GATT, WTO, and Regