GATT Article XX
Two paragraphs, (b) and (g), in GATT Article XX will play an important role in determining the kind of measures that may be used to combat climate change. In addition, the analysis under the chapeau of Article XX will determine how those measures should be applied.
Article XX(g) applies to measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.” This phrase raises four key issues.
- (1) Is the climate an “exhaustible natural resource”? (2) If a jurisdictional nexus is required between the Member enacting a measure and the natural resource, does a sufficient nexus exist between all WTO Members and the global climate? (3) How should a panel determine whether a specific measure relates to climate change?
- (4) Are the measures “made effective in conjunction with restrictions on domestic production or consumption”?
In US—Shrimp, the Appellate Body interpreted the term “exhaustible natural resources” to include both living and non-living natural resources. The Appellate Body and GATT panels have found the following to be exhaustible natural resources: clean air; migratory sea turtles; salmon and herring; tuna; and dolphins. In US—Shrimp, since the migratory sea turtles were listed under CITES as being in danger of extinction, the Appellate Body held that they were exhaustible natural resources. Preserving the global climate could be considered analogous to the preservation of clean air in US—Gasoline. Alternatively, the issue of the levels of carbon and other greenhouse gases in the atmosphere could be viewed as a clean air issue. The US Environmental Protection Agency decision to address greenhouse gases under the Clean Air Act supports this view. Multilateral environmental agreements on climate change might be taken into account to support the view that the global climate is an exhaustible natural resource. The following passage in US—Shrimp lends support to this view:
The words of Art. XX(g), “exhaustible natural resources,”... 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. . . . From the perspective embodied in the Preamble of the WTO Agreement [referring to the objective of sustainable development], the generic term of “natural resources” is not “static” in its content or reference but is rather, by definition, evolutionary.
In US—Shrimp, the Appellate Body held there was a sufficient jurisdictional nexus between migratory sea turtles and the United States because they spent part oftheir migratory life cycle in American waters, without ruling on whether there was a jurisdictional limit implied in the language of Article XX(g). The effects of climate change are global. Therefore, there should be a sufficient jurisdictional nexus between all WTO Members and climate change.
The term “relating to” has been interpreted to mean “primarily aimed at,” rather than “necessary or essential.” The term “relating to” requires an examination of “the relationship between the measure at stake and the legitimate policy of conserving exhaustible natural resources.” This requires “a close and genuine relationship of ends and means” and an examination of “the relationship between the general structure and design of the measure ... and the policy goal it purports to serve.” Multilateral environmental agreements on climate change could serve as evidence that measures aimed at the reduction of greenhouse gas emissions relate to the conservation of the global climate. This could include measures such as differential tax treatment based on the different carbon emissions resulting from production processes, provided that there is a close and genuine relationship between the general structure and design of the measure and the policy goal of reducing carbon emissions to conserve the global climate. If the structure and design of the measure is based on specific obligations in a multilateral environmental agreement on climate change, it would be more likely to meet the requirements of paragraph (g). While this is probably not essential, such specific obligations would provide evidence that the measure does relate to climate change.
Article XX(g) also requires that conservation measures be “made effective in conjunction with restrictions on domestic production or consumption.” In US— Gasoline, the Appellate Body interpreted “made effective” as referring to a governmental measure being “operative,” as “in force,” or as having “come into effect.” The clause does not establish an empirical “effects test” for the availability of the Article XX(g) exception. Rather, this clause is a requirement of evenhandedness in the imposition of restrictions, in the name of conservation, upon the production or consumption of exhaustible natural resources, but does not require identical treatment of domestic and imported products. In China—Raw Materials, the Appellate Body noted that the equivalent terms in Spanish and French of “made effective” (“se apliquen” and “sont appliques”) confirm this interpretation. There is no additional requirement that the trade measure be primarily aimed at making the domestic restrictions effective. It is not clear whether differences in the treatment of products, based on their impact on climate change, could meet this requirement without the differences in treatment being justified by reference to the evidence regarding the reasons for the differential treatment, such as scientific evidence comparing the carbon footprints of different products.
