World Trade Organization caught in the middle: are TEDS the only way out?

• Author: Sam, Corinne

1. INTRODUCTION

   The international community strives to achieve the common goals of environmental conservation and trade liberalization.(1) In the global community environmental conservation protects biodiversity and encourages efficient use of resources; the free flow of commodities promotes efficiency of labor as well as cooperation and unification among nations. These values are not inherently in conflict. Often, however, environmental protection measures are interpreted as contradictory to free trade rules.(2) It is the system of international trade and the interpretation of its obligations that tend to bring the goals of freer trade and environmental protection into conflict.

   The General Agreement on Tariffs and Trade (GATT)(3) is the international system that was designed to promote the liberalization of trade. Parties to this agreement incur three main obligations: Article I requires that members not discriminate against products based on national origin,(4) Article III requires that they not discriminate between similar foreign and domestic products,(5) and Article XI limits the imposition of quantitative import restrictions.(6) Although Article XX creates an exception to these rules for environmental conservation measures,(7) GATT Dispute Resolution Panels (Panels) interpret the obligations of the members broadly, while interpreting the exceptions very narrowly.(8) Thus, environmental conservation measures are rarely justified and often interpreted as conflicting with international trade rules.(9)

   The most well known example of the conflict between trade and the environment occurred in the GATT Panel decision of the Tuna/Dolphin case involving the United States and Mexico.(10) The United States placed a ban on all imports of tuna from Mexico because Mexican fisherman employed a method of catching tuna that caught and killed dolphins as well.(11) Although the United States implemented the ban as an environmental protection measure, the GATT Panel found that the United States violated its obligations under GATT.(12)

   A similar case recently emerged that again addressed the tension between free trade and the environment. The United States implemented a ban on all imports of shrimp or shrimp products from countries that harvest shrimp with commercial fishing technology that may adversely affect species of sea turtles protected under U.S. laws or regulations.(13) The U.S. ban applied to all shrimp imports from countries such as India, Malaysia, Pakistan, and Thailand.(14) This time, however, the GATT Panel had been replaced by the World Trade Organization (WTO).(15) The GATT parties established the WTO to oversee the agreement's implementation and to formalize a system for dispute resolution.(16) The purpose of the WTO is to maintain a multilateral system of trade while pursuing the optimal use of the world's resources in accordance with the objective of sustainable development.(17) The WTO could have decided the Shrimp/Turtle dispute in line with previous GATT Panel rulings that found environmental conservation measures in violation of GATT rules.(18) However, the WTO is not bound by prior GATT Panel rulings and broke new ground by finally recognizing an environmental protection measure as an Article XX exception to GATT obligations. Although the WTO seemed to be moving in the right direction, it ultimately decided that the United States implemented its environmental protection measure in a manner that violated the chapeau, or introductory provision, of Article XX.

   This Article analyzes the conflict between free international trade rules and global environmental conservation. First, this Article introduces the international system of trade liberalization and explains the trade obligations under GATT. Part II discusses the outcomes of prior GATT rulings, focusing on the Tuna/Dolphin case. In Part III, this Article comments on the advent of the WTO and the implications of this new organization for GATT. Part IV focuses on the U.S. shrimp ban, explaining the arguments on both sides of the issue. Part V analyzes these arguments, advocating the position of the United States. Next, this Article summarizes the Report of the Panel on the U.S. shrimp ban, as well as the Appellate Body decision. In conclusion, this Article discusses the outcome of the Shrimp/Turtle case and questions the WTO's interpretation of GATT in light of environmental protection practices.

2. BACKGROUND OF GATT

   The General Agreement on Tariffs and Trade (GATT) is the result of a conference among national representatives held in Bretton Woods, New Hampshire in 1944.(19) The purpose of this conference was to develop a method for liberalizing trade between nations, with the hope that freer trade would lead to increased resources and richer economies.(20) In order to promote the efficient use of labor and resources, national representatives created GATT to ensure that member countries engaged in free and fair international trade. To achieve this end, GATT essentially eliminates quantitative trade restrictions, limits the use of tariffs to concessional rates, and subjects other "nontariff" trade barriers to international-law rules.(21) At the core of GATT obligations are two nondiscrimination principles: the most-favored-nation principle and the national treatment principle. The most-favored-nation principle of Article I requires members to treat products from all other GATT members the same.(22) Article I demands equality of treatment for similar products originating in, or destined for, any member country.(23) In essence, a member cannot discriminate among products based on their national origin. The national treatment provision in Article III requires members to treat foreign and domestic products alike.(24) This provision is broadly applied to a member country's "internal" requirements for imported products, including taxes, charges, and other regulations.(25) In other words, the provisions of GATT allow a member to impose its domestic regulations on imported products, but only if the imported product is treated no less favorably than the similar domestic product. One other core obligation, designed to liberalize trade, is the quota provision of Article XI.(26) Article XI limits the use of quantitative restrictions, such as quotas, as a barrier to the importation or exportation of any product.(27)

   In recognition that there may be compelling reasons to violate these obligations, however, GATT contains a general exception provision under Article XX.(28) This article allows for conditional exceptions to GATT obligations, even to the core obligations in Articles I, III, and XI.(29) Article XX seems to be aimed at helping to permit environmental rules that come into conflict with trade. The Article makes exceptions for measures necessary to protect human, animal, or plant life,(30) and for measures relating to the conservation of exhaustible natural resources.(31) What constitutes "necessary," "relating to," or "exhaustible natural resource," however, is a matter of contention among GATT Panels.(32) The values found in protecting the environment and promoting international free trade are not unavoidably opposed. It is the interpretation of the meaning of these GATT provisions and how they are applied that tend to bring environmental conservation measures and free trade obligations into conflict.(33)

   1. Environmentalist Criticisms of the GATT System

      There are many environmental objections to the type of international trading system that GATT creates. Daniel Esty, a staunch environmentalist, identified the following critiques:

      Without environmental safeguards, trade may cause environmental harm by promoting economic growth that results in the unsustainable consumption of natural resources and waste production. Trade rules and trade liberalization often entail market access agreements that can be used to override environmental regulations unless appropriate environmental protections are built into the structure of the trade system. Trade restrictions should be available as leverage to promote worldwide environmental protection, particularly to address global or transboundary environmental problems and to reinforce international environmental agreements. Even if the pollution they cause does not spill over into other nations, countries with lax environmental standards have a competitive advantage in the global marketplace and put pressure on countries with high environmental standards to reduce the rigor of their environmental requirements.(34) In spite of all of the criticism, GATT Dispute Resolution Panels often favor the liberalization of trade to the detriment of environmental conservation measures. The most well known dispute involved a U.S. ban on the importation of tuna from countries that caught tuna in a manner that killed a large number of dolphins.(35) Although the ban was a barrier to free trade, the United States contended that it instituted the measure to protect part of the natural environment.

   2. The GATT Panel Ruling on the Tuna/Dolphin Case

      The GATT Panel analysis of the Tuna/Dolphin case demonstrates the conflict between the interpretation of GATT provisions and environmental protection efforts. The Tuna/Dolphin dispute began when the United States attempted to ban imports of tuna from Mexico because Mexico employed the drift net method of capturing tuna, a practice that violates the Marine Mammal Protection Act.(26) Fishermen that use this technique inadvertently trap dolphins in their nets because dolphins tend to swim with schools of tuna.(37) Using drift nets is so detrimental that it threatens the dolphin population.(38)

      Mexico challenged the U.S. ban, alleging that it violated GATT obligations.(39) The GATT Dispute Resolution Panel first considered the U.S. position that Article III allowed the restriction.(40) The United States argued that because it also forbade domestic fishermen from using this method of...