GATT and the environment: reconciling liberal trade policies with environmental preservation.

• Author: Parks, David M.

1. INTRODUCTION

   With the passage of the Uruguay Round(1) of the General Agreement on Tariffs and Trade ("GATT")(2) and the creation of the World Trade Organization ("WTO"),(3) there has been much debate over what role, if any, the WTO should play in reconciling tension between liberal trade policies and environmental protection.(4) In the words of the WTO Committee on Trade and Environment, the multilateral trading system must be able to "apply [the principle of] non-discrimination(5) while ensuring that countries can implement domestic environmental policies appropriate for their social, political, economic and environmental preferences."(6)

   Many environmentalists, however, argue that the very premise of the WTO, that of free-trade,(7) directly conflicts with environmental preservation and protection.(8) Furthermore, they argue that the most troubling aspect of the Uruguay Round and the WTO is that the new legalism of the WTO(9) will diminish the effectiveness of United States environmental legislation(10) by allowing the WTO the final say over what domestic legislation is or is not GATT legal.(11)

   This article analyzes the interplay between the principle of non-discrimination and the need for a comprehensive system for environmental protection. Part II examines the principle of non-discrimination in the WTO and the WTO's new dispute resolution process. Part III explains some of the domestic forces that corrupt the multilateral trading system by influencing domestic environmental regulations in the direction of protectionism. Part IV analyzes how trade and the environment interplay within the WTO, paying particular attention to some recent GATT/WTO panel decisions: the Reformulated Gasoline Case and the Tuna-Dolphin Case. Finally, this article concludes with the observation that, despite the criticism levied against the WTO the new legalism of the WTO is a blessing in disguise for environmentalists because it is only through the principles of non-discrimination and legalism that environmental concerns can be shielded from political forces that use environmental protection as a guise for protectionism. In effect, the Uruguay Round will allow national decision makers to focus on the real and important concern of protecting the environment.

2. THE GENERAL AGREEMENT ON TARIFFS AND TRADE

   Some scholars have suggested that the collapse of the world economy and ultimately the cause of World War II arose from the nationalistic sentiments and economic protectionism that existed during the 1930s.(12) As such, one of the primary purposes behind the creation of many of the post-World War II international organizations was the prevention of this type of nationalistic protectionism.(13)

   GATT, in particular, was adopted(14) to address specific issues thought to hinder the free flow of goods between countries.(15) The original agreement addressed both overt governmental interference(16) as well as individual corporate actions(17) believed to be counterproductive and injurious to the world economic order.(18) Although the original GATT agreement and subsequent rounds of negotiations addressed a variety of Issues,(19) essentially three basic principles underlie GATT: (1) trade should be conducted on the basis of non-discrimination,(20) (2) markets should remain open and any protection afforded domestic industries should be accomplished exclusively through overt measures such as tariffs and import quotas,(21) and (3) violations of the principle of fair trade should be adjudicated exclusively through GATT.(22) These substantive benchmarks are also largely premised on a liberal notion of "free-trade."(23) The method by which free-trade is accomplished is through the harmonization and containment of the domestic barriers to the free-flow of goods.(24) In essence, the GATT was created to facilitate economic integration to further the ultimate goal of convergence by "adopt[ing] rules of international behavior and . . . imposing those rules on member states."(25) Thus, the GATT has evolved into a twofold process: first, the Contracting Parties to the GATT agree upon principles regarding the trade process and second, they attempt to enforce those principles upon the Contracting Parties in specific instances. The next section discusses two principles that were developed in the early years of the GATT and the exceptions to those principles that have evolved over the years.