Article XX(b) applies to measures “necessary to protect human, animal or plant life or health.” This paragraph requires that the policy goal at issue falls within the range of policies designed to protect human, animal or plant life or health. In Brazil—Retreaded Tyres, the Panel accepted that measures aimed at protecting Brazil’s environment fell within the range of policies covered by Article XX(b).
Once it is established that the policy goal fits the exception, the issue is whether the measure is “necessary” to achieve the policy goal. This analysis takes place in light of the level of risk that a Member sets for itself. To demonstrate that the measure is necessary involves weighing and balancing a series of factors. First, the greater the importance of the interests or values that the challenged measure is intended to protect, the more likely it is that the measure is necessary. Second, the greater the extent to which the measure contributes to the end pursued, the more likely that the measure is necessary. Third, the less the trade impact of the challenged measure, the more likely that the measure is necessary. Fourth, whether a WTO-consistent alternative measure which the Member concerned could reasonably be expected to employ is available, or whether a less WTO- inconsistent measure is reasonably available. The weighing and balancing process of the first three factors also informs the determination of the fourth.
There is no question that environmental protection would be considered an important interest or value in Article XX(b). In Brazil—Retreaded Tyres the Panel found that “few interests are more ‘vital’ and ‘important’ than protecting human beings from health risks, and that protecting the environment is no less import- ant.” The Appellate Body agreed that protection of the environment is an important value. However, the weight accorded to the objective of environmental protection could be less than that accorded to the objective of protecting human life or health, given the Appellate Body’s characterization of the former as “important” (Brazil—Retreaded Tyres) and of the latter as “both vital and important in the highest degree” (EC—Asbestos).
The extent to which a climate change measure contributes to the end pursued would be difficult to measure. A measure must be “apt to produce a material contribution to the achievement of its objective.” A measure that only makes “a marginal or insignificant contribution” to the objective is not enough to be considered necessary. Nevertheless, in Brazil—Retreaded Tyres, the Appellate Body emphasized the need to view the measure against the broader context of a comprehensive strategy to deal with a problem. Moreover, the Appellate Body stated that the contribution of a trade-restrictive measure to address climate change, while not immediately observable, can be justified under Article XX(b):
We recognize that certain complex public health or environmental problems may be tackled only with a comprehensive policy comprising a multiplicity of interacting measures. In the short-term, it may prove difficult to isolate the contribution to public health or environmental objectives of one specific measure from those attributable to the other measures that are part of the same comprehensive policy. Moreover, the results obtained from certain actions—for instance, measures adopted in order to attenuate global warming and climate change ... —can only be evaluated with the benefit of time.
In China—Raw Materials, the Panel had to confront China’s arguments based on this passage. China argued that this passage indicates that the contribution should be evaluated in the present and in the future. The Panel first focused on the contribution in the present. Taking into consideration how some regulatory policies cancelled the alleged environmental benefits of others, the panel found that the net effect of the export restrictions did not contribute significantly to environmental protection. The Panel then rejected China’s argument that its policies would contribute to its economic development over the long-term, which would in turn contribute to its ability to protect the environment, in accordance with the Kuznet’s curve, which shows a correlation between pollution and the level of economic development. The Panel concluded that, while economic growth makes environmental protection statistically more likely, this did not prove that China’s export restrictions were necessary to obtain environmental benefits.
Regarding the trade impact of the challenged measure, if a “comprehensive regulatory strategy” is relevant to the extent of the contribution, then it should also be examined in assessing the trade-restrictive impact of the measure. In that case, the cumulative impact of a series of climate change measures could together have much more significant restrictive effects than a measure considered in isolation.
