of the eventual rule.195 The recognition phase would also result in making immediate contact with affected countries and/or foreign industrial groups, and in initiating a meaningful dialogue with these parties. 196 This interaction would be conducive to later cooperative negotiations. Contact with foreign parties would also educate EPA administrators, who often devise sweeping environmental regulations from within the relative vacuum of their Washington DC offices, of the transnational consequences of their actions.

2.

Formulation

Once it has recognized the foreign interests potentially affected by a regulation, the EPA must have the functional ability to integrate these international concerns into rule formulation without disrupting necessary domestic rule-making processes. The RFG Appellate Body’s directive to modify administrative methods, just as its directive for recognition, appears in its authoritative final statements. The second part of the first omission speaks of “mitigating the administrative problems relied on as justification by the United States for rejecting individual baselines for foreign refineries.”197 In stating its case before the RFG Appellate Body, the United States could make no persuasive argument justifying administrative formulation of the RFG rule’s discriminatory effects. U.S. administrative procedures are governed by the Administrative Procedural Act (APA), 198 a federal statute that governs the manner in which proposed rules are promulgated into specified regulations.199 The APA contains a foreign affairs exception 195 Such documentation could be required in displaying recognition before the WTO DSB. In any event, it would likely be substantially persuasive. As a note, the precise information needed for a true recognition of foreign interests is necessarily factually specific to the immediate dispute. As such, this comment will not expand further into the form and quality of the data gathered during the recognition stage. Suffice it to say that this information must provide a clear sense of the realities faced by implicated countries and the perspective with which they view a potential U.S. environmental measure. 196 Most relevant information would have to be provided specifically by these parties. Thus, some form of contact is necessary. 197 RFG AB Decision, supra note 1, at 19. 198 See Administrative Procedure Act, Pub. L. No. 79-404, Stat. 237–244 (June 11, 1946); as codified by An Act to enact title 5, United States Code, 5 U.S.C. §§ 551–580, 700–706, (Sept. 6, 1966), Public Law No. 89–554, 80 Stat. 378 (1946 as amended) [hereinafter APA]. 199 See id.

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that allows agencies to bypass normal procedural formalities when rulemaking is made pursuant to an international agreement, such as the GATT.200 This exception opens the door to meaningful investigative efforts outside of the harsh light cast by self-interested domestic groups. Debate continues, however, as to the level of independence that may be exercised by U.S. agencies pursuant to the foreign affairs exception and the appropriateness of agencies’ relative seclusion from internal political control. Experts generally agree that executive agencies have gradually increased their discretionary latitude in recent years.201 They disagree, however, as to whether this increased discretion is beneficial or potentially treacherous. Some commentators believe that the relative autonomy of executive agencies in the foreign relations sector is to be desired and promoted.202 These scholars point out that “[t]he Legislative Branch tends to be more protectionist” and “more influenced by local and special interests than the office of the President.”203 As such, they worry that allowing a high level of congressional oversight could “slow down the trade process” and even “make the President victim to the wants and desires of [congressional] committee members.”204 The executive branch’s ability to weigh a wide variety of concerns in relative insulation, they argue, is why the authority to make trade decisions has traditionally been granted to the executive branch.205 In addition, these commentators feel that language in the Uruguay Round Agreements Act, 206 which enables Congress to require notice from the executive branch in regard to potential WTO adjudicative action, represents an unnecessary “check” on the executive branch’s ability to effectively function in accordance with WTO mandate.207 See id. See also Smith, supra note 20, at 1280. See Parks, supra note 70, at 166. This accumulation of “quasi-legislative” power has prompted some scholars to question whether it is the agencies or Congress that is the real engine of novel regulatory approaches. See id. According to Linda Hirshman, “the executive branch, in the form of the administrative agencies, led the way to the new policies, deregulating under pre-existing regulatory statutes, with congressional action trailing well behind.” Linda R. Hirshman, Postmodern Jurisprudence And The Problem Of Administrative Discretion, 82 NW. U. L. REV. 646, 647 (1988). 202 See McBride, supra note 21, at 301. According to McBride, “[i]n spite of a multitude of critics and concerned parties, the best solution to harmonizing free trade with strong environmental laws is to allow more oversight to the executive branch.” Id. 203 Id. at 330. As McBride describes, until recently, “voting for a free trade measure could be political suicide for those members who represent constituents who live in areas adversely affected by businesses moving overseas.” Id. 204 Id. “This is no way to conduct foreign policy.” Id. 205 See id. 206 See Pub. L. No. 103–465, 108 Stat. 4809 (1994). 207 See McBride, supra note 21, at 322. These notice provisions, in the RFG case, led directly to the congressional appropriations rider which eliminated potential use of the May 4th Amendments, supra note 23, by the EPA. See id. 200 201

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In essence, this group believes that EPA officials should be granted a high level of independence over foreign affairs matters and that congressional input on how the EPA conducts its rulemaking should be avoided. 208 Commentators at the opposite side of the debate, however, argue that executive branch autonomy infringes upon public participation during agency rulemaking.209 These commentators fear that, in the absence of “high-profile” concerns, such as those in the RFG case, Congress will have little opportunity to affect the regulatory process, leaving agencies with complete control over the development of national policies.210 Because they view Congress as the political voice of the public at large, these commentators argue that near complete agency independence in foreign affairs matters “could result in a steady erosion of direct democratic control over domestic regulatory policies that conflict with free-trade rules.” 211 The second, or pro-Congress, group of commentators seem more Congressional concerns over the impact of the world trading system on domestic issues led to URAA provisions that enable Congress to control the executive branch’s role in settling trade disputes through adjudication but fail to control the executive when it negotiates settlements as an alternative to adjudication. See Smith, supra note 20, at 1276; see also, e.g., H.R. Con. Res. 246, 102d Cong., 2d Sess. 1 (1992) (expressing the “sense of Congress” that trade agreements negotiated in the Uruguay Round must be compatible with U.S. health, safety, labor, and environmental laws.) 208 See McBride, supra note 21, at 343–44. 209 See Smith, supra note 20, at 1270. 210 See id. 211 Id.; see also Brian J. Schoenborn, Public Participation in Trade Negotiations: Open Agreements, Openly Arrived At?, 4 MINN. J. GLOBAL TRADE 103, 116–19 (1995). Some believe that discord between diplomatic agreements and domestic political positions may be explained by the existence of so-called “two-level games,” parallel political scenarios involving two sets of actors with little understanding or concern for the interests or situation of the other set. See Robert Putnam, Diplomacy and Domestic Politics: The Logic of Two-Level Games, INT’L ORG. 42, 3 (Summer 1988). Level I consists of those negotiators working within a cooperative framework of international diplomacy. See id. Level II consists of domestic political loyalists determining whether the multilateral agreements made by Level I negotiators will infringe on their own legitimacy. See id. Professors Edith Brown Weiss and John Jackson of Georgetown University Law Center have questioned whether such games actually extend to a third level in the dynamics of current international negotiation: non-governmental organizations (NGOs) and special interests. See Interview with Professor Edith Brown Weiss, supra note 111. Large NGOs, such as Greenpeace International, and powerful lobbies, such as the gasoline industry, certainly played a role in determining the argumentative vigor and form used by the United States in defending the RFG rule. See Greenpeace http://www.greenpeace.org. These groups have also been vocal and forceful in their disdain for WTO invalidation of domestic laws. Though issues surrounding the degree to which such groups may become directly involved, as third parties, at the WTO level have sparked heated debate of late, suffice it to say at this point that these groups play an important indirect role in shaping the attitudes of the governmental actors whom they pressure.

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offended by the veil of “secrecy” cloaking executive branch autonomy than the unsuitability of U.S. agencies to conduct foreign affairs.212 These commentators point to the confidential dialogue between U.S. agencies and foreign interests, or so-called ex parte communications, as the main source of their agitation. Although the APA generally prohibits such offthe-record dialogue in formal adjudication and formal rulemaking, ex parte communications are permitted during informal, “notice and comment” rulemaking. 213 Because the RFG rule was promulgated through informal processes, ex parte communications made during its formulation are a focal point of the debate.214 As evidenced in the RFG case, however, ex parte communications by U.S. agencies can be highly effective in reaching a fair consensus quickly and amicably. 215 Another argument for granting greater executive branch autonomy during the rule-making process is that the executive branch, as part of the presidential administration, makes policy choices with national interests in mind, rather than those of a localized constituency. 216 Like the legislative branch, the executive branch is still ultimately responsible to the U.S. public217 and must ensure that popular concerns receive adequate 212 See Smith, supra note 20, at 1269–70. As Smith states “it would be against the public interest for executive branch agencies to seek to accommodate those concerns by negotiating with foreign powers in utter secrecy without engaging in some form of systematic consultation with the range of domestic parties concerned.” Id. (emphasis added). 213 Notice and comment rulemaking is the most common rulemaking technique, due in large part to its time-effectiveness. 214 Specifically highlighted have been the meetings between the EPA, U.S. Secretary of State, and Venezuelan authorities in which modifications were agreed to in the form of the May 4th Amendments, supra note 23. 215 All reports indicate that the meeting between U.S. and Venezuelan representatives prior to litigation before the WTO were comfortable and productive. It was not until Congress rejected RFG rule modifications and the dispute came before the WTO that the two sides dissolved their cooperative alliance and became terse adversaries. 216 See I.M. Destler, A MERICAN T RADE P OLITICS 4–8 (3d ed.1995). Although free trade interests are diffuse, protectionist interests are concentrated. See id. This may be a prime reason why Congress had delegated much trade-making authority to the President, who is better able to ignore concentrated protectionist interests in favor of a diffuse, general interest. Perhaps no better contrast may be exemplified than the statements of an unnamed EPA bureaucrat during congressional questioning and the statements of U.S. Senator Barbara Mikulski (D-Md.) during a floor address. The EPA official’s statements that the EPA certainly viewed the non-modified RFG rule as a boon to domestic producers were likely a subtle, though frustrated, commentary on the evils of local politics affecting national goals. In contrast, Senator Mikulski’s statements admitting more or the same motivation emphasized the primary responsibility of the U.S. government to its voting citizenry. In the end, both statements constitute “albatrosses” of protectionistoriented goals. 217 Through the election of the President.

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attention. Furthermore, neither the EPA nor any other agency has an incentive to favor foreign concerns over domestic ones.218 Conversely, the EPA has a natural tendency to be wary of foreign countries, which often have environmental policies that are inferior to those of the United States, and potentially undermine the EPA’s primary mission to assure the continued vibrancy of the environment. As at least one scholar has proclaimed, “if any change is to be made in the United States’ governance structure that will help guarantee a positive future for both the economy and the environment, it is the granting of more power, not less, to the executive office.”219 Assuming that U.S. agencies have the ability and the motivation to act at a more globally aware level than does Congress, the question remains as to how these aspirations are best integrated within the EPA’s specific procedural framework. Aside from the CAA, which merely provides a tertiary outline for the sorts of rules to be promulgated in connection with preserving air quality, two federal statutes illustrate a ground-work for EPA procedures: the National Environmental Protection Act (NEPA) and the APA. NEPA is broad in its application, calling on all federal agencies to provide an environmental impact statement (EIA) when agency actions may affect environmental quality.220 The APA provides most of the procedural framework under which the EPA must operate in its general rule formulation. Thus, the APA is the best location in which to execute potential strategies for modifying rulemaking. Notice and comment rulemaking, through which the EPA devises and approves regulations, essentially follows a three-step process.221 First, notice publication of the proposed rule is put in the Federal Register.222 Second, submissions of views on the proposed rules by interested parties are accepted by the agency.223 Third, upon rule adoption, a general statement of the rule’s basis and purpose is released.224 Although this process focuses primarily on domestic American interests, foreign concerns can submit their views as well.

218 See, e.g., Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (U.S. Secretaries of the Interior and Commerce refuse to extend their authority internationally where it would negatively affect U.S. industrial interests abroad). 219 McBride, supra note 21, at 326–27. 220 The EPA’s role in NEPA is chiefly the evaluation of the actions of other agencies. Because NEPA focuses on the procedural compliance of non-EPA agencies, it is not directly implicated in the thesis of this comment. Discussion of NEPA, therefore, will not continue beyond this point. 221 See Smith, supra note 20, at 1280 n.52. 222 See 5 U.S.C. § 553(b) (1994). 223 See id. 224 See id.

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Modifications to agency procedures that arise from non-administrative sources are not new to the U.S. administrative law system.225 In fact, a historical and legal basis may be very helpful in modifying APA step one notice provisions. The so-called “trigger” provisions analyzed in the 1973 Florida East Coast decision provide one example of possible modifications to APA notice requirements. 226 The Florida East Coast court contemplated the use of “triggering” provisions within statutes to increase the level of administrative formality and particularize agency action when certain circumstances were implicated.227 In the APA, these provisions could be used to heighten agency responsiveness to foreign concerns where a proposed rule could substantially affect foreign trading interests. For example, when an EPA official working on a rule finds, after doing a series of basic analytical tests on the international industries affected, that a rule could potentially infringe on trading rights of another WTO member, more detailed process, such as the four-step Sensitivity Projection, would be set in motion. International notice would be provided as efforts at recognition were initiated with affected countries. Greater awareness of a proposal often arouses a greater interest in expressing views on how such a rule should be shaped. Traditional notice and comment procedures allow for APA step-two submission principally by those directly implicated in rule formulation and implementation. Broadening the range of acceptable points of view would encourage greater input from international contingents and ultimately enhance the global righteousness of a proposed rule. A less U.S.-centric submission process, however, is subject to criticism both ideologically, for its failure to appreciate domestic American political sovereignty, and technically, for its likelihood of extending the rule-making process. 228 Ideological concerns 225 See, e.g., KENNETH CULP DAVIS & RICHARD J. PIERCE, ADMINISTRATIVE LAW TREATISE, (3d ed.1993) (describing the creativity of the U.S. federal courts of the 1970s in outlining how agencies should formulate rules in specific instances). Davis and Pierce highlight three factors, however, which limit the effectiveness of courts in modifying notice and comment administrative techniques: (1) the tendency of courts to look to adjudication methods and thus impose more formal requirements, (2) the retroactive quality of judicially directed procedures, and (3) the questionable authority of courts to require the increased participation that more formal techniques demand. See id. 226 See United States v. Florida E. Coast Ry. Co., 410 U.S. 224 (1973). 227 See id. Importantly, the Florida East Coast court viewed these provisions narrowly, so that agency formality would not reach infeasible levels. See id. In an application in favor of greater foreign awareness, these trigger provisions must be “closely tailored” so that they do not impose an undue burden on the agency and are only implicated in situations where foreign interest are clearly at stake. See id. 228 These concerns are highly sensitive in the environmental context in light of both U.S. leadership in promoting greater environmental protection and U.S. interest in quickly promulgating environmental rules to prevent further eco-systematic degradation.

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should be tempered by the realization that invalidation of U.S. regulations by the WTO DSB presents a more acute threat to American sovereignty and that a more thorough formulation process involving a wider array of perspectives would likely lessen the chances of such an invalidation occurring.229 In addition, although broad-based participation in the submission process certainly extends the rule-making process, fully litigating disputes over them before the WTO DSB takes even longer. 230 Encouragement of broad-based participation in the submissions process could be administered, at the initial review stage of submissions, by an advisory committee. This advisory committee, which would be comprised of both trade and environmental experts who are well respected in the international community, 231 could offer an initial analysis of the feasibility of the foreign submissions and issue a report to EPA administrators on them.232 The committee would be convened only when a proposed rule could significantly affect international interests and only when a sufficient amount of international interest was expected. Although a considerable commitment of time and resources by the U.S. government, such an advisory committee could alleviate the burden on EPA personnel, while at the same time enhancing the WTO’s perception of American international sensitivity.233 229 Although an extensive discussion of the pros and cons relating to national sovereignty by allowing foreign submissions into the informal rule-making process is certainly prudent, they are beyond the scope of this comment. It will suffice at this junction to state only a basic reply to the relevant criticism. 230 See generally P ETER L. S TRAUSS ET AL ., G ELLHORN AND B YSE’S A DMINISTRATIVE L AW (1995). The basis for this argument lies in the general administrative law precept that it takes longer to litigate hastily enacted regulations than to formulate solidly justified ones. See generally id. 231 Advisory committee members must display a capacity to appreciate variety of concerns potentially raised by foreign, and especially developing, countries. Previous U.S. experience with “advisory committees” overseeing international matters has demonstrated the inappropriateness of an entirely pro-American membership. See Walter Holm & Co. v. Hardin, 449 F.2d 1009 (D.C. Cir. 1971) (DOA advisory committee was dissolved after the committee, comprised completely of American growers, set low tomato size restrictions in order to protect American growers from Mexican tomato exports). In addition, these members must at the very least have little to no financial interest in the effects of the regulation. For an example of American judicial skepticism toward granting the power to regulate its competitors, see Blalock v. Ladies Professional Golf Ass’n, 359 F. Supp. 1260 (N.D. Ga. 1973) (Executive Board comprised of fellow competitors suspends player for one year for minor rule infraction). 232 There would, of course, be set time limitations through which the efficient turnover of accepted submissions and reports to the EPA could be ensured. 233 An in-depth discussion of the specific composition and procedural framework of such an advisory body, though potentially intriguing, is beyond the scope of this comment. Suffice it to say that the possible configurations are numerous and that

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The final step through which informal rules are promulgated, the APA step-three statement explaining the basis and purpose of the regulation, should remain unchanged. Because forcing administrators to comply with overly elaborate procedural requirements has an overall negative affect on the quality of regulations produced, modifications should not be overly elaborate.234 Such a statement would only be slightly increased in length, due to the likely greater number of concerns it must address, and should include internationally motivated factors in its concluding rationale. A more internationally oriented rule formulation process will inevitably attract new pressures, and create new tensions, that threaten to disrupt the U.S. regulatory system. The U.S. government, however, should welcome the challenge to adapt its regulatory procedures to modern global standards. Successful regulatory adaptation would demonstrate U.S. bureaucratic flexibility in a rapidly changing global climate and identify those who lack the vision to lead the world’s only superpower into a new century.

3.

Consultation

In the 21st century the United States will increasingly rely on its relationships with other nations to ensure the stability of its future economic and social status. To analogize, the U.S. position in the global marketplace is like a child that has gotten himself entangled in a large bush, replete with thorns and thick branches, as well as soft leaves. If the child struggles, twists, turns, and fights with the bush, breaking branches and swiping at thorns, the child finds himself slipping only further within the bush until the child is helpless and frustrated and must be saved by someone else. Conversely, if the child patiently adjusts to its surroundings, letting the gently moving branches keep their form around him, the child may actually find relative comfort as the mass and structure of the bush support him in a state of semi-relaxation. further examination should be done to determine if such a program could realistically be implemented. An important step toward the use of an advisory committee may have been made when President Clinton announced the creation of a Trade and Environment Policy Advisory Committee at the end of March 1994. See Executive Order 12905—Trade and Environmental Policy Committee, 30 WEEKLY COMP. PRES. DOC. 639 (Mar. 25, 1994). However, neither the precise jurisdictional workload of this committee, nor its composition, nor its relationship with specific agencies has been the subject of much public comment. Until such a group takes an active role in rule promulgation, suggestions for improvements are certainly still valid. 234 According to Georgetown University Law Center Administrative Law Professor Roy A. Schotland, judicial insertion of an increasing number of formal requirements within notice and comment rulemaking has resulted to a large extent in “rule ossification,” a slowing down of the rule-making process that leads ultimately to an unre-

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After accepting that U.S. procedural mechanics for rule promulgation may be modified to better allow for international awareness, the United States, just as the child, must then find the capacity to interact with the surrounding community in a way that is both understanding and cooperative. Investigative activities that demonstrate a comprehension of the underlying economic and social needs and values of the global community create a foundation from which to launch a meaningful dialogue. Additionally, an attitude of goodwill and flexibility fosters an environment in which consultation with other WTO members may be successful. Achieving a true understanding of foreign countries is deeply rooted within the expansion of procedural techniques that aim to qualify such enlightenment. Correspondingly, the RFG Appellate Body positioned a need to modify governmental structures within the same omission as its directive to cooperate. Prior to suggesting the United States look into changing administrative procedure, the RFG Appellate Body first instructed the United States to “explore adequately means, including in particular cooperation with the governments of Venezuela and Brazil.” 235 The RFG Appellate Body seemed to be saying that the procedural framework through which an enlightened understanding is displayed should be reviewed first, followed by the means through which effective cooperation, through consultation, can be accomplished. The RFG Appellate Body was disappointed that the United States chose not to invite comment from foreign countries on the new RFG rule when it certainly could have done so.236 This omission was central to the Appellate Body’s conclusion that the rule constituted “unjustifiable discrimination” and a “disguised restriction on international trade.”237 These sentiments were later echoed by the Shrimp-Turtle Appellate Body, which criticized the U.S. rule certification process for failing to provide any “formal opportunity for an applicant country to be heard.” 238 The Shrimpsponsive administrative agency. See Interview with Roy A. Schotland, Professor of Law, Georgetown University Law Center (Nov. 11, 1999). As a contrary example demonstrating the value of more formal procedures, however, Professor Schotland points out rulemaking during the Carter Administration in which so-called “experimental” rules were pushed through quickly only to be tied up in the courts for up to ten years at a time. See id. Under this scenario, there seems a strong impetus to get the rule right the first time. See id. The endgame of these competing theories is that a balance must be struck between the time needed to formulate a rule effectively and the need of agencies to promulgate rules quickly and efficiently. 235 RFG AB Decision, supra note 1, at 19. 236 See McBride, supra note 21, at 319–20. The RFG Appellate Body felt that present administrative procedures could have allowed a wider range of comment submissions to be fielded. See id.; see also discussion supra pp. 193–197. The RFG Appellate Body Decision. 237 McBride, supra note 21, at 319–20. 238 Shrimp-Turtle, supra note 91, para. 180, at 41. Such “due process” rights, the

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Turtle Appellate Body required the United States to initiate quasi-due process rights through the creation of “an administrative procedure pursuant to which foreign governments or traders would have an opportunity to comment on and challenge regulations before U.S. administrative bodies.”239 Such a procedure in the RFG case could have included widespread notice, including notice to individual companies, followed by an extended comment period for the concerns of interested foreign countries, such as Venezuela, to respond.240 While an extended time period for comments to be accepted would certainly be necessary due to the realities of international communications, widening the spectrum of those who receive notice may not create significant procedural delays or expense.241 Most WTO members have embassies in Washington, DC, as well as affiliations with U.S.-based law firms. Moreover, the relative cost of a simple letter of notice is almost negligible.242 A widespread notice system would enhance the ability of interested WTO members to participate in the rule formulation process. Shrimp-Turtle Appellate Body claimed, were necessary through Article X of the GATT, which requires all members to “maintain . . . administrative tribunals . . . for the purpose . . . of the prompt review and correction of administrative action.” Id. 239 Shaffer & Oxman, supra note 191, at 512. 240 See McBride, supra note 21, at 346. Discussion could then ensue and record could be created including all matters with the exception of national security issues. This would satisfy both the WTO’s evidentiary demands of meaningful consultation and the worries of American interests concerning the “secrecy” of ex parte communications. See id. Some scholars have also worried that the inclusion of foreign concerns and discussion could lead U.S. agencies to favor international comments over those received from domestic sources. See Smith, supra note 20, at 1280. These scholars point to three reasons for this phenomenon: (1) the time expended by the agency and foreign interest in reaching a delicate balance, (2) the natural desire of U.S. agencies, through the USTR, to implement an agreement as negotiated in order to foster trust in future negotiations, and (3) the institutional bias of the USTR in promoting free trade over specified domestic interests. See id. A potential solution would be to split up the comment and negotiation phases. In such a process, the rule would be formulated, with the inclusion of foreign comment, prior to discussion of its potential modifications in line with important foreign interests. Such a situation would create a healthy tension for agencies and the USTR between protecting what has been agreed upon with foreign interests in mind, and granting further concessions with the WTO in mind. 241 See McBride, supra note 21, at 345. It is the belief of at least one scholar that the best way to mandate such extended services would be through an Executive Order specifying greater care in the notice and comment provision to foreign countries. See id. Although the use of an Executive Order is certainly interesting, a discussion of its substance and potential use is beyond the scope of this comment. 242 See id. at 345 n.255.

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These procedural measures may have reduced the likelihood of RFG rule invalidation by the RFG Appellate Body. 243 “[I]t does not seem so absurd to assume that had the EPA contacted Venezuela and every other major gasoline exporter and offered to discuss possible baseline standards in a diplomatic fashion, the agency’s actions would have satisfied the Appellate Body’s criteria, even if Venezuela had completely rejected the idea.”244 Neither the RFG, nor Shrimp-Turtle, Appellate Body reports require successful cooperation for WTO compliance. 245 Rather, they require the willingness to fully engage in cooperative discussion in the hope that communication will lead to compromise. Thus, U.S. negotiators should engage interested foreign countries in consultation to a point of mutual impasse.246 The WTO’s perception of U.S. cooperative egoism may have doomed U.S. efforts in both the RFG and Shrimp-Turtle cases before the disputes even got to the merits.247 The WTO DSB has shown concern that despite the apparent ability of the United States to negotiate effectively on certain international issues, the United States blatantly refuses to do so on issues specifically implicating the concerns of other WTO members.248 243 See id. at 337–38. In spite of its procedural criticism, the Appellate Body did seem to indicate that its substantive requirements would have been met by the provisions held in the May 4th Amendments, supra note 23. See id. 244 Id. at 339. 245 See id. at 319. A key criticism of the United States by the RFG Appellate Body was the failure of the United States to negotiate to a point in which it encountered countries with an unwillingness to cooperate in a reciprocal fashion. See id. 246 This point would be similar to the point of impasse under the National Labor Relations Act. See generally National Labor Relations Act, embracing the Wagner Act of 1935, the Taft-Hartley Act of 1947, and the Landrum-Griffin Act of 1959, 29 U.S.C. § 151 et seq. (1973) [hereinafter NLRA]. Under that concept, as well as that put forth in this work, both parties must negotiate with each other in good faith until the “give and take” conducing to cooperative compromise has extinguished and neither party is willing to budge. See id. In the case of the United States, the USTR, on behalf of the EPA, must be open to all arguments that do not interrupt the essential function and purpose of the rule in question. 247 See McBride, supra note 21, at 352. According to McBride, “[i]n both Cases, the United States failed the chapeau requirements of Article XX, not because the laws were environmental and therefore protectionist in nature, but because the government showed an unwillingness to communicate with other members of the global community.” Id. 248 See Shaffer & Oxman, supra note 191, at 511–12. The Shrimp-Turtle Appellate Body noticed that the United States had recently successfully negotiated the InterAmerican Convention for the Protection and Conservation of Sea Turtles but had never seriously attempted to negotiate a similar agreement with the four complainants in the instant action. See id. To the RFG Appellate Body, this indicated not only an ability, and even a skill, at negotiating, but also a frustrating self-interested capacity to withhold such efforts in the WTO context. See id. This raises the question of whether the United States feels threatened that the WTO could subsume some its relatively unchallenged power and status as the leader

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U.S. explanations of this failure have been viewed as wholly insufficient.249 The WTO has been especially concerned with U.S. egoism in regards to transnational U.S. environmental measures. The WTO favors the use of multilateral agreements over extraterritorial domestic regulations.250 Under this approach, WTO member countries such as the United States, who frequently promulgate transnational environmental laws, should “attempt to negotiate multilateral agreements prior to imposing their own domestic environmental regulations on other members.”251 By willingly discussing proposed regulations commensurate with their initial formulation but prior to final rule promulgation, the United States would impress the WTO and thereby improve its chances of success before the WTO DSB. The WTO, however, most favors the ability of countries to reach an agreement and settle their dispute prior to resorting to the WTO DSB. This interest is codified in the WTO’s requirement that disputing parties conduct several negotiation sessions prior to panel assemblage. 252 Negotiated settlements offer a cooperative compromise brought about by an adherence to GATT obligations. Negotiated settlements also provide individual member states an opportunity to quickly resolve disputes in the absence of unnecessary expense and negative publicity. Although negotiated settlements are an excellent means to avoid a drawn-out litigious conflict, however, they are extremely difficult to achieve. Although settlement agreements offer a number of benefits, the culmination of a bilateral or multilateral agreement involves the balancing of a number of competing objectives that make successful agreements relatively rare. This balancing of objectives also sparks fears that executive branch negotiation will limit “democratic participation” and impair the “accountability of the administrative state.”253 Alternatively, some feel that if not controller of global trade expansion efforts. Such a realization would mean that the United States is, in fact, light years behind in understanding that global economic success in the modern era comes with working effectively in the system, not dominating it. 249 See McBride, supra note 21, at 319. For example, the United States essentially claimed that it was “too difficult to come to an agreement with other countries” and discrimination was necessary, while a few months earlier the EPA stated, following the secret talks with Venezuela, that baseline “discrimination” was not necessary to meet the objectives of the Clean Air Act Amendments. Id. 250 See Susan L. Sakmar, Free Trade and Sea Turtles: The International and Domestic Implications of the Shrimp-Turtle Case, 10 COLO. J. INT’L ENVTL. L. & POL’Y 345, 386 (1999). 251 Id. The importance of negotiations is highlighted by comments from other WTO members who claim that they would even accept unilateral actions by the United States if the country would only make a genuine effort to develop internationally agreed standards previously. See id. 252 See WTO DSU, supra note 33, arts. 4–5. 253 Smith, supra note 20, at 1293. An example would be the dismantling of domestic laws in order to reach a quick compromise. See id. at 1274.

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negotiated settlements carry less authority than WTO rulings, thus limiting the international efficacy of their corresponding enforceable obligations.254 While the U.S. government should certainly pursue settlement vigorously, as it did with the May 4th Amendments, negotiators should compile a full record of consultations with foreign countries for possible future use before the WTO DSB. The WTO can, in turn, provide some assistance in completing these cooperative endeavors. In light of the tension between North and South, which has spawned many trade versus environment disputes and been the Achilles heel to effective multilateral negotiation, the WTO has moved forward in creating a cooperative body to deal with conflicts between the two movements. The WTO Committee on Trade and Environment (CTE),255 which is open to representatives of all member states, is a neutral forum in which countries may air their concerns, refute the arguments of other states, and investigate new methods through which trade and environmental objectives may coalesce. In coordinating meaningful consultation strategies, however, the CTE has the potential of offering much more. One option would be to use the CTE as an auxiliary to the rudimentary chores of domestic rule promulgation. For example, in connection with the USTR, a U.S. environmental policy advisory council,256 or even individual U.S. agencies, a body like the CTE could prove invaluable in providing widespread, authoritative notice to member countries who may be affected by proposed domestic regulations. One method would involve U.S. agency officials contacting their national CTE representative to announce a rule affecting transnational interests. U.S. administrators could then refocus their efforts on just the particular countries that respond to the notice, thereby eliminating administrative drag and allowing the administrators more opportunity to engage in in-depth foreign relations as opposed to cursory apprisal. By converging the administrative duties

See id. at 1278. As Smith states, “[e]ven though both WTO adjudicative rulings and negotiated settlements create international law obligations, a WTO ruling is likely to carry greater moral force than a negotiated settlement.” Id. 255 The WTO Committee on Trade and the Environment was formally established on January 1, 1995, with the coming into force of the WTO Agreement after the Marrakesh Ministerial Conference. See The Marrakesh Ministerial Decision on Trade and Environment, WTO, at http://www.wto.org/wto/environ/marrakes.htm (last visited Dec. 16, 1999). “Trade Ministers in Marrakesh agreed to establish a WTO Committee on Trade and Environment (CTE) with a broad-based remit covering all areas of the multilateral trading system—goods, services and intellectual property. The CTE has been given both analytical and prescriptive functions: to identify the relationships between trade and environmental measures in order to promote sustainable development, and to make recommendations on whether any modifications to the provisions of the multilateral trading system are required.” Id. 256 See discussion supra pp. 230–236. 254

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of WTO organizations with those of U.S. personnel, it is possible to arrive at a more unitary, globally conscious response to rule promulgation. The CTE has already begun a more coordinated effort at clarifying the interaction of trade and environmental policies within the WTO DSB through inquiries before the WTO Secretariat.257 The “enthusiasm” surrounding potential discussions on environmental issues at the 2000 WTO Ministerial Conference in Seattle258 has heightened the potential for joint administrative action between member countries and the CTE prior to domestic rule promulgation. Although developing country representatives have exhibited a wariness concerning the CTE’s role in promoting the future inclusion of certifiable environmental protection provisions within the GATT, they have exhibited a similar level of eagerness to be involved in the committee’s affairs. Even in the absence of a more active CTE, however, the United States should work to bolster its image as an international negotiator before the WTO. To accomplish this, the United States should limit the dynamics of its natural bargaining advantage in the global community and participate in meaningful, good faith consultations with the WTO countries that its environmental policies affect. As with the child in the analogy alluded to above, the United States must decide whether to rest comfortably and confidently within the wiry structure of the bush, or to struggle against its branches, thereby ending up scratched, frustrated, and trapped at the bottom.

4.

Implementation

The final step toward U.S. compliance with the RFG Appellate Body’s procedural mandate is embedded within the decision rather than located within a specific omission. Following completion of the three foregoing steps, the United States must implement the regulation in a way that takes into account the comparative rationales of these three steps.259 The imple257 See, e.g., GATT/WTO Dispute Settlement Practice Relating to Article XX, paragraphs (b), (d), and (g) of GATT, Note by the Secretariat to the Committee on Trade and Environment, WT/CTE/W/53, 97–3248 (July 30, 1997). 258 See The WTO: Ten Proposals for the Seattle Conference and Beyond, Oxfam Policy Papers, Oxfam GB Parliamentary Briefing, No. 3 (Oct. 1999), Oxfam, at http:// www.oxfam.org.uk/policy/papers/wto.htm (last visited Nov. 12, 1999). 259 The term implementation as it applies to domestic rule promulgation and the WTO has two distinct forms. The first is implementation of a rule following the processes discussed supra and contained in the prior three phases of the Sensitivity Projection. The second is implementation of a rule following a WTO DSB proceeding following the modifications contained in a Panel or Appellate Body report. In line with the proactive strategic character of the centerpiece of this work, only the first type of implementation will be discussed at length. Discussion of the second form of implementation will not continue beyond this note.

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mentation phase’s relatively minor role in the entire scheme of rule promulgation makes it particularly treacherous for U.S. agencies. The Shrimp-Turtle Appellate Body expressed an overt dissatisfaction that the permission of “a degree of discretion or flexibility” within the Shrimp-Turtle rule had been “effectively eliminated in [its] implementation.”260 This admonishment was not directed at the substance of the rule itself, but at the failure of U.S. administrative agencies to act “responsibly” when enforcing a potentially valid rule. The EPA and other U.S. agencies must make a devoted effort to prospectively review the quality and character of the regulations to be implemented in order to analyze the potential for misuse. Although blame for improper implementation was directly leveled at U.S. agencies,261 the U.S. Congress has been the most blameworthy in regards to rule implementation. The EPA, for example, has embraced a “new collaborative approach” to rulemaking and has a more globally conscious attitude toward implementation. In contrast, Congress has continued to express doubts over parting with any aspect of legislative control.262 At times, Congress’ involvement in rule promulgation has risen to a point at which a regulation that is sensitive to the needs of an affected The main issue surrounding the second or DSB mandated form of implementation is the amount of time that a country may reasonably exhaust before complying with the WTO’s directive. As noted supra p. 220, the WTO DSU includes the ability of any affected country to sanction the offending country should it not bring its policies into compliance. In the RFG decision, the EPA’s ready possession of the May 4th Amendment proposal and willingness to modify the rule lessened the emphasis on this rule. In the Shrimp-Turtle decision, however, U.S. firmness in backing its regulation and a particular form of TED, made the question of timing of compliance an issue. See World Trade Organization, United States—Import Prohibition of Certain Shrimp and Shrimp Products, Addendum to Status Report by the United States, WT/DS58/Add.1, 99–3788 (Sept. 8, 1999). Without going to length on the subject, the United States and the affected parties to the dispute eventually agreed on January 21, 1999, that 13 months was a “reasonable period of time” for implementation. See id. In attempting to conceive of this time period as a standard of any sort, however, one must understand that the facts and parties in a specific dispute shall be the ultimate determinative factors. 260 See Shrimp-Turtle, supra note 91, para. 161, at 32; see also, Shaffer & Oxman, supra note 191, at 512. 261 See id. 262 See Macchiaverna, supra note 67, at 133. Past EPA rules were overwhelmingly subject to litigation in order to determine their appropriateness (80% of all major regulatory rules), rather than consulting other parties. See Edward P. Weber & Anne M. Khademian, From Agitation to Collaboration: Clearing the Air Through Negotiation, P UB. ADMIN. REV. 396 (Sept. 19, 1997). Alhough the EPA has made progressive steps toward getting its regulations right the first time, Congress has resisted allowing agencies too much authority over categorically quasi-legislative functions. See Macchiaverna, supra note 67, at 133.

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foreign country no longer embodies these qualities after implementation. This occurred in the RFG case when Congress invalidated the May 4th Amendments by withholding EPA funding. Where congressional involvement has overridden international consensus, proper implementation may require a decision not to implement the measure at all. In the RFG case, the WTO DSB could reasonably infer that the United States had “actual knowledge” of the discriminatory effects of the RFG rule prior to its implementation. In instances where government involvement connotes a regulation “protectionist” on its face, U.S. agencies should withhold immediate implementation.263

The Future of the United States Within the WTO Global Harmonization: Mission Impossible? The four-step Sensitivity Projection requires faith in the efficacy of the WTO system and a commitment by the United States to be a part of that system. As the protests at the December 1999 Seattle Ministerial Conference meetings signify, the debate concerning the degree to which environmental policies should be incorporated within the WTO continues. The United States must balance its actions between promotion of free trade and the promotion of environmental concerns. Because the United States is a nation with an economically successful and intellectually informed populace, achieving a balance that accomplishes both ends is a real possibility. A belief that an effective balance may be struck between trade and the environment, however, is rare outside of the United States. Although some foreign commentators have casually discussed a possible convergence of trade and environmental goals in the distant future,264 developing country leaders generally believe that only trade goals can be sufficiently harmonized internationally.265 As a result of fears concerning the loss of domestic decision-making abilities, which many developing countries have only recently regained as colonialism has receded, the South attaches a dubious quality to transnational environmental measures.266 The South’s 263 The author recognizes the realpolitik dynamics that would make such action a virtual impossibility in some cases and wishes only to assert a theoretical ideal for use in future consideration. 264 See, e.g., P.T.B. Kohana, The WTO and Trade and the Environment Issues: Future Directions, 20(4) WORLD COMPETITION L. & ECON. REV. 87–111 (1997) (stating that while there is potential for trade and environmental objectives to mutually exist within the WTO, such a event is still many years away). 265 See discussion supra note 107. 266 See Farber, supra note 121, at 1319. “The U.S. experience also demonstrates the difficulties of constructing an appropriate form of multijurisdictional environmental regulation without losing the virtues of decentralization.” Id.

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short-term economic gains may, therefore, sew the seeds of environmental degradation.

The WTO as the Arena for Change The WTO is the best means by which to dispel Southern skepticism and bring about a convergence of international conceptions on trade and the environment. No other international body, treaty, or circumstance commands the widespread economic incentives necessary for multilateral consensus in the environmental arena. The economic benefits of free trade are the most powerful means by which to persuade change not only inside the sphere of trade, but in other areas as well. In the WTO, developing countries negotiate with genuine economic interests at stake. The persuasive power of these financial interests can legitimize discussions concerning environmental issues if economic incentives for environmental compliance are also included. The potential for harmonization, or multilateral consensus on trade and the environment, is, at present, limited within the WTO. Globally accepted norms, such as the protection of intellectual property, are still few in number.267 In addition, domestic officials are wary of eviscerating their own political power in favor of the WTO.268 Furthermore, the WTO’s desire to secure its own legitimacy has led it to restrict its regulation to those areas that are largely uncontroversial. In the past, the WTO has favored free trade at the direct expense of the environment. This pro-trade posture is ingrained within the jurisprudence of the WTO DSB. For example, the difficult burden of demonstrating a rule’s non-discriminatory basis in order to satisfy Article XX exceptions “naturally produces results that favor free trade over other public policy concerns.”269 To environmentalists, this legal standard not only fails to “affirmatively require any level of environmental protection” but “prohibit[s] all environmental laws to the extent that they are deemed inappropriately trade restrictive or discriminatory.”270 Environmentalists argue that because “no worldwide mechanism approaching the level of 267 See Freider Roessler, Diverging Policies and Multilateral Trade Integration, 2 FAIR TRADE AND HARMONIZATION 21, 52 (J. Bhagwati & R. Hudec, eds. 1996). 268 See id. 269 Smith, supra note 20, at 1275. In more general terms, though the Article XX exceptions were put in place expressly for the purpose of preventing “undue encroachment on national governments’ efforts to pursue legitimate trade policies,” the standard by which a country may be privy to the exception has proven virtually impossible. Id. 270 McCrory & Richards, supra note 8, at 25. A key observation by McCrory and Richards in this respect is that the WTO DSB has focused mainly on “scrutinizing the trade friendliness of the domestic environmental laws” rather than examining whether the laws had a justifiable environmental basis. See id.

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efficacy of the WTO enforces countervailing international norms,” such as environmental standards, the WTO dispute settlement process represents a very powerful, and potentially destructive, global force. Suggestions for creative changes to the GATT/WTO structure have been prevalent. These suggestions have arisen because neither the WTO’s substantive rules, nor the DSB procedural body that implements these rules, have a substantial methodology in which to argue in favor of the environment.271 Some commentators favoring substantive GATT modifications have suggested amending Article XX to specifically exempt environmental laws that are “legitimate.”272 Other commentators have argued that the substantive legal test applied by the WTO DSB should better reflect an analytical balance between trade and environmental concerns.273 For example, even prior to the RFG case, the GATT/WTO dispute resolution panels had interpreted the exceptions so narrowly that out of all disputes that had come before a panel, not one claim of exception under Article XX was allowed to stand: 271

United States—Standards for Reformulated and Conventional Gasoline Treatment of Imported Gasoline and Like Products of National Origin, Jan. 29, 1996, 35 I.L.M. 274 (1996). United States—Taxes on Automobiles, Sept. 29, 1994 (unadopted), 33 I.L.M. 1397 (1994). United States—Restrictions on Imports of Tuna, (unadopted), 33 I.L.M. 839 (1994). United States— Measures Affecting Alcoholic and Malt Beverages, June 19, 1992, GATT B.I.S.D. (39th Supp.) 206 (1992). United States—Restriction on Imports of Tuna, Sept. 3, 1991 (unadopted), GATT B.I.S.D. (39th Supp.) 155 (1991). Thailand—Restrictions on Importation of and Internal Taxes on Cigarettes, Nov. 7, 1990, GATT B.I.S.D. (37th Supp.) 200 (1991). United States—Section 337 of the Tariff Act of 1930, Nov. 7, 1989, GATT B.I.S.D. (36th Supp.) 345 (1990). European Economic Community—Antidumping Regulation on Imports of Parts and Components, May 16, 1990, GATT B.I.S.D. (37th Supp.) 132 (1991). Japan—Restrictions on Imports of Certain Agricultural Products, Mar. 22, 1988, GATT B.I.S.D. (35th Supp.) 163 (1989). Canada—Measures Affecting Exports of Unprocessed Herring and Salmon, Feb. 2, 1988, GATT B.I.S.D. (35th Supp.) 98 (1989). Canada—Administration of the Foreign Investment Review Act, Feb. 7, 1984, GATT B.I.S.D. (30th Supp.) 140 (1984). United States—Import of Certain Automotive Spring Assemblies, May 26, 1983, GATT B.I.S.D. (30th Supp.) 107 (1984). United States—Prohibition on Imports of Tuna and Tuna Products from Canada, Feb. 22, 1982, GATT B.I.S.D. (29th Supp.) 91 (1983). Reprinted in large part from Deere, supra note 50, at 2 n.4. 272 See, e.g., McCrory & Richards, supra note 8, at 43 (stating that “legitimate” environmental laws are those that are both pretextual and non-protectionist); J.L. Nissen, Achieving a Balance between Trade and the Environment: The Need to Amend the WTO/GATT to Include Multilateral Environmental Agreements, 28 LAW & POL’Y IN INT’L BUS. 901, 927 (1997) (arguing that multilateral environmental agreements containing a certain level of international involvement should be per se “legitimate”). 273 See, e.g., Judith Bello & Maury Shenk, WTO Dispute Settlement Body: Article XX Environmental Exceptions to GATT—National Treatment—Consistency with GATT of U.S.

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Alternatively, many commentators have concluded that the procedural characteristics of the WTO DSB, rather than the substantive provisions of the GATT, are the source of seemingly “anti-environment” decisions. These commentators suggest the inclusion of environmental experts in DSB panel deliberations so that an effective understanding of both trade and environmental issues is achieved prior to dispute resolution.274 One commentator has argued that the WTO should investigate the subsidiary questions and problems facing WTO DSB adjudicators and divulge a framework of principles under which Panel members should function.275

The WTO as a Balanced Unifier There is little chance that continued pro-trade decisions by the WTO DSB will cause the United States to renounce its WTO membership. The WTO conveys many economic advantages available in no other international agreement. Moreover, the WTO is moving towards being a more environmentally conscious organization. The RFG case is one example of this slow transition.276 Some have criticized the WTO for expanding too far into non-trade areas. Presidential candidate Steve Forbes recently described the WTO as a “wooly mammoth without the charm.” The WTO’s ready utility in bringing about meaningful discussion of nontrade subjects, however, is more likely to enhance, rather than detract from, the organization’s charm. Rules Regarding Imports of Reformulated Gasoline, 90 AM. J. INT’L L. 669, 673 (1996) (concluding that a better approach than the least-restrictive alternative test would be to measure the importance of the environmental measure against the seriousness of the alleged international trade violation); Shenk, supra note 50, at 673 (pointing out that legal tests that are more principled and flexible than the strict least-restrictive alternative test were contemplated in Article 2.2 of the Agreement on Technical Barriers to Trade (TBT), Article 5.6 of the Agreement on Sanitary and Phytosanitary Measures (SPS), and Article XVI of the Agreement on Subsidies and Countervailing Measures). 274 See e.g. Deere, supra note 50, at 2 (arguing that the addition of at least one panel member with expertise in environmental regulation or science could contribute to the panel’s ability to review a country’s rationale basis for the need to discriminate); Schultz, supra note 60, at 19 (stating that the establishment of an expert review group could facilitate fact finding and provide technical advice on certain aspects of the dispute); see also, WTO DSU, supra note 28, at Appendix 4 (providing that the assistance of expert review groups are within a panel’s authority and discretion). 275 See Waincymer, supra note 54, at 178. 276 See McBride, supra note 21, at 336. “An analysis of the differences between the Tuna-Dolphin Panel decisions on the one hand, and the Reformulated Gasoline Panel and Appellate Board decisions on the other, reveals the environmentally enlightened approach taken by the WTO.” Id.; see also WTO Secretariat Press Release, Trade Liberalization Reinforces The Need For Environmental Cooperation, WTO, at http:// www.wto.org/wto/environ/press140.htm (Oct. 8, 1999) (last visited Nov. 28, 1999) (WTO Secretariat report argues that international economic integration and growth

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The WTO is at a “crucial turning point in its efficacy.” 277 Recent decisions, such as RFG, have acknowledged the close ties between environmental regulation and trade liberalization and have not foreclosed on allowing legitimate environmental measures that negatively affect international trade. These decisions have also provided the procedural groundwork that the WTO requires for compliance. While recognizing the naturally antagonistic relationship between transnational environmental regulation and a loss of domestic sovereignty, 278 a dynamic largely absent from free trade agreements, the RFG Appellate Body dealt with environmental issues fairly and intelligently. “After the Reformulated Gasoline decision,” one scholar has claimed, “environmentalists may find the WTO to be the best friend they have ever had.”279

CONCLUSION Now the United States, as the tired traveler, must decide upon which of the two paths to take. The United States has witnessed the pitfalls of the shorter, easier path, and should now make the bold decision to struggle along the longer path, which promises to deliver it safely. In making this decision, the United States must trust in the words that the WTO DSB has placed on the sign and follow all the twists and turns along the path in accordance with the sign’s directives. The United States must go over the “hill” of recognition, down into the “valley” of rule formulation, through the “woods” of consultation, and finally out into the “clearing” of implementation. Although the journey, i.e., the application of the Sensitivity Projection, may be tiresome and lengthy, the path’s destination promises to be worth the effort. The RFG decision should not be feared but embraced. The decision presents certifiable measures by which the United States, through the EPA, may proactively promulgate environmental rules that will comply with U.S. obligations under the WTO. These procedural requirements will certainly receive criticism because they command a “fundamental reevaluation” of the pro-litigation U.S. approach to resolving disputes over extraterritorial environmental measures. These shallow concerns must be overcome, however, by a belief in, and an understanding of, the new and more extensive global community. In the end, although thorough completion of the Sensitivity Projection will be very useful during legal proceedings before the WTO DSB, its greatest usefulness may be before the international court of public opinion.

reinforce the need for sound environmental policies at the national and international level). 277 Schelin, supra note 37, at 440. 278 See Farber, supra note 121, at 1319. 279 McBride, supra note 21, at 338–39.

CHAPTER 8

CHARACTERIZING AIR AS AN EXHAUSTIBLE NATURAL RESOURCE Victoria H. Imperiale

INTRODUCTION When Article XX(g) was drafted, the term “natural resource” was interpreted as referring to a “raw material” or “mineral.” “Exhaustible natural resources” were considered to be stock resources, such as metals, in contrast to “renewable” resources, such as animals, plants, soil, and water.1 Over time, the term has been broadened to include several other resources, both living and non-living. Several General Agreement on Tariffs and Trade (GATT) panels that interpreted Article XX(g) have centered their consideration on the question as to what constitutes an “exhaustible natural resource,” concluding, for example, that tuna, salmon, and herring stocks, and petroleum are included in that term. Similarly, in the Shrimp-Turtle case,2 the World Trade Organization (WTO) Appellate Body concluded that sea turtles constitute “exhaustible natural resources” for the purposes of Article XX(g). It expressly mentioned that measures to conserve exhaustible natural resources, whether living or non-living, may fall within Article XX(g) in line with the principle of effectiveness in treaty interpretation. In the Reformulated Gasoline case,3 Venezuela considered that clean air was a “condition” of air that was renewable rather than a resource that was exhaustible, such as petroleum or coal. It claimed that there was no textual basis for expanding the scope of Article XX(g) to cover renewable “conditions” of resources as opposed to exhaustible natural resources. The United States maintained that air was undoubtedly a natural resource 1 Charnovitz, Steve, Exploring the Environmental Exceptions in GATT Article XX, 25 J. WORLD TRADE 37, 45 (1991). 2 United States—Import Prohibition of Certain Shrimp and Shrimp Products, World Trade Organization, Appellate Body, WT/DS58/AB/R (Oct. 12, 1998). 3 United States—Standards for Reformulated and Conventional Gasoline, World Trade Organization, Report of the Panel, WT/DS2/R (Jan. 29, 1996).

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that could be exhausted if it was rendered unfit for human, animal, or plant consumption, and referred to prior panel decisions where it was recognized that fish were an “exhaustible natural resource” since their populations could be depleted or rendered extinct. The WTO panel considered that clean air is a resource and is exhaustible, since it could be depleted. It did not consider decisive the fact that the depleted resource was defined with respect to its qualities. In addition, the fact that air was renewable was not considered a valid objection. In line with an earlier report 4 in which a GATT panel had accepted that renewable stocks of salmon could constitute an exhaustible natural resource, the WTO panel found that a policy to reduce the depletion of clean air was a policy to conserve a natural resource within the meaning of Article XX(g). The evolution of GATT and WTO jurisprudence is most significant. The framers of GATT originally intended only minerals to be considered exhaustible natural resources. This term has been broadened to include other natural resources, both living and non-living. The ensuing expansion will avail the necessary protection to all resources in the global international trade arena.

BACKGROUND Before dealing specifically with the reports of the panel and the Appellate Body in the Reformulated Gasoline case, this article will briefly examine several related issues, including the theory behind the concept of “exhaustible natural resources,” air pollution’s adverse effects, the legislation in the United States meant to protect this natural resource, and the origins of the term “exhaustible natural resources” within Article XX(g) of the General Agreement.

Exhaustible Natural Resources What can be considered an exhaustible natural resource? Resources are defined as any material that, when extracted, has economic value.5 The term “living resources” refers to the ability to reproduce and propagate itself that animals and plants have.6 It can be considered that all natural resources are exhaustible, since all are capable, in theory, of being depleted. Living resources can be destroyed, or reduced in number to such an extent that species’ viability is negated. Non-living resources can be exploited until they are depleted. 4 Canada—Measures Affecting Exports of Unprocessed Herring and Salmon, B.I.S.D. 35S/98, para. 4.6. 5 BLACK’S LAW DICTIONARY, 711 (6th ed. 1991). 6 Axel Bree, Article XX GATT—Quo Vadis? The Environmental Exception After The Shrimp-Turtle Appellate Body Report, 17 DICK. J. INT´L L. 99 (1998).

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Air, water, and soil could be contaminated to such an extent that their composition no longer allows their use by the living resources. It is important to take into account that even if these resources could eventually regenerate, if it cannot be done within the human time frame, this possibility is irrelevant. Forests could eventually be transformed into oil, but this would take hundreds of thousands of years. To qualify all resources as exhaustible would make the distinction between exhaustible and nonexhaustible resources useless. Originally, only minerals were considered exhaustible natural resources. They could not be generated—again, within the human time frame—once they were depleted. Living beings were thought to be an inexhaustible resource, since they could reproduce and propagate.7 This primary classification was modified, as this theory advanced, and the term “renewable” was introduced into the equation. Oil, for example, was considered to be an exhaustible and non-renewable resource, whereas timber or fish where thought of as exhaustible but renewable.8 Air could be considered an exhaustible natural resource, if all resources are susceptible of total depletion. In a less dramatic approach, “clean” air can be exhausted, within a certain area, when there is no possibility of remediating this situation with the actually existing technologies. In consulting officials at the U.S. Environmental Protection Agency (EPA), the opinions relating to this topic were varied. Some expressed the view that clean air can be a scarce resource, but that it is renewable. They agreed that the answer depends on the perspective taken, since localized air quality changes by the hour, but the pollution always goes somewhere else, for example to acidify lakes.9 Other officials stated that air is replenishable, renewable, and that all resources are exhaustible, depending on the way they are managed.10 As will be seen, the framers of the GATT originally intended only minerals to be considered exhaustible natural resources. But, as the Appellate Body noted in the Shrimp/Turtle case,11 the language of the treaty is not “static” but “by definition, evolutionary.” 12 Consequently, this term was broadened to include other natural resources, both living and non-living.

7

See id. MURRAY C. KEMP, & NGO VAN Long, EDS., EXHAUSTIBLE RESOURCES, OPTIMALITY, AND TRADE, 71 (1980). 9 From dialogues with various officials at the EPA in December 1999. 10 Id. 11 Supra note 2. 12 Supra note 6. 8

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Air Pollution Why is it necessary to prevent air pollution? Air pollution has many adverse effects,13 ranging from health problems to reduced crop yields and the loss of life forms in and around lakes due to their acidification. It can originate from natural sources, such as volcanoes, forest fires, and windblown dust, or anthropogenic ones, from auto emissions, heating units, power plants, and metal smelters. Pollutants are also classified as “traditional”—carbon monoxide, ozone, particulate matter, sulfur dioxide, nitrogen dioxide, and lead—and “toxic” or “hazardous”—asbestos, benzene, vinyl chloride, beryllium, mercury, radionuclides, and arsenic. The former cause or aggravate, e.g., respiratory tract problems, eye and throat irritation, asthma, and impairment of some cardiovascular functions. “Toxic” or “hazardous” air pollutants have been found to contribute to lung disease, leukemia, liver, spleen, kidney and lymph damage, and a variety of other serious ailments.

U.S. Air Pollution Legislation The drive to prevent air pollution has produced abundant legislation in the United States on related topics since the latter part of the 19th century. In 1881, the cities of Chicago and Cincinnati issued norms protecting air quality in response to dense smoke problems, and over the next 30 years 23 other U.S. cities passed similar ordinances.14 The first federal air pollution legislation was passed in 1955, and in 1963, the federal government began taking a more active hand in controlling air pollution with the Clean Air Act. The most important regulation on air pollution, though, is the 1970 Clean Air Act, an environmental norm with significant built-in enforcement provisions.15 In 1990, the Clean Air Act was amended, in an effort to reduce air pollution through a variety of instruments including the use of several different enforcement and implementation mechanisms. Of these, the most innovative one is the establishment of tradable pollution permits for sulfur dioxide emissions, the primary precursor of acid rain, in Title IV and Title V.16

See http://www.american.edu/projects/mandala/TED/CLEAN.htm (last visited Oct. 31, 1999). 14 See id. 15 See id. 16 See id. 13

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The Term “Exhaustible Natural Resources” Within Article XX(g) of GATT During the preparatory GATT/ITO (International Trade Organization) meetings, the term “natural resource” was described as a “raw material” or “mineral.” “Exhaustible natural resources” were considered those stock resources, such as metals, in contrast to “renewable” resources, such as animals, plants, soil, and water. Some authors question this classification of resources, saying that while renewable resources can be exhausted if misused, categorizing them as “exhaustible” robs that term of any meaning. If “exhaustible” includes both renewable and non-renewable resources, what is left for the “inexhaustible” category? 17 During the meetings leading to the drafting of the chapter on Intergovernmental Commodity Arrangements, which was not included in the GATT, there was an extensive debate on exceptions to commodity rules that had significant bearing on Article XX. The New York Draft added a complete exception for “international fisheries or wildlife conservation agreements with the sole objective of conserving and developing these resources.”18 In the meetings at Geneva, one of the versions of the exemption applied to agreements relating “solely to the conservation of exhaustible natural resources such as fisheries and wildlife.” The delegate from Great Britain proposed dropping the words “such as fisheries or wildlife.” The temporary Chairman of the Working Group suggested that the examples be deleted with the understanding that “fisheries and wild life were in fact covered by the language ‘conservation of natural resources.’” The change in question was made, but this conservation exception, unlike the New York Draft, applied only to one section of the commodities chapter. 19 Norway, which had been in favor of retaining the words “fisheries or wildlife” in Geneva, reintroduced the issue in Havana, pointing out that said Draft could be viewed as contradictory. The commodities chapter provided a complete exemption for agreements protecting animal life or health, while agreements to conserve exhaustible natural resources were exempt from just one part of the chapter and regulated in the remainder. Norway wondered under which of the two exemptions fisheries fit, particularly since “fisheries might be considered rather as renewable than as exhaustible resources.” The Commodities Committee inserted a total exemption for “any intergovernmental agreement relating solely to the conservation of fisheries resources, migratory birds or wild animals” to remedy this ambiguity. It recommended, as well, adding an analogous 17 18 19

Supra note 1. See id. See id.

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exception to the Commercial Policy chapter, and this change was made in the ITO Charter.20 The term “exhaustible natural resources” started out as a reference to minerals, but since the Commodity Drafting Group at Geneva intended the term to cover living resources also, this interpretation should carry over to the Commercial chapter. Steve Charnovitz mentions, nonetheless, that the opposite conclusion could be supported, this being that the authors of Article XX(g) understood “exhaustible natural resources” to be finite raw minerals. He notes that it is sometimes contended that the decision in Havana to add a fisheries and wildlife exception implies that GATT lacks such an exception, but this line of argument fails to take into account the fact that the Havana amendment on fisheries was the culmination of a long debate over the proper wording of the commodities exemption. He insists that while the United States did not object to inserting an explicit fisheries exception in the Commercial policy chapter, the American delegation believed that the Geneva Draft—and therefore the GATT—already included that exception implicitly. 21

EARLIER GATT PANEL DECISIONS Several panels that interpreted Article XX(g) have addressed the question as to what constitutes an “exhaustible natural resource.” They have concluded, for example, that tuna (United States—Prohibition of Imports of Tuna and Tuna Products from Canada, February 22, 198222), salmon and herring stocks (Canada—Measures Affecting Exports of Unprocessed Herring and Salmon, March 22, 198823), and petroleum (United States—Taxes on Automobiles, September 30, 199424) are exhaustible natural resources.

United States—Prohibition of Imports of Tuna and Tuna Products from Canada25 Canada complained that an action taken by the government of the United States to prohibit imports of tuna and tuna products from Canada was discriminatory and contrary to the obligations of the former under the GATT. Section 205 (Import Prohibitions) of the Fishery Conservation and Management Act of 1976 provided that if the Secretary of State deter20

See id. See id. 22 United States—Prohibition of Imports of Tuna and Tuna Products from Canada, L/5198, B.I.S.D. 29S/91. 23 Supra note 4. 24 United States—Taxes on Automobiles, GATT No. DS31/R (unadopted), at para. 5.57, reprinted in 33 I.L.M. 1399 (1994). 25 Supra note 22. 21

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mined that any fishing vessel of the United States, while fishing in waters beyond any foreign nation’s territorial sea, to the extent that such sea was recognized by the United State, was seized by any foreign nation as a consequence of a claim of jurisdiction that was not recognized by the United States, the Secretary of the Treasury should immediately take such action as may be necessary and appropriate to prohibit the importation of fish and fish products from the foreign fisheries involved. The United States argued that the measures restricting the import of tuna and tuna products from Canada were justified under Article XX(g), the subject being an exhaustible natural resource. Tuna were potentially subject to overexploitation and exhaustion, and according to a primary listing by the U.S. National Marine Fisheries Service, albacore tuna was under intensive use. Canada agreed that tuna was an exhaustible natural resource, but, although its authorities did not doubt that the United States had a genuine interest in the conservation of tuna stocks, the representative from that country denied that the measures in question were triggered by concerns about conservation. The panel realized that both parties considered tuna stocks, including albacore tuna, to be an exhaustible natural resource in need of conservation management and that both parties were participating in international conventions aimed at a better conservation of such stocks. However, the panel noted that Article XX(g) contained a qualification on measures relating to the conservation if they were to be justified under said article, namely that such measures were made effective in conjunction with restrictions on domestic production or consumption. The panel, in a report adopted on February 22, 1982, arrived at the conclusion that the U.S. embargo on imports of tuna and tuna products from Canada was not consistent with the provisions of Article XI. It did not find that the representative of the United States had provided sufficient evidence that the import prohibition on all tuna and tuna products from Canada as applied from August 31, 1979, to September 4, 1980, complied with the requirements of Article XX and notably its subparagraph (g).

Canada—Measures Affecting Exports of Unprocessed Herring and Salmon26 A report of the panel adopted on March 22, 1988, dealt with the U.S. claim that the restrictions maintained by Canada, which prohibit the exportation or sale for export of unprocessed herring and pink and sockeye salmon, were inconsistent with the existing obligations under Article XI of the General Agreement. Canada maintained that those restrictions 26

Supra note 4.

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where part of a complex and long-standing system of fishery resource management, while the United States contended that the issue in this case was the permissibility of additional measures that prohibit the export of unprocessed fish that have already been harvested. Canada held that its export measures on unprocessed sockeye and pink salmon and unprocessed herring were fully consistent with the provisions of Article XX(g). They argued that those species were “exhaustible natural resources” within the meaning of said article, a position that the United States and the panel agreed on. But even though the panel adopted the position that salmon and herring stocks are exhaustible natural resources, it reached the conclusion that the export prohibitions were contrary to Article XI:1 and were justified neither by Article XI:2(b) nor Article XX(g). Among other arguments to justify this decision, it stated that while a trade measure did not have to be necessary or essential to the conservation of an exhaustible natural resource, it had to be primarily aimed at the conservation of one to be considered as “relating to” conservation within the meaning of Article XX(g). As the preamble of Article XX indicates, the purpose of including Article XX(g) in the General Agreement was not to widen the scope for measures serving trade policy purposes but merely to ensure that the commitments under the General Agreement do not hinder the pursuit of policies aimed at the conservation of exhaustible natural resources. All the participants and the third participants in this appeal accepted the propriety and applicability of the view of the Herring and Salmon report and the Panel Report that a measure must be “primarily aimed at” the conservation of exhaustible natural resources in order to fall within the scope of Article XX(g).

United States—Taxes on Automobiles27 The European Community requested the United States to hold consultations pursuant to Article XXIII:1 on three measures maintained by the latter. These were: the luxury tax on automobiles contained in the Omnibus Budget Reconciliation Act of 1990, the gas guzzler tax on automobiles contained in the Energy Tax Act of 1978, as amended, and its regulations, and the Corporate Average Fuel Economy law contained in the Energy Policy and Conservation Act, and its regulations, as amended. The “luxury tax” imposed a tax on the retail sale of vehicles over $30,000 and on several other products, such as boats, aircraft, jewelry, and furs. It was paid by the customer to the dealer who then submitted receipts periodically to the U.S. Internal Revenue Service. The “gas guz27

Supra note 24.

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zler tax” was a tax on the sale of automobiles within “model types” whose fuel economy failed to meet certain fuel economy requirements. It was imposed on manufacturers. The Corporate Average Fuel Economy law (CAFE) required a minimum average fuel economy for passenger automobiles or light trucks manufactured by a manufacturer (any person engaged in the business of “manufacturing” automobiles). The definition of manufacture was included in the legislation; it refers to the production or assembly in the customs territory of the United States or the import into the customs territory of the United States. Therefore, for CAFE purposes, the production or assembly of a vehicle in Europe or Asia would not be considered manufacturing, but importing the vehicle into the United States would. The European Community claimed that the gas guzzler tax could not be considered as “primarily aimed” at the conservation of carbon fuels; it had long since become a revenue measure designed to fund domestic programs favored by the U.S. Congress and Administration. The United States argued that the gas guzzler tax was primarily aimed at fuel conservation and that by creating incentives for shifting manufacturing and purchasing practices toward more fuel-efficient vehicles, it had increased fuel efficiency across the board and directly resulted in fuel conservation. The Panel Report mentioned that the relevant natural resource in question should not be deemed to be gasoline alone, since gasoline was one of many derivatives of natural carbon fuel. But even if the relevant natural resource was gasoline, the United States had not taken comprehensive steps to reduce all types of gasoline consumption. The Panel Report also noted that with continued growth in population and vehicle travel, light vehicles in the United States still accounted for close to seven million barrels per day of oil consumption. Excessive fuel consumption was a serious problem in the United States and fuel conservation remained an important objective of U.S. policy. Fossil fuels were an exhaustible natural resource and total U.S. and global reserves were limited. The disproportionate contribution of fuel consumption to the threat of global climate change had lent further support to the U.S. goal of fuel conservation. The U.S. fuel economy requirements had been recognized internationally as a success not only in reducing U.S. oil consumption but also in reducing emissions of carbon dioxide and other gases contributing to global warming and ozone depletion. In considering whether the policy in respect of which the CAFE measure was invoked was a policy to conserve an exhaustible natural resource, the panel noted that, since gasoline was produced from petroleum, an exhaustible natural resource, a policy to conserve gasoline was within the range of policies mentioned in Article XX(g). The panel finally concluded that the luxury and gas guzzler taxes on automobiles were not inconsistent with Article III:2 and that the CAFE

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regulation was inconsistent with Article III:4 and, to the extent that it was based on separate foreign fleet accounting, could not be justified under Article XX(g) or Article XX(d). It further recommended that the contracting parties request the United States to bring that part of the CAFE regulation found to be inconsistent with the General Agreement into conformity with its obligations under it.

