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Regulations, labels, and standards

What if access to carbon labels is discriminatory? As with discriminatory taxes in Archer Daniels Midland v. Mexico, Corn Products International v. Mexico, and Cargill v. Mexico, foreign investors could succeed in claiming a violation of national treatment. A key issue is whether the foreign investor and a competing domestic company are in “like circumstances.” As we saw in Chapter 3, the WTO Appellate Body Report in US—Tuna II (Mexico) suggests that processing and production methods could be relevant to a determination of the likeness of products in the TBT Agreement. If consumer preferences for products labeled low carbon in the relevant market determine the competitive relationship between domestic and imported products, and there is evidence that demonstrates that the products in fact have different carbon footprints, the products might not be considered “like” in the TBT Agreement and there would not be a violation of national treatment. A similar situation could lead to the conclusion that a foreign investor and a domestic competitor are not in “like circumstances” with respect to the national treatment obligation in an IIA. However, carbon labels are a recent development and consumer awareness of carbon footprints is not sufficiently developed to determine the competitive relationship between products. If governments introduce carbon labeling schemes it will be difficult to design the measurement of carbon footprints in a manner that avoids discrimination between otherwise competing products. If governments introduce carbon labeling schemes, this could constitute not just a violation of GATT or the TBT Agreement, but form the basis of a claim under an IIA. The same would be true for technical regulations regarding the carbon intensity of processing and production methods.

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