Trade measures and the environment: can the WTO and UNCLOS be reconciled?

• Author: Myers, Brian K.
• Position: United Nations Convention on the Law of the Sea

I

INTRODUCTION

Critics frequently lambaste the World Trade Organization's (WTO) (1) actions as detrimental to the goal of environmental conservation. While the WTO's success in fostering free trade and open markets is indisputable, these critics have lamented the Organization's seeming lack of tolerance for measures designed to protect the environment. (2) On the other hand, the United Nations Convention for the Law of the Sea (UNCLOS) has been lauded as a major success in promoting environmental preservation of the oceans. (3) UNCLOS's unique, broad-based approach to managing and preserving marine resources has been described as a "constitution for the oceans." (4)

To further efforts at international environmental protection, nations frequently resort to trade measures. These measures might be taken unilaterally to enforce domestic environmental norms or collectively within the context of multilateral environmental agreements (MEAs). Traditionally, disputes concerning trade measures were handled at the WTO--often with disappointing results for environmentalists. With the advent of UNCLOS, however, an alternative forum was created for hearing such disputes--at least as they pertain to UNCLOS provisions. In this context, it is possible that a nation might use trade measures that are permissible under UNCLOS but which violate WTO rules. This raises the possibility of a jurisdictional dispute between the two regimes. Notwithstanding persuasive arguments to the contrary, it is unclear whether a UNCLOS tribunal could properly exercise jurisdiction in such a case. This potential dispute is not altogether bad from an environmental perspective; rather, given the recent evolution in WTO jurisprudence, environmental measures employed in marine preservation have a much greater chance of surviving WTO scrutiny. Moreover, to the extent trade measures are taken unilaterally, they are likely to be illegal under both the WTO and UNCLOS.

Despite this potential benefit, the spectre of having two trade measure regimes in fundamental disagreement is neither desirable nor tenable. Reconciliation between the WTO and UNCLOS is necessary to avoid a polarizing dispute that would needlessly consume limited international judicial resources. Such reconciliation is possible by following established rules in international law, as well as by recognizing the frequent convergence between the WTO and UNCLOS.

This article begins with an introduction to the origins and salient features of the WTO and UNCLOS. Such an introduction is helpful in understanding the current posture and priorities of the two regimes. Through a discussion of WTO and UNCLOS jurisprudence, this article highlights the need to discard traditional assumptions regarding the superiority of each regime in dealing with environmental issues generally, and marine environmental issues in particular. This article then discusses the issue of competing jurisdiction between the regimes, with an emphasis on the vital role of customary international law in resolving such disputes. Finally, this article suggests the need for reconciliation between the WTO and UNCLOS, with a view that the two regimes have more in common than many may have thought.

II

WTO BACKGROUND

The development of the General Agreement on Tariffs and Trade (GATT)--and its successor, the WTO--largely reflects the United States' (U.S.) view that free and non-discriminatory trade is essential for maintaining peace, security and economic prosperity. (5) Given the number of WTO participants and the Organization's impact on world trade, the WTO is a landmark in international law and policy. (6) The WTO also breaks ground in terms of the binding nature of its provisions and extensive enforcement mechanisms--components that are often conspicuously missing in international legal agreements. The WTO Agreement is generally viewed in terms of the "four pillars" that establish the fundamental obligations of WTO Members. These pillars are (1) most-favoured nation treatment (MFN); (2) tariff bindings; (3) national treatment; and (4) transparency and the prohibition of quantitative restrictions.

A GATT Article I: Most-Favored Nation Treatment

GATT Article I defines most-favoured nation treatment. It requires that any "advantage, favour, privilege, or immunity" granted by a contracting party to the products of any other country, shall be extended to the "like products" of any other contracting party. (7) Simply put, the best treatment one WTO Member gives to any country must also be given to all other WTO Members. Thus, MFN is fundamentally a non-discrimination obligation, though the obligation only applies as between "like products." The definition of like products has proven troublesome and has been the subject of much WTO jurisprudence and academic commentary. This issue is discussed more thoroughly in Section III:A in relation to the national treatment obligation and WTO jurisprudence on environmental measures.

While the MFN obligation is agreeable in principle, its controversy stems from the fact that WTO Members are generally not free to discriminate between products of different countries based on disparate environmental practices. For example, suppose Country A imports shrimp from two countries, Country B and Country C. Country B harvests shrimp in an environmentally responsible fashion, while Country C does not. Under MFN, Country A is obligated to extend similar treatment to shrimp imports from Country C, notwithstanding concerns about Country C's harvesting methods.

B GATT Article II: Tariff Binding

Article II contains the second pillar of WTO Member obligations: tariff binding. (8) WTO Members generally agree to bind tariffs at a level that is agreed upon following a round of negotiations (i.e., the Tokyo Round, Uruguay Round, etc.). These negotiations are conducted with other WTO Members on the basis of reciprocity. Once a tariff is "bound," a Member may not raise the tariff above the bound rate, though it may choose to lower it. Additionally, although the bound rate may have been the result of reciprocal negotiations with only one or a few Members, the bound rate applies to all other Members. In other words, the tariff must be applied on an MFN basis. (9) The purpose of Article II is straightforward: it prevents Members from rescinding their tariff agreements. In theory, tariff bindings are to be negotiated down over time so that trade among nations eventually becomes unfettered. (10)

The tariff binding obligation is not without environmental implications. For example, if a Member is concerned about products entering its territory from countries with lax environmental standards, it cannot single out that Member for less-preferential tariff treatment. Likewise, if a Member has already bound its tariffs vis-a-vis another Member and the other Member decides to lower its environmental standards, there is no opportunity to alter tariff treatment in response.

C GATT Article III: National Treatment

From an environmental perspective, the national treatment obligation has proven the most controversial of the four pillars of WTO Member obligations. Article III requires that products of any Member imported into the territory of any other Member shall not be subject to taxes or other charges in excess of those applied to like domestic products. (11) Additionally, Article III requires that products of any Member imported into the territory of any other Member be accorded treatment no less favourable than like domestic products with respect to laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. (12) The importance of the national treatment obligation stems from the reality that tariffs are not the only means nations use to discriminate against imported goods. Rather, numerous "behind the border" taxes, regulations and charges can be applied to imported goods to achieve a protectionist result that benefits domestic producers. (13)

As with the MFN obligation, national treatment hinges on the "like product" distinction. (14) The traditional definition of "like products" takes no account of process and production methods (so-called PPMs). Thus, a WTO Member may not discriminate between two products regardless of whether one product was produced in a more environmentally conscious way. (15) This logic supported the basic holding in the infamous Tuna-Dolphin cases--"tuna is tuna," even if it is harvested with purse-seine nets that kill dolphins. (16) The U.S. was not free to discriminate between tuna caught with destructive purse-seine nets and tuna caught with dolphin-safe nets because the method of catching tuna was not relevant to the "like product" determination. The subsequent evolution of the like product definition will be discussed further in Section III:A.

D GATT Articles XI and X: Quantitative Restrictions and Transparency

The prohibition of quantitative restrictions (quotas) and transparency obligations comprise the fourth pillar of WTO Member obligations.

1 Article XI: Prohibition of Quantitative Restrictions

Article XI states that no restrictions made effective through quotas shall be maintained by any Member on the importation of the products of any other Member. (17) The ban on quantitative restrictions reflects the generally held belief that quotas have a larger trade distorting effect than tariffs. As such, if a Member wants to halt trade in environmentally destructive products, quantitative restrictions are likely the most effective means of doing so. Thus, in Tuna-Dolphin I, the U.S. imposed a ban on the importation of Mexican tuna caught with purse-seine nets. The direct import prohibition on Mexican tuna was a quantitative restriction in violation of Article XI. (18)

2 Article X: Transparency Obligations

Article X lays out extensive transparency obligations for Members. They include provisions such as the prompt publication of...