UNITED STATES—STANDARDS FOR REFORMULATED AND CONVENTIONAL GASOLINE28 In 1990, an amendment to the Clean Air Act directed the EPA to establish new regulations on the composition and emissions effects of gasoline in order to improve air quality in the most polluted areas of the country. This was to be done by reducing vehicle emissions of toxic air pollutants and ozone-forming volatile organic compounds, and the regulations would apply to refiners from the United States, blenders, and importers. The amendment establishes “non-attainment areas,” nine large metropolitan areas that experienced the worst summertime ozone pollution during the period of 1987–1989, plus any other areas that did not meet national ozone requirements and were added at the request of the governor of the state. In these areas only “reformulated gasoline” may be sold to consumers, whereas in the rest of the United States “conventional gasoline” may be sold. The EPA published in December of 1993 a final draft of regulations on reformulated gasoline under the Clean Air Act. The EPA established methods to determine a domestic refiner’s individual refinery baseline, mainly on the basis of the quality data and volume records of its 1990 gasoline.29 However, most importers, which are also foreign refiners, were required to use the statutory baseline set by the EPA. This way, the levels required of foreign refiners were more difficult to achieve than those required of refiners in the United States. 30 Because of this situation, Venezuela, in January of 1994, requested consultations with the United States under Article XXII of the old GATT regime, alleging that the aforementioned regulations violated the requirements of national treatment. It referred the matter to a panel in November of that year, because it did not find satisfaction in the response it received through the consultations.31 28 29

Supra note 3. See http://www.miti.go.jp/report-e/g400110e.html, (last visited Oct. 26,

1999). 30 31

See id. See id.

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In January 1995, Venezuela again requested consultations with the United States under Article XXII (GATT 1994) to settle the dispute under the new WTO regime. Since, again, no satisfactory response was received during the consultations, in April 1995, it became the first dispute to go before a WTO panel.32 Brazil also requested consultation in the same month, for similar reasons, and in May 1995, it asked for a panel to be established. In the month of June, the Brazilian and Venezuelan panels were merged.

The Report of the WTO Panel33 Venezuela and Brazil requested the panel to find that the final rule promulgated by the U.S. EPA on December 15, 1993, “Fuels and Fuel Additives—Standards for Reformulated and Conventional Gasoline” was contrary to Articles I and III of GATT 1994, was not covered by any of the exceptions under Article XX of GATT 1994, and was contrary to Article 2 of the Agreement on Technical Barriers to Trade. Additionally, Venezuela requested the panel to find that the Gasoline Rule nullified and impaired benefits accruing to Venezuela under the General Agreement within the meaning of Article XXIII:1(b). Venezuela and Brazil noted that the United States had the right to enact stringent environmental standards and regulations in order to improve air quality within its territory, but this only provided that these norms treated imported products no less favorably than domestic like products. They argued that the Gasoline Rule, by denying foreign refiners the possibility of establishing an individual baseline, violated Article III:4 of the General Agreement, because it accorded less favorable treatment to imported gasoline—both reformulated and conventional—than to U.S. gasoline. The Unitd States contended that clean air was an exhaustible natural resource within the meaning of Article XX(g), since it could be exhausted by the emissions of pollutants such as VOCs, Nox, and toxics. In the most polluted areas, it could become chronically contaminated and remain so over long periods of time. It stressed that, since air containing pollutants could move long distances, by stopping air degradation, the Clean Air Act also protected other exhaustible natural resources, such as lakes, streams, parks, crops, and forests. This way, the objective was not only to preserve clean air but also other natural resources. The Panel Report then noted that Venezuela claimed that the U.S. arguments were legally and factually erroneous. Recalling past panel reports, Venezuela considered that the exceptions provided for by Article XX(g) had to be interpreted narrowly, in a manner that preserved the 32 33

See id. Supra note 3.

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basic objectives and principles of the General Agreement. Since the original purpose of Article XX(g) was to permit exceptions to otherwise applicable prohibitions or restrictions on the export of tradable goods that could be exhausted as a result of their exploitation, Venezuela doubted that clean air was an exhaustible natural resource within the meaning of Article XX(g). Venezuela considered that clean air was a “condition” of air that was renewable rather than a resource that was exhaustible, such as petroleum or coal. It claimed that there was no textual basis for expanding the scope of Article XX(g) to cover renewable “conditions” of resources as opposed to exhaustible natural resources. The United States maintained that air was undoubtedly a natural resource that could be exhausted if it was rendered unfit for human, animal, or plant consumption, as in Canada—Measures Affecting Exports of Unprocessed Herring and Salmon34 and United States—Prohibition of Imports of Tuna and Tuna Products from Canada,35 where GATT panels proceedings recognized that fish were an “exhaustible natural resource,” since their populations could be depleted or rendered extinct. The panel considered that clean air was a resource (it had value) and that it was natural. It could be depleted. The panel did not consider decisive the fact that the depleted resource was defined with respect to its qualities, and the fact that a resource was renewable could not be an objection. Since a past panel had accepted that renewable stocks of salmon could constitute an exhaustible natural resource, in Canada—Measures Affecting Exports of Unprocessed Herring and Salmon,36 a policy to reduce the depletion of clean air was a policy to conserve a natural resource within the meaning of Article XX(g). The panel stressed, also, that it was not its task to examine generally the desirability or necessity of the environmental objectives of the Clean Air Act or the Gasoline Rule. It stated that its examination was confined to those aspects of the Gasoline Rule that had been raised by the complainants under specific provisions of the General Agreement and that under this norm, WTO members were free to set their own environmental objectives, but they were bound to implement these objectives through measures consistent with its provisions, notably those on the relative treatment of domestic and imported products. The panel concluded that the baseline establishment methods contained in Part 80 of the Title 40 of the Code of Federal Regulations were not consistent with Art. III:4 of the General Agreement and could not be justified under paragraphs (b), (d) and (g) of Article XX of the General Agreement. The panel recommended that the Dispute Settlement Body 34 35 36

Supra note 4. Supra note 26. Supra note 4.

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request the United States to bring this part of the Gasoline Rule into conformity with its obligations under the General Agreement.

Report of the WTO Appellate Body37 The United States decided to appeal certain conclusions on issues of law and legal interpretations in the Panel Report. It claimed that the panel erred in law, firstly in holding that the baseline establishment rules of the Gasoline Rule were not justified under Article XX (g) of the General Agreement and, secondly, in its interpretation of Article XX as a whole. There are several findings by the panel that the United States did not appeal, including its ruling that clean air was an exhaustible natural resource within the meaning of Article XX(g), contrary to the position supported by Venezuela and Brazil. As a preliminary matter, the United States raised a procedural issue at the oral hearing, concerning arguments made by Venezuela and Brazil in their appellees’ submissions on whether clean air was an exhaustible natural resource within the meaning of Article XX(g) and whether the baseline establishment rules were consistent with the Agreement on Technical Barriers to Trade (TBT Agreement). The United States argued that Venezuela and Brazil had not appealed from the ruling of the panel on the clean air issue or from the non-ruling of the panel on the applicability of the TBT Agreement. They had not filed appellants’ submissions under Rule 23(I) of the Working Procedures, nor filed separate appeals under Rule 23(4). It also stated that their arguments on these two matters had been made in their appellees’ submissions pursuant to Rule 22 and, as Appellees, Venezuela and Brazil could not challenge the panel’s finding on the clean air issue and its non-finding on the TBT Agreement’s applicability. Venezuela and Brazil confirmed at the oral hearing that they were not appealing the mentioned matters but that they believed it would be within the scope of authority of the Appellate Body to address the results of the panel’s examination of those two issues, if it found it necessary to do so. The United States considered that unfairness would be generated if the Appellate Body were to take up those two matters and that it would encourage a disregard for the Working Procedures. This would create difficulties for third parties who would have to make up their minds to become third participants or not on the basis of the issues raised on appeal as set out in the notice of appeal and the appellant’s submission. The United States itself had not raised the clean air issue and the appli37 United States—Standards for Reformulated and Conventional Gasoline, World Trade Organization, Appellate Body, AB-1996-1, Apr. 22, 1996, 35 I.L.M. 603 (1996).

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cability of the TBT Agreement in its appeal, and it was the only appellant in the appellate procedure. The Appellate Body found the submissions made by the United States on the preliminary question to be persuasive. It found that the route chosen by Venezuela and Brazil for addressing the two issues in question is not contemplated by the Working Procedures, and, therefore, these issues were not properly the subject of the appeal. As a consequence, the Appellate Body did not further discuss the question whether or not “clean air” was an exhaustible resource within the meaning of Article XX(g). The Appellate Body found, among other things, that the panel erred in law in its conclusion that the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations did not fall within the terms of Article XX(g) of the General Agreement. It also came to the conclusion that the panel had erred in asking whether the less favorable treatment was primarily aimed at the conservation of clean air, since a correct application of the article in point asks if the measure is primarily aimed at the conservation of the exhaustible natural resource. The Appellate Body found as well that the measures implemented under the Gasoline Rule were primarily aimed at the conservation of an exhaustible natural resource and held that this finding was not negated by the inconsistency in the application of the Rule to foreign and domestic producers. The Appellate Body recommended that the Dispute Settlement Body request the United States to bring the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations into conformity with its obligations under the General Agreement. They also pointed out that this does not mean that the ability of any WTO member to take measures to control air pollution or protect the environment is at issue. They stressed that that would be to ignore the fact that Article XX of the General Agreement contains provisions designed to permit important state interests, including the protection of human health, as well as the conservation of exhaustible natural resources, to find expression. The Appellate Body supported the conclusion of the panel, although it found that the panel erred in its findings that the measures of the United States were not measures regarding the conservation of exhaustible natural resources within the meaning of Article XX(g) of the GATT. It said that the Gasoline Rule satisfied Article XX(g), which requires only that the challenged measure “relate to” the conservation of natural resources.38 It also found that the measures failed to meet the requirements of the chapeau of Article XX of the GATT.

Stephen L. Kass, Clean Air, Trade and WTO´s New International Law, N.Y.L.J., June 3, 1996, at S3. 38

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The Appellate Body Report was adopted in May 1996 by the DSB, which then recommended that the United States amend the measures accordingly. The United States informed the DSB in June 1996 of its intentions in the report of implementations of the DSB.39 In August 1997, the EPA issued a final regulation amending the measures, which allows foreign refiners to apply to this agency for an individual baseline by the same methods as they do for domestic refiners.40 This decision was criticized widely in the United States, because it was considered to be a threat to the U.S. sovereignty and its environment. Nonetheless, it has also been argued that, even if the WTO decision did nullify a rule set by the EPA, the panel did not hold that the United States had to allow dirtier gasoline into this country; it just said that the United States must try harder to make the rules non-discriminatory. 41

United States—Import Prohibition of Certain Shrimp and Shrimp Products42 India, Malaysia, Pakistan, and Thailand complained about a prohibition imposed by the United States on the importation of certain shrimp and shrimp products by Section 609 of Public Law 101–162. These regulations, and their subsequent modifications, required the use of approved TEDs (turtle exclusion devices) at all times and in all areas where there was a likelihood that shrimp trawling would interact with sea turtles, with certain limited exceptions. The Panel Report concluded that the aforementioned import ban was not consistent with Article XI:1 of GATT 1994, and that it therefore could not be justified under Article XX of GATT 1994. It also recommended that the DSB request the United States to bring this measure into conformity with its obligations under the WTO Agreement. The United States appealed certain issues of law covered in the Panel Report. The Appellate Body took into consideration whether turtles could be considered an exhaustible natural resource. The Panel Report left the issue open, even though the parties stressed its importance. India, Pakistan, and Thailand contended that a “reasonable interpretation” of the term “exhaustible” is that it refers to “finite resources such as minerals, rather than biological or renewable resources.” They further contended that such finite resources were exhaustible “because there was a limited supply which could and would be depleted unit for unit as the resources were consumed” Supra note 29. See id. 41 Telisa Webb Schelin, United States—Standards for Reformulated and Conventional Gasoline: The Effect of the World Trade Organization Decision on the U.S. and its Administrative Agencies, 33 TULSA L.J. 440 (1997). 42 Supra note 2. 39 40

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and that if all natural resources were considered to be exhaustible, that term would become superfluous. Express mention was made of the drafting history of Article XX(g). Malaysia argued that turtles could only be considered under Article XX(b), since Article XX(g) was meant for “nonliving exhaustible natural resources.” The Appellate Body did not agree with these arguments. It considered that Article XX(g) was not limited to the conservation of “mineral” or “non-living” natural resources. Exhaustible natural resources and renewable natural resources are not mutually exclusive. Living species, though in principle capable of reproduction, are just as “finite” as petroleum or coal, because they are susceptible to depletion, exhaustion, and extinction. The Appellate Body pointed out that Article XX(g) should be interpreted taking into account that it was drafted more than 50 years ago and considered the concerns that existed at that time about the protection and conservation of the environment. The Appellate Body then went on to analyze the preamble of the WTO Agreement, which says: “The Parties to this Agreement . . . allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.” It considered also that the generic term “natural resources” utilized in Article XX(g) was not “static” in its content or reference, but rather “by definition, evolutionary.” This is a significant addition to WTO jurisprudence.43 It mentioned as well that the international conventions and declarations of our time refer frequently to natural resources as embracing both living and non-living creatures. The Appellate Body arrived at the conclusion that, “given the recent acknowledgement by the international community of the importance of concerted bilateral or multilateral action to protect living natural resources, and recalling the explicit recognition by WTO members of the objective of sustainable development in the preamble of the WTO Agreement, the Appellate Body believes that it is too late in the day to suppose that Article XX(g) of the GATT 1994 may be read as referring only to the conservation of exhaustible mineral or other non-living resources.” It expressly mentioned, also, that two previous GATT panel reports found fish to be an exhaustible natural resource within the meaning of Article XX(g) and that measures to conserve exhaustible natural resources, whether living or non-living, may fall within Article XX(g) in line with the principle of effectiveness in treaty interpretation. To show that this arti43 Benjamin Simmons, In Search of Balance: An Analysis of the WTO Shrimp/Turtle Appellate Body Report, 24 COLUM. J. ENVTL. L. 413 (1999).

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cle included both classifications of natural resources, it cited many sources, including the 1982 UN Convention on the Law of the Sea (UNCLOS) and the Convention on Biological Diversity (CBD).44 Finally, on this point, the Appellate Body turned to analyze whether turtles are exhaustible under Article XX(g). It concluded that it was a very difficult fact to controvert, since all of the seven species of sea turtles are listed in Appendix 1 of the Convention on International Trade in Endangered Species (CITES), which includes “all species threatened with extinction which are or may be affected by trade.” It decided that the sea turtles here involved constituted “exhaustible natural resources” for the purposes of Article XX(g). The Appellate Body reversed the panel’s finding that the U.S. measure at issue was not within the scope of measures permitted under the chapeau of Article XX of the GATT 1994 and arrived at the conclusion that the U.S. measure, while qualifying for provisional justification under Article XX(g), failed to meet the requirements of the chapeau of Article XX and, therefore, was not justified under Article XX of the GATT 1994.

CONCLUSION In the Reformulated Gasoline case,45 Venezuela considered that clean air was a “condition” of air that was renewable rather than a resource that was exhaustible, such as petroleum or coal. It claimed that there was no textual basis for expanding the scope of Article XX(g) to cover renewable “conditions” of resources as opposed to exhaustible natural resources. The United States, on the other hand, maintained that air was undoubtedly a natural resource that could be exhausted if it was rendered unfit for human, animal, or plant consumption, and it referred to prior panel decisions where it was recognized that fish were an “exhaustible natural resource,” since their populations could be depleted or rendered extinct. The panel agreed with the U.S. position and considered that clean air is a resource and that it is natural, since it can be depleted. It did not consider decisive the fact that the depleted resource was defined with respect to its qualities and the fact that the resource was renewable. This conclusion of the DSB of the WTO is correct. Air can be contaminated to such an extent that its composition no longer allows its use by the living resources. “Clean” air can be exhausted within a certain area, when there is no possibility of remediating the situation with existing technologies. The framers of GATT originally intended only minerals to be considered exhaustible natural resources. But, as the Appellate Body noted 44 45

See id. Supra note 3.

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in the Shrimp/Turtle case,46 the language of the treaty is not “static,” but “by definition, evolutionary,”47 and this term was broadened to include other natural resources, both living and non-living. In consideration of the Reformulated Gasoline case, then, air is an exhaustible natural resource within the meaning of Article XX(g) of GATT. This conclusion derives from the previous cases decided by the WTO, in which the term “exhaustible natural resources” had been interpreted in a broad sense to include both living and non-living organisms. It is important to analyze, though, what the consequence of such a conclusion might be. If the term “exhaustible natural resource” is broadened enough, it could include any resource, since all resources, in theory, posses the capacity of being depleted. Consequently, the objective of Article XX(g) would be violated if there’s no limit as to which resources could be encompassed in its terms.

46 47

Supra note 2. Supra note 6.

CHAPTER 9

CONSERVING “EXHAUSTIBLE NATURAL RESOURCES”: THE ROLE OF PRECEDENT IN THE GATT ARTICLE XX(g) EXCEPTION Lewis Briggs

INTRODUCTION The World Trade Organization (WTO), inaugurated on January 1, 1995, is the institutionalization of 50 years of past practice under the General Agreement on Tariffs and Trade (GATT 1994). The original purpose of the GATT 1947, the multilateral negotiation of a reduction in tariff barriers, is now but one facet of the current negotiations. Member states, rightly or wrongly, now see the WTO as a forum to address many trade related issues. One of the most crucial “trade and” issues is the interaction, or some would argue conflict, between a continued move toward liberalizing international trade and some members’ growing sensitivity to environmental concerns. In many areas of the WTO treaty text, however, there are “gaps, and considerable ambiguities.” 1 This article hopes to shed some light on the “trade and environment” ambiguity contained in the application of the exception articulated in Article XX(g) of the GATT. Absent a clear consensus to amend the WTO/GATT treaties, the dispute settlement system must search out a method for managing complaints concerning the trade restrictive effects of national environmental regulations. As at least one author has noted, “[W]hen nations exchange goods and services, they also trade environmental and health risks . . . [A]dvocates of more open trade and environmentalists alike share concerns over how [the two] . . . are to be linked.” Article XX(g) represents a negotiated standard that attempts to govern the linkage between different degrees of environmental concern, and the need to supervise adherence to the 1 John H. Jackson, Dispute Settlement and the WTO: Emerging Problems, 2 J. INT’L ECON. L. 329–51, 334 (1998).

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obligations of national treatment and most-favored nation status contained in the WTO/GATT.2 The first section of this chapter will use the “rules and standards” model outlined by Professor Joel Trachtman3 to illustrate how the panel and Appellate Division system created by the Dispute Settlement Understanding (DSU) has been charged with managing this link between trade and the environment. It will also highlight the severe limitations inherent in the WTO to search out a “legislative” response, by drafting more specific articles, to managing the conflict. The burden of searching for a workable solution to this conflict thus resting squarely on the shoulders of the Dispute Settlement Body (DSB), the next section will analyze how the adjudication of complaints brought to the DSB could result in the determination of rules through a “body of law.” If a “body of law” can be developed, however, its justification must rest on a solid jurisprudential background, and to this end this section will analyze two apparently diverging opinions. Both opinions posit that the precedential effect of prior decisions adopted by the DSB can create this “body of law;” however, Professor Raj Bhala suggests that the current legal reasoning is deficient and requires new terminology if it is to facilitate the development of a “body of law.” On the other hand, Rutsel Silvestre J. Martha, Minister Plenipotentiary, Netherlands Permanent Mission to the European Union, suggests that the current practice in the DSB is based on the general principles of jurisprudence supporting the use of precedent in international disputes before the International Court of Justice (ICJ) and other international tribunals. In other words, the DSB has been given all the tools necessary to construct a “body of law.” A further section examines the use of precedent in formulating a methodology for the application of the Article XX(g) exception. Using this methodology, the adopted reports of the DSB significantly expand the range of national environmental laws that qualify for provisional justification under the Article XX(g) exception. Another section traces this expansion of provisional justification through an analysis of the inaugural decision of the Appellate Division in United States—Standards for Reformulated and Conventional Gasoline (Gasoline) and United States—Import Prohibition of Certain Shrimp and Shrimp Products (Shrimp/Turtle). This evolving interpretation of Article XX(g) has arguably placed the analytical focus on the chapeau to filter out abuses of the exception. The development and use of the chapeau in Shrimp/Turtle reflects not only this emphasis, but also the spirit of the Gasoline report’s interpretation of the language of the chapeau. A final section demonstrates that this development of the chapeau has drawn heavily from the prior decision in Gasoline but has also added vital substance to the skeletal language of the chapeau. WTO Agreement arts. I and III. Joel P. Trachtman, The Domain of WTO Dispute Resolution, 40 HAR. INT’L L.J. 333–77 (1999). 2 3

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This chapter is narrowly focused on the interpretation and application of Article XX(g) by the Appellate Division and the resulting “body of law.” The trade and environment debate, however, also centers on Article XX(b). However, the “body of law” governing Article XX(g) places the analytical focus squarely on the chapeau, which is also applicable to any discussion of the Article XX(b) exception.4

USING A RULES AND STANDARDS MODEL TO ANALYZE ARTICLE XX(g) Under GATT 1947, prior to the establishment of the WTO,5 trade negotiations were the exclusive domain of diplomats using power threats and compromise to hammer out treaties that served to liberalize international trade but offered “victories” that could be trumpeted at home to appease domestic constituencies wary of opening up to international competition. Many countries also recognized that the principles of a liberal trading system, national treatment and most-favored nation status, had the potential to impinge on national sovereignty. Sovereignty can mean a number of different things, but in the trade and environment context, it often refers to a government’s freedom to promulgate whatever laws and regulations it sees fit to protect environmental interests reflecting the country’s unique cultural, economic, and political circumstances. To ease this tension the negotiators promulgated the General Exceptions in Article XX. This tension between sovereignty and liberal trade dates back to the negotiations for arguably the first multilateral trade round, The International Convention for the Abolition of Import and Export Prohibitions and Restrictions in 1927 (1927 International Convention).6 Under this Convention eight permissible categories of national laws were identified; among them was an exception “for the protection of public health or for the protection of animals or plants against disease, insects or harmful parasites.”7 An addendum to the Treaty Protocol added, “the protection of animals and plants against disease also refers to measures

4 There is no logical reason why national laws to protect exhaustible natural resources should be treated differently from national laws to protect human health. Article XX(b) provides an exception subject to the terms of the chapeau for measures “necessary to protect human, animal, or plant life or health.” Arguably the “relating to” standard is different from the “necessary” standard and, based on the following analysis, this difference is quite severe. 5 Agreement Establishing the World Trade Organization, opened for signature Apr. 15, 1994, in Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Marrakesh, Apr. 15, 1994. 33 I.L.M. 1144 (1994). 6 Steve Charnovitz, Exploring The Environmental Exceptions in GATT Article XX, 25 J. WORLD TRADE 37, at 41 (1991). 7 Id. citing 97 L.N.T.S. 405.

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taken to preserve them from degeneration and extinction.”8 This permissible measure was equivalent to the exception for measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption” stated in Article XX(g). The permissible measure negotiated in the 1927 International Convention was subject to the following condition: “that they [measures] are not applied in such a manner as to constitute a means of arbitrary discrimination between foreign countries where the same conditions prevail, or a disguised restriction on international trade.”9 As Steve Charnovitz goes on to point out, even in a treaty negotiation calling for the abolition of import prohibitions, the parties agreed that legitimate action to protect certain interests should be permitted subject to the above condition.10 The parties’ attempt to include this provision illustrates the fundamental nature of the conflict between an effort to liberalize international trade and the retention of sovereignty to promulgate domestic environmental laws and regulations. Furthermore, it is striking to note that after over 70 years of continued negotiation to liberalize international trade, the negotiated language of GATT 1994 did not produce any substantial change in the language of this type of provision. The chapeau of Article XX is quite similar in that it requires that environmental and mental health measures are permitted “subject to the requirement that such measures are not applied in a 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.” Aside from the addition of “unjustifiable discrimination” and the clarification that discrimination can be between “countries where the same conditions prevail,” there is not much difference between the standard outlined in the first multilateral trade round and the last one. In the rules versus standards literature, a law is a “rule” to the extent that it is specified in advance of the conduct to which it is applied.11 For purposes of the following analysis, the chapeau cannot be considered as setting out a “rule” that could have been followed by the WTO members prior to a complaint. The analysis will show that the provision’s practical utility hinges upon clarification of the general terminology. At the other end of the 8 9 10 11

Id at 42. Id. at 42, citing 97 L.N.T.S. 403, 405. Id. Trachtman, supra note 3, at 350.

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spectrum, a law can be considered as enunciating a standard that provides guidance rather than clear direction. Professor Trachtman points out that the “relativity of these definitions is critical” and that “each law is comprised of a combination of rules and standards.”12 Then is there any distinction between “standards” and “general rules?” Probably not; however, describing the text of Article XX(g) and the chapeau as a “standard” rather than a “general rule” is useful in highlighting the limitations of the treatymaking process and the delegation of power to the DSB.

The Rationale Behind the Standard The fact that the language of the chapeau is similar to the language in the 1927 International Convention should not belittle the efforts of trade negotiators. It is evidence of the institutional limitations inherent in attempting to formulate a solution to the conflict at the treaty-making level. It is clear that the words and phrases used in the chapeau are ambiguous, and this “incompleteness of specification” falls short of being considered a rule that can be followed in advance by members. The chapeau more accurately establishes general guidance to “both the [members] governed and the [panel or Appellate Division] charged with applying the law but does not, in advance, specify in detail the conduct required or proscribed.”13 With over 134 governments represented at a multilateral trade round, it is easy to see how the negotiators must resort to general language, especially regarding divisive issues, such as what constitutes a permissible exception to GATT obligations in order to reach an agreement on the applicable standard. It is unlikely that this “legislative” process (as opposed to the adjudicative process governed by the DSU) could muster the consensus to arrive at a more specific provision. Nevertheless, considering the insistence with which the United States is urging the inclusion of environmental standards in the next trade round, perhaps more specificity will be added to Article XX. The negotiators’ reliance on a general standard could also be explained by what Professor Trachtman describes as a “political decision . . . to cloak the hard decisions in the false inevitability of judicial interpretation.”14 By outlining a standard, such as the chapeau, countries that support the permissible promulgation of environmental regulations can claim victory before their domestic constituencies. Meanwhile, developed countries can state that they have included the appropriate safeguards to prevent environmental protectionism.15 In addition, with the establishment of the DSU, member states may be encouraged to rely on the adjudicative system to 12 13 14 15

Id. at 351. Id. Id. Id. at 352.

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specify the rules of permissible behavior in the trade and environment conflict. This “political decision” has thrust the DSB into the spotlight. Considering the failure of negotiators to inject any innovative language into clarifying the “guidance” offered by Article XX, perhaps the power to make such determinations was purposely delegated to the mechanism created for dispute settlement. Trachtman states that “[s]tandards may be used earlier in the development of a field of law, before sufficient experience to form a basis for more complete specification is acquired.”16 He goes on to point out that often when less specific standards are created by the “legislative” Division, this may be an indication that the legislators, or in this case the members, intended to transfer the decision-making power to the adjudicative Division, the DSB.17 Although members would most likely never acknowledge this strategy, it is not unlikely given the difficulty they have experienced in creating a more specific standard. Prior to the establishment of the DSU, dispute settlement under the GATT exhibited a reliance on the negotiating skills of the parties to the dispute. In the beginning, disputes were handled at semi-annual meetings of the contracting parties, and then, if no resolution was reached, to an “intercessional committee” of the contracting parties, and subsequently to ad hoc working parties.18 Around 1955, there was a shift in dispute resolution methodology from what Professor Jackson refers to as primarily a negotiating atmosphere of multilateral diplomacy to a more arbitrational procedure.19 In 1979, the contracting parties adopted the “Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance.” It provided for consultation first, but if that failed then a panel process was initiated to resolve the dispute.20 This process resulted in an often commented upon weakness in the dispute settlement system because panel reports could only be adopted by a consensus, and therefore the losing party could “block” the adoption.21 Throughout this slow march to a more adjudicative or legalistic approach to dispute resolution, the provisions of Article XX went unchanged. Perhaps this reflects the contracting parties’ belief that the process adequately protected their sovereignty concerns. With the establishment of the DSU, however, there was little doubt that sovereignty issues would arise under a panel’s or Appellate Division’s interpretation of Article XX. Yet the language of the exception was not 16

Id. Id. at 335. 18 J. Jackson, supra note 1, at 333, citing R.E. HUDEC, THE GATT LEGAL SYSTEM AND WORLD TRADE DIPLOMACY 66–96 (1975). 19 Id. at 333. 20 Id. at 335. 21 Id. at 335–36. 17

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amended or clarified. Furthermore, given the growing concern about global environmental problems, as illustrated by the 1992 UN Conference on the Environment and Development in Rio de Janeiro (1992), the clash between trade and environmental issues was sure to intensify. It was in this context that the WTO members established the Dispute Settlement Division. Under Article XVI, paragraph 4, the losing party could no longer block consensus. The paragraph states: Within 60 days after the date of circulation of a panel report to the Members, the report shall be adopted at a DSB meeting unless a party to the dispute formally notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the report. If a party has notified its decision to appeal, the report by the panel shall not be considered for adoption by the DSB until after completion of the appeal. This adoption procedure is without prejudice to the right of Members to express their views on a panel report. Before this revolutionary change, governments could rely on the generally non-specific nature of the Article XX exception and the weak dispute settlement process to ensure that domestic regulations, which violated their GATT obligations, were not struck down. In fact, in the first 30 years of the GATT, there were almost no cases involving Article XX(g) so there was little concern.22

From Standards to Rules—Delegation of Authority The reliance on a general standard in Article XX is both a product of the institutional limitation of treaty drafting in a large-scale multilateral setting and the political motivation to pass on the difficult rule-making process to the adjudicative system. Operating in its own self-interest, a government would rather have its constituencies rail against an unfavorable decision of a panel or Appellate Division than against an unfavorable negotiated legislative solution. This is referred to as the “public choice critique of legislatures.”23 In addition, Professor Trachtman posits that the choice of legislator or courts to make particular decisions may also be made using cost-benefit analysis, because legislatures may not be as efficient at specifying ex ante all the details of treatment of particular cases.24 As demonstrated above, the negotiators have been unable to add any degree of specificity to the Article XX(g) exception. But in placing the onus on the DSB, the member states are relying on the multiplying 22 23 24

Charnovitz, supra note 6 at 47. Trachtman, supra note 3, at 354. Id.

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interpretation of a general standard to create a workable rule that can provide the predictability necessary to minimize disputes and secure the legitimacy of the WTO. Although strict adherence to stare decisis is not a necessary pre-condition to the growth of rules out of general standards, some basis must exist to create the body of law that sets up such rules. If panels were expected to interpret Article XX on a de novo basis for each individual dispute, the goals of the WTO would remain unserved. It is apparent that the DSB must take this announced standard and attempt to enunciate a “rule” that promotes ex ante decisionmaking by the members.

THE PRECEDENT EFFECT OF PANEL AND APPELLATE DIVISION DECISIONS The DSB is unlike any previously established international tribunal because it has the consent of over 134 sovereign states to adjudicate trade disputes arising out of the covered agreements of the GATT/WTO. In matters of trade, members have submitted themselves to the exclusive jurisdiction of the DSB. DSU25 Article XXIII states in part: 1. When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of this Understanding. 2. In such cases, Members shall: (a) not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Division report adopted by the DSB or an arbitration award rendered under this Understanding.

25 Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 1994. art. 23, Marrakech Agreement Establishing the World Trade Organization, Annex 2, Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, 33 I.L.M. 1125 (1994) [hereinafter DSU]. 26 Id. DSU art. IV(2) provides: Each Member undertakes to accord sympathetic consideration to and afford adequate opportunity for consultation regarding any representations made by another Member concerning measures affecting the operation of any covered agreement taken within the territory of the former.

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Although a negotiated solution is encouraged under Articles IV26 and V27 of the DSU, any dispute not resolved by consultation must go to through the DSB. Despite the existence of the amending clause in Article X and the right to seek an “authoritative interpretation” in Article IX, legislative options that will be discussed below, a panel or Appellate Division interpretation will provide the corpus of any GATT acquis. However, on what legal basis will these interpretations suffice to establish a functional rule via a body of law?

Adopted Versus Unadopted Reports A decision rendered by the panel or Appellate Division only becomes binding upon the parties to the dispute after adoption by the DSB. Whether or not a report is adopted also determines its precedential value. In United States—Standards for Reformulated and Conventional Gasoline, the Appellate Division’s first case, the decision neglected to cite to two prior unadopted decisions, United States—Restrictions on Imports of Tuna from Mexico28 (Tuna I) and United States—Restrictions on Imports of Tuna 29 (Tuna II). This is significant because both Tuna cases centered on the interpretation of Article XX(g). The Tuna I decision was not adopted by a consensus; Mexico failed to press the issue, since the U.S. Congress was voting on the North American Free Trade Agreement (NAFTA). 30 Likewise, due to political considerations, the Tuna II decision was not adopted. Although the Gasoline Report did not explicitly reject any reference to prior unadopted reports, the glaring absence of any such reference provides some evidence that only adopted reports can be used as precedent. In Japan—Taxes on Alcoholic Beverages,31 the second Appellate Division Report, the Appellate Division acknowledged that prior adopted reports are: an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into

Id. DSU art. V(Q) provides: Good offices, conciliation or mediation may be requested at any time by any party to a dispute. They may begin at any time and be terminated at any time. Once procedures for good offices, conciliation or mediation are terminated, a complaining party may then proceed with a request for the establishment of a panel. 28 Supp. B.I.S.D. 155 (1993). 29 WTO, Report of the Panel, United States—Restrictions on Imports of Tuna, DS29/R (June 16, 1994) [hereinafter Tuna II]. 30 Howard Chang, An Economic Analysis is of Trade Measures to Protect the Global Environment, 83 GEORGETOWN L.J. 2131, at 2133 (1995). 31 WTO, Report of the Appellate Body, Japan—Taxes on Alcoholic Beverages, WT/DS8/AB/R, at 14–15, para. 5.4 (Nov. 1, 1996). 27

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account where they are relevant to any dispute. However, they are not binding, except with respect to resolving the particular dispute between the parties to that dispute. In short, their character and their legal status have not been changed by the coming into force of the WTO agreement. The Report adds credence to what was implicit in the Gasoline Report, that only adopted reports can form an important part of the GATT acquis. The almost automatic adoption of reports translates the legal reasoning or interpretation of the decision immediately into eligible precedent. I use the qualifier “eligible” because, as I will discuss below, adopted reports are usually only referred to when not doing so would fail to “protect the legitimate expectations among WTO Members” or run contrary to the principle that “like cases should be decided alike.” In the context of Article XX(g), there now appears to be a very small body of law developing utilizing three adopted reports, Canada—Measures Affecting Exports of Unprocessed Herring and Salmon,32 United States—Standards for Reformulated and Conventional Gasoline, and United States—Import Prohibition of Certain Shrimp and Shrimp Products.

Establishing the GATT Acquis: Two Perspectives In a trade and environment context, given the general standard outlined in Article XX and the apparent delegation of authority to the panels and Appellate Division in interpreting such a provision, what is the legal reasoning that supports the use of individual adopted reports as the basis for a more specific body of law? It is frequently argued that the principle of stare decisis, the practice of courts to “stand by precedent and not to disturb a settled point,”33 does not exist in public international law, but it is undeniable that ICJ tribunals look to past practice as a basis for determining the instant case, and any examination of the three above mentioned cases reveals that both panels and the Appellate Division also rely on such reasoning to arrive at a decision. Precedent is defined in Black’s Law Dictionary as: An adjudged case or decision of a court, considered as furnishing an example or authority for an identical or similar case afterwards arising or a similar question of law. Courts attempt to decide cases on the basis of principles established in prior cases. Prior cases which are close in facts or legal principles to the case under consideration are called precedents. A rule of law estab-

32 33

Adopted Mar. 22, 1988, B.I.S.D. 35S/98. Black’s Law Dictionary, at 1406.

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lished for the first time by a court for a particular type of case and therefore referred to in deciding similar cases.34 Arguably, something is at work to create a body of law. According to Professor Raj Bhala the non-existence of stare decisis is a myth that needs to be shattered in order to facilitate a more legalistic and hence predictable approach to international trade law under the GATT/WTO.35 In a sense, the article attempts to “shift focus to the distinction between ‘de facto’ and ‘de jure’ stare decisis.”36 Bhala’s article is only the first part of a trilogy. 37 Is there what Bhala calls a “fundamental disconnect between myth [stare decisis does not operate] and reality [de facto stare decisis]”? Professor Bhala argues that the best evidence (but not conclusive) of the rejection of stare decisis in the WTO rests in the text of the DSU and GATT. DSU Article III(2) states that “[r]ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.” This statement, however, can also be interpreted as a check against judicial activism,38 thus reflecting a negotiated preference among WTO members that, although the panels and Appellate Division may be charged with interpreting ambiguities and gaps in the general standards of the treaty text, they have no authority to “set forth norms which carry the organization into totally new territory such as competition policy or labor standards.”39 Moreover, the provision may be read simply to provide that “panel and Appellate Division decisions are interpretive only; they cannot add to or diminish the rights and obligations provided for under the covered agreements.”40 Both of the above-mentioned readings of DSU Article III(2) are consistent with the limitations discussed in the rules and standards approach to the delegation of decision-making authority. Acknowledging that the negotiation process has limitations that encourage the drafting of predominantly general standards, DSU Article III(2) provides a necessary safeguard against judicial activism. The provision also seeks to ensure that the panels and Appellate Division are restricted to offering interId., at 1176. Raj Bhala, The Myth of Stare Decisis, 14 AM. U. INT’L L. REV. 845–956 (1999). 36 Id. at 855. 37 Id. Raj Bhala, The Precedent Setters: De Facto Stare Decisis in WTO Adjudication (Part Two of a Trilogy), 9 FLA. ST. U. J. TRANSNAT’L L. & POL’Y I (forthcoming Dec. 1999) and Raj Bhala, The Power of the Past: Toward De Jure Stare Decisis in WTO Adjudication (Part Three of a Trilogy), GEO. WASH. J. INT’L L. & ECON. (forthcoming 2000–01). 38 Bhala, supra note 35, at 879. 39 Jackson, supra note 1, at 347. 40 Bhala, supra note 35, at 879, citing Jeffrey S. Thomas & Michael A. Meyer, NEW RULES OF GLOBAL TRADE 311, 323 (1997). 34 35

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pretations of the standard in the chapeau of Article XX, a call for “judicial restraint.” These two ways of reading DSU Article III(2) serve to accomplish the same thing, since they protect the WTO members who have delegated considerable decision-making authority to the panels and Appellate Division from broad interpretations of the general standards established in provisions such as Article XX. If DSU Article III(2) has such a specific purpose, it would be difficult to interpret it as providing a restriction against the existence of some form of stare decisis. In the remaining paragraphs of DSU Article III the narrow focus is on the dispute at hand, the complaint currently before the panel or Appellate Division. For example, DSU Article III(4) provides that “[r]ecommendations or rulings by the DSB shall be aimed at achieving a satisfactory settlement of the matter in accordance with the rights and obligations under this Understanding and under the covered agreements.” This provision clarifies the decisionmaking authority delegated to the DSB, the primary purpose of which is to settle or resolve the dispute at hand. In fact, all the provisions of DSU Article III must be read within the context of the purpose of the article outlined in paragraph 2, which states: The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements. This clearly demonstrates that the purpose of such a provision is to rein in the decision-making power delegated to the DSB. Most importantly, the paragraph specifically charges the dispute settlement system with achieving a level of predictability. Bhala argued that DSU Article 3 does not mention “building a Division of international common law on trade,” and “[t]here is not even a hint of possible effects on future parties involved in similar disputes.”41 This statement disregards a plain reading of the text. This issue may not have been thoroughly addressed in the DSU text because the practice of standing international tribunals like the ICJ, although explicitly shunning strict adherence to stare decisis, has been to establish a system of precedent. The Statute of the ICJ, Article 38(d)(1), states that “judicial decisions” are among the “subsidiary” sources of inter-

41

Id. at 880.

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national law that can be considered by a tribunal.42 Combined with Article 59 of the Statute,43 it has produced a “system of precedent under which the Court essentially refers to and considers its prior decisions, but is not legally required to follow them.”44 In addition, it has been observed that though the ICJ has the power to depart from prior legal reasoning, the Court “will not likely exercise that power.”45 Although the WTO may have intended to duplicate this system of precedent, the members did not incorporate analogous language into the DSU. Since the establishment of the DSB was in and of itself a highly contentious issue, any attempt at including such language was unlikely. The negotiators settled on charging the DSB with establishing predictability but offered very little guidance on how to achieve such a result. Rutsel Silvestre J. Martha has proposed that one of the bases on which the ICJ’s use of precedent rests, aside from the statutory language, is of a general jurisprudential nature.46 He argues that since the ICJ is the “lawapplying organ” authorized to interpret international law, “[therefore, its interpretations of international law constitute what Hans Kelsen calls ‘authentic interpretations.’”47 The ICJ’s interpretation of international law is “different from any other interpretation—all other interpretations are not authentic that is, they do not create law.”48 Accordingly, when the ICJ makes a choice between “possibilities shown by cognitive interpretation,” it creates a “new norm”49 that it must follow in subsequent cases based on the “fundamental principle of the administration of justice that like cases should be decided alike.”50 Hans Kelsen’s description of the general jurisprudential basis of ICJ practice can be used to describe the precedential effect of prior adopted reports in the WTO. This viewpoint seems to raise two problems when applied by the panels and the Appellate Division. The first apparent deficiency, addressed by R.S.J. Martha, is that the above theory “presume[s] that the law-applying organs concerned are not ad hoc entities but rather

David Palmeter & Petros C. Mavroidis, The WTO Legal System: Sources of Law, 92 AM. J. INT’L L. 398, at 400 (July 1998). 43 States that the decisions of the ICJ have no binding force except between the parties and in respect of a particular case. 44 Palmeter & Mavroidis, supra note 42, at 400. 45 Id. citing M OHAMED S HAHABUDDEN, P RECEDENT IN THE W ORLD C OURT 3 (1996). 46 Silvestre J. Martha, Precedent in World Trade Law, 44 NETHERLANDS INT’L L. REV. 346, at 359 (1997). 47 Id. 48 Id. 49 Id. citing HANS KELSEN, PURE THEORY OF LAW 354 (M. Knight trans., 1978). 50 Id. citing L.N. BROWN & F.G. JACOBS, THE COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES 311 (3d ed. 1989). 42

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standing bodies with fixed mandates.”51 Although the Appellate Division satisfies this requirement, panels may be considered ad hoc arbitral tribunals not capable of rendering “authentic interpretation.”52 This deficiency should not inhibit the application of Kelsen’s analysis to the WTO context because panels are a part of the DSB, specifically charged with interpreting the provisions of the GATT/WTO under the mandate provided by the DSU. In other words, as R.S.J. Martha argues, they operate within the framework of the permanent institutional structure of the WTO.” 53 That panel members are not a fixed group should not deter from imposing Kelsen’s analysis onto the GATT/WTO dispute settlement system. The second apparent deficiency that needs to be addressed is Kelsen’s statement that “law-applying organs,” whenever rendering an “authentic interpretation,” create law. This may be inconsistent with the mandate given to the DSB discussed earlier. The panel and Appellate Division reports serve only to specify “rules” by interpreting general standards rather than creating law. In a very strict sense, the DSB’s ability to “create law” is severely limited by the provisions of DSU Article III. A discussion concerning the law-making tendencies of judges is beyond the scope of this article. However, in a dispute between WTO members, only the DSB is authorized to render an authentic interpretation.54 Given the aversion towards “judge-made law,” especially in the international law context, whether public international law or trade law, it is highly unlikely that Kelsen’s use of the phrase “create law” should be read in such a strict manner as to prevent the use of his analysis in describing the use of precedent in the DSB. By using Kelsen’s theory of authentic interpretation in conjunction with the fundamental principle of administrative justice that “like cases should be decided alike,” one can explain the current practice of referring to prior reports for support. Furthermore, the Appellate Division has also recognized this fundamental principle in Japan—Taxes on Alcoholic Beverages in stating that prior adopted reports “create legitimate expectations among WTO Members, and, therefore should be taken into account where they are relevant to any dispute.” This awareness of the legitimate expectations of the WTO members is entirely consistent with the “predictability” goal stated in DSU Article III(2). In fact, it is this “predictability” goal that gives the sole guidance in the text to the current practice of adhering to prior adopted reports when relevant, a practice equivalent to what Bhala calls “de facto stare decisis.” The WTO members did not see fit 51 52 53 54

Id. at 359. Id. at 360. Id. DSU supra note 25, art. XXIII(2)(a).

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to elaborate any further on the issue of precedent because the practice of adhering to relevant decisions was already well established.

Authorative Interpretation Professor Bhala cites WTO Article IX(2) as further evidence that any form of stare decisis is explicitly prohibited by the text of the GATT/WTO. He states the provision “makes it plain that the Ministerial Conference and General Council are the exclusive organs for rendering a definitive interpretation.”55 It provides that: The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a threefourths majority of the Members. In addition, the Appellate Division in Japan—Taxes on Alcoholic Beverages states that the consequence of such a provision “is reason enough to conclude that such authority does not exist by implication or by inadvertence elsewhere.”56 Does this suggest that the non-existence of some form of stare decisis is, as Bhala states, “ostensible black letter international trade law?” 57 Arguably, the Appellate Division was discussing the distinction between adopted and unadopted reports, and therefore it was rejecting the view that adoption by the WTO members of a report constitutes a definitive interpretation of the relevant provision; that ability clearly rests with the WTO members acting pursuant to WTO Article IX(2). 58 The fact that jurisdiction to render an “authorative interpretation” rests with the WTO members should not preclude panels and the Appellate Division from acting under the mandate properly delegated to them by the GATT/WTO and the DSU. This mandate, as stated above, is to clarify the provisions of the covered agreements and establish predictability by protecting the legitimate expectations of the WTO members. These legitimate expectations arise from the “authentic interpretations” rendered, and the principle that like cases should be decided alike.

55 56 57 58

Bhala, supra note 35, at 882–83. Japan—Taxes on Alcoholic Beverages, supra note 31, at 14, para. 5.4. Bhala, supra note 35, at 885. Martha, supra note 46, at 362–63.

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Under DSU Article XXIII, disputes between WTO members must go exclusively through the dispute settlement process, and therefore the right to render “authorative interpretations” is an exceptional measure akin to a legislative act.59 The difficulties outlined earlier in this chapter concerning the negotiation of treaty language will still be present if a three-fourths majority of the members is required to agree on the language of the interpretation. Furthermore, it is unclear from the text if this “authorative interpretation” can be used to appeal an Appellate Division decision60 or if a WTO member has the right to seek such an interpretation despite the non-existence of an active dispute. In short, DSU Article IX(2) provides a distinct and exceptional procedure for interpreting the covered agreements, while the primary method of interpretation and clarification rests with the DSB. DSU Article IX(2) does not prohibit the panels and Appellate Division from performing delegated duties, it only serves to provide an additional, and somewhat more definitive, interpretation because it is rendered by the WTO members.

In Defense of the Status Quo Current practice need not rely on the problematical and clumsy “distinction” between “binding” and “non-binding” precedent. Nowhere in the above discussion was it necessary to use such terminology in order to explain current practice. Bhala states that this distinction between “binding and non-binding precedent” represents the language of the myth.61 However, as has been discussed above, there is no myth because the text provides no explicit prohibition against the fundamental principle that “like cases should be decided alike.” In fact, the dispute settlement system is charged with “predictability” by the text, and the system is designed to protect the “legitimate expectations of the WTO Members.”62 In the end, is there any significant difference between current practice and formal stare decisis? Under current practice, a report cannot lightly disregard prior decisions lest the DSB derogate from its responsibility to establish predictability. A panel or Appellate Division decision may justify its failure to adhere to a prior decision by distinguishing the facts of the case at hand from the prior case, a practice often used in common law jurisdictions to avoid strict adherence to stare decisis.

Id. at 362. DSU supra note 25, art. III(9) states: “The provisions of this Understanding are without prejudice to the rights of Members to seek authoritative interpretation of provisions of a covered agreement through decision-making under the WTO Agreement or a covered agreement which is a Plurilateral Trade Agreement.” 61 Bhala, supra note 35, at 923. 62 DSU supra note 25, art. III(2). 59 60

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It appears as though Bhala’s attempt to redefine the current practice as more akin to “de facto stare decisis” is intended to move the dispute settlement system towards a “de jure stare decisis” regime, “where earlier decisions are officially recognized as a source of law for future disputes, hence the development of a common law from the decisions.”63 To assume that it is only through a doctrine of de jure stare decisis that the dispute settlement system can establish predictability is to discount the influence of civil law traditions in achieving the same goal. This is not to overstate the difference between civil law and common law systems, a fact referred to by Bhala, but merely to state that the WTO system can establish predictability without reliance on strict stare decisis. Furthermore, since there is no express prohibition against the use of prior decisions when relevant in the WTO context, current practice is not contrary to the theory. Civil law traditions that expressly prohibit any form of precedent despite evidence to the contrary are problematic and, as Bhala argues, probably not sufficient to explain the source of current WTO practice. The fundamental principles outlined by R.S. J. Martha, however, explain current practice in a manner consistent with the language of the DSU. There may also be a political rationale that precludes a formal adoption of de jure stare decisis. The provisions of the DSU create an entirely new adjudicative regime with similarities and differences to traditional courts of law. The DSB functions in an atmosphere that makes no attempt to mask its preference for negotiated settlements; after all, the participants in this system are sovereign states. Considering the varied legal histories of the WTO members, perhaps the participants are more comfortable with a predictable dispute settlement system predicated on a fundamental principle of law, characteristic of the ICJ and other international tribunals. A strictly common law approach utilizing de jure stare decisis may also indicate an Americanization of the dispute settlement system, an idea that may be particularly loathsome to some members. There is no doubt that the practice of the panels and Appellate Division can use some refinement. Perhaps decisions can be drafted in a more legalistic manner over time. It is important to stress that this is a relatively new process that must be given time to develop. Under the current regime, reports already recognize the precedential effect of an authentic interpretation and work towards building an international common law of trade. For example, in United States—Standards for Reformulated and Conventional Gasoline (Gasoline) the Appellate Division recognized that its interpretation of the language “relating to” in Article XX(g) had precedential effect when it noted “that the phrase ‘primarily aimed at’ is not itself treaty language and was not designed as a simple litmus test for inclusion or exclusion from Article XX(g).”64 Thus, by recognizing the appli63 64

Bhala, supra note 35, at 937. WTO, Report of the Appellate Body, United States—Standards for

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cability to subsequent cases and limiting such applicability, the Appellate Division explicitly acknowledged that its interpretation is setting precedent. A further examination of the Gasoline and Shrimp/Turtle decisions will demonstrate that precedent has been set regarding the interpretation and application of Article XX(g).

PRECEDENT: THE APPROACH TO ARTICLE XX(g) INTERPRETATION The Gasoline case was the first Appellate Division report to interpret and apply the exception created in Article XX(g). The complaint initiated by Venezuela and Brazil alleged that the regulation in dispute, enacted under the U.S. Clean Air Act of 1990 (CAA), violated the most-favored nation (MFN) obligation of GATT Article I and the national treatment obligation of GATT Article III. A comprehensive summary of the case is not required for purposes of this article; the following brief summary should suffice. The Environmental Protection Agency (EPA) was charged with administering the gasoline program established by the CAA. Two categories of gasoline were to be regulated, conventional and reformulated (gasoline sold in major pollution centers). The basis of the regulation was to establish baseline establishment rules based on 1990 standards to prevent the “dumping” of pollutants from reformulated gasoline into conventional gasoline, a non-degradation goal. The regulation provided three methods of determining baseline standards. Domestic refiners who were in operation for at least six months in 1990 must use the quality data and volume records of its 1990 gasoline, or, if that data was not available, two other baselines based on individual refiner data could be used. Domestic blenders and importers could use the first method, but if the data was unavailable, then they had to use the statutory baseline established by the EPA. The panel ruled that imported and domestic gasoline were “like products” for the purposes of GATT Article III(4). Imported gasoline was treated less favorably, and therefore the Gasoline Rule violated GATT’s national treatment obligation. The Panel also held that the rule was not “relating to the conservation of an exhaustible natural resource” in the context of GATT Article XX(g).

Establishing the Methodology Although the methodology for the application of GATT Article XX(g) was not outlined until Part IV of the Gasoline Appellate Division Report,

Reformulated and Conventional Gasoline, WT/DS2/AB/R, 1–19, at 12 (Apr. 29, 1996) [hereinafter Gasoline].

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it establishes a fundamental precedent that precipitates the Appellate Division’s interpretation of the constitute elements of the provision. The Appellate Division stated: In order that the justifying protection of Article XX may be extended to [the baseline establishment rules], the measure at issue must not only come under one or another of the particular exceptions paragraphs (a) to (j)-listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX. The analysis is, in other words, two-tiered: first, provisional justification by reason of characterization of the measure under XX(g); second, further appraisal of the same measure under the introductory clauses of Article XX. The Appellate Division explicitly stated how the Article XX(g) exception should be applied in future disputes, thus creating a legitimate expectation by the WTO members through an authentic interpretation. In similar disputes, there is no alternative approach. It was not long before a similar case involving Article XX(g) was brought before an Appellate Division, and the previous panel’s failure to follow this established methodology was properly corrected by the Appellate Division. In United States— Import Prohibitions of Certain Shrimp and Shrimp Products (Shrimp/Turtle), Section 609 was alleged to violate GATT Article XI(l) by India, Malaysia, Pakistan, and Thailand. Under Section 609(b)(1) an import ban on shrimp harvested with commercial fishing technology, which may adversely affect sea turtles, was to become affective no later than May 1, 1991. Section 609(b)(2) added that only non-certified harvesting nations would be subject to the import prohibition. According to its 1996 Guidelines, the Department of State established the following criteria for certification: (1) any harvesting nation without any of the relevant species of sea turtle occurring in waters subject to its jurisdiction; (2) any nation that harvests shrimp exclusively by artisanal means; (3) any nation whose commercial shrimp trawling operations occur exclusively in waters in which sea turtles do not occur. 65 Under Section 609(b)(2)(A) and (B) harvesting nations could also be certified upon the presentation of documentary evidence of the adoption of a regulatory program comparable to that established by the United States and where the average rate of incidental taking of sea turtles is comparable to that of United States vessels.66 In the 1996 Guideline the Department of State clarified the rules 65 WTO, Report of the Appellate Body, United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R., 1–43, at para. 4 (Oct. 12, 1998) [hereinafter Shrimp/Turtle]. 66 Id.

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stating that certification would occur only if the regulatory program required the use of turtle excluder devices (TEDs) comparable to U.S. TEDs and “a credible enforcement effort that includes monitoring for compliance and appropriate sanctions.”67 The Shrimp/Turtle panel ruled that the regime violated GATT XI(l) and did not qualify for an exception under Article XX(g). Upon appeal to the Appellate Division, the initial substantive issue addressed was the panel’s failure to follow the appropriate method for applying GATT Article XX(g) and subsequent flaws in the panel’s analysis. The Appellate Division cites the appropriate method established by the Gasoline decision after chastising the panel for applying the chapeau first. The Shrimp/Turtle panel had explicitly acknowledged the existence of the precedent, but found it “equally appropriate to analyse [sic] first the introductory provision of Article XX.”68 The Appellate Division found this reasoning unconvincing. The proper methodology is not only convenient and logical, but, as the Appellate Division points out, it forms the foundation on which to begin a proper application of GATT Article XX(g). The Appellate Division reinforced the importance of the methodology when it stated: The task of interpreting the chapeau so as to prevent the abuse or misuse of the specific exemptions provided . . . is rendered very difficult, if indeed it remains possible at all, where the interpreter (like the panel in this case) has not first identified and examined the specific exception threatened with abuse. The Appellate Division then went on to reverse the panel’s interpretation and application of the chapeau based on the precedent established by the Gasoline Appellate Division Report.

The Vienna Convention on the Laws of Treaties Perhaps the most important precedent, in terms of ramifications for not only GATT XX(g) cases but also all disputes brought before the DSB, established by the Gasoline Appellate Division Report is its “authentic interpretation” of the language “customary rules of interpretation of public international law” in DSU Article III(2). The Gasoline Appellate Division noted that the panel overlooked a fundamental rule of treaty interpretation provided in the Vienna Convention on the Law of Treaties (Vienna Convention) Article 31(1), which states:

67 68

Id. Id. at para. 119.

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A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. The Appellate Division held that this rule of interpretation, now a rule of customary or general international law, forms a part of the “customary rules of interpretation of public international law” that the panel should have applied. By incorporating the Vienna Convention into the DSU, the Gasoline Appellate Division set up an interpretive tool that future adjudicators should use in analyzing and applying the often ambiguous standards of the treaty text. The Shrimp/Turtle Appellate Division clarified how it expects panels to follow this interpretation exercise: A treaty interpreter must begin with, and focus upon, the text of the particular provision to be interpreted. It is in the words constituting that provision, read in their context, that the object and purpose of the states parties to the treaty must first be sought. Where the meaning imparted by the text itself is equivocal or inconclusive, or where confirmation of the correctness of the reading of the text is desired, light from the object and purpose of the treaty as a whole may be usefully sought.69 In other words, the context considered for purposes of interpretation is focused on the immediate provision and only if this analysis fails to clarify the text should the overall purpose of GATT be considered. The Shrimp/Turtle panel’s analysis failed to examine how the “application” of Section 609 constitutes “a means of arbitrary or unjustifiable discrimination . . . or disguised restriction on international trade” and focused on the “design of the measure itself” contrary to the ordinary plain meaning of the chapeau. Having failed to attribute the proper ordinary meaning to the chapeau, the panel proceeded to look at the object and purpose of the “whole of the GATT 1994 and the WTO Agreement” rather than the object and purpose of the chapeau. The panel’s erroneous use of Vienna Convention Article 31(1) precipitated the flawed analysis, and consequently the Shrimp/Turtle Appellate Division set up a rule for its own application that will most likely be followed by future WTO adjudicators. Is the Vienna Convention Article 31(1) the only technique available to the panel or Appellate Division? Would it be acceptable to look at other factors to determine the proper meaning to be given to a word or phrase? Arguably, this is exactly what the Shrimp/Turtle Appellate Division did when it looked to other international treaties in its interpretation of “unjustifi69 Id. at para. 114, citing L. SINCLAIR, THE VIENNA CONVENTION ON THE LAW OF TREATIES 130–31 (2d ed. 1984).

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able discrimination.” In clarifying its interpretation of “unjustifiable discrimination,” the Appellate Division found support in a number of treaties advocating multilateral cooperation to solve transboundary environmental issues. This will be discussed in more detail in a further section. With a methodology firmly established and the interpretative guidance of Vienna Convention Article 31(1), the two Appellate Division decisions set up the framework for the proper application of the GATT Article XX(g) exception.

PRECEDENT: EXPANDING PROVISIONAL JUSTIFICATION Provisional justification under Article XX(g) qualifies only such measures “relating to the conservation of an exhaustible natural resource if such measures are made in conjunction with restrictions on domestic production or consumption.” The Gasoline Appellate Division initiated the authentic interpretation of provisional justification, but by no means did they engage in an exhaustive analysis. The Appellate Division reasoned that “following the practice of earlier panels in applying Article XX to provisions found to be inconsistent with Article III(4), the measures to be analyzed under Article XX are the same provisions infringing Article III(4).”70 The Appellate Division wanted to make sure that only the measures a WTO member sought justification for under Article XX(g) were analyzed. Some earlier panels “had interpreted ‘measures’ more broadly to include provisions not found inconsistent with Article (4).” The Appellate Division did not cite to any specific examples. Although the point made by the Appellate Division is not controversial, perhaps there was a political damage control aspect to the rationale. The United States complained about the Gasoline panel’s use of the phrases “the difference in treatment,” “the less favourable treatment” or “the discrimination” to describe the baseline measures in dispute. The Appellate Division commented that the use of the “[panel’s] legal conclusion in respect of Article III(4) . . . did not serve the cause of clarity in analysis when it came to evaluating the same baseline establishment rules under Article XX(g).” The Appellate Division recognized that due to the sensitivity of the trade and environment conflict these disputes would be closely monitored for objectivity and any pro-trade bias could erode the legitimacy of the process.

Exhaustible Natural Resources In recognizing that clean air was an exhaustible natural resource, the Gasoline Appellate Division seemed to be legitimizing the protection of natural resources within the global commons. The jurisdictional argu70

Gasoline, supra note 64, at 9.

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ment previously raised in Tuna I and Tuna II—that a member only has the right to regulate natural resources within its territory—was not raised, perhaps because the previous Tuna Reports indicated there was “no valid reason supporting the conclusion that the provisions of Article XX(g) apply only to policies related to the conservation of exhaustible natural resources located within the territory of the contracting party invoking the provision.”71 Whether Article XX(g) contains an implied jurisdiction limitation does not seem relevant to “clean air,” but the Shrimp/Turtle report made it clear that the issue is not resolved. 72 A set of facts may arise where a member seeks to protect a natural resource, living or nonliving, which only exists outside of its territory. The adjudicator must then determine if a “sufficient nexus” exists between the exhaustible natural resource and the member state invoking the exception.73 This “nexus” test will have to be determined on a case-by-case basis. The Shrimp/Turtle Appellate Division, however, demonstrated a tendency to look at international environmental treaties to help define what is an “exhaustible natural resource,” and this may impact the “nexus” test. In the Tuna I and II Reports the panel determined that reference to outside international environmental treaties was not relevant to defining whether or not the subject of the conservation measure—dolphins— should be included as an “exhaustible natural resource.” The Tuna panels held that under the Vienna Convention “any subsequent agreement between the parties regarding the interpretation of the treaty [GATT] or the application of its provisions” could be relevant to the interpretation of a treaty [GATT]. 74 The Gasoline Appellate Division agreed with the Gasoline panel’s holding that the cited treaties did not involve all the parties to the GATT and did not specifically address the interpretation or application of the GATT; therefore, they were irrelevant.75 Nevertheless, a more expansive definition of “exhaustible natural resource” is emerging following the Shrimp/Turtle Appellate Division statement that the term “must be read by a treaty interpreter in the light of contemporary concerns of the community of nations about the protection and conservation of the environment.” 76 The Appellate Division then relied on the preamble of the WTO Agreement, the 1982 UN Convention on the Law of the Sea, and the Convention on Biological Diversity, to support its conclusion that “natural resources” includes both living and non-living resources.77 The Appellate Division chose not to follow the reasoning in 71 72 73 74 75 76 77

Tuna II, supra note 29, para. 5.20. Shrimp/Turtle, supra note 65, para. 133. Id. Tuna II, supra note 29, para. 5.19. Id. Shrimp/Turtle, supra note 65, para. 129. Id. at paras. 129–131.

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the unadopted Tuna I and II decisions or the reasoning in the Gasoline decision. The Appellate Body thus seems amenable to using outside international treaties to assist in determining what “exhaustible natural resources” a WTO member may seek to protect. Perhaps outside treaties could also be referred to when conducting the “nexus” test. For example, if a WTO member is a signatory to a number of international treaties providing for the conservation of a particular natural resource, this may serve to demonstrate the value such member attaches to the natural resource thereby countering any argument that there is an insufficient “nexus.” The interpretation of this element of Article XX(g) has evolved from the restrictive reading forwarded in Tuna I and II to an expansive definition, supported by outside international environmental treaties and a sensitivity to the dynamic nature of the term. Consequently, given this substantial deference to national definitions of “exhaustible natural resource,” it is unlikely that a complaining party will succeed in convincing a WTO adjudicative body to deny provisional justification at this stage of the analysis.

The End of the Effects Test The Gasoline Appellate Division interpreted this clause to require “that the measures concerned impose restrictions, not just in respect of imported gasoline but also with respect to domestic gasoline.” The Appellate Division held that there must be “even-handedness.”78 This does not mean identical treatment. Furthermore, the Appellate Division dismissed the “empirical effects test” argument on two grounds: the difficulty in determining causation, and the long time period before conservation effects can be measured or proven to be “effective” in an empirical sense. In discussing the “even-handedness” requirement, the Appellate Division reasoned that a lack of corresponding domestic restrictions, in conjunction with only import restrictions, would not be accepted as “primarily or even substantially designed for implementing conservationist goals.”79 In effect, this “evenhandedness” requirement does not pose a significant hurdle to provisional justification unless the conservation law is not applied to domestic production of consumption. That a measure be “even-handed” is not a difficult test. The Shrimp/Turtle Appellate Division succinctly found that Section 609, combined with the U.S. Endangered Species Act, set up a regime that met the clause’s standard, and therefore Section 609 in “principle” was an “even-handed” measure. In elaborating on the effects test, the Gasoline Appellate Division also reasoned that only if there is no “positive effect on conservation goals” 78 79

Gasoline, supra note 64, at 11. Id. at 14.

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could this provision prevent provisional justification. Only in extreme circumstances would a conservation law fail this interpretation of the “evenhandedness” and “effects” test; therefore, the primary burden for provisional justification rests on the “relationship between the measure at stake and the legitimate policy of conserving exhaustible natural resources.”80

The “Relating to” Requirement To filter out the “proper” interpretation of “relating to” in Article XX(g) the Gasoline Appellate Division used the interpretive tools of the Vienna Convention. The Gasoline panel had inappropriately substituted a “necessary” test to determine if the baseline rules qualified for provisional justification.81 The panel had referred to a prior adopted report, Canada— Measures Affecting Exports of Unprocessed Herring and Salmon (Herring/Salmon)—and followed its reasoning that a measure must be “primarily aimed at the conservation of an exhaustible natural resource to be considered as ‘relating to’ conservation within the meaning of Article XX.” 82 Reference to a prior adopted report, however, does not ensure proper application of the reasoning to the case at hand. The panel awkwardly stated that the “less favorable baseline establishments methods” were only “primarily aimed at” conservation if there was no GATT consistent measures available to “attain the desired level of conservation.”83 This logic completely disregards the ordinary meaning of the term “relating to” and implies that a measure must be “necessary” to qualify for Article XX(g). Having established that “relating to” requires a different interpretation than that attributed to it by the panel, the Gasoline Appellate Division went on to interpret the phrase in light of the object and purpose of the exception. Given that both parties had accepted the propriety of the Herring Salmon “primarily-aimed-at” interpretation, the Appellate Division expressed some concern at substituting non-treaty language into the provision and proceeded to give some depth and grounding to the language.84 The Appellate Division emphasized the purpose of Article XX(g)—”to ensure that the commitments under the General Agreement do not hinder the pursuit of policies aimed at the conservation of a natural resource”—but also cautioned that the object and purpose can only be determined on a case-by-case basis.85 The Appellate Division also wisely 80 81 82 83 84 85

Id., at 11. Id., at 11. Id. Id. Id., at 12. Id.

