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
• Pages: 46-46

46 SUSTAINABLE DEVELOPMENT LAW & POLICY

ARTICLE XX: PROTECTOR OF PUBLIC HEALTH,

THE ENVIRONMENT, AND THE NEW PROVISIONS OF

EUROPEAN UNION’S FUEL QUALITY DIRECTIVE

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

continued on page 75