September 1996

Saving Dolphins and Trade

Legal Times

The free trade discipline of the General Agreement on Tariffs and Trade and its successor, the World Trade Organization Agreement, is a continuing thorn in the side of many environmental protection advocates in the United States. It has repeatedly been contended that the GATT/WTO threatens the global environment by constraining the United States from aggressively pursuing environmental protection both inside and outside U.S. borders. The so-called tuna/dolphin case, in which two independent GATT dispute settlement panels determined that U.S. trade sanctions aimed at dolphin protection were unjustifiable under GATT rules, has been a principal catalyst for these claims.
Adoption of the WTO Agreement did not change the fundamental GATT rules applicable in the tuna/dolphin case. Contrary to the criticisms regarding those rules, however, there is evidence that they afford individual WTO member nations considerable latitude for pursuing legitimate environmental protection objectives.
First, the new WTO Committee on Trade and Environment, established specifically to explore how best to integrate environmental protection objectives into the WTO framework, is making notable progress toward ensuring that WTO rules do not impede the achievement of such objectives.
Second, the evolving jurisprudence on the GATT/WTO's application to environmental protection measures suggests sensitivity to and respect for discretionary judgments of individual nations in designating and implementing these measures.
Relevant Provisions
Under the basic GATT regime, as incorporated into the WTO Agreement, two provisions are particularly relevant to disputes over the trade effects of measures aimed at environmental protection. Both these provisions constitute exceptions to the general GATT/WTO prohibition against trade restrictions (including import/export banks and more technical impediments to free trade). One exception, set forth in GATT Article XX(b), permits the use of trade-restrictive measures necessary to protect human, animal or plant life or health." The other exception, provided under GATT Article XX(g), is 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."
Both Article XX(b) and Article XX(g) are potentially applicable to a variety of types of environmental measures. The United States invoked both provisions in defense of the embargoes on tuna imports that were challenged in the tuna/dolphin case. More recently, in the first case brought under the WTO, the United States invoked both provisions in defense of certain aspects of the gasoline regulations issued by the Environmental Protection Agency pursuant to the 1990 amendments to the Clean Air Act. It also invoked Article XX(g) in defending the corporate average fuel economy (CAFE) standards against a GATT challenge brought by the European Community.
Although the United States did not fully prevail in any of these cases, it is important to scrutinize the bases for the GATT/WTO decisions before making any judgments about the potential for reconciliating U.S. environmental objectives with WTO rules.
One of the most contentious aspects of GATT/WTO analyses of the applicability of Article XX to environmental measures is the use of the "less trade-restrictive" test. This test emerged as part of GATT panel interpretations of the "necessary" requirement in Article XX(b) (and Article XX(d)). Under well-established GATT jurisprudence, a measure is deemed "necessary" under Article XX(b) only if there is no less trade-restrictive means available to achieve the measure's legitimate health-related goals. Because this test suggests a limitation on a WTO member's ability to fashion a preferred approach to environmental protection, it has provoked protests from GATT/WTO critics, particularly those concerned about the WTO and national sovereignty.
In the CAFE case, the "necessary" requirement of Article XX(b) was not an issue because the CAFE standards are aimed at fuel conservation, rather than health protection, and thus the United States defended them principally under Article XX(g). That article does not require a showing of necessity. Nevertheless, the United States was concerned that the GATT panel might read into Article XX(g). That article does not require a showing of necessity. Nevertheless, the United States was concerned that the GATT panel might read into Article XX(g) a "less trade-restrictive" test -- or, indeed, an even stricter "least trade-restrictive" test.
The panel did not. In fact, it found, as the United States had urged, that certain challenged aspects of the CAFE standards (the "fleet averaging" requirements) were legitimate conservation measures under Article XX(g).
Finding Good News in the Bad
In response to this ruling, the Office of the U.S. Trade Representative declared that the panel decision, while adverse to the United states in certain respects, "confirms that GATT's trade rules can be compatible with our laws that protect the environment" and "is a recognition that our government -- and those of other countries -- have latitude to legislate and regulate in these crucial areas as long as they are not discriminating between domestic and imported products." The USTR specifically stated that the decision "laid to rest the concern that governments were obligated to select the ‘least trade-restrictive' conservation measure."
