Environment
...es. India, Pakistan, Thailand and Malaysia challenged this extension before a WTO panel. The panel, on the basis of reasoning analyzed below, concluded that the import ban on shrimp and shrimp products as applied by the US was not consistent with Article XI:1 of GATT 1994and was not justified under Article XX of GATT 1994. 4 Some of the interpretations developed by the panel were subsequently rejected by the Appellate Body in a bid to arrive at a balanced view on the relation-ship between trade and environment. Amicus curiae briefs: A significant procedural issue that the panel had to address in the course of hearing the case was whether a panel is obliged to take cognizance of non-requested information received from non-governmental sources. The panel noted that pursuant to Article 13of the DSU “the initiative to seek information and to select the source of information rest with the panel”.5 It therefore ruled that ‘accepting non-requested information from non-governmental sources would be... incompatible with the provisions of the DSU as currently applied”. Unilateralism vs. multilateralism: In its discussion of the substantive issues the panel report emphasized that “the WTO Agreement favors a multilateral approach to trade issues”. In its view even if a particular unilateral measure had a relatively minor impact on the multilateral trading system it should be withdrawn for, if adopted by others, it could raise a serious threat to its functioning. The panel went on to observe: As far as the WTO Agreement is concerned, we considered that certain unilateral measures, insofar as they could jeopardise the multilateral trading system, could not be covered by Article XX...General international law and international environmental law clearly favour the use of negotiated instruments rather than unilateral measures when addressing trans boundary or global environmental problems, particularly when developing countries are concerned. However, significantly, it refused to categorically pronounce against unilateral measures: ... Our findings regarding Article XX do not imply that recourse to unilateral measures is always excluded, particularly after serious attempts have been made to negotiate;....But the panel found that in this particular case measures “were applied without any serious attempt to reach, beforehand, a negotiated solution”. Environment vs. development: The panel went on to consider the relationship between trade, environment and development. While recognizing that the preamble acknowledges the objective of sustainable development it nevertheless asserted the priority of promoting development through trade: While the WTO preamble confirms that environmental considerations are important for the interpretation of the WTO Agreement, the central focus of that agreement remains the promotion of economic development through trade; and the provisions of GATT are essentially turned toward liberalization of access to markets on a nondiscriminatory basis (para 7.52).It further noted that the objective of sustainable development was to be pursued “in a manner consistent with respective needs and concerns at different levels of economic development” and concluded that “the preamble endorses the fact that environmental policies must be designed taking into account the situation of each member, both in terms of actual needs and in terms of its economic means’. Extra-jurisdictional application: The panel clarified that what it was not doing was to find the US turtle conservation measures GATT illegal on the ground that it led to the “extra-jurisdictional application of US law” but because it required all other countries to have policies comparable to the US. This is significant because the ruling of the GATT Panel in the famous Tuna-Dolphin case (1992) was heavily criticized by environmentalists for using the extraterritorial application argument to find the concerned environmental protection measure GATT illegal. In this case the WTO panel made a conscious bid to distance itself from the Tuna-Dolphin understanding. It observed: Many domestic measures can have an effect outside the jurisdiction of the government, which takes them. What was found was that a measure cannot be considered as falling within the scope of Article XX if it operates so as to affect other governments’ policies in a way that threatens the multilateral trading system...For instance, a US requirement, that US norms regarding the characteristics of a given product be met for that product to be allowed on the US market, would not constitute such a threat. Such types of measures are contemplated by the WTO Agreement on Technical Barriers to Trade and the Agreement on Sanitary and Phytosanitary Measures. However, requiring that other members adopt policies comparable to the US policy for their domestic markets and all other markets represent a threat to the WTO multilateral trading system .From the passage it is clear that what the panel is merely protesting is the imposition of ‘comparable’ process and production methods (PPMs) and not the extra-jurisdictional