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stated that the words used by the WTO members to express the intent and purpose of the measure should not be disregarded. The Appellate Division then ruled that the baseline establishment rules were “substantially related” to the conservation goals put forth by the United States. The Appellate Division reasoned that, if the relationship was substantial, then by definition it cannot be “regarded as merely incidentally or inadvertently aimed at conservation.” 86 Does this mean that in effect a measure will fail provisional justification only if conservation is an inadvertent or incidental goal? This interpretation would significantly expand the range of conservation laws for provisional justification. The Shrimp/Turtle Appellate Division closely followed the reasoning in Gasoline. The Shrimp/Turtle Appellate Division found that since there was a substantial relationship between the means (Section 609) and the ends (conservation of sea turtles), the measure was primarily aimed at the conservation of sea turtles. If we were to draw conclusions from these two Appellate Division decisions, it would appear that the interpretations have expanded or liberalized the meaning of “relating to.” Considerable deference is being given to WTO members in how they design conservation laws and regulations. Granted there have only been two Appellate Division decisions authentically interpreting GATT Article XX(g), but the decisions reveal a strong deference to how WTO members design their laws and regulations to meet their own conservation goals. What constitutes an exhaustible natural resource has been broadly defined, “made effective” has been watered down to a requirement of “even-handedness,” and the GATT inconsistent measure need only have a substantial relationship to a conservation goal. A growing body of law is developing, transforming the ambiguous standard of GATT Article XX(g) into a rule that creates “legitimate expectations.” Members can now expect a broad range of conservation laws to qualify for provisional justification.

PRECEDENT: THE CHAPEAU ASSUMES CENTER STAGE United States—Standards for Reformulated and Conventional Gasoline Having expanded the availability of provisional justification for conservation measures in violation of GATT obligations, the Gasoline Appellate Division attempted to clarify the chapeau. Highlighting the difference between provisional justification and the application of the chapeau, the Appellate Division stated, “[t]he chapeau by its express terms addresses, not so much the questioned measure or its specific contents as such [provisional justification], but rather the manner in which that measure is 86

Id. at 18.

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applied.” Moreover, the Appellate Division concluded that the chapeau, its purpose “generally the prevention of abuse of the exceptions of Article XX,” puts forth a standard different from that in Article III(4). In short, a mere showing of discriminatory impact by the complaining member does not qualify the measure as “unjustifiable discrimination.” In its first attempt at interpreting the chapeau, the Appellate Division does not establish the clearest of interpretations, but rather sheds light on what the standard is not. In very general terms, however, the Appellate Division established a principle of cooperation that is fundamental to the application of the chapeau’s “unjustifiable” standard. In keeping with its delegated responsibility to clarify the standard, again the Appellate Division turns to the Vienna Convention for interpretive guidance. Faced with this ambiguous standard, however, the Appellate Division failed to follow the methodology it used in interpreting provisional justification under Article XX(g). It did not look to the ordinary meaning of the elements of the chapeau. In contradiction with its previous reasoning that “relating to” warrants a different meaning then the other introductory terms in paragraphs (a) through (j) of Article XX (e.g., “necessary,” “essential,” and “for the protection of”), the Appellate Division failed to establish clear interpretations of the chapeau’s three standards.87 The chapeau states: Subject to the requirement that such measures are not applied in a 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. The Appellate Division appeared to ignore the ordinary meaning of the constituent elements of the chapeau and instead synthesized them under the fundamental theme “found in the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules available in Article XX.”88 The Appellate Division did not separately analyze what constitutes a “disguised restriction” and in the end appeared to hold that if a measure is “unjustifiable discrimination” then it may also be a “disguised restriction on international trade.89 While the Appellate Division’s statement that the terms of the chapeau impart meaning to each other is accurate on one level, it should not prevent the clarification of each of the three elements. 87 88 89

Id. at 11. Id., at 16. Id. at 19.

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The Appellate Division considered a measure “unjustifiable” if the United States could not justify its failure to pursue GATT consistent measures to achieve the same conservation goal, for example, making individual baselines available to foreign refiners as well as domestic refiners. 90 The Appellate Division noted two justifications put forth by the United States to explain why imported gasoline was relegated to the more exacting statutory baseline requirement: (1) difficulties in verification and enforcement of individual baselines for imported gasoline, and (2) the burden on domestic refiners of statutory baselines. These arguments were dismissed by the Appellate Division because a cooperative arrangement between the United States and the complainants, it determined, could have been pursued in order to negate/mitigate these concerns. The Appellate Division emphasized this fact when it noted that cooperative arrangements were common U.S. practice in the fields of antitrust and tax.91 In essence, the Appellate Division reasoned that discriminatory conservation measures were only the result of a failure to pursue GATT consistent measures, and justification for the failure arises out of an inability to establish a cooperative arrangement. Although the Appellate Division failed to clearly interpret the two remaining standards, it held that cooperation, a fundamental principle of GATT, clearly animates an interpretation of the chapeau’s “unjustifiable” standard. The decision created a relationship between the concept of cooperation and the “unjustifiable” standard. This animation, however, was only the initial step towards clarification of the chapeau. It is doubtful that this decision created legitimate expectations among the WTO members. Since this was the first dispute brought under the DSU, obviously the Appellate Division exercised considerable judicial restraint and cautiously addressed just the facts of this particular case, focusing on the dispute at hand.

United States—Restrictions on Imports of Shrimp and Shrimp Products Realizing that the expansion of provisional justification in the Gasoline decision placed the balance of the analysis on the chapeau, it is no surprise the Shrimp/Turtle Appellate Division went to great lengths to clarify the chapeau. At the panel hearing, the United States put forth an interpretation that would have eviscerated the chapeau, arguing that the measure’s conservation goals could also serve as justification in regards to the chapeau. The Appellate Division correctly pointed out that if this were true it would “disregard the standards established by the chapeau.”92 Strict 90 91 92

Id. Id. at 18, n.52. Shrimp/Turtle, supra note 65, at para. 149.

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adherence to the rules of treaty interpretation would have to be followed this time to establish some degree of specificity. After discounting the offered interpretation, the Appellate Division set out to interpret the ordinary meaning of the provision, something it neglected to do in the Gasoline case. The Appellate Division clearly established that the chapeau contained three distinct standards: (1) arbitrary discrimination between countries where the same conditions prevail; (2) unjustifiable discrimination between countries where the same conditions prevail; and (3) a disguised restriction on international trade.93 Before applying each standard to the facts, the Appellate Division looked to the object and purpose of Article XX, utilizing the preamble94 and the Decision on Trade and the Environment, which established the permanent Committee on Trade, and the Environment (CTE). The Appellate Division referred to such sources to give “colour, texture and shading to the rights and obligations of Members under the WTO Agreement, generally, and under the GATT 1994, in particular.”95 It used this not only to trumpet the new environmental sensitivity of the WTO, but also to clarify the purpose of the chapeau, to strike a balance between “the right of a Member to invoke an exception under Article XX and the duty of that Member to respect the treaty rights of the other Members.”96 This coloring of the chapeau enhances the interpretation put forth in the Gasoline case, “generally the prevention of abuse of the exceptions of Article XX,” by stressing that the chapeau judges the behavior of the Member seeking the exception.

Unjustifiable Discrimination The conservation law in the Shrimp/Turtle decision involved an import prohibition, which, the Appellate Division notes, is “ordinarily, the heaviest ‘weapon’ in a Member’s armoury of trade measures.”97 Meanwhile, the Gasoline decision involved a regulation that established different requirements for imported gasoline, a somewhat lighter weapon. While the principle of cooperation behind the “unjustifiable” standard applied, Id. at para. 150. The preamble to the GATT 1947 sought the objective of “full use of the resources of the world.” The Members amended this purpose and the preamble to the WTO Agreement reads: while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development[.] 95 Shrimp/Turtle, supra note 65, at para. 155. 96 Id. at para. 156. 97 Id. at para. 171. 93 94

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the sufficient level of cooperation to meet the standard, it was suggested, may be more exacting for an import restriction measure. This reasoning, in effect, created a sliding-scale analysis dependent on the measure’s discriminatory effect on international trade. The purpose of the “unjustifiable” requirement is rooted in the spirit of multilateral cooperation on which the GATT/WTO rests. In striking that balance between a member’s “right” and “duty,” a member should seek “across-the-board negotiations with the objective of concluding bilateral or multilateral agreements for the protection and conservation of sea turtles.”98 The Appellate Division held that the member’s “right” is not “illusory,” but the negotiating history confirms that it is “limited and conditional.”99 If a member seeks an exception for an import restriction, that member is only justified after attempting “prior consistent recourse to diplomacy.” In holding that the United States failed to meet its burden of cooperation, the Appellate Division cited three relevant factors. First, Section 609(a) directs the Secretary of State to: Initiate negotiations as soon as possible for the development of bilateral and multilateral agreements with other nations for the protection and conservation of such species of sea turtles. Second, various international environmental agreements to which the United States is a signatory encourage multilateral solutions based on international cooperation rather than unilateral action. These two factors establish that the United States is aware of the need for cooperation to attain such transboundary conservation goals, consequently providing support for the Appellate Division’s reasoning. Third, the Appellate Division noted that although the United States did conclude the Inter-American Convention on a regional level, “[C]learly, the United States negotiated seriously with some, but not with other Members (including the appellees), that export shrimp to the United States.” The level of cooperation sufficient to provide justification for an import prohibition is clearly more stringent than what had been previously established by the Gasoline decision. A member must also seek negotiations with all exporting members on an equal basis. The burden of cooperation imposes a heavy duty on the member seeking out the exception for an import prohibition. Obviously, the Appellate Division cannot outline the specific duty level in all circumstances, but this interpretation builds upon the Gasoline decision and should help a member to better access its chances. Through these two decisions the Appellate Division has attempted to clarify the meaning of “unjustifiable discrimination.” 98 99

Id. at para. 166. Id. at para. 157.

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While the Gasoline decision incorporated a duty of cooperation into the analysis, the Shrimp/Turtle decision clarified that the level of cooperation required is proportional to the trade effects of the measure. The chapeau’s ambiguous standard is slowly being transformed into a functional rule that solicits more specific questions regarding the duty of cooperation. This benefits the decision-making process by emphasizing the duty members have to observe the obligations negotiated in the covered agreements and adding specificity to the standard by provoking justification arguments arising out of a much narrower factual context. A member now has a legitimate expectation that its efforts at reaching a multilateral achievement of its conservation goals are subject to review.

Arbitrary Discrimination This standard was not addressed in the Gasoline decision; consequently, the Shrimp/Turtle decision is a de novo analysis. In attempting to further analyze the appropriate balance between a member’s “right” and “duty,” the Appellate Division interpreted this clause as adding an element of due process to the analysis. It stated: Inasmuch as there are due process requirements generally for measures that are otherwise imposed in compliance with WTO obligations, it is only reasonable that rigorous compliance with the fundamental requirements of due process should be required in the application and administration of a measure which purports to be an exception to the treaty obligations of the Member imposing the measure and which effectively results in a suspension pro hac vice of the treaty rights of other Members. The Appellate Division analyzed the certification process contained in Section 609 and determined that the ex parte internal government procedures lacked transparency because they failed to give notice to applicants stating reasons for denial and did not allow for review or appeal.100 In support of this finding, the Appellate Division relied on the fact that the GATT contains an explicit due process requirement in Article X(3)(b), which provides that: Each Member shall maintain, or institute as soon as practicable, judicial, arbitral or administrative tribunals or procedures for the purpose of the prompt review and correction of administrative action relating to customs matters.

100

Id. at para. 182.

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The Appellate Division interpreted the standard consistent with the ordinary meaning of “arbitrary” contained in the Oxford English Dictionary, which defines “arbitrary” as decisions “based on random or convenient selection or choice rather than on reason or nature.” It then used Article X(3) to provide an example of how “arbitrariness” is addressed in the GATT/WTO system. Just as the Gasoline report set forth an initial step in the interpretation and application of the “unjustifiable” standard, the Shrimp/Turtle Appellate Division has similarly established a starting point in the application of the “arbitrary” standard. A due process “duty” can now be crafted into functional rules that promote ex ante compliance. This interpretation should also provoke specific issues relating to the level of due process that must be observed. Moreover, although not explicitly stated by the Appellate Division, this interpretation most likely contains a “sliding-scale” element dependent on the severity of the trade restriction.

CONCLUSION By using the rules and standards model to explain how this difficult decision-making process has been delegated to the adjudicatory branch of the WTO, we see how the decisions of panels and the Appellate Division are responsible for creating a set of functional rules out of general standards. The stated goal of the DSU is to create predictability in a line of disputes, especially crucial in disputes involving Article XX(g). While common law lawyers believe that predictability is best established through stare decisis, resort to such practice may not be necessary at the international level. The practice of referring to legal reasoning and interpretation in prior decisions is based on the fundamental principle that like cases be decided alike. In reality there is not much difference between the two approaches, but a system of de jure stare decisis is distasteful to many members who believe the WTO has already delegated significant decision-making and interpretation authority to the dispute settlement system. In short, if the status quo serves to accomplish the same predictability goals as stare decisis, as we have seen in the development of Article XX(g), then why change the terminology? By examining the development of Article XX(g) interpretation, we see that a more rule-based interpretation of the general standard is evolving. A member has a clearer understanding of what categories of measures can qualify for Article XX(g). Furthermore, a member has a legitimate expectation that its duty to cooperate with other members and its duty to observe due process in the application of its conservation measures will be scrutinized. The appropriate level of cooperation or due process will be determined on a case-by-case basis, but these decisions have added specificity to the standard and focused the issues in a constructive man-

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ner. WTO members now have a better understanding of how the chapeau can prevent abuse of the Article XX(g) exception. In just two reports, the Appellate Division has taken on the task of interpreting a standard that for so long had defied interpretation.

BIBLIOGRAPHY RELATING TO THE REFORMULATED GASOLINE CASE Articles Ala’I, Padideh, Free Trade or Sustainable Development? An Analysis of the WTO Appellate Body’s Shift to a More Balanced Approach to Trade Liberalization, 14 AM. U. INT’L L. REV. 1129 (1999). Anderson, Lisa, The Future of Hemispheric Free Trade: Towards a Unified Hemisphere?, 20 HOUS. J. INT’L L. 635 (1998). Bello, Judith & Maury Shenk, United States—Standards for Reformulated and Conventional Gasoline, 90 AM. J. INT’L L. 669 (1996). Deal, David T., Motor Fuel Regulation in the 1990s, NAT. RESOURCES & ENV’T 17–20, 51–52(Fall 1992). Deere, T. Alana, Balancing Free Trade and the Environment: A Proposed Interpretation of GATT Article XX’s Preamble, 10 I NT’L L EGAL P ERSP. 1 (1998). Hudec, Robert E., Differences in National Environmental Standards: The LevelPlaying-Field Dimension, 5 MINN. J. GLOBAL TRADE 1 (1996). Kohana, P.T.B., The WTO and Trade and the Environment Issues: Future Directions, 20 WORLD COMPETITION L. & ECO REV. 4 (1997). Macchiaverna, Francesca, The Reformulated Gasoline Case: International Trade’s Impact on U.S. Environmental Policy, 7 S.C. ENVTL. L.J. 129 (1998). Mass, C.M., Notes: Should the WTO Expand GATT Article XX: An Analysis of United States—Standards for Reformulated Gasoline, 5 M INN. J. GLOBAL TRADE 415 (1996). McBride, Scott Daniel, Reformulating Executive and Legislative Relationships After Reformulated Gasoline: What’s Best For Trade and the Environment?, 23 WM. & MARY ENVTL. L. & POL’Y REV. 299 (1998). McCrory, Martin A. & Eric L. Richards, Clearing the Air: The Clean Air Act, GATT and the WTO’s Reformulated Gasoline Decision, 17 UCLA J. ENVTL. L. & POL’Y 1 (1999). Nissen, J.L., Achieving a Balance between Trade and the Environment: The Need to Amend the WTO/GATT to Include Multilateral Environmental Agreements, 28 LAW & POL’Y IN INT’L BUS. 901 (1997). Palmeter, David, The WTO Appellate Body’s First Decision, 9 LEIDEN. J. INT’L LAW 337 (1996). Parks, David M., GATT and the Environment: Reconciling Liberal Trade Policies with Environmental Preservation, 15 UCLA J. ENVTL. L. & POL’Y 151 (1997).

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Petersmann, Ernst-Ulrich, International Trade Law and International Environmental Law: Prevention and Settlement of International Environmental Disputes in GATT, 27 J. WORLD TRADE 43 (1993). Langhorst Raclin, Linda, Clean Trade, GOV’T EXEC. (1994). Reitze Jr., Arnold W., The Regulation of Fuels and Fuel Additives Under Section 211 of the Clean Air Act, 29 TULSA L.J. 485 (1994). Rogers, Paul G., The Clean Air Act of 1970, EPA J. 21 (Jan./Feb. 1990). Sakmar, Susan L., Free Trade and Sea Turtles: The International and Domestic Implications of the Shrimp-Turtles Case, 10 COLO. J. INT’L ENVTL. L. & POL’Y 345 (1999). Schelin, Telisa Webb, United States—Standards for Reformulated and Conventional Gasoline: The Effect of the World Trade Organization Decision on the U.S. and Its Administrative Agencies, 33 T ULSA L.J. 421 (1997). Schoenbaum, Thomas J., International Trade and Protection of the Environment: The Continuing Search for Reconciliation, 91 AM. J. INT’L L. 268 (1997). Schultz, Jennifer, The Demise of “Green” Protectionism: The WTO Decision on the US Gasoline Rule, 25 DENV. J. INT’L L. & POL’Y 1 (1996). Shaffer, Gregory (Bernard Oxman ed.), United States—Import Prohibition of Certain Shrimp and Shrimp Products, 93 A M. J. I NT’L L. 507 (1999). Shenk, Maury D. (Judith Hippler Bello, ed.), United States—Standards For Reformulated and Conventional Gasoline, 90 AM. J. INT’L L. 669 (1996). Waincymer, Jeffrey, Reformulated Gasoline Under Reformulated WTO Dispute Settlement Procedures: Pulling Pandora Out of a Chapeau?, 18 MICH. J. INT’L L. 141 (1996). Weber, Edward P. & Anne M. Khademian, From Agitation to Collaboration: Clearing the Air Through Negotiation, PUB. ADMIN. REV. 396 (Sept./Oct 1997).

Selected Materials Clean Air Act of 1970, Pub. L. No. 91–604, 84 Stat. 1676, 1694 (1970). Reformulated Gasoline Final Rule, 59 Fed. Reg. 7716 (1994). Regulation of Fuels and Fuel Additives: Individual Foreign Refinery Baseline Requirements for Reformulated Gasoline, 40 C.F.R. pt. 80, 59 Fed. Reg. 22800 (May 3, 1994). United States Invites Public Comment on Next Step in WTO Dispute on EPA Rules for Imported Gasoline, U.S. Envrionmental Protection Agency, Friday 28, 1996, at http://www.epa.gov/fedrgstr/EPAAIR/1996/June/Day-28/pr-23469.html (last visited Oct. 30, 2007).

PART III

FOOD SAFETY: THE BEEF HORMONES CASE

FOOD SAFETY: THE BEEF HORMONES CASE At least since the 1950s, cattle have been treated with growth promoting hormones throughout the United States and in certain parts of Europe. The types of hormones used for this purpose include three synthetic hormones (trendbolone acetate, zeranol, and melengestrol acetate) and three natural hormones (17 beta-oestradiol, progesterone, and testosterone). While the sale of meat and meat products derived from cattle treated with such hormones is permitted in the United States, the European Communities (EC) prohibited the use of hormones in the 1980s. As a result, the United States, which was a major exporter of beef to Europe, lost an important market. The EC first prohibited the use of growth promotion cattle hormones in 1981. This prohibition was a response to the widely publicized “hormone scandals” in Italy in the late 1970s, in which Italian schoolchildren showed signs of premature development, which were suspected to be linked to illegal growth hormones in veal. Under this prohibition, the use of hormones was allowed as long as they were applied according to the regulations of member states and foreign countries. In 1985, the EC adopted a directive prohibiting the use of growth hormones in Europe as well as the import of hormone treated beef. However, the 1985 EC directive was annulled by the European Court of Justice on procedural grounds. The ban was reintroduced in 1988. The United States viewed the ban as a crisis management decision that had evolved into a non-tariff barrier to trade without any scientific justification and responded by imposing retaliatory tariffs on food products from Europe. The conflict between the EC and the United States could not be solved under the “old” General Agreement on Tariffs and Trade (GATT) procedure. In 1996, the EC Council Directive Prohibiting the Use in Livestock Farming of Certain Substances Having a Hormonal Action was adopted, which slightly modified the 1988 Directive but continued to prohibit the use of growth hormones and the import of meat and meat products derived from cattle to which specific natural and synthetic hormones had been administered to promote growth. On April 25, 1996, the United States requested the establishment of a panel under the new World Trade Organization (WTO) Dispute Settlement Procedure. With the adoption of the Agreement on Sanitary and Phytosanitary Measures (SPS Agreement) in 1994, the United States had new legal grounds for its complaint. The SPS Agreement allows WTO members to take food safety measures. 303

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However, it subjects this right to several conditions. Among other things, the SPS Agreement requires that a SPS measure be based on sufficient scientific evidence (Article 2.2) and risk assessment (Article 5.1). Furthermore, it encourages the harmonization of SPS measures (Article 3.1) but permits the maintenance of measures resulting in a higher level of protection than would be achieved by international standards (Article 3.3). The United States alleged that measures taken by the EC under the 1996 Directive restricted or prohibited imports of meat and meat products from the United States and thus violated Articles III (requiring national treatment) or XI (prohibiting quantitative restrictions) of GATT, Articles 2, 3, and 5 of the SPS Agreement, Article 2 of the Agreement on Technical Barriers to Trade (on the preparation, adoption, and application of technical regulations), and Article 4 of the Agreement on Agriculture (on market access commitments). On June 28, 1996, Canada also requested consultations with the EC. Canada’s claim was essentially the same as that of the United States. In both cases, the panel examined only the consistency with the SPS Agreement and found that the EC ban on imports of meat and meat products from cattle treated with six specific growth promoting hormones was inconsistent with Articles 3.1, 5.1, and 5.5 of that agreement. On September 24, 1997, the EC announced its intention to appeal the findings of the panel. The Appellate Body upheld the panel’s conclusion in both disputes that the EC import ban was inconsistent with Article 5.1 requiring risk assessment. However, it reversed the panel’s conclusion that the EC, by maintaining SPS measures, which are not based on existing international standards, acted inconsistently with Article 3.1 of the SPS Agreement, which encourages the use of international standards. Moreover, it reversed the panel’s findings and conclusions on Article 5.5 of the Agreement, which provides that arbitrary or unjustifiable distinctions in the levels of protection must be avoided if such distinctions result in discrimination or a disguised barrier to trade. The Appellate Body Reports and the Panel Reports, as modified by the Appellate Body, were adopted on February 13, 1998. At the request of the EC, the reasonable period of time for the implementation of the rulings was determined at 15 months from the date of adoption of the reports. When the implementation period expired, the United States and Canada, on June 3, 1999, requested authorization from the Dispute Settlement Body (DSB) for the suspension of concessions to the EC in the amount of U.S. $202 million and Can. $75 million, respectively. In response, the EC requested arbitration under Article 22.6 of the Dispute Settlement Understanding (DSU) on the level of the requested suspension of concessions. The issue was referred to the original panel for arbitration. The arbitrators estimated the total nullification and impair-

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ment caused by the EC hormone ban on U.S. and Canadian exports of beef and beef products at U.S. $116.8 million per year and Can. $11.3 million respectively. On July 26, 1999, the DSB authorized the suspension of concessions in the determined amounts. On May 24, 2000, the EC, referring to new scientific evidence supporting its ban on hormone treated beef, adopted a proposal to amend existing legislation to permanently ban 17 beta-oestradiol and continue to prohibit the use of the other five hormones on a provisional basis. Several years later, on September 22, 2003, the EC again adopted new legislation based on comprehensive risk assessments undertaken in June 2000 that were aimed at proving whether health hazards are linked to the consumption of hormone treated beef. The independent Scientific Committee on Veterinary Measures relating to Public Health carried out the risk assessments focusing on potential risks to human health from hormone residues in bovine meat, particularly oestradiol 17_, testosterone, progesterone, trenbolone acetate, zeranol, and melengestrol acetate. In its Request for the Establishment of a Panel, the EC concludes that based on the risk analysis the “avoidance of the intake of oestradiol 17_ is of absolute importance to human health,” and that as a consequence the EC continues to ban the marketing of meat containing this substance from the market. Moreover, the EC continues to prohibit the placing on the market of the other hormones on a provisional basis claiming that the relevant scientific evidence is insufficient. The EC asserts that the new legislation, Directive 2003/74/EC, has brought the EC into compliance with the WTO covered agreements by removing the WTO inconsistent measure. The EC still prohibits use of the six hormones in question, but contends that such measures are based on valid comprehensive risk assessments and, thus, the prohibitions are fully compliant with the DSB recommendations and rulings (particularly Articles 5.1 and 5.7 of the SPS Agreement). Despite the EC notifying the DSB of the adoption of the amended measure on November 7, 2003, the United States and Canada continue to impose retaliatory duties. The continuation of U.S. and Canadian retaliatory measures in part reflects a process problem that has not been addressed in the WTO dispute settlement procedures. These provide that when there is “disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings[,] such dispute shall be decided through recourse to these dispute settlement procedures.” The procedures do not provide the defendant party with a procedure to unilaterally request a declaratory judgment of compliance, however. While the procedures require that the suspension of concessions authorized by the DSB be temporary “and shall only be applied until such time as the measure found to be inconsistent with a covered agreement

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has been removed,” they do not explicitly provide an avenue for the DSB to determine when an inconsistent measure has been removed. Thus, in response to the continued suspension of concessions by the United States and Canada, on November 8, 2004, the EC filed a complaint with the DSB, initiating a new case and seeking the removal of the U.S. and Canadian retaliatory measures. The EC asserts that retaliation is no longer valid because the EC has removed the measures found to be WTOinconsistent by adopting new legislation based on newly conducted risk assessments in conformity with the recommendations and rulings of the DSB. The EC claims that by continuing to impose retaliatory measures, the United States is in violation of Articles I and II of GATT 1994 and several articles of the DSU. In its first written submission, the United States maintains that its “suspension of obligations to the EC was, and remains, multilaterally authorized by the DSB,” and believes that “nothing of substance appears to have changed since the DSB found the EC to be in breach of its obligations under the SPS Agreement.” The crux of the dispute has thus become a question of what legal effect should be accorded to a member’s unilateral declaration of compliance after the DSB has multilaterally authorized the suspension of concessions. As of October 31, 2007, this dispute is still pending. As an aside, it is interesting to note that, for the first time in the history of the WTO, the panel hearings in the EC challenge against the United States and Canada were open to public observation with the agreement of all parties. The 1998 Beef Hormones decision was the first decision under the SPS Agreement. It was also the first time that a trade panel convened a group of experts to serve as expert witnesses. The case has raised many important issues, some of which are addressed in this case study. Chapter 10 by Charles F. De Jager explores the links between the Appellate Body’s decision in the Beef Hormones case and the EC’s current position on agriculture, particularly concerning the concept of multifunctionality, the precautionary principle, and animal welfare. The following chapter by Regine Neugebauer addresses questions of interpretation of the SPS Agreement in light of the Beef Hormones decision. In focuses on how the panel and the Appellate Body dealt with scientific evidence and might deal with it in the future. Chapter 12 by Christopher Bisgaard analyzes the standard of review that WTO panels should use when dealing with SPS measures. Finally, the last chapter in this case study, by Katy Eiseman, examines the possibility of informative food labeling as an option to come into compliance with the Appellate Body decision. It examines the consumer’s right to know and the question as to which WTO provisions might govern domestic labeling regulations.

CHAPTER 10

THE EUROPEAN UNION’S POSITION ON AGRICULTURE AFTER THE WTO APPELLATE BODY’S DECISION IN BEEF HORMONES Charles F. De Jager

INTRODUCTION In the course of the 1990s, trade in hormone-treated beef has lingered as an irritant in the conduct of trade relations between the United States and the European Union. In 1998, the World Trade Organization’s (WTO) Appellate Body issued a decision in the dispute that unfortunately did not definitively settle matters and with which, to date, the European Union has failed to comply. By allowing for measures based on a sufficient risk assessment without setting a certain threshold, the opinion arguably has served to weaken the WTO Sanitary and Phytosanitary Agreement. As a result, the European Union has been able to retain certain of its arguments based on the precautionary principle. Simultaneously, trade in agricultural goods must be revisited in accordance with the WTO Agreement on Agriculture. To the apprehension of nations with highly protected agricultural markets, the time has come to consider imposing greater discipline and further liberalization on this traditionally problematic area. Not surprisingly, the European Union has called for renewed consideration of the precautionary principle in the New Round of multilateral trade negotiations, while also stressing other nebulous concepts, such as the multifunctionality of agriculture. As one foreign negotiator in Geneva is reported to have said: “It is as if the EU is sitting at a poker table trying to bluff with a pair of twos when everyone in the room knows that is all they have got.”1 This chapter will therefore explore the links between the Appellate Body’s decision in the Beef Hormones case and the European Union’s 1 Simon Taylor, Seattle to Break Logjam over WTO Talks, E UROPEAN V OICE, Nov. 25–Dec. 1, 1999, at 12, quoting a third country trade negotiator in Geneva shortly before the Seattle Ministerial Meeting.

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current negotiating position on agriculture in entering the New Round. The first section considers the Beef Hormones case, including its origins, the decisions in the WTO dispute settlement process, the latest developments, and the EU interpretation of the decisions. This section also includes an overview of the WTO Agreement on Agriculture and of some of the current trends in agriculture within the European Union. The next section introduces the various elements of the EU negotiating position on agriculture in the New Round, including the concept of multifuntionality, clarification of the precautionary principle, and consideration of animal welfare issues. This section also presents the negotiating positions of the United States and the Cairns Group, both in opposition to the European Union. A third section discusses and critiques the EU negotiating position in the realm of agriculture, while also trying to offer certain solutions and approaches to be pursued in the New Round. A brief conclusion follows these sections.

THE BEEF HORMONES DISPUTE AND THE AGRICULTURE AGREEMENT The Beef Hormones Case Since at least the 1950s, hormones have been used to varying extents in parts of Europe and throughout the United States in the production of beef. They may be characterized either as natural hormones produced endogenously by animals, including estrogen, progesterone, and testosterone, or as synthetic hormones, including trenbolone acetate, zeranol, or melengestrol acetate. Whether natural or synthetic, hormones promote growth in beef cattle through the more efficient absorption and conversion of feed into muscle. The resultant benefits of using hormones in the production of beef, including a greater proportion of lean meat to fat and a decrease in the time required for cattle to reach market weight, translate into quantifiable economic benefits for beef producers. Thus, beef producers who use hormones can be more efficient and more competitive than hormone-free beef producers.

Origins of the Beef Hormones Dispute Within the European Union, regulation of the use of hormones in the production of meat varied among the member states until the early 1980s. However, following incidents in which children were adversely affected by the consumption of veal containing a specific hormone, consumer boycotts and the restriction of imports among certain member states prompted the European Community (EC) authorities to enact legislation restricting the use of hormones in the production of meat in 1981.2 2

Council Directive of July 31, 1981, concerning the prohibition of certain sub-

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Following this first Council directive, three progressively more restrictive directives were issued to further limit the use of growth-promoting hormones in the European Union. Although health concerns and scientific studies guided these legislative efforts, the existence of large chronic surpluses of meat and especially beef also affected the decision to restrict the use of hormones. In the United States, the use of hormones in the production of beef has been allowed. The practice is subject to oversight by the Food and Drug Administration (FDA), which has deemed safe for human consumption meat subject to hormone treatments at the levels commonly used by the industry. Thus, most beef produced in the United States originates from hormone-treated cattle, and exports of U.S. hormone-treated beef to the European Union were severely affected by the EU regulations generally prohibiting the use of hormones or the importation of hormonetreated meat. As a result, the United States brought an action against the European Union under the dispute settlement provisions of the WTO.

The WTO Panel and Appellate Body Decisions At approximately the same time that the United States initiated its action against the European Union, Canada brought a similar case against the restrictive EC meat measures. The members of the panel adjudicating both disputes were the same and reached similar conclusions in both cases. The Panel Reports recommended that the Dispute Settlement Body (DSB) request the European Communities bring the disputed measures into conformity with the obligations of the SPS Agreement. The European Union, the United States, and Canada appealed the Panel Reports, and the cases were merged before the WTO Appellate Body. In its Report,3 however, the Appellate Body reversed the panel’s conclusions that the European Communities acted inconsistently with Articles 3.1 and 5.5. Furthermore, the Appellate Body modified the panel’s conclusion with respect to Article 5.1: “[The Appellate Body] modifies the Panel’s interpretation of the concept of ‘risk assessment’ by holding that neither Articles 5.1 and 5.2 nor Annex A.4 of the SPS Agreement require a risk assessment to establish a minimum quantifiable magnitude of risk, nor do these provisions exclude a priori, from the scope of a risk assessment, factors which are not susceptible of quantitative analysis by the empirical or experimental laboratory methods commonly associated with

stances having a hormonal action and of any substances having a thyrostatic action (81/602/EEC), O.J. L 222/32 (1981). 3 Report of the Appellate Body, EC—Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R and WT/DS48/AB/R, AB-1997-4 ( Jan. 16, 1998) [hereinafter AB-1997-4].

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the physical sciences.”4 Thus, the Appellate Body allowed for the possibility that the European Union could maintain its measures on hormonetreated meat given even a single risk assessment finding in favor of the restrictions.

The Beef Hormones Dispute Since the WTO Appellate Body Decision The conclusions of the Appellate Body Report allowed both the United States and the European Union to claim victory. While the lack of a risk assessment supporting the hormone ban was invoked by the United States as a basis for requiring the European Union to set aside its restrictive measures and allowing imports of U.S. beef, it prompted the European Union to commission further studies. In light of EU recalcitrance, there existed a system to screen and certify as hormone-free U.S. beef exports to the European Union. However, given the perception among American beef interests that victory had been achieved, both this system and proposed labeling schemes met with resistance and failure. By May 1999, it became clear that the European Union would not meet the deadline for compliance with the WTO dispute settlement ruling. As a result, the United States responded by imposing retaliatory measures on a variety of European food products in the amount of approximately $117 million.

EU Interpretation of the Appellate Body Decision in the Beef Hormones Case Ultimately, the EU authorities’ interpretation of the Appellate Body Decision in the Beef Hormones case is important in understanding the bases of the EU negotiating position in the realm of agriculture in the New Round. In the view of the EU authorities, the Appellate Body Decision allows the European Union to maintain as high a level of protection as it desires, up to and including a zero risk level. As Trade Commissioner Pascal Lamy has stated, although compensation may have to be paid or sanctions may be imposed, “nothing in the WTO can ever limit the sovereign right of members to choose their own level of protection.”5 While the EU authorities recognize the requirement to provide sufficient scientific evidence in support of the chosen level of protection, they interId., para. 253(j). Speech by Pascal Lamy, Member of the European Commission, Mr. Lamy speaks to the Organizations, Assembly of Consumers Associations in Europe Conference, Nov. 18–19, 1999, at http://europa.eu.int/comm/trade/speeches_articles/spla05en.htm (last visited Dec. 4, 1999) [hereinafter Lamy Speech]. 4 5

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pret the Appellate Body Decision as having clarified that qualitative scientific evidence is acceptable where quantitative evidence is lacking “and also that measures may be based on minority scientific views, since it recognized that science is not monolithic.”6 Although the European Commission claims to have received independent scientific advice suggesting there exist health risks associated with the consumption of hormone-treated beef, a confidential European Commission document prepared by former Trade Commissioner Sir Leon Brittan and Agriculture Commissioner Franz Fischler reportedly states that 17 currently ongoing scientific risk assessment studies would fail to provide the scientific proof required to establish the existence of such a risk. Such findings, it is recognized, would have to lead to some form of legislative action on the part of the EU authorities to allow, on a substanceby-substance basis, for the use of some of the hormones implicated in the dispute. However, the actual articulation of such legislative measures would be guided by the possible continued application of sanctions and the likelihood of prevailing against them before a WTO dispute settlement panel.7 Thus, the European Commission will allow the risk assessment studies to be completed within the year, although these will not help the European Union prevail in the hormones dispute. Nonetheless, the EU authorities are proceeding at least partly on the basis of the opinion8 of the EU Scientific Committee for Veterinary Measures Relating to Public Health that “very significant gaps in current knowledge exist.”9 As one official is reported to have stated, “this all goes back to the precautionary principle. We believe the SPS Agreement allows the ban on the basis that scientific gaps do exist.”10 As a result, instead of implementing the WTO judgment, the European Union has maintained its ban and opted to seek, in the New Round, clarification within the WTO Agreements of the extent to which the precautionary principle may be used.

The WTO Agreement on Agriculture The negotiation of commitments to reduce barriers to agricultural trade has been historically problematic. Unlike industrial goods, agricultural commodities were subject to softer rules under the General Agreement 6

Id. 16(37) Int’l Trade Rep. (BNA) 1529 (Sept. 22, 1999). 8 European Commission Directorate-General for Health and Consumer Protection, Opinion of the Scientific Committee on Veterinary Measures Relating to Public Health: Assessment of potential risks to human health from hormone residues in bovine meat and meat products, Apr. 30, 1999, at http://www.europa.eu. int/comm/dg24/health/ sc/scv/out21_en.html (last visited Dec. 4, 1999). 9 Supra note 7. 10 Id. 7

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on Tariffs and Trade (GATT). At the last minute, the lack of agreement on certain elements of a reform program for agricultural trade threatened to scuttle all of the Uruguay Round Agreements. In the end, however, the Agreement on Agriculture (the “Agriculture Agreement”) became one of the general agreements of the Uruguay Round. The Agriculture Agreement, which is intended to impose gradually upon the field the normal discipline of the international trading rules, covers three main topics: first, market access, under which the emphasis was placed on the tariffication of countries’ non-tariff import restraint measures; second, domestic support, under which an overall limit on the total amount of domestic subsidy is established for each country and made subject to gradual reductions; and, third, export subsidies, under which discipline is imposed on total budgetary expenditures for export subsidies and total quantities of exports covered thereby.11 All commitments are included in each member’s individual schedule of agricultural concessions. The WTO Committee on Agriculture supervises implementation of these commitments over the six-year implementation period established for developed countries from January 1, 1995. Under the Agriculture Agreement, support programs that directly stimulate production and trade are subject to stricter reduction commitments. Other support programs that are not considered to have such direct effects, however, are not covered by reduction commitments and come under the “Blue Box” or “Green Box” exemptions. The “Blue Box” or Article 6 exemptions are measures that are at least partially decoupled from production, including direct payments under production-limiting programs and de minimis domestic support.12 The “Green Box” or Annex 2 exemptions are measures that have no or minimal effect on trade or production, including general government service programs and such direct payments to producers as decoupled income support.13 In addition to these exemptions, however, WTO members also agreed upon the “Peace Clause” under Article 13 of the Agriculture Agreement. In accordance with the Peace Clause, domestic support measures and export subsidies would not be challenged, within certain limits, through December 31, 2003. Finally, the “Special Safeguard Measure” allows WTO members who have undertaken the process of tariffication to impose additional duties on imports subject to certain conditions.

Current Trends in EU Agriculture Within the European Union, the individual member states have elected to have agriculture be one of the fields of competence of the 11 B HAGIRATH L AL D AS , T HE WTO A GREEMENTS: D EFICIENCIES , I MBALANCES REQUIRED CHANGES 58–61 (1998) [hereinafter DAS]. 12 Id. 13 Id.

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Union, under the control of its governing organs and subject to uniform rules. As a result, the Common Agricultural Policy (CAP) evolved into not only quite possibly the most convoluted field of competence of the EU institutions but also the costliest item in its budget, claiming a hugely disproportionate share of EU revenues. Thus, the reform of the CAP has once again become a priority, as agreed by the European Council at its meeting in Berlin in March 1999.

The Common Agricultural Policy and Agenda 2000 A number of internal and external challenges facing European agriculture are now lending particular urgency to the efforts to reform the CAP. Most prominent among these challenges are both the initiation of the New Round of WTO negotiations, in which agriculture is to be a prominent subject and the projected enlargement of the European Union to the Central European Countries (CECs), in which agriculture is still often a major source of employment. Given its currently exorbitant levels of agriculture-related expenditures, the European Union would be incapable either of competing in increasingly liberalized agricultural markets or of moving forward with accession of the CECs without reforming the CAP. Thus, under the “Agenda 2000” EU agricultural reform program, the Berlin European Council sought to establish an average level of CAP expenditure of 40.5 billion between 2000 and 2006, excluding 14 billion for rural development and veterinary and plant health measures. “The reform aims at stabilizing agricultural expenditure over the period while staying more in keeping with actual levels of spending.”14 That no actual savings are projected, however, highlights the modest nature of the proposed reforms. In fact, the European Union appears to rely in part on the concept of the multifunctionality of agriculture to avoid more thorough and painful reforms. “The reduction in support prices [is] largely compensated by expenditure on the rural development budget and other accompanying measures (direct income aids, early retirement, aid to young farmers, etc.).”15 As must be expected, Agriculture Commissioner Franz Fischler has staunchly defended, as being in conformity with Uruguay Round commitments, such EU agricultural policies as guaranteed premiums to farmers for sales at low prices on the world market. However, he is also reported to have warned, with the support of Finland, which currently holds the EU presidency, the other EU member states that the CAP would be severely challenged in the course of the New Round, especially con14 Agenda 2000: Reform of the common agricultural policy (CAP), at http://www. europa.eu.int/scadplus/leg/en/lvb/160002.htm (last visited Oct. 31, 1999). 15 Id.

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troversial EU export subsidies. 16 Reports like this one highlight the tensions that prevail in the realm of agriculture between the generally more market-oriented Northern member states and their more protectionist Southern counterparts.

EU Agricultural Projections With respect to beef and veal, annual net production in the European Union has reached approximately eight million tons in recent years and accounts, as the second biggest commodity, for approximately 11.9% of the total value of EU agricultural production. Among the individual member states, France, Germany, Italy, and the United Kingdom account for approximately two thirds of EU beef and veal output. While exports of beef from the European Union have exceeded 1 million tons in recent years, imports have remained around 450,000 tons. “Budget expenditure on beef for the first time exceeded the 4 billion ECU mark in the early nineties, when production reached a high, accounting for 14% of total [European Agricultural Guidance and Guarantee Fund] expenditure (i.e. slightly more than the share of beef in the total value of agricultural production).”17 Based on status quo forecasts as of August 1998, the European Union does not predict any success in its efforts to reduce surpluses in the market for beef between 1998 and 2005.18 The outbreak of the BSE (Bovine Spongiform Encephalopathy or “mad cow disease”) crisis in March 1996 disrupted patterns of production, resulting in a drop in production that nevertheless was not matched by a more significant drop in consumption and that brought “the share of beef in total expenditure and in absolute terms to a historically high level.”19 Although consumption is projected to recover gradually from the BSE crisis, it is also projected to decline overall in the long term. Production, on the other hand, is forecast to resume normal levels after 2001.20 “From 2001 onwards, higher levels of production combined with lower internal and external demand (due to GATT constraints) are forecast to affect the beef market balance and lead to an accumulation of stocks in the second half of the forecast period (about 1.5 million tons by the year 2005).”21 Supra note 7, at 1531–32. Directorate-General VI, Situation and Outlook: Beef Sector, at http://www. europa.eu.int/comm/dg06/publi/cap2000/beef/beefen/execute.htm (last visited Oct. 31, 1999) [hereinafter Beef Outlook]. 18 Directorate-General VI, CAP Reports: Prospects for agricultural markets 1998–2005, at http://www.europa.eu.int/comm/dg06/publi/caprep/ prospects/summary/sum_ en.htm (last visited Oct. 31, 1999) [hereinafter Prospects]. 19 Beef Outlook, supra note 17. 20 Prospects, supra note 18. 21 Id. 16 17

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However, the European Union bases its assessment on a number of important assumptions. First, it assumes that between 2001 and 2005 “all GATT commitments regarding imports and subsidized exports will be fully respected.”22 The European Union also forecasts a relatively small surplus from the CECs, despite agriculture remaining a major source of employment and the general improvement of production methods in the CECs.23 Finally, the European Union relies on forecasts for growth in Asia and Latin America, where rising incomes are expected to result in increased consumption of food products, stimulating world trade and strengthening world prices.24

Food Safety Within the European Union In 1999, a food safety crisis originated in Belgium stemming from the discovery of the presence of dioxin in animal feed. Because dioxin residues can pose significant risks of carcinogenesis in humans, consumer confidence plummeted along with meat and dairy industry revenues in Belgium and neighboring regions. The dioxin crisis and the comparable earlier outbreak of BSE in the United Kingdom highlight both the shortcomings of the EU authorities’ current approach to food safety and the tensions that can prevail as a result among the EU member states. Thus, the 1996 ban imposed by the EU authorities on British beef in response to the BSE outbreak has now been lifted subject to stringent conditions. Nevertheless, the French government has maintained its own ban based on the doubts expressed by its newly created independent food safety agency regarding the eradication of BSE in the United Kingom. Disagreements among the various member states have also arisen regarding the composition of animal feeds. Beyond meat and bone flour derived from the carcasses of various animals, Belgium, France, Germany, and the Netherlands, for example, allow for the inclusion of processed boues d’épuration or “sewage sludge” in animal feed. Although the use of sewage sludge as such has been made illegal, fats and greases that have been filtered and chemically separated from waste water may be pressure-cooked at high temperatures and included as “a cheap and calorific additive for use in pig- and chicken-feed.”25 Furthermore, while farmers in many member states commonly continue to use animal feeds containing antibiotic additives, Health and Consumer Protection Commissioner David Byrne has endorsed a ban on the use of antibiotics as growth promoters in EU agriculture, extending the current EU ban on six antibiotics.26 It is also known that the illegal 22 23 24 25 26

Id. Id. Id. Boue to You Too, ECONOMIST, Oct. 30, 1999, at 59. 16(36) Int’l Trade Rep. (BNA). 1479 (Sept. 15, 1999).

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use of hormones continues to a large extent in the EU beef industry, with supplies now coming in part from Eastern Europe.27 The administration of hormones under these conditions, however, may pose greater risks to human health as farmers use improper doses or mixes of unapproved substances to achieve the desired results while avoiding detection.28 Thus, different levels of enforcement prevail among the various member states while the EU Food and Veterinary Office (FVO) remains understaffed in the face of a very broad mandate. The principal missions of the FVO are “to monitor and control how Member States and third countries implement EU legislation on food safety, animal health, plant health and animal welfare, and to contribute towards the maintenance of confidence in the safety of food offered to the European consumer.”29 In addition, attempts to grant slightly broader powers to the FVO, such as the ability to conduct surprise inspections, while supported by the European Commission and Parliament, have been struck down by the representatives of the individual member states in the Council. The need to create a full-fledged centralized EU food safety agency equivalent to the Food and Drug Administration in the United States is increasingly being recognized and has been endorsed by European Commission President Romano Prodi,30 Agriculture Commissioner Fischler, and Internal Market Commissioner Frits Bolkestein.31

AGRICULTURE AND FOOD SAFETY ON THE EVE OF THE NEW ROUND Negotiating Position and Goals of the European Union Under Article 20 of the Agriculture Agreement, the WTO Members decided to initiate by 2000 a New Round of negotiations to reduce support for agriculture. In keeping with this commitment, the EU authorities identified four main areas of negotiation in preparation for the Seattle Ministerial: 1. The question of whether any of the specific instruments provided in the Agreement itself need to be adapted. Rod Usher, Hard to Swallow, TIME, July 5, 1999, at 24. European Commission Directorate-General for Health and Consumer Protection, Press Release: Abusive use and difficulties of controls of growth hormones increase risks, May 17, 1999, at http://www.europa.eu.int/comm/dg24/library/ press/ press25_en.html (last visited Dec. 4, 1999). 29 European Commission Directorate-General for Health and Consumer Protection, Food and Veterinary Office Annual Report, April 1998–March 1999 (1999). 30 Clinton, Prodi Agree to Efforts on Developing Countries, GMOs, INSIDE U.S. TRADE, Oct. 29, 1999, at 21. 31 Supra note 26. 27 28

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2. Progress on the key trade issues, access, assistance to exports, and commitments to reduce support. 3. Non-trade concerns, notably the multifunctional role of agriculture, food safety and quality, policies to protect the environment, and animal welfare. 4. Special and differential treatment for developing countries. 32 Thus, Trade Commissioner Pascal Lamy was able to confirm the EU authorities’ dedication to Article 20 and their willingness to consider even sensitive issues, such as agricultural export subsidies.33 However, qualifications were appended to these statements regarding both the extent of the reductions to which the EU would agree and the precise list of concerns to be included. Thus, the EU authorities have elected to adopt “an offensive approach” aimed at “taking full advantage of the expansion in world trade while maintaining and developing the European model of agriculture with its multifunctional characteristics and with high quality and safety standards.”34 Their goal is to emphasize, in the course of the New Round, the need to achieve a better balance between trade concerns (such as substantial, progressive reductions in support and protection) with non-trade issues (such as multifunctionality, the precautionary principle, and animal welfare). Ultimately, recent statements by Agriculture Commissioner Franz Fischler may be used to summarize the crux of the EU authorities’ negotiating position on agriculture. While the European Union professes to be “ready to negotiate substantially about agriculture,” it is “not prepared to accept that the outcome of these negotiations jeopardizes or undermines [its] policy, which supports the multifunctional role of European agriculture.” Thus, the EU authorities would prefer to address a broader range of concerns in the course of the New Round, including issues arising at the intersection of the Agriculture Agreement with other WTO Agreements, such as the SPS Agreement, and more nebulous concepts beyond the core negotiations on agricultural trade.

Long-Term Nature of the Negotiations In addressing the more traditional trade concerns raised by agriculture, the EU authorities have been careful in the time before the Seattle Ministerial to emphasize the notion that reducing trade barriers in 32 Seattle Conference Preparation: EC Approach on Agriculture, at http://www. europa.eu.int/comm/trade/2000_round/ecapragr.htm (last visited Dec. 4, 1999) [hereinafter EC Approach]. 33 16(42) Int’l Trade Rep. (BNA) 1726 (Oct. 10, 1999). 34 European Commission, Directorate-General for Agriculture, Fact-sheet, EU Agriculture and the WTO, From the Uruguay Round to the Millennium Round 13 (1999).

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agriculture is “an ongoing process resulting in fundamental reform and not something which can be completed in the next Round.”35 While the EU authorities invoke the language of Article 20 of the Agriculture Agreement in maintaining this position, the call for protracted, wide-ranging negotiations is indicative of the pressures facing the European Union. Before the Peace Clause lapses in 2003, the European Union must gain more time within which to finalize the dates and terms of accession of at least the leading candidates among the CECs. This approach also highlights the arguably modest nature of many of the CAP reforms to date. By insisting on the fact that Agenda 2000 constitutes an essential element of its negotiating stance on agriculture, the European Union in a sense concedes the limitations inherent in some of its positions. For example, a number of Agenda 2000 reforms depend upon the continuation of existing commitments under the Agreement on Agriculture. Thus, the EU authorities are mindful of the need to retain various current provisions of the Agreement, such as the Green and Blue Box provisions (which the Commission has described as being “essential to ensure implementation of CAP reform”).36 They will also seek to extend the application of the Peace Clause and the Special Safeguard Clause. The EU agriculture ministers have also continued to pledge support for direct aids, especially where these advance the objectives of multifunctionality.37

“Multifunctionality” or the Multiple Roles of Agriculture “Multifunctionality” is the notion that agriculture performs a variety of tasks beyond simply the production of basic agricultural commodities. Thus, agriculture may contribute to the preservation of rural landscapes, to the protection of the environment, to the sustained vitality of rural areas, and to the quality and safety of food.38 “Indeed, apart from their biological and ecological interest, cultivated landscapes and habitats also have aesthetic, cultural, and historic qualities, and contribute to the general well-being of society.”39 According to the proponents of multifunctionality, agriculture constitutes the provision of a public good and deserves special protection. EC Approach, supra note 32. Communication from the Commission to the Council and to the European Parliament, The EU Approach to the WTO Millennium Round 7 (1999) [hereinafter Millennium Round Communication]. 37 Supra note 7, at 1531–32. 38 European Commission, Directorate-General for Agriculture, Info-Paper, Agriculture: Process of Analysis and Information Exchange of the WTO, Contribution of the European Community on the Multifunctional Character of Agriculture (1998) [hereinafter Multifunctionality Contribution]. 39 Id. 35 36

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Adopting a somewhat idealized notion of agriculture within its borders, the European Union, in its promotion of multifunctionality, has come to cast its farmers in the roles of stewards of the environment and caretakers of the cultural heritage.40 However, given the belief that intervention is required to encourage the performance of these duties, the EU authorities argue that farmers are entitled to receive forms of assistance as compensation for the added societal value that their occupation brings but for which they are not directly remunerated. As Agriculture Commissioner Fischler has stated: “Direct aid measures with no or minimal trade impact have an important role to play in this context.” 41 Thus, through framework articulation at the EU level and detailed implementation at the local level, multifunctionality has become an integral part of EU agricultural policy and an essential element of the EU negotiating position in the realm of agriculture. 42 In articulating the concept of multifunctionality, the European Union refers to the language of the preamble and Article 20 of the Agriculture Agreement, which calls for the consideration of “non-trade concerns” in the continuation of the reform process. Multifunctionality has also received a measure of international attention and support from other countries with more protected agricultural markets, such as Japan, Korea, Norway, and Switzerland. At the same time, given the fluid nature of the concept, multifunctionality has emerged as one of the main points of contention in the New Round.

Food Safety and the Clarification of the Precautionary Principle At the intersection of agriculture with health and food safety, the EU authorities have stated their intention to seek to reopen the SPS Agreement in the New Round “to clarify the conditions for the use of the precautionary principle, and develop multilaterally agreed guidelines for that purpose.”43 In the name of consumer protection, Commissioners Byrne, Fischler, and Lamy have all endorsed this effort to ensure that “the WTO will not be used to force onto the market products about whose safety there are legitimate concerns.”44 In an attempt to defuse controversy, however, Commissioner Lamy has argued that the precautionary principle is merely synonymous with “sound, clear, and agreed scientific evidence.”45 The call for review of the precautionary principle stems from the EU authorities’ perceived need to capitalize on the points favorable to them 40 41 42 43 44 45

Id. EC Approach, supra note 32. Multifunctionality Contribution, supra note 39. Lamy Speech, supra note 5. EC Approach, supra note 32. 16(43) Int’l Trade Rep. (BNA) 1774 (Nov. 3, 1999).

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in the Appellate Body Decision in the Beef Hormones case and from the consideration the concept has received in the environmental law context. Their principal interest is to secure, beyond its present inclusion in the language of the SPS Agreement, a clearer legal base within the WTO rules for invocation of the precautionary principle before WTO dispute settlement panels. The intent is to provide guidance to such panels in future environmental, health, and food safety controversies (for example, genetically modified organisms), hopefully allowing the EU to maintain a right to ban products it deems unsafe.

Animal Welfare Beyond endorsing the concept of multifunctionality and calling for a clarification of the precautionary principle, the EU authorities also express “the need to address certain new issues, which could include animal welfare.”46 The need to consider this “legitimate moral requirement” apparently stems from “increasing public concern about the conditions in which animals are kept and reared.” 47 According to the European Commission: “Consensus should be sought on the accommodation within WTO rules of any trade measures taken pursuant to any multilateral agreement which might be reached regarding welfare standards.”48 However, the position of the EU authorities on this point has “provoked howls of derision in Geneva.”49 As one non-EU negotiator is reported to have said sarcastically: “This is from the people who brought us foie gras, bullfighting and veal crates.”50 In fact, this EU request must be considered as much as a strategic element of the EU negotiating position in the New Round as for either its moral appeal or the concern of the European Union over equal conditions of competition between EU and third country producers. It must also be remembered that divisions may exist among the EU member states themselves on this point, with resistance likely to emanate from the intensive production outfits to be found in Belgium, France, Germany, and the Netherlands.

Millennium Round Communication, supra note 36. European Commission, Directorate-General for Agriculture, Info-Paper, Preparations for the 1999 Ministerial Conference, EC Approach on Agriculture, Communication from the European Communities, 23 July 1999, submitted to the General Council of the WTO by the European Commission, at http://www.europa. eu.int/comm/ trade/2000_round/ecapragr.htm (last visited Dec. 4, 1999). 48 Id. 49 Taylor, supra note 1. 50 Id. 46 47

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U.S. and Cairns Group Opposition to the EU Negotiating Positions The EU negotiating position on agriculture will be met in the course of the New Round with stiff opposition from the United States and the Cairns Group. Forming a fairly united front, these two entities have independently expressed their desire to focus the New Round in large part on trade in agricultural goods. Although both profess a desire to achieve significant progress in this area, the commitment of the members of the Cairns Group appears even greater than that of the United States, given their heavy reliance on revenues from agricultural exports.

U.S. Position in Entering the New Round of Negotiations In preparing for the New Round, the U.S. negotiating position in the context of agriculture is premised on the following general goals: the elimination or equalization of export subsidies (the United States will not consider percentage reductions); the reduction or elimination of tariffs and domestic support programs; the imposition of greater discipline and transparency on state trading enterprises; and expanded market access, strengthening enforcement against unfair market access.51 No specific agricultural sectors can be excluded a priori from the scope of the negotiations in the opinion of the United States, whether, for example, rice in the case of Japan or meat and dairy products in the case of the European Union.52 Beyond the position of the Administration, the Congressional WTO Trade Caucus for Farmers and Ranchers, a bipartisan coalition of U.S. farmstate lawmakers, has called for the complete elimination of export subsidies to remedy the disparity between the United States and the European Union in this context.53 The fact that the members of this group have suggested that the renewal of fast-track authority for the President could be partly predicated upon achieving early progress in the agricultural negotiations is to some degree indicative of the determination within certain circles in the United States to further liberalize trade in agriculture. Any such signs of progress, however, must be weighed against the fact that the United States continues to provide sizeable amounts of direct aid to its farmers. The United States has also clearly stated its intent to oppose the concept of multifunctionality. U.S. Trade Representative Charlene Barshefsky has expressed suspicion for the term, given its nebulous character and

16(41) Int’l Trade Rep. (BNA) 1694-96 (Oct. 20, 1999). 16(42) Int’l Trade Rep. (BNA) 1727-28 (Oct. 27, 1999). 53 Supra note 51. Rep. Michael Simpson (R-Idaho) stated: “The key is going to be export subsidy elimination, or at least equalization, not percentage reductions that only perpetuate our present disadvantage.” Id. 51 52

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elastic definition. In her opinion, “what it adds up to for many countries is a protectionist device, and that’s clearly unacceptable.”54 Many other countries have adopted a position similar to that of the United States on this controversial concept. Finally, the United States is calling for a return to sound science and risk assessment principles, as well as transparency, as the guiding principles governing the adoption of food safety measures and the approval of novel products derived from biotechnology. David Aaron, the U.S. Undersecretary of Commerce for International Trade, has decried the lack of political will within the European Union to remedy the confusion that reigns with respect to the products of biotechnology: “In Europe, biotechnology has gotten mixed up in the public’s mind with dioxin chicken and Mad Cow Disease.”55 He and other U.S. officials have repeatedly urged the European Union to adopt more coherent food safety and biotechnology policies, better safeguarding public health while fostering consumer confidence.

Role of the Cairns Group in the New Round of Negotiations Since the 1986 Uruguay multilateral trade talks, the members of the Cairns Group of Agricultural Fair Traders—nations including Australia, Brazil, Argentina, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand, and Uruguay, all defined and united by the prominent role of agricultural exports in their economies—have vigorously promoted agricultural trade liberalization. Their commitment to fundamental reforms in the area is founded upon the Agriculture Agreement and its goal of achieving “a fair and market-oriented agricultural trading system.”56 The members of the Cairns Group firmly believe that trade in agricultural goods ought to be subjected to the same discipline as trade in other goods. Thus, they have focused their agenda for the New Round on three major elements: (1) domestic support, calling for curbs on domestic agricultural subsidies far in excess of those available to other industries; (2) market access, calling for commercially viable conditions similar to those available with respect to other products; and (3) export subsidies, simply stating that there is “no justification for maintaining export subsidies.” 57 Thus, while these positions generally mirror those of the United States, they are also fundamentally more far reaching. Supra note 52, at 1728. Supra note 7, at 1531. 56 The Cairns Group, Cairns Group ‘Vision’ for the WTO Agriculture Negotiations, at http://www.dfat.gov.au/trade/negotiations/cairnsgroup/vision.html (last visited Dec. 4, 1999). 57 Id. 54 55

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The members of the Cairns Group argue that subsidies have encouraged overproduction of agricultural commodities, outstripping world demand. In arguing that such subsidies have exerted significant downward pressure on the prices of commodities in the global marketplace, reference is made to the $280 billion and $362 billion of domestic support payments made by the Organization for Economic Cooperation and Development (OECD) countries, including the European Union and the United States, to their farmers in 1997 and 1998, respectively. These trends have severe negative repercussions on the economies of countries, such as Argentina and Brazil, whose agriculture and foreign affairs officials have been quite outspoken recently given the large proportion of revenues derived from export sales of agricultural products. Thus, the need to reduce the burden of competition from heavily subsidized agricultural exports, reversing the current downward pull on the prices of agricultural commodities, is central to the negotiating position of the Cairns Group in the New Round. The members of the Cairns Group are also clearly opposed to the concept of multifunctionality. Australian Trade Minister Mark Vaile expressed his frustration shortly before the Seattle Ministerial Meeting over the failure of the European Union and Japan, for example, to offer much in the context of agriculture in return for big demands on other issues. Vaile is reported to have said: “[T]hey are arguing that non-trade concerns should be given as much importance as removing agricultural protection and subsidies. There is no basis for this.”58

DISCUSSION AND CRITIQUE OF THE EU NEGOTIATING POSITION Certain facile generalizations are often made regarding the respective approaches of the European Union and the United States to agriculture, biotechnology, and food safety. Thus, the European Union is usually characterized by its skeptical approach to biotechnology in response to its consumers’ unquestioned preference, without much regard to price, for the safe natural products of its traditional agricultural methods. The United States, on the other hand, is usually characterized by its aggressive reliance on biotechnology to assure productivity and food safety in the face of relative consumer indifference. The reality is much more fluid, however, as these characterizations become increasingly irrelevant in light of evolving global trends in consumer activism and agricultural production. As a result, the European Union may as much be defined by the use of intensive farming techniques and the growth of large food retailing operations within its borders while the situation in the United States is 58

16(45) Int’l Trade Rep. (BNA) 1875 (Nov. 17, 1999).

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being redefined by growing consumer preference for organic products and grass-roots pressure from environmental advocacy groups against biotechnology. Given that the desire for healthful foods at a reasonable price may come as close as any other to being universal, what these developments highlight is the very pressing need for significant international cooperation and discipline in the realm of agricultural production and trade.

Multifunctionality and Animal Welfare In light of the trends and needs currently manifesting themselves in the areas of agriculture and food safety, the invocation of the multifunctionality concept and of animal welfare concerns by the European Union in the New Round is entirely misguided. Setting aside the inherent value of their underpinnings and their unarguably worthy aims, these two principles’ deleterious effect in clouding the substantive issues of the New Round must be acknowledged. Indeed, few foreign negotiators have given the European Union the benefit of the doubt on these points, recognizing them for the bargaining chips they appear to be. In fact, multifunctionality remains open to criticism at a fundamental level. Premised as it is on an idealized view of agriculture within the European Union, multifunctionality does little to promote food safety specifically. While offering direct aids to farmers in compensation for their efforts as environmental stewards and cultural caretakers, multifunctionality does not impose these duties upon them, much less standards of due care with respect to animal and human health. As the influence of market forces on agriculture inexorably and rightfully increases, dictating the terms of agricultural production, only sound scientific analysis can provide the necessary degree of certainty with which to sustain consumer confidence. In hiding behind nebulous concepts, the EU authorities are shirking their responsibility to provide healthful, reasonably priced food to their people.

The Precautionary Principle The crux of the problem then lies in defining the actual degree of certainty acceptable to any given people, at which point the EU authorities invoke the precautionary principle. In refusing to accept reasonable if not statistically insignificant levels of scientific uncertainty, the EU authorities have made clarification of the precautionary principle a cornerstone of their negotiating position on agriculture in the New Round. However, the precautionary principle is arguably already present to the extent necessary in the SPS Agreement. The Appellate Body in the Beef Hormones case concluded that the precautionary principle did not override the relevant provisions of the SPS

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Agreement. The Appellate Body arrived at this conclusion by considering the EC argument that the precautionary principle had become a general rule of customary international law or a general principle of law. After reviewing the opinions of various authorities, however, the Appellate Body found that “the precautionary principle, at least outside the field of international environmental law, still awaits authoritative formulation.” Articles 53 and 64 of the Vienna Convention address the concept of peremptory norms of general international law or jus cogens. Article 53 defines a peremptory norm as “a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character.” Article 64 further provides that any existing treaty that is in conflict with an emerging peremptory norm of general international law becomes void and terminates. However much the precautionary principle may have become a general rule of international environmental law, it cannot yet reasonably be found to satisfy the definition of Article 53, much less to supplant the SPS Agreement in accordance with Article 64. The general rule of treaty interpretation of Article 31 of the Vienna Convention provides guidance in the present case. Article 31(1) states that “[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to terms of the treaty in their context and in the light of its object and purpose.” Thus, the precautionary principle must be considered as incorporated in the SPS Agreement. Any more radical interpretation in contravention of Article 31 would be unjustified absent amendment of the SPS Agreement. The Appellate Body in the Beef Hormones case found reflections of the precautionary principle, inter alia, in the sixth preamble and Articles 5.7 and 3.3 of the SPS Agreement. As a result, the Appellate Body stated that: “These explicitly recognize the right of Members to establish their own appropriate level of sanitary protection, which level may be higher (i.e., more cautious) than that implied in existing international standards, guidelines and recommendations.” Nevertheless, the Appellate Body confirmed in its conclusions that the precautionary principle does not override the explicit wording of Articles 5.1 and 5.2 of the SPS Agreement. Following this reasoning, a reopening of the SPS Agreement to clarify the role of the precautionary principle would be inappropriate. While the European Union has very starkly been shown incapable of shielding its people from risks emanating from within its own borders, it has chosen to capitalize on public misinformation, confusion, and fears in shaping its international stance. Once again, however, the articulation and application of scientific standards and methods, especially within the context of the SPS Agreement, can do much more to address health and consumer protection in concrete terms.