The same issue arises regarding the issue of whether alternative measures would achieve the same objectives as the challenged measure. If the challenged measure is part of a comprehensive regulatory strategy and the effect of the measure might not be revealed in the near future, this will be a difficult point to argue. The Member defending the measure may point out why alternative measures would not achieve the same objectives as the challenged measure, but it is under no obligation to do so in order to establish, in the first instance, that its measure is “necessary.” If the complainant raises a WTO-consistent alternative measure that, in its view, the respondent should have taken, the respondent will be required to demonstrate why its challenged measure nevertheless remains “necessary” in the light of that alternative or, in other words, why the proposed alternative is not, in fact, “reasonably available.” If the respondent demonstrates that the alternative is not “reasonably available,” in light of the interests or values being pursued and the party’s desired level of protection, it follows that the challenged measure must be “necessary.” Should the alternatives be considered in light of relevant international norms, such as those set out in multilateral environmental agreements on climate change? Should any alternative measures be measures that the respondent can take alone, rather than measures that are beyond its control or that would require consultations or negotiations with other countries? What kind of scientific evidence will be required? The Appellate Body has stated the following in this regard: “In justifying a measure under Article XX(b) of the GATT 1994, a Member may also rely, in good faith, on scientific sources which, at that time, may represent a divergent, but qualified and respected, opinion.”
The purpose of the chapeau is to prevent the abuse of the exceptions in Article XX. The chapeau embodies the recognition on the part of WTO Members of the need to maintain a balance between the right of a Member to invoke an exception on the one hand, and the substantive rights of the other Members on the other hand.
The chapeau requires that a measure that has been provisionally justified under one of the paragraphs of Article XX not be applied in a manner that constitutes:
- (1) arbitrary discrimination between countries where the same conditions prevail;
- (2) unjustifiable discrimination between countries where the same conditions prevail; or (3) a disguised restriction on international trade. The respondent has the burden of proof to show that the application of the measure meets the requirements of the chapeau. In order for the measure to pass the chapeau test, the respondent must prove that all three requirements have been met. In order for the measure to fail the chapeau test, the complainant only needs to show that one of these three requirements has not been met.
There are three elements in the chapeau analysis of whether a measure is applied in a manner that constitutes “arbitrary or unjustifiable discrimination between countries where the same conditions prevail”: (1) the application of the measure results in discrimination; (2) the discrimination is arbitrary or unjustifiable; and
(3) the discrimination occurs between countries where the same conditions prevail (between different exporting countries or between the exporting countries and the importing country). The chapeau also refers to disguised restrictions on international trade. The jurisprudence has tended to find that the evidence that supports a finding of arbitrary or unjustifiable discrimination also supports a finding of disguised restrictions on international trade.
In US—Gasoline and US—Shrimp, the Appellate Body identified two main criteria to determine whether discrimination that has been shown to exist is arbitrary or unjustifiable: (1) a serious effort to negotiate with a view to achieving the policy goal of the measure at stake; and (2) flexibility of the measure (e.g. in taking into account the situation prevailing in other countries). With respect to the second criteria, in US—Shrimp (Art. 21.5), the Appellate Body agreed with the Panel that conditioning market access on the adoption of a program comparable in effectiveness, allows for sufficient flexibility in the application of the measure, so as to avoid arbitrary or unjustifiable discrimination.
In US—Shrimp, the Appellate Body found that the American regulations were arbitrary or unjustifiable because the US: (1) required WTO members to adopt “essentially the same policy” as that applied in the United States without taking into account other policies and measures a country may have adopted that would have a comparable effect on sea turtle conservation; (2) applied the same standard without taking into consideration whether it was appropriate for the conditions prevailing in other countries; (3) 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”; and (4) failed to provide due process in the denial of certification compared to those who were granted certification. However, the chapeau does not require that a Member succeed in its efforts to negotiate a multilateral solution to a transnational environmental problem.
In Brazil—Retreaded Tyres, the Appellate Body held that:
there is arbitrary or unjustifiable discrimination when a measure provisionally justified under a paragraph of Article XX is applied in a discriminatory manner “between countries where the same conditions prevail,” and when the reasons given for this discrimination bear no rational connection to the objective falling within the purview of a paragraph of Article XX, or would go against that objective.
