The squabble of nations

Cloudy dispute settlement mechanism

By Bharath Jairaj
Published: Monday 15 September 2003

The squabble of nations

-- In the early days of the General Agreement on Trade and Tariffs (gatt), trade and environment related disputes were diplomatically resolved. Over the years, there developed a 'rule based' system. Under the present two-stage dispute settlement procedure under the wto, a finding of the dispute settlement panel -- arrived at after evidence and arguments from all sides -- may be appealed against before the Appellate Body (ab), whose decisions are binding unless wto Members unanimously decide not to adopt them.

On trade and environment, gatt/wto dispute settlement has focused primarily on interpretation of Article xx of the gatt. The article allows countries to impose trade-restrictive measures necessary to achieve certain objectives, such as the protection of animals, plants, and humans or relating to the exhaustion of natural resources. In this context, decisions in four gatt/wto dispute cases relevant to the environment -- now called the Tuna i and ii, Reformulated Gasoline, Shrimp/Turtle and Asbestos cases -- are key in developing a perspective on the emerging environmental jurisprudence within the dispute settlement body.
EMERGING JURISPRUDENCE ppm (process and production methods) and et (extra-territoriality): The gatt/wto rules do not allow Members to take extra-territorial (et) trade measures to enforce domestic laws in another Member state or discriminate between "like products". Both the Tuna/Dolphin panels' decisions held that the ppm-based import bans did not qualify for exception. They ruled that products intrinsically comparable would be considered "like", regardless of differences in the manner in which they were produced or harvested. On the et issue, the panel in Tuna ii identified other systems of jurisdiction a country could rely upon to apply its laws outside its territory, effectively making it possible for states to use these systems.

The Shrimp/Turtle panel reiterated what the Tuna panels said. But, the ab opened the door to ppm-based trade restrictions so long as they applied in a non-discriminatory way to wto members. It accepted the possibility of et measures where there is sufficient environmental nexus and replaced the prima facie threshold test with a broader set of tests more applicable to ppms.

Therefore while the ab upheld the right of the us to impose trade measures aimed at mandating harvesting standards -- for shrimp harvested in foreign countries for import into the us -- as justifiable under Article xx, the ab found that the manner of implementation was violative of Article xx.

The end result of the Turtle/Shrimp dispute is that Members will be able to invoke Article xx to impose conditions on imports' ppms to accomplish environmental objectives both outside their jurisdiction and in the global commons.

mainstreaming non-trade issues under article iii: The ab ruling in the Asbestos dispute laid down a test of "competitiveness" in determining "likeness" under Article iii, which implies countries cannot discriminate between domestic and foriegn goods Though the ruling does not deal with environment, it is nevertheless relevant because it deals with health, or more specifically, carcinogenicity as a distinguishing physical characteristic.

The panel concluded that the products in question should be seen as "like products". This required the ban to be justified as an exception under Article xx. The ab, however, reversed the ruling by taking into account health issues under Article iii. This interpretation suggests that countries are now allowed to make more nuanced product differentiations and might even base these on environmental reasons or ppms in the future.

wto jurisprudence has not yet clarified whether Article iii covers ppm-type issues. But, despite no conclusive findings, the ab rulings in Shrimp/Turtle and Asbestos have promoted apprehensions that the concept of a "like product" has been opened to accommodate non-trade concerns, including environment, labour and other human rights.
SETTLING DISPUTES: CURRENT TRENDS Global economic integration will increase the potential for conflict. Therefore public health standards, food safety requirements, emissions limits and such factors may shape trade flows. The wto dispute settlement mechanism thus has the task of reconciling international environmental policy with the promotion of free trade.

Strictly speaking, the mechanism is not expected to operate on precedents. However, its precedent-setting value is becoming increasingly significant. It is being seen as taking on the role of "judicial activist", arriving at decisions that do not necessarily take account of discussions in the cte, or reflect the positions of all member states.

Developing countries have consistently had a problem with this "judicial activism". The ab in particular is being questioned for accepting amicus briefs from ngos and non-members, and for authorising panels to do the same. However, given the slow progress at the cte, the findings of panels and the ab will continue to determine how the wto treats environmental issues. Further, where efforts to solve particularly difficult trade-environmental conflicts via negotiation have failed, there is a strong move to resolve these issues through the dispute settlement body.

Thus, there are two distinct trends emerging on trade and environment disputes -- a shift towards extraterritorial environmental protection or human health protection and a shift from using Article xx exceptions to mainstreaming non-trade concerns under Article iii. These findings are situated in a context of broader wto institutional reform aimed at making its workings more transparent, including the dispute settlement mechanism. The wto law is no longer an impermeable system, resistant to other issues of international law. On the contrary, it is clearly being moved within the precincts of regular international law, irrespective of what developing countries think.

Bharath Jairaj is of the Citizen consumer and civic Action Group

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