application of the concerned measure. According to the panel, “if one WTO member were allowed to adopt such measures, then other members would also have the right to adopt similar measures on the same subject but with differing, or even conflicting, requirements”. It “would rapidly lead to the end of the WTO multilateral trading system”. Article XX chapeau: Turning to an examination of the relationship of Article XX to the object and purpose of GATT/WTO regime, the panel stated: ... when invoking Article XX, a member invokes the right to derogate to certain specific substantive provisions of GATT1994 but that, in doing so, it must not frustrate or defeat the purposes and objects of the General Agreement and the WTO Agreement or its legal obligations under the substantive rules of GATT by abusing the exception contained in Article XX. It went on to observe: ... we are of the opinion that the chapeau of Article XX, interpreted within its context and in the light and purpose of GATT and the WTO Agreement, only allows members to derogate from GATT provisions so long as, in doing so, they do not undermine the WTO multilateral trading system, thus also abusing the exceptions contained in Article XX. Such undermining and abuse would occur when a member jeopardises the operation of the WTO Agreement in such a way that guaranteed market access and nondiscriminatory treatment within a multilateral framework would no longer be possible. The panel, to put it differently, agreed with the understanding of previous panel reports that the ‘general exception’ provision should be interpreted narrowly. International cooperation: Stressing “the need for international cooperation and for avoiding unilateral measures” the panel referred to the 1992 Rio Declaration on Environment and Development and “the right of states to design their own environmental, social and economic conditions prevailing where they are to be applied” and concluded that: the preamble does not justify interpreting Article XX to allow a member to condition access to its market for a given product on the adoption of certain conservation policies by exporting members in order to bring them in line with those of the importing member. On the contrary, the diversity of the environment and development situations underlined by the preamble can best be taken into account through international cooperation. The preamble also implies that attempts to generalize standards of environmental protection would require multilateral discussion, especially when, as here, developing countries are involved . Appellate Body Report The US appealed from the panel report on certain issues of law and legal interpretations. The Appellate Body submitted its findings and conclusions on October 8,1998. It (a) reversed the finding of the panel that accepting non-requested information from non-governmental sources was incompatible with the provisions of the DSU; (b) reversed the panel’s finding that the US measure in issue was not within the scope of measures permitted under the chapeau of Article XX of the GATT 1994;and (c) concluded that the US 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. 8 The panel report, as revised by the Appellate Body report, was adopted by the DSB. On November 25, 1998 the US informed the DSB that it was committed to implementing its recommendation and rulings. We discuss below key aspects of the Appellate Body report. First, the Appellate Body rejected the Panel view that non-requested information could not be accepted from non-governmental sources. It distinguished between a legal right to make a submission before a GATTWTO tribunal and what a tribunal was authorized to do under the DSU. In its opinion the legal right to make a submission only vested with the members of WTO. (para 101). However, Article 13of the DSU entitled ‘Right to Seek Information’ gave “comprehensive... authority” to a panel to “‘seek’ information and technical advice from ‘any individual or body’ it may consider appropriate, or from’ any relevant source’ ...”. The Appellate Body also referred to Article 12of the DSU which allows panels to possess” sufficient flexibility” to “ensure high-quality panel reports...” (para 105). Contending that “ample and extensive authority” vested with the panels to seek information the Appellate Body ruled: the panel’s reading of the word ‘seek’ is unnecessarily formal and technical in nature...we do not believe that the word’ seek’ must necessarily be read, as apparently the panel read it, in too literal a manner...authority to seek information is not properly equated with a prohibition on accepting information which has been submitted without having been requested by a panel. In brief, according to the Appellate Body,” the panel erred in its legal interpretation that accepting non-requested information from non-governmental sources is incompatible with the provisions of the DSU”. It thus went a long way in meeting criticism that the transnational civil society was being kept at bay or that trade experts with little understanding of environmental issues were evaluating