Multilateral environmental agreements and the GATT: conflict and resolution?

• Author: Wold, Chris

1. INTRODUCTION

   International trade increasingly is making human society economically and socially interdependent. A Chevrolet, the quintessential American automobile, may contain predominately Japanese parts, and the design of the automobile and the management of the factory may rely on German ingenuity and Japanese efficiency.(1) Such interdependence has led to stunning growth in international trade.(2) Similarly, resolution of global environmental problems demands cooperative action by a large number of countries. The restoration of the ozone layer, depleted by the use of chlorofluorocarbons (CFCs) and other ozone depleting substances for refrigeration and air conditioning, cannot be accomplished without most countries agreeing to eliminate their consumption and production of ozone depleting substances. Global warming and international traffic in endangered species likewise cannot be resolved without the participation of many countries.

   Although conflict is not inherent, trade can cause environmental problems or conflict with environmental goals.(3) International trade rules, as declared in the General Agreement on Tariffs and Trade (GATT) and incorporated into the new World Trade Organization (WTO),(4) the principal international trade agreement and institution, often conflict with environmental goals and laws. Nations, however, continue to treat trade and environment separately, rather than make them mutually reinforcing. This dichotomy could pose significant problems for resolving global environmental problems, because many multilateral environmental agreements rely on trade restrictions to achieve their goals.

   Although no country has challenged a trade measure of a multilateral environmental agreement as inconsistent with GATT, countries have challenged domestic environmental laws, and GATT and WTO dispute resolution panels have concluded that several national environmental laws are inconsistent with GATT rules.(5) Recent opinions of GATT panels and the failure of the negotiators of the WTO to exempt multilateral environmental agreements from GATT's scrutiny--as the parties to the North American Free Trade Agreement (NAFTA) did(6)--cast doubt on whether trade measures in multilateral environmental agreements would survive a GATT challenge. Moreover, according to the GATT Working Group on Trade and the Environment, GATT parties that are nonparties to a multilateral environmental agreement

   may wish to use their GATT rights if they believe they are suffering from

   unfair or unnecessary discrimination; the provisions of [a multilateral

   environmental agreement], or the judgment of parties to a [multilateral

   environmental agreement], should not be allowed to override those rights,

   especially without there being an obligation to explain the case for trade

   discrimination if there were to be a challenge under the GATT.(7)

   Other international bodies are compiling evidence of the effectiveness and necessity of the trade provisions in various multilateral environmental agreements in light of GATT.(8) The tension between trade rules and environmental rules seems likely to increase in the near future as the use of trade restrictions in multilateral environmental agreements becomes more prevalent and trade rules become more stringent. In fact, the GATT parties recently rejected a proposal to ease GATT sCrutiny of trade restrictions adopted pursuant to multilateral agreements.(9)

   Because multilateral environmental agreementS increasingly use trade measures to implement and enforce their objectives, some reconciliation must occur. The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)(10) and the Montreal Protocol on Substances That Deplete the Ozone Layer (Montreal Protocol)(11)--perhaps the two most successful multilateral environmental agreements--as well as the Basel Convention on the Control of TranSboundary Movements of Hazardous Wastes and Their Disposal (Baser Convention),(12) rely on trade measures to achieve their environmental goals and to enforce the treaties' provisions against parties and nonparties alike. In addition, two recent treaties, the Convention on Biological Diversity (Biodiversity Convention)(13) and the United Nations Framework Convention on Climate Change (Climate Change Convention),(14) both incorporate or envision the use of trade measures.

   Although the GATT Secretariat has stated that GATT's Article XX exceptions to the core obligations justify some of these multilateral environmental agreements,(15) such GATT opinions are far from reassuring. First, only the parties to GATT can officially interpret GATT's provisions; the Secretariat's interpretations do not bind the parties.(16) More importantly, while the GATT Secretariat has relied on GATT's Article XX exceptions--specifically Article XX's preamble--for its opinions,(17) most GATT panels have struck down environmental measures before they even reached the issue of consistency with the preamble.(18) Instead, GATT panels have rejected arguments that environmental measures are justified under specific Article XX exceptions, because the measures were not "necessary to protect human, animal, or plant life or health" under Article XX(b) or `primarily aimed at" the conservation of a natural resource under Article XX(g).(19) Only the first WTO Appellate Body has reviewed an environmental measure critically for consistency with the preamble, and it found the measure inconsistent with the preamble.(20) No panel has justified an environmental measure based on the Article XX exceptions.

   Many of the problems with finding multilateral environmental trade measures consistent with GATT are attributable to the GATT and WTO panels' broad interpretations of GATT's core obligations and their narrow interpretations of GATT's exceptions. In addition, many of the problems arise because multilateral environmental agreements use ecological standards to define when an activity is permitted or not, while panels emphasize trade considerations. For example, CITES sometimes "split lists" a species so that parties can trade specimens from some populations of a species but cannot trade specimens from endangered populations.(21) Thus, for ecological reasons, parties permit trade in chinchillas from the United States but not from Peru.(22) The GATT nondiscrimination obligations, intended to ensure that trading partners do not discriminate against products from other parties, generally prohibit such distinctions because a chinchilla from the United States is the same product as a chinchilla from Peru.(23) Under GATT rules, the chinchilla's endangered status throughout much of its range appears to be irrelevant.

   This Article addresses the underlying conflicts between international trade law and multilateral environmental agreements. Part II reviews the applicable GATT and WTO law and GATT and WTO panel decisions that have created the tension between trade rules and environmental rules. Part III reviews the major environmental agreements that utilize trade measures to ensure the agreements' effectiveness. Parts IV through IX examine various trade provisions of environmental agreements in light of GATT and WTO obligations. Part IV analyzes the permitting provisions of CITES and the Basel Convention that employ ecological and environmental standards as thresholds for barring trade. Part V evaluates quotas and other quantitative restrictions that appear to be prima facie inconsistent with GATT. Part VI examines the provisions that allow parties to take stricter domestic measures than the multilateral environmental agreements specifically provide. Part VII reviews trade restrictions with nonparties. These provisions often are necessary to ensure the effectiveness of an agreement but are inconsistent with GATT. Part VIII discusses technology transfer and financing provisions used to entice developing countries to participate in agreements when they would not otherwise be able to participate. Part IX examines the economic incentives that parties are considering under the Climate Change Convention. Even though the Climate Change Convention envisions the use of economic tools, they too might be inconsistent with GATT.

   Part X attempts to reconcile any conflicts between trade rules and environmental agreements. It concludes that the rules of treaty interpretation do not provide a useful framework for reconciling any conflicts between trade rules and multilateral environmental trade restrictions. Rather, the parties to multilateral environmental agreements should prepare resolutions or amendments to the agreements that assert the primacy of the agreements' provisions over GATT. Because most of the environmental agreements discussed in this paper have more parties than the WTO, such a resolution or amendment would eliminate most conflicts. Nonetheless, because such a mechanism would apply only to parties to the environmental agreements, the parties to GATT must amend GATT to exclude some or all environmental agreements from GATT obligations or, alternatively, more broadly construe the GATT exceptions that GATT panels have narrowed. In the end, nations must preserve the integrity of multilateral environmental agreements vis-a-vis GATT, or risk losing one of the most effective means for achieving the goals of environmental agreements--trade restrictions.

2. A PRIMER ON GATT AND GATT PANEL DECISIONS

   Led by negotiators from the United States and Britain, national representatives gathered in Bretton Woods, New Hampshire in 1944 to create a mechanism for liberalizing trade between nations.(24) They believed that freer trade would lead to a more efficient use of labor and resources, expand world trade, and increase standards of living.(25) In 1947, their efforts resulted in the General Agreement on Tariffs and Trade (GATT).

   Designed to ensure the efficient allocation of economic resources, GATT includes three core obligations intended to...