   1. The Uruguay Round of GATT Negotiations And The Principle of Non-Discrimination

      The GATT's Articles I and III obligate a Contracting Party to treat imports no less favorably than other imports (the "Most Favored Nation" or "MFN" clause)(26) and no less favorably than similar domestic goods after border duties (the "National Treatment" clause).(27) Article XX, however, provides some general exceptions to these obligations. For purposes of this article, the relevant exceptions state: "Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination . . . or a disguised restriction on international trade . . .,"(28) Contracting Parties may adopt measures that are "necessary to protect human, animal or plant life or health"(29) or that "relat[e] to the conservation of exhaustible natural resource[]."(30) Finally, a measure invoking an Article XX exception must still avoid "arbitrary or unjustifiable discrimination between countries"(31) and must not be a "disguised restriction on international trade."(32)

      The "necessary" requirement under Article XX(b) has been interpreted narrowly as only allowing measures which are "least GATT-inconsistent."(33) This interpretation has been criticized as being too narrow because less GATT-inconsistent measures inevitably will be found in every case.(34) At first glance this narrow interpretation of "necessary" may appear to allow a GATT panel to sit as a super-legislature and dictate national environmental priorities.(35) A closer look reveals, however, that this is clearly not the case.

      It is important to note that the Article XX exceptions are only invoked when a Contracting Party wishes to use a GATT-inconsistent measurement.(36) That is, the measure must treat an import differently than another similar import, thereby violating the MFN clause, or the measure must treat the import differently than similar domestic goods, thereby violating the National Treatment clause. As such, invoking the Article XX exceptions must be justified by legitimate differences between the products.(37)

      Even though application of these principles to trade disputes was suppose to be a very straightforward process, prior to the Uruguay round the Contracting Parties to the GATT had a very difficult time applying these principles to the actual trade disputes that arose. At the center of the difficulty lay the pre-Uruguay Round dispute resolution process.

   2. The WTO Dispute Resolution Process

      In the past, the United States expressed some concern over the cumbersome and sometimes ineffective GATT dispute resolution process.(38) The primary justification for the use of unilateral measures outside of the GATT was the lack of enforcement of GATT obligations by the contracting parties.(39) The United States, therefore, led the drive to enhance the GATT dispute resolution process and hold contracting parties in strict compliance with the agreement.(40)

      i. The History and Problems of the GATT Dispute Resolution Process

      The original purpose of GATT dispute resolution, and more generally the original purpose of the GATT itself, was not to gain strict compliance with GATT law.(41) Its purpose was twofold: (1) to reach a settlement acceptable to the parties; and (2) to restore the balance of advantages(42) to the parties.(43) GATT dispute resolution is not based on a system of stare decisis and, therefore, the rulings of the panel do not have any legal force whatsoever beyond the reconciliation of the dispute between the parties.(44)

      The procedure for settling disputes within GATT begins with bilateral consultations.(45) If bilateral consultations are ineffective in resolving the dispute, the parties may request outside intervention and assistance.(46) Finally, a party may request a panel(47) to hear the dispute.(48)

      After hearing the parties, the panel, through an objective assessment of the facts and the applicability of the GATT, delivers its findings and recommendations.(49) The purpose of these findings, however, is not to state the strict letter of the law, but rather to help the parties reach a mutually acceptable solution to the problem.(50) Once the recommendations are adopted,(51) the only enforcement mechanism is the allowance of retaliatory measures by the complaining party.(52) However, there has been only one instance of the use of this enforcement mechanism.(53)

      In the past, the primary problems with the GATT dispute resolution rested with the inability to enforce, in an orderly fashion, the dispute resolution process or any resulting findings or conclusions upon the Contracting Parties. For instance, the length of time for a normal ruling to run its course has in many ways favored the tendency to not address many contentious issues.(54) In fact, the political implications of many issues has been said to make it advantageous for parties to fully drag down the entire system.(55) As an example, in 1970, the European Community brought a complaint against the United States, claiming that certain United States tax legislation constituted an export subsidy contrary to Article XVI.(56) This case bogged down, requiring over three years to determine the composition of the panel.(57) In fact, this case exemplifies multiple inadequacies in the prior GATT dispute resolution process including "undue delays, meager resources contributing to inadequate consideration, inadequate fact-finding [and] undefined roles of panels."(58)

      Troubles with the dispute resolution process...