This requirement that the reasons for the discrimination relate to the objective of the particular paragraph of Article XX might explain diverging WTO jurisprudence on whether the chapeau requires an effort to negotiate prior to employing trade restrictions to address environmental issues. In the two WTO cases involving paragraph (g), the Appellate Body found that a failure to negotiate led to a failure to comply with the nondiscrimination requirements of the chapeau. In US— Shrimp, it was unclear whether the obligation to negotiate stemmed from multilateral environmental documents that expressed a preference for multilateral solutions to transboundary or global environmental problems, or whether it stemmed from the American failure to negotiate with Asian countries having done so with countries in the Americas. In the cases involving paragraph (b), the Appellate Body has not found any obligation to negotiate in order to comply with the nondiscrimination requirements of the chapeau.
The divergence in the jurisprudence might be explained by arguing that paragraphs (b) and (g) apply to different matters. This might explain why in some cases the avoidance of arbitrary or unjustifiable discrimination requires an effort to negotiate. The rule of effective treaty interpretation requires that treaty terms be interpreted so as to avoid redundancy. This suggests that paragraphs (b) and (g) must apply to different matters. However, paragraph (g) has been applied to measures aimed at the conservation of animals (migratory turtles, salmon, herring, tuna, and dolphins) and paragraph (b) has also been applied to a measure aimed at protecting animals (monkeys in Brazil). The only obvious difference in these animals is that those considered under paragraph (g) are migratory, and hence a transboundary environmental issue, whereas the monkeys considered under paragraph (b) are not migratory, and hence a domestic environmental issue. In addition to migratory species, a clean air measure has been addressed under paragraph (g). While the clean air at issue was that of the United States, and hence domestic, clean air is a transboundary environmental issue. Air pollution does not respect national boundaries. Examples include forest fires in Mexico causing air pollution in the United States and air pollution in the United States causing acid rain in Canada. Thus, the case law supports the view that one difference between the two paragraphs might be that (b) addresses domestic issues and (g) addresses transboundary issues. An analysis under the Vienna Convention on the Law of Treaties, Articles 31, 32, and 33 also supports this view.
The obvious objection to the notion that paragraph (g) addresses only transboundary issues is that this appears to exclude exhaustible natural resources that are contained within one country’s borders, such as mineral resources. The answer to this objection is not obvious. One possibility is to consider that mineral resources are a finite global resource, even when they are contained within the borders of one country. Another possibility is to address domestic resources under other exceptions, such as: GATT Article XX(i) (for restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry); GATT Article XX(j) (for measures essential to the acquisition or distribution of products in general or local short supply); or GATT Article XXI (for measures necessary for the protection of a Member’s essential security inter- ests). However, neither the Panel nor the Appellate Body considered the difference between paragraphs (b) and (g) in China—Raw Materials.
The different thresholds in paragraphs (b) and (g) also suggest that they apply to different matters. WTO jurisprudence has indicated that the term “necessary” sets a higher threshold than the term “relating to.” At the same time, WTO jurisprudence has indicated that there is no interest or value more important than human life and health. It would be an odd result to set a higher threshold for measures that aim to preserve human life and health than for the conservation of an exhaustible natural resource. Another possible reason for a stricter threshold in paragraph (b) is that the cause of protecting human, animal, or plant life or health can be more easily abused by Members because it is more subjective than the conservation of natural resources, which can be determined more objectively. One solution to this conundrum is for WTO jurisprudence to evolve to a point where the threshold converges. If one considers that the avoidance of arbitrary or unjustifiable discrimination under the chapeau requires WTO Members to seek multilateral solutions to address the conservation of transboundary resources, while no such requirement exists for measures that address the protection of domestic human, animal or plant life or health, the analysis under the chapeau would eliminate any difference in the thresholds in paragraphs (b) and (g). In other words, the term “relating to,” in combination with a negotiation requirement, would set a higher threshold than the term “necessary” without a negotiation requirement. Indeed, a negotiation requirement could act as a barrier to litigation, not just a threshold issue in litigation. In the context of GATS Article XIV(a), the Appellate Body disagreed with the panel that the term “necessary” implied a negotiation requirement. However, the circumstances in which there might be a negotiation requirement in the chapeau of GATT Article XX or GATS Article XIV has not been resolved in WTO jurisprudence. It is also inappropriate to require international cooperation or negotiations to address domestic health issues, since each WTO Member has the right to determine its appropriate level of health protection and this issue is entirely within each Member’s jurisdiction. Indeed, limiting the scope of paragraph (b) to domestic concerns resolves the question of whether there is an implicit jurisdictional limitation in paragraph (b) and paragraph (g).