alternative measures available for pursuing environmental protection goals. In making its pronouncements the Appellate Body was clearly faced with a dilemma that Kingsbury has well articulated in a general context: The WTO faces the essential difficulty that, as an organization created by and resting on the will of states and state representatives, it remains within theirpower to insulate the organization from national and transnational civil society. Yet such insulation threatens both the quality of the WTO product and, more seriously, its legitimacy in an international system no longer monopolized by states. Unsurprisingly, this dilemma is evident in problems of rule-making and dispute settlement. Therefore, the Appellate Body creatively interpreted Articles 12 and 13 of DSU to empower the panels to receive and consider on-requested information.9 The ruling of the Appellate Body was termed” welcome progress” by president Clinton in his statement to the High Level Symposium on Trade and Environment organized by the WTO in March 1999. It is indeed welcome, albeit the ruling may have the not-so-unintended consequence of empowering northern environmental groups for they alone have the material resources to consistently intervene in disputes arising before the WTO. As Kingsbury has pointed out: If a transnational civil society can be said to exist and to be important, the power relations within it are not necessarily more equitable than those in the interstate system, and it may contribute no more to solving fundamental problems of poverty, environmental degradation, and sustainable development besetting much of humanity than does the interstate system as traditionally conceived. In other words, there is the danger that the” transnational civil society” will be hijacked by northern environmental groups in coalition with other interest groups which often act on behalf of protectionist forces. Second, the Appellate Body pointed to” the explicit recognition by WTO members of the objective of sustainable development in the preamble of the WTO Agreement’ and went out of its way to clarify what it was not deciding in the appeal: We have not decided that the protection and preservation of the environment is of no significance to the members of the WTO. Clearly, it is. 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. And we have not decided that sovereign states should not act together bilaterally, plurilaterally or multilaterally, either within the WTO or in other institutional for a, to protect endangered species or to otherwise protect the environment. Clearly, they should and do. Renata Ruggiero, the former director general of WTO, has cited this passage as evidence that the “WTO does not stand in the way of environment”. Third, the Appellate Body approvingly cited the two-tier test that it had laid down in the Imported Gasoline case in order to prevent an impugned measure from being pronounced GATT-illegal without considering the legitimacy of the measures involved: “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”. In this case, in the view of the Appellate Body, the Panel had stood the ruling on its head by refusing to look at the legitimacy of the measures before proceeding to see if the same were justified under the chapeau. In considering the legitimacy of the measures under Article XX(g) the Appellate Body propounded the test of “a close and genuine relationship of ends and means”. Thereafter, considering the US law it concluded that “the means and ends relationship between Section 609 and the legitimate policy of conserving an exhaustible, and, in fact, endangered species, is observably a close and real one...”. In order to do so it expanded the ambit of Article XX(g) exception through its interpretation of the words” exhaustible natural resources” in the light of the WTO Preamble. In contrast to the decision of the GATT panel in the Tuna Dolphin case, the Appellate Body did not treat the WTO legal order as a hermetically sealed system. It observed that the words of Article XX “must be read by a treaty interpreter in the light of contemporary concerns of the community of nations about the protection and conservation of environment”. It therefore proceeded to refer to the 1982 United Nations Convention on the Law of the Sea, the 1992 Convention on Biological Diversity, and the 1979Resolution on Assistance to Developing Countries, adopted in conjunction with the Convention on Conservation of Migratory Species of Wild Animals, in order to justify its interpretation of the phrase “exhaustible natural resources” (para 130). In considering the exhaustibility of sea turtles, the Appellate Body noted that such a conclusion would be “very difficult to controvert since all of the seven species of sea turtles are today listed in Appendix 1of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (‘CITES’)”. Next, the Appellate Body clarified the meaning of Article XX in a bid to integrate trade and environment objectives. First, the Appellate Body noted that the Panel was mistaken in interpreting Article XX through analyzing