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The SPS Agreement and Beyond Under the terms of the SPS Agreement individual governments have the right to establish their own food safety and animal and plant health standards to the extent these are based on science. Higher sanitary and phytosanitary standards can be imposed given sufficient scientific justification. Invocation of the precautionary principle in itself is clearly insufficient. Given the inherent difficulty in deciding where to draw the line between sound science and questionable evidence, however, the Committee on Sanitary and Phytosanitary Measures (the “SPS Committee”) and its mission should be strongly reaffirmed in the New Round as the focus of efforts in this field. In an attempt to impose discipline, the SPS Agreement encourages governments to base national measures on international standards and guidelines. The work and participation of international organizations, such as the joint FAO/WHO Codex Alimentarius Commission, is instrumental in this context. However, WTO members themselves theoretically can achieve much to promote their own standards and views in their capacity as members of the SPS Committee. Thus, the European Union should be made to recognize the value of constructive participation in the SPS Committee. Assuming they are approached in good faith, the mechanisms of the SPS Agreement appear fundamentally sound enough to resolve a dispute between the United States and the European Union over an issue such as beef hormones. The scientific grounds of the dispute are not controverted, as even the studies initiated by the European Commission apparently will attest. Ultimately, structural factors tend to confirm suspicions as to the protectionist nature of the EU stance. As a result of its continued reticence in the beef hormones context, the European Union has, in fact, lost much credibility. Thus, while the EU authorities have not failed to advocate a multilateral approach to their non-trade concerns for multifunctionality or animal welfare, these proposals are largely falling on deaf ears among negotiators. The desire to see these or other inherently worthy principles still further afield considered and perhaps implemented should induce the European Union to resume a constructive role within established multilateral structures. Good faith participation in the SPS Committee on the part of the European Union would go further toward reestablishing its credibility than its current call for clarification of the precautionary principle by reopening the SPS Agreement itself. Because more problematic health and food safety questions than the use of growth-promoting hormones in beef cattle loom ahead in relations between the European Union and the United States (for example, antibiotics and genetically modified organisms), existing fora for constructive

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discussion on sound scientific bases cannot be undermined. Thus, it might be hoped that, in their imminent proposals on the creation of an EU food safety agency, the EU authorities will muster the political courage necessary to call for an entity with the far-reaching powers needed to confirm the commitment of the European Union to genuine health and consumer protection both within its own borders and internationally. 59

CONCLUSION On the basis of the partial victory it was able to claim in the decision of the Appellate Body in the Beef Hormones case, the European Union was able to renew its reliance on the precautionary principle in the context of food safety and plant and animal health issues. Thus, while failing to comply with the decision of the Appellate Body in anticipation of seemingly inconclusive or even unfavorable studies, the EU authorities have called for no less than the reopening of the SPS Agreement in the New Round of multilateral trade negotiations, capitalizing on public misinformation by invoking external food safety threats. This negotiating position, to which the EU authorities have added the other non-trade concerns of mutifunctionality and animal welfare, risks undermining not only the agricultural trade negotiations that were to have been one of the centerpieces of this New Round but also the credibility of the WTO itself in the present climate of opposition thereto. The speedy creation of an EU food safety agency enjoying broad powers within and on behalf of the European Union (as the primary EU representative in the SPS Committee, for example) could presently do much to remedy the situation.

59 Renée Cordes, Commission Plans Radical Overhaul of Food Safety Laws, EUROVOICE, Dec. 9–15, 1999, at 1. “Consumer Protection Commissioner David Byrne and his enterprise counterpart Erkki Likkanen will unveil plans to plug the gaps in more than 80 pieces of EU food safety law in the institution’s most eagerly-awaited and potentially most controversial policy initiative so far. The full Commission is due to approve the proposals at its last meeting before the Christmas break on 22 December.” Id.

PEAN

CHAPTER 11

FINE-TUNING WTO JURISPRUDENCE AND THE SPS AGREEMENT TO IMPROVE TRADE INTEGRATION AND HARMONIZATION Regine Neugebauer*

INTRODUCTION In 1989, the European Economic Community (the EC)1 implemented Council Directive 96/22, a law prohibiting the import of beef treated with growth hormones.2 Specifically, as amended in 1996, the directive “prohibits the administration of certain growth promoting hormones to farm animals, bans the sale of domestic and imported meat from animals that received these hormones, and allows an exception for meat from animals that received hormone treatment for therapeutic and zootechnical purposes.”3 The ban includes three synthetic hormones, trenbolone acetate (TBA), zeranol, and melengestrol acetate (MGA), and three natural hormones, oestradiol-17 beta, progesterone, and testosterone.4 It is widely recognized that there is little scientific evidence supporting this ban. 5 Since the 1950s, the many studies that have been done worldwide regarding the health impact of these hormones, including those of the EC, have indicated that the proper administration of these hormones presents “no * A version of this chapter appears as a note in 31 L AW P OL’Y I NT’L B US. 1255 (2000). 1 In 1992, the European Economic Community (EEC) became the European Community (EC).. 2 Steve Charnovitz, The World Trade Organization, Meat Hormones, and Food Safety, 14 INT’L TRADE REP. 1781, 1781 (1997). 3 Layla Hughes, Note, Limiting the Jurisdiction of Dispute Settlement Panels: The WTO Appellate Body Beef Hormone Decision, 10 GEO. INT’L ENVTL. L. REV. 915–42, at 917 (1998). 4 David A. Wirth, International Decisions: European Communities—Measures Concerning Meat and Meat Products, 92 AM. J. INT’L L. 755–95, AT 755 (1998). 5 See Charnovitz, supra note 2, at 1781.

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indications of a possible human health risk.”6 In 1996, the United States and Canada filed complaints against the EC import ban with the World Trade Organization (WTO) under the recently implemented Agreement on the Application of Sanitary and Physotanitary Measures (the “SPS Agreement” or “Agreement”).7 On August 16, 1997, a WTO dispute settlement panel (the “Panel”) issued its report, finding that this EC ban violated the SPS Agreement.8 In particular, it found that the EC ban was neither based on a risk assessment nor based on existing international standards.9 The EC appealed this ruling. The WTO Appellate Body (the “Appellate Body”) released its opinion on January 16, 1998. It agreed with the Panel’s finding that SPS measures must be warranted by an appropriately conducted risk assessment, and that the EC hormone ban was not based on such a risk assessment. However, in disagreement with the Panel, the Appellate Body found that the hormone ban was not inconsistent with international standards.10 In the last decade, much has been written about the EC hormone ban, and the Panel’s and the Appellate Body’s decisions have been repeatedly analyzed—and criticized. The commentators who favor greater trade liberalization and harmonization of SPS standards critique the Appellate Body’s ruling as having taken much of the SPS Agreement’s thunder and reducing it from a powerful mandate into a precatory suggestion. The greater number of commentators have questioned and critiqued the SPS Agreement as insufficient to deal with global environmental issues. Though they generally breathed a sigh of relief at the Appellate Body’s overruling of the much more strident interpretations by the Panel, these commentators claim that this case has proved just how incapable the WTO is of dealing with cases that involve complex scientific and greater environmental issues. This chapter argues that the SPS Agreement was not drafted with the intent of being an environmental treaty, and that concern about it weakening member countries’ ability to protect the environment is misplaced. Further, harmonization of SPS standards is a worthy goal that should be pursued. While the SPS Agreement is not perfect, and its force has been weakened by the WTO Appellate Body’s ruling in the Beef Hormones case, it is still the best tool the WTO has to further the goal of harmonization. The WTO Dispute Settlement Body, like any domestic court, is able to 6 Dale E. McNeil, The First Case Under the WTO’s Sanitary and Phytosanitary Agreement: The European Union’s Hormone Ban, 39 VA. J. INT’L L. 89, at 107 (1998) (quoting language from the final report of the Scientific Conference on Growth Promotion in Meat Production sponsored by the EC in 1995). 7 Hughes, supra note 3, at 917. 8 McNeil, supra note 6, at 91. 9 Id. 10 Id at 92.

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handle cases involving complex issues, scientific or otherwise. Establishing a series of common-sense guidelines for dispute resolution panels and the Appellate Body for dealing with complex scientific or technical evidence will enable the WTO to develop a body of jurisprudence that correctly interprets and supports the aims of the SPS Agreement. Other than developing such guidelines, as well as fine tuning the SPS Agreement, both through amendments to the Agreement itself and through WTO jurisprudence, the status quo should be maintained. The following section of this chapter describes the aims and provisions of the SPS Agreement and the international organizations responsible for developing the relevant international standards. The next section describes the Appellate Body’s analysis of the SPS Agreement in the context of the Beef Hormones dispute. The next section sets out suggestions of how the Appellate Body might have more properly addressed the concerns of the SPS Agreement. A final section suggests ways in which future WTO jurisprudence, as well as the SPS Agreement itself, could be improved.

THE SPS AGREEMENT The Aims of the SPS Agreement The SPS Agreement entered into force on January 1, 1995, along with, and as part of, the establishment of the WTO.11 By accepting the WTO Agreement, member states also agreed to be bound by the rules of the SPS Agreement, one of the multilateral trade agreements attached to the WTO Agreement.12 The WTO itself describes the basic aim of the SPS Agreement as follows: “to maintain the sovereign right of any government to provide the level of health protection it deems appropriate, but to ensure that these sovereign rights are not misused for protectionist purposes and do not result in unnecessary barriers to international trade.”13 “During drafting, the negotiators of the SPS Agreement looked at the EU ban on imports of beef produced from cattle administered growth hormones as a prototypical example,”14 one negotiator has stated. In fact, the agreement was negotiated as a response to, and against a background of, the ongoing EC-U.S. beef hormone dispute,15 and it was anticipated 11 Understanding the WTO Agreement on Sanitary and Phytosanitary (SPS) Measures, available at http://www.wto.org/wto/goods/spsund.htm (last visited Sept. 21, 1999) [hereinafter “Understanding the SPS Agreement”]. 12 Understanding the SPS Agreement, supra note 11. 13 Id. 14 McNeil, supra note 6, at 90–91. 15 Wirth, supra note 4, at 756.

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that the beef hormone ban would become the test case for this new Agreement.16 The SPS Agreement was primarily designed to be an instrument of trade liberalization. It was not meant to be an environmental treaty, and various commentators’ call for a “greening” of the SPS Agreement is wholly inappropriate and shows a lack of understanding for the underlying issues.17 It was felt, at the time of negotiating the Agreement, that determining the acceptable levels of risk was a completely political decision, and that each member nation should be able to determine these levels with completely sovereignty. 18 This sentiment is also expressed within the Agreement itself. The SPS Agreement’s basic requirement is that there be scientific evidence showing that a risk actually exists. In order to promote the harmonization of member states’ SPS measures, the SPS Agreement mandates a greater reliance on the “international standards, guidelines and recommendations developed by the relevant international organizations, including the Codex Alimentarius Commission, the International Office of Epizootics, and the . . . International Plant Protection Convention.”19 The Codex Alimentarius Commission (the “Codex”) is the organization specifically responsible for standards, guidelines and recommendations regarding food safety.

Provisions of the SPS Agreement Article 2.2 is in many ways the linchpin of the SPS Agreement.20 It plainly and unambiguously confers on member nations the obligation to “ensure that any sanitary or phytosanitary measure is . . . based on scientific principles and is not maintained without sufficiently scientific evidence.” 21 (Emphasis added.) Article 3.1 imposes on member states the further obligation to “base their sanitary and phytosanitary measures on international standards, guidelines or recommendations, where they exist.”22 However, it allows members to use an “escape provision” found in Article 3.3.

16 Interview with Dale E. McNeil, Esq., in Washington, DC (Oct. 25, 1999) [hereinafter “Interview with Mr. McNeil”]. 17 Interview with Kevin Brosch, in Washington, DC (Oct. 27, 1999) [hereinafter “Interview with Mr. Brosch”]. 18 Id. 19 Agreement on the Application of Sanitary and Phytosanitary Measures, GATT Doc. MTN/FA II-A1A-4, Preamble (Jan. 1, 1995) available at http://www.wto. org/wto/goods/ spsagr.htm (last visited Jan. 19, 2000) [hereinafter “SPS Agreement”]. 20 Interview with Mr. Brosch, supra note 17. For a general discussion, see also McNiel, supra note 6. 21 SPS Agreement, supra note 19, art. 2.2. 22 SPS Agreement, supra note 19, art. 3.1.

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This was meant to be the main provision of the Agreement to promote greater harmonization with international standards, and was meant to be a strong mandate.23 The reason the negotiators chose the phrase “based on,” rather than “conform to,” one commentator who had been intimately involved in the negotiations tells us, was “to allow minor differences in national standards stemming from differences in national diets.”24 For instance, if a country’s diet staple is rice, then that country might set its allowable residue levels for pesticides used in the cultivation of rice higher than the Codex Alimentarius standard, if the Codex standard is based on global, rather than regional, data.25 Article 3.3 allows members to maintain SPS measures that “result in a higher level of sanitary or phytosanitary protection” than those based on international standards, “if there is a scientific justification,” and if the member has conducted a risk assessment according to the guidelines of Article 5.26 This article further admonishes that measures cannot be inconsistent with any other provisions of the Agreement.27 (This would include, for instance, Article 2.2.) This is the “escape provision” added in the negotiations surrounding this treaty to accommodate instances where a member country feels compelled to run its own, separate scientific studies and risk assessment, either because its administrative agencies have their own testing procedures, or to take cultural perceptions into account.28 For instance, the U.S. Food and Drug Administration (FDA) has its own procedures and data requirements that do not allow it to use the scientific evaluation procedures performed by the Codex Alimentarius.29 This is not an indication of lack of confidence in the procedures performed by the Codex but merely an incompatibility between the form of the data used by each organization.30 This provision was also meant to apply in cases where the relevant international organization has not recently reviewed its standard at issue (reviews take place every eight years), and in the meantime additional scientific research has shown that the substance in question may pose a greater health risk than the organization’s standards reflect.31 Interview with Mr. McNeil, supra note 16. McNeil, supra note 6, at 122. 25 See McNeil, supra note 6, at 122–23. This article also contains a valuable discussion of Codex standards and procedures. 26 SPS Agreement, supra note 19, art. 3.3. 27 SPS Agreement, supra note 19, art. 3.3. 28 Interview with Mr. Brosch, supra note 17. 29 Id. 30 Id. For administrative and budgetary reasons, it appears that efforts to harmonize the procedures of some U.S. administrative agencies with those of the relevant international agencies are progressing very slowly. 31 Interview with Mr. Brosch, supra note 17. 23 24

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Article 5 imposes disciplines regarding two primary issues: risk assessment (Articles 5.1–5.3) and risk management—i.e., determining appropriate levels of sanitary protection (Articles 5.4–5.6).32 It also has a provision (Article 5.7) for instances of insufficient scientific evidence. Article 5.1 mandates that SPS measures must be based on an assessment of the “risk to human . . . life or health,” “as appropriate to the circumstances.”33 Article 5.2 lists factors to be taken into account when conducting a risk assessment. The text’s “shall” indicates that this is a mandatory list. Many commentators believe that this is a closed list but that each factor listed can, but does not have to, be taken into account.34 There is also the opposite view (in my opinion correct) that these factors must be taken into account, but that whether other factors (such as cultural preferences, societal value judgments, or consumer concerns) may also be considered is not indicated.35 The Beef Hormones case may have provided an answer to this question (see discussion in the next section below), at least until the SPS Agreement is modified to clarify this point. Article 5.4 urges members to remember to minimize negative trade effects. Article 5.5 mandates that “each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade.”36 Article 5.7 provides guidance for circumstances where “scientific evidence is insufficient.” This language is broad enough to include many situations, for instance where an international standard has not yet been developed; where there are conflicting scientific theories, each supported to a similar degree; or where simply not enough information is available.37 Annex A defines “international standards, guidelines and recommendations” pertaining to food safety to be those “established by the Codex Alimentarius Commission relating to food additives, veterinary drug and pesticide residues, contaminants, methods of analysis and sampling, and codes and guidelines of hygienic practice.”38

32 See David Hurst, Hormones: European Communities—Measures Affecting Meat and Meat Products, 9 EUR. J. INT’L L., 182 (1998), available at http://www.ejil.org. 33 SPS Agreement, supra note 19, art. 5.1. 34 See Joost Pauwelyn, The WTO Agreement on Sanitary and Phytosanitary (SPS) Measures as Applied in the First Three SPS Disputes: EC-Hormones, Australia-Salmon and JapanVarietals, 2 J. INT’L ECON. L. 641, (1999) available at http://www.oup.co.uk/jielaw. 35 Id. 36 SPS Agreement, supra note 19, art. 5.5. 37 Interview with Mr. Brosch, supra note 17. 38 SPS Agreement, supra note 19, Annex A.3(a).

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It further defines risk assessment as “the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs.”39

The “Relevant International Organization”40 In 1962, the UN Food and Agriculture Organization (FAO) and the World Health Organization (WHO) created the Codex Alimentarius Commission as a joint undertaking.41 It currently has 165 member countries.42 The Commission’s dual mission consists of “protecting the health of the consumers and ensuring fair practices in the food trade.”43 Most WTO members belong to this international organization.44 For various veterinary drugs, the Codex establishes Acceptable Daily Intakes (ADIs) and Maximum Residue Limits (MRLs).45 An ADI for a substance is the amount of that drug that may be safely ingested during a lifetime without appreciable health risk. The corresponding MRL is the limit of the drug residue in food to prevent the ADI from being exceeded.46 The delegates of member countries vote on the standards to be promulgated by the Codex. This vote can be open or secret. Generally, the delegates are scientists employed by their member state governments.47 Codex has stated that no limits are necessary for the three natural hormones at issue in the Beef Hormones dispute, since their use does not present a health hazard. This effectively establishes a “no limit” residue standard.48 Codex also released standards for two of the synthetic hormones, TBA and zeranol,49 but not for MGA. These standards were adopted via a secret vote, with 33 votes in favor, 29 votes opposing them, and seven abstentions. 50 The split occurred directly along “party lines,” with the 39

Id. For a thorough discussion of the relationship between the SPS Agreement, the WTO and the Codex, see Terence P. Stewart & David S. Johanson, The SPS Agreement of the World Trade Organization and International Organizations: The Roles of the Codex Alimentarius Commission, the International Plant Protection Convention, and the International Office of Epizootics, 26 SYRACUSE J. INT’L L. & COMM. 27–53 (1998). 41 Wirth, supra note 4, at 757. 42 Codex Alimentarius Commission, Latest News, at http://www.fao.org/WAICENT/FAOINFO/ECONOMICS/ESN/codex/lnews.htm (last visited Oct. 30, 1999). 43 Wirth, supra note 4, at 757. 44 See Hurst, supra note 32. 45 Id. 46 Id. 47 See Stewart & Johanson, supra note 40, at 28. 48 See Hurst, supra note 32. 49 Id. 50 Id. 40

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United States and other beef-producing nations voting in favor of the standards and EC member nations as well as other European nations opposing the standards.51 The Codex was further involved in the Beef Hormones proceedings before the WTO in that it provided names of possible experts to the Panel, and one scientist from the Codex’s Secretariat did serve as an expert to the Panel. 52 Because of the SPS Agreement’s reliance on Codex standards, there is a fear that the Codex, as well as the International Office of Epizootics (OIE) and the International Plant Protection Convention (IPPC), will become increasingly politicized. Possibly its processes and procedures will have to be reviewed in the future in light of this trend illustrated by the events regarding the adoption of beef growth hormone standards.

THE APPELLATE BODY’S TREATMENT OF THE SPS AGREEMENT IN THE BEEF HORMONES DECISION Analysis Under Article 3 Article 3.1. The Appellate Body reversed the Panel’s interpretation of “based on” as meaning the same thing as “conform to” (as had been the negotiators’ intent53). It failed to specify what “based on” means, but suggested that a measure was based on an international standard if it adopted some, but not necessarily all, of the elements of that standard.54 It thus weakened the impact envisioned by the negotiators. “[T]he Appellate Body’s interpretation of Article 3.1 . . . gutted the mandatory language that members ‘shall base’ their sanitary or phytosanitary measures on existing international standards. . . . As a consequence, it would appear that one of the central features of the SPS Agreement—the obligation to base SPS measures on existing international standards—has been converted into an idealistic but wholly unenforceable objective,”55 laments one commentator. This unfortunate effect is compounded by the Appellate Body’s view of the relationship between Articles 3.1, 3.2, and 3.3. The Panel had labeled Articles 3.1 and 3.2 as the “general rule” and Article 3.3 the “exception.”56 The Appellate Body negated this and accorded equal weight to the two mandates, asserting that they applied in different circumstances.57 51

Interview with Mr. McNeil, supra note 16; Interview with Mr. Brosch, supra

note 17. See Stewart & Johanson, supra note 40, at 33. Interview with Mr. McNeil, supra note 16. 54 See McNeil, supra note 6, at 123. 55 Id. 56 See Report of the Appellate Body: EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, para. 19 (Jan. 16, 1997), available at http://www.wto.org/dispute/hormab.wp5 (last visited Jan. 19, 2000) [hereinafter “Appellate Body Report”]. 57 See id., paras. 169–172. 52 53

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It therefore never attempted an analysis of whether the EC’s hormone ban was actually based on international standards. Though this leaves member states without current guidance, it may be fortunate in the long run. A future panel’s analysis of Article 3.1 may provide clearer guidance as to what a country must do to conform to this article and will hopefully interpret this article as strictly as possible under the analysis conducted by the Beef Hormones Appellate Body. Article 3.3. The Appellate Body interpreted Article 3.3 to mean that measures not based on international standards need scientific justification and need to comply with Article 5 (i.e., implementing member states must conduct a risk assessment).58 It then continued with an analysis of Article 5.

Analysis Under Article 5 Article 5.1. The Appellate Body interpreted the requirement that health measures had to be based on a risk assessment as meaning that there had to be a rational relationship between the two.59 Since the EC’s ban was clearly not based on a risk assessment, the Appellate Body did not outline the contours of this rational relationship test in any meaningful way.60 It further overruled the Panel’s procedural requirement that a defending country had to show that a risk assessment was considered at the time the disputed measure was being created. Instead, the Appellate Body held that all that was required was an objective relationship between the two, an “objective situation that persists and is observable between an SPS measure and a risk assessment.”61 Thus, the requirement of Article 5.1 is met if the conclusions of the SPS measure and of the risk assessment are comparable. Whether the implementing member actually considered the risk assessment at the time of implementation has become irrelevant.62 As long as the member can find scientific evidence when the measure is disputed, it is presumed that such evidence was considered at the time the measure was developed.63 This has given rise to concern that, in future disputes, a defending state need only find one scientist willing to assert that the substance protected against does pose a health hazard in order to comply with Article 5.1.64 However, whether this scenario would actually ever come to pass is highly doubtful, especially if the WTO were to adopt some guidelines for dealing with scientific evidence similar to the ones outlined below. 58 59 60 61 62 63 64

See Hurst, supra note 32. Id. Id. Appellate Body Report, supra note 56, para. 189 (emphasis in original). See Hurst, supra note 32. Id. See McNeil, supra note 6, at 93.

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Article 5.5. Both the Panel and the Appellate Body broke Article 5.5 into three requirements: (1) different levels of protection in different situations; (2) the differences are “arbitrary or unjustifiable;” and (3) the differences result in “discrimination or disguised restriction on international trade.”65 Under the first requirement, the Panel found three comparable situations. Since it found that the first situation violated the second prong, the Panel stopped its analysis there. The Appellate Body went on to analyze all three situations. 1. Natural and synthetic hormones administered for growth vs. natural hormones occurring endogenously in meat. The Panel had cited five reasons for finding that the distinctions were arbitrary. The Appellate Body dismissed the Panel’s reasoning without explanation, and found that the difference was not unjustifiable, because it is possible to eliminate growth hormones but not to eliminate naturally occurring hormones. It did not explain why its one reason overruled the Panel’s five reasons. Thus, analysis under Article 5.5 has become a subjective inquiry and, in future cases, will depend “entirely on the body making the evaluation.”66 2. Natural hormones administered for growth vs. natural hormones administered for therapeutic or zootechnical purposes. The Appellate Body discussed two of the EC’s arguments without explaining how it weighed them. It found that the distinction was not arbitrary. 3. Natural and synthetic hormones administered for growth vs. carbadox and olaquindox administered for growth. (Carbadox and olaquindox are anti-microbial agents fed to piglets.67) Without providing any analysis, the Appellate Body upheld the Panel’s finding that the differences in protection in this scenario were arbitrary and unjustifiable. As one commentator puts it, “[t]he Appellate Body has adopted a ‘we know it when we see it’ stance . . . such an approach provides no guidance to the parties. . . . There is simply no way to predict what a panel or the Appellate Body will find to be ‘arbitrary or unjustifiable.’” 68

65 66 67 68

See Hurst, supra note 32. Id. Appellate Body Report, supra note 56, para. 226. Hurst, supra note 32.

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The Appellate Body then went on to find that the third requirement of Article 5.5—discrimination or a disguised restriction of trade—had not been met. It focused on the second half of this prong, a subjective test, and restricted itself to an inquiry into what the intent of the EC had been. It ignored that the objective test—discrimination—does not call for an inquiry of intent, only an analysis of the objective effect of the measure. This reasoning appears to condone measures that, though they are arbitrary and discriminatory, are imposed out of purely political concerns. 69

Regarding Risk Assessment Article 5 lists a number of factors that “shall” be taken into account when conducting the risk assessment and when determining what measure to apply in order to achieve the appropriate level of protection from that risk.70 The SPS Agreement itself is silent on whether this is a closed list, but the Appellate Body indicated that it was not. It found that there is nothing to indicate that the listing of factors that may be taken into account in a risk assessment of Article 5.2 was intended to be a closed list. . . . [T]he risk that is to be evaluated . . . under Article 5.1 is not only risk ascertainable in a science laboratory operating under strictly controlled conditions, but also risk in human societies as they actually exist, in other words, the actual potential for adverse effects on human health in the real world where people live and work and die.71 Thus, the Appellate Body opened the door to including such factors as cultural preferences and societal values in the risk assessment for SPS measures. The Panel and Appellate Body made several findings regarding risk assessments: 1.

69 70 71 72 73 74

Risk assessments must be specific.72 This may entail more stringent requirements than those textually supported by the SPS Agreement.73 For instance, studies had to focus on particular hormones rather than the categories or classes of hormones. Also, the studies could not just focus on hormone residues in meat but on particular hormones used to promote growth.74 Id. SPS Agreement, supra note 19, arts. 5.1–5.8. Appellate Body Report, supra note 56, para. 187. See Pauwelyn, supra note 34. See Hurst, supra note 32. Id.

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Reconciling Environment and Trade All risks must be included in risk assessment. For instance, all threats to human health, including “matters not susceptible of quantitative analysis by the empirical or experimental laboratory methods,” should be taken into account,75 as well as “risks arising from failure to comply with the requirements of good veterinary practice” and from “difficulties of control, inspection and enforcement of the requirements of good veterinary practice.”76 Because the EC did not present evidence regarding this risk scenario, the Appellate Body ruled that the EC had not conducted such a risk assessment.77 No minimum level of risk is required before a risk assessment can be considered to be in compliance with Article 5.1.78 This recognizes that a panel may not judge the substantive merits of an SPS measure. However, an unquantifiable or theoretical amount of risk stemming from the possibility of unknown factors is not enough. The risk, however small, must be identifiable.79 Minority science may be used to support risk assessments.80 However, whether a minority viewpoint is sufficient to support a risk assessment remains to be determined on a case-by-case basis. This point is discussed in more detail below. The member country that implemented the SPS measure does not necessarily need to conduct its own risk assessment. Risk assessments carried out by another member state or an international organization may provide sufficient objective justification for the measure being challenged.81

Regarding Scientific Standards 1. In paragraph 198, the Appellate Body discussed the opinions expressed by Dr. George Lucier,82 one of the scientists convened by the Panel. Dr. Lucier stated that he believed the use of growth hormones might increase the risk of breast cancer in women by up to one in one million.83

75 See Hurst, supra note 32, quoting from Appellate Body Report, supra note 56, para. 187. 76 Appellate Body Report, supra note 56, para. 205. 77 See Hurst, supra note 32. 78 Id. 79 Id. 80 Id. 81 See Appellate Body Report, supra note 56, para. 190. See also Pauwelyn, supra note 34. 82 Dr. Lucier was the head of the Environmental Toxicology Programme of the National Institute of Environmental Health Sciences. See McNeil, supra note 6, at 117. 83 See Appellate Body Report, supra note 56, para. 198.

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The Appellate Body, as the Panel before it, refused to give this opinion any weight. However, it did so in a somewhat ambiguous manner. It stated: [T]his opinion . . . does not purport to be the result of scientific studies . . . focusing specifically on residues of hormones in meat from cattle fattened with such hormones. Accordingly, it appears that the single divergent opinion expressed by Dr. Lucier is not reasonably sufficient to overturn the contrary conclusions reached in the scientific studies referred to by the European Communities that related specifically to residues of the hormones in meat from cattle to which hormones had been administered for growth promotion84 [emphasis added]. This statement can be interpreted in two ways. The more obvious conclusion is that this stance does not leave defending member countries unlimited leeway in their selection and reliance on any scientific evidence they choose. It seems to “clearly indicate that a WTO Member maintaining a purported SPS measure must be able to adduce evidence that prominent scientists would accept as scientific.” 85 However, a different interpretation is possible. At least one commentator has noted that this opinion “strongly implies that if Dr. Lucier’s estimate had met the requirements for a risk assessment, then the estimate would have been sufficient to support the EC’s measures.”86 This leads to the inference that a single minority opinion may be sufficient to support a health measure in spite of a tremendous body of mainstream scientific opinion to the contrary.87 How this issue will be resolved remains to be seen. Here, also, adopting some guidelines for evaluating scientific evidence would forestall such an irrational result as the second interpretation envisions. 2. The Appellate Body accepted the Panel’s failure to analyze and reach a decision regarding whether the EC import ban violated Article 2, the Agreement’s core requirement.88 The Panel stated that it did not reach this issue, since it had found violations of Articles 3 and 5 of the Agreement.89 The Appellate Body, though it wondered at this decision,90 Id., para. 198. McNeil, supra note 6, at 118. 86 Hurst, supra note 32. 87 Id. 88 McNeil, supra note 6, at 118. 89 See Report of the Panel: EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/R/USA, para. 8.271 (Aug. 18, 1997), available at http://www.wto.org/wto/dispute/horm1.wpt.htm (last visited Jan. 19, 2000). See also McNiel, supra note 6, at 119. 90 “We are, of course, surprised by the fact that the Panel did not begin its analy84 85

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stated that “the further analysis of . . . [Article 2] should await another case.”91 This avoidance of making a strong statement that an SPS measure must be “based on scientific principles” and “not maintained without sufficient scientific evidence,”92 regardless of the existence or nature of any risk assessment performed, was shortsighted and unfortunate. A clear statement in this case would have sent a stronger message to member countries about the obligations they have assumed regarding their development of health measures while promoting the aims of the SPS Agreement, and might thus have prevented at least to some extent future dispute. Given the repeated and extensive scientific evidence that overwhelmingly supported the proposition that growth hormones are safe additives, generated by the EC’s scientists as well as scientists around the world,93 the Panel could and should have found that the EC hormone ban was not based on scientific principles and not maintained with sufficient scientific evidence—and thus in violation of Article 2.2 of the SPS Agreement. Its failure to do so, approved by the Appellate Body, raised grave doubts in some quarters of the world trade community about the WTO’s ability to handle complex cases involving scientific issues.94 At least, however, the Appellate Body did not close the door to such future affirmative action. Since the Appellate Body found that, had the EC measure not violated Article 5.1, it would have been necessary to proceed to an analysis of Article 2.2,95 it has left the door open to a future finding that an SPS measure is in violation of the SPS Agreement because of non-conformance with Article 2. In fact, the language of Appellate Body Report paragraph 250 suggests that an analysis under Article 2 should be the first step in the next Panel decision involving the SPS Agreement.

Procedural Points Retroactivity The Appellate Body found that the disciplines of the SPS Agreement apply to SPS measures that were implemented prior to the Agreement entering into force and that are still in force.96 This means that WTO memsis of this whole case by focusing on Article 2 that is captioned “Basic Rights and Obligations,” an approach that appears logically attractive.” Appellate Body Report, supra note 56, para. 250. 91 Appellate Body Report, supra note 56, para. 250. 92 SPS Agreement, supra note 19, art. 2.2. 93 See McNeil, supra note 6, at 119. For a detailed discussion of the scientific evidence in this case, see generally McNeil, supra note 6. 94 See McNeil, supra note 6, at 119. 95 Appellate Body Report, supra note 56, para. 250. 96 Id., paras. 128–130.

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bers will need to review existing SPS measures to ascertain that they are in compliance with the Agreement.97

Precautionary Principle The Appellate Body found that the precautionary principle does not override the provisions of Articles 5.1 and 5.2 of the Agreement98 and that it was not meant to be a ground for justifying SPS measures that otherwise would violate particular provisions of the Agreement. Furthermore, it was reflected in certain other provisions, for instance Article 5.7.99

Burden of Proof The Appellate Body reversed the Panel’s holding regarding the parties’ burden of proof, and allocated it along “traditional” lines: The complaining party has the initial burden to establish a prima facie case of violation of a provision of the SPS Agreement by the SPS measure complained about. If that burden is met, the defending party has the burden of refuting this inconsistency.

Standard of Review Since the SPS Agreement does not set out an appropriate standard of review of WTO panel decisions,100 the Appellate Body found that Article 11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) applied to the Panel’s fact-finding activities. The applicable standard of review was somewhere between de novo review and total deference: “the objective assessment of the facts.”101 For legal questions, it held that the Panel was under an obligation to use the customary rules of interpretation of international law. Here, too, the DSU applies. The standard of review for legal questions is thus “an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements.”102

HOW COULD THE DISPUTE SETTLEMENT BODY HAVE STRENGTHENED THE SPS AGREEMENT As its first step, the Panel and Appellate Body should have analyzed the EC’s hormone ban under Article 2.2. In this particular case, the ban 97 98 99 100 101 102

See Pauwelyn, supra note 34. Appellate Body Report, supra note 56, para. 125. Id., para. 124. Id., para. 114. Id., para. 117. (Internal quotation marks omitted.) Id., para. 118. (Internal quotation marks omitted.)

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was obviously enacted without any scientific justification and in the face of overwhelming scientific evidence. It would have been very easy for the Panel to find that the ban violated Article 2.2. This might have obviated the necessity to continue with an analysis of the rest of the Agreement— surely more in keeping with the principles of judicial economy that kept the Appellate Body from evaluating Article 2.2 in the actual case. This would have reinforced the member states’ intent to make this article the Agreement’s anchor when they were creating it. Also, since there was overwhelming scientific support for the contention that hormone-treated beef is safe, such a holding would have left ample room for different holdings in future, much closer, decisions. In fact, such a finding would merely have defined the outer limits of SPS jurisprudence, and have left the shaping of “gray area” issues to future disputes. The Appellate Body should have upheld the Panel’s opinion regarding the relationship of Articles 3.1 and 3.3. It was the intent of the creators of the SPS Agreement to impose a serious obligation on member countries to base their SPS measures on international standards, but the Appellate Body’s holding reduced the negotiators’ efforts to stimulate harmonization to nothing more than wishful thinking. The Appellate Body should have upheld the Panels’ interpretation of “based on” in Article 3.1. As explained above, the Panel’s holding that “based on” is equivalent to “conform to” is much closer to the intent of the drafters of the Agreement. Since it redefined “based on” in Article 3.1, the Appellate Body should have continued its analysis of whether the EC ban met this requirement. This would have fleshed out the contours of the requirements necessary to establish this “rational relationship” between a measure and the international standard. Instead, member countries thinking of implementing new health measures are left with a few vague hints at what they have to do to base their measures on international standards. When analyzing the hormone ban in light of Article 5.1, the Appellate Body should have left the Panel’s procedural requirement intact. This would have provided more of an incentive for member countries to conduct and consider risk assessments during the process of establishing health measures. As it stands now, until a country finds itself actually before a WTO panel, there is no need for it to go through the effort. In its analysis of the hormone ban in light of Article 5.5, the Appellate Body should have focused more on the objective requirement of Article 5.5 and less on the subjective requirements. By ignoring the objective part—that a measure is not in compliance if it results in discrimination, regardless of intent in enacting it—the Appellate Body has allowed the European Union to squeeze out from under its obligations by hiding behind its sovereign right to humor the (irrational) fears of its citizens.

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By signing the SPS Agreement, WTO members have voluntarily bound themselves to observe the obligations imposed thereby. This analysis, however, will allow a future defending member state to justify an SPS measure that results in de facto discrimination by citing intentions it possibly might have had during implementations, whether they were actual reasons for the measure or not. By relying on the objective criterion, the Appellate Body would have given member countries more guidance for drafting future health measures. Plus, using an objective standard would allow future WTO panels to make rulings that address de facto discrimination while avoiding the appearance of not having a deferential enough attitude toward national legislation, as an intent-based analysis is liable to do.103 When reviewing the distinctions in levels of protection in different situations, vis-à-vis the comparison between growth hormones and endogenous hormones, the Appellate Body should have upheld the Panel’s reasoning and finding that the distinctions were arbitrary and unjustifiable. Further, in its review of the three comparison situations outlined by the Panel, it should have given more explanations about why it ruled as it did.

WHY “FINE-TUNING” RATHER THAN A MAJOR OVERHAUL OF THE SYSTEM IS APPROPRIATE Rather than creating a whole new organization to hear cases under the SPS Agreement, or amending this Agreement by “greening” it, or adopting any of the other more or less radical measures proposed by some of the environmentally-conscious commentators,104 the WTO should leave the SPS Agreement intact, and also continue to hear cases involving SPS measures. The adjustments necessary to further promote the WTO’s goal of harmonization through the SPS Agreement can be achieved through carefully-crafted future WTO jurisprudence and small adjustments to the Agreement itself.

WTO Jurisprudence: Analysis Under Article 2.2 Since, as discussed above, Article 2.2 is the most important discipline of the SPS Agreement,105 any future case brought under this agreement should include an analysis of whether the SPS measure in question violates this provision. The first steps towards a body of jurisprudence regarding the provisions of Article 2.2 have already been taken in the Japan-Varietals case.106 103 See John H. Jackson, Dispute Settlement and the WTO, 1 J. INT’L ECON L. 329, at 342 (1998) for a discussion of why deference toward national governments may be beneficial for the WTO in the long run. 104 See, e.g., Hughes, supra note 3, and Charnovitz, supra note 2. 105 Interview with Mr. Brosch, supra note 17. 106 See Pauwelin, supra note 34.

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The Appellate Body found that an SPS measure maintained with sufficient scientific evidence required “a rational or objective relationship between the SPS measure and the scientific evidence.”107 Whether this has been met, the Appellate Body held, will have to be determined on a case-by-case basis and will depend on the circumstances of each case.108 It remains for future decisions to underline the importance of Article 2.2—that any SPS measure, regardless of risk assessment performed, has to be based on sufficient scientific evidence. The future panels can use the techniques described below to assess whether this is the case in the particular circumstances before them.

WTO Jurisprudence: Analysis Under Article 3.1 While the Appellate Body was extremely vague about what “based on” means, it did hint at a much less than identical relationship between a measure and a standard. A future panel should examine the issue of whether a measure complies with Article 3.1, possibly even translating the Appellate Body’s very general guidance into hard numbers. For instance, at what point does divergence become so great that the measure is no longer based on the standard? At 5–10% difference? 20–30% difference? 50% difference? At least some absolute minimum and maximum levels should be established. These would include the cut-off divergence level up to which divergence is automatically small enough to leave the “based on” holding intact and the point at which divergence has become too great to find that any measure was “based on” the standard. The vast gray area in between should be left for a case-by-case determination.

Scientific Interpretation There are claims that the WTO does not have the requisite scientific and/or environmental knowledge to deal adequately with SPS measures.109 However, it is not necessary for a dispute resolution panel to have such expertise. First, when the SPS Agreement was created, it was never intended that a panel should make scientific judgments. 110 Second, the SPS Agreement gives panels the option of seeking expert scientific or technical advice.111 They may establish an “advisory technical experts group,”112 or consult the relevant international organizations—i.e., the Codex, the 107 Pauwelyn, supra note 34 (quoting Report of the Appellate Body on Japan— Measures Affecting Agricultural Products, WT/DS76/AB/R, paras. 73 and 84 (Feb. 22, 1999)). 108 Id. 109 See, e.g., Charnovitz, supra note 2, and Hughes, supra note 3. 110 Interview with Mr. Brosch, supra note 17. 111 See SPS Agreement, supra note 19, art. 11.2. 112 Id.

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OIE, and the IPPC. This aid is available to them even before they have made any findings of facts. That, combined with the aid from the Codex and the SPS Committee, obviates any need to hear amicus briefs, as has been suggested by some commentators. Third, the well-experienced panel members are perfectly capable of performing the judicial fact-finding functions expected of them. In the United States judicial system, for instance, judges and juries (consisting of untrained laypersons, from students to little old ladies) evaluate complex scientific data and make appropriate findings of facts based thereon every day. If this works on a national level, there is no reason to suppose that it will not work on an international level. The panel members surely can understand and evaluate scientific evidence as well as or better than the average American jury member. Further, in the system of many European countries, Germany for instance, the judge herself performs this function on a daily basis.113 It has been argued that the German system, where the judge directs discovery and fact-finding, is even more efficient and effective than the U.S. system.114 And the WTO regime under the SPS Agreement bears greater resemblance to the German than to the U.S. system, in that the judge makes the final decision regarding what experts to appoint and in what direction to pursue scientific (and other) evidence. Further, in all likelihood, most cases brought under the SPS Agreement will not require the panel to make complex scientific decisions. There are several possible scenarios that, in theory, might force a WTO panel to evaluate complex and conflicting scientific evidence. 115 However, as made clear below, there are arguments that show why each scenario is not likely to occur and/or not likely to force the panel to make difficult scientific decisions.

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The “Battle of the Scientists”

In this scenario, two opposing conclusions, each supported by ample research, are presented by the opposing parties. It has been assumed that the WTO panel would not have the requisite scientific understanding to make a decision regarding which party is right. There are several arguments regarding this hypothetical:

113 See John H. Langbein, The German Advantage in Civil Procedure, 52 U. CHI. L. REV. 823–66 (Fall 1985). 114 Id. 115 These were developed in my interview with Kevin Brosch (Oct. 27, 1999).

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This Is an Unrealistic View of How the Process of Science Works. There may be a “geography of science;”116 scientific inquiry may be directed to questions posed by the regulating state through funding;117 and scientists do perform their research within a greater framework, created by various external sources, which colors their observations.118 However, given even these regional, sociopolitical influences, the global scientific community will develop a certain paradigm and continue developing theories or views “of the operation of the physical world” within the penumbra of that precept.119 This will continue until one or more scientific studies will show results that suggest that the paradigm previously developed is flawed. These counterstudies will either be discounted by the scientific community, or they will be incorporated into future research and studies regarding this particular issue. This will lead to anywhere from a modification of the original paradigm to a complete paradigm shift.120 Very rarely will they start off a branch of identical research proving a different conclusion. Hence, in most cases brought before a WTO panel, the weight of scientific research will support one conclusion over all others— as was the case in the Beef Hormones decision.

In the Rare Instance of Divergent, Amply Supported Scientific Opinions, the Panel Can and Should Find that the Party that Implemented the Contested Measure Had a Scientific Basis. Article 3.3 of the SPS Agreement allows members to implement measures that result in higher levels of protection than the international standards, as long as there is a scientific justification. 121 If the scientific conclusion on which the measure is based is truly supported by a significant number of studies and/or scientists, then this would be the scientific justification Article 3.3 demands, even if there is an opposing view that also has ample scientific backing.

This Scenario Would also Fall Under Article 5.7. Article 5.7 is the provision designed for circumstances where there is not enough scientific evidence to draw one conclusion, for instance when a relevant international standard does not exist.122 It was meant to 116 Jeffery Atik, Science and International Regulatory Convergence, 17 I NT’L L. B US. 736–58, at 749 (1997). 117 Id. at 750. 118 Id. 119 Id. at 751. 120 For a more complete discussion of the scientific progress, as well as suggested further reading on this subject, see Atik, supra note 116. 121 See SPS Agreement, supra note 19, art. 3.3. 122 See id., art. 5.7.

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cover scenarios where too many scientific theories create legislative confusion.123 This provision expressly permits member countries to adopt health measures based on the scientific information available to them, as long as the country maintains an effort to obtain enough information to make a more objective risk assessment and reviews the measure in question. Under Article 5.7, this would be a temporary measure, but nowhere is there any indication of how long a temporary measure can endure. The implication from the language of this article is that such a temporary measure could last until the scientific debate is resolved. Thus, the WTO panel again could find that the measure in question does not violate the SPS Agreement on scientific grounds. (Of course, it may still be violative for another reason, for instance because it was not based on an appropriate risk assessment.)

2.

The “Lone Scientist”

In this scenario, a member country claims that it based its health measure on the research of one scientist. This research reached conclusions that are contrary to the conclusions, or paradigms, of the general body of science, and of the relevant international organizations.

The Panel Should Function Just Like Any Other Finder of Fact. In a U.S. trial, scientific evidence may be admitted and presented to the judge and/or jury if it is relevant. The finder of fact then weighs this evidence, and may make conclusions about the relevance and reliability of the evidence. The WTO panel should be able to make the same determination. If it hears the evidence of one scientist that runs counter to the conclusion of the rest of the scientific world, then the panel should have the ability to discount that scientist’s opinions. This actually happened during the Beef Hormones case. During the Panel’s joint meeting with the experts it had convened, one scientist, Dr. Lucier, stated his opinion that the use of growth hormones could increase the risk of breast cancer by about one in one million.124 The Panel, as well as the Appellate Body, refused to give this opinion any weight. 125 However, as discussed above, the wording of the Appellate Body left room for differing interpretations. Should this scenario arise again, the panel should make it clear that it discounts the single divergent opinion because it flies in the face of the body of mainstream scientific opinion, regardless of whether it was based on studies about the underlying issues or not.

123 124 125

Interview with Mr. Brosch, supra note 17. See McNeil, supra note 6, at 117. Appellate Body Report, supra note 56, para. 198.

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The “Galileo Phenomenon” Is Very Rare. If the panel exercises its common sense and discounts the theories of the one “rogue” scientist, there is always a danger that this person was, in fact, right and that the rest of the world is operating within an incorrect paradigm. However, the chances of that are slim. “Paradigm shifts are infrequent,” one critic of science-based regulations admits.126 And extraordinarily gifted and far-sighted scientists, like Galileo and Copernicus, come along at very vast intervals. Further, the scientific community today is much more open-minded than in the past when it was dominated by religious or political institutions (like the Catholic church in the Middle Ages or the National Socialists in Germany or Bolsheviks in Russia). Therefore, for every latter-day Galileo who is wrongly disbelieved, there will be droves of ordinary misguided scientists whose opinions are correctly discounted.

3.

The “Chinese Scientist”

In this scenario, the member state whose health measure has been attacked has a culture so widely divergent from that of the complaining party that the paradigms and framework in which its science has developed are fundamentally different from that of the complaining party. For instance, it has been hypothesized that, if China joins the WTO, it could base a food and drug law on herbalism and with this law restrict the import of products considered safe by “Western” standards. China could claim that this ban was based on a scientific justification and an appropriate risk assessment.127

The Chances of this Happening Are Slim. The types of disciplines that fall under the SPS Agreement—for instance quarantine procedures—are conducted fairly similarly globally.128 Further, if this kind of a scenario did occur, the “science,” no matter of what kind, still has to be evaluated by the panel for its reliability. Using the suggestions set out herein, a WTO panel should still be able to come to a conclusion regarding a scientific justification’s reliability.

Establishing Common-Sense Guidelines for Jurisprudence in the WTO In order to facilitate future panel decisions involving the SPS Agreement (and also the TBT Agreement), as well as to bolster member states’ confidence in the ability of panels to make appropriate decisions 126 127 128

Atik, supra note 116, at 751. See id. at 749. Interview with Mr. Brosch, supra note 17.

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that promote uniformity and predictability, the WTO should develop some common-sense guidelines for its panels. These could be adopted through amendment of the relevant agreements—a long and frustrating process, but one that assures more member input in the creation of these guidelines. Alternately, they could also be adopted through WTO jurisprudence—a panel or the Appellate Body could develop them and set them out in its opinion. This would give greater leeway for future refinement and adjustment of these guidelines, as may prove to be necessary. The guidelines for evaluation of scientific evidence should be similar to the rules adopted in U.S. federal jurisprudence. Daubert v. Merrell Dow Pharmaceuticals Inc.,129 for instance, set out a number of non-exclusive factors to be taken into consideration by the judge when evaluating the reliability of a piece of scientific evidence. These factors, which would also work well in the WTO setting, are as follows: Testability: Can it be tested (i.e., can the results be recreated)? Has it been tested? Peer Review: Has there been appropriate exposure to review by colleagues? These could include publication, presentation at meetings or conventions, and informal peer review. Have the reviews been favorable? This factor includes a built-in skepticism of theories that have been developed just for a particular litigation. This circumstance does not automatically rule a theory out, it just weighs against it. If a scientist’s theory has been mustered previously, independently of the litigation, it generally has more weight. Error Rate: Is the error rate of the procedure known? How low is it? Standard Controlling Techniques: Are there professional organizations’ standards that are maintained and applied to control this technique or procedure? In this context, they could, but would not have to, be international organizations. If an international organization has developed relevant standards, but the procedure is controlled by the standards of a national organization, this would be a matter or weight. Acceptance in Scientific Community: How substantial or widespread is a theory’s or procedure’s level of acceptance? 130 These factors are not exclusive or always necessary. The panel or Appellate Body can give each factor as much or little weight as it deems appropriate in each particular case, plus it can still consider other factors it feels are relevant. An evaluation based on these factors could, for instance, keep out or reduce the weight of a scientific theory like that of a “Chinese scientist,” which is not based on “Western” science. Conversely, after such an evaluation, the panel could conclude that this particular evidence is reliable. 129 130

See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). See id.

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Other Procedural Issues Retroactive Enforcement Requiring members to review already existing SPS measures in light of current scientific knowledge and international standards is a way of keeping them up-to-date. While this may seem somewhat unfair at first blush, it is not really such a heavy burden. After all, the only time this issue will arise is if a measure seems blatantly protectionist in nature, and a member nation files a complaint. Thus, already-existing measures will be reviewed only if they “ought” to be revised.

Precautionary Principle The Appellate Body’s depiction of the relationship of the precautionary principle and the SPS Agreement keeps the proper balance between the two. The Appellate Body proved that it could show plenty of deference to national decisions without letting this principle be an excuse for a measure that is in violation of the SPS Agreement. This balance should continue to be maintained.

Burden of Proof Maintaining the burden of proof in the traditional manner is fair, and maintains unity and predictability within the WTO’s entire dispute resolution mechanism.

Standard of Review Applying the DSU’s guidelines regarding the Appellate Body’s standard of review is reasonable and proper. If the negotiators of the SPS Agreement had wished to change it for subject matters under its aegis, they would have included such a provision in the text of the Agreement. Applying the DSU’s guidelines also fosters cohesion and predictability. Further, an “objective assessment” gives the Appellate Body enough room to apply its own reasoning, without giving it the power to totally ignore and trample over the findings of the panel.

The SPS Agreement The SPS Agreement has the potential to fulfill its creators’ vision of enhanced harmonization of SPS regulations without being changed. Certain additions, however, might be made to take into account possible future scenarios and to alleviate the conflict between the WTO’s jurisdiction and member states’ sovereignty.

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Encouraging Harmonization Even in its weakened state, the SPS Agreement, by virtue of its very existence, encourages global harmonization of SPS standards. Harmonization —the convergence of standards and procedures used by different countries, based on international standards—as well as equivalence—states’ acceptance of each others’ procedures as accomplishing their SPS goals in other ways—are ongoing. For the last four years, for instance, the United States and European Union have been negotiating regarding veterinary practices, in particular meat inspection.131 This negotiation proceeded by identifying differences in regulatory requirements and comparing the reasons underlying these rules. Through this process, the differences were melted down to a small, finite group of issues that could not be resolved (approximately nine EU requirements and two U.S. requirements).132 Now, through an Equivalency Agreement, only the Food Safety and Inspection Service conducts inspections of U.S. plants. It checks that the U.S. requirements have been met, as well as the additional requirements of the Europena Union. Conversely, EU regulatory authorities inspect for U.S. as well as EU requirements.133 Another example is the convergence occurring through the AustraliaNew Zealand Closer Economic Relations Trade Agreement.134 The two states now have harmonized their quarantine and SPS laws under the principle “approved by one—approved by both.”135 Such instances of equivalence and harmonization are immensely gratifying. Sharing of standards of technology leads to synergy, economies of scale, and better sociopolitical relationships between the sharing countries. While equivalence is different from harmonization, it is yet a step closer toward achieving this ultimate goal. Since there are so many counterproductive forces, like all the cultural perceptions and misperceptions and protectionist instincts, to overcome, the process is naturally a very slow one. The SPS Agreement raises member states’ awareness of the need for equivalence and, eventually, harmonization, and encourages such progress on a global scale. If it improves progress even just ever so mildly, it should remain in place and be strengthened by WTO jurisprudence.

Interview with Mr. McNeil, supra note 16. Interview with Mr. Brosch, supra note 17. 133 Id. 134 See Richard H. Steinberg, Trade-Environment Negotiations in the EU, NAFTA, and WTO: Regional Trajectories of Rule Development, 91 AM. J. INT’L L. 231, at 232 (1997). 135 Interview with Mr. Brosch, supra note 17. 131 132

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The “Race to the Bottom” Some commentators have expressed concern that the SPS Agreement will lead to a global “race to the bottom” regarding health safety standards. They argue that, by prohibiting member states from implementing SPS measures with higher levels of protection than the relevant international standard, this will lead to a general lowering of standards. Further fears include “the probability that production will be located in poorer countries with less stringent . . . standards, since liberalization [of trade] means that goods produced there will face lowered barriers to their export into wealthier . . . countries.”136 However, these fears seems to misread the SPS Agreement. Higher levels of protection are only prohibited if there is no sound scientific basis for them. Article 3.3, in particular, was meant to accommodate countries wishing to implement health measures during that time period between Codex reviews of the relevant standards set by it.137 If, during this time, scientific research has indicated that higher standards are warranted, Member states are justified in adopting them. Indeed, it seems more likely that the SPS Agreement will lead to a gradual raising of global SPS standards. Since it encourages sharing of information and techniques, this can facilitate scientific research without the sociopolitical barriers. Artificially high levels of protection (i.e., those implemented without scientific support) would be reduced, but the standard of scientific knowledge overall would be raised. One critic of the SPS Agreement even admitted that it may assist in raising food safety standards and will “impel greater coordination between the international regimes for trade, environment, and labor.”138

Taking Account of Cultural Differences The negotiators of the SPS Agreement realized that each member country has deeply ingrained cultural norms that run counter to the aim of applying equal levels of protection in different situations. People voluntarily expose themselves to great risk through the consumption of certain substances. This includes cigarettes and alcoholic beverages, in general, but also more specific instances. For instance, smoked fish continues to be a staple in North European countries, even though it has been recognized to be carcinogenic.139 The last sentence of Article 5.5 recognizes this and signals the understanding and acceptance of such behavior and preferences. 136 137 138 139

Steinberg, supra note 134, at 235. Interview with Mr. Brosch, supra note 17. Charnovitz, supra note 2. Interview with Mr. Brosch, supra note 17.

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However, although the SPS Agreement emphasizes in several places that it recognizes member countries’ right to determine what level of protection they deem appropriate, it does not recognize the cultural norms that may play such an important role in risk perception. The EC hormone ban is a good example of a measure that was, probably, at least partially, compelled by European perception of artificially enhanced food as something inherently unnatural, dangerous, and “wrong.”140 Yet, on national levels, protectionism in the guise of local cultural preference is often not countenanced.141 In the European Union, for instance, constitutional and case law prohibit using cultural traditions to disguise protectionism.142 In the United States as well, courts have struck down locally based protectionism.143 Thus, it is not unreasonable to assume that this kind of behavior was also in the minds of the drafters of the SPS Agreement. Instead of completely ignoring cultural preferences, the SPS Agreement should at least acknowledge that they exist and maybe even create some very strict rules that would allow a member country to include cultural norms in an SPS measure. These rules should be very restrictive, to discourage this practice, and also to prevent it from becoming an excuse for protectionism. For instance, the member country wanting to maintain this measure should have the burden of proving that there were no underlying protectionist motives. In the Beef Hormones case, this would have been a nearly impossible hurdle for the EC to overcome, since there was a very strong suggestion of protectionist motives in the case. Also, the defending member country should have the burden of showing that this alleged cultural preference has been ongoing for a very long time and would be impossible to overcome, for instance by attempts to educate the public. If there were such a separate article dealing specifically with cultural values, there could also be a reference to it in Article 5 of the Agreement. If a member country felt it was absolutely necessary to take (often irrational) cultural preferences into consideration during its determination of acceptable risk, it would then operate under the extra obligations imposed under this new article. This would also signal that cultural norms may not be included in a “standard” Article 5 risk assessment (and thus close the door the Appellate Body has opened). One commentator has suggested that the WTO should not scrutinize laws “enacted to reflect underlying socie-

140 For a detailed discussion of how cultural perceptions shape food and health measures, see Marsha A. Echols, Food Safety Regulation in the European Union and the United States: Different Cultures, Different Laws, 4 COLUM. J. EUR. L. 525 (1998). 141 Id. at 540. 142 Id. See Ms. Echols’ article, supra note 140, for a list of a half-dozen cases within the EC that prohibited protectionism in the guise of cultural preferences. 143 Id. at 540.

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tal values and that only incidentally impede trade.”144 Such a provision in the SPS Agreement would give member countries a chance to prove that the contested SPS measure indeed only reflects cultural or societal value judgments.

CONCLUSION The SPS Agreement was meant to be a strong tool mandating member states to base SPS measures on quantifiable scientific principles, and, where possible, on international standards developed by certain international organizations. The strength of this Agreement has been undermined by the WTO Appellate Body’s ruling regarding the EC hormones ban. By failing to analyze the EC’s measure in light of Article 2.2, which is considered one of the most important parts of the Agreement, both the Panel and the Appellate Body failed to send the message that the crucial question regarding any SPS measure is: “Is the measure based on science?” The Appellate Body then went on to weaken Article 3.1’s mandate that SPS measures must be based on international standards. It did this both through its analysis of the relationship between Articles 3.1 and 3.2, and by eviscerating the intended meaning of “based on.” It further weakened the Agreement by its interpretation of “based on” in the context of Article 5.1’s mandate that SPS measures not in conformance with international standards must be based on a risk assessment. However, this erosion of certain parts of the Agreement can be shored up through future WTO jurisprudence. Future panels hopefully will stress the importance of Article 2.2, and will give greater, and fairly stringent, guidelines about what it means to base an SPS measure on international standards, or on a risk assessment. It will also remain for future panels to display that they are well-equipped to evaluate complex scientific evidence. By articulating and adopting guidelines for dealing with complex evidence, which are well-established on a national level, the WTO can demonstrate its capability and foster uniformity and predictability. This, and minor additions to the SPS Agreement, will allow it to encourage and foster global harmonization of member states’ SPS measures.

144 Steve Charnovitz, supra note 2, quoting Philip M. Nichols. (Internal quotation marks omitted).

CHAPTER 12

ASSESSING THE STANDARD OF REVIEW FOR TRADE-RESTRICTIVE MEASURES IN THE SANITARY AND PHYTOSANITARY AGREEMENT Christopher Bisgaard

INTRODUCTION The Agreement on the Application of Sanitary and Phytosanitary Measures (“SPS Agreement” or “the Agreement”), which forms part of the General Agreement on Tariffs and Trade (GATT) 1994, is an attempt to provide rules to govern the “the momentous clash between the interest in efficient international trade and the sovereign duty to protect health.” 1 The Agreement applies to product standards used to protect human, animal, or plant life from “additives, contaminants, toxins or disease-carrying organisms in foods, beverages or feedstuffs,”2 and its central goal is to “lessen the burdens on international trade by . . . health regulations.”3 At the same time, members maintain their rights to set their own health measures, with the proviso that the measures must be “based on scientific principles” and with “sufficient scientific evidence.” Science serves as a balance between the competing goals of freer trade and state sovereignty. Scientific proof allows a state to enact virtually any measure it deems appropriate to deal with the risk, but without it a World Trade Organization (WTO) Dispute Settlement Body panel has good grounds Vern R. Walker, Keeping the WTO from Becoming the ‘World Trans-science Organization:’ Scientific Uncertainty, Science Policy, and Factfinding in the Growth Hormones Dispute, 31 CORNELL INT’L L.J. 251, 319 (1998). 2 Agreement on Sanitary and Phytosanitary Measures, Apr. 15, 1994, in The Results of the Uruguary Round of Multilateral Trade Negotiations: The Legal Text, at 69. 3 Michele D. Carter, Selling Science Under the SPS Agreement: Accommodating Consumer Preference in the Growth Hormones Controversy, 6 M INN . J. G LOBAL T RADE 627 (1997). 1

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to call for a state to change its laws. The two most crucial issue in this environment are, “What is science?” and “How much is enough?” One way to picture the situation is that freer international trade and sovereign rights are balanced on the opposite ends of a scale with the SPS Agreement as the fulcrum between the two. Science is weight that will tip the scales and determine whether a certain measure is a valid exercise of sovereign rights or merely a disguised impediment to trade. In 1996, the United States brought a case to the DSB of the WTO against the European Community (EC) for its ban on beef treated with hormones. Both the DSB’s panel and Appellate Body agreed that the European measures violated the SPS Agreement based, inter alia, on the fact that the EC’s scientific evidence was inadequate. The Beef Hormones case presents an opportunity to examine the standard of review that WTO panels should use when deciding cases under the SPS Agreement. This chapter will examine the background of the case, and then analyze some of the more important parts of the SPS Agreement that relate to science, review how the panel and Appellate Body handled these principles, and present the best way to handle them in future cases. The final conclusion is that panels should adopt a rational basis standard of review to determine whether a member’s health standards are “based on” a risk assessment and an “assessment of the risks” as well as whether “sufficient scientific evidence exists.”

BACKGROUND Use of Hormones Hormones occur naturally in all plants and animals. In mammals a hormone is “any chemical substance produced by an organ which, after being transported in the blood of the mammal, has a specific regulatory effect upon cells remote from the hormone’s origin.” 4 The hormones central to the dispute between the United States and the European Union are estrogen (estradiol-17 B), progesterone, testosterone, trenbolone acetate (TBA), and melengestrol acetate (MGA). The first three hormones occur naturally in both humans and bovine mammals, while the last two are synthetically produced. TBA mimics the effects of estrogen and MGA mimics those of testosterone. U.S. farmers first began administering hormones to their cattle in the 1950s. Since that time, they have refined the practice and continued to engage in it. Scientific evidence demonstrates that cattle treated with See DORLAND’S ILLUSTRATED MEDICAL DICTIONARY 776 (28th ed. 1994). See Dale E. McNeil, The First Case Under the WTO’s Sanitary and Phytosanitary Agreement: The European Union’s Hormone Ban, 39 VA. J. INT’L L. 89, 102 (1998), available at www.fas.usda.gov/itp/policy/hormone2.html. (“The use of hormones provides 4 5

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hormones grow larger more quickly than those grown without.5 The U.S. Food and Drug Administration (FDA) has found that consumption of beef properly treated with hormones does not exceed the safety levels it has set for natural hormones residues.6 The FDA has also determined that consumption of beef treated with artificial hormones falls below the acceptable daily intake standard it has established. The U.S. Department of Health and Human Services (DHHS) has researched the effects of growthpromoting hormones for over 40 years and has found no associated risks to human health.7 In 1981, the Council of the European Communities (EC Council), prompted by a health scare in Italy, adopted Directive 81/602/EEC, 8 which required, inter alia, that EC member states prohibit the administration to farm animals of substances having a thyrostatic, oestrogenic, androgenic, or gestagenic action.9 Directive 81/602/EEC further provided that pending adoption of a decision of the EC Council on the administration to farm animals for growth promotion purposes of oestradiol-17 B, testosterone, progesterone, zeranol, and trenbolone, EC member states could continue to apply the national regulations in force concerning those substances. In 1988, the EC Council adopted Directive 88/146/EEC, 10 which brought the administration to farm animals for growth promotion purposes of these five hormones within the general prohibition imposed by directive 81/602/EEC. This Directive also prohibited the importation of animals and of meat from animals to which substances with thyrostatic, oestrogenic, androgenic or gestagenic action have been administered from third countries. Directive 88/299/EEC11 provided two exceptions to the general ban: the administration for therapeutic treatment of oestradiol-17 B, testosterone, progesterone, and some of their derivatives, and the administration for zootechnical treatment of substances having an oestrogenic, androgenic, or gestagenic action that are authorized in accordance with EC Directives on veterinary medicinal products. several benefits in beef production. A hormone-treated animal gains weight more rapidly, producing a more flavorful and tender product. By reaching market weight sooner, there is a reduction in the cost of beef production.”) 6 See McNeil, supra note 5 at 98 (“The FDA has established that the safe incremental level for natural hormone residues resulting from growth promotion is one percent of the daily production of sex steroids by prepubertal boys for estrogen and progesterone, and prepubertal. girls for testosterone. Scientists do not find any increased physiologic action in an individual who chronically ingests one percent of the amount of sex steroids produced through the daily de novo synthesis of prepubertal children.”) 7 See http://www.ustr.gov/release/1999/07/fact.html. 8 EC O.J. L 222, at 32 (Aug. 7, 1981). 9 See McNeil, supra note 5 at 100. 10 EC O.J. L 70, at 16 (Mar. 16, 1988). 11 EC O.J. L 128, at 36 (May 21, 1988).

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On April 29, 1996, the EC Council adopted Directive 96/22/EC,12 which confirms and extends the above-mentioned prohibitions. This 1996 Directive entered into force on July 1, 1997.

Beef Hormones Case History After years of failed attempts to resolve the dispute between the European Union and the United States, in 1996, the United States began proceedings that would bring the dispute before a WTO DSB panel (“Panel”). The United States claimed that the European measures were inconsistent with the GATT 1994, the SPS Agreement, the TBT Agreement, and the Agreement on Agriculture.13 The Panel established by the Dispute Settlement Body found in favor of the United States. The Panel based its decision, inter alia, on the following: that the EC did not base its sanitary measures on a risk assessment; that they were inconsistent with Article 5.1 of the SPS Agreement; that the EC acted inconsistently with Article 5.5 of the SPS Agreement, because it adopted arbitrary or unjustifiable distinctions in the levels of sanitary protection that resulted in discrimination or a disguised restriction on international trade; and that the EC acted inconsistently with Article 3.1 of the Agreement, because its sanitary measures were not based on existing international standards without justification under Article 3.3 of the Agreement SPS.14 The Panel consequently recommended that the DSB request the EC to bring its measures in dispute into conformity with its obligations under the SPS Agreement.15 After losing the case before the Panel, the EC appealed the case, as provided for in the Dispute Settlement Understanding (DSU). While the Appellate Body reached the same conclusion as the Panel, its reasoning was much more favorable towards the Europeans. The Appellate Body’s final decision did the following: confirmed the Panel’s conclusions that the precautionary principle would not override the explicit wording of Articles 5.1 and 5.2 and that the precautionary principle has been incorporated in, inter alia, Article 5.7 of the SPS Agreement; reversed the Panel’s conclusion that the term “based on” as used in Articles 3.1 and 3.3 has the same meaning as the term “conform to” as used in Article 3.2 of the SPS Agreement; modified the Panel’s interpretation of the relationship between Articles 3.1, 3.2 and 3.3 of the SPS Agreement; reversed the Panel’s con12 EC O.J. L 1125, at 3 (May 23, 1996) (repealing and replacing Directives 81/602/EEC, 88/146/EEC and 88/299/EEC). 13 EC—Measures Concerning Meat and Meat Products (Hormones), Panel Report, WT/DS26/R/USA (Aug. 18, 1997). 14 Id. 15 Id.

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clusion that the EC, by maintaining without justification under Article 3.3 SPS measures, which are not based on existing international standards, acted inconsistently with Article 3.1 of the SPS Agreement; modified the Panel’s interpretation of the concept of “risk assessment” by holding that neither Articles 5.1 and 5.2 nor Annex A of the SPS Agreement require a risk assessment to establish a minimum quantifiable magnitude of risk, nor do these provisions exclude a priori, from the scope of a risk assessment, factors that are not susceptible of quantitative analysis by the empirical or experimental laboratory methods commonly associated with the physical sciences; and reversed the Panel’s finding that the term “based on” as used in Article 5.1 of the SPS Agreement entails a “minimum procedural requirement” that a member imposing an SPS measure must submit evidence that it actually took into account a risk assessment when it enacted or maintained the measure. In the end, the Appellate Body upheld the Panel’s finding that the EC’s measures were inconsistent with Article 5.1 of the SPS Agreement. It then recommended that the DSB request the EC to bring those measures found inconsistent into conformity with its obligations under the SPS Agreement. However, as noted, the inconsistencies found by the Appellate Body were not as glaring as those found by the Panel.

SPS Agreement Prior to 1994 and the completion of the Uruguay Round, Article XX of the GATT provided for, inter alia, sanitary and phytosanitary exceptions to the general principles of most-favored nation and domestic treatment. As part of the Uruguay Round, WTO members negotiated and signed the Agreement on the Application of Sanitary and Phytosanitary Measures, which sets forth the rights and obligations of members with respect to any measure taken by a member to protect the health or life of humans, animals, or plants (“sanitary or phytosanitary measures”) that may, directly or indirectly, affect international trade. Some of the Agreement’s stated goals are the following: to “elaborate rules for the application of the provisions of GATT 1994 . . . [particularly] Article XX(b);” to harmonize the use of sanitary and phytosanitary measures, based on international standards developed by international organizations; and to minimize the negative effects of SPS measures on international trade. Perhaps the Agreement’s most important principle was that requiring members to base their sanitary and phytosanitary measures on scientific principles. 16 The SPS Agreement recognizes that members have the sovereign right to take measures to protect health and life within their territories.

16

SPS Agreement, supra note 2.

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However, this is not a grant of an “absolute right,” as the Appellate Body found, because this exception applies only if such measures are not inconsistent with the provisions of the SPS Agreement and, in particular, are not arbitrarily or unjustifiably discriminatory and do not constitute disguised restrictions on international trade. A sanitary measure that adversely affects international trade is consistent with the SPS Agreement only to the extent it is necessary to protect health or life. Additionally, a sanitary or phytosanitary measure that results “in a higher level of sanitary or phytosanitary protection than would be achieved by measures based on the relevant international standards, guidelines, or recommendations” is subject to certain conditions. 17 These conditions include the following: it must be “based on scientific principles and is not maintained without sufficient scientific evidence,” and “based on an assessment . . . of the risks,” and it cannot be “not more trade-restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection.” 18 The SPS Agreement states that, if a disagreement arises between WTO member countries regarding compliance with its provisions, then the process set forth under the DSU governs. The DSU established a DSB of the WTO with authority to establish factfinding panels, adopt panel and Appellate Body reports, and otherwise administer the dispute settlement process of the WTO.19 Significantly, the Agreement sets forth no standard of review for a panel to use when examining a case. The driving force behind the SPS Agreement is the belief that science can ferret out disguised barriers to trade, while still allowing a country with a legitimate concern the ability to take whatever steps it feels are necessary to protect its citizenry.20 The allure of a scientific test for a regulatory measure is understandable.21 “Science is held to be universal knowledge” and thus should help us utilize universal principles to resolve our disputes.22

International Standards Of almost equal importance as science to the SPS Agreement are international standards. Article 3 addresses the SPS Agreement’s goal of Id., art. 3.3. Id., arts. 2.2, 3.3, 5.1, 5.7; See Walker, supra note 1; Cf. Julie Cromer, Sanitary and Phytosanitary Measures: What They Could Mean for Health and Safety Regulations Under GATT, 36 HARV. INT’L L.J. 557, 568 (1995) (stating that the SPS Agreement’s purpose is “to ensure that free trade continues regardless of technological differences or expectations as to what is ‘healthy’ or ‘safe’”). 19 See, Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes, 33 I.L.M. 1226, art. 1.1, 23, app. 1 (1994) [hereinafter DSU]; SPS Agreement, art. 11.1. 20 Jeffrey Atik, Science and International Regulatory Convergence, 17 NW. J. INT’L L. & BUS. 736, 738 (1997). 21 Walker, supra note 1, at 926. 22 Atik, supra note 20. 17 18

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liberalizing trade through the harmonization of internal standards among members. And members basing their SPS measures on international standards developed by the “relevant international organizations” represent the means by which this harmonization is to occur. 23 The role of these standards is to eliminate the risk of members using SPS measures to restrict trade. Between the competing forces of trade and regulation comes science, which is seen as an impartial mediator. If a scientifically provable risk exists, then a country is free to maintain standards higher than those agreed upon by the international community. However, where no such evidence exists, a country must bring its standards in line with international standards and thus remove any barriers to trade that it may have raised. Unfortunately, as the Beef Hormones case demonstrates, scientific uncertainty exists, which complicates the reliance upon science as a neutral mediating principle.24 The first paragraph of Article 3 provides the following. To harmonize sanitary and phytosanitary measures on as wide a basis as possible, Members shall base their sanitary or phytosanitary measures on international standards, guidelines or recommendations, where they exist, except as otherwise provided for in this Agreement, and in particular in paragraph 3.25 Paragraph 3 of Annex A defines “international standards” as those referred to in the SPS Agreement.26 As noted, juxtaposed against the goal of liberalizing trade through harmonization is the exception that allows members to “introduce or maintain sanitary or phytosanitary measures which result in a higher level of protection than would be achieved by measures based on the relevant international standards, guidelines or recommendations.”27 This exception is only for cases in which “there is a scientific justification, or as a consequence of the level of sanitary or phytosanitary protection a Member determines to be appropriate.”28 In the present case, the Codex Alimentarius Commission (Codex) represents the relevant international organization upon whose standards the members should base their measures.29 The Codex, an international body of which most WTO members (including the United States and the SPS Agreement, supra note 2, pmbl.. See Walker, supra note 1. 25 SPS Agreement, supra note 2, art. 3.1. 26 Id., Annex A, para. 3(a). 27 Id., art. 3.3. 28 Id. 29 Id., Annex A 3(a). International standards, guidelines and recommendations [are] for food safety, the standards, guidelines and recommendations established by the Codex Alimentarius Commission relating to food additives, veterinary drug and 23 24

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EC member states are members, establishes, inter alia, Acceptable Daily Intakes (ADIs), Maximum Residue Limits (MRLs), and other recommendations for veterinary drugs. It does so on the basis of the advice of the Codex Committee on Residues of Veterinary Drugs in Foods and the recommendations of the Joint FAO/WHO Expert Committee on Food Additives (JECFA). While Codex is composed of government representatives of EC member states, JECFA is composed of independent scientists. JECFA makes scientific evaluations and recommendations; Codex takes the decision whether or not to adopt these recommendations. However, once adopted, Codex recommendations are, according to the General Principles of Codex, not binding upon Codex members. They are only of an advisory nature. An ADI set by Codex is “an estimate by JECFA of the amount of a veterinary drug, expressed on a body weight basis, that can be ingested daily over a lifetime without appreciable health risk (standard mean = 60 kg).” This ADI is derived from the experimental no-observable-effect level in the most appropriate animal species, by applying an appropriate safety factor. A Codex MRL, on the other hand, if implemented in national law, determines the amount of residue that is legally permitted or recognized as acceptable in food and is primarily a regulatory tool to ensure that intake does not exceed the ADI and that good practice is observed. A Codex MRL is frequently set at levels below (even far below) the theoretical safe levels determined from an ADI. Codex MRLs for veterinary drugs are normally expressed in gg/kg on a fresh weight basis in meat. In the Beef Hormones case, Codex had established standards for five of the six hormones. MGA was the only one without any standard. A state may use international standards in one of three ways. It may simply adopt the standard as its own. It may base its standards on the international standards, adjusting the ADI or the MRL to reflect, if not necessarily mimic, those of the relevant international body. A state may also adopt regulations that are higher than those proscribed by the international body, but in this case it may do so only if it meets one of the two following conditions: either a “scientific justification,” or the sanitary measures must be “a consequence of” a higher level of protection selected in accordance with the relevant provisions of SPS Article 5.30 The SPS provisions are a weak effort to harmonize global standards, in part because of the concern of a “race to the bottom” or of countries adopting the least common denominator. The text of the preamble to the Agreement, however, demonstrates the importance that the drafters gave international standards: pesticide residues, contaminants, methods of analysis and sampling, and codes and guidelines of hygienic practice. 30 See SPS Agreement, supra note 2, art. 3.3.

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Noting that sanitary and phytosanitary measures are often applied on the basis of bilateral agreements or protocols; Desiring the establishment of a multilateral framework of rules and disciplines to guide the development, adoption and enforcement of sanitary and phytosanitary measures in order to minimize their negative effects on trade; Recognizing the important contribution that international standards, guidelines and recommendations can make in this regard; Desiring to further the use of harmonized sanitary and phytosanitary measures between Members, on the basis of international standards, guidelines and recommendations developed by the relevant international organizations, including the Codex Alimentarius Commission, the International Office of Epizootics, and the relevant international and regional organizations operating within the framework of the International Plant Protection Convention, without requiring Members to change their appropriate level of protection of human, animal or plant life or health.31

ANALYSIS OF THE STANDARD OF REVIEW Article 3.3 is perhaps the most crucial paragraph of the SPS Agreement, because this paragraph provides the general guidelines for an exception to the Agreement’s goal of standardized regulations. The article states that Members may introduce or maintain sanitary or phytosanitary measures which result in a higher level of sanitary or phytosanitary protection than would be achieved by measures based on the relevant international standards, guidelines or recommendations, if there is a scientific justification, or as a consequence of the level of sanitary or phytosanitary protection a Member determines to be appropriate in accordance with the relevant provisions of paragraphs 1 through 8 of Article 5. Article 5 is entitled “Assessment of Risk and Determination of the Appropriate Level of Sanitary or Phytosanitary Protection,” and, as the title indicates, it deals with risk assessments. As discussed below, Article 5 should be read in conjunction with Article 2.2,32 which deals with members’ general obligations. These articles together provide the basis for a state to properly enact a sanitary or phytosanitary measure that has the effect of restricting trade. The phrase “based on” appears in two sections Id., pmbl. EC—Measures Concerning Meat and Meat Products (Hormones) AB-19974, Appellate Body Report, WT/DS26/AB/R (Jan. 16, 1998). 31 32

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of the SPS Agreement other than Article 3.3. In Article 2.2 the phrase relates to scientific principles and in Article 5.1 to a risk assessment. A dispute regarding whether an SPS measure is an invalid trade-restricting one or a valid health measure turns upon a WTO panel’s interpretation of this phrase. The following is an analysis of the standard of review that WTO panels should use when interpreting the phrase “based on” and subsequently examining whether a sanitary or phytosanitary measure is a valid exception to the Agreement’s goal of harmonization. A review of the Agreement and the Appellate Body decision in the Beef Hormones case suggests that a three-part test may develop for measures based on standards that are higher than international standards. While this test does not provide a complete list of the factors that the Appellate Body would examine, it does provide a sound foundation for discussing the validity of SPS measures. One iteration of the test is the following: to be valid, an SPS measure, whose effect is to restrict trade, must (1) be “based on scientific principles,”33 (2) be based on a valid assessment of the risks, 34 and (3) not be maintained without “sufficient evidence.”35

“Scientific Principles” Article 2.2 of the SPS Agreement states: “Members shall ensure that any sanitary or phytosanitary measure . . . is based on scientific principles” (emphasis added). This signals the first obligation that a signatory to the Agreement must assume. While it is a very general one—Article 2 is entitled “Basic Rights and Obligations”—that has no specific definition, the obligation is important nonetheless. Principally, the responsibility, combined with the requirement that a measure “is not maintained without scientific evidence,”36 sets a general tone for the Agreement—that members must use science to justify trade-restrictive measures. Significantly, “scientific principles” and “scientific evidence” are separate issues. Scientific principles deal with the procedures by which scientists can arrive at substantive scientific evidence.37 Because the Beef Hormones case was the first to deal with a claimed violation of, inter alia, Article 2.2, the Panel, before determining whether the EC had based its measures on scientific principles, had first to define what “scientific principles” were. However, it never did so, because of the SPS Agreement, supra note 2, art. 2.2. Id., art. 5.1. 35 Id., art. 2.2. 36 Id., art. 2.2. 37 Id., art. 2.2. The text of Article 2.2 states, “Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence.” 33 34

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way it decided the case, focusing on Articles 3 and 5. Nor did the Appellate Body define “scientific principles.” However, it did agree with the Panel’s finding that Article 2.2 should be used to inform Article 5.1 and that both should be read in conjunction with each other. The Appellate Body found that “the requirements of a risk assessment under Article 5. 1, as well as of ‘sufficient scientific evidence’ under Article 2.2, are essential for the maintenance of the delicate and carefully negotiated balance in the SPS Agreement between the shared, but sometimes competing, interests of promoting international trade and of protecting the life and health of human beings.”38 It also stated, “We agree with this general consideration and would also stress that Articles 2.2 and 5.1 should constantly be read together. Article 2.2 informs Article 5.1: the elements that define the basic obligation set out in Article 2.2 impart meaning to Article 5.1.”39 The parties to the case offered their own suggestions of what “scientific principles” meant. The United States claimed that “at a minimum this term incorporated the scientific method, which represented those principles and processes universally regarded as necessary for scientific investigation.”40 It then listed six steps, which the EC claimed were a “caricature of ‘the scientific method’ which could have been taken straight from a school textbook circa 1960.”41 In contrast to the U.S. approach, the EC preferred an expansive definition of “scientific principles,” one that would accept almost anything short of “superstition.” To meet the Article 2.2 obligation only “minimal attributes of scientific inquiry [need to be] respected.”42 A future WTO panel will have to determine the precise definition, but it seems that the most appropriate one would be a broad, expansive one. As noted, the heading to Article 2 is “Basic Rights and Obligations.” This would not seem to indicate any specific detailed responsibilities, such as the United States proposes. Additionally, the United States and the EC both supported a loose definition of “scientific evidence,” the companion requirement of Article 2.2. For example, the EC argued that the SPS Agreement only required “sufficient,” not clear or certain, scientific evidence.43 For these reasons, a future panel should create a definition of “scientific principles” that is expansive. Appellate Body Report, supra note 32. Id. 40 Panel Report, supra note 13, at 34. 41 Id. 42 Id. 43 Id. The EC based this claim on the fact that because the SPS Agreement applied retroactively, older SPS measures might be found to lack sufficient scientific evidence. Therefore, the framers of the SPS Agreement merely required that sometime in the past the measure was based on some type of loosely defined scientific principles. Additionally, the U.S. Statement of Administrative Action states that Article 2.2 38 39

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The Appellate Body noted its surprise that the Panel did not first examine 2.2 before proceeding to 5. 1. Given this “surprise,” a future panel will probably examine Article 2.2 prior to moving on to Articles 3 or 5. The following analysis concludes that, like the definition of “scientific principles,” the standard to determine whether a measure is “based on” them should be loose. Specifically, the standard should be one of mere rationality. After a panel has determined that a member has used scientific principles, its next decision is whether the measure in question is “based on” those principles. Both the Panel and the Appellate Body found that Article 2.2 informed Article 5.1 and should be read in conjunction with it. Article 5.1 (discussed below) requires that any SPS measure be “based on an assessment . . . of the risks.” Thus, an assessment of the risks, or risk assessment, must take into account “scientific principles” and produce “sufficient scientific evidence” to support a restriction on trade. Based on this reading, a panel would not necessarily make a separate finding of whether a contested measure met both the requirements of Articles 2.2 and 5. 1. Instead, the two paragraphs would together form a three-part test for trade-restrictive measures. The test would be the following. In order to maintain a trade-restrictive sanitary or phytosanitary measure, a member state must use (1) scientific principles to perform a (2) valid “assessment of the risks” that produces (3) sufficient scientific evidence to maintain that measure. Assuming the adoption of a broad definition of “scientific principles,” the first part of the test would be the one most easily met. (The other two will be discussed in conjunction with Article 5. 1, below.) Only in cases of blatant misconduct would a panel find that a state had failed to base its measure on proper scientific principles. For example, in the present case, neither the Panel nor the Appellate Body found that the EC had violated Article 2.2, despite the fact that both bodies agreed that the EC had not conducted a proper risk assessment. Thus, the standard should be an extremely deferential one, as a panel would presumably not wish to become involved in decisions regarding the appropriateness of procedural steps used when conducting a risk assessment. Because of this policy reason, the standard could be the following: in order to be valid, a trade-restrictive sanitary or phytosanitary measure has to be rationally based on scientific principles. The rational basis standard proposed here would mirror the rational basis standard used by the U.S. Supreme Court when examining economic

of the SPS Agreement did not require the best science nor the weight of scientific evidence to be taken into account; it only stipulated that there should be “scientific principles” and “sufficient” (not absolute) scientific evidence.

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regulations for potential violations of the Equal Protection Clause.44 Under this standard, “[Legislative] classifications are valid unless they bear no rational relationship to the State’s objectives.”45 The Court stated in another decision that legislation “does not violate the Equal Protection Clause merely because the classifications [it makes] are imperfect.”46 What is notable about this standard is the deference that the Supreme Court is willing to pay to state and federal legislatures. The U.S. Supreme Court adopted this deferential “mere rationality” standard for, inter alia, two policy reasons. First, it allows governments to function more effectively and, second, it reflects a reluctance to engage in judicial review of laws enacted by democratically elected legislatures for philosophical reasons. WTO panels, while analyzing decisions made by sovereigns rather than classifications by U.S. federal and state legislatures, could adopt this deferential “mere rationality” standard for the same reasons.

“Assessment of the Risks” Article 5 contains the most significant and most detailed responsibility for signatory states to the SPS Agreement: they must base their SPS measures on a risk assessment. The risk assessment described in Article 5 represents the second part of the test for SPS measures that are not based on international standards. Such standards must be “based on” an “assessment of the risks.”47 The most challenging task facing a WTO panel in a case involving the SPS Agreement is defining a risk assessment, analyzing whether the member conducted a valid assessment, and deciding whether the member based its sanitary or phytosanitary measures in question on the risk assessment. Article 5.1 states: “Members shall ensure that their sanitary or phytosanitary measures are based on an assessment, as appropriate to the circumstances, of the risks to human, animal or plant life or health.” Annex A, paragraph 4, defines a risk assessment as “the evaluation of the likelihood of entry, establishment or spread of a pest or disease within the territory of an importing Member according to the sanitary or phytosanitary measures which might be applied, and of the associated potential biological and economic consequences; or the evaluation of the potential for adverse effects on human or animal health arising from the presence of additives, contaminants, toxins or disease-causing organisms in food, beverages or feedstuffs.”48 A more formal definition is that “a risk assessment involves a scientific determination of the relationships between 44 45 46 47 48

U.S. CONST. amend. XIV. Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307, 314. Dandridge v. Williams, 397 U.S. 471, 485 (1970). SPS Agreement, supra note 2, art. 5.1. Id., Annex A(4).

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causes and effects. . . . Total risk is a function of at least two factors: the toxicity of the agent and the predicted exposure to that agent.”49 Also, the risk assessment on which that measure is based must take into account the available information about toxicity and exposure.50 Where called upon to determine whether a disputed SPS measure is based on a risk assessment, a WTO panel must, as a preparatory measure, determine the validity of the risk assessment itself. The determination involves the same two steps as a risk assessment: first, to determine what the risk is and second to decide what the potential consequences of that risk are. Theoretically, this should be an easy process. After all, science is a black and white issue. Either a risk exists or it does not. Unfortunately, the reality is not quite so easy, because possible scientific error is always present. Also, given the serious harm to human life and health that a potential mistake could cause, scientists and regulators prefer to err on the side of caution.51 The first step for a panel to take when evaluating a disputed sanitary or phytosanitary measure is to determine if a risk actually exists. This raises two crucial questions. The first is what should the standard of review be for a member state’s scientific findings, and the second is what constitutes a “risk” in reaction to which member states can impose barriers to trade. In regards to the first question, the two ends of the spectrum of possibilities are “deference” and de novo review. Under a deferential standard, the panel could accept the findings delivered to it by a country seeking to support its measure without any review of them whatsoever. A de novo review would consist of the panel conducting a completely new scientific study. Conducting no review at all would significantly and quickly diminish the importance of the SPS Agreement, because the individual countries’ scientists would essentially replace the WTO panels. At the same time, a panel has neither the time nor the resources, not to mention the authority, to conduct its own evaluation of the risks. As the Appellate Body pointed out, “the SPS Agreement itself is silent on the matter of an appropriate standard of review for panels deciding upon SPS measures of a Member. Nor are there provisions in the DSU or any of the covered agreements (other than the Anti-Dumping Agreement) prescribing a particular standard of review.”52 Article 17.6(i) of the Anti-Dumping Agreement contains language that deals with the standard of review that panels should use in the “assessment of the facts

See McNeil, supra note 5, p. 123. SPS Agreement, supra note 2, arts. 2.2, 5.2. 51 Id., art. 5.2. See Walker, supra note 1, at 165. Scientific uncertainty is a reflection of the potential for error inherent in scientific information. 52 Appellate Body Report, supra note 32. 49 50

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of the matter.”53 However, the Appellate Body found “no indication in the SPS Agreement of an intent on the part of the Members to adopt or incorporate into that Agreement the standard set out in Article 17.6(i) of the Anti-Dumping Agreement. Textually, Article 17.6(i) is specific to the Anti-Dumping Agreement.”54 The Appellate Body did determine that the appropriate standard of review would be one that reflects “the balance established in that Agreement between the jurisdictional competences conceded by the Members to the WTO and the jurisdictional competences retained by the Members for themselves.”55 The appropriate standard of review, according to the Appellate Body, comes from Article 11 of the DSU, which states that a panel should make an “objective assessment of the matter before it, including an objective assessment of the facts of the case.” This objective assessment standard is neither a de novo review nor total deference. Rather, to reach its conclusion a panel should use all of the information at its disposal, including the evidence presented by the two parties, third-party submissions, expert witnesses the panel chooses to call, or any other relevant sources. Such a standard would also allow a country to present “new” evidence, or evidence not considered during the risk assessment. Benefits to including all evidence available would include efficiency in not having to relitigate a matter and in not having to try and determine what a scientist or legislator considered when developing the risk assessment. In a case such as Beef Hormones, the “facts” on which a panel would need to make an objective assessment include a member state’s scientific evidence. Given the weight of the decision’s potential impact on human health and the uncertainty that will frequently accompany scientific “evidence,” this represents the most difficult job that a panel will have. The underlying question is how much evidence a country needs to prove that a risk exists. The Beef Hormones Panel’s view was that a risk must be identified or characterized quantitatively by assigning a probability to the likelihood of occurrence. 56 The Appellate Body correctly rejected this definition, concluding that the SPS Agreement contained no basis for a de minimis threshold. At the same time, the Appellate Body found that the kind of risk arising from a merely “theoretical uncertainty” is not adequate 53 Agreement on Implementation of Article VI of GATT 1994. “In examining the matter referred to in paragraph 5 (i) in its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;” 54 Appellate Body Report, supra note 32. 55 Id. 56 Id. at 184.

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to justify protective measures under the Agreement.57 Instead, the Appellate Body concluded that there must be a justification based on an “ascertainable risk,” although the methods of demonstrating its existence need not be “quantitative analysis by the empirical or experimental laboratory methods commonly associated with the physical sciences.”58 What the Beef Hormones Panel completely missed, as did the Appellate Body, was that risk includes not only the quantifiable, but also the unknown.59 Just because a risk has not been “assessed” does not mean that it does not exist. “On the continuum between a merely speculative risk and a conclusively demonstrated one lies a vast stretch of undemonstrated, unquantified, but scientifically plausible risks. Within that zone, the risk of harm is real so long as safety is unproven.”60 Each state will make determinations in the best way to handle this unknown risk, as it is entitled to under the SPS Agreement.61 However, this approach to dealing with and defining risk presents potentially huge problems. First, such a definition would stand the SPS Agreement, which focuses on using science as the exception to prove that trade-restrictive SPS measures are valid, on its head. Allowing countries to adopt measures that are not “based on international standards” whenever they cannot conclude that that the product is free from risk (which is, as noted, an extremely difficult challenge) is completely opposed to the intention of the Agreement. Article 3.3 of the SPS Agreement lists two instances when a member may introduce or maintain sanitary or phytosanitary measures that restrict trade. They are “if there is a scientific justification” or because of a risk assessment as described in Article 5.62 The Agreement determines that “scientific justification” exists if, “on the basis of an examination and evaluation of available scientific information in conforinity with the relevant provisions of this Agreement, a Member determines that the relevant international standards, guidelines or recommendations are not sufficient to achieve its appropriate level of sanitary or phytosanitary protection.”63 Again, the Agreement focuses on the use of science as a tool to identify risk, rather than means to refute a presumption of risk. Id. at 186. Id. 59 Walker, supra note 1 at 305. 60 Id. 61 SPS Agreement, supra note 2, art. 2. 1. “Members have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health.” Given that a member has the right construct its own laws for the protection of its citizens and animals and plants, the members have the right to determine the reasons for those laws. 62 SPS Agreement, supra note 2, art. 3.3. 63 Id., art. 3.3 n.2. 57 58

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Article 5.7 is the exception to this general rule of not maintaining trade-restrictive measures without some sort of scientific justification. This paragraph provides that “[i]n cases where relevant scientific evidence is insufficient, a Member may provisionally adopt sanitary or phytosanitary measures on the basis of available pertinent information, including that from the relevant international organizations as well as from sanitary or phytosanitary measures applied by other Members.” In such instances, while the evidence does not have to be conclusive, a requirement seems to exist that there be at least some evidence. In conclusion, “risk” for a WTO panel must include at least some amount of scientific evidence. In its most basic formulation and at the very least, a test for risk under the SPS Agreement would require a country to point to something, anything, and say, “We are afraid of that.” Another determination that a panel must make in a case involving the SPS Agreement is to determine the validity of the risk. The question that needs answering in this instance is how much proof of an existence of a risk is necessary. In other words, how many scientists need to state that a risk exists for a country to be validated in enacting trade-restrictive measures? Is one enough, or can a country bring a small group of scientists who represent a minority position and ask them to examine the potential risks of a product? Neither the Beef Hormones Panel nor the Appellate Body answered this question, and the Agreement itself provides little direction. The footnote to Article 3.3, which deals with scientific justification for measures that adopt higher-than—internationally established measures, provides no bright line rules. It states the following: There is a scientific justification if, on the basis of an examination and evaluation of available scientific information in conformity with the relevant provisions of this Agreement, a Member determines that the relevant international standards, guidelines or recommendations are not sufficient to achieve its appropriate level of sanitary or phytosanitary protection. Apparently the SPS Agreement would allow a country to establish a trade-restrictive measure as long as some evidence of a risk exists. However, this allowance appears to be subject to two important caveats, Articles 3.3 and 2.2. Article 3.3 requires either scientific justification or a valid risk assessment and that the measure not be inconsistent with any other provision of the Agreement, including Article 5.6, which requires that measures be not more “trade restrictive than is necessary.”64 Article 2.2 contains the basic requirements of “scientific principles” and “scientific evidence.” The most important of these three paragraphs is 64

Id., art. 5.6.

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the sixth of Article 5, as it limits the options available to a country to only the least trade restrictive. All that is necessary then for a country to impose a trade-restrictive measure is to establish that a risk exists by some scientifically testable method. The potential for abuse is obvious, but a panel could find, as it did in the Beef Hormones case, that no risk existed, based on the overwhelming evidence to the contrary. However, a panel should, like the Beef Hormones Panel, tread very lightly where a discrepancy exists between scientists. But when should it attempt to choose? Where there is a legitimate dispute between competing camps, a panel would be better served—and would better serve the member states of the SPS Agreement—if it were to allow the scientific community to resolve the dispute. The rule seems clear in light of the above discussion of determining risk. It is enough to note that there was at one time a debate about whether the Earth was flat or a globe. However, not always will there be a legitimate debate about the risks of a certain product. As the Beef Hormones case demonstrates, sometimes one will be created. Just as with the previous topics of risk and amount of risk, so too determining when a difference of opinion among scientists is legitimate is a very difficult decision. A standard that would be extremely deferential to member states would be one based on scientific plausibility.65 Where a risk assessment was scientifically plausible, a panel would accept it as valid. This sets a very low burden to be met. However, it does provide a panel with a rule that would advance the Agreement’s goals of maintaining state sovereignty while eliminating (at least some) SPS measures that are scientifically unsound.

“Sufficient Scientific Evidence” The final part of the test that a sanitary or phytosanitary measure that restricts trade must pass is that it is “not maintained without sufficient scientific evidence.”66 This issue is intertwined with the previous analysis of the validity of a risk assessment. To review, the SPS Agreement does not require a certain minimum amount of support from the scientific com65 Walker, supra note 1 at 259. Roughly speaking, a causal account can be said to be scientifically plausible whenever it is supported by empirical data (as opposed to mere speculation or personal intuition) and by a line of reasoning (often including a model and theory), which together provide a rational basis for drawing a conclusion, even though reasonable scientists might disagree on whether that conclusion is the only inference that can be drawn validly from the data. Thus, there can be several scientifically plausible conclusions or accounts, with wide disagreement among scientists as to which conclusions or accounts will ultimately prove to be correct. As indirect evidence, therefore, the existence of good-faith disagreement among respected scientists is itself a good indication that the alternative accounts are scientifically plausible. 66 SPS Agreement, supra note 2, art. 2.2.

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munity for a measure to be valid. As long as a risk assessment meets the requirements set forth in the preceding section, hypothetically a WTO panel should not invalidate the measure for a failure to meet the requirement in Article 2.2 that a measure “not be maintained without sufficient scientific evidence.”67 However, one significant danger stems from the requirement of scientific justification, not only in regard to Article 2.2 but also for the whole Agreement. It is that science can be and is bought. The industry or state funding the investigation inevitably directs the scientific inquiry.68 Sociologists have observed that science, much like policy, is a social construction.69 Despite this danger, however, science is the best tool available to reach the SPS Agreement’s goals of increased liberalization of global trade with continued state sovereignty over sanitary and phytosanitary health measures.

CONCLUSION The focus of this chapter has been on the standard of review that WTO panels should apply when examining sanitary or phytosanitary measures that are not based on international standards. It has focused on a test that covers the most important elements that a panel should consier to determine the validity of SPS measures. The test requires that such measures be based on scientific principles, based on a valid risk assessment, and not maintained without sufficient scientific evidence. With respect to each of these elements, a rational basis standard best meets the Agreement’s goals of liberalizing trade while allowing a member country to maintain as much sovereignty as possible over its politically sensitive health regulations.

67 Interview with Dale McNeil, Oct. 9, 1999. Some within the U.S. Agriculture Department, while the Beef Hormones case was before the WTO DSB, wondered how much support a country needed from the scientific community to maintain a traderestrictive SPS measure. Specifically they wondered whether one scientist would be enough. McNeil worked in the Agriculture Department, and he said that the term that the attorneys who worked in the Department for this hypothetical, lone scientist was the “Guatemalan scientist.” 68 See Atik, supra note 20, at 750. “The presumption of regulatory correctness that attaches to international standards makes the setting of these standards increasingly important.” Id. at 744. This is especially true when the adoption of particular standards within the organization was contentious. The adoption of standards by Codex for the hormones at issue was very controversial, and they were adopted by less than a majority of the countries participating in the decision. Furthermore, Codex cannot be considered a legitimate expression of the international community’s values because producers exercise inordinate influence. 69 Atik, supra note 20, at 750.

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In sum, the SPS Agreement represents a move by the international community to solidify the gains made by international trade. It seeks to ensure through increased liberalization, harmonization, and science that WTO members will not be able to use sanitary or phytosanitary measures as a means of restricting trade. Within the Agreement, its two most important goals—liberalizing trade by harmonizing SPS measures and maintaining state sovereignty—are at loggerheads with each other. In between the precarious balance of these two competing forces, the Agreement places science. It is upon science, and the belief that science can prove what is right, that the SPS Agreement depends. Unfortunately, uncertainty plays just as an important part in science, as does certainty. Because of this, the Agreement cannot function as it might were scientific evidence more sure. But as it is, “regulations to protect public health involve social policy choices. Because the regulatory process is not wholly scientific, science cannot provide all the answers.”70

70 David A. Wirth, The Role of Science in the Uruguay Round and NAFTA Trade Disciplines, 27 CORNELL INT’L L.J. 817, at 832–40, 833 (1994).

CHAPTER 13

FOOD LABELING: FREE TRADE, CONSUMER CHOICE, AND ACCOUNTABILITY Katy Eiseman

INTRODUCTION People have highly complex and personal reasons behind their dietary decisions. In several countries, consumers are taking an increasing interest in how food is produced, and this interest is only partially based on health concerns. Increasingly, consumers seek information about how production methods affect the environment.1 Other production-related concerns may be based on religious, moral, or cultural values. 2 Where consumers wish to differentiate between food products based on varying methods of production, the World Trade Organization (WTO) should not prevent governments from mandating accurate labeling. To deny consumers the information they seek is to manipulate the market. In this chapter, I propose that governments should be allowed to mandate informational labels that address food production methods. I explore two areas of ongoing controversy in food production methods: hormone treatment of beef and genetic modification of agricultural products. I first discuss the background of the hormone dispute, and review the WTO Appellate Body’s decision with respect to the EU’s “precautionary principle” rationale. I then summarize the current state of this ongoing dispute, and suggest mandatory labeling as a solution. I discuss various consumer concerns over hormone-treated beef to demonstrate that many of the concerns are not based on food safety. A parallel examination of the controversy surrounding genetic modification of agricultural products follows. 1 See PROCESSES AND PRODUCTION METHODS (PPMS): CONCEPTUAL FRAMEWORK AND CONSIDERATIONS ON THE USE OF PPM-BASED TRADE MEASURES 7 (OECD Working Papers No. 70, 1997). 2 See id. at 28.

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I then explain why the mandatory labels discussed herein should not be deemed food safety measures, which are governed under the Agreement on the Application of Sanitary and Phyto-Sanitary Measures (SPS).3 Instead, the Agreement on Technical Barriers to Trade (TBT)4 should govern labels that address multiple consumer concerns. The SPS and the TBT are essentially mutually exclusive in the types of measures that they cover, and, apparently, if a measure has any health safety component, the SPS governs in the event of a dispute over that measure. I argue that this leads to perverse outcomes, and that, where a measure serves multiple purposes, the TBT should govern. The consumers’ right to know is an adequate and legitimate basis for purely informative food labeling, even if that labeling strictly concerns the method by which food is produced. When consumers have concerns about particular methods of food production, international trade rules should not prevent governments from enabling their citizens to make informed choices about the food that they buy.

HORMONE USE IN THE CATTLE INDUSTRY The beef hormones dispute is a small part of a far larger clash between different approaches to agriculture. The dispute raises many questions about who ultimately determines agricultural practices and sets standards and how best to meet the concerns of consumers. The hormone dispute is complex because it involves elements of protectionism on both sides (putative safety regulations that aim to serve multiple purposes), and has led to enormous consumer uproar and distrust on one side of the Atlantic, and apparent consumer apathy on the other. Farmers use hormones to make their cattle grow at a faster rate. This allows them to save money on feedstock. The use of hormones in cattle is widespread in the United States, and the practice purportedly gives U.S. farmers a 15% cost advantage over EU farmers.5 Under 10% of U.S. farmers do not treat their beef with hormones,6 but a niche market has developed in this country for untreated beef. As in Europe, American consumers cite potential health effects among an array of other reasons for their opposition to hormone-treated beef. Other reasons include concerns over animal cruelty, support for small, local farmers, and opposition to agricultural practices that consumers consider unnatural. Most Americans Agreement on the Application of Sanitary and Phytosanitary Measures, GATT Doc. MTN/FA II-A1A-4 (Dec. 15, 1993), available at http://www.wto.org/ [hereinafter “SPS Agreement”]. 4 Agreement on Technical Barriers to Trade, available at http://www.wto.org [hereinafter “TBT Agreement”]. 5 See Kevin O’Sullivan, Farmers Share Concerns About Effects of GM Crops, I RISH TIMES, Sept. 30, 1999, at 9. 6 See Janelle Carter, U.S. Dismisses EU Report on Beef, AP ONLINE, May 5, 1999, available at 1999 WL 17800366. 3

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are unaware that beef is treated with hormones, antibiotics, and other growth stimulants in this country, so general U.S. consumer attitudes towards the practice remain unknown.

The EU Ban on Hormone-Treated Beef European concern over hormone-treated beef dates back to the early 1980s, when diethylstilbestrol (DES) was found in baby food made from veal. 7 Resultant birth defects were reported all over Europe; reported effects included menstrual bleeding in infant girls and development of breasts in boys.8 The particular grotesqueness of the baby food scare lead to a regulatory response that most commentators agree was overinclusive from a public health standpoint.9 The EC issued three separate directives during the 1980s that amounted to a near total ban on hormone-treated beef in the European market.10 The decision to opt for a total ban was driven in part by the fact that a test for DES alone would have been much more expensive than the general hormone test.11 While naturally occurring hormones, both in our food and those produced by humans, are also linked to cancer and endocrine disorders, 12 the EU has not been able to produce evidence that the kinds of hormones used in cattle, at the levels administered in the course of good veterinary practice, are harmful to human health.13 The European ban on hormone treated beef imports began in 1989.14 Effective July 1, 1997, the three original directives were replaced by Council 7 See Janice Castro, Why the Beef Over Hormones?, TIME, Jan. 16, 1989, at 44. DES was banned in the United States in 1979. 8 Id. 9 See, e.g., Dale E. McNeil, The First Case Under the WTO’s Sanitary and Phytosanitary Agreement: the European Union’s Hormone Ban, 39 VA. J. INT’L L. 89 (Fall 1998). 10 See Report of the Appellate Body EC—Measures Concerning Meat and Meat Products, WT/DS26/AB/R, WT/DS48/AB/R, at paras. 3 and 4 (Jan. 16, 1997), available at http:www.wto.org/wto/dispute/hormab.wp5 (last visited Sept. 24, 1999) [hereinafter Appellate Body Report]. 11 See Michele D. Carter, Note, Selling Science Under the SPS Agreement: Accommodating Consumer Preference in the Growth Hormones Controversy, 6 MINN. J. GLOBAL TRADE 627, at 626 (Summer 1997). 12 “Although the specific human health effects of these residues are uncertain, there is general scientific evidence that the consumption of greater amounts of hormones causes cancer, magnifies the effects of other carcinogens and causes estrogenic effects, including a reduction in male human fertility.” Layla Hughes, Note, Limiting The Jurisdiction of Dispute Settlement Panels: The WTO Appellate Body Beef Hormone Decision, 10 GEO. INT’L ENVTL. L. REV. 915, at 916 (Spring 1998). 13 See Anne Swardson, U.S.-European Trade Battle: Cheese is a Metaphor for Special Way of Life, SEATTLE TIMES, Aug. 30, 1999, at A2. 14 See Kristin Mueller, Note, Hormonal Imbalance: An Analysis of the Hormone Treated Beef Trade Dispute Between the United States and the European Union, 1 DRAKE J. AGRIC. L. 97, at 98 (Spring 1996).

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Directive 96/22/EC (“Directive 96/22”) of April 29, 1996.15 As in the previous directives, Directive 96/22 prohibited the administration to farm animals of substances having a hormonal or thyrostatic action, and prohibited the import or placement on the market of meat products from animals treated with such substances.16 The directive made certain exceptions for meat that had been treated with hormones for therapeutic or zootechnical purposes.17

The WTO Dispute and the Precautionary Principle After SPS came into effect, Canada and the United States challenged the EU’s ban as an unjustifiable restriction to trade in separate WTO panel proceedings.18 All parties agreed that the ban was a sanitary measure and that consideration under the SPS was therefore appropriate. A challenge brought under the TBT was thus not evaluated. The separate panels held that the ban violates the SPS Agreement.19 The Appellate Body agreed, but significantly differed with the panels on several points.20 I will highlight the Appellate Body’s treatment of the precautionary principle because of this principle’s importance in the context of consumer behavior: a personal precautionary approach often lies behind dietary decisions of individual consumers. In the beef hormones dispute, the EC argued that its hormone ban was justified by its adherence to the precautionary principle. The Appellate Body rejected this justification, saying that if the precautionary principle had achieved the status of customary law at all, it was only in the context of international environmental law. An understanding of what the precautionary principle really is would require recognition that, if it applies in the environmental context, not to apply it in other contexts relating to human health is illogical. One commentator explains the precautionary principle thus: The environmental effect of an activity often does not become apparent until some time after the activity has occurred, so that See Appellate Body Report, supra note 10, at para. 5. See id. The six hormones in question are oestrodiol-17B, progesterone, and testosterone, all of which are naturally occurring hormones, and three synthetic hormones, trenbolone acetate, zeranol, and melengestrol acetate. See id. at para. 2. 17 See id. at para. 5. 18 See WTO Doc. WT/DS26/R/USA (Aug. 18, 1997) and WTO Doc. WT/DS48/R/CAN (Aug. 18, 1997). 19 Id. 20 For an in-depth analysis of the panel and Appellate Body reports, see McNeil, supra note 9. 15 16

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undesirable and potentially irreversible effects may result if the activity is not prevented before sufficient scientific evidence exists to prove the harmfulness of the activity. These observations about science not only describe the global environment, but also characterize our knowledge of human physiology and the effects of external environmental factors on human health. An understanding of science in light of these global interconnections and in light of extreme scientific uncertainty reveals the danger of presuming that a chemical substance is safe until we have proof that it will cause harm. The precautionary principle is based on this understanding and can be seen as a rejection of the “wait and see” philosophy that emphasizes scientific certainty as a precondition to adopting a protective health measure. The scientific test in the SPS Agreement indicates that the Agreement itself is insufficient to reconcile the interests of trade and the environment or human health, because it fails to appreciate the inability of science to predict environmental and physiological interactions.21 When originally enacting the hormone ban, the EU cited “inherent limits to science” as a factor in its determination that hormones pose an unjustifiable risk.22 In defense of the ban in the dispute settlement process, the EU cited cases where a precautionary approach would have been appropriate, most notably in the recent scares involving BSE and E. coli; it also cited examples of dangerous products that the United States had allowed on the market, such as cyclamates, saccharin, phenformin, and pesticides.23 In its submission to the panel, the EU argued that it places “[t]he attainment of a high level of consumer protection before the commercial interests of farmers and pharmaceutical companies.” 24 Many European environmentalists believe that the United States has taken an aggressive stance in the hormones dispute in order to prevent the precautionary principle from becoming an acceptable defense in international trade disputes. 25 Indeed, the U.S. fears that the precautionary

Hughes, supra note 12. See Lisa K. Seilheimer, The SPS Agreement Applied: the WTO Hormone Beef Case, 4 ENVTL. LAW. 537, at 557 (Feb, 1998). 23 See First Written Submission of the European Community to the Panel on European Communities—Measures Concerning Meat and Meat Products (Hormones), 114–22 (Sept. 20, 1996), available at 1996 WL 807621 [hereinafter EC Submission]. 24 Id. at 124. 25 See Alex Scott, Europe’s Beef Ban Tests Precautionary Principle, CHEM. WK., Aug. 11, 1999. 21 22

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principle would arise as a point of contention if the SPS were reopened for negotiation.26 The Appellate Body appears to have misunderstood what the precautionary principle is. The Appellate Body, on the one hand, refused to acknowledge the precautionary principle as a customary rule of international law, while stating that it may well have become a principle of customary international environmental law.27 As explained in the quote above, it is hard to imagine how this principle of environmental law would not be applicable to food safety laws. The public at large is generally more reluctant to submit itself to unknown risks of direct harm to human health than to environmental risks; moreover, human health and the environment are often closely interrelated.28 Nonetheless, the Appellate Body concluded that the precautionary principle was an insufficient basis to justify the hormone ban.

The Hormone Dispute Post-Decision Each side remains equally adamant about the sincerity of its position. The EU has taken the stance that “the logical conclusion of the Appellate Body’s ruling on the hormone ban is to do a new risk assessment, not to lift the ban.”29 In accordance with its reading of the Appellate Body Report, the EU is working to complete 17 scientific studies in the year 2000 to show that the ban is in fact scientifically justifiable. 30 Nonetheless, given its commitment to a precautionary approach to hormones, and its recognition of the “inherent limits to science,” the EU has suggested that nothing the studies come up with would cause them to lift the ban. Meanwhile, with the WTO’s approval, the United States and Canada have imposed approximately $125 million worth of duties in retaliation for the ban.31 26 See ACTPN Set to Address U.S. Biotech Position in WTO Negotiations, 17 INSIDE U.S. TRADE (No. 22), June 4, 1999. 27 See Appellate Body Report, supra note 10, at para. 123. 28 Beyond this apparent confusion about the basis for the precautionary principle, and its proper scope, the Appellate Body went on to state that “the precautionary principle indeed finds reflection in” the SPS. Id. at para. 124. The Appellate Body cites Articles 5.7, 3.3, and the sixth paragraph of the preamble. Id. The Appellate Body went on to state that a panel “may, of course, and should, bear in mind that responsible, representative governments commonly act from perspectives of prudence and precaution where risks of irreversible, e.g., life-terminating, damage to human health are concerned[.]” Id. 29 EU Says Response to WTO Panel on Hormones May Take Four Years, 16 INSIDE U.S. TRADE, Apr. 13, 1999, at 13. 30 See Scott, supra note 25. 31 See Doug Palmer, US Cattle Industry Sees New Hope in EU Beef Row, REUTERS ENG. NEWS SERV. Oct. 28, 1999, 13:44.

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The United States continues to insist on an end to the ban, and has proposed a labeling solution that would identify beef originating in the United States. As Secretary of Agriculture Dan Glickman and U.S. Trade Representative (USTR) Charlene Barshefsky explained in a letter to EU External Relations Commissioner Leon Brittan: This beef labeling proposal will allow consumers to recognize U.S.-sourced beef. Therefore, consumers can choose whether to purchase the product. By labeling U.S. beef and beef products with those U.S. labels already approved by the Commission, the EU will have the necessary product identification to allow for consumer awareness and choice.32 Of course, pure country-of-origin labels would only allow consumers the choice of whether to buy U.S. beef and would not allow European consumers to know whether the beef is hormone-treated. Leon Brittan has explained as much: “I don’t think it’s sufficient for it just to say that they are a product of the United States, because that doesn’t meet the concern.”33 Concerned consumers could only react to this label by boycotting all U.S. beef, even though not all of it is hormone-treated. The United States is currently allowed to ship 11,500 tons of untreated beef to Europe.34 The EU has proposed expanding the quota for non-hormone-treated beef and allowing it in tariff free.35 The label that the United States has proposed would harm the U.S. farmers who raise cattle without treating them with hormones.

32 Dan Glickman and Charlene Barshefsky, U.S. Letter on Hormone Dispute (dated Feb. 11, 1999), available in 17 INSIDE U.S. TRADE, Feb. 19, 1999. 33 EU Considers New Beef Ban as US, EU Try to Resolve Hormone Dispute, 17 INSIDE U.S. TRADE, Apr. 23, 1999. 34 EU Body Delays US Beef Decision to Feb 15, DOW JONES COMMODITIES SERV. Dec. 8, 1999, 13:10, available on Westlaw at 12/8/99 DJCOMS 13:10:00. 35 See Palmer, supra note 31. In April 1999, EU Agricultural Commissioner, Franz Fischler, offered further access to untreated U.S. beef as a way to ease tensions caused by the ban. See Fischler Letter on Hormones, 17 INSIDE U.S. TRADE, Apr. 2, 1999. However, later that month EU veterinarians detected residues of the three banned synthetic hormones in some of the beef that the United States ships to Europe, all of which the U.S. designates as non-hormone treated. See EU Considers New Beef Ban, supra note 33. Upon this revelation, the EU considered extending the ban to cover this beef as well. In July, the USDA temporarily shut down its program for non-hormone beef due to admitted lack of controls. USDA Work to Restart Program that May Help Ease Hormone Dispute, 17 INSIDE U.S. TRADE, Aug. 20, 1999. In August, the USDA announced a new, third-party certification system to assure that beef shipped to the EU does not contain growth hormones.

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Mandatory Labeling as a Solution I propose, instead, that hormone-treated beef be allowed into Europe if labeled as hormone treated. Such a labeling system would meet the European concern, would comport with basic principles of free trade, and would be a more easily justifiable solution than either the U.S. proposal or the EU ban. Erick Boutry, managing director of the society that oversees Roquefort cheese production (one of the products singled out for retaliation in response to the hormone ban), admittedly has a vested interest in seeing the ban lifted, but he states the case for labels succinctly: “I think the EU consumer has a right to buy beef from America. We should label it >hormone-treated’ and let the consumer to choose [sic].”36 If a mandatory “hormone-treated” label were put in place, it would still have to comply with the SPS “scientific justification” requirements if it were construed as a health safety label. The EU has proposed such a label.37 I suggest, that the EU should not try to justify such a label as a sanitary measure, however, because the measure would not be strictly based on health concerns. Instead, the EU should be able to base a label on the consumers’ right to know. Subsequently in this chapter, I explain how such a label could be acceptable under the WTO Agreements. As currently written, the WTO Agreements do not seem to contemplate the possibility of a label that is based in part on health concerns and in part on concerns unrelated to health; by their terms, the SPS and the TBT are mutually exclusive. I suggest, however, that when a labeling system is designed to serve multiple purposes, the measure should be evaluated under the TBT. This should be the case when some consumer concerns are health related, and there is no science to justify an import ban. While the precautionary principle may have its limits in the context of governmental bans, consumers should be free to set whatever level of caution they want.

Consumer Concerns Beyond Human Health A mandatory label for hormone-treated beef should not be construed as a sanitary measure, because consumers have a range of reasons for preferring non-hormone-treated beef beyond health safety concerns. These range from gastronomical to protectionist, with a variety of ethical considerations in between.

36 Ross Tieman, Cheese Burgers Left Trapped in a Trade War, EVENING STD., Aug. 19, 1999, at 46. 37 See EU Member States Bless Effort to Comply With WTO Hormone Ruling, 17 INSIDE U.S. TRADE, Apr. 30, 1999.

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First, many people insist that hormone-treated beef tastes worse than non-treated beef.38 In Scotland, for example, restaurant owners seek meat from cattle that have not been subjected to more than a necessary level of stress, from the farm to the slaughterhouse, claiming that the excessive levels of natural hormones produced by stress will taint the meat.39 Within the U.S. beef industry, there are claims that hormone treatment leads to the leaner kind of meat that American consumers demand.40 These divergent statements both suggest that hormone treatment affects the end product in significant ways that would justify distinguishing between them. Second, ethical concerns about hormone treatment are more prevalent in Europe than in the United States and operate on a variety of bases. Kees de Winter, a food officer for the European Consumers Organization, says of European consumers: “They are not just motivated by fear, but also by principles. These animal rearing practices are considered unnatural.”41 This concern about “unnatural” practices ties in with a traditional approach to agriculture that many Europeans want to preserve. Consumers also sometimes see hormone treatment as part of an approach to agriculture that does not simply go against tradition but is inhumane. Finally, some consumers might have “protectionist” reasons for preferring non-hormone-treated beef. Value-based, non-health and non-environmental concerns are difficult to distinguish from purely protectionist concerns.42 This is particularly true of consumer preferences for local agricultural products, but it hardly seems possible that populist, consumerdriven efforts to support local community farming could be in violation of true principles of free trade. Admittedly, such efforts are in some sense “protectionist,” but when action is taken by consumers, rather than government, “free trade” cannot contravene basic market principles in such a way as to invalidate certain consumer motives.

GENETICALLY MODIFIED ORGANISMS IN AGRICULTURE Before I discuss the appropriateness of such mandatory labels under the TBT, I will provide background on recent developments in the current genetically modified organisms (GMOs) controversy. This method 38 See Mary Dejevsky, A Cook’s Beef with GM Foods: Steaks and Mince Emerge from the Oven Shrunken and Tough, However Slowly They Are Cooked, I NDEP. (London), Aug. 13, 1999, at 4. 39 See Boning Up: Jackie Kemp, SUNDAY HERALD, Dec. 5, 1999, at 16, available at 1999 WL 22707787. 40 Personal communication with Dale McNeil, Member of the law firm of Ablondi, Foster, Sobin & Davidow, P.C., Fall 1999. 41 Mueller, supra note 14, at 103, citing Caroline Southey, Hormones Fuel a Meaty EU Row, FIN. TIMES, Sept. 7, 1995, at 2. 42 See PROCESSES AND PRODUCTION METHODS (PPMS), supra note 1, at 29.

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of food production has led to bans, mandatory labels, and voluntary labels. While the scientific justification for absolute bans seems stronger in this instance than in Europe’s hormone-treated beef ban, I will limit my arguments to the defense of mandatory labeling.

Background on the GMO Controversy Genetically engineered crops now account for one fourth of U.S. cropland, amounting to over 90 million acres.43 Crops are altered for a range of traits, including pest resistance and increased nutritional value. Popular resistance to the use of GMOs has increased dramatically in recent months in this country, as more people learn about them and begin to question the environmental risks and ethical questions that genetic engineering raises. In September of 1997, Senate Agriculture Committee Chairman Richard Lugar (R-IN) urged that U.S. trading partners should not stifle biotechnology, saying that these advances are needed to meet the increasing demand for food production worldwide.44 In Europe, the United States, and Canada, however, there is a general oversupply of agricultural produce.45 A better distribution system for food would address the problems of food shortages without increasing the problem of food surpluses. But, as one commentator puts it, “With market analysts estimating sales of genetically engineered foods of up to $10 billion by the year 2000, the stakes are high.”46 The GMO issue strikes a chord with people around the world. Surveys conducted in several countries find that, across the board, about 90% of consumers would like genetically modified food to be labeled.47 In 1996, a coalition of over 300 agricultural, health, and trade groups announced a boycott of newly introduced GMOs, calling for labeling and segregation.48 See Seeds of Change, 64 CONSUMER REPORTS 41, at 41, (Sept. 1999). See Austria, EU Commission Heading for Possible Court Battle over GMOs, 15 INSIDE U.S. TRADE, Oct. 3, 1997. 45 This is currently a particularly pressing issue politically in Europe. See O’Sullivan, supra note 5, at 9. 46 Steve Lustgarden, Gene Cuisine: When Genetically Engineered Foods Come to Your Local Supermarket, Will You Be Able to Identify Them by Their Labels?, VEGETARIAN TIMES, Apr. 1, 1994, at 62, available at 1994 WL 13643754. 47 A Prairie Research Associates Survey found that 92% of Manitobans want labels on GMO food. Laura Rance, Biotech Backlash—A Signal to Industry Customers Nervous about Eating Food Produced by Science, WINNIPEG FREE PRESS, Aug. 28, 1999, at B13. In a survey in Australia, 93% of consumers advocated clear labels for genetically modified foods. Australian, New Zealand Health Ministers Agree to GMO Labeling, FOOD CHEM. NEWS, Aug. 23 1999, available at WL 9626227. “A 1992 USDA survey found that 85 percent of citizens questioned considered it ‘very important’ to label whether a food was produced with biotechnology.” Lustgarden, supra note 46. 48 See Coalition Seeks Labeling of Genetically Engineered Corn, Soybeans; Launches Worldwide Boycott, FOOD LABELING NEWS, Oct. 10, 1996. 43 44

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It is clear to most people that GMO labeling is not simply a food safety issue. As a Greenpeace spokesman put it, GMOs are “an environmental threat and an unjustified experiment with food.”49

Concerns Raised by Consumers The unknown ecological consequences cover one range of concerns about GMOs. Earlier this year, Bt corn pollen on milkweed killed monarch butterfly larvae in a lab study at Cornell University. 50 A spokesman for Monsanto, the company responsible for this strain of corn, attempted to reassure the public in response to the Bt findings: “Most corn pollen remains within the corn field and monarch larvae can choose to avoid feeding on Bt pollen by feeding on the underside of leaves or on other milkweed with little or no Bt pollen.”51 Meanwhile, European scientists’ lab studies of genetically modified crops indicate harm to ladybugs and green lacewings. 52 In another lab study involving genetically modified canola, scientists fed the new gene to bees and found that their ability to distinguish between flowers was impaired, and some died earlier than expected.53 The concern of environmentalists is not limited to the harm caused by these specific crops but to all of the potential harms that could never be tested for in the lab. The concern more commonly addressed by the recent legislation is the possibility of harm to human health. One U.S. company was attempting to design soybeans with increased nutritional value; when it introduced a Brazil nut gene into the soybeans, however, this caused allergic reactions in a clinical test.54 While this specific project was dropped, it hints at all of the possible unforeseen consequences that can be unleashed by introducing new foods. The final category of concerns about GMOs includes a range of ethical concerns. Some of these concerns are about specific types of GMOs. For example, vegetarians want to be able to know that the food they buy has not been modified with animal DNA. Some animal rights activists oppose genetic modification as part of a broader protest against experimentation with other species.55 Religious concerns might arise if genes from species prohibited by Jewish or Muslim food law were introduced 49 Shada Islam & Peter Honey, ‘We Don’t Like Nothin’ If Baby Makes a New Gene Stalk’ Selling, FIN. MAIL, July 9, 1999, at 44. 50 See Seeds of Change, supra note 43, at 45. 51 Rance, supra note 47. 52 See Seeds of Change, supra note 43, at 44–45. 53 See id. at 45. 54 See id. at 44. 55 See Ruarc Gahan, Licensed to Cause Pain, IRISH TIMES, Dec. 16, 1999, at 17, available at 1999 WL 24435042.

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into foods that would otherwise meet the dietary restrictions. Then there is the type of genetic engineering that hits closer to home for most people: the USDA, for example, is experimenting with replicated human insulin growth hormone to develop “leaner pigs and extra meaty hogs.”56 While some people feel that tinkering with a bacterium here or there is justifiable, many question the ethical ramifications of using human genes in food.

Legislation Until very recently, most of the governmental activity on GMOs had taken place in Europe. As early as 1990, the EC issued Council Directive 90/220/EEC (“Directive 90/220”), which regulates the release of GMOs into the environment. After two million Austrians signed a petition to ban GMOs57 in 1997, Austria banned the genetically modified corn and soy strains that the EU Commission had approved.58 Austria’s initiative was followed shortly by a ban in Luxembourg. In May 1997, the European Novel Foods regulation59 set out guidelines for genetically modified agricultural products destined for human consumption, while GM livestock feed remained unregulated. These steps were not enough to allay consumer fears in Europe. In September 1997, EU Agriculture Commissioner Franz Fischler called upon industry to provide more information to consumers or risk threatening the development of GMOs. Fischler stated, “It is up to scientists, the biotechnological industry and public authorities to fully take into account the rightful concerns of consumers.”60 The next week, the EU Commission adopted a decision to require labeling of foods containing the GMOs that were approved under the Novel Foods regulation. Under the labeling requirement, products carry a label saying they “may contain” genetically altered material.61 After the Cornell study showing potential harm to monarch butterflies, the EC revoked the license it had granted under Directive 90/220 for that strain of corn.62 On June 24, 1999, EU Environmental Ministers Seeds of Change, supra note 43, at 44. See David Benady, Genetically Moribund: Consumer Rejection of Genetically Modified Products Has Forced All UK Manufacturers to Stop Using Them as Ingredients, Says Greenpeace, MKTG. WK. 18, May 27, 1999. 58 See Austria, EU Commission Heading for Possible Court Battle over GMOs, 15 INSIDE U.S. TRADE, Oct. 3, 1997. 59 EU Novel Foods and Novel Food Ingredients Regulation 258/97. 60 See Fischler Asks Industry to Make Case for Genetically Altered Goods, 15 INSIDE U.S. TRADE, Sept. 26, 1997. 61 See Austria, EU Commission Heading for Possible Court Battle over GMOs, 15 INSIDE U.S. TRADE, Oct. 3, 1997. 62 See Benady, supra note 57. 56 57

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agreed not to license any new genetically modified foods until 2002, when a licensing law is to come into effect.63 A July 1999 draft of Directive 90/220 expands risk assessment of new GMOs to examine whether there are risks “direct or indirect, immediate or delayed.”64 This new attempt to legislate a precautionary approach was met with concern in North America. Canadian officials proclaimed, “Risk management is based on the science of the day and not of the future.”65 In August 1999, a new Japanese proposal specifically lists ethical concerns as a valid reason for labeling GMO products. In the United States, The Natural Law Party has gathered 500,000 signatures of Americans in support of GMO labels66; after 250,000 letters sent to the Department of Agriculture, the Department agreed not to allow GMOs in foods that qualify for the national standards for organic products.67 In July 1999, Glickman urged companies to consider labeling, saying that countries could try to use the industry’s resistance to GMO labeling as a way to block entry to their markets. 68 Canada, Australia, New Zealand, Thailand, and the Philippines are all working to develop policies to deal with GMOs. In November 1999, Congressman Dennis Kucinich of Ohio introduced a bill into the U.S. House of Representatives that would require mandatory labeling of GMO products.69 The Kucinich bill was referred to the House Committees on Agriculture and Commerce; as of this writing, no action had been taken on the bill.

THE SPS REQUIREMENTS SHOULD NOT TRUMP OTHER CONSUMER CONCERNS Clearly, food safety concerns underlie the desire of many consumers to ban or label food that is produced with genetic engineering, hormone treatment, irradiation, and other modern innovations of the agricultural industry. Many consumers are motivated by a personal precautionary approach, due to their perceptions of inadequate scientific proof of the safety of foods produced using these methods. Allowing consumers to apply the precautionary principle is not only a much less trade restrictive solution than the government directly applying the precautionary prin-

Islam & Honey, supra note 49. Draft GMO Directive May Not Speed Up Approval Process, 17 INSIDE U.S. TRADE, July 23, 1999. 65 Id. 66 See Genetically Altered Food Needs Labels, Group Says, GREENSBORO NEWS AND REC., June 20, 1999, at A7. 67 Id. 68 See U.S. Tables Proposals for WTO Talks, Fails to Reveal Key Details, 17 INSIDE U.S. TRADE, July 30, 1999. 69 H.R. 3377, 106th Cong., 1st Sess. (introduced Nov. 16, 1999). 63 64

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ciple and banning certain products; it is also far more democratic, and it is a strictly market-based solution. As outlined in the discussion above, however, the concerns of many consumers go far beyond the realm of human health and touch upon basic issues of personal ethics and choice. Unfortunately, the WTO Agreements set up a framework under which, if health concerns are considered to be a factor in the enactment of a measure, the SPS will normally be the governing document in the event of a dispute. The SPS and the TBT are, by their terms, mutually exclusive. TBT Article 1.5 states: The provisions of this Agreement do not apply to sanitary and phytosanitary measures as defined in Annex A of the Agreement on the Application of Sanitary and Phytosanitary Measures. In turn, Annex A of the SPS Agreement defines “sanitary or phytosanitary measure” as any measure applied: (a) to protect animal or plant life or health within the territory of the Member from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying organisms or disease-causing organisms; (b) to protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs; (c) to protect human life or health within the territory of the Member from risks arising from diseases carried by animals, plants or products thereof, or from the entry, establishment or spread of pests; or (d) to prevent or limit other damage within the territory of the Member from the entry, establishment or spread of pests. Sanitary or phytosanitary measures include all relevant laws, decrees, regulations, requirements and procedures including, inter alia, end product criteria; processes and production methods; testing, inspection, certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants, or with the materials necessary for their survival during transport; provisions on relevant statistical methods, sampling procedures and methods of risk assessment; and packaging and labelling requirements directly related to food safety [emphasis added].

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A few WTO member nations have argued that measures regulating GMOs are not SPS measures even if a health risk has been raised, saying that the risks posed do not fit into any of the four categories above. 70 However, health concerns over allergens or other potential unknown risks seem to fit comfortably into the category of “toxins” under part (b), and many environmental concerns would be covered under part (d), which addresses the spread of pests. Arguably, if labels are strictly informative and do not make any health claims, such labels are not “directly related” to food safety, but only indirectly related. Nonetheless, measures adopted specifically to address health and environmental concerns would appear to be covered under Annex A of the SPS and, therefore, would be excluded from TBT coverage by Article 1.5 of the TBT. However, SPS Article 1.4 states: Nothing in this Agreement shall affect the rights of Members under the Agreement on Technical Barriers to Trade with respect to measures not within the scope of this Agreement. Here a question remains open as to measures that are “not within the scope of” the SPS but, instead, are measures with a broader scope than those covered by the SPS. A measure that serves multiple purposes, only some of which are within the scope of the SPS, is not a measure within the scope of the SPS. The WTO has acknowledged the existence of multipurpose regulations in other contexts,71 and encourages governments to notify under both the SPS and the TBT, identifying which parts of the regulation are SPS measures and which fall under the TBT. Thus, to the extent that a label is adopted to allow consumers to differentiate between foods produced using traditional agricultural methods and foods produced through biotechnology, for personal reasons that are not strictly based on health or environmental concerns, the measure is not within the scope of the SPS, and must be analyzed under the TBT. In the case of a label that simply identifies the presence of GM material or synthetic hormones, and makes no claims with respect to safety risks, separating out the TBT measure from the SPS measure would be a pointless task because the label looks the same no matter which purpose it serves. To avoid SPS coverage, a country could simply deny that any health concerns exist, but this seems a perverse and disingenuous result. The existence of health concerns that are difficult to substantiate scientifically 70 Gretchen Stanton, Counsellor in WTO’s Agriculture and Commodities Division, personal communication, Nov. 18, 1999. 71 For example, a regulation may have provisions aimed at avoiding food contamination, and other provisions addressing size or weight requirements. Id.

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should not invalidate labeling measures that serve the legitimate aim of informing the public. Where a critical mass of consumers makes a distinction between products in their own minds, their governments should be allowed to assist market differentiation by mandating the labels that their citizens demand.

Analysis of Mandatory Labeling Measures Under the TBT Mandatory labels are classified under the TBT as technical regulations.72 Article 2.1 of the TBT states: Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favorable than that accorded to like products of national origin and to like products originating in any other country.73 This formulation of the principles of national treatment and mostfavored nation treatment left open the determination of when products will qualify as “like products.” Several General Agreement on Tariffs and Trade (GATT) and WTO decisions inform this determination. In the Japan—Alcoholic Beverages decision, the Appellate Body drew upon the Report of the GATT Working Party on Border Tax Adjustments for a basic approach for interpreting what constitute Alike or similar products”: the interpretation of the term should be examined on a case-bycase basis. This would allow a fair assessment in each case of the different elements that constitute a “similar” product. Some criteria were suggested for determining, on a case-by-case basis, whether a product is “similar”: the product’s end-uses in a given market; consumers’ tastes and habits, which change from country to country; the product’s properties, nature and quality. 74 The Appellate Body’s recognition of “consumers’ tastes and habits” effect on the “likeness” of products gives some credence to the TBT, legitimacy of labels based on consumers’ ethical values. In Japan—Alcoholic Beverages, the Appellate Body further explained: [T]here can be no one precise and absolute definition of what is “like.” The concept of “likeness” is a relative one that evokes See TBT Agreement, supra note 4, Annex 1. Id. art. 2.1. 74 Japan—Taxes on Alcoholic Beverages, WT/DS8/AB/R, at 22 (Oct. 4, 1996), quoting Report of the Working Party on Border Tax Adjustments, B.I.S.D. 18S/97, para. 18. 72 73

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the image of an accordion. The accordion of “likeness” stretches and squeezes in different places as different provisions of the WTO Agreement are applied. The width of the accordion in any one of those places must be determined by the particular provision in which the term “like” is encountered as well as by the context and the circumstances that prevail in any given case to which that provision may apply. The Appellate Body determined that in the first sentence of Article III:2 of GATT 1994 “the accordion of ‘likeness’ is meant to be narrowly squeezed” and concluded that shochu and vodka are “like products” under that provision, invalidating the Japanese tax measure that treated the products differently. However, it is hard to imagine that the same Appellate Body would have invalidated a measure that required different labels for shochu and vodka. A more relaxed understanding of “likeness” is appropriate in the context of labeling under the TBT. Because labeling is a less trade restrictive measure than taxation in the first instance, the concept of “likeness” should allow room for informing consumers of differences that they deem important.

Accepting Measures Based on Processes and Production Methods The primary problem with only recognizing a difference in physical characteristics as rendering products “unlike” is that this does not get to the heart of the concern of many consumers, namely, the very method by which products are produced. Labels based strictly on physical content would not, for example, reach items where use of GMOs was no longer detectable (such as where chickens have been raised on GM corn). It is counterintuitive to say that the methods by which a product is produced should be of no concern to the consumer. Even the original GATT specifically allows for discrimination when products were produced by prison labor, which is strictly a discrimination based on production method.75 There is no conceptual reason why prison labor should be more valid than, for example, child labor, as a basis for consumer choice; nor is a preference for traditional family farms over industrial farms an invalid basis for consumer differentiation. In a free market system, it seems odd that consumers could be denied ready access to information upon which they would like to base their purchasing choices, when the government has decided that the information should be provided. Nonetheless, many scholars have accepted a dichotomy between regulations that deal with products and those that regulate processes and 75 See General Agreement on Tariffs and Trade, Article XX(e), found in Final Act Embodying The Results of The Uruguay Round of Multilateral Trade Negotiations, Marrakesh, Apr. 15 1994, reprinted in 33 I.L.M. 1144, 1154, 1168, 1197 (1994).

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production methods (PPMs). This distinction does not find definitive support in the text of the GATT, but is instead crystallized in United States— Restrictions on Imports of Tuna (Tuna-Dolphin).76 This dispute dealt with a voluntary “dolphin safe” label as well as an import ban. Examining the meaning of Article III of the GATT, this unadopted panel decision states: The text of Article III:1 refers to the application to imported or domestic products of “laws, regulations and requirements affecting the internal sale . . . of products” and “internal quantitative regulations requiring the mixture, processing or use of products”; it sets forth the principle that such regulations on products not be applied so as to afford protection to domestic production. Article III:4 refers solely to laws, regulations and requirements affecting the internal sale, etc. of products. This suggests that Article III covers only measures affecting products as such.77 It is important to note that, notwithstanding the above statement, the panel found that the labeling scheme was consistent with GATT 1947,78 which was the governing agreement at the time. This suggests that even if more trade-restrictive measures, such as import bans, may not be permissible if they address only processes that do not effect end products, informational labeling that deals strictly with PPMs is not necessarily problematic under the GATT. The product-process distinction gained some weight but also some confusion with the newer agreement, the TBT. Commentators have worked their way from the Tuna-Dolphin decision to create a dichotomy not just between regulations of products versus PPMs, but between product-related PPMs and non-product-related PPMs. The TBT definition of a technical regulation is as follows: Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marketing or labelling requirements as they apply to a product, process or production method.79 76 United States—Restrictions on Imports of Tuna, DS21/R—39S/155, (Sept. 3, 1991) available at 1991 WL 771248 [hereinafter Tuna-Dolphin]. See MICHAEL J. TREBILCOCK & ROBERT HOWSE, THE REGULATION OF INTERNATIONAL TRADE 413 (2d ed. 1999). 77 Tuna-Dolphin, id. at para. 5.11 (emphasis added). 78 Id. at para. 5.44. 79 TBT Agreement, supra note 4, Annex 1.

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Some argue that the phrase “product characteristics or their related processes and production methods” means that the definition of technical regulation refers to PPMs only when the method of production changes the end product physically and detectably. This interpretation of the definition means that the phrase “related processes and production methods” modifies the word “characteristics.” This makes sense grammatically, but a common-sense reading would be that PPMs associated with end products are technical regulations. This reading is strengthened by the second sentence, where “process or production method” is clearly unmodified. Most discussion of this ambiguity relates to ecolabeling. Addressing ecolabeling, the WTO Web site states, “Further discussion is needed on how the use in eco-labelling programmes of criteria based on non-product-related processes and production methods should be treated under the rules of the WTO Agreement on Technical Barriers to Trade.” 80 This statement suggests that, while there is uncertainty within the WTO itself on how to treat non-product-related PPMs, the TBT is the controlling agreement. The only reasonable alternative,81 if such labels are not covered by the TBT or the SPS, is that they must be considered under the provisions of GATT 1994. In such an instance, the label would be subject to Article III requirements, but the exceptions provided under Article XX would also become available.82 Because the TBT directly addresses labeling, however, analysis under Articles III and XX of the GATT is unlikely.

Strictly Informational Labeling Cannot Amount to an Illegitimate Trade Barrier Many of the problems typically associated with ecolabeling are not present in the context of a strictly informational label. Ecolabels often involve extensive evaluations of various environmental impacts, some of See http://www.wto.org/wto/environ/eco.htm (last visited Nov. 20, 1999). Some have suggested that if non-product-related PPMs are not covered by the TBT, they are prohibited, while others have argued that if they are not covered by the TBT, they are not regulated at all. Personal communication with Steve Charnovitz, Wilmer, Cutler & Pickering, Nov. 17, 1999. Both of these options misapprehend the GATT system. The TBT does not create rights for WTO members, prohibiting all unenumerated types of measures. Instead, it refines and narrows the scope of technical regulations that might otherwise have been permissible under the GATT. Thus, if a type of measure is not covered by the TBT or SPS, it must still comply with the provisions of the basic GATT 1947. 82 Analysis under Article XX(b) would be similar to SPS analysis. Article XX(g) allows measures “relating to the conservation of exhaustible natural resources.” Analysis under this provision would be appropriate in the context of GMOs, where biodiversity is arguably an exhaustible natural resource that might be threatened by the spread of genetically engineered strains of crops. 80 81

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which must be traded off against one another in the calculation.83 Such ecolabels emerge from a process that is not entirely transparent from the consumers’ perspective: certain factors are given more value than others, and the label does not inform the consumer as to how the determination was reached to grant a label.84 The resultant label is then a seal of approval, such as the German “Blue Angel” ecolabel.85 Such voluntary labels, while useful, can potentially mislead consumers in at least two ways. 86 The first—the one most commonly raised in the international trade context—is that consumers may assume that a product without an ecolabel was not “green” enough to receive the government’s approval, when in fact the producer simply may not have applied for an ecolabel. The impact can be especially negative on exporting producers, who may not have considered the ecological factors required in the domestic market but find that a different evaluation is required in the importing country.87 This problem is related to a second problem: consumers do not have the labeling criteria readily available and must take on faith that the labeler accurately weighed the ecological factors.88 Such voluntary labeling schemes should be allowed to make ecological or health claims so long as they are justifiable based on the science. Where a label merely informs consumers as to how a product was produced, there is no room for consumer error that may be present with such ecolabels. In an ideal economic system, consumers have full information about the products on the market. Most consumers, of course, would not be in a position to evaluate a full life-cycle analysis of each product they buy, if it were even possible to print such extensive labels on every product. But every piece of informative labeling is another step in improving the market so that purchases accurately reflect consumer preferences. When specific methods of production achieve such a significant amount of popular concern that a government decides that democracy is best See JULIAN MORRIS, The Pitfalls of Ecolabelling, in GREEN GOODS? 33–50 (1997). For a detailed discussion of various approaches to ecolabeling, see Atsuko Okubo, Environmental Labeling Programs and the GATT/WTO Regime, 11 GEO. INT’L ENVTL. L. REV. 599 (Spring 1999). 85 For an analysis of the international trade effects of the “Blue Angel” program, see Kilian Delbrück, The German Eco-Label “Blue Angel” and International Trade, in ECOLABELLING AND INTERNATIONAL TRADE 189–94 (S. Zarrilli, V. Jha & R. Vossenaar eds., 1997). 86 Several other potential problems with life-cycle analysis ecolabeling are discussed in Anil Markandya, Eco-Labelling: An Introduction and Review, in ECO-LABELLING AND INTERNATIONAL TRADE, supra note 85, at 4–9. 87 For a fuller discussion of possible discriminatory effects on exporting producers, see René Vossenaar, Eco-Labelling and International Trade: The Main Issues, in ECO-LABELLING AND INTERNATIONAL TRADE, supra note 85, at 21–36. 88 See Erik P. Barthagen, The Intersection of Trade and the Environment: an Examination of the Impact of the TBT Agreement on Ecolabeling Programs, 17 VA. ENVTL. L.J. 51, 56–57 (1997). 83 84

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served by banning the products produced by these methods, then, at the very least, producers should be required to inform consumers that they use these methods. GMO or hormone-treatment labeling would be responses to specific concerns that consumers have about how food is produced and would allow consumers to make their own decisions.

The TBT and Prevention of Deceptive Practices The TBT also recognizes legitimate measures that aim to prevent deceptive practices.89 Some, including Charlene Barshefsky, have actually argued that even accurate GMO labeling would confuse and mislead the public.90 Representatives from the U.S. agricultural industry wrote in a letter to the USTR that voluntary ecolabels “create unfair competitive advantage and pose discriminatory trade barriers, especially when the labels are based on PPMs. Therefore, we believe that the Agreement on Technical Barriers to Trade (TBT) should emphasize sound science and transparency and discourage non-product related PPMs as a component of environmental labeling.”91 In light of the heightened controversy over GMOs, the agricultural industry is apparently advocating the option of voluntary GMO labels in order to fight against mandatory labeling. 92 Given that most consumers surveyed believe that GMOs should be labeled, and the majority of Americans believe that the technology has not yet been implemented,93 not labeling GMOs allows the public to continue in the false belief that they are not buying GMO products. How could providing the information mislead the public? Industry is resistant to labeling precisely because Americans do care about how their food is produced. It is up to the industry to convince the consumers that the technologies that they use are appropriate rather than suppress information about the processes they use when consumers seek such information.

See TBT Agreement, supra note 4, art. 2.2. G/TBT/M/13, Nov. 18, 1998 (98–4613) Committee on Technical Barriers to Trade, Minutes of The Meeting Held on 15 September 1998, para. 12. 91 Industry Letter on Trade and Environment, 17 INSIDE U.S. TRADE, Apr. 23, 1999. The April 14, 1999, letter addressed to Charlene Barshefsky was signed by the American Bakers Association, the American Forest and Paper Association, the Biotechnology Industry Organization, the Chemical Manufacturers Association, the Grocery Manufacturers Association the National Association of Manufacturers, the National Fisheries Institute, the National Foreign Trade Council, the National Mining Association, and the United States Council for International Business. 92 See Agriculture Groups Letter on GMOs, 15 INSIDE U.S. TRADE, June 20, 1997. 93 One-third of Americans surveyed were aware that genetically engineered food is available, and one half believed that it is not, the rest didn’t know or didn’t answer. Seeds of Change, supra note 43, at 41. 89 90

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MARKET FORCES, ACCOUNTABILITY, AND TRANSPARENCY The agricultural industry groups’ call for transparency, quoted above, rings hollow. Who is transparency meant to serve? Transparent rules are certainly important; producers and suppliers need to know how to get their products on the market. But producers are only one side of the market equation. There must be transparency for consumers as well if the market is to serve them adequately.

Consumer-Oriented Transparency Usually calls for transparency in the WTO system involve criticism of the non-public nature of WTO rulemaking and dispute settlement. 94 Another aspect of transparency, however, is corporate and industry transparency, which relates to the notion of producer accountability. In the United States, more and more, social causes are taking the form of consumer boycotts of companies that engage in practices of which citizens do not approve.95 Such campaigns include attempts to influence corporate behavior by boycotting companies that use child labor or engage in clearcutting of old growth forests, to name two examples from outside the realm of agricultural practices. Such efforts depend on direct consumer access to information about business practices. This explains, of course, why trade associations that represent these industries are fighting tooth and nail to prevent legislation that would mandate disclosure of production methods. They fear that providing information to the public will enable consumers to make purchases according to their preferences. One result of market globalization is a disconnect between producers and consumers. This disconnect creates a lack of accountability and a lack of information for consumers, amounting to a fundamental flaw in the functioning of markets. The broader the distribution, the more distorted market forces are. Consider a rural village, where you know the butcher and you know which farmers supply him with animals. Contrast this scenario, where individuals are directly accountable for their products and services, with industrial cattle lots on one end of the chain and a shrink-wrapped piece of beef on the other, where you have no idea how far the meat has traveled, let alone the number of middlemen, or what happened in the feed lots, slaughterhouses, or meat-packing districts. In the United States, we get USDA approval on our food, and most Americans 94 See, e.g., Bruce Silverglade, The Impact of International Trade Agreements on U.S. Food Safety and Labeling Standards, 53 FOOD & DRUG L.J. 537 (1998). 95 For a further discussion of labeling in the context of a broader movement for corporate accountability, see Robin Broad & John Cavanagh, The Corporate Accountability Movement: Lessons & Opportunities, 23 F LETCHER F. W ORLD A FF. 151, at 159–60 Fall (1999).

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accept that as good enough, if they bother to think about it at all. But most consumers are not sufficiently aware of what goes into the meat-making process to be able to form an opinion. Consumers cannot express their preferences when they have incomplete information about products on the market.

Labeling and Democracy While consumers can be wrong about which factors are most important from a health standpoint, or an environmental standpoint, the marketplace of ideas and the marketplace of goods must work in tandem. The solution to improper valuation is more information and debate; in the interim, consumer preferences cannot be ignored simply because producers deem them irrational. Just as producers gather information about consumer preferences, and often seek to influence those preferences consumers should be allowed to gather information about production methods and to influence those methods at least through purchasing that accurately reflects the consumers’ own preferences. In a market system, consumers need no added incentive to provide information to producers about their preferences; the market responds to the preferences that consumers express. The accuracy of these expressed preferences, however, is limited by the imperfection of information available to consumers.96 A producers’ monopoly on information regarding methods of production is a market imperfection. This imbalance of information can be corrected somewhat by mandating informative labels. Some may see such a policy as leading to useless, endless, and costly labeling. Where can one draw the line on what labels can be required? I believe that the line is drawn by the democratic process itself. As imperfect as it may be, consumer preference is the only reasonable guide in consumer markets. As Franz Fischler has said: “Trade is a rather abstract concept for consumers. To them, what counts is the price, the quality, and more and more, the production methods and composition of the food they buy.”97 If, some day, the people of Europe want to know how much space chickens are provided in their hen houses, and the United States decides that such a labeling scheme would be too costly, the United States can find somewhere else to sell their chickens. Trade cannot be viewed only from the side of producers and exporters. If concern is high enough to reach the level of legislative action, then mandatory labeling is justifiable. The argument of the costliness of testing The accuracy of the market as a gauge of consumer preferences is also, of course, limited by wealth effects that are far beyond the scope of this chapter. 97 Mueller, supra note 14, at 102, quoting “New Politics and Global Trade, Address Before the World Meat Congress (June 2, 1995)” in Commission of the European Communities, June 2, 1995, at 95–111. 96

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and labeling seems ridiculous in the food context, where extensive testing and labeling is already required for nutritional content. After all, farmers already know whether they are using GMOs or hormones, so if a viable system of accountability were available, these factors would not even need the chemical analysis that is unavoidable in nutritional testing. When consumers in other nations have a strong enough voice to convince their governments to mandate disclosure though labeling, the United States should not step in to defend corporations who would keep their customers uninformed. As one commentator points out: [T]he American public demands accountability from all power sources in our society. The corporations are such a source. The public perception of the American corporations is a at very low point. They are not deemed to be sufficiently or effectively accountable for the economic, political or social impact of their decisions.98 Speaking of a proposal to require disclosure of workplace conditions, another commentator writes: [T]he United States has strong cultural norms in favor of transparency. This proposal is consistent with political notions about the role of public knowledge in a democracy as well as the role of information in efficient capital markets.99 Belief in responsive labeling rests on the modest assumption that the consumer concern reflected in surveys and political activity by consumer groups is an accurate reflection of real consumer concern. Even accepting that democracy does not function perfectly, the risk that a call for a label by non-governmental organizations (NGOs) will overpower the respective industry to the extent that the government decides to require a label is not something to lose sleep over.100 Even if this were to occur, the worst result would be a label to which consumers did not respond. If, after several years, industry can show that consumers do not care about the difference that the label is denoting, the government can decide to 98 Richard Saliterman, Perceptions Bearing on the Public Policy Dynamics of Corporation Law, 20 HAMLINE L. REV. 261, at 303 (Winter 1996). 99 Marleen O’Connor, Organized Labor as Shareholder Activist: Building Coalitions to Promote Worker Capitalism, 31 U. RICH. L. REV. 1345, at 1391 (Dec. 1997). 100 For a discussion of different theories of the politics behind legislative action, see TREBILCOCK & HOWSE, supra note 76, at 15–17. The basic theories considered posit that either governments are attempting to maximize social welfare by correcting for market failure, or governments are responding to the influence of narrow and concentrated producer interests. Id. at 15.

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drop the labeling requirement. If, on the other hand, the label does provoke a consumer response, this is empirical proof that a significant amount of consumers do care about the distinction, and producers should respond accordingly. Producers are not morally positioned to decry “scare tactics” used by consumer advocates, given the kinds of irrelevant information they are allowed to use in advertising and promoting their products. Producers play off of irrationality as least as much as public interest groups.101

MANDATORY LABELS IN THE UNITED STATES BASED ON THE RIGHT TO KNOW In the United States, mandatory labels based strictly on consumer concern have been allowed. For example, the FDA has ruled that because some protein hydrolysates are derived from animal sources, labeling is essential because “the food source of a protein hydrolysate is information of material importance for a person who desires to avoid certain foods for religious or cultural reasons.”102 This requirement is based on ethical concerns that have nothing to do with nutrition or food safety. Other mandatory labels in the United States have stemmed from multiple consumer concerns that relate only in part to questions of food safety.

Irradiated Food One example is in the area of irradiated food. In 1986, the FDA declared that food irradiation is safe and began to allow the treatment as a way to destroy bacteria on produce.103 Many consumers did not approve of the decision to allow irradiation. Some of the concerns related to food safety, while others expressed opposition to the nuclear waste that the practice would produce.104 Again, there is also the sense that such practices are simply “unnatural.” Without backing down from its position that the practice is safe, the FDA mandated labeling of irradiated food to give consumers the choice not to buy it.105 This year, the FDA may replace its label with less informative wording, such as “cold pasteurized” or “electronic pasteurization.”106 The move towards an opaque label comes from 101 For example, recall the advertising campaign with the slogan, “Pork: the other white meat”—so if it’s white meat it must be healthy? 102 Lustgarden, supra note 46. 103 See Radiation Scandal (FDA Regulations on Food Irradiation Labels), 29 ECOLOGIST 304 (Aug. 1, 1999). Some studies have linked irradiated foods to chromosomal disorders in children, and cancer, reproductive failure and kidney damage in laboratory tests on animals. Id. 104 See id. 105 See 21 C.F.R. § 179.26(c). 106 Radiation Scandal, supra note 103.

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pressure from the beef industry, which claims that the current label is misleading and causing “inappropriate anxiety.” 107

Vermont’s Label for Dairy Products from Hormone-Treated Cows In another controversy quite similar to the hormones dispute, Vermont passed a law in 1994 requiring mandatory labeling of dairy products produced from the milk of cows that had been treated with recombinant Bovine Growth Hormone.108 Vermont did not attempt to define this as a public health measure but instead based the label on the consumers’ right to know.109 A large majority of Vermonters favored the label, objecting to the use of synthetic hormones in the dairy industry for a variety of reasons: Their reasons for not wanting to purchase such products include: (1) They consider the use of a genetically-engineered hormone in the production unnatural; (2) they believe that use of the hormone will result in increased milk production and lower milk prices, thereby hurting small dairy farmers; (3) they believe that use of rBST is harmful to cows and potentially harmful to humans; and, (4) they feel that there is a lack of knowledge regarding the long-term effects of rBST.110 The state was eventually enjoined from enforcing the label, when the Second Circuit granted a preliminary injunction on questionable First Amendment grounds.111 The case, brought by several associations representing the dairy industry, was never decided on the merits.

ENFORCEMENT OF A MANDATORY LABEL For a consumer label to be a valuable tool in influencing the market, it must be properly enforced. Otherwise, a mandatory label is no more 107 Id. “Irradiated foods received such a frigid reception that the industry is still on hold. The nation’s only operating irradiator—Vindicator of Mulberry, Fla.—sits largely idle and has lost about $2 million in its first two years of operation.” Lustgarden, supra note 46. 108 See Int’l Dairy Foods Ass’n v. Amestoy, 898 F. Supp. 246, 249 (D. Vt. 1995). 109 See Int’l Dairy Foods Ass’n v. Amestoy, 92 F.3d 67, 73 (2d Cir. 1996). 110 Int’l Dairy Foods Ass’n v. Amestoy, 898 F. Supp. 246, 250 (D. Vt. 1995). 111 I consider the court’s First Amendment analysis questionable because it considers the right to refrain from speech to be as strong in the commercial context as in the political context. As the dissent explains, the Supreme Court’s rulings in favor of free commercial speech have been based on the principle of providing accurate information to consumers. See Int’l Dairy Foods Ass’n v. Amestoy, 92 F.3d 67, 73 (2d Cir. 1996). Thus, a right to refrain from speech may well be weaker in the commercial context.

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than a feel-good measure that leads to deceptive market practices and does not address consumers’ underlying concerns. Below I address the enforcement problem that has come to light in the EU’s hormone ban and suggest how this problem might be addressed in the labeling context.

Lessons from the EU Hormone Ban Among the EU’s concerns that led to the ban on hormones is the proliferation of uncontrolled, black market hormones, so that their use is totally unregulated. Of course, banning hormones does not prevent their illegal use. In late October 1999, French farming associations admitted that as much 80% of their beef is treated with illegal hormones, antibiotics, and other drugs.112 This revelation puts a whole new spin on the viability of the current EU measure. Any system, be it a ban or a labeling regime, can only be effective if random testing and monitoring is put in place. If the EU intends to regulate certain substances or agricultural processes, there must be some system of accountability. If member states do not think that the problem is important enough to actually enforce the ban, arguments of any “precautionary” approach fall by the wayside, and the hormone ban looks more like a strictly political measure to placate consumers. According to Jean-Claude Depoil, a regional director for a French farmer’s union, “the technology is available for all meat to be automatically tested using DNA technology before it reaches the shops and also have the piece of meat traced right back to that farmer who raised it.”113 While the technology exists, universal DNA testing would surely be expensive at this time. Monitoring and random testing of beef, however, combined with a certification system, could be the basis of a viable labeling system at a reasonable cost.

How to Label Beef in Europe One problem with using a consumer label on beef in Europe is that many consumers buy their meat directly from the butcher. Also, of course, much meat is purchased in restaurants. To address this problem, I suggest a certification scheme for hormone-free butcher shops, markets, and restaurants. The system has existing analogies in voluntary label schemes, used in natural food stores and Kosher butcher shops.114 Where the end See Ian Sparks, French Feed Cows Banned Drugs, MAIL ON SUN, Oct. 24, 1999, at 1. Id. 114 See Benjamin N. Gutman, Note, Ethical Eating: Applying the Kosher Food Regulatory Regime to Organic Food, 108 YALE L.J. 2351 (1999) for a discussion of how the system for Kosher food identification might by used as a model for organic food regulation. For a discussion of how organic labeling may be treated under the WTO system, see Rick Franzen, Will GATT Take a Bite out of the Organic Food Production Act of 1990? 7 MINN. J. GLOBAL TRADE 399 (1998). 112

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product for the consumer is not readily able to be labeled, a system of accountability would link the shop to the farm. Random monitoring and testing would be necessary for such a system but no more than the testing that would be necessary for the current ban to work properly. For such a system to generate an accurate market response, uncertified shops would also be required to clearly indicate that they use hormone treated beef. If the consumer concern over hormone-treated beef in Europe is as high as it is purported to be, once shops became certified, the uncertified shops would fall out of favor. If they did not, then that might be seen as proof that the ban was unjustified from a consumer preference standpoint. So long as enough consumers would rather have cheap beef than hormone-free beef, it should be allowed on the market. If more compelling science or advocacy drives consumers away from hormonetreated beef, it will become uneconomic to export hormone-treated beef. The key to allowing the market forces to work is to make the distinctions that consumers make in their minds readily apparent to them in the shops.

Mandatory Labeling and Setting Priorities Were the EC to begin to set up such a system, they might find, for example, that antibiotics in livestock feed pose a greater public health threat than hormones.115 They might also find that European consumers would prefer to buy clearly labeled USDA-approved, hormone-treated beef over European beef of questionable origin labeled “may contain artificial hormones.” Such a result would help pressure the European Union to develop a food inspection system that deserves the trust of its citizens. Such certification schemes could also be applied to restaurants and shops that want to go entirely GMO free. The consumer outcry over GMOs has had an effect on some companies. Honda has publicized plans to open a facility in the United States that only handles soybeans that are GMO free. The Honda Trading Corporation (a subsidiary of the Honda Motor Company) will contract directly with U.S. growers and will ship the soybeans to Japan to be processed into tofu.116 Most notably, by May 1999, all major food producers in the United Kingdom had begun phasing GMOs out of their products.117 However, most consumers do not see voluntary labeling as an adequate solution.118 Mandatory labeling of the foods that concern consumers would level the playing field, allowing the market to respond more accurately to consumer demand. 115 For a discussion of the various potential health threats from animal feeding and raising practices, see Rod Usher, Hard to Swallow: Intensive Farming Has Slashed Household Food Bills In Europe, But at What Cost to Consumers’ Health, Animals, and the Countryside?, 154(1) TIME INT’L, July 5, 1999, at 26. 116 Rance, supra note 47. 117 Benady, supra note 57. 118 See supra note 47.

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CONCLUSION The decisions people make about food are highly personal and idiosyncratic. While taste, nutrition, safety, and price may be the primary factors driving food purchases, they are certainly not the only factors. Many of the world’s religions require their followers to adhere to an array of dietary laws and restrictions. People with the income and diversity of products to chose among also often differentiate among products for a variety of ethical reasons—to support local farmers, for example, or to encourage organic farming and ecological agriculture. A preference for natural products reflects a moral and cultural choice about how humans should interact with the rest of the natural world. Resistance to GMO foods and hormone-treated food can be linked to any of these reasons. A given consumer’s reason for deciding not to purchase such foods may be complex and perhaps may appear irrational. The reason is not as important as the ability to choose. For a market to operate honestly, consumers must be allowed to determine what information is important for them. It is not for the producer, or the regulator, or the WTO, to judge the validity of a consumer’s food choices.

BIBLIOGRAPHY RELATING TO FOOD SAFETY AND THE BEEF HORMONES CASE

Books and Monographs BERNASCONI-OSTERWALDER, NATHALIE ET AL. (2006). ENVIRONMENT AND TRADE: A GUIDE TO WTO JURISPRUDENCE. B UTTON, C ATHERINE. (2004). T HE P OWER TO P ROTECT: T RADE, H EALTH AND UNCERTAINTY IN THE WTO. ECHOLS, MARSHA. (2001). FOOD SAFETY AND THE WTO: THE INTERPLAY OF CULTURE, SCIENCE AND TECHNOLOGY. FENNELL, ROSEMARY. (1997). THE COMMON AGRICULTURAL POLICY: CONTINUITY AND CHANGE. JOSLING, TIMOTHY. (1998). AGRICULTURAL TRADE POLICY: COMPLETING THE REFORM. RITSON, CHRISTOPHER ET AL. (1991). THE COMMON AGRICULTURAL POLICY AND THE WORLD ECONOMY: ESSAYS IN HONOR OF JOHN ASHTON.

Articles Atik, Jeffery, Science and International Regulatory Convergence, 17 NW. J. INT’L J. & BUS. 736 (1997). Atik, Jeffery & David A. Wirth, Science and International Trade—Third Generation Scholarship, 26 B.C. INT’L & COMP. L. REV. 171 (2003). Bartenhagen, Erik P., The Intersection of Trade and the Environment: An Examination of the Impact of the TBT Agreement on Ecolabeling Programs, 17 VA. ENVTL. L.J. 51 (1997). Barton, John H., Biotechnology, the Environment, and International Agricultural Trade, 9 GEO. INT’L ENVTL. L. REV. 95 (1996). Bohanes, Jan, Risk Regulation in WTO Law: A Procedure-Based Approach to the Precautionary Principle, 40 COLUM. J. TRANSNAT’L L. 323 (2002). Briese, R., Precaution and Cooperation in the World Trade Organization: An Environmental Perspective, 22 AUSTRALIAN Y.B. INT’L L. 113 (2002). Broad, Robin & John Cavanagh, The Corporate Accountability Movement: Lessons & Opportunities, 23(2) FLETCHER F. WORLD AFF. 151 (1999). Bureau, Jean-Christophe et al., Non-Tariff Trade Barriers and Consumers’ Information: The Case of the EU-US Trade Dispute Over Beef. 25(4) EUR. REV. AGRIC. ECON. 437 (1998).

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Carter, Michele D., Note, Selling Science Under the SPS Agreement: Accommodating Consumer Preference in the Growth Hormones Controversy, 6 MINN. J. GLOBAL TRADE 625 (1997). Chang, Howard F., Risk Regulation, Endogenous Public Concerns, and the Hormones Dispute: Nothing To Fear But Fear Itself?, 77 S. CAL. L. REV. 743 (2004). Charnovitz, Steve, Environment and Health Under WTO Dispute Settlement, 32 INT’L LAW. 901 (1998). Charnovitz, Steve, The World Trade Organization, Meat Hormones, and Food Safety, 14 INT’L TRADE REP. 1781 (1997). Christoforou, Theofanis, Settlement of Science-Based Trade Disputes in the WTO: A Critical Review of the Developing Case Law in the Face of Scientific Uncertainty, 8 N.Y.U. ENVTL. L.J. 622 (2000). Cromer, Julie, Recent Developments: Sanitary and Phytosanitary Measures: What They Could Mean for Health and Safety Regulations Under GATT, 36 HARV. INT’L L.J. 557 (1995). Driesen, David M., What Is Free Trade?: The Real Issue Lurking Behind the Trade and Environment Debate, 41 VA. J. INT’L L. 279 (2001). Echols, Marsha A., Food Safety Regulation in the European Union and the United States: Different Cultures, Different Laws, 4 COLUM. J. EUR. L. 525 (1998). Fisher, Elizabeth C., Beyond the Science/Democracy Dichotomy: The World Trade Organisation Sanitary and Phytosanitary Agreement and Administrative Constitutionalism, in CONSTITUTIONALISM, MULTI-LEVEL TRADE GOVERNANCE, AND SOCIAL REGULATION (C. Joerges, E-U. Petersmann eds., 2006), available at http://ssrn.com/abstract=907021. Ford, Rosemary A., The Beef Hormone Dispute and Carousel Sanctions: A Roundabout Way of Forcing Compliance with World Trade Organization Decisions, 27 BROOK. J. INT’L L. 543 (2002). Guzman, Andrew T., Food Fears: Health and Safety at the WTO, 45 VA. J. INT’L L. 1 (2004). Howse, Robert, Democracy, Science, and Free Trade: Risk Regulation on Trial at the World Trade Organization, 98 MICH. L. REV. 2329 (2000). Hughes, Layla, Note, Limiting the Jurisdiction of Dispute Settlement Panels: The WTO Appellate Body Beef Hormone Decision, 10 GEO. INT’L ENVTL. L. REV. 915 (1998). Hurst, David, Hormones: European Communities—Measures Affecting Meat and Meat Products, 9 EUR. J. INT’L L. 182 (1998). Kerr, William A. & Jill E. Hobbs, The North American-European Union Dispute Over Beef Produced Using Growth Hormones: A Major Test for the New International Trade Regime, 25 W ORLD E CON . 283 (Feb.2002), at http://www.blackwell-synergy.com/links/doi/10.1111/14679701.00431. Maruyama, Warren H., A New Pillar of the WTO: Sound Science, 32 INT’L LAW. 651 (1998).

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Mbengue, M.M. et al., The Precautionary Principle: Torn between Biodiversity, Environment-related Food Safety and the WTO, 5 INT’L J. GLOBAL ENVTL. ISSUES 36 (2005). McNiel, Dale E., The First Case Under the WTO’s Sanitary and Phytosanitary Agreement: The European Union’s Hormone Ban, 39 V A. J. I NT’L L. 89 (1998). Mota, Sue Ann, The World Trade Organization: An Analysis of Disputes, 25 N.C. J. INT’L L. & COM. REG. 75 (1999). Mueller, Kristin, Note, Hormonal Imbalance: An Analysis of the Hormone Treated Beef Trade Dispute Between the United States and the European Union, 1 DRAKE J. AGRIC. 97 (1996). Pauwelyn, Joost, The WTO Agreement on Sanitary and Phytosanitary (SPS) Measures as Applied in the First Three SPS Disputes, 2 J. INT’L ECON. L. 641 (1999). Okubo, Atsuko, Environmental Labeling Programs and the GATT/WTO Regime, 11 GEO. INT’L ENVTL. L. REV. 599 (1999). Quick, Reinhard & Andreas Blüthner, Has the Appellate Body Erred? An Appraisal and Criticism of the Ruling in the WTO Hormones Case, 2 J. INT’L ECON. L. 603 (1999). Roberts, Donna, Preliminary Assessment of the Effects of the WTO Agreement on Sanitary and Phytosanitary Trade Regulations, 1 J. INT’L ECON. L. 337 (1998). Saliterman, Richard, Perceptions Bearing on the Public Policy Dynamics of Corporation Law, 20 HAMLINE L. REV. 261 (1996). Seilheimer, Lisa K., The SPS Agreement Applied: The WTO Hormone Beef Case, 4 ENVTL. LAW. 537 (1998). Silverglade, Bruce, The Impact of International Trade Agreements on U.S. Food Safety and Labeling Standards, 53 FOOD & DRUG L.J. 537 (1998). Steinberg, Richard H., Trade-Environment Negotiations in the EU, NAFTA, and WTO: Regional Trajectories of Rule Development, 91 AM. J. INT’L L. 231 (1997). Stewart, Terence P. et al., Trade and Cattle: How the System Is Failing an Industry in Crisis, 9 MINN. J. GLOBAL TRADE 449 (2000). Stewart, Terence P. & David S. Johanson, The SPS Agreement of the World Trade Organization and the International Trade of Dairy Products, 54 FOOD & DRUG L.J. 55 (1999). Stewart, Terence P. & David S. Johanson, The SPS Agreement of the World Trade Organization and International Organizations: The Roles of the Codex Alimentarius Commission, the International Plant Protection Convention, and the International Office of Epizootics, 26 SYRACUSE J. INT’L L. & COMM. 27 (1998). Sykes, Alan O., The Least Restrictive Means, 70 U. CHI. L. REV. 403 (2003). Sykes, Alan O., Domestic Regulation, Sovereignty, and Scientific Evidence Requirements: A Pessimistic View, 3 CHI. J. INT’L L. 353 (2002).

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Sykes, Alan O., Regulatory Protectionism and the Law of International Trade, 66 U. CHI L. REV. 1 (1999). Thomas, Ryan David, Where’s the Beef? Mad Cows and the Blight of the SPS Agreement, 32 VAND. J. TRANSNAT’L L. 487 (1999). Timura, Christopher, T., Cross-Examining Expertise in the WTO Dispute Settlement Process, 23 MICH. J. INT’L L. 709 (2002). Victor, David, The Sanitary and Phytosanitary Agreement of the World Trade Organization: An Assessment After Five Years, 32 N.Y.U. J. INT’L L. & POL. 865 (2000). Walker, Vern R., The Myth of Science as A “Neutral Arbiter” for Triggering Precautions, 26 B.C. INT’L & COMP. L. REV. 197 (2003). Walker, Vern R., Keeping the WTO from Becoming the “World Trans-Science Organization”: Scientific Uncertainty, Science Policy, and Factfinding in the Growth Hormones Dispute, 31 CORNELL INT’L L.J. 251 (1998). Walker, Vern R., Risk Regulation and the “Faces” of Uncertainty, 9 RISK HEALTH SAFETY & ENV’T 27 (1998). Wehr, H. Michael, Update on Issues before the Codex Alimentarius, 52 FOOD & DRUG L.J. 531 (1997). Wirth David A., International Decisions: European Communities—Measures Concerning Meat and Meat Products, 92 AM. J. INT’L L. 755 (1998). Wirth, David A., Symposium, The Role of Science in the Uruguay Round and NAFTA Trade Disciplines, 27 CORNELL INT’L L.J. 817 (1994). Wüger, Daniel, The Never Ending Story: The Implementation Phase in the Dispute Between the EC and the United States on Hormone-Treated Beef, 33 LAW & POL’Y INT’L BUS. 777 (2002). Zerjav, Victoria H., United States/European Union Trade Relations: The Need for a Solution to the Bovine Trade Disputes, 78 WASH. U. L.Q. 645 (2000).

PART IV

COMMERCIAL FISHING AND ENDANGERED SPECIES: THE SHRIMP-TURTLE CASE

COMMERCIAL FISHING AND ENDANGERED SPECIES: THE SHRIMP-TURTLE CASE There is much concern about the increasingly rapid disappearance of species. One way to address this concern is to regulate international trade in those species and their products. In 1973, countries concluded the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). The convention utilizes a permit system, prohibiting commercial trade in species threatened with extinction and restricting trade in those whose survival could otherwise be threatened. The convention only controls trade in those species that parties have agreed to list. As of October 31, 2007, roughly 5,000 species of animals and 28,000 species of plants are listed; 172 countries are party to the convention. All of the seven sea turtle species are included in CITES’ Appendix I List of Endangered Species, which permits trade in species threatened with extinction only in exceptional circumstances. Domestically, the U.S. Endangered Species Act lists all sea turtle species as endangered or threatened. Under this act, the taking of sea turtles within the United States, its territorial sea, and high seas is prohibited. Ostensibly designed to complement the Endangered Species Act, Section 609 of U.S. Public Law 101-162 uses trade to provide additional protection. It instructs the Secretary of State to begin negotiating international agreements for the protection and conservation of sea turtles and prohibits the importation of shrimp harvested with commercial fishing technology that may adversely affect sea turtles. Harvesting countries with conservation programs that have been certified on the basis of regulatory guidelines are excepted from the ban. In 1991, the Department of State required countries exporting shrimp to the United States to use turtle excluder devices (TEDs) or a comparably effective turtle protection program. Subsequent 1993 guidelines eliminated the possibility of using methods other than TEDs. On October 8, 1996, four major exporters of shrimp and shrimp products—India, Malaysia, Pakistan, and Thailand—requested consultations under the World Trade Organization (WTO). The joint complaint concerned the shrimp and shrimp products importation ban imposed by the United States under Section 609. The complainants alleged violations of Articles I (Most-Favoured-Nation Treatment), XI (Elimination of Quantitative Restrictions), and XIII (Non-Discriminatory Administration of Quantitative 413

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Restrictions) of the General Agreement on Tariffs and Trade (GATT) 1994 as well as nullification and impairment of benefits. When the consultations did not lead to an acceptable solution, Malaysia and Thailand, and then Pakistan and India, requested the establishment of a panel. The resulting case, referred to here as Shrimp-Turtle, is one of the most significant trade and environment cases in WTO history. The United States argued that the measure was justified under the General Exceptions clause in GATT Article XX. Article XX permits members to restrict imports in pursuit of policy goals listed in paragraphs (a) to (j). These goals are exceptions to other GATT obligations. The United States specifically contended that two clauses applied, and that the measure at issue was “necessary to protect human, animal or plant life or health” (paragraph b) and “relating to the conservation of exhaustible natural resources” (paragraph g). In addition to qualifying as one of the listed exceptions, a measure must satisfy the requirements of Article XX’s chapeau, or introductory clause. The chapeau is intended to prevent abuse of the exceptions. It provides that measures may not be applied in a manner constituting arbitrary or unjustifiable discrimination, or a disguised restriction on international trade. The panel found that the U.S. measure was inconsistent with Article XI:1 of GATT 1994, which prohibits the use of quantitative restrictions. Moreover, it held that the measure could not be justified under Article XX of GATT 1994. On July 13, 1998, the United States notified the panel of its intention to appeal the Article XX ruling. A reversal of that ruling would justify Section 609’s violation of Article XI. The Appellate Body criticized the panel’s Article XX analysis and conclusions. Ignoring previous Appellate Body jurisprudence, the panel had examined whether Section 609 met the requirements of the Article XX chapeau before determining whether it constituted an Article XX exception. It had also formulated an overly broad, a priori chapeau test. The test focused primarily on the purpose of the WTO and the GATT, rather than the language of Article XX and its chapeau. With that approach, the panel concluded that a measure conditioning market access on the adoption of policies threatened the WTO system, constituted unjustifiable discrimination, and was outside the scope of Article XX exceptions. Instead, said the Appellate Body, the panel should have begun with a narrow focus on Article XX, not on the WTO as a whole. The chapeau should be applied after the panel decided whether Section 609 qualified as a listed exception. Applying this approach, the Appellate Body concluded that the United State’s conditioning market access on the adoption of conservation policies qualified for provisional justification under Article XX(g) as a measure relating to the conservation of exhaustible natural resources. However, in application the measure failed to meet the requirements of Article XX’s chapeau. In accordance with the the Appellate

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Body’s recommendation, the Dispute Settlement Body (DSB) requested that the United States bring its measure into conformity with its obligations under the GATT. On January 27, 2000, the United States announced that it had implemented the DSB rulings and recommendations by revising the guidelines implementing Section 609 (1999 Revised Guidelines). The revisions were intended to bring the measure into compliance with the Article XX chapeau. They introduced greater flexibility into the approval process, allowing programs “comparable in effectiveness” to the U.S. program and considering local conditions. They also elaborated a certification timetable and procedures to improve transparency and equal treatment. The United States noted that it was negotiating with the governments of the Indian Ocean region on the protection of sea turtles and continued to offer technical assistance related to the use of TEDs to any requesting government. Subsequently, at the DSB meeting, Malaysia claimed that the United States was not in compliance with the Appellate Body’s recommendations. Accordingly, Malaysia initiated a new process, which ultimately led to an implementation decision by the original dispute panel (Shrimp-Turtle Implementation decision). There the panel found that the improvements in the 1999 Revised Guidelines satisfied the recommendations of the Appellate Body as long as the United States continued to negotiate in good faith with the original complainants. Malaysia appealed the panel’s findings on two grounds. First, Malaysia contended that the chapeau of GATT Article XX requires that an international agreement be concluded before Article XX General Exception measures may be implemented. Second, Malaysia contended that the U.S. Revised Guidelines were not sufficiently flexible to satisfy the Article XX chapeau, constituting a “unilateral” policy prescription in violation of WTO obligations. The Appellate Body disagreed with Malaysia’s first allegation. It distinguished the original recommendations, which faulted the United States for failing to seriously negotiate but not for failing to conclude an agreement. It also noted that such a requirement would grant an unreasonable veto power to exporting states over rightful Article XX actions. Using the Inter-American Convention on the Protection and Conservation of Sea Turtles as a benchmark, it determined that the United States was pursuing good faith negotiations. The Appellate Body also rejected Malaysia’s second contention. It cited its findings in the original Shrimp-Turtle decision stating that access to domestic markets conditioned on unilaterally prescribed policy may be permissible under Article XX. In addition, it determined that the 1999 Revised Guidelines were sufficiently flexible to satisfy the non-discrimination requirements of the chapeau. In sum, the Appellate Body agreed with the panel in finding the U.S. measures under the 1999 Revised Guidelines to be a permissible Article XX exception in compliance with the chapeau. It was the first WTO deci-

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sion to uphold a unilateral environmental measure premised on the method of production or harvest. The 1999 Revised Guidelines implementing Section 609 were also challenged in the U.S. by environmental groups. After earlier rounds of litigation, the U.S. Court of International Trade (CIT) ruled in Turtle Island Restoration Project v. Malett, 110 F. Supp. 2d 1005 (2000), that the current U.S. system of allowing shrimp imports on a shipment by shipment basis, instead of solely from certified countries, violated on its face the governing statute. However, the ruling did not require the U.S. government to change the policy. The court refused to grant an injunction, arguing that the goal of the law (the prevention of the extinction of sea turtles) was not “being drowned by vessel-specific shipments,” and that it was unable to conclude that the U.S. government’s position was not “substantially justified.” Turtle Island Restoration Project v. Malett, 110 F. Supp. 2d 1005, 1019 (2000). Both parties to the dispute appealed the decision. In Turtle Island Restoration Network v. Evans, 284 F.3d 1282 (Fed. Cir. 2002), the Court of Appeals for the Federal Circuit reversed the CIT ruling. The court reasoned that the plain language of Section 609 does not prohibit shipment by shipment certification, nor does it mandate that shrimp imports only be permitted from certified countries. In addition, the court found that legislative history demonstrated Section 609 was passed to protect not sea turtles but U.S. shrimp fishermen from a competitive disadvantage with foreign vessels not required to use TEDs. Accordingly, Turtle Island arguments concerning the wisdom of the revised guidelines with regards to sea turtle protection were not considered. According to the U.S. Department of State Web site, as of October 31, 2007, the United States allows imports from non-certified countries and economies. Countries exporting shrimp into the United States on a shipment by shipment basis must have enforcement and catch segregation systems approved by the United States. As of the same date, only Australia and Brazil had such systems in place. In addition, the importer and exporter, and a government official from the exporting country must all guarantee that each individual shipment is turtle safe. The first chapter of this case study, Chapter 14 by Renata Benedini, addresses the question of whether the United States will be able to comply with the recommendations of the DSB in view of the ongoing domestic litigation regarding the legality of the guidelines implementing Section 609. This chapter is followed by Paul O’Brien’s detailed analysis of the Appellate Body Report, which seeks to identify and provide guidance on the elements required for an environmental measure to be considered WTO consistent. Chapter 16 by Hannah Gillelan offers scientific background on sea turtles and examines the role that science played in the decisions of the WTO panel and Appellate Body. Chapter 17 by Peter

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Chessik explores the domestic and economic forces that influenced the U.S. position in the Shrimp-Turtle dispute. Finally, the last chapter of this case study, by Andres Rueda, focuses on the evolution of the legal treatment of environmental embargoes under GATT and WTO jurisprudence in comparison to approaches taken under the North American Free Trade Agreement (NAFTA).

CHAPTER 14

COMPLYING WITH THE WTO SHRIMP-TURTLE DECISION Renata Benedini

INTRODUCTION The preamble to the World Trade Organization (WTO) Agreement acknowledges the double objective of “expanding the production of . . . trade in goods and services . . . while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development seeking both to protect and preserve the environment.” The interface between liberalized trade and environmental protection, however, often places the two objectives in opposition to each other. The WTO has recently delivered an influential decision in a line of international disputes involving environmental protection and trade liberalization. In United States—Import Prohibition of Certain Shrimp and Shrimp Products (ShrimpTurtle),1 the WTO Appellate Body’s decision attempted to strike a balance between these two competing interests as it sought to balance the right of one WTO member, the United States, to enact unilateral trade measures to pursue environmental aims, and the rights of other WTO members to free trade. This chapter considers whether, in view of the competing pressures of ongoing domestic litigation in the U.S. Court of International Trade (CIT), the United States will be able to comply with the recommendations of the WTO. First, this chapter provides a summary of the nature of the sea turtles and the threat to their survival. This section includes a discussion of the United States legislation (hereinafter Section 609) enacted to protect them. The next section addresses the litigation brought by the Earth Island Institute, first in the District Court of California, then in the CIT. The rul1 Report of the Appellate Body, United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R (Oct. 12, 1998). [hereinafter Appellate Body Report].

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ings in the series of cases brought by Earth Island are significant not only because they directly brought about the changes in regulations issued by the U.S. Department of State, but because they were also a catalyst to member states of the WTO to bring a case against the U.S. ban in the WTO. The CIT holdings are also the biggest obstacle the United States has to face when attempting to comply with the WTO Appellate Body’s decision. The next section addresses the decisions of the WTO’s panel and Appellate Body, including the arguments of the parties regarding the scope of Article XX of the General Agreement on Tariffs and Trade (GATT) and its exceptions, and the acceptability of the ban imposed unilaterally by the United States in accordance with Section 609. Another section examines the changes in U.S. law following the WTO decision and the several CIT holdings and analyzes whether the United States will be able to comply with both the WTO and the CIT. A further section concludes that the United States will not be able to comply with both the CIT and the WTO decisions and examines what effect, in terms of predictive value, the CIT and WTO holdings will have for the drafting of legislation on environmental protection. The next section offers recommendations for balancing environmental protection and trade liberalization, including some proposals to be implemented domestically, such as educating judges how to avoid conflicts with international treaty obligations. Finally, this chapter concludes by restating the difficulty of reconciling the goals of trade liberalization and environmental protection, and offering multilateral negotiations as the most feasible solution.

BACKGROUND Plight of the Sea Turtles Of the seven species of sea turtles, most species are distributed around the globe in subtropical and tropical areas. Five2 of the seven species are found in the waters off the U.S. coast and are listed as endangered or threatened under the Endangered Species Act of 1973 (ESA).3 The turtles have been adversely affected by human activity either directly or incidentally. In response to the decline in the sea turtle population due to shrimp trawling,4 Congress instructed the National Marine Fisheries Service 2 The five species are (1) the loggerhead (Caretta Caretta), (2) Kemp’s Ridley (Lepidochelys Kempi), (3) Green Turtle (Chelonia Mydas), (4) Hawksbill (Eretmochelys Imbricata), and (5) Leatherback (Dermochelys Coriecea). See 52 Fed. Reg. 24,244. 3 16 U.S.C. §§ 1531–1544 (1994). 4 Research programs in the Gulf of Mexico and the Atlantic Ocean off the southeastern United States concluded that shrimp trawling was the most significant source of incidental capture and drowning of sea turtles.

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(NMFS) to begin an extensive research project to develop alternative methods of shrimp trawling that would not dramatically increase the cost to shrimpers while protecting the sea turtles. In 1981, the research led to the development of the turtle excluder device (TED), a grid trapdoor installed inside a trawling net that allows shrimp to pass through the back of the net while directing sea turtles and other large objects caught accidentally out of the net.5 Despite their efforts to distribute TEDs to shrimp fishermen and instruct them how to properly use them, the NMFS was unable to induce enough fishermen to voluntarily use the TEDs to affect the turtle mortality rates.6

Legislative Framework—U.S. Regulations and Guidelines After the NMFS’ failed attempt to induce shrimpers to voluntarily adopt the use of TEDs, it urged the Department of Commerce to issue regulations to order shrimp fishermen to utilize TEDs or to limit tow times to protect the at-risk sea turtles.7 Due to the success of the 1987 regulations in reducing the number of turtles killed domestically, they were extended internationally. In 1989, Congress enacted Section 609, or the “Sea Turtle Act,” pursuant to the Endangered Species Act,8 to confront the global threat posed to the turtles from unregulated fishing operations of foreign shrimping fleets.9

Section 609 Section 609 called upon the U.S. Secretary of State, in consultation with the U.S. Secretary of Commerce, to initiate bilateral and multilateral negotiations of agreement for the protection of sea turtles with governments of countries that participated in commercial fishing operations that could adversely affect the sea turtles.10 In addition, Section 609 mandated a ban on importation into the United States of shrimp and shrimp products caught with methods that could be adverse to sea turtles. The president would certify nations that either had a regulatory program that had an incidental take rate comparable to the United States or whose harvesting methods did not pose a threat to the sea turtles.11 Shrimp could only be imported under Section 609 from certified nations. Certification had to be made to Congress by May 1, 1991, and annually thereafter.12 5 6 7 8 9 10 11 12

Id. For a detail technology of the TEDs, see 52 Fed. Reg. 24,257–61. Id. Id. citing 52 Fed. Reg. 24,244–45. Endangered Species Act § 609, 16 U.S.C. § 1537 (1999). Id. at 5. See Endangered Species Act § 609, 16 U.S.C. § 1537 (1999). Id. Id. Id.

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The 1991 Guidelines In 1991, the United States issued Guidelines13 to address the problem of comparing foreign regulatory programs with the U.S. program. To be comparable, the foreign nation’s program would have to include a commitment to require all shrimp trawlers to use TEDs at all times or, in the alternative, commit to a reliable and verifiable scientific program to reduce the deaths of sea turtles.14 The scope of Section 609 was limited to the wider Caribbean and western Atlantic region, with the affected nations being given a three-year phase-in period.15

LITIGATION IN THE UNITED STATES16 Earth Island Institute Challenges 1991 Guidelines Although the scope of the Guidelines were expanded to affect not only domestic but also foreign nations’ trawling practices, according to some environmental groups, its limited geographical application was contrary to the ESA’s goal of protecting sea turtles. The environmental groups were concerned that since sea turtles migrate great distances and cross many national boundaries, Section 609’s limited application to the wider Caribbean/western Atlantic Region would fail to protect many turtles.17 In 1992, the Earth Island Institute, an environmental group based in San Francisco, California, and which ran the Sea Turtle Restoration Project, filed suit in the Federal District Court in San Francisco to challenge the government’s Guidelines.18 Earth Island also asked that the court order Id., citing 61 Fed. Reg. 1051 (Jan. 10, 1991) [hereinafter 1991 Guidelines]. Id. 15 Id. 16 For a detailed narrative of Earth Island’s successive attacks on Section 609, see Earth Island Inst. v. Daley, 48 F. Supp. 2d 1064 (CIT, 1999) [hereinafter Daley]. See also Appendix I, infra. 17 Some commentators argue that: 13 14

the real impetus behind the State Department’s limited application of Section 609 to only the wider Caribbean/western Atlantic region had little to do with United States coastal waters or the migratory patterns of turtles. It had to do with the Bush and Clinton Administrations’ interest in avoiding a high-profile international trade dispute. Such a dispute could potentially undermine the United States’ credibility as a free trade advocate, and therefore undermine the adoption and implementation of GATT and NAFTA. Susan L. Sakmar, Free Trade and Sea Turtles: The International and Domestic Implications of the Shrimp-Turtle Case, 10 COLO. J. INT’L ENVTL. L. & POL’Y 345, 351 (Summer 1999), citing Judge Says Law to Save Turtles Prevents Most Imports of Shrimp, N.Y. TIMES, Jan. 8, 1996, at A9. 18 Id. See Earth Island Inst. v. Christopher, 6 F.3d 648, 649 (9th Cir. 1993).

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that the executive branch follow the directives of Section 609 and initiate negotiations with foreign nations regarding sea turtle protection and conservation.19 The district court, however, held that it lacked subject matter jurisdiction to address this claim under the political question doctrine. Earth Island appealed to the Ninth Circuit but the Ninth Circuit affirmed, holding that the U.S. Court of International Trade (CIT) had exclusive jurisdiction over the Section 609 certification dispute.20

Revised 1993 Guidelines Despite the dismissal in federal court, the 1991 Guidelines were revised in 1993 to eliminate the option of developing an alternate program to the TEDs. The 1993 Guidelines21 required that affected nations use TEDs in all their commercial shrimp trawling vessels subject to a few exemptions in order to be eligible to receive certification in 1994 and subsequent years. In order to acquire certification, a foreign nation had to provide documentary evidence that the program adopted to address the accidental killing of sea turtles was comparable to that of the United States or that their fishing environment did not pose a threat to the turtles. The limited scope of Section 609, however, was not changed, and Earth Island was left to either accept defeat or refile in the CIT. Earth Island’s resistance to filing at the CIT was probably due to a perception that the judges’ expertise in international trade law would lead to results favorable to pro-trade interests and against pro-environment interests.22

Choosing a New Battleground—Suit in the Court of International Trade: Background of the CIT In order to better understand the plaintiff’s reluctance to file in the CIT, a brief background and history of the CIT is helpful. Congress created the Board of General Appraisers in 1890.23 The Board was created as a quasi-judicial administrative unit inside the Department of the Treasury to review decisions on duties charged by the U.S. Customs Service on foreign goods. In 1926, when the types of decisions relating to export started

19

Id. Earth Island Inst. v. Christopher, 6 F.3d 648 (9th Cir. 1993). 21 Id., citing 58 Fed. Reg. 9015 (Feb. 18, 1993). 22 See generally Birgit Kurtz, Dolphins, Sea Turtles, and Finnish Elks: Is the Court of International Trade the Proper Forum for Environmental Disputes? 7 FORDHAM ENVTL. L.J. 111 (1995)[hereinafter Kurtz]. 23 Customs Administrative Act, ch. 407 §§ 12,13, 26 Stat. 136–37. Kurtz argues throughout her Note that the CIT is a favorable and appropriate forum for dispute involving environmental issues. 20

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to grow, Congress renamed the Board the U.S. Customs Court.24 Throughout the 1960s and 1970s, Congress realized that fundamental jurisdictional changes were necessary for the Customs Court.25 It was not until the 1980s that Congress changed the name of the Customs Court to the U.S. Court of International Trade and expanded its jurisdiction through the Customs Courts Act of 1980. 26 The court consists of nine judges, appointed for life by the president with Senate approval.27 Although most cases are assigned to one judge, the Chief Judge may assign a cause of action to a three-judge panel if the case “involves the constitutionality of an Act of Congress, a proclamation of the President, . . . an Executive order . . . or has broad or significant applications in the administration or interpretation of the customs law.”28 The court’s new name, the Court of International Trade, described more accurately its new functions. The CIT has jurisdiction over: 1. certain civil cases against the United States, its agencies, and officers; 2. all cases involving the enforcement and monitoring of international agreements; 3. the imposition of anti-dumping and countervailing duties; and 4. the classification and valuation of imported merchandise for imposing customs duties. The CIT also has exclusive subject-matter jurisdiction over any action that “arises out of any law of the United states providing for . . . embargo or other quantitative restrictions on the importations of merchandise for reasons other than the protection of the public health or safety.” 29 The definition of the word “embargo,” which would limit the jurisdiction of the CIT, progressed through a series of Supreme Court cases.30 24 The Court was created under U.S. Constitution, Article I. U.S. CONST. ART. I, § 8(1). Although the jurisdiction of the Court remained basically the same, the Court was slowly integrated into the federal system and in 1956 was reestablished under Article III of the Constitution. U.S. CONST. art. III, § 1. 25 Congress recognized that the Court’s statutory procedures and jurisdictional reach needed some revamping. See HONORABLE DOMINICK L. DICARLO, THE UNITED STATES COURT OF INTERNATIONAL TRADE, at i (1992) (cited in Kurtz, supra note 22). 25 Kurtz, supra note 22, at 111. A former Chief Judge of the CIT, Honorable Edward Re, stated that trade was the “common language among nations,” and, therefore, that trade policy was a vital tool used by the United States in its dealing with other countries. Id. 26 Pub. L. No. 96–417, 94 Stat. 1727 (1980). 27 28 U.S.C. § 251(a) (1994). 28 Pub. L. No. 96–417, 94 Stat. 1727 §§ 253–255 (1994). 29 28 U.S.C. §§ 1581–1585 (1994). 30 See K-Mart Corp. v. Cartier, Inc., 485 U.S. 176 (1988) (consisting of trademark holders bringing a case in federal district court attacking the permissive customs policy on admission of gray-market goods).

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The Court held that under 28 U.S.C Section 1581(i)(3),31 an embargo was a “governmentally imposed quantitative restriction—of zero—on the importation of merchandise”32 when “trade policy is not the sole, nor perhaps even the primary purpose served by the embargoes.” 33 The Court’s holding on the distinction between quantitative and qualitative restrictions brings the cases involving trade bans to enforce environmental policy within its jurisdiction. When the United States designed Section 609 aimed to protect sea turtles, and threatened to use trade sanctions as an instrument of their policy, it fell within the ambit of the CIT.

Earth Island Sues in the CIT34 After fighting a losing battle in the Ninth Circuit, Earth Island35 again filed suit against the U.S. government36 in the Court of International Trade (CIT).37 The defendants argued that Earth Island’s CIT suit was meritless and challenged Earth Island’s standing to bring a suit on the basis of an earlier case.38 The CIT held that, due to Earth Island’s demonstrated interest in the protection and conservation of sea turtles, and because Section 609 posed a real threat to those interests, Earth Island was given standing to sue.39 The CIT then proceeded to order the government to comply with the clear language of Section 609 and to ban the importation of shrimp from all nations that had not complied with its dictates. In 1995, the CIT found that the 1991 and the 1993 Guidelines were contrary to law by limiting the geographical scope of Section 609 to shrimp harvested in the Caribbean and western Atlantic regions. The CIT ordered the Department of State to prohibit by May 1, 1996, all the importation

28 U.S.C. § 1581 (1994). Id. at 185 33 Id. at 184. See Kurtz, supra note 22, for a comprehensive discussion of the term “embargo.” 34 See Appendix I to this chapter for a chronology of all Earth Island cases against the United States involving the law governing the importation of shrimp. 35 Plaintiffs were: Earth Island Institute, Todd Steiner, the American Society for the Prevention of Cruelty to Animals, the Humane Society of the United States, the Sierra Club, and the Georgia Fisherman’s Association, Inc. [hereinafter, collectively, Earth Island]. 36 Defendants in this case were: Secretary of State Warren Christopher, Secretary of the Treasury Lloyd Bentsen, Assistant Secretary of State for the Bureau of Oceans, International Environmental and Scientific Affairs Elinor G. Constable, Secretary of Commerce Ronald Brown, Assistant Administrator for Fisheries, National Marine Fisheries Service, Roland A. Schmitten, and the National Fisheries Institute [collectively United States government]. 37 See Earth Island Inst. v. Christopher, 890 F. Supp. 1085 (CIT 1995). 38 See Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). 39 See Earth Island Inst. v. Christopher, 890 F.Supp. 1085 (CIT 1995). 31 32

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of shrimp and shrimp products, wherever harvested, without fishing technology that did not affect the sea turtles.40 The United States attempted to petition the CIT for an extension of one year, but the CIT denied the request.41

1996 Guidelines and Earth Island’s Challenge In October 1996, the State Department again revised the guidelines under Section 609 and determined that the import prohibitions imposed pursuant to Section 609 did not apply to shrimp or shrimp products harvested by commercial shrimp trawl vessels using TEDs comparable in effectiveness to those required in the United States.42 Beginning May 1, 1996, all shipments of shrimp into the United States were required to either be accompanied by a declaration that the shrimp was harvested under conditions that did not affect sea turtles or be harvested in waters of a nation currently certified.43 Earth Island once again challenged this approach as “dangerous” and “disingenuous” since it would eliminate any incentive for countries to put TEDs on all nets.44 Countries could simply evade the embargo by exporting into the United States the shrimp caught by its few vessels equipped with TEDs while exporting shrimp caught by other methods to other countries.45 Once again contending the State Department’s regulations were not in conformity with the Court’s judgments, Earth Island went back to the CIT asking that the CIT compel the government to reinstate the embargo to apply to all countries which do not adopt a regulatory scheme requiring TED comparable to those used in the United States. In October 1996, the CIT ruled that the ban on shrimp and shrimp products required under Section 609 “applied to all shrimp or shrimp products harvested in the wild by citizens or vessels of nations which have not been certified”46 and mandated worldwide application of Section 609.47

40 Appellate Body Report, supra note 1, at 5 (citing Earth Island v. Warren Christopher, 913 F. Supp. 559 (CIT 1995). 41 See Earth Island Inst. v. Christopher, 922 F. Supp. 616 (CIT 1996). 42 See Earth Island Inst. v. Daley, 48 F. Supp. 2d 1064, 1067 (citing 61 Fed. Reg. 24,998, May 17, 1996). 43 Id. citing Earth Island Inst. v. Christopher, 922 F. Supp. 616 (CIT 1996) 44 Id. 45 Id. 46 See Earth Island Inst. v. Christopher, 922 F. Supp. 616 (CIT 1996). 47 An argument advanced by National Fisheries Institute involved a potential GATT challenge to Section 609. The CIT rejected the National Fisheries argument, since “[t]he record of enforcement of Section 609 to date does not reveal troubling tensions with the foreign sovereigns already deemed covered, including those not certified positively and thus subject to embargoes.” Id.

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INTERNATIONAL CHALLENGE: THE WTO DISPUTE Panel Report To further complicate matters for the U.S. government, on October 8, 1996, India, Malaysia, Pakistan, and Thailand (the WTO plaintiffs) jointly requested consultations with the United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) 48 and Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994)49 due to the ban imposed on shrimp importation under Section 609.50 After the consultation held in November 1996 did not result in a satisfactory solution, the WTO plaintiffs51 requested that the Dispute Settlement Body (DSB) establish a panel to examine under Article XXIII:2 of GATT 199452 and Article 6 of the DSU, the partial ban on the importation of shrimp resulting from the implementation of Section 609 and accompanying regulations.

Plaintiffs’ Arguments53 The plaintiffs, Malaysia, Thailand, Pakistan, and India, requested that the panel find that Section 609 and its implementation measures: 1. were contrary to Articles XI:1 and XIII:I 54 of the GATT 1994; 2. were not covered by the exceptions under Article XX(b) and (g) of GATT 1994; 3. nullified or impaired benefits accruing to the WTO plaintiffs within the meaning of Article XXIII:1(a) of GATT 1994; and 4. were contrary to Article I:1 of GATT. See art. 4 DSU on Consultations. See GATT art. XXII on Consultations. 50 Report of the Panel, United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58 (May 15, 1998) [hereinafter Panel Report]. 51 Although for simplicity’s sake the WTO plaintiffs are portrayed as having filed together, in fact, Malaysia and Thailand requested the establishment of a GATT panel to resolve the dispute on January 9, 1997. Pakistan requested to join as a co-complainant on January 30, 1997. On February 25, 1997, the DSB established a panel. India then asked to join as a co-party on February 25. On April 10, 1997, the DSB established a panel pursuant to India’s request and consolidated it with the panel requested by Malaysia, Thailand and Pakistan. The members of the panel were selected on April 15, 1997. Panel Report, supra note 50, at 2–3. 52 See GATT art. XXII on nullification or Impairment. 53 For detailed explanation of the panel case, see Marlo Pfister Cadeddu, Turtles in the Soup? An Analysis of the GATT Challenge to the United States Endangered Species Act Section 609 Shrimp Harvesting Certification Program for the Conservation of Sea Turtles, 11 GEO. INT’L. ENVT’L. L. REV. 179 (Fall, 1998) [hereinafter Cadeddu]. 54 See GATT art. XIII on Non-Discriminatory Administration of Quantitative Restrictions. 48 49

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U.S. Violation of GATT Article XI:155 The plaintiffs claimed that the Section 609 certification program violated GATT Article XI:1, which forbids one member nation from imposing quantitative prohibitions or restrictions on imports and exports from other member nations. Plaintiffs argued that by restricting shrimp imports from non-certified member nations under Section 609, the United States was imposing a restriction on trade that was not “in the nature of duties, taxes or other charges.”

U.S. Violation of the Equal Treatment Provision of GATT Article XIII:156 Plaintiffs also argued that Section 609 violated GATT Article XIII:1, which establishes that any prohibition or restriction on the importation of the products of one contracting party under GATT must be applied to all other countries. Because the parties defined the “product” in question as shrimp, irrespective of the method by which it was caught, the United States’ differing treatment of shrimp from certified and uncertified nations resulted in a violation of the provision.57

U.S. Violation of GATT Article I:158 The WTO plaintiffs also claimed that Section 609 violated the mostfavored-nation (MFN) principle embodied in GATT Article I, whereby each member of the GATT is obliged to treat other GATT members at least as well as it treats any other country with regard to imports and exports. Plaintiffs argued that Section 609 violated the MFN clause by: 1. Prohibiting shrimp imports from non-certified nations while permitting importation of identical shrimp from certified nations. Even assuming that TED-harvested shrimp constituted a distinct

See GATT art. XI on the General Elimination of Quantitative Restrictions. See GATT, art. XIII on Non-Disciminatory Administration of Quantitative Restrictions. 57 WTO plaintiffs argued that under the CIT’s October 9 ruling, even shrimp caught with TEDs were prohibited from entering the United States when the exporting nation lacked certification. Non-certified nations, therefore, could not export shrimp caught with the prescribed TED methodology to the United States, but certified nations could. In addition, the WTO plaintiffs argued that nations in the wider Caribbean/western Atlantic region had a three-year phase-in period during which to comply with Section 609, but the newly affected nations received only four months. See First Submission of Thailand, World Trade Organization Panel on United States, Import Prohibition of Certain Shrimp and Shrimp Products, para. 37. 58 See GATT art. I.1 on General Most-Favored-Nation Treatment. 55 56

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product, the United States could import TED-caught shrimp from certified nations under section 609, but not from non-certified nations, and 2. Allowing disparate time frames for phasing in of Section 609.59

U.S. (Defendant’s) Argument In its defense, the United States claimed that Section 609 fell within two exceptions to the GATT Article XX(g),60 which allows the use of import prohibitions for the conservation of an “exhaustible natural resource” as long as the measures applied also apply to domestic production or consumption.61 The applicability of Article XX(g) revolved around whether or not sea turtles fit the definition of “exhaustible natural resources.” The United States maintained that since sea turtles face the possibility of imminent extinction, they fit the definition of “exhaustible.”62 Also, since Section 609 was designed for the purpose of conserving and protecting sea turtles, it qualified as a measure “related to” their conservation. 63 The United States also enlisted Article XX(b)64 to its defense. XX(b) permits import prohibitions “necessary to protect human, animal or plant life or health.”65 The United States argued that Section 609 was “necessary” since it addressed threats to the sea turtles that all parties acknowledged. And because Section 609 called for negotiations of agreements for the protection and conservation of sea turtles, and embargoes on shrimp caught by non-turtle safe techniques, it was a measure intended to protect the life and health of sea turtles. Finally, the United States argued that the issue of whether Section 609 constituted a measure necessary to protect animal life or related to the conservation of an exhaustible natural resource was the only addressable issue in this case. The United States argued that, under Article XX, nothing in GATT was to be construed to prevent the adoption or enforcement of conservation or protective measures such as Section 609.

The Panel’s Decision: The Panel Found that Section 609 Violated GATT Article XI:1 On April 6, 1998, the WTO dispute panel issued its final report holding that the import ban imposed by the United States under Section 609 59 60 61 62 63 64 65

Id., citing para. 40. GATT art. XX(g). Id. Panel Report, supra note 50, at para. 162. Id. Id. Id.

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could not be justified.66 The panel found that Section 609 operated as a restriction on trade prohibited by that article. The panel determined that because Section 609 banned the importation of shrimp/shrimp products from any country not meeting the U.S. criteria, it constituted an impermissible “prohibition or restriction” under Article XI:1.67 The panel did not address the WTO plaintiffs’ arguments that Section 609 also violated Articles I:1 and XIII:1 since it had already found that Section 609 violated Article XI:1.68

The Panel Found that Section 609 Violated the Chapeau of Article XX, and Therefore Found No Need to Address Whether the Measure Fell Under the Exceptions to Article XX69 The panel first examined the measure under the chapeau of Article XX, which prohibits application of measures that would constitute “arbitrary or unjustifiable discrimination between countries where the same conditions prevail.”70 Believing that the exceptions in Article XX were limited and conditional,71 the panel held that a GATT member nation could not utilize the Article XX exceptions so as to frustrate or defeat the “liberaliz[ation] and . . . access to markets on a nondiscriminatory basis.” 72 The panel stated that the central purpose of the GATT, free trade, and the multilateral trading system itself would be hampered if a member nation was allowed to adopt a measure conditioning access to its market on the adoption of certain policies by other members. Since, in the view of the panel, Section 609 attempted to do just that, it violated the chapeau of Article XX.73 Because Section 609 failed to comply with the chapeau, the panel did not even address whether it could qualify under the exceptions in Article XX(b) or (g).74 Finally, the panel emphasized that multilateral negotiations should be the preferred means of achieving environmental protection.75 See Panel Report, supra note 50. Id. at para. 7.17. 68 Id. at para. 7.23. 69 In the interest of brevity, the panel’s decision on this item is summarized. In its unabridged decision, the panel addresses at length whether Section 609’s discrimination between countries was “unjustifiable” within the meaning of the chapeau. 70 Panel Report, supra note 50, at para. 7.33. 71 Id. at paras. 7.36–7.38 72 Id. at paras. 7.40, 42. 73 Id., para. 7.45. 74 See id., para. 7.62. 75 See generally, id., paras. 7.50–7.60. The panel rejected both the U.S. argument that (1) it was authorized to take unilateral action for the protection of the turtles under CITES; and (2) the use of TEDs was a recognized multilateral environmental standard. See id., paras. 7.58–7.59. 66 67

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The Appellate Body’s Report On July 13, 1998, the United States notified the WTO of its decision to appeal certain issues of law and legal interpretations in the Panel Report.76 The United States raised two claims of error: that the panel erred in finding that it could not accept unsolicited submissions from NGOs; and that the panel erred in finding that Section 609 was outside the scope of Article XX.77

U.S. Arguments The United States argued that the panel erred in finding that it could not accept unsolicited submission from non-governmental organizations (NGOs)78 and that the panel misinterpreted Article XX of the GATT.79 The United States argued that the panel erred in finding that the chapeau required the panel to first determine whether a measure constituted a “threat to the multilateral trading system”80 and that the inquiry ended at this point if it did. The United States opposed the panel’s view that in GATT 1994 trade concerns always prevailed over other interests.81 The panel’s interpretation of the chapeau as a prohibition to any measures that could threaten the multilateral trading system would “impermissibly diminish the rights that WTO reserved under Article XX”82 and add “an entirely new obligation under Article XX of the GATT 1994: namely that Members may not adopt measures that would result in certain effects on the trading system.”83 The United States also argued that the panel failed to address the U.S. rationale for its differing treatment of shrimp harvesting nations. The United States argued that differentiating between the nations that did and did not employ TEDs84 was reasonable and justifiable since most nations, including the Joint Appellees,85 recognized the importance of conserving sea turtles and the danger created by shrimp trawling without the use of TEDs. The United States, therefore, believed that the panel failed to apply the ordinary meaning and context of the term “unjustifiable discrimination,86 and instead asked whether the United States meas76 77 78 79 80 81 82 83 84 85 86

Appellate Body Report, supra note 1. See id., paras. 8, 10. Id. at para. 9. This argument will not be discussed in this chapter. Id. Id. at para. 10. Id. at para. 16. Id. at para. 9(2). Id. at para. 13. Id. at para. 11. The Joint Appellees are India, Malaysia, Pakistan and Thailand. Id. at para. 10.

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ure and similar measures taken by other countries would undermine the “multilateral trading system.”87 According to the United States, Article XX neither “defines nor mentions the ‘multilateral trading system,’ nor conditions a Member’s right to adopt a trade-restricting measure on the basis of the hypothetical effects on that system.”88 The United States insisted that Section 609 reasonably differentiated between countries based on the risk posed to endangered sea turtles by their shrimping industries. If a measure that differentiated between countries was “legitimately connected” with the policy of an Article XX exception, not for protectionist reasons, then that measure was not an abuse of the exception.89 Although neither the United States nor the Joint Appellees appealed the finding regarding the chapeau and the panel’s decision not to reach Article XX(g) and XX(b), both parties agreed that if the Appellate Body finds that Section 609 meets the criteria of the Article XX chapeau, it may address Articles XX(g) and XX(b). The United States argued that Article XX(g) allowed Section 609’s differing treatment of imported shrimp, and that Section XX(b) was only to be addressed in the alternative. 90 The United States alleged that Section 609 complied with all the requirements set under Article XX(g): turtles are an “exhaustible natural resource”; Section 609 “relates to” the conservation of sea turtles; and a “substantial relationship” exists between Section 609 and the conservation of sea turtles. 91

Joint Appellees’ Arguments The Appellees claimed that the panel’s decision did not misinterpret the chapeau of Article XX by understanding the term “unjustifiable” to mean “a threat to the multilateral trading system.”92 Rather, the panel had simply followed past GATT/WTO practice and the accepted rules of interpretation set forth in the Vienna Convention.93 The Joint Appellees also argued that the United States had abused Article XX by unilaterally developing a trade policy, and unilaterally imposing this policy through a trade embargo, instead of through multilateral negotiations, as required by the multilateral trading system. 94 The Joint Appellees stated that Id. at para. 12. Id. 89 Id. at paras. 20–21. 90 Appellate Body Report, supra note 1, at paras. 24–26. The Appellate Body decision only covered Article XX(g); the parties’ arguments on XX(g), therefore, are not included in this discussion. 91 Id. 92 Id. at para. 34. 93 Id. 94 Id. at para. 35. 87 88

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“conditioning access to markets for a given product upon the adoption of certain policies by exporting Members, can violate the WTO Agreement.” 95 The threat to the multilateral trade system cited by the panel, therefore, was unrelated to the appellant’s support for TEDs or turtle conservation. In conclusion, the Appellees viewed that the panel correctly addressed the chapeau in terms of the manner in which the measure was applied and correctly decided that Section 609 was applied “in an abusive manner so as to frustrate the substantive rights of the Appellees under the WTO Agreement.”96

Findings of the Appellate Body On October 12, 1998, the Appellate Body released its decision. The Appellate Body disapproved of the panel’s application of “customary rules of interpretation of public international law” as required by Article 3.2 of the DSU which calls for an examination of the ordinary meaning of the words of a treaty, read in their context, and in the light of the object and purpose of the treaty involved.97 The Appellate Body found that the panel’s interpretation was contrary to the WTO’s analysis in Reformulated Gasoline,98 as the panel “did not inquire specifically into how the application of Section 609 constitutes a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade.”99 The Appellate Body also found the panel’s approach was not within the scope of measures permitted under the chapeau of Article XX. The Appellate Body overturned the panel’s conclusions that the export ban was not within the chapeau of GATT as broad and having no basis in the text of Article XX. The panel should have followed the approach articulated in Reformulated Gasoline: a two-tiered analysis, which first required an examination of the measure’s qualification under the general exemptions allowed by Article XX and then, if the measure qualifies, an evaluation of whether the measure is permitted under the approach.100

95

Id. Id. at para. 40. The Joint Appellees also requested that, if the Appellate Body reversed the panel’s legal findings with respect to the chapeau, it make legal findings regarding Articles XX(b) and (g), with the arguments submitted to the panel incorporated by reference. Id. at para. 45. 97 Id. at para. 114. 98 Report of Appellate Body, United States—Reformulated Gasoline, WT/DS2/AB/R (May 20, 1996). 99 Appellate Body Report, supra note 1, at para. 115. 100 Id. at para. 118. 96

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Since the Appellate Body found that the panel’s “chapeau down” approach was incorrect, it then proceeded, as per the agreement of the parties, to consider whether Section 609 was justified under Article XX(g) and if so, whether the requirements of the chapeau were met.

Article XX(g) The Appellate Body held, taking into account the global community’s concerted effort to mobilize to protect living natural resources, that “measures to conserve exhaustible natural resources, whether living or nonliving, may fall within Article XX(g).”101 The sea turtles were “exhaustible” within the meaning of XX(g) and Section 609 was “relat[ed] to the conservation of exhaustible resources”102 since there is a “relationship between the general structure and design of [Section 609] and the policy goal it purports to serve.”103 After finding that Section 609 came within the terms of Article XX(g), the Appellate Body proceeded to step two, deciding whether Section 609 satisfied the requirements of the chapeau of Article XX.104

The Chapeau of Article XX The Appellate Body stated that in order to comply with the chapeau, a measure had to be applied in a manner that did not constitute “a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail” or a “disguised restriction on international trade.”105 The Appellate Body found that applying the embargo required by Section 609 to coerce other WTO members to adopt similar regulations to fulfill the United States’ chosen policy goal was unacceptable in international trade relations.106 The fact that the United States excluded shrimp caught using methods identical to those employed in the United States solely because they were caught in waters of countries that have not been certified under Section 609 further amounted to arbitrary and unjustifiable discrimination among countries where the same conditions pre-

101 Id. at paras. 125–132. The Appellate Body took into account the fact that all species of sea turtles are listed in Appendix 1 of CITES. 102 Id. at para. 135. 103 Id. at para. 137. 104 Id. at para. 147. 105 Id. at para. 150. 106 The Appellate Body found that the 1996 Guidelines promulgated by the Department of State had eliminated any flexibility that could allow differences between countries to be taken into account. The result was that, in essence, in order to become certified, a nation would have to implement a regulatory program which mandated the use of TEDs. Id. at paras. 161–162.

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vailed.107 In addition, the Appellate Body repeatedly stressed the U.S. failure to engage in serious negotiations for bilateral or multilateral agreements for the protection and conservation of sea turtles with the other countries,108 an especially significant oversight in light of the mandate of the CIT.109 Finally, the Appellate Body found the disparity in phase-in periods and technology transfer to different nations unjust. The initially affected countries had a period of three years to adapt their domestic shrimping industry, while the newly affected nations, including the Joint Appellees, had just months to comply.110 The Appellate Body also noted that the discrepancy in treatment also applied to the transfer of technology. Lastly, the ruling criticized the United States for failing to ensure the transparency and fundamental fairness of the certification process. Due to the differences in the application of Section 609 to the various shrimp-exporting countries, the Appellate Body found that there was “unjustifiable discrimination” within the meaning of the chapeau of Article XX. It was clear to the Appellate Body that certain minimum standards for transparency and procedural fairness were required under Article X:3 of GATT 1994.111 In short, Section 609 amounted to “‘arbitrary discrimination’ between countries where the same conditions prevail, contrary to the requirements of the chapeau of Article XX.”112 The Appellate Body concluded that while the United States measure qualified for provisional justification under Article XX(g), it failed to meet the requirements of the chapeau of Article XX, and therefore was not excused under Article XX of GATT 1994.113 The Appellate Body recommended that the DSB request that the United States bring its measure into conformity with its obligations under the GATT.114

EFFECTS OF WTO LITIGATION ON U.S. LEGISLATION Prior to the outcome, and perhaps in hopes of influencing the WTO Appellate Body Report, but after the Federal Circuit’s mandate, the State Department once again revised the Guidelines for Section 609 regulaId. at para. 166. Id. at para. 165. 109 The Appellate Body found it plainly discriminatory and unjustifiable behavior that the United States had engaged in multilateral negotiations with some members of the WTO but not others. Id. at para. 166. 110 See id. at paras. 163–165. 111 Id. 112 Id. at paras. 183–184. 113 Id. at para. 187. 114 Id. at para. 188. 107 108

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tions.115 The 1998 Revised Guidelines reinstate the decision to “permit the importation of TED-caught shrimp from uncertified Nations.”116 After the WTO Appellate Body’s decision on October 1, 1998, a flurry of comments came down from the U.S. administration. Trade Representative Charlene Barshefsky said in a statement issued on the date the decision was handed down that although the Appellate Body rightly recognized the importance and legitimacy of the conservation measure, she disagreed with their assessment that it had not been implemented in an even-handed manner.117 On November 6, 1998, the United States formally accepted the Appellate Body ruling that the restrictions imposed under Section 609 on the importation of shrimp violated its obligations under the GATT.118 However, the United States did not establish how and if it would change its laws, indicating that “the Clinton administration was consulting with Congress and would advise the WTO of its plans.”119 On April 2, 1999, Earth Island initiated proceedings at the CIT to declare the 1998 Guidelines in violation of Section 609 and enjoin the defendants from allowing the importation of shrimp and shrimp products from any nation with commercial fishing operations that may adversely impact sea turtles unless and until the Secretary of State determines and certifies that the nation has a current and enforceable sea turtle protection program comparable to that of the United States.120 The U.S. plaintiffs’ position is summarized by their statement that the “1998 Revised Guidelines . . . conform to the plain meaning of the statute, that its legislative history supports their interpretation, and that any ambiguity should be resolved in a manner deferential to their administrative prerogatives and/or that affects the fewest nations and shipments possible consistent with the doctrine articulated in Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118, 2.L.Ed 208 (1804).”121 The CIT stated that due to Section 609’s “notable clarity of purpose and cohesiveness of content” that the 1998 Revised Guidelines did not comport with the expressed approach of Congress in Section 609.122 The 63 Fed. Reg. 46,094 (Aug. 28, 1998) [hereinafter 1998 Revised Guidelines]. March 1999 Notice of Revisions, 64 Fed.Reg. at 14,482. 117 Environment: WTO Appeals Body Faults Implementation of Shrimp Turtle Law, 15 Int’l Trade Rep. (BNA) 1698 (Oct. 14, 1998). 118 Daniel Pruzin, Environment: WTO Formally Adopts Shrimp-Turtle Ruling as Thailand Fears Victory May be Pyrrhic, 15 Int’l Trade Rep. (BNA) 1884 (Nov. 11, 1998) [hereinafter Pruzin]. See United States Agrees to Shrimp Restrictions, ASSO. PRESS, Nov. 7, 1998, available iat 1998 WL 22416163. 119 See Pruzin, supra note 118, at 1884. 120 Earth Island Inst. v. Daley, 48 F. Supp. 2d 1064, 1077 (CIT 1999). 121 Id. at 1078. 122 Id. at 1079. 115 116

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court stated that only the country-by-country approach, as opposed to the proposed shipment-by-shipment approach, was required to satisfy Congress’ intent that Section 609 apply to shrimp shipments from everywhere in the world. The court concluded that the “part of the 1998 Revised Guidelines which constitutes the decision to permit importation of TED-caught shrimp from uncertified nations, on its face, is not in accordance with Section 609.”123 The court, however, withheld entering judgment on plaintiff’s motion until it received defendants’ annual report to Congress on the actual enforcement of the 1998 Guidelines. On July 8, 1999, the U.S. Department of State issued revised guidelines in accordance with recommendations and rulings of the DSB. The new guidelines were intended to (1) introduce greater flexibility in considering the comparability of foreign programs and the U.S. program and (2) elaborate a timetable and procedure s for certification decisions, including expedited timetables to apply in 1999 only. The changes were designed to increase the transparency and predictability of the certification process and to afford foreign governments seeking certification a greater degree of due process.124

CAN THE UNITED STATES COMPLY WITH DOMESTIC AND WTO RULINGS? At first glance, it would seem that the United States would be able to comply with the WTO’s decision without amending Section 609, since the Appellate Body did not take issue with the law but with the application of Section 609.125 Upon closer inspection, however, it appears that, without legislative action, it will be very difficult for the United States to remedy the problems the Appellate Body found. In complying with the Appellate Body decision, the United States would have to address the following problems.

Lack of Flexibility in Applying Section 609 The first problem the United States would have to address in the application of Section 609 is that Section 609 required all exporting members to adopt essentially the same TED program as that of the United States. The Appellate Body conceded that Section 609 permitted a degree of discretion or flexibility in how the standards for determining comparability might be applied, but in practice U.S. officials only looked to see Id. at 1081. United States—Import Prohibition of Certain Shrimp and Shrimp Products— Status Report by the United States, Addendum, WT/DS58/15/Add.1 (Sept. 8,1999). 125 Comments of Rita Hayes, United States Ambassador to the WTO, cited in Pruzin, supra note 118, at 1884. 123 124

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whether there was a regulatory program requiring the use of TEDs. To address this criticism from the Appellate Body, the United States made adjustment to the 1998 Guidelines in order to introduce greater flexibility in considering the comparability of foreign programs and the U.S. program.126 The problem in taking into account other methods of safeguarding sea turtles is twofold: First, since turtles are migratory, there is no way to ensure that no turtles are present in the area. The use of TEDs would seem to be the only effective way to ensure that sea turtles are protected. Secondly, since TEDs have been estimated to be 99% effective, according to Section 609, any other program would have to have an average rate of incidental taking of sea turtles by shrimp trawling vessels comparable to that. To date, no other program has proven to be as effective.

Discrimination in Exclusion from U.S. Market of Shrimp from Uncertified Countries Caught with TEDs Secondly, the Appellate Body faulted the U.S. exclusion from the U.S. market of shrimp from uncertified countries even if caught using TED technology. In attempting to remedy this situation, the United States promulgated the 1998 Revised Guidelines, as discussed above. The 1998 Guidelines allowed a shipment-by-shipment approach, which did not discriminate against shrimp that were caught with TEDs even if the shrimp came from a non-certified nation. This measure to comply with the WTO provisions ran afoul of the CIT’s previous 1996 ruling and Earth Island has challenged these guidelines.127 Earth Island requested that the court declare that the 1998 Revised Guidelines are in violation of the Administrative Procedure Act and Section 609 and asks that the United States be enjoined from allowing the importation of shrimp and shrimp products from any nation with commercial fishing operations that may adversely impact sea turtles unless and until the Secretary of State determines and certifies that the foreign nation has a current and enforceable sea turtle protection program, with an incidental taking rate fully comparable to that of the United States.128 Although, after hearing the parties’ arguments, the CIT denied the motion for immediate injunctive relief, the CIT stated that it could not conclude that the United States Revised Guidelines “comport[ed] with the expressed approach of Congress in Section 609, which is notable for its clarity of 126 See United States—Import Prohibition of Certain Shrimp and Shrimp Products, Status Report by the United States, WT/DS58/15 (July 15, 1999); See also United States— Import Prohibition of Certain Shrimp and Shrimp Products, Status Report by the United States, Addendum, WT/DS58/15/Add.1 (Sept. 8, 1999). 127 Earth Island Inst. v. Daley, 48 F. Supp. 2d 1064 (CIT 1999). 128 Plaintiff’s Complaint for Declaratory Judgment, Review of Agency Action, Mandamus and Injunctive Relief, § IX.

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purpose and cohesiveness of content.”129 Although the court’s final holding is still under consideration, 130 the CIT preliminarily held that the United States is in violation of the intent of Congress in implementing Section 609. If the judgment is made final, Earth Island’s continued challenge to the Guidelines issued by the United States will make it difficult for the United States to comply easily with the WTO’s ruling. 131 State Department Officials, however, maintain that it is possible to reconcile the obligations under the WTO to the obligation under domestic courts.132 Comments from U.S. officials downplay the conflict between the WTO rulings and the United States law as interpreted by the CIT and have discarded the idea that a change in the law would be necessary for compliance.133 Assuming the CIT upholds its decision that the U.S. shipment-by-shipment approach is in contravention of Section 609, the United States will be unable to maintain the shipment-by-shipment approach, the key provision to satisfying the complaints of the WTO complainants. In that case, the only way the United States will be able to comply with both the CIT and the WTO would be to change the law (Section 609) in order to provide a shipment-by-shipment approach exemption or pay compensation to the WTO complainants. Another way for the United States to address compliance would be to follow the WTO recommendation that it cure its failure to engage in serious negotiations with the objective of concluding bilateral or multilateral agreements for the protection and conservation of sea turtles. The preference for negotiated treaties were echoed in recent comments by Renato Ruggiero, former Director-General of the WTO: We both want a strong, rules-based trading system as well as a strong and effective environmental system, and we both want the two systems to support one another. The question is how do we arrive at these objectives. We will not arrive there through Earth Island Inst. v. Daley, 48 F. Supp. 2d 1064, 1080 (CIT 1999). Although the court concluded that the part of the 1998 Revised Guidelines, which constitutes the decision to permit the importation of TED-caught Shrimp from non-certified countries, on its face, was not in accordance with Section 609, the CIT withheld entry of judgment on plaintiff’s motion. The CIT agreed to wait until defendants submitted their annual report to Congress pursuant to Section 609(b)(2), their March 1999 notice of revisions, and the presentment of evidence on or before July 2, 1999, regarding the actual enforcement of the 1998 Guidelines to date, as well as of the 1996 Revised Guidelines. See id. at 1081. 131 As per the clerk of the CIT, on July 6, 1999, an entry docket reveals that the United States has submitted the required evidence. Despite this, the CIT has not yet entered a decision. 132 See CIT Strikes Blow at U.S. Compliance with WTO Shrimp-Turtle Ruling, 17(15) INSIDE UNITED STATES TRADE (Apr. 16, 1999). 133 See id. 129 130

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unilateralism, through discriminatory actions and protectionism, with each nation free to impose its standards and priorities on the other following its own perceptions of the problem. On the contrary, we will only arrive at our shared objectives through consensus, through negotiations.134 The Appellate Body stated that the fact that the United States had engaged in negotiations with some of the countries and not others was plainly discriminatory and unjustifiable. The existence of the InterAmerican Convention for the protection of sea turtles also indicated to the Appellate Body that protection through negotiation of multilateral treaties was a feasible possibility that the United States failed to pursue. It indicated that the United States could have attempted to negotiate with the countries not implementing turtle safety measures that complied with the U.S. requirements without resorting to unilateral measures such as Section 609. The United States could follow the WTO’s recommendation and energetically pursue a treaty similar to that of the Inter-American Convention. According to a recent status report to the WTO,135 the United States has “redoubled its efforts, begun in 1996, to negotiate an agreement with the governments of the Indian Ocean region towards the protection of sea turtles in that region.” The report also stated that several governments of the region as well as NGOs were approached in an effort to get the negotiations underway. The problems raised by the multilateral approach are three-fold. First, the Appellate Body has left open the question of to what extent a WTO member must negotiate for a collective solution before acting unilaterally. Although the Appellate Body noted that it had not decided that the sovereign nations that are members of the WTO could not adopt measures to protect endangered species, such as sea turtles,136 it never clarified how, if ever, a member of the WTO could adopt environmental measures unilaterally without violating the GATT and WTO obligations. The United States’ only option seems to be to follow a trial-and-error path through negotiation efforts which the other countries are free to reject, in an effort to comply with both its domestic and WTO dictated principles. 134 Renato Ruggiero, Opening Remarks to the WTO High Level Symposium on Trade and the Environment (Mar. 15, 1999). 135 See United States—Import Prohibition of Certain Shrimp and Shrimp Products, Status Report by the United States, WT/DS58/15 (July 15, 1999); See also United States— Import Prohibition of Certain Shrimp and Shrimp Products, Status Report by the United States, Addendum, WT/DS58/15/Add.1 (Sept. 8, 1999). 136 See generally Appellate Body Report, supra note 1.

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Discrepancy with the Phasing-in Period Under Section 609 Another problem highlighted by the WTO was the different time frames allotted to different countries during the “phase-in” periods and the diversified effort the United States made to transfer the TED technology to member nations. To address this shortcoming, the United States, in its September 8, 1999, status report to the WTO, 137 stated that the United States offers technical training in the design, construction, installation, and operation of TEDs to any government that requests it, an offer that Pakistan has already accepted. While the United States can address the technology transfer through this non-discriminatory, open offer of technology transfer, the “phase-in” discrepancy is not as easily resolved. While the wider Caribbean and western Atlantic region were originally given a three-year phase-in period, the CIT’s ruling that newly affected nations must comply by May 1, 1996, does not allow similar leeway to be given to other countries. In fact, the CIT noted that the order to modify the 1996 deadline imposed by Section 609 had to be made by Congress and not by the court. However, the chance that the United States may be able to petition the CIT for an extension in light of the Appellate Body holding may not be completely foreclosed, due to the court’s apparent inclination to grant an extension of the May 1, 1996, deadline for implementing Section 609 worldwide. The request was ultimately denied but on the grounds that the government failed to submit any evidence that certain nations would not be able to comply within that time frame. If the United States could compile the evidence at this point, the court may be willing to entertain it. However, the United States apparently had the opportunity to request the extension from the CIT in Daley, but failed to do so by opting instead to argue that the 1998 Revised Guidelines complied with the WTO recommendations as well as with congressional intent in enacting Section 609. Whether this is both legally and practically feasible at this point is not clear.

Lack of Flexibility and Transparency of the Section 609 Certification Process The fifth and sixth points raised by the WTO—the lack of flexibility and transparency in the U.S. certification process, were addressed by the United States in its submission of a report to the WTO on September 8, 1999.138 In the September 1999 report, the United States stated that the 137 See United States—Import Prohibition of Certain Shrimp and Shrimp Products—Status Report by the United States, Addendum, WT/DS58/15/Add.1 (Sept. 8, 1999). 138 See United States—Import Prohibition of Certain Shrimp and Shrimp

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1998 Revised Guidelines were intended to introduce greater flexibility in comparing the United States and foreign programs and to elaborate a timetable and procedures for certification decisions. The United States stated that the changes were “designed to increase the transparency and predictability of the certification process and afford foreign governments seeking certification a greater degree of due process.”139 Although the measures may comply with the WTO and appease the complainants, as seen above, the CIT found the 1998 Guidelines to be inconsistent with Section 609. The United States, therefore, will not be able to comply with both the CIT and the WTO decisions through the Revised 1998 Guidelines.

Failure to Negotiate The Appellate Body found the U.S. failure to engage in negotiations for a multilateral solution for the protection of sea turtles particularly serious.140 In its status report to the WTO, the United States stressed its efforts to negotiate an agreement with the governments in the Indian Ocean region.141 Despite the WTO’s pronouncement of the desirability of negotiations, there are problems with pursuing a negotiated treaty solution to environmental threats. Negotiations are usually long, complex, and protracted. In general, by the time the environmental threats gain public attention, a solution has become critical, time being of the essence. A negotiated solution that requires long, expensive negotiations may address a moot point. In this case, if the ban under Section 609 is lifted and countries are left to negotiate an acceptable form of protection, by the time a treaty is created it may be too late for the sea turtles. By the time countries agree, the species in question may become extinct. Also, a multilateral solution may default to inaction, as countries have an incentive to not negotiate and free-ride. These obstacles to multilateral negotiations do not, however, imply that negotiations are never an acceptable solution. One can look at the WTO case that preceded Shrimp-Turtle in addressing unilateral environment protection, the Tuna-Dolphin case,142 as a model for U.S. actions in light of an adverse WTO decision. After the Tuna-Dolphin case, the United Products—Status Report by the United States, Addendum, WT/DS58/15/Add.1 (Sept. 8, 1999). 139 Id. at 1. 140 Appellate Body Report supra note 1, at para. 165. 141 See United States—Import Prohibition of Certain Shrimp and Shrimp Products, Status Report by the United States, WT/DS58/15 (July 15, 1999); see also United States— Import Prohibition of Certain Shrimp and Shrimp Products, Status Report by the United States, Addendum, WT/DS58/15/Add.1 (Sept. 8, 1999). 142 See GATT Dispute Settlement Panel Report on United States Restrictions on Imports of Tuna, Aug. 16, 1991, 30 I.L.M. 1594 (1991).

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States pursued a multilateral environmental agreement, the International Dolphin Conservation Act (IDCA) of 1992 143 to protect the dolphins. In the Tuna-Dolphin context, the IDCA Dolphin Accord, which addressed the question of dolphin mortality caused by tuna fishing, provided the foundation for a post Tuna-Dolphin I and II multilateral agreement known as the Declaration of Panama. Several international agreements upon which a similar treaty for the sea turtles could be based exist. These international agreements include CITES and the Convention on Biodiversity. Using CITES is an obvious choice because sea turtles are listed in both Appendices I and II of CITES, demonstrating the recognition by its signatories that sea turtles are endangered and need to be protected. In the Shrimp-Turtle case, the United States could select an agreement that all parties to the dispute have signed, and use it as a foundation for a more expansive treaty. However, the question remains whether or not this kind of agreement, enforced through trade sanctions, would be GATT compliant.

IMPLICATIONS FOR THE FUTURE This Case Does Not Provide the United States With Guidance in Avoiding Future Conflict Between Its Domestic Court System and the WTO Despite the shortcomings of negotiated solutions, in this case a negotiated solution could enable the United States to satisfy the requirements of both the WTO and the CIT. If the complainants agreed to comply voluntarily with the requirements under Section 609 by implementing turtle-safe harvesting methods in exchange for U.S. technical assistance, the United States would be able to comply with the mandate of the CIT. A negotiated solution in this case, however, does not offer the United States a predictable model to follow in potential future conflicts. The lack of guidance for future cases will further muddle the U.S. analysis of available tools for environmental protection. In the United States, similar conflicts between national laws (like Section 609) and the mandates of a multinational organization (WTO) will likely increase as the government views environmental protection as an important area. For example, 143 After the Tuna-Dolphin opinion, the parties, through the Inter-American Tropical Tuna Commission (IATTC), established in 1949, negotiated a dolphin accord, the International Dolphin Conservation Act (IDCA) of 1992. The IDCA lifted the tuna import ban against Mexico and Venezuela but provided for unilateral trade sanctions if they failed to comply with the moratorium. The Declaration of Panama was signed on October 4, 1995, giving multinational effect to the IDCA. Finally, on August 15, 1997, the U.S. Congress amended the Marine Mammal Protection Act to recognize the IDCA and to lift the ban on tuna imports from signatories of the Declaration of Panama. See Cadeddu, supra note 53.

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President Clinton signed an executive order committing U.S. agencies to “a policy of careful assessment and consideration of the environmental impacts of trade agreements.”144 The evaluation145 is supposed to include ongoing assessments and, in some cases, written environmental reviews.146 Also, the order established that trade agreements should contribute to the goal of sustainable development. Although the focus of the environmental review will be on impacts within the United States, the reviews may also examine global and transboundary impacts. From the above, we can conclude that countries like the United States are increasingly treating environmental protection as an important goal. Tackling environmental protection is not easy, as modern environmental problems, like pollution and endangered species that migrate, are not contained within states’ borders and cannot be addressed by purely national legislation. In addressing practices that are not environmentally sound, as in the case of shrimping without TEDs, laws with an extraterritorial reach may be the only effective action a country can take. Without the ability to implement such measures without running afoul of the WTO mandate, the United States needs some guidance from the WTO. In order to implement legislation, the United States needs to be able to analyze what tools it can employ to assess, address, and implement environmental protection policies.

Some Proposals to Be Applied Domestically As seen above, the WTO in Shrimp-Turtle does not make clear what the boundaries are of acceptable versus unacceptable unilateral behavior. We should not expect to see a clearer enunciation of the WTO’s preferred direction. The United States should, therefore, also seek to address the situations that could result in conflicts between domestic courts and the WTO. One way to avoid future problems is to change the way domestic judges analyze a case whose outcome could affect the United States’ ability to comply with an international agreement. Judges could be required to be educated and informed in a manner that would later permit them to be able to evaluate the consequences of his/her ruling on international agreements. Perhaps we could go even further and curtail the judges’ dis144 Document archived at the U.S. Department of State’s Daily Washington File, at http://www.usia.gov/products/washfile/econ.shtml (last visited Nov. 29, 1999 [hereinafter Daily Washington File]. 145 Environmental review is not required where the United States negotiates: (1) comprehensive multilateral trade rounds; (2) bilateral or plurilateral free trade agreements; and (3) new trade liberalization agreements in natural resource sectors. Id. 146 Written environmental reviews will be initiated through a Federal Register notice and will be open to the public for comments where practicable. See Daily Washington File, supra note 144.

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cretion through legislation, or construct rules that, following the tenet articulated in Murray v. Schooner Charming Betsy,147 would lead the judge to resolve cases in a manner deferential to their administrative prerogatives and/or that affects the fewest nations and shipments possible. In facing a similar situation as the conflict between the CIT and the WTO in the Shrimp-Turtle case, a judge would have to take into account the effect that a CIT ruling that was adamantly opposed to a WTO provision or ruling would have for the United States. Perhaps in that way, the courts and the legislators could work together in resolving the vexing issues in the confrontation between free trade and the environment.

CONCLUSION Countries around the world have begun to realize recently that the protection of the environment can only be realized on a global basis.148 Throughout the 1990s, meeting the objectives of environmental protection and free trade were often at odds. Many bilateral and multilateral treaties have been negotiated to attempt to reconcile and address both goals. In addition to negotiating treaties, the United States has also used unilateral measures, such as the threat of trade sanctions, as an instrument to achieve environmental goals. This chapter addressed the problems the United States continues to encounter as it attempts to achieve a balance between trade liberalization and environmental protection in the context of the recent Shrimp-Turtle Appellate Body decision and the outcome of the cases brought by Earth Island Institute challenging the United States’ implementation of the U.S. legislation (Section 609) enacted to protect the sea turtles. The United States was faced with the task of defending its implementation of Section 609 both internationally and domestically and implementing its shrimp ban in a way that satisfies the conflicting demands of the CIT and the WTO. In addressing the domestic challenges of the Earth Island Institute, the CIT repeatedly emphasized the shortcomings of the Section 609 guidelines. The CIT held that the numerous revisions of the guidelines subject to the Earth Island suits failed to achieve the level of protection Congress had intended in enacting the legislation. Meanwhile, in the WTO, the Appellate Body chastised the United States’ arbitrary and discriminatory application of Section 609 Guidelines. After an analysis of the problems the United States must address under the CIT ruling and the WTO ruling, it appears that, absent legislative changes to Section 609, the United States will not be able to com147

Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118, 2. L. Ed. 208

(1804). 148 See generally Thomas J. Schoenbaum, Free International Trade and Protection of the Environment: Irreconcilable Conflict?, 86 AM. J. INT’L L. 700 (1992).

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ply with both the decision of the CIT and the WTO Appellate Body decision. If the United States changes the Revised Guidelines to return to a country-by-country approach to the certification process, as maintained by previous CIT holdings (and most likely the pending holding in Daley), the U.S. approach will remain at odds with the mandate of the WTO. On the other hand, if the United States maintains its shipment-by-shipment approach as part of the series of steps to comply with the WTO Appellate Body Report, it will be in violation of the CIT rulings. The only feasible solutions to compliance include amending Section 609 to comply with the WTO ruling, adopting new guidelines that would instruct judges to take into account and resolve cases in light of the U.S. treaty obligation, or negotiating a multilateral solution. An amendment to Section 609 is not a workable solution since U.S. officials have been outspoken against it. Developing a system that would curtail the judge’s discretion, or would provide him with a set of guidelines that would enable the judge (or require the judge) to consider the impact of the ruling on U.S. multilateral treaties or cases, requires further study. Both this proposal and negotiations of a multilateral solution are time-intensive. Despite its inherent flaws, a negotiated solution as an alternative to unilateral action seems to be the only workable manner in which the United States will be able to comply with both the CIT and the WTO. Only if the complainants agree to submit voluntarily to the U.S. requirements for certification under the ban imposed under Section 609 will the United States be able to maintain its legislation intact. Without a negotiated solution, the United States will have to compensate the affected countries in order to implement Section 609’s country-by-country certification approach after January of 2000.

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APPENDIX I COURT OF INTERNATIONAL TRADE—CASE CHRONOLOGY Earth Island Inst. v. Baker, 1992 WL 565222 (N.D.Cal. Aug 06, 1992) (No. C 92–0832 JPV)

Affirmed by Earth Island Inst. v. Christopher, 6 F.3d 648, 15 ITRD 2460, 23 Envtl. L. Rep. 21,553 (9th Cir.(Cal.) Oct. 1, 1993) (No. 92–16544) Earth Island Inst. v. Christopher, 19 C.I.T. 812, 890 F. Supp. 1085, 17 ITRD 1785 (CIT. Jun 5, 1995) (No. SLIP OP. 95–103, 94–06–00321) Earth Island Inst. v. Christopher, 19 C.I.T. 1262, 1995 WL 604708, 17 ITRD 2336 (CIT Oct. 12, 1995) (No. 94–04–00321) Earth Island Inst. v. Christopher, 19 C.I.T. 1461, 913 F. Supp. 559, 42 ERC 1196, 17 ITRD 2534 (CIT Dec. 29, 1995) (No. 94–06–00321, 95–208)

Appeal Dismissed by Earth Island Inst. v. Christopher, 86 F.3d 1178 (Fed.Cir. May 14, 1996) (TABLE, TEXT IN WESTLAW, NO. 96–1253, 96–1254) Earth Island Inst. v. Christopher, 20 C.I.T. 460, 922 F. Supp. 616, 18 ITRD 1469 (CIT Apr. 10, 1996) (No. 94–06–00321, 96–62) Earth Island Inst. v. Christopher, 20 C.I.T. 1221, 942 F. Supp. 597, 18 ITRD 2344, 27 Envtl. L. Rep. 20,408 (CIT Oct. 8, 1996) (No. SLIP OP. 96–165, 94–06–00321)

Order Vacated by Earth Island Inst. v. Albright, 147 F.3d 1352, 28 Envtl. L. Rep. 21,421 (Fed. Cir. June 4, 1998) (No. 97–1085, 97–1086) Earth Island Inst. v. Christopher, 20 C.I.T. 1389, 948 F. Supp. 1062, 18 ITRD 2516 (CIT Nov. 25, 1996) (No. SLIP. OP. 96–188, 94–06–00321) Order Vacated by Earth Island Inst. v. Albright, 147 F.3d 1352, 28 Envtl. L. Rep. 21,421 (Fed.Cir. June 4, 1998) (No. 97–1085, 97–1086 Earth Island Inst. v. Daley, 48 F. Supp. 2d 1064 (CIT Apr. 2, 1999) (No. 98–09–02818, 99–32)

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APPENDIX II Section 609 Section 609(a) provides: (a) The Secretary of State, in consultation with the Secretary of Commerce, shall, with respect to those species of sea turtles the conservation of which is the subject of regulation promulgated by the Secretary of Commerce on June 29, 1987— (1) initiate negotiations as soon as possible for the development of bilateral or multilateral agreements with other nations for the protection and conservation of such species of sea turtles; (2) initiate negotiations as soon as possible with all foreign governments which are engaged in, or which have persons or companies engaged in, commercial fishing operations which, as determined by the Secretary of Commerce, may affect adversely such species of sea turtles, for the purpose of entering into bilateral and multilateral treaties with such countries to protect such species of sea turtles; (3) encourage such other agreements to promote the purposes of this section with other nations for the protection of specific ocean and land regions which are of special significance to the health and stability of such species of sea turtles; (4) initiate the amendment of any existing international treaty for the protection and conservation of such species of sea turtles to which the United states is a party in order to make such treaty consistent with the purposes and policies of this section; and (5) provide to the Congress by not later than one year after the date of enactment of this section [Nov. 21, 1989] (A) a list of each nation which conducts commercial shrimp fishing operations within the geographic range of distribution of such sea turtles; (B) a list of each nation which conducts commercial shrimp fishing operations which may affect adversely such species of sea turtles; and (C) a full report on— (i) the results of his efforts under this section; and (ii) the status of measures taken by each nation listed pursuant to paragraph (A) or (B) to protect and conserve such sea turtles.

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Section 609(b) provides: (1) In general.—The importation of shrimp or products from shrimp which have been harvested with commercial fishing technology which may affect adversely such species of sea turtles shall be prohibited not later than May 1, 1991, except as provided in paragraph (2). (2) Certification procedure.—The ban on importation of shrimp or products from shrimp pursuant to paragraph (1) shall not apply if the President shall determine and certify to the Congress not later than May 1, 1991, and annually thereafter that— (A) the government of the harvesting nation has provided documentary evidence of the adoption of a regulatory program governing the incidental taking of such sea turtles in the course of such harvesting that is comparable to that of the United States; and (B) the average rate of that incidental taking by the vessels of the harvesting nation is comparable to the average rate of incidental taking of sea turtles by United States vessels in the course of such harvesting; or (C) the particular fishing environment of the harvesting nation does not pose a threat of the incidental taking of such sea turtles in the course of such harvesting.

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APPENDIX III Section 1581 Section 1581(i) provides, in relevant part: (i) In addition to the jurisdiction conferred upon the Court of International Trade by subsections (a)–(h) of this section and subject to the exception set forth in subsection (j) of this section, the Court of International trade shall have exclusive jurisdiction of any civil action commenced against the United States, its agencies, or its officers, that arises out of any law of the United States providing for— (3) embargoes or other quantitative restrictions on the importation of merchandise for reasons other than the protection of the public health or safety.

CHAPTER 15

UNILATERAL ENVIRONMENTAL MEASURES AFTER THE WTO APPELLATE BODY’S SHRIMP-TURTLE DECISION Paul O’Brien

INTRODUCTION WTO Members have a large measure of autonomy to determine their own policies on the environment (including its relationship with trade), their environmental objectives and the environmental legislation they enact and implement. So far as concerns the WTO, that autonomy is circumscribed only by the need to respect the requirements of the General Agreement and the other covered agreements.1 And so concluded the World Trade Organization (WTO) Appellate Body in its first report following its establishment under the WTO Agreements resulting from the Uruguay Round negotiations. Two and a half years later, the Appellate Body would issue its most comprehensive decision considering the parameters of trade-disrupting environmental measures—the Shrimp-Turtle report. However, it still has not satisfactorily defined the contours of the autonomy of WTO members in relation to environmental measures. The global commons context in which environmental policies are pursued both on the national and international level makes evaluation of environmental measures particularly complex. Because many environmental concerns are of global impact, there can be both a need for multilateral cooperation and a national obligation to help ensure appropriate conservation or preservation measures—an interaction of multilateral consensus building and unilateral actions that impose policies on other states. Reading environmental rules into the General Agreement on Tariffs 1 Report of the Appellate Body, United States—Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, at 19 (Apr. 29, 1996).

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and Trade (GATT) through the WTO preamble and the work of the Committee on Trade and Environment (CTE) does not resolve the debate over the appropriateness of unilateral actions. While major environmental agreements cited in the Appellate Body’s report, such as the Rio Declaration and Agenda 21, express a preference for multilateral actions, they do not prohibit unilateral actions. Nor should the WTO. This chapter seeks to decipher the WTO Appellate Body’s report in the matter of United States—Import Prohibition of Certain Shrimp and Shrimp Products with reference to the central issue of Section 609’s compatibility with GATT Article XX. As the Appellate Body explained, its Article XX analysis is the search for a balancing point, a line of equilibrium that changes with the type of measure involved and the facts that surround it. Due to that case-by-case approach, the Appellate Body’s report does not read like a checklist of factors to consider when implementing or challenging a unilateral environmental measure. Still, language in the report suggests that, under some circumstances, unilateral action may be appropriate and consistent with WTO obligations. 2 As the most complete analysis of an environmental measure to date from the Appellate Body, there are broad parameters that emerge from the report that could shape what a GATT-consistent unilateral environmental measure might look like. The chapeau standards, unlike the Article XX(g) analysis that is taken largely from international environmental standards, are very much seen in the trade context. Because of the Appellate Body’s proclamation that the analysis shifts from case to case, it is important to be sensitive to particular facts or circumstances that can color the analysis under the chapeau. Four main points, each discussed below, emerge in reference to the application of the measure at issue from the Appellate Body’s chapeau analysis: the coercive effect of the policy matters; serious negotiations intended to conclude multilateral agreements are important; the factors are considered on the basis of their cumulative effects; and the procedural appearances of the measure are weighed in the balance.

2 Report of the Appellate Body, United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, sec. 6, para. 121 (Oct. 12, 1998). “It appears to us, however, that conditioning access to a Member’s domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) of Article XX.”

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THE WTO APPELLATE BODY REPORT Overview In its report of October 12, 1998, the Appellate Body disagreed with the Article XX analysis employed by the panel, and in so doing the Appellate Body set out its most comprehensive musings on the compatibility of unilateral environmental measures and the WTO Agreements, specifically GATT 1994. While the Appellate Body criticized the panel’s analysis, ultimately it too determined that Section 609 was arbitrary and unjustifiable discrimination and therefore outside of permissible Article XX exceptions.3 The Appellate Body reestablished that the correct analytical procedure for Article XX claims, as delineated in its Reformulated Gasoline decision,4 was to first examine the measure under the standards of specific Article XX subparts and only then consider its compatibility with the chapeau requirements. Under its Article XX(g) analysis the Appellate Body concluded that sea turtles were an exhaustible natural resource5 and that Section 609’s aim related to the legitimate policy of sea turtle preservation.6 The Appellate Body determined that Section 609 was a reasonable and proper measure under Article XX(g). Exploring numerous factors under its chapeau analysis, the Appellate Body claimed to follow a balancing test in determining whether Section 609 was arbitrary and unjustifiable discrimination.7 Due to the lack of flexibility in the administration of Section 609, due process concerns with its certification process, and the failure of the United States to engage in multilateral consensus-building prior to enacting Section 609, the Appellate Body proclaimed the U.S. measure unjustifiable and arbitrary discrimination, thus failing under Article XX’s chapeau standards.

General Interpretative Approach: Design vs. Application In Shrimp-Turtle, the Appellate Body first explored the required interpretative approach established in Article XX. As in its past decisions, the Appellate Body invoked “customary rules of interpretation of public international law” as required in the Dispute Settlement Understanding, Article 3.2.8 In the words of the Appellate Body, “[t]hese rules call for an examination of the ordinary meaning of the words of a treaty, read in their context, and in light of the object and purpose of the treaty involved.”9 3 4 5 6 7 8 9

Supra note 2, para. 184. Supra note 1. Supra note 2, para. 134. Id., para. 142. Id., para. 159. Id., para. 114. Id.

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Beginning, then, with the text of Article XX, in its first observation the Appellate Body noted that the words in the introductory clauses of Article XX “speak of the ‘manner’ in which measures sought to be justified are ‘applied.’”10 The flaw with the panel’s analysis was to explore the design of Section 609 and its consistency with the chapeau’s standards, whereas the text requires examining only the application of the measure in reference to the chapeau. The panel had not abided by the customary interpretive approach, as it had failed to examine the ordinary meaning of Article XX’s words. The Appellate Body reiterated, as developed in its United States—Reformulated Gasoline report, that the design of a measure— its purpose, wording, and evenhandedness—is examined under the paragraphs of Article XX, not its chapeau. To develop the ordinary meaning of Article XX’s words, the Appellate Body stated that the context for the Article XX chapeau is not the whole of GATT 1994 or the WTO Agreement, nor is its purpose maintaining the WTO multilateral trading system. 11 Rather, as a set of general exceptions to GATT 1994 obligations, which are therefore at odds with obligations otherwise required under the WTO multilateral trading system, the context for the Article XX chapeau is properly found in Article XX’s paragraphs, and its purpose, more narrowly, is the prevention of the abuse or misuse of Article XX exceptions. The panel’s flaw in scrutinizing Section 609 under an overly broad entire GATT/WTO consistency standard, in the eyes of the Appellate Body, was a result of its misapplication of Article XX analysis outlined in the Appellate Body’s United States—Reformulated Gasoline report. Quoting itself, with emphasis, the Appellate Body repeated its Article XX sequence—first, provisional justification is considered under specific paragraphs, and then appraised under the chapeau standards. To the Appellate Body, this sequence is the “fundamental structure and logic of Article XX,”12 and therefore the panel’s reversal of the sequence is an error in interpretation. Before concluding its section on the general interpretive approach to Article XX, the Appellate Body pursued the consequences of Article XX’s structure. The application of the “necessarily broad” standards of the chapeau of arbitrary or unjustifiable discrimination will vary with the measure under scrutiny. The panel failed to grasp this and instead attempted to craft an “a priori test that purports to define a category of measures which, ratione materiae, fall outside the justifying protection of Article XX’s chapeau.”13 To the Appellate Body, “[i]t is not necessary to assume” that any particular aspect of a measure renders it “a priori incapable of justification under Article XX.” 14 With this introduction, the 10 11 12 13 14

Id., para. 115. Id., para. 116. Id., para. 119. Id., para. 121. Id.

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Appellate Body will later develop its balancing test for the Article XX justification scrutiny of an environmental measure.

Guidance In the introductory section to the Appellate Body’s interpretive approach, there are no clues to be found to guide the specific structure of an Article XX justified measure. However, paragraphs 120 and 121 provide a telling overview of its approach to Article XX analysis. The first insight suggests how the Appellate Body views the chapeau standards—“necessarily broad in scope and reach.” Some implications of this will be developed later, but it is important to note the primary consequence of this perspective mentioned for the first, though not last, time in paragraph 120: the Appellate Body will analyze measures claimed under Article XX through a case-by-case approach, even stating that the chapeau standards “may be different” for measures aimed at different purposes. To the extent that the Shrimp-Turtle report is guidance at all under such a case-by-case approach, it will be most relevant to guide environmental measures under Article XX(g). Flowing from such an approach, the second broad insight from paragraph 121 is that the Appellate Body claims not to assume categories of aspects of measures that will prohibit a finding of justification under Article XX (in this case the panel’s broad condemnation of unilateralism). In other words, there is no concept of a universal block category that will result in a failure under an Article XX analysis. While this comports with the case-by-case approach to Article XX and the balancing test later professed, questions remain whether after claiming to distance itself from an a priori approach, the Appellate Body has truly done so.

Discussion Through paragraph 121, the Appellate Body intends to delineate what sets its analysis of Section 609 apart from the panel’s report, which sought to address “a particular situation where a Member has taken unilateral measures, which by their nature, could put the multilateral treaty system at risk.” 15 The Appellate Body viewed the panel report as constructing “an a priori test that purports to define a category of measures, which, ratione materiae, fall outside the justifying protection of Article XX’s chapeau.” Specifically, Section 609 fell into an excluded class of measures that condition access to the domestic market on “the adoption by exporting countries of certain conservation policies.”16 In other words, according to the panel, Section 609 failed the chapeau test because of its unilateralism. 15 16

Supra note 2, para. 7.60; also cited supra note 2, para. 115. Supra note 2, para. 121.

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It is the Appellate Body’s cryptic response to this perceived panel persistence against unilateralism that lies at the crux of the entire Appellate Body decision and the uncertainty surrounding the GATT/WTO compatibility of unilateral environmental measures.17 The Appellate Body stated: It appears to us, however, that conditioning access to a Member’s domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) of Article XX. It is here, in paragraph 121, that the Appellate Body comes closest to confronting the unilateral/multilateral debate over environmental measures, before retreating to the refuge of procedural details in its analysis under Article XX. Even this single statement, indeed the single word “may,” is indicative of the ultimate lack of guidance offered by the Appellate Body and its inability to fully confront the issue. The Appellate Body bolsters this statement with the following: “It is not necessary to assume that requiring from exporting countries compliance with, or adoption of, certain policies (although covered in principle by one or another of the exceptions) prescribed by the importing country, renders a measure a priori incapable of justification under Article XX.” Read together, these statements, and the context of the dispute over Section 609, seem to indicate that unilateralism, in and of itself, will not render a measure in violation of Article XX. What the Appellate Body appears to allow under exceptions (a) to (j) of Article XX, however, will be emasculated, though cloaked in a similar dose of ambiguity, through its chapeau analysis.

17 Indeed, commentators lack consensus on what the Appellate Body decision means for unilateral environmental measures. See, e.g., Joseph Robert Berger, Unilateral Trade Measures to Conserve the World’s Living Resources: An Environmental Breakthrough for the GATT in the WTO Sea Turtle Case, 24 COLUM. J. ENVTL. L. 355, 410 (1999) (“the decision accepts the principle that nations may undertake unilateral trade actions in order to change the conservation policies of foreign countries.”); Julie B. Master, International Trade Trumps Domestic Environmental Protection: Dolphins and Sea Turtles are “Sacrificed on the Altar of Free Trade,” 12 TEMP. INT’L & COMP. L.J. 423, 430 (Fall 1998) (“it is doubtful that any single country’s effort to protect the environment will be upheld by the international trade regime.”); Susan L. Sakmar, Free Trade and Sea Turtles: The International and Domestic Implications of the Shrimp-Turtle Case, 10 COLO. J. INT’L ENVTL. L. & POL’Y 345, 345 (Summer 1999) (“[The Appellate Body report] recognized that a WTO member could impose its domestic environmental regulations on another member so long as certain safeguards are met.”).

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Article XX(g) Analysis: Generally While the panel never examined Section 609 in light of Article XX paragraphs (g) or (b), the Appellate Body viewed such analysis as its responsibility under Article 17 of the Dispute Settlement Understanding, in order to properly resolve the dispute. 18 The text of Article XX(g) addresses measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.” 19 Once again, as stated, the Appellate Body views its Article XX(g) analysis as an examination of the design of the measure. Drawing heavily upon the international environmental context for an understanding of the environmental measure Section 609, the Appellate Body looks to the place of the measure within a broader international environmental understanding and scrutinizes the specific policy aim and objective of the measure evidenced in its structure. Section 609 has a legitimate policy aim in the viewpoint of the Appellate Body because it is reflective of a broader international consensus for the preservation of the sea turtle. Measures that are contrary to existing international environmental consensus or even simply much ahead of current environmental understandings are less likely to pass Article XX(g) justification. Finally, while the Appellate Body’s invocation of several international environmental agreements to support its view that Section 609 is a legitimate policy goal suggests a comfort with measures that are consistent with established consensus, the Appellate Body does indicate a willingness to pursue “evolutionary” standards in the agreements it interprets, suggesting the possibility of arguing for the justification of more innovative, cutting edge environmental measures. Having analyzed the policy aim (the preservation of sea turtles) and whether it qualified as an exhaustible natural resource under international environmental standards, examined the specific structure and language of the measure and its relation to international environmental standards, and determined that its requirements were applied in an evenhanded manner to importing, as well as domestic industry, the Appellate Body decided that Section 609 was within the terms of Article XX(g) and therefore provisionally justified as an exception to GATT obligations.

Exhaustible Natural Resources: The Report The first component of the design analysis is whether the measure at issue is concerned with exhaustible national resources. Given its textual interpretative approach, based upon customary rules of interpreta18 19

Supra note 2, para. 123. Id., para. 126.

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tion, the Appellate Body first explored the meaning of “exhaustible national resources.” Most prominently, the Appellate Body draws upon several international environmental agreements in determining whether the term includes living resources and whether sea turtles are exhaustible. As the text of Article XX does not define exhaustible natural resources itself, the Appellate Body broadens the context in which to evaluate the term, encompassing the “contemporary concerns of the community of nations about the protection and conservation of the environment.” 20 The Appellate Body first mentions the preamble to the WTO Agreement for the proposition of heightened member awareness “of the importance and legitimacy of environmental protection as a goal of national and international policy.” 21 The perspective of the preamble language and its objective of sustainable development vaults WTO awareness and analysis from a static context to one that is “by definition, evolutionary.” 22 The Appellate Body is then able to reference and take note of the richness of international environmental legal heritage. The Appellate Body cites the UN Convention on the Law of the Sea,23 the World Commission on Environment and Development, 24 the Convention on Biological Diversity,25 Agenda 21,26 and the Resolution on Assistance to Developing Countries, adopted in conjunction with the Convention on the Conservation of Migratory Species of Wild Animals,27 all as evidence that “natural resources,” as used in the environmental context, includes living resources. In its own words, the Appellate Body views these examples from international environmental law as dispositive of the issue, for they are “recent acknowledgment by the international community of the importance of concerted bilateral or multilateral action to protect living natural resources.”28 The mention of two adopted GATT 1947 panel reports that found fish to be an exhaustible natural resource seems almost an afterthought,29 merely adding consistency to the overwhelming evidence already marshaled from the international environmental context. The Appellate Body, then, specifically evaluates the resource at issue, sea turtles, by examining whether they are exhaustible. Again, the Appellate Body turns to the international environmental legal forum for its answer, citing Appendix 1 of the Convention on International Trade in Endangered 20 21 22 23 24 25 26 27 28 29

Id., para. 129. Id. Id., para. 130. Id. Id. Id. Id. Id. Id., para. 131. Id.

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Species of Wild Fauna and Flora (CITES).30 Appendix 1 lists species that are threatened with extinction, including all seven species of sea turtles. Thus,the fact that it is agreed, through international consensus, that sea turtles are threatened with extinction comports with the meaning of “exhaustible.” The Appellate Body also raised the question of a jurisdictional limitation to employing Article XX(g). Rather than address any such implied jurisdictional limitation, the Appellate Body notes that in the specific circumstances before it, there is a “sufficient nexus between the migratory and endangered marine populations involved and the United States for the purposes of Article XX (g).”31 The report observes that sea turtles are “highly migratory animals” that pass through numerous jurisdictions, and are “known to occur” in U.S. waters.32

Guidance The Appellate Body’s Article XX(g) analysis is more precise, based upon the text, than its chapeau analysis, and therefore provides better guidance as to what will pass Article XX(g) muster, as Section 609 did. Proceeding with its textual interpretation approach, the guidance to be gleaned from the Appellate Body’s Article XX(g) analysis is specific and clear, comporting with the mechanical review of Article XX(g)’s terms. Also, as Section 609 was found to be provisionally justified under Article XX(g), the opinion offers an example of what will pass muster under Article XX(g). One specific finding is that Article XX(g)’s “natural resource” language includes living resources, such as sea turtles. With the extensive international environmental evidence marshaled in that respect, the Appellate Body ruling is clear: members need not hesitate in employing Article XX(g) for living resources. The Appellate Body gives little guidance to the meaning of “exhaustible,” other than determining that the threat of extinction is sufficient to establish exhaustibility. Note this “threatened” status is taken from an international environmental agreement, CITES, suggesting some level of consensus is required beyond one party making the claim of exhaustibility, though such a parameter remains unexplored. Finally the Appellate Body raises the issue of a jurisdictional limit to Article XX(g), stating; “We do not pass upon the question of whether there is an implied jurisdictional limitation.”33 Even so, the Appellate Body notes a “sufficient nexus” between sea turtles and the United States for the purposes of Article XX(g). Though the short treatment of this possi30 31 32 33

Id., para. 132. Id., para. 133. Id. Id.

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ble component to Article XX(g) leaves the impression that it will not be treated as much of a limiting point, members should remain attentive to offering a “sufficient nexus” with the natural resource to be protected. Language in paragraph 133 that all sea turtles species involved are “known to occur in waters over which the United States exercises jurisdiction” suggests that if a presence of the natural resources or impact of its loss is within a member’s jurisdiction, the sufficient nexus standard will be satisfied.

Discussion The most striking point of the Appellate Body’s Article XX (g) analysis is the willingness to evaluate the measure in light of common international environmental standards. Because of the preamble’s recognition of the objective of sustainable development, the Appellate Body is emboldened to read in international environmental interpretations. With the heightened awareness for environmental concerns and sustainable development in the WTO preamble, the Appellate Body is able to properly evaluate a trade dispute under Article XX(g) in light of applicable international environmental standards and interpretations. Specifically, because, in the Appellate Body’s words, the text of Article XX(g) “is not limited” to non-living natural resources, its definition can be informed, indeed transformed, by international environmental understandings. Despite its professed textual approach, this example reveals the extent to which the Appellate Body will expand the context in which to evaluate the “ordinary meaning” of Article XX. Here, the context appears to be “modern biological sciences” and “contemporary concerns of the community of nations,” and, as the Appellate Body openly admits, it is “not ‘static’” but “by definition evolutionary.” 34 While confined to the Article XX(g) analysis of Section 609’s design, these concepts speak to a wider application, hinting that the acceptability of international environmental measures that affect trade may also be “evolutionary,” to be developed and shaped by contemporary concerns. The Appellate Body’s acceptance of an evolutionary approach to interpreting elements of Article XX does not contradict its preference for consensus; indeed, in such exercise, the Appellate Body seeks to decipher and follow international consensus in its interpretation.

Relating to Conservation: The Report The next major facet of the Appellate Body’s Article XX(g) analysis centered on the “relating to the conservation of” language. “In making this determination, the treaty interpreter essentially looks into the rela34

Id., para. 130.

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tionship between the measure at stake and the legitimate policy of conserving exhaustible natural resources.”35 Whereas the first part of the Article XX(g) examination questioned whether the subject of the measure met the “exhaustible natural resource” requirements of Article XX(g) under international environmental standards and consensus, this part scrutinizes the language and intent of the measure to ensure that it sufficiently relates to that aim. The Appellate Body dissected Section 609, matching its design, structure, and language with the purported policy goal of sea turtle conservation. The Appellate Body notes the two narrowly focused exemptions from the import ban on shrimp; shrimp harvested in a manner that does not adversely affect sea turtles and shrimp from certified countries, deciding that each relates “clearly and directly to the policy goal of conserving sea turtles.”36 The report then explores the two types of possible country certification: certification that the fishing environment does not pose a threat to the taking of sea turtles, or the adoption of a regulatory program comparable to the U.S. program with a similar turtle taking rate. Again, the Appellate Body proclaims the language of the measure “directly connected with the policy of conservation of sea turtles.”37 In review, the Appellate Body, in its focus on the design of Section 609, proclaims that it “is not disproportionately wide in its scope and reach in relation to the policy objective of protection and conservation of sea turtle species.”38

Guidance Several standards emerge in the analysis of Article XX(g)’s “relating to” language. Having established a legitimate policy involving exhaustible natural resources, the Appellate Body seeks to ensure the measure has a clear and direct relationship with the environmental goal. The Appellate Body quotes from its United States–Reformulated Gasoline decision, characterizing the necessary relationship as “substantial” and not “merely incidentally or inadvertently” aimed at the policy goal. Further, as explained in paragraph 138, that a provision is “designed to influence countries” in adopting a regulatory program appears acceptable under Article XX(g). The structure and design of an acceptable measure should be “narrowly focused” and “not a simple, blanket prohibition” of importation. In this respect, it is important for a member to consider and account for, in implementation, circumstances in which an import ban might be overinclusive. Section 609, for example, exempted two situations from the ban in which harvesting shrimp posed no danger to sea turtles, the policy aim of the 35 36 37 38

Id., para. 135. Id., para. 138. Id., paras. 139–140. Id., para. 141.

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measure. It is clear that any measure will be scrutinized with specific review of any exceptions and their purpose. Given a legitimate, internationally recognized, policy goal, a measure narrowly tailored to that aim, and accounting for trade exceptions that do not affect the goal, a measure should pass this step of the Article XX(g) analysis. In a final note of guidance, the Appellate Body reveals what amounts to an allowance for discretion in crafting and arguing that a measure relates to a legitimate goal. Its language proclaims Section 609 as “not disproportionately wide in its scope and reach in relation to the policy objective of protection and conservation of sea turtle species. The means are, in principle, reasonably related to the ends.”39 Assuming, then, a member enacts a measure intended to produce a legitimate environmental goal, and keeps the parameters of such measure to a “close and real” relationship with that goal, there appears to be a range of proportionality or reasonableness test through which to evaluate the measure under Article XX(g)’s “relating to” language.

Discussion Three items are noteworthy in the Appellate Body’s “relating to” analysis. First, again there is emphasis on international consensus as a justification for the measure under scrutiny, as the Appellate Body reminds that “the policy of protecting and conserving the endangered sea turtles here involved is shared by all participants and third participants in this appeal, indeed, by the vast majority of the nations of the world.”40 A second point from this portion of the report, is the acceptance that Section 609 is “designed to influence” the regulatory programs of other countries, though it is narrowly focused on the policy of conserving sea turtles. Given that Section 609 is given provisional justification under Article XX(g), it can be assumed that a measure designed to influence is not contrary to Article XX(g). At this point, the Appellate Body mentions such design in passing, almost casually. However, when it returns to the concept of influence during the chapeau analysis, the Appellate Body characterizes Section 609 as “coercive,” leading to a condemnation of the measure under the chapeau. This tension will be explored later, during the chapeau analysis. Finally, the Appellate Body’s suggestions of proportionality and reasonableness in evaluating a measure under Article XX(g) echo the professed balance test employed under the chapeau. Yet again, the Appellate Body’s mere proclamation that Section 609 is “not disproportionately wide” and is “reasonably related to the ends” without further explanation of appropriate standards for such terms presents a stark contrast with the 39 40

Id. Id.

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chapeau analysis where the Appellate Body details numerous shortcomings of Section 609 that invalidate it under Article XX. While it appears the Appellate Body may know reasonableness and disproportionality related to environmental goals under Article XX(g) only when it sees it, it clearly feels comfortable detailing and attacking perceived trade-related discriminatory components of measures.

In Conjunction With: The Report To complete the Article XX(g) textual requirements, the Appellate Body finally reviewed whether the U.S. measure was done in conjunction with restrictions on domestic production. Noting the domestic law requirement that U.S. shrimp trawl vessels use turtle excluder devices (TEDs) and the enforcement measures that accompany such regulations, the Appellate Body concluded that Section 609 was an evenhanded measure, as similar requirements were imposed domestically. 41

Guidance As suggested by the Appellate Body’s brief, three-paragraph discussion of the “in conjunction with” language, there is clear and specific guidance on this point. The overarching standard here is “evenhandedness,” as the Appellate Body quotes from its United States—Reformulated Gasoline decision. A member that ensures the imposition of other measures to similar domestic situations, as the United States did with respect to the requirement to use TEDs by all domestic trawlers, will pass this hurdle.

Discussion The Appellate Body expends little energy in the analysis of Article XX(g)’s “in conjunction with” language. Relying on its textual, ordinary meaning approach, the Appellate Body adds little to the clear mandate of Article XX’s language of “if such measures are made effective in conjunction with restrictions on domestic production or consumption,” characterizing that requirement with its term “evenhandedness.” A member that enacts a measure in the name of environmental conservation must ensure restrictions are evenhanded between foreign trade and domestic results. Though not coextensive, because the context is one of an exception to general GATT obligations, this is a concept akin to national treatment obligations.

Article XX Chapeau Analysis Generally: The Report After finding that Section 609 fit, within the scope of Article XX(g), the Appellate Body turned its attention to the requirements of the intro41

Id., para. 144.

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ductory clauses, or chapeau, of Article XX. The chapeau to Article XX reads: “Subject to the requirement that such measures are not applied in a 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:”42 The chapeau applies to all Article XX general exceptions, whether they involve environmental concerns, as in the Shrimp-Turtle dispute, or other concerns such as health or safety. On general reflection, the Appellate Body made a point of rejecting an argument advanced by the United States that the policy goal of the measure at issue is instructive as to whether the measure is unjustifiable discrimination under the chapeau. Rejecting such viewpoint, the Appellate Body again delineated the design/application distinction, explaining that a measure’s policy objective should only be examined under an Article XX paragraph analysis. Specifically, “[t]he policy goal of a measure at issue cannot provide its rationale or justification under the standards of the chapeau of Article XX.” 43 Under its reading of the chapeau, the Appellate Body enunciated three standards by which to judge measures: first, “arbitrary discrimination between countries where the same conditions prevail; second, unjustifiable arbitrary discrimination between countries where the same conditions prevail; and third, a disguised restriction on international trade.”44 The Appellate Body considers the Article XX chapeau as central to the balance between the rights of a member to invoke an Article XX exception and the rights of other members under GATT 1994. “A balance must be struck between the right of a member to invoke an exception under Article XX and the duty of that same member to respect the treaty rights of the other Members.”45 Article XX’s chapeau limits each Article XX exception, conditioning each to the unjustifiable and arbitrary standards. Its requirements are the proper balance that prevent misuse of Article XX exceptions and abuse of the treaty rights of other members. The Appellate Body describes the interpretation of the chapeau as the search for a “line of equilibrium”46 balancing a member’s right to invoke an exception and the substantive rights of others’ members under the GATT 1994. Further, “[t]he location of the line of equilibrium, as expressed in the chapeau, is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ.”47 42 43 44 45 46 47

Id., para. 147. Id., para. 149. Id., para. 150. Id., para. 156. Id., para. 159. Id.

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Guidance Much like the earlier portion of the report dealing with the general interpretive approach, its general considerations of the chapeau analysis speak little to measure specific components that will inform Article XX consistency. Rather, the Appellate Body returns to a more abstract level of discourse, which provides clues to its developing Article XX jurisprudence. Here we find such assertions as (from United States—Reformulated Gasoline Appellate Body report) a measure “should not be so applied as to frustrate or defeat the legal obligations” under the GATT. This is not the discussion for a particular aspect or characteristic of a contested measure but encompasses the entire baseline test established by the chapeau. One concept discussed in this section may be of use to members seeking to justify environmental measures under Article XX—that of the context of international environmental objectives, specifically those incorporated into the work of the WTO. Once again, the Appellate Body raises the WTO Agreement preambular language on the goal of sustainable development and the work of the CTE. Given that the Appellate Body looks to such sources for “colour, texture and shading” 48 of its interpretations of the WTO agreements, members should monitor, consider, and shape the environmental discourse within WTO negotiations and the work of the CTE. The Appellate Body reveals its propensity to look to such sources for its own guidance, stating that “[p]ending any specific recommendations by the CTE to WTO Members on the issues raised in its terms of reference, and in the absence up to now of any agreed amendments or modifications to the substantive provisions of the GATT 1994 and the WTO Agreement generally, we must fulfill our responsibility in this specific case.”49 While modification or amendments are difficult results to affect, and even CTE recommendations can be time-consuming in their development, Members should not overlook the ability of such measures to affect Appellate Body interpretations and the ultimate use of Article XX.

Discussion As discussed earlier, the Appellate Body reiterates that the chapeau analysis is one of a measure’s application. Its design, the policy goal and its legitimacy, are factors for XX(g) scrutiny. Specifically, “[t]he policy goal of a measure at issue cannot provide its rationale or justification under the standards of the chapeau of Article XX.”50 By enunciating the design/application distinction in its Article XX examination, the Appellate Body acknowledges a useful analytical tool within which to frame difficult environment and trade conflicts. Having disregarded this separation, the 48 49 50

Id., para. 153. Id., para. 155. Id., para. 149.

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panel’s conclusion included an overly broad “maintenance of the WTO multilateral trading system” standard in the chapeau, which no doubt could be used to invalidate any unilateral environmental measure enacted by a member and therefore render the rest of Article XX superfluous. However, the Appellate Body’s analysis ultimately meets a similar fate, as its examination of Section 609, according to chapeau standards, meanders through questions of both design and application, most notably the unilateral/multilateral distinction, ignoring the fundamental structure and logic of Article XX. While it reverses the panel’s approach as error in legal interpretation, it is a similar error that plagues the Appellate Body’s discussion of the chapeau. It is also noteworthy that the Appellate Body, for a second time, invokes WTO environment-related developments—the WTO preamble language and the work of the CTE, quoting the terms of reference for the CTE. The presentation of those items with no specific relevance to the dispute at issue appears odd. The Appellate Body’s language of “[p]ending any specific recommendations by the CTE to WTO Members” gives the impression that the Appellate Body found itself confronted with the environment-related Shrimp-Turtle dispute at a time it felt ill-equipped to deal with such issue, left with a trade-centered analytical approach during a time of flux in consideration of environmental concerns. It is here, in its general considerations of the chapeau section that the Appellate Body characterizes its analysis as a balancing test—striking a balance “between the right of a Member to invoke an exception under Article XX and the duty of that same Member to respect the treaty rights of other Members.”51 The Appellate Body continues, laying out its perspective of the chapeau: “The task of interpreting and applying the chapeau is, hence, essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions . . . of the GATT 1994.” Though the Appellate Body speaks of a “line of equilibrium,” it is quick to add that such line is “not fixed and unchanging,” as it varies with specific facts in each case. An obvious consequence of such an approach is the professed lack of guidance for future environmental measure implementation. Members are left without guidance as to how the Appellate Body will apply Article XX chapeau standards to future environmental measures.52 Id., para. 156. In the words of one commentator, “states remain unable to accurately predict the GATT legality of environmental trade measures prior to dispute resolution despite provisions of the GATT that mandate the contrary.” Mark Edward Foster, Trade and Environment: Making Room for Environmental Trade Measures Within the GATT, 71 S. CAL. L. REV. 393, 395 (Jan. 1998). 51 52

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Unjustifiable Discrimination: The Report In considerable detail, yet lacking guidance as to the relative weight of the various identified factors, the Appellate Body enumerates several factors that characterized Section 609 as unjustifiable discrimination. According to the Appellate Body, the “most conspicuous flaw” in the application of Section 609 was its coercive effect.53 While the statutory language of Section 609 did not require a change in policy from shrimp exporting countries, the Appellate Body believed the actual application of Section 609 required exporting members to adopt “essentially the same policy” for sea turtle protection as enforced in the United States.54 The Appellate Body pointed to 1996 U.S. Department of State guidelines implementing Section 609 that certification required that shrimp trawl vessels use TEDs comparable to those in the United States. 55 Further, the guidelines described only one manner in which a regulatory program could be considered comparable to the U.S. program. The Appellate Body found this “rigid and unbending standard” in the application of Section 609 unacceptable, implying that measures must take into account different conditions in the territories of other members.56 The second aspect of Section 609 that led the Appellate Body to conclude that the measure was unjustifiable discrimination was “the failure of the United States to engage the appellees, as well as other members exporting shrimp to the United States, in serious, across-the-board negotiations with the objective of concluding bilateral and multilateral agreements for the protection and conservation of sea turtles.”57 In constructing its requirement for a prior recourse to diplomacy, the Appellate Body points to an impressive array of sources. First, Section 609 itself directs the U.S. Department of State to initiate negotiations for bilateral and multilateral agreement for the protection of sea turtles.58 Second, the Appellate Body asserts that for the conservation of sea turtles, “the very objective of the measure, demands concerted and cooperative efforts on the part of many countries.”59 As support for the appropriateness of multilateral action, the Appellate Body invokes a series of international environmental and WTO environment-related items including the WTO Supra, note 2, para. 161. Indeed, the Appellate Body report has been subject to criticism on this point. “The 1996 Guidelines specifically provide that shrimping operations ‘comparable’ to those of the United States may be certified. The Appellate Body adduces no support for its assertion that the United States requires foreign shrimping policies to be ‘essentially the same’ as those of the United States.” Supra, note 2, Puls at 375. 55 Supra note 2, para. 161. 56 Id., paras. 163–164. 57 Id., para. 166. 58 Id., para. 167. 59 Id., para. 168. 53 54

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Decision on Trade and Environment, 60 the Rio Declaration on Environment and Development, 61 Agenda 21, 62 the Convention on Biological Diversity,63 the Convention on the Conservation of Migratory Species of Wild Animals,64 and the Report of the CTE, forming part of the Report of the General Council to Ministers on the occasion of the Singapore Ministerial Conference, 65 each of which includes language expressing a preference for multilateral action and international consensus to address global environmental problems. The Appellate Body’s preference for multilateral consensus was further supported by citing the Inter-American Convention negotiated by the United States for the protection and conservation of sea turtles pursuant to Section 609.66 Explicitly, the Inter-American Convention mentions trade measures and commits the parties to act in accordance with the provisions of the WTO Agreements. The Appellate Body extols the Inter-American Convention as a model for available multilateral alternatives. The United States’ one multilateral success under Section 609 in relation to the preservation and conservation of sea turtles is the Appellate Body’s exhibit for the United States’ failures in producing similar multilateral agreements with other members and therefore an indication of unjustifiable discriminatory application. Returning to the application of Section 609, the Appellate Body noted several aspects of its administrative practice that added to the finding of unjustifiable discrimination. Due to its unilateral nature, and the lack of consensual undertakings, the Appellate Body viewed the ability of the United States alone to shape Section 609 policies, processes of certification, grants, denials, and withdrawals of certifications, without input from exporting members, as unjustifiable discrimination.67 The administrative practice also revealed differential treatment in the phase-in period (complaining parties only had four months with which to comply with the use of TEDs, whereas countries subject to the ban earlier had three years) and in the transfer of TED technology to specific countries.68

Guidance The Appellate Body expends the most analysis on whether Section 609’s application amounted to unjustifiable discrimination under the cha60 61 62 63 64 65 66 67 68

Id. Id. Id. Id. Id. Id. Id., para. 169. Id., para. 172. Id., paras. 173–175.

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peau. Guidance for a member considering an environmental measure is plentiful, though perhaps ultimately neither possible nor based on discernable, textual obligations. Four points of consideration arise from the Appellate Body’s treatment of unjustifiable discrimination: the coercive effect of a measure, the pursuit of serious, across-the-board negotiations, the administrative practice of a measure’s implementation, and the cumulative effect of the previous three. For Article XX, a member should first and foremost consider the intended and actual coercive effect of the contemplated measure on the policy-making decisions of foreign governments. To the Appellate Body, unacceptable coercion occurs when the application of a measure requires exporting members to adopt “essentially the same policy” as the member enacting the measure. In other words, the measure blocks the free exercise of exporting members’ GATT rights. As an analysis that focuses on the application of a measure, neutral, non-coercive statutory language is not enough. A member must also ensure that the implementation of the measure does not result in inappropriate coercion. The Appellate Body viewed Section 609 guidelines as specifying only one manner in which a foreign regulatory program could be comparable to that of the United States. Based on that, it characterized the U.S. measure as “rigid and unbending” and therefore unjustifiable discrimination. The primary point of guidance is to account for differing conditions in foreign countries. While exact parameters on how to craft such rules remains unexplored, a member can attempt to meet this standard by considering and accounting for differently situated circumstances rather than require, or even specify, a single requirement for regulation of the covered resource. This can be accomplished either through open-ended statutory or rule language either incorporating several regulatory alternatives, or allowing for foreign-developed alternatives that meet intended environmental goals or establishing implementing procedures that allow foreign countries to voice concerns and modify regulatory requirements. The second mandate for justification under the chapeau is “serious, across-the-board negotiations with the objective of concluding bilateral or multilateral agreements.”69 In the Appellate Body’s words, this aspect “bears heavily in any appraisal of justifiable or unjustifiable discrimination.” Following, then, the Appellate Body’s interpretation of the chapeau, a member should engage all other affected exporting members in serious negotiations. With respect to such negotiations, there must be the objective of concluding an agreement, though not necessarily the conclusion of negotiations. Note, however, that the U.S. claims of raising the possibility of an agreement with the complainants did not rise to the level of a serious attempt. Further, from the United States— 69

Id., para. 166.

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Reformulated Gasoline decision, the Appellate Body offered the guidance that negotiations be pursued to the point where governments are “unwilling to cooperate.”70 Unlike other aspects of Section 609 declared unjustifiable, here, the Appellate Body is able to point to an example with approval: the one multilateral success of the U.S. application of Section 609, the Inter-American Convention. The juxtaposition of (a) the consensual undertakings to put in place regulations providing for, inter alia, use of TEDs jointly determined to be suitable for a particular party’s maritime areas, with (b) the reaffirmation of the parties’ obligations under the WTO Agreement, including the Agreement on Technical Barriers to Trade and Article XI of the GATT 1994, suggests that the parties to the Inter-American Convention together marked out the equilibrium line to which we referred earlier.71 The Appellate Body viewed this convention as evidence of the continued validity and significance of the WTO Agreements in any balance of WTO obligations and rights. Clearly, members can ensure chapeau consistency by concluding multilateral agreements that incorporate recognition of WTO standards akin to the Inter-American Convention. Two further clues with regard to the extent multilateral action may be pursued are found in the Appellate Body’s words “available” and “feasible.”72 Presumably, under the meaning of such terms, if multilateral procedures are not available or feasible, perhaps due to refusal of other parties to participate or to burdensome costs associated with such attempts, a member could still satisfy chapeau standards. Still, even under this attempt standard, the Appellate Body reiterates that “serious efforts” be made towards multilateral action. Finally, the Appellate Body provides guidance with respect to unjustifiable discrimination in the administrative practice of an environmental measure. To avoid the condemnation Section 609 received, a measure should include the input or participation of exporting members in administrative decision-making facets, such as granting, denying, or withdrawing exemptions. Further, exporting members should be consulted and given equal treatment and access with respect to policy phase-in timetables and technology transfers to implement the policy. An interesting aspect with respect to future guidance is the Appellate Body wording, mentioned twice, that aspects of unjustifiable discrimina70 71 72

Supra note 1, at 18. Supra note 2, para. 170. Id.

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tion are considered in their “cumulative effects.”73 While the report does not develop the contours of such assertion, the ordinary meaning would suggest that unjustifiable discrimination is found over a range of action and that perhaps unacceptable items identified in this report would not violate chapeau standards under circumstances standing alone. For instance, the failure to pursue multilateral negotiations may not render a measure in violation of Article XX if such failure did not result in a harmful discrimination to exporting members (if, for example, exporting member concerns were addressed in administrative practice). Or perhaps, degrees of discrimination in administrative practice (differing phase-in periods) may not alone rise to the level of unjustifiable. Of course, such language, rather than implying levels at which some effects will not violate Article XX, is just as likely to lead to the result that the Appellate Body will judge an accumulation of small effects, each perhaps de minimis, or of little impact on trade, to amount to a violation of Article XX that no single aspect would reach. The language remains to be argued in future disputes but suggests that the Appellate Body will scrutinize aspects of unjustifiable discrimination across a range of permissibility.

Discussion Under the earlier examination of Article XX(g) standards, and along the way to provisional justification, the Appellate Body noted that Section 609’s import ban is designed to influence the regulatory programs of other countries. Showcasing the difference of the chapeau analysis, the Appellate Body proclaims Section 609’s “intended and actual coercive effect on the specific policy decisions” as its “most conspicuous flaw.”74 In the eyes of the Appellate Body, the difference arises from its design/application distinction: Section 609’s design, while intended to influence, was not discriminatory (or more precisely, it did not need to be evaluated as such under Article XX(g)) whereas its application was rigid, forcing foreign regulatory decisions. Still, the two standards leave the tension that a measure may properly be designed to influence foreign policymaking, but may not be rigidly enforced to such effect. With respect to the second component amounting to unjustifiable discrimination, Section 609’s unilateralism, the Appellate Body blurs its design/application distinction. In justifying its requirement for multilateral action, the Appellate Body points to “the very policy objective of the measure” claiming it “demands concerted and cooperative efforts.” 75 Though the text of Article XX makes no such demand, the Appellate Body finds a multilateral requirement within its unjustifiable discrimination 73 74 75

Id., paras. 172 and 176. Id., para. 161. Id., para. 168.

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analysis, bolstered by language from several international environmental conventions and the work of the CTE. Without a basis in the text of Article XX, an interpretive anchor the Appellate Body professed to be employing, the multilateral requirement appears little more than the echo of an institutional preference that unilateral action is to be avoided rather than a grounded, agreed-upon legal obligation. As the Appellate Body explores the “cumulative effects” of the failure to pursue negotiations and the “resulting unilateralism,” it comes close to the condemnation found in the panel report—that Section 609’s unilateralism, as such, violates Article XX. Though the panel found the unilateralism a threat against a backdrop of the overly broad standard of the entire WTO multilateral trading system, and the Appellate Body much more specifically found the unilateralism disruptive as unjustifiable discrimination, the result remains the same—Section 609 violates the chapeau because of its unilateral nature. The third unjustifiable component of Section 609 identified by the Appellate Body is one that rings of basic obligations fundamental to the WTO system. While not considered under the MFN heading, that Section 609 had a disparity in phase-in periods, foreign cost considerations, and technology transfer levels, is counter to traditional equal treatment concerns that serve as part of the foundation for the WTO system. The Appellate Body appears most comfortable, and is at its most effective, in identifying and condemning such traditional fair trade-related shortcomings, detailing several administrative specifics both as unjustifiable and arbitrary discrimination. Finally, it is important to note the consideration of “cumulative effects.” While some consequences of such language were explored above, such a perspective is indicative of the pervasiveness of the idea of a balancing approach to Article XX analysis. While the Appellate Body presents a onesided rendition of many factors that violate the chapeau, important clues to a much broader consideration approach, such as this language, permeate the report. In such language, the Appellate Body signals that particular aspects declared unacceptable under Article XX, in this case, may pass muster in different circumstances or that components of minor import may add up to Article XX violations.

Arbitrary Discrimination: The Report The Appellate Body also considered Section 609 in light of the second standard found in the chapeau: application in a manner constituting “arbitrary discrimination between countries where the same conditions prevail.” The Appellate Body first reiterated its findings related to unjustifiable discrimination—the imposition of a single, rigid certification requirement, without proper analysis of differing conditions in various

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exporting members. The inflexibility of such a certification process also constitutes arbitrary discrimination in the view of the Appellate Body.76 The arbitrary discrimination analysis also adds to the evaluation of the measure at issue. The Appellate Body again turned to the administration of the measure, and specifically the certification procedures, with an eye beyond simply comparing treatment afforded different members, but rather on the procedures and process given to any particular member. The Appellate Body concluded that certifications lacked a “transparent” and “predictable” process.77 Applicants receive no formal opportunity to be heard concerning certification, nor are they able to respond to arguments.78 There are no formal written decisions related to certifications, nor is there an appeal process for denials.79 The Appellate Body characterized such process as “informal and casual,” lacking assurances that Section 609 procedures are applied in a fair and just manner.80 Further, the Appellate Body invokes the standards of due process of Article X:3 of GATT 1994, noting that compliance with such requirements should also be required for measures that purport to be exceptions to WTO obligations.81 The minimum standards of transparency and procedural fairness required by Article X:3 were not met in the application of Section 609. Because of the problematic aspects in the administrative procedures of Section 609, the Appellate Body found that the measure amounted to arbitrary discrimination, violating the requirements of the Article XX chapeau. Given the determination of unjustifiable and arbitrary discrimination, the Appellate Body did not explore whether Section 609 application constituted a disguised restriction on international trade under the chapeau. Finally, under its arbitrary discrimination review, the Appellate Body incorporated Article X:3 standards of fairness and due process, indicating a scrutiny of the appearance and application of a measure’s administrative procedures. Section 609 was cited for its lack of transparency, predictability, formal opportunity to be heard and procedure for review of decisions. If a unilateral environmental trade measure is to succeed, just like any trade-related measure, it must meet these requirements, or, as the Appellate Body wrote, its application must have “rigorous compliance with fundamental requirements of due process.”

76 77 78 79 80 81

Id., para. 177. Id., para. 180. Id. Id. Id., para. 181. Id., para. 182.

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Guidance The arbitrary discrimination section of the report is a review of the administrative practice and procedures of Section 609. The first point of guidance provided is that administrative aspects that revealed disparate treatment between exporting members and thus were determined to be unjustified are also considered arbitrary under the chapeau. Remedies that would cure rigid, unbending regulations would also pass the arbitrary discrimination hurdle. Further guidance relates to procedures applied to any one exporting member in the application of the measure. The application must be “transparent” and “predictable.” Ex parte administration is likely to be viewed with skepticism. A measure’s application should provide an opportunity to be heard for affected members and the ability to respond to arguments made against them. Decisionmaking under the measure should be reasoned and written, with procedures for review or appeal. In other words, ensure safeguards for the rights of other members through transparent and participatory procedures. Furthering the concept of “basic fairness and due process,” the Appellate Body invoked Article X:3 and its requirements that measures meet fundamental requirements of due process, transparency, and procedural fairness. Such GATTembodied concepts are required of environmental measures, even as justified under Article XX.

Discussion Unlike other components of its analysis, the Appellate Body does not call upon international environmental standards in determining arbitrary discrimination. As exemplified by its invocation of Article X:3 standards, the Appellate Body employs concepts well developed in the trade context. It is here, in the minutiae of procedure and administration, that the Appellate Body provides its most clear guidance for future Article XX chapeau analysis. In this type of evaluation, the Appellate Body is on solid textual ground, drawing exclusively on trade concepts of procedural fairness and not having to import environmental policy and assess its status as consensus.

WHAT NOT / WHAT NEXT Perhaps recognizing the political sensitivity of evaluating an environmentally friendly measure, the Appellate Body concludes with a recitation of what it did not decide, including the following: “We have not decided that the sovereign nations that are Members of the WTO cannot adopt effective measures to protect endangered species, such as sea turtles. Clearly, they can and should.”82 This professed clarity stands in stark 82

Id., para. 185.

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contrast to earlier muddied attempts to delineate a proper line of equilibrium identifying acceptable unilateral measures. It is a clarity not evidenced in what the Appellate Body did decide. We have seen the Appellate Body criticize the panel’s overly broad a priori condemnation of Section 609’s unilateralism as a threat to the WTO trading system. In paragraph 121, the Appellate Body went as far as indicating unilateralism “may” be a common aspect of Article XX (g) justifiable measures. However, through its chapeau analysis, the Appellate Body seems to cloak any attempted unilateral measure with the requirement that multilateral action first be attempted, in effect answering and canceling its “may” with its own condemnation of unilateralism. Though not as ambiguous as the standard used in the panel report, the Appellate Body’s finding that Section 609’s character as a unilateral action results in unjustifiable discrimination, itself not based on the text of Article XX, produces the same result. The Appellate Body’s chapeau analysis revisits concepts it decided in its Article XX (g) analysis. Chapeau standards are crucial in assessing a measure’s impact on other members, but they are not the whole of an Article XX test. Separating the environmental issues, or a measure’s design, or the rights of a member to invoke Article XX exceptions from the trade impact issues, or a measure’s design, or infringement of the GATT rights of other members will help to clarify a workable standard and provide guidance for future contemplated measures. During its proclaimed application examination under the chapeau, in discussing the failure of the United States to pursue more multilateral negotiations, the Appellate Body cannot help but invoke the “very policy objective of the measure.”83 The question presented under the chapeau is whether the measure is consistent with GATT obligations and sustainable development, not, as the Appellate Body suggests, whether the measure is consistent with the development of multilateral consensus making. The flaw of the Appellate Body’s chapeau analysis is that it constructs an all-encompassing approach that alone determines the validity of the measure at issue, by introducing evaluation of a measure’s policy goals. The chapeau analysis retraces ground explored under its Article XX (g) analysis but now, with a different outcome, using international environmental law to show the unilateral Section 609 is inconsistent with Article XX. While Section 609, as a unilateral action, may run against a general preference for multilateral solutions in dealing with multijurisdictional environmental concerns, in no way does its unilateral nature conflict with the language, object, and purpose of the Article XX chapeau. There is no mandate requiring multilateral action in the GATT/WTO. International negotiations require time and resources, and are subject to various political and economic factors in each negotiating nation, which are at times unrelated to the subject of the negotia83

Id., para. 167.

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tions. Foreclosure of the possibility of unilateral action will hinder the development of innovative new policies seeking to preserve the environment or time critical policies that will be significantly less effective if forced to wait for an arduous treaty-making procedure.84 The Appellate Body is in an unfamiliar role, going beyond using international environmental law to shed light on environmental concepts encountered during its design test under Article XX(g), but actually reaching further, with a requirement to spur international environmental legal development as a precondition to trade consistency. The chapeau analysis, based upon the chapeau’s purpose and objective of preventing misuse and abuse of Article XX exceptions, is properly grounded in trade concerns, such as administrative fairness and transparency, and coercive effects identified in the Appellate Body’s report. Imposing, in essence, the political hurdle of multilateral agreement negotiations, without a textual basis in Article XX, only exposes the Appellate Body’s shortcomings in assessing international environmental concerns. This becomes clear in the Appellate Body’s inability to enunciate standards by which to judge the appropriate pursuit of multilateral agreements prior to enacting a unilateral environmental measure. To what point must talks progress or time pass with no outcome before unilateral action is appropriate? With who must a country negotiate, and are there standards of consistency for the outcomes of each negotiation? These are questions the Appellate Body or panels are not able to answer in the context of international environmental consensus-building, even on a case-by-case basis. The WTO is equipped, and indeed charged, to explore and expose discriminatory application of trade measures. Once a Panel determines the design of an environmental measure to be legitimate under Article XX(g), the chapeau analysis should not retrace questions of design, such as whether it is unilateral or multilateral in nature, but rather center on an examination of possible discriminatory trade effects. The Appellate Body grounded its chapeau analysis in procedural requirements, largely avoiding more difficult discussion of categorical components that may violate or be justified under Article XX. When it

84 Many authors have explored the utility of unilateral environmental measures, indicating that unilateral measures can often be the spark for more widespread preservation actions. See Howard Chang, An Economic Analysis of Trade Measures to Protect the Global Environment, 83 GEORGETOWN L.J. 2131 (1995); Joseph Berger, Unilateral Trade Measures to Conserve the World’s Living Resources: An Environmental Breakthrough for the GATT in the WTO Sea Turtle Case, 24 COLUM. J. ENVTL. L. 355 (1999); or have noted that multilateral attempts are difficult to consummate, and often take several years, resulting in a compromised level of environmental protection. Joshua R. Floum, Defending Dolphins and Sea Turtles: On the Front Lines in an “Us-Them” Dialectic, 10 GEO. INT’L ENVTL. L. REV. 943, 948 (Spring 1998).

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does confront such a difficult issue, such as multilateral action, the Appellate Body recites institutional preferences, abandoning its textual approach. Transforming any promise of unilateral action with the requirement of attempted multilateralism creates its own a priori standard—in effect, a measure violates Article XX if it is unilateral in nature. “As we emphasized in United States—Reformulated Gasoline, WTO Members are free to adopt their own policies aimed at protecting the environment as long as, in so doing, they fulfill their obligations and respect the rights of other Members under the WTO Agreement.”85 Even in its final sentence, the Appellate Body cannot help but avoid the tension over unilateralism stirred throughout the report, at once offering the promise of justification for unilateral action while at the same time limiting it to standards (obligations and rights under the WTO Agreement) that were only identified by their negation in the current dispute and are subject to change with the next dispute due to the Appellate Body’s case-by-case approach. Members are left with no better understanding of these obligations with respect to unilateralism than offered by the word “may.” In its list of items not decided by the Shrimp-Turtle decision, the Appellate Body could appropriately include the validity of unilateral environmental measures under Article XX.

APPENDIX Table 15.1 Checklist for Article XX Consistency Under

Shrimp-Turtle Appellate Body Analysis Analytical Step

Report Language

Guidance

XX(g) Natural resources

“not limited to . . . non-living natural resources” (¶ 128)

By definition, evolutionary; reflects contemporary concerns of nations

XX(g) Exhaustible XX(g) Jurisdictional limit

“threatened with extinction” (¶ 132) “sufficient nexus” (¶ 133)

Derived from international convention, agreement Presence or impact of natural resource within jurisdiction

XX(g) Relating to

“substantial relationship” “between the measure at stake and the legitimate policy” (¶ 135/6)

Clear, direct relationship; narrowly focused; not disproportionately wide; reasonable relation to ends

XX(g) In Conjunction with

“evenhandedness” (¶ 143)

Regulatory regime should include domestic restriction on production or consumption

85

Supra note 2, para. 186.

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Chapeau Generally

Application of measure under scrutiny (¶ 115) “not a fixed and unchanging” analysis (¶ 159)

Purpose is the prevention of abuse of Art. XX exceptions; Analysis varies with case and facts

Chapeau Unjustifiable Discrimination, Coercive Effect

“degree of discretion or flexibility in how standards . . . applied” (¶ 161)

Avoid rigid/unbending application; account for differently situated exporting Members

Chapeau Unjustifiable Discrimination Multilateralism

Requires “serious across-the-board negotiations with the objective of concluding . . . agreements” (¶ 166)

Pursue all feasible and available multilateral negotiations with respect to measure’s goal

Chapeau Unjustifiable Discrimination Administrative practice

“differential treatment among various countries” (¶ 173)

Seek consistency in application of process to exporting Members

Chapeau Arbitrary Discrimination Administrative practice

Same “rigid and unbending” and coercive concerns as above (¶ 177)

See above

Chapeau Arbitrary Discrimination Procedures

“transparent, predictable . . . process” (¶ 180) “basic fairness and due process” (¶ 181) Art. X:3 standards of transparency and procedural fairness (¶ 182)

Formal process, including; opportunity to be heard and respond; reasoned decisions, available review or appeal; avoid ex parte enforcement; give notice of decisions

CHAPTER 16

CONSIDERING THE BIOLOGY OF THE SEA TURTLES IN THE WTO DISPUTE SETTLEMENT PROCESS Hannah Gillelan

INTRODUCTION U.S. regulations require turtle excluder devices (TEDs) in the catching of all shrimp sold in the United States, whether or not the shrimp were trawled in U.S. waters. These regulations have provoked heated controversies about the science that underlies them. The Panel Report of the World Trade Organization (WTO) spent hundreds of pages summarizing the back and forth arguments of the five parties in the dispute. At the end of its report, however, the panel merely says, “We do not question either the fact generally acknowledged by the experts that TEDs, when properly installed and used and adapted to the local area, would be an effective tool for the preservation of sea turtles.”1 The non-scientist layman who reads the discussions of the dispute does not understand the science surrounding sea turtles and therefore does not necessarily comprehend why every aspect of the science is disputed so vehemently. The bickering between the parties of the dispute, and even the expert testimony, is confused and contradictory. This chapter therefore attempts to lay out facts about sea turtles that are generally held by international scientists. The hope is that this chapter will provide a background from which more people will be able to understand the challenges surrounding the protection of sea turtles from extinction. The chapter will begin with a discussion of general sea turtle biology, followed by a summary of each of the natural and anthropogenic threats facing sea turtles and current “solutions” used to address

1 Report of Panel, United States—Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R (May 15, 1998), reprinted in 37 I.L.M. 832, 856 (1998) [hereinafter Shrimp-Turtle Panel].

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these threats. Finally, this chapter will bring the science together and lay out the central debate at issue in the Shrimp-Turtle dispute, analyzing the impact of this science on the WTO Shrimp-Turtle decisions.

THE BIOLOGY OF SEA TURTLES A Summary of Life Worldwide, there are seven widely recognized species of sea turtles.2 Six species forage and nest multinationally—green (Chelonia mydas), hawksbill (Eretmochelys imbricata), Kemp’s ridley (Lepidochelys kempii), leatherback (Dermochelys coriacea), loggerhead (Caretta caretta), and olive ridley (Lepidochelys olivacea)—while one species, the flatback (Natator depressus), is only found around Australia.3 Despite differences between the species, the similarities are a good starting place. Sea turtles have lived on Earth since the time of the dinosaurs, over 110 million years ago.4 They are airbreathing reptiles that spend their lives floating and swimming around the world’s oceans. Turtles only leave the water for occasional brief stays on beaches where the females lay their eggs, where the eggs, hatch and where one species, the green turtle, hauls itself out of the water to bask in the sun. While sea turtles are quite slow on land, they swim through the water with great speed and ease, using their large front flippers to propel them. Similar to their slow pace on land, sea turtles have a slow maturation rate. The specific age at which turtles are able to reproduce is unknown and varies by species. For example, the range attributed to the green turtle is 20 to 50 years5 whereas leatherbacks are thought to take closer to 50 years to reach reproductive age. The several month mating/nesting season finds turtles of reproductive age swimming sometimes thousands of miles to the beaches on which they hatched in a process called “natal honing.”6 An eighth species, the black turtle or East Pacific green (Chelonia agassizii), is currently treated as belonging to Chelonia mydas, although some scientists dispute this and provide conflicting data that it is its own species. See A.B. Meylan & P.A. Meylan, Introduction to the Evolution, Life History, and Biology of Sea Turtles, in K.L. ECKERT, K.A. B JORNDAL, ET AL. EDS, IUCN/SSC M ARINE T URTLE S PECIALIST G ROUP P UBLICATION N O. 4, R ESEARCH AND M ANAGEMENT T ECHNIQUES FOR THE C ONSERVATION OF S EA T URTLES 3 (Consolidated Graphic Communications, 1999) [hereinafter RESEARCH AND MANAGEMENT T ECHNIQUES]. 3 See id. 4 See id. 5 See G.H. Balazs, Growth Rates of Immature Green Turtles in the Hawaiian Archipelago, in B IOLOGY AND C ONSERVATION OF S EA T URTLES 117–25 (K.A. Bjorndal ed., 1982); N.B. Frazer & L.M. Ehrhart, Preliminary Growth Models for Green, Chelonia mydas, and Loggerhead, Caretta caretta, Turtles in the Wild, COPEIA 73–79 (1985). 6 See J.C. Avise & B.W. Dower, Investigating Sea Turtle Migration Using DNA Markers, 4(6) CURRENT OPINION IN GENETICS & DEV. 882–86 (1994). 2

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The turtles mate in the water, and the females subsequently haul out to dig nests and lay “clutches” of eggs that they cover with sand and abandon.7 After roughly two months of incubation8 where the sexual make-up of the clutch is decided by the temperature of the sand (cooler sand leading to more males),9 the hatchlings begin their exodus during the cool of night. Orienting themselves to the sea by using the reflection of the moon on the water, the hatchlings, just a couple of inches long, enter a 36-hour swimming frenzy that carries them into ocean currents. Transported by these currents, it is believed that the hatchlings live in algae floats until they reach subadulthood.10 These subadults leave the open oceans and swim to foraging grounds, joining the other subadults and adults of their nesting population.11 Sea turtles spend the majority of their lives in these foraging grounds, traveling the sometimes thousands of miles back to their nesting beach only once every several years.12 And thus does the cycle go round.

Population Status Internationally, all species of sea turtles are listed in Appendix I of the Convention on International Trade in Endangered Species (CITES), the most protective listing under CITES, which places restrictions on both imports and exports.13 Additionally, the six multinational species are listed in the Convention on Migratory Species of Wild Animals14 and all seven species are on the World Conservation Union (IUCN) Red List.15 Nationally, most countries have endangered species legislation that protects sea turtles. The five species that are present in the waters of the United States, for example, are listed as endangered or threatened under the Endangered Species Act.16 These listings are based on general consensus among the international scientific community that the species as a whole have declined in 7 The number of eggs in each clutch depends on the species but averages about 100. See NATIONAL RESEARCH COUNCIL, DECLINE OF THE SEA TURTLES: CAUSES AND PREVENTION 2 (Nat. Acad. Press, Wash. D.C. 1990). 8 See id. 9 This characteristic of temperature deciding the sexuality of the hatchlings is called “temperature-dependent sex determination.” 10 See Meylan & Meylan, supra note 2, at 4. 11 See id. 12 See id. 13 Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora (Oct. 12, 1940), 161 U.N.T.S. 193, app. I [hereinafter CITES]. 14 Bonn Convention on the Conservation of Migratory Species of Wild Animals (Nov. 1, 1983), 19 I.L.M. 15, app., s (1980). 15 See Meylan & Meylan, supra note 2, at 4. 16 Endangered Species Act, 16 USC § 1531 (1973).

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population to the extent that the population is in danger of or threatened with complete extinction. By placing sea turtles on these lists, both nationally and internationally, the hope is that the protections provided by their status as protected species will allow them to recover and become self-sustaining, stable populations.17 Two characteristics of sea turtle species make these goals even more difficult to achieve than with many other species. The first difficulty with recovery of sea turtles is that little is known about these species compared with other endangered species due to the fact that they spend the majority of their lives in the vast oceans. Much has been learned regarding their habits from tagging over the last 40 years, but because only the females come ashore, information about the species is based only on the status of the females.18 Satellite transmitters have provided valuable information on the migrations of sea turtles, but the power of the transmitter only lasts for less than two months, not always enough time to even allow the turtle to reach its foraging ground from the nesting beach on which the transmitter was affixed. Another drawback is the cost of this method of data collection. While the transmitters themselves are not prohibitively expensive, the cost of satellite time to receive the results from the transmitters has prevented this method of research from being more widely utilized. Unlike large marine mammals, which remain in a pod during all stages of their lives, sea turtles are unable, as of yet, to be followed during the years between hatching and subadulthood and therefore remain a mystery. In addition to leaving gaps in understanding of the overall health of the species, these methods of research result in data based on each nesting population, and only on the numbers of females nesting annually (FNA). Therefore, for the areas where information is not gathered during a nesting season or where the data is collected by unreliable methods, more holes are left unfilled.19 The gaps, which this set of difficulties leave in knowledge, translate into difficulties in identifying problems and solutions. A second difficulty with sea turtles is the long time they take to reach maturity. This length, particularly when combined with the other gaps in knowledge, makes it difficult to assess accurately the status of each sea turtle species population. An example will help to clarify this problem. Assume that we are researchers in a country that undertakes large scale protection of eggs and “headstarting” (see below) in response to data, which showed that the FNA had dropped in recent years. Five years later, significantly more females are nesting annually on the same beaches. Does 17 See Meylan & Meylan, supra note 2, at 4–5; K.L. Eckert, Designing a Conservation Program, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 6–8. 18 See T. Gerrodette & B.L. Taylor, Estimating Population Size, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 67. 19 See Shrimp-Turtle Panel, supra note 2, at para. 5.20.

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this mean that the protection mechanisms are successful? No. Even if data ten or 15 years later show an increase in FNA, not enough time has passed for the eggs, which were protected, to have grown to reproductive age and be reflected in the FNA. Therefore, the increase must be due to some other variable. The indeterminacy of the hypothetical is increased by the first difficulty with sea turtles, namely that the estimates of reproductive age are just that, estimates. After 30 years of headstarting, we could be fairly sure that for some species the protected eggs were resulting in an increase in FNA, but if the species in question were leatherbacks, for example, we could still not be sure after 30 years of collecting data that we were seeing beneficial results from our attempted protective measures, because the estimates for leatherbacks involve more guesswork than with the other species. The second difficulty with sea turtles, therefore, is our lack of knowledge about the impact the measures that we undertake, or even the several years of natural disasters, have on a population.20 Despite these difficulties, if we value the continued existence of sea turtles, we must continue to collect and analyze data and to implement conservation measures as best we can.

Why Do We Care About Extinction? As can be seen from the above estimates, sea turtle species are severely depleted from their historic populations. The question then becomes, do we care? International agreements and national laws protecting endangered species represent the overwhelming international consensus that the answer is “Yes, we do care.” The reasons for concern over extinction of even one of these species of sea turtles are numerous. First, there is a feeling of human responsibility for the world in which we live. Based in part on a reading of the Book of Genesis in which God creates Adam to oversee the animals, this view takes the perspective that people have a duty to protect animals. Additionally, sea turtles have been around since the age of the dinosaurs. Particularly if we think of ourselves as being “shepherds,” it is morally repugnant to us to cause, or to allow other factors to cause, the extinction of these historic, graceful animals of wonder. Another reason to care is that the extinction of sea turtles would signal a further decline in genetic diversity. The importance of such diversity rests in part on the theory of the world as a living web, all parts of which contribute to the health of the other parts. Sea turtles contribute to this web in more ways than providing meals to hungry sharks. Sea turtles add to the health of their ecosystems by mixing the benthic layers, i.e., mixing the various layers of water in their foraging grounds and thereby mixing temperature, oxygen, and micro-organisms. Sea turtles also keep the beds 20

See id. at para. 5.24.

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of seaweed on which some of the species feed trim, encouraging new growth, which in turn encourages the health of the numerous other species that depend on the beds. For these and other reasons, such as the continuance of cultural traditions that look upon sea turtles as sacred, the consensus at local, national, and international levels is that great efforts should be expended to keep sea turtles from becoming extinct.21

THREATS TO SEA TURTLES In order to engage in successful techniques of protecting sea turtles, we must determine the various natural and anthropogenic threats to their survival. Known natural threats include birds and feral animals, such as cats and dogs, mongoose, and raccoons, which raid nests of their eggs and snatch hatchlings on their way into the ocean.22 Once in the ocean, hatchlings are considered one more source of protein to the many carnivorous fish and other ocean-dwelling species. Between infertile eggs, disease, and predation, a high proportion of eggs will not live to reproductive age. Once the turtles reach several years of age, their only threats are sharks and humans. Of greater concern are the anthropogenic threats.23 These threats are caused by contact with human-caused pollution, human technology, and, of course, humans themselves.

Anthropogenic Nesting Habitat Threats We begin our discussion of anthropogenic threats with those posed to nesting females. In order for nesting to occur, a good nesting habitat must exist. What with beachside development of buildings and roads, and high volumes of people and vehicles on beaches, turtles have distractions that lead to increased incidents of “false crawls,”24 where there is literally no sandy beach left far enough back from high tide in which the nest may be laid, and nests that are laid are subject to being crushed by beach traffic.25 Beach tract suitability is further diminished by structures, such as 21 See J.G. Frazier, Community-Based Conservation, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 15 (sea turtles are the “oceans’ canaries,” species that are good indicators of the overall health of the oceans). 22 See R.H. Boulon, Jr., Reducing Threats to Eggs and Hatchlings: In Situ Protection, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 169. 23 What follows is a discussion of the threats in order of threat to life stages, from egg to reproductive adult. The relative importance of these threats will be left to another discussion due to the complicated nature of analyzing the conflicting data and claims of the five parties to the Shrimp-Turtle dispute. 24 “False crawls” occur when females haul out and fail to dig a nest or lay a clutch. 25 See B.E. Witherington, Reducing Threats to Nesting Habitat, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2 at 179–80.

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jetties and sea walls, which attempt to stabilize other areas of the beach or which are used in ports and docks.26 Additional nesting habitat degradation occurs with beach replenishment projects. In attempts to replace sand, which is washed away in storms or by natural patterns of sand transfer (which patterns are intensified by structures such as the aforementioned jetties), the replacement sand is rarely of the same coarseness or chemical make-up as the original sand.27 This affects the sexual distribution of the population and sometimes prevents the females from digging a sufficiently deep nest.28 The effects of this habitat degradation are exacerbated by the fact that most sea turtles are thought to be fiercely loyal to their natal beach, choosing not to nest rather than to nest at a different location than that at which they hatched. It appears that when turtles come ashore to nest on their natal beach and are unable to find a suitable place, they sometimes do not nest at all, or they nest too close to the sea and the eggs are washed away with the first high tide. Nesting females, eggs, and hatchlings also face anthropogenic threats from lighting.29 Beachside developments not only reduce available sandy beach, they also install bright lights. These lights have proved distracting to nesting females, increasing the number of false crawls, and confusing hatchlings. As mentioned above, hatchlings orient themselves towards the water by following the reflection of the moon on the ocean.30 When that reflection is in competition with bright lights from homes, roads, boardwalks, and cities, the hatchlings become disoriented and follow the brighter artificial lights.31 Such disorientation leads to hatchlings dying of dehydration or getting flattened by cars on nearby roads. While it may sound minor, disorientation from artificial lighting has proved to be a large source of hatchling mortality in some areas.32 A final anthropogenic threat to nesting females, eggs, and hatchlings is predation. Predation of turtles on beaches is both a natural and an anthropogenic threat. While the natural threat was discussed above, the anthropogenic threat comes from the large number of feral cats and dogs in and around human populations and the human-caused lack of predators of animals, such as raccoons, which target eggs and hatchlings. 33 Humans also play an important direct role in the mortality rate of hatchSee id. at 180. See id. at 181. 28 See id. 29 See id., at 181–82. 30 See id. at 181. 31 See id. 32 See id. 33 See R.H. Boulon, Jr., Reducing Threats to Eggs and Hatchlings: In Situ Protection, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 172–73. 26 27

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lings. Human poaching of turtles in all stages of development on beaches is a significant problem, particularly in poor areas where protein is otherwise hard to come by. For those who struggle with obtaining square meals, a slow-moving nesting female is an easy, and apparently tasty, way of obtaining a large quantity of protein. Eggs are collected for similar reasons—both protein and taste. Poaching of eggs in some areas reaches close to 100%. Human consumption of eggs and nesting females comes in many areas from long traditions of local culture and beliefs. In some of these regions, turtles are considered sacred and therefore were historically not consumed, or they were only consumed by chiefs. However, as traditional cultures are replaced or influenced by new cultures, economics, and governmental structures, consumption of turtles has increased, and the previous view of the species as sacred is disregarded. In sum, the anthropogenic threats to nesting females, eggs, and hatchlings are very severe. The almost complete annihilation of turtles on nesting beaches and of nesting beach habitat undeniably hold a terrifying potential of many populations to be unable to replenish themselves.

Solutions to Anthropogenic Nesting Habitat Threats Management options for these threats to sea turtles in their nesting habitat are varied and have varying degrees of success. Obvious methods used to address nesting habitat degradation include restricting development and roads to a set distance from the beach.34 Lights from such developments can have shields attached that direct light away from the beach and back towards the development.35 Construction and beach replenishment projects can be restricted to times other than nesting season.36 Sand used in replenishment projects can be analyzed to standards that are beach-specific in attempts to maintain similar temperatures and nest protections as the original sand.37 All of these methods are used with positive results around the world, and new methods continue to be developed as more information about the turtles is learned. Predation and poaching are more difficult to address. Successful methods utilized worldwide have included euthanasia to reduce populations of feral animals, aversive conditioning by use of hormones and smells (such as urine and pepper spray, and installation of wire cages around the nests).38 To reduce poaching, nests have been hidden by erasing the tracks of the females, by education, and most successfully, by patrolling the

34 35 36 37 38

See Witherington, supra note 25, at 182–83. See id. at 181–82. See id. at 180. See id. See Boulon, supra note 33, at 172–73.

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beaches on a nightly basis.39 In some areas, it is enough to have volunteers conduct these patrols; however, in areas where poaching is rampant and other methods are unsuccessful, military patrols of even a few men have proved extremely effective.40

Hatcheries and “Headstarting” Additional management techniques that address more threats than those related to nesting are the use of hatcheries and “headstart” programs. Hatcheries have been employed worldwide for almost 30 years, with varying degrees of success. Hatcheries operate by collecting the eggs from the nests, or in some cases even buying eggs from locals who would otherwise consume them or sell them to others for consumption. By incubating the eggs in an environment safe from animal predators and poachers, more eggs are likely to hatch, or so the theory goes. Headstart programs take the process one step further by raising the hatchlings for a period of time, which usually does not exceed one year and only then releasing them. The theory behind headstarting is that more hatchlings are likely to survive because they are not exposed to the hazards of the natural world until they are larger. Problems with hatcheries relate to the procedures used and the cost of keeping such facilities staffed with trained people. The temperature at which the eggs are incubated is very important due to the temperaturedependent sexual determination of sea turtles. While some hatcheries aim for a 50/50 male/female ratio, it is not known if this is a ratio that occurs naturally in the wild and therefore whether it is a desirable outcome.41 Additionally, improper release can cause large mortality rates if proper procedures are not used. For example, when releases are scheduled at the same time and place, as is often done when the release is a tourist attraction, fish and birds congregate for their regular feeding.42 Another large problem with hatcheries has been with their security. Some hatcheries, particularly in areas where poaching is a great problem, have experienced routine theft of a majority of eggs being incubated. While security is relatively easy to add, the other problems are more difficult to address and therefore limit the assured effectiveness of hatcheries. See id. at 169. The nesting colony at Rancho Nuevo is one example of the success of such armed military protection from poachers. See DECLINE OF THE SEA TURTLES, supra note 7, app. B, at 185–86, citing John Magnuson, Interim Report to Robert A. Mosbacher, Secretary of Commerce (Oct. 3, 1989). 41 See M. Godfrey & N. Mrosovsky, Estimating Hatchling Sex Ratios, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 175. 42 See J.A. Mortimer, Reducing Threats to Eggs and Hatchlings: Hatcheries, in RESEARCH AND MANGAMENT TECHNIQUES, supra note 2, at 175. 39 40

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Headstart programs face even greater problems than do the hatcheries. While hatcheries are still used and endorsed internationally, provided identified procedures are used, headstart programs have become increasingly unpopular due to the dangers of the programs. One concern is that sea turtles will become more prone to disease by virtue of being raised in the close quarters of the nurseries. One possibility is that diseases previously unknown or rare to turtle populations will be released into the wild populations when they mix with the headstart populations. The headstart turtles are particularly prone to new diseases because of their proximity to humans and their close quarters. If the headstart turtles are given medications, such as antibiotics to fight off infections during their stay in the nursery, this can further affect their spread of the disease to the wild populations who have not been inoculated or given the antibiotics. Even further, because it is unknown how hatchlings imprint on their natal beach or what benefits are achieved by their hatchling frenzy, it is unknown what failure to crawl out of the sand on the beach or failure to swim in a frenzy, or even to get regular exercise swimming about the ocean, has on the hatchlings reared in headstart programs.43 Headstart programs involve a decision: whether it is better to take the chance that not enough turtles will survive their first year in the wild to be able to contribute meaningfully to a new generation of turtles, or whether it is better to risk contaminating the rest of the population and removing the few hatchlings that would have survived to reproduce from that population.44 The growing consensus is to take the natural risks rather than adding more through headstarting, except in cases where the mortality-to-eggs ratio is nearly 100% and less invasive solutions to address the problem are ineffective and/or impractical.

Anthropogenic Foraging Ground Threats The next stage of life about which anything is known occurs when subadults move into known foraging grounds. Similar to nesting habitat threats, one threat to sea turtles is loss and degradation of the foraging habitat. High levels of nutrients and sewage wash downstream from farms and homes sometimes hundreds of miles away from the foraging grounds. These high nutrient levels lead to algal blooms that in turn create “dead zones” in which no life, including turtles, other than the algae thrives.45 43 There is little evidence as of yet that headstart turtles return to nest on any beach, or in particular that they return to contribute reproductively to their natal population. See J.P. Ross, Ranching and Captive Breeding Sea Turtles: Evaluation as a Conservation Strategy, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 200. 44 See Mortimer, supra note 42, at 175. 45 See J. Gibson & G. Smith, Reducing Threats to Foraging Habitats, in RESEARCH AND MANAGEMENT TECHNIQUES, supra note 2, at 184.

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Oil pollution and marine debris also add to the death of the coral reefs around which the turtles feed.46 Another example of an anthropogenic source leading to the denigration of foraging grounds is overharvest by fishermen and shrimpers scraping the bottom or removing the crustaceans on which the turtle species depend.47 The primary solution to date against dead zones is reduction of nitrogen fertilizer, but this is not a popular move in countries that value farming. Hence, these dead zones remain a significant problem. Impacts from fishing and shrimping are being addressed by new technologies, such as TEDs with flotations, restrictions on fishing and trawling times, numbers of permitted boats, catch limits, and reserves.

Reserves There is a fair smattering of reserves around the world. They consist of sections of territorial waters in which it is illegal to engage in certain activities such as trawling. The reserves tend to be in areas where high concentrations of turtles forage and rest. The purpose of the reserves is to provide protection for both the turtles and their natural environment. Research is also easier to conduct when human interaction is minimized. The reserves encounter local resistance from fishermen and businesses providing water sports, and they can be economically costly. Additionally, while reserves provide protection within a particular area, nesting grounds, the open oceans home to hatchlings, and the migration routes between foraging and nesting grounds are all still sources of great threats to turtles. Reserves, therefore, are only one important step in the more complex, widespread and international protections needed to bring sea turtles back from the brink of extinction.

Miscellaneous Anthropogenic Threats: Fishing Gear—Longlining The threat from longlining extends to waters off nesting grounds and to migrating turtles in the open oceans. Longlines are fishing lines sometimes miles long with thousands of baited hooks hanging to cover horizontal miles of ocean. Turtles become hooked in these lines and drown, unable to surface for air. Leatherback turtles, the only turtle species without a hard exoskeleton, are most affected by this method of fishing. The only currently known solution to the threat from longlines is to ban them, although research is being done into different types and to spacing and weighting of hooks.

46 47

See id. at 185. See id.

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Shrimp Trawling The threat at the center of the Shrimp-Turtle dispute in the WTO is that shrimp trawling kills turtles by ensnaring them in the trawls along with shrimp and other by-catch, such as fish. Shrimp trawls are essentially large, open-mouthed nets that are dragged behind a boat and that trap everything in their path. As it is dragged through the water, the trawl develops a mild vortex that further ensnares sealife. Shrimp live predominately in areas that subadult and adult turtles favor. For this reason, areas in which shrimp are in high concentration are also often areas of high turtle concentration. Trawls kill at least 150,000 turtles annually worldwide by drowning and by poaching once the turtles are hauled aboard with the shrimp.48

TEDs The U.S. National Marine Fisheries Service (NMFS), pursuant to the U.S. Endangered Species Act and the Recovery Plans for the Atlantic Populations of Sea Turtles, developed mechanisms to be added to a trawl so that the new, modified trawl ensnares fewer turtles, and also less of other types of by-catch. These TEDs, also known as “by-catch reduction devices” or “BRDs,” have been demonstrated to significantly reduce the number of turtles caught in trawls. In fact, NMFS data require a 97% success rate at excluding turtles from shrimp trawls when used properly for any model of TED to be permissible.49 While this high percentage is not constant, data seem to indicate that TEDs modified for the different conditions in which the trawls occur, such as different bottom conditions, result in similar high success rates.50 Perhaps the greatest advantage of TEDs over management solutions, such as those used to counteract threats on nesting grounds, is that the technology prevents the threat from being actualized. Whereas solutions, such as hatcheries, are reactive, TEDs are proactive and prevent the initial harm from ever occurring. TEDs are trap doors that are inserted into the rear of the trawl. The door is triggered only by the weight of large by-catch, in particular turtles. There are various designs of TEDs that meet differing economic and

See C.A. Oravetz, Reducing Incidental Catch in Fisheries, in RESEARCH AND MANTECHNIQUES, supra note 2, at 189; NATIONAL MARINE FISHERIES SERVICE, NATIONAL MARINE FISHERIES SERVICE AND U.S. FISH AND WILDLIFE SERVICE STATUS REVIEWS FOR SEA TURTLES LISTED UNDER THE ENDANGERED SPECIES ACT OF 1973 10–11 (1995). 49 See 50 C.F.R. § 223.206; John Mitchell et al., A Method For Evaluating the Exclusion of Juvenile Sea Turtles From Turtle Excluder Devices (TEDs), in NATIONAL MARINE FISHERIES, PROCEEDINGS OF THE NINTH ANNUAL WORKSHOP ON SEA TURTLE CONSERVATION AND BIOLOGY, NOAA Tech. Mem. NMFS-SEFC-232 115 (Aug. 1989). 50 See id. 48

AGEMENT

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situational needs. For example, some TEDs are meant for trawls done in areas of lots of mud, whereas others are better for areas where the bottom is more rocky.51 The cost of a TED, without added costs of educating shrimpers on the need for them and their methods of use, vary according to the model but average U.S.$70–$150. Shrimpers use one trawl per boat, so this cost is not compounded for individual shrimpers, and the sturdy construction of the TED means that they will last for several years.52 The TED consists of a grid and an exit hole. The grid is spaced such that shrimp are let through into the tailbag. Heavy weights, such as turtles, jelly balls, sharks, and rays, cannot fit between the bars and instead push the TED back, opening up the exit hole through which they are then able to swim away.53 U.S. regulations require hard TEDs, as opposed to soft TEDs which no longer meet U.S. regulations,54 to be made of strong materials, such as steel, fiberglass, or aluminum.55 These sturdy materials ensure that the TED will withstand the stresses of repetitive trawls. Within each type of TED, there are numerous variations to allow for differing shrimping conditions. One such option is whether the exit hole is at the top or the bottom of the trawl. Bottom opening TEDs are better at excluding by-catch and debris in part because the exit opens in conjunction with water flow, and gravity naturally pulls large objects down the TED grid and out the exit hole.56 Greater exclusion of heavy by-catch and debris benefits shrimpers because shrimp are less damaged when they are hauled up, and shrimpers do not have to spend as much time sorting out by-catch once the trawl is on deck. On the other hand, top opening TEDs can retain more shrimp, allowing fewer to escape through the hatch.57 If the trawl area is one without much debris, top openings can be advantageous, but if the area is one with debris, the trawl can become clogged with heavy logs and rocks rather than with shrimp.58 In addition to top or bottom openings, TEDs can be modified using different grids, angles, flotation, accelerator funnels, webbing flaps, chafing webbing, roller gear, and lazylines.59 With these and other methods, TEDs can be modified for different geographic ocean conditions while maintaining high turtle release rates. 51 See NATIONAL MARINE FISHERIES, THE TURTLE EXCLUDER DEVICE (TED): A GUIDE BETTER PERFORMANCE, NOAA Tech. Memo. NMFS-SEFSC-366 (Apr. 1995) [hereinafter TED MANUAL]. 52 See id. 53 See id. at 6. 54 See Chris Smith, More Gulf Shrimpers Using Turtle Devices, NOAA R EPORT (September 1997), at http://www.noaa.gov/public-affairs/nr/teds.html. 55 See TED MANUAL, supra note 51, at 4–5. 56 See id. at 6. 57 See id. 58 See id. 59 See id. at 7–30.

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One caveat, however, on TED effectiveness: while TEDs release turtles from trawls in very high percentages, some turtles die as a result of trawl-related injuries. Trawlers typically concentrate in a relatively small area and trawl repeatedly. The response of a turtle, which senses the vortex of the approaching trawl and sees the gaping mouth of the net, is to swim away as fast as it can. Recent necropsies60 provide evidence that turtles, which attempt to outrun a trawl, are caught by the trawl, released by the TED, and subsequently attempt to outrun another trawl are dying of adrenaline overdoses.61 The percentage of turtles that die from such overdoses is as yet unknown.

Other Solutions to Trawl Threats Non-TED solutions, all of which can be used in conjunction with TEDs for even greater success at reducing turtle mortality from trawling, cover a wide spectrum. In areas where turtles are not present throughout the entire shrimping season, trawling can be banned or severely restricted during those times during which turtles are present. This solution has obvious limitations in areas in which turtles are present throughout the shrimping season. Another option is to limit trawl durations, requiring the trawl to be brought in every so many minutes. The theory behind this solution is that turtles are saved because they are brought to the surface for fresh air rather than drowning. Turtles, which have been racing to escape a trawl, however, or which have been feeding at the bottom and are close to surfacing for air, are likely to drown if caught by the trawl. While shorter trawl durations help some turtles, they will most likely not be sufficient to meaningfully reduce turtle mortality from shrimp trawling.62

Pollution Pollution is a broad-spectrum threat to sea turtles at all stages of life. As mentioned above, light pollution is one of the first threats sea turtles encounter. Toxic pollution in foraging grounds affects the health of turtles. Pollution can also be fatal when ingested by turtles. This is a particular problem with leatherback turtles that live almost completely off jellyfish. In the water, jellyfish and plastic bags are easily mistaken, and the similarities have proven fatal to leatherbacks.63 Tar and oil balls have also been fatal for all species of turtles. Ingestion of pollution and habi-

Necropsies are autopsies performed on dead animals. See Interview with Sandra MacPherson, National Sea Turtle Coordinator, U.S. Fish and Wildlife Service, in Washington, D.C. (Mar. 31, 1999); see also Oravetz, supra note 48, at 190. 62 See Oravetz, supra note 48, at 190. 63 See DECLINE OF THE SEA TURTLES, supra note 7, at 41. 60 61

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tat degradation from pollution are very serious threats. 64 The threat of increased toxins in the oceans is yet another unknown in the survival equation of turtles.

Fibropapilloma Virus A deadly disease is decimating Hawaiian and now some Floridian populations of green turtles. This disease, cutaneous fibropapillomatosis, is a recent development. Very little is known about the disease. It is believed to be a herpes-like virus, which is contagious among turtles but non-injurious to humans. The virus invades the turtle, causing tumors that originate on flippers and eyes and spread internally to lungs, stomach, and other organs. While the disease itself is not directly fatal, the indirect effects eventually doom all infected turtles. The disease blinds turtles when the tumors grow too large around the eyes, making it difficult for the diseased turtle to find food, to mate, or to avoid sharks. More immediately fatal are the tumors in internal organs that limit digestion, breathing, and other functions.65 Much research has been conducted over the past 15 years, but so far scientists have been unable to isolate a cause or a cure, or even to determine the nature of the disease. Possible causes include toxic exposure, spread from human contact, such as researchers, or a natural development. The task of bringing the disease under control is complicated by the fact that only females come ashore. 66 Inoculations are therefore impractical, and it appears that the cause will have to be identified if the disease is to be eliminated to as great an extent as possible.

THE WTO SHRIMP-TURTLE REPORTS The WTO Dispute Settlement Body only recently began to consult experts to assist them in understanding the often complex science at the center of today’s trade disputes. In the Beef Hormones case, the Appellate Body upheld the panel’s formation of a panel of experts to offer individual testimony as to the science at issue in the dispute.67 This was the first occasion in which such individual testimony was used, rather than the consensus of a group of experts on questions of science posed to them by the panel. Following in the path of the Beef Hormones panel, the panel in the Shrimp-Turtle dispute convened five experts who were asked to testify, as their knowledge allowed, to six sets of questions.68 The parties were See id. at 114–16, 139. See id. at 64–65; G.H. Balazs, Fibropapillomas in Hawaiian Green Turtles, 39 MARINE TURTLE NEWSLETTER 1–3 (1989). 66 See STATUS REVIEWS, supra note 48, at 31. 67 Appellate Body Report, EC—Measures Concerning Meat and Meat Products, WT/DS26/R/USA, para. VI.1–2 (Aug. 18, 1997) [hereinafter Beef Hormones]. 68 Shrimp-Turtle Panel, supra note 1, at paras. 5.1–5.9. 64 65

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Reconciling Environment and Trade

then allowed to comment on this testimony. While the Dispute Body reversed the panel on most of its conclusions, it, too, relied on the expert testimony to reach its decision.69 Despite the use of the panel of experts, however, environmental groups worldwide look upon the Shrimp-Turtle dispute as an example of the incompatibility of environment and the WTO, rallying for greater transparency in WTO proceedings. The recent protests at the WTO talks in Seattle featured many demonstrations dressed up as turtles and a banner was unfurled within the Seattle Convention Center, where the WTO meeting was held, which equated free trade with dead sea turtles and denounced the WTO.70 Were the protesters correct that the WTO panel and Dispute Body ignored the weight of science? Yes, although not necessarily in the manner in which many environmental groups would like to believe.

THE USE OF THE EXPERT TESTIMONY BY THE WTO PANEL The panel convened the panel of experts because the parties had “submitted a number of studies by experts and often quoted the same scientific documents to support opposite views.”71 However, despite this lofty beginning—using experts to settle difficult scientific questions disputed by the parties—the panel essentially made no use of the testimony in its conclusion. It instead decided that the regulation failed because the United States made no serious attempts at a multilateral measure to reach the same goal of sea turtle conservation through use of TEDs in trawls. 72 The structure of the analysis of a disputed measure for compliance with or violation of the General Agreement on Tariffs a