Other paragraphs that use the term “necessary” are consistent with the idea that this threshold applies to domestic matters. GATT Article XX(a) applies this term to “public morals” and GATS Article XIV(a) to “public morals” and “public order.” Since the standards for public morals vary from one country to the next (and even among communities within the same country), it is reasonable to conclude that these paragraphs apply to domestic issues. Similarly, public order is a domestic issue. GATT Article XX(d) and GATS Article XIV(c) apply the term “necessary” to measures to secure compliance with laws or regulations. The Appellate Body has held that the term “laws or regulations” in GATT Article XX(d) refers to domestic laws or regulations. GATS Article XIV(b) applies to the same subject matter as GATT Article XX(b).
If Article XX(b) does not apply to transnational or global environmental concerns, measures aimed at addressing climate change would not fall within the range of policies covered by Article XX(b), unless it could be shown that the measures also addressed domestic environmental or health concerns. While climate change is a global issue, it can also affect domestic issues such as human health. It is possible for more than one paragraph in Article XX to apply to different aspects of the same measure. The Appellate Body ruled that the GATT and the GATS could apply to different aspects of the same measure. Thus, measures aimed at climate change could be characterized as addressing both transnational and domestic issues, allowing both paragraphs to apply. The issue of whether a measure addresses a transnational or domestic problem is a question of fact. The scope of paragraphs (b) and (g) is a question of law.
-  Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products(US—Shrimp), WT/DS58/AB/R, adopted November 6, 1998, paras. 128—31.
-  Appellate Body Report, United States—Standards for Reformulated and Conventional Gasoline(US——Gasoline), WT/DS2/AB/R, adopted May 20, 1996.
-  Appellate Body Report, US—Shrimp.
-  GATT Panel Report, Canada—Measures Affecting Exports of Unprocessed Salmon and Herring(Canada—Salmon and Herring), L/6268—35S/98, adopted March 22, 1988.
-  GATT Panel Report, United States—Prohibition of Imports of Tuna and Tuna Products fromCanada (US—Tuna from Canada), L/5198—29S/91, adopted February 22, 1982.
-  GATT Panel Report, US—Tuna (Mexico).
-  I thank the moot team from the University of Melbourne in the 2009 ELSA moot courtcompetition on WTO law in Taipei, Taiwan for this observation (Ms. Bellamy, Mr. Kruse, andMr. Tran).
-  See further Massachusetts and others v. Environmental Protection Agency and others (United StatesSupreme Court) 549 US (2007).
-  Appellate Body Report, US—Shrimp paras. 129—30.
-  GATT Panel Report, Canada—Salmon and Herring; Appellate Body Report, US—Gasoline;Appellate Body Report, US—Shrimp.
-  Appellate Body Report, US—Shrimp.
-  Appellate Body Report, US—Gasoline 20—1.
-  Appellate Body Report, China—Raw Materials para. 356.
-  Appellate Body Report, Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef(Korea—Beef), WT/DS161/AB/R, adopted January 10, 2001; Appellate Body Report, EC—Asbestos;Appellate Body Report, United States—Measures Affecting the Cross-Border Supply of Gambling andBetting Services (US—Gambling), WT/DS285/AB/R, adopted April 20, 2005; Appellate Body Report,Dominican Republic—Measures Affecting the Importation and Internal Sale of Cigarettes (DominicanRepublic—Cigarettes), WT/DS302/AB/R, adopted May 19, 2005; Appellate Body Report, Brazil—Measures Affecting Imports of Retreaded Tyres (Brazil—Retreaded Tyres), WT/DS332/AB/R, adoptedDecember 17, 2007.
-  Panel Report, Brazil—Measures Affecting Imports of Retreaded Tyres (Brazil—Retreaded Tyres),WT/DS332/R, adopted December 17, 2007, para. 7.108.