the object and purpose of the “whole of the GATT 1994 and the WTO Agreement” and describing the same in an overly broad manner. Instead, it should have confined itself to a close reading of Article XX. Second, it clarified that what was in issue in the Article XX chapeau was not the design of the measure itself but the manner in which a measure was applied. As it had noted in Imported Gasoline case,” the provisions of the chapeau cannot logically refer to the same standard(s) by which a violation of a substantive rule has been determined to have occurred”. Third, it recalled its ruling in the Imported Gasoline case that Article XX(g) did not establish an empirical “effects test” for the exception to be availed of. It explained that the legal characterization of a measure is not to be “made contingent upon occurrence of subsequent events”. Fourth, it pointed out that GATT Article III cannot be given so broad a reach as to effectively emasculate Article XX(g) and the policies and interests it embodies, and called for a case to case analysis of the factual and legal context of a given dispute. Fifth, the Appellate Body did not pay much attention to the fact that the effect of the impugned environment protection laws were on the developing countries. While the above clarifications went along way to ensure that Article XX did not pose an insuperable hurdle to environmental protection measures being declared GATT-legal, the Appellate Body also explicitly enunciated a balance test to ensure that trade objectives would not always trump environmental protection goals. It stated that 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”. It defined its task as “marking out a line of equilibrium” rather than of simply safeguarding the principles and goals of free trade. On this background the Appellate Body considered whether, as required by the Chapeau of Article XX, there was in this case “unjustifiable discrimination between countries where the same conditions prevail”. According to it, the “most conspicuous flaw” with the “application” of the US measure was “its intended and actual coercive effect on the specific policy decision made by foreign governments, members of the WTO”: ...it is not acceptable, in international trade relations, for one WTO member to use an economic embargo to require other members to adopt essentially the same comprehensive regulatory programme, 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 other members. Second, it pointed to: the failure of the US to engage the appellees, as well as other members exporting shrimp to the US, 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 against the shrimp exports of those other members (para 166).In other words, the US did not pursue an alternative course of action available to it but rather relied on unilateral action. This amounted to “unjustifiable discrimination” for, as the Appellate Body noted, “an import prohibition is, ordinarily, the heaviest’ weapon’ in a member’s armory of trade measures” (para 171). Further, the” rigid and unbending standard” it sought to impose amounted to “arbitrary discrimination”. Three different responses to the Appellate Body report have been forthcoming. First, that the Appellate Body report did little to transform the bias of the WTO infavor of free trade, perhaps with the exception of its ruling in favour of accepting non-requested information. Second, that while the WTO did take some interpretive steps in favour of a more balanced view of trade and environment “in practice their consequences may prove to be rather small”. Third, that the report of the WTO Appellate Body reflected a fundamental change in the approach to the trade-environment problem and that the preconditions it set for the useof unilateral measures are necessary to occlude green protectionism. In our view the last response represents the most appropriate reading of the Appellate Body report. The fundamental change in the approach of the WTO Appellate Body was reflected in the following: reference to the objective of sustainable development mentioned in the Preamble of the agreement establishing the WTO; the view that the protection and preservation of environment is of significance to the members of the WTO; the ruling that WTO panels can accept non-requested information from non-governmental sources; the fact that the GATT/WTO law is not to be treated as a hermetically sealed system; the acceptance of the panel view that the extra-jurisdictional application of laws was not the basis of ruling against the US measure; the acceptance of the legitimacy of the US environmental measures through clarifying the structure and language of Article XX; the enunciation of a balance test to ensure that trade objectives will not always trump environmental protection goals; and the significant fact that both the panel and the Appellate Body did not rule out the possibility of using unilateral trade measures to achieve environment protection objectives. The Appellate Body merely specified certain preconditions, which must be met before recourse to unilateral measures is