In fact, concerns about a "least trade-restrictive" test in any GATT/WTO context appear unwarranted. The more lenient, "less trade-restrictive" test is the prevailing standard, as underscored by, among other things, recent dispute settlement rulings and the references to "less trade-restrictive" measures in the WTO Agreement on Technical Barriers to Trade.
Interestingly, although the "less trade-restrictive" test emerged from GATT panel interpretations of the "necessary" requirement in Article XX(b) (and Article XX(d)), the WTO Appellate Body in the recent case challenging the EPA's gasoline regulations suggested that some form of the test -- albeit a less stringent one than applies under Article XX(b) -- may be relevant to any Article XX analysis. (The Appellate Body in the so-called Gasoline Rule case did not address Article XX(b), since the United States appealed the case based solely on Article XX(g).
Under the introductory clause -- or chapeau -- to Article XX, none of the exceptions set forth in the separate paragraphs of Article XX will justify a measure that, while meeting the requirements of that separate paragraph, is "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." In the Gasoline Rule case, the Appellate Body indicated that a measure may not comport with thesechapeau requirements if other measures that are less trade-restrictive are available and have not been sufficiently explored by the nation imposing the challenged measure.
In reaching its conclusion regarding the U.S. defense of the trade-restrictive aspects of the Gasoline Rule -- that is, the discrimination against imports of gasoline from Venezuela and Brazil -- the Appellate Body observed that "[t]here was more than one alternative course of action available to the United States in promulgating regulations implementing the [Clean Air Act]," including imposing rules that, "if properly implemented, could have avoided any discrimination at all." Based on the facts before it, the Appellate Body reasoned that "[t]he United States must have been aware that for these [alternative, nondiscriminatory rules] to work, cooperative arrangements with both foreign refiners and the foreign governments concerned would have been necessary and appropriate." Yet, the Appellate Body found, "the United States had not pursued the possibility of entering into cooperative arrangements with the governments of Venezuela and Brazil or, if it had, not to the point where it encountered governments that were unwilling to cooperate."
Notably, these statements of the WTO Appellate Body echo those of the first GATT panel that analyzed the U.S. import embargo in the tuna/dolphin case. In the earlier case, the panel found that the embargo did not meet the "necessary" requirement of Article XX(b) in part because the United States had not demonstrated that it had "exhausted all options reasonably available to it to pursue its dolphin protection objectives through measures consistent with the [GATT], in particular through the negotiation of international cooperative arrangements, which would seem to be desirable in view of the fact that dolphins roam the waters of many states and the high seas." This statement, much like the reference to cooperative arrangements in the Gasoline Rule case, suggests a reasonable formulation of the "less trade-restrictive" test, which could fairly be applicable under either the Article XX exceptions that require "necessity" or the Article XX chapeau.
Recent developments in the tuna/dolphin case underscore the potential value of the "less trade-restrictive" test. Although neither of the panel decisions in the case has been adopted as an official GATT ruling, the United States has, in fact, pursued precisely the course suggested by the first panel's "less trade-restrictive" analysis: negotiation of a cooperative arrangement on dolphin protection. Together with the other nations involved in tuna fishing that may kill dolphins, the United States last year reached agreement on a plan for multilateral reductions in -- and ultimately near elimination of -- such fishing-related mortality. Legislation is pending in the Senate, following its recent passage in the House, that would incorporate the agreement into U.S. law and thereby lift the tuna embargoes found inconsistent with GATT.
Although it may not always be possible to secure -- or even to foresee the need for -- multilateral agreement on the design and implementation of environmental protection measures that may burden international trade, it seems reasonable and appropriate that, where alternatives to trade-restrictive measures are available, they should be fully explored. Such exploration should attempt to determine, fairly and reasonably, whether the alternatives will be sufficiently effective to achieve the legitimate environmental objectives at issue in a manner that also mitigates adverse trade impacts on all affected WTO members.


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