-  Appellate Body Report, Brazil—Retreaded Tyres para. 179.
-  Appellate Body Report, Brazil—Retreaded Tyres para. 151.
-  Appellate Body Report, Brazil—Retreaded Tyres para. 150.
-  Appellate Body Report, Brazil—Retreaded Tyres para. 154.
-  Appellate Body Report, Brazil—Retreaded Tyres para. 151.
-  Panel Report, China—Raw Materials paras. 7.470—7.471.
-  Panel Report, China—Raw Materials para. 7.518.
-  Panel Report, China—Raw Materials paras. 7.540—7.551.
-  Appellate Body Report, US—Gambling paras. 310—11.
-  Appellate Body Report, US—Gambling paras. 316—18.
-  Appellate Body Report, EC—Asbestos para. 178, citing Appellate Body Report, EuropeanCommunities—Measures Concerning Meat and Meat Products (Hormones) (EC—Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted February 13, 1998, para. 194.
-  Appellate Body Report, US—Shrimp.
-  Appellate Body Report, US—Gasoline para. 23; Panel Report, Brazil—Retreaded Tyres para.7.319; Appellate Body Report, Brazil—Retreaded Tyres para. 239.
-  Appellate Body Report, US—Shrimp (Art. 21.5) para. 144.
-  Appellate Body Report, US—Shrimp paras. 163—6, 181.
-  Appellate Body Report, US—Shrimp (Art. 21.5).
-  Appellate Body Report, Brazil—Retreaded Tyres para. 227.
-  Appellate Body Report, US—Gasoline; Appellate Body Report, US—Shrimp.
-  Appellate Body Report, EC—Asbestos; Appellate Body Report, Brazil—Retreaded Tyres; AppellateBody Report, US—Gambling (considering a comparable provision in Article XIV of the GATS).
-  Bradly J. Condon, “GATT Article XX and Proximity of Interest: Determining the SubjectMatter of Paragraphs b and g” (2004) 9 UCLA Journal of International Law and Foreign Affairs 137.
-  Appellate Body Report, US—Shrimp; Appellate Body Report, US—Shrimp (Art. 21.5).
-  GATT Panel Report, Canada—Salmon and Herring.
-  GATT Panel Report, Canada—Salmon and Herring.
-  GATT Panel Report, US—Tuna from Canada.
-  GATT Panel Report, US—Tuna (Mexico).
-  Panel Report, Brazil—Retreaded Tyres.
-  ViennaConventionontheLawofTreaties,openedforsignatureMay23, 1969,1155UNTS331(entered into force 27 January 1980); Condon “GATT Article XX and Proximity of Interest.”
-  I thank David Morgan for this idea.
-  I thank David Morgan again for helping me on this point.
-  Appellate Body Report, EC—Asbestos para. 172.
-  I thank an anonymous reviewer for making this point.
-  I thank Professor Matsushita for this idea.
-  Appellate Body Report, US—Gambling paras. 308, 317, 321.
-  Appellate Body Report, EC—Asbestos paras. 167—8.
-  GATT Secretariat, The Results of the Uruguay Round of Multilateral Trade Negotiations,the Legal Texts (Geneva, 1994) 284.
-  Appellate Body Report, Mexico—Tax Measures on Soft Drinks and Other Beverages (Mexico—Taxes on Soft Drinks), WT/DS308/AB/R, adopted March 24, 2006, para. 69.
-  Bradly J. Condon and Tapen Sinha, Global Lessons from the AIDS Pandemic. Economic,Financial, Legal and Political Implications (Springer Verlag, Berlin 2008) 5—6; Bradly J. Condon andTapen Sinha, “Chronicle of a Pandemic Foretold: Lessons from the 2009 Influenza Epidemic” (2010)22 Florida Journal of International Law 1.
-  Appellate Body Report, European Communities—Regime for the Importation, Sale and Distribution of Bananas (EC——Bananas III), WT/DS27/AB/R, adopted September 25, 1997, para. 221.