permitted. This was only appropriate for unilateral measures are capable of being hijacked by forces of protectionism in alliance with environmentalist groups and, furthermore, often do not yield any green benefits. We will return to this theme in the concluding section. EC-Hormones Case (1998) In this case two panels dealt with separate complaints by the US and Canada against the European Community (EC)concerning prohibition of imports of meat and meat products derived from cattle to which either the natural hormones: oestradiol17B, progesterone, or the synthetic hormones: trenbolone acetate, zeranol ormelengestrol acetate (MGA), had been administered for growth promotion purposes. Since the dispute involved the Agreement on SPS it would be appropriate to begin with a brief reference to some of its provisions. Agreement on SPS The Agreement on SPS addresses government regulations and import bans regarding food safety and disease-spreading products to protect human, animal or plant life or health. SPS measures are however to be “applied only to the extent necessary” and “within the territory of the member”. They are to be “based on scientific principles” and not maintained “without sufficient scientific evidence...” (Article 2.2). Members are also required to ensure that sanitary and phytosanitary measures (SPMs) are based “on an assessment as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organization” (Article 5.1). Finally, members are required to ensure that SPMs “do not arbitrarily or unjustifiably discriminate between members where identical or similar conditions prevail, including between their own territory and that of other members” and are not applied in a manner which would constitute a disguised restriction on international trade (Articles 2.3 and 5.5).The SPS Agreement favours international standards. Article 3.1 calls on WTO members to base measures “on international standards, guidelines or recommendations, where they exist, except otherwise provided in this Agreement”. Measures conforming to such international standards are “presumed to be consistent with the relevant provisions of this Agreement and of GATT 1994” (Article 3.2). The SPS Agreement specifies the source of international standards: Codex Alimentarius Commission as the international source relating to food, the International Office of Epizootics relating to animals, and the International Plant Protection Convention relating to plants. Article 3.3 allows members to introduce or maintain SPMs which result in a higher level of protection than would be achieved based on relevant international standards “if there is scientific justification, or as a consequence of the level of sanitary and phytosanitary protection a member deter-mines to be appropriate pursuant to procedures to assess risks”. The Agreement on SPS also incorporates the Precautionary Principle and permits members “incases where relevant evidence is insufficient” to adopt provisional SPMs on the basis of “available pertinent information”(Article 5.7). Finally, it contains a special and differential treatment clause(Article 10). Panel Reports Having considered the facts of the dispute in the light of the SPS Agreement the respective panels circulated their reports to the members of the WTO in August1997. Both the panels reached the same conclusions: (i) The EC, by maintaining sanitary measures which were not based on a risk assessment, had acted inconsistently with the requirements contained in Article 5.1 of the SPS Agreement. (ii) The EC, by adopting arbitrary or unjustifiable distinctions in the levels of sanitary protection it considered to be appropriate indifferent situations, which resulted in discrimination or a disguised restriction on international trade, had acted inconsistently with the requirement contained in Article5.5 of the SPS Agreement. (iii) The EC,by maintaining sanitary measures which are not based on existing international standards without justification under Ar-ticle3.3 of the SPS Agreement had acted inconsistently with its Article 3.1. The panels therefore recommended that the DSB request the EC to bring the measures in dispute into conformity with its obligations under the SPS Agreement. Appellate Body Report On September 24, 1997 the EC appealed from certain legal issues covered by the panel reports. The Appellate Body formulated, among others, the following issues in appeal: (a) whether the panel had correctly allocated the burden of proof in this case; (b) whether, or to what extent, the precautionary principle was irrelevant in the interpretation of the SPS Agreement;(c) whether the panel correctly interpreted Articles 3.1 and 3.3 of the SPS Agreement;(d) whether the EC measures are ‘based on’ a risk assessment within the meaning of Article 5.1 of the SPS Agreement; and (e) whether the panel correctly interpreted and applied Article 5.5 of the SPS Agreement. The Appellate Body handed down its report on January 5, 1998. The Appellate Body upheld the conclusion of the panel that the EC measures at issue were inconsistent with the requirements of Article 5.1 of the SPS Agreement. It agreed with the panel that the scientific reports submitted by the EC did not rationally support the imposition of the import ban. According to the Appellate Body the studies relied upon by the EC were not sufficiently specific to justify the ban. However, while the Appellate Body upheld the conclusion of the panel it advanced several interpretations of the Agreement on SPS, which go a long way in integrating trade and environment objectives. We examine below key aspects of the Appellate Body report, which qualifies it as an environment friendly ruling. The Appellate Body rejected the “general, unqualified, interpretative ruling” of the panels that the SPS Agreement allocated the “evidentiary burden” to the member imposing an SPS measure. It noted that the panel ruling was” bereft of basis in the SPS Agreement”. It ruled that it was for the complaining party to establish a prima facie case of inconsistency with a particular provision of the SPS Agreement before the burden of proof shifted to the defending party which would then be required to counter or refute the claimed inconsistency. It clarified in this regard the meaning of a prima facie case: ...a prima facie case is one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima-facie case. This understanding raises the problem as to “how and when to decide that a prima-facie case has been established by the complaining party and, as the case may be, that this prima facie case has been rebutted by the defendant party”. According to Pauwelyn, legal officer in the WTO secretariat, “the risk is that panels and/or the Appellate Body may use this, in practice, very open rule as a tool to support result-oriented findings”. To put it differently, the indeterminacies which characterize the meaning of a prima facie case and its rebuttal can be used to arrive at rulings which favour the use of SPMs. The Appellate Body also reversed the conclusion that when a SPM is not based on an international standard in accordance with Article 3.1, the burden is on the member to show that it is consistent with Article 3.3 of the SPS Agreement. According to the Appellate Body, Article 3.3 was not an exception to Article 3.1 but an autonomous right. But as Pauwelyn has pointed out, the Appellate Body has in other instances (for example, in the case of Article XX) considered similar provisions as exceptions. But “the Appellate Body did not really explain why it reached these different conclusions. This may create problems for future panels in deciding whether a specific WTO provision should be considered as an ‘exception’... or as an’ autonomous right’ ”. Be that as it may, the determination of the Appellate Body that it is the autonomous right of a state to adopt a higher than international standard offers states greater latitude in the adoption of SPMs than if it had deemed it an exception. The Appellate Body next showed its willingness to descend into the real social world in order “to determine whether an SPS measure is sufficiently supported or reasonably warranted by the risk assessment”(para 187). In its view: It is essential to bear in mind that the risk that is to be evaluated in a risk assessment 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. Further, the Appellate Body noted the” depth and extent of the anxieties experienced” and “the intense concern of consumers” within the EC. The Appellate Body report reveals “surprising sensitivity to public anxieties regarding ecological risks, and adopts a broad concept of the concept of risk” which represents an important step forward in the attempt to integrate trade and environment objectives. It thus created “a legal link” between the level of public anxiety and conformity to WTO rules, endowing the civil society with the power to confer legitimacy on governmental regulatory measures. The WTO DSS has to be alert to the fact that this legal link between the democratic sentiment and trade measures can be mobilized in future by the forces of protection to curtail free trade. On the other hand, it is to be hoped that future WTO rulings will pay equal attention to consumer anxiety in third world when it comes to the enforcement of other WTO agreements, such as for example, the TRIPs text. Finally, turning to the precautionary principle (embodied in Article 5.7, the sixth paragraph of the preamble and Article 3.3), the Appellate Body pointed out 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”(para 124). It then went on to state that: a panel charged with determining, for instance, whether ‘sufficient scientific evidence’ exists to warrant the maintenance by a member of a particular SPS measure may, of course, and should, bear in mind that responsible, representative governments commonly act from perspectives of prudence and precaution where risks are irreversible, e g, life-terminating, damage to human health are concerned. It is again to be hoped that the perspective of prudence and precaution when risks are irreversible will also be applied in interpreting other WTO agreements. And that the WTO Appellate Body and ...