Article XX: Protector of Public Health, the Environment, and the New Provisions of European Union's Fuel Quality Directive

Author:Joy Marie Virga
Position:J.D. Candidate 2016, American University Washington College of Law
By Joy Marie Virga*
After some controversy in the 1990s, the World Trade
Organization (“WTO”)1 adopted a provision in the Gen-
eral Agreement on Tariffs and Trade (“GATT”) that cre-
ated exceptions to the GATT’s free trade rules.2 These exceptions,
codified at Article XX, allow nations to impose trade restrictions
relating to, inter alia, the conservation of the environment, the pro-
motion of human health, and the protection of national treasures.3
Since then, various countries have adopted regulations aimed at
protecting the environment with challenges to those regulations
moving through the WTO Dispute Settlement Body (“DSB”).4
Recently, controversy has erupted following the European
Union’s (“EU”) announcement of new implementing provi-
sions in the EU Fuel Quality Directive (“FQD”).5 The Canadian
Government6 and U.S. oil producers have expressed their strong
objections to the provisions.7 Their concern specifically regards a
provision that may be adopted in the near future8 requiring EU
member states to reduce life cycle greenhouse gas (“GHG”) emis-
sions of fuels used in “road-vehicles and non-road machinery”
by 6% by 2020.9 The provision assigns a default value to various
sources of crude oil, including crude oil derived from tar sands.10
In May 2013, Karen Harbert of the U.S. Chamber of Commerce,
alongside U.S. oil executives, wrote a letter to the Directorate-
General for Climate Action of the European Commission express-
ing their discontent with the FQD.11 In this letter, the oil executives
state that if the provisions are adopted, they will request that the
U.S. government seek resolution of the matter at the WTO.12 They
believe the new provisions are a clear violation of core WTO prin-
ciples of free and open trade and equal treatment among nations.13
However, Article XX of the GATT likely protects the new
provision. If the EU formally adopts the provision and Canada and
the United States seek to challenge it at the WTO, Canada and the
United States must show that tar sands oil is a “like product”14
and that it is being treated “less favorably” than other “like prod-
ucts.”15 Moreover, if the United States and Canada can prove tar
sands oil is a “like product” (to other crude oil feedstocks) being
treated “less favorably” (than those feedstocks), they still have to
prove that the Article XX exception does not apply. Previous DSB
decisions, along with the language of Article XX, suggest that any
resolution on this matter will likely uphold the EU’s adoption of
the FQD implementing provisions.
Article XX allows for trade restrictions “relating to the conser-
vation of exhaustible natural resources if such measures are made
effective in conjunction with restrictions on domestic production
or consumption.”16 In 2009, the Environmental Protection Agency
found that GHG emissions present a risk to public health.17 This
finding lends support to the view that the EU provision easily falls
into this exception. The provision is essentially a regulation to
prevent an increase in GHG emissions. It safeguards clean air and
a climate fit for human habitation, both of which are “exhaustible
natural resources.”18 Further, a reduction in GHG emissions will
promote human health and environmental conservation.19
The DSB has already ruled that clean air constitutes an
exhaustible natural resource.20 In 1996, Brazil and Venezuela filed
a complaint against the United States for imposing air quality stan-
dards on gasoline imports.21 The purpose of these standards was to
achieve cleaner air.22 The DSB ruled that because these standards
were intended to preserve clean air, they could be “appropriately
regarded as ‘primarily aimed at’ the conservation of natural
resources for the purposes of Article XX(g).”23 However, under
the U.S. fuel quality standards as promulgated, stricter standards
were placed on foreign producers compared to domestic produc-
ers.24 The DSB concluded that the United States had the power
to impose standards to achieve environmental objectives, but that
such standards must be consistently applied to both domestic and
foreign producers.25
Additionally, the new provisions must not violate the “cha-
peau” of Article XX.26 When determining if a trade regulation vio-
lates the chapeau, the DSB considers whether the regulation would
arbitrarily treat WTO member nations differently27 and if there
was a good-faith effort to negotiate an international agreement.28
The DSB will likely find that the provisions do not violate the cha-
peau, as the provision does not create an “arbitrary discrimination”
based on national origin. 29 Moreover, the EU actively engaged
with WTO member nations to mitigate disputes for several years.30
If enacted, the DSB will likely uphold the EU’s new FQD
implementing provisions. The purpose of the provision is “to
achieve levels of air quality that do not give rise to significant neg-
ative impacts on, or risks to, human health and the environment.31
These objectives fall directly under the exceptions of Article XX32
and by reducing GHGs, the EU will be able to achieve these objec-
tives. Nations have the right to protect the environment and the
health of their people. This right is protected under the GATT’s
Article XX exceptions. Thus, the WTO has no power, nor will it
likely attempt, to overturn the potential new implementing provi-
sion of the EU FQD.
* J.D. Candidate 2016, American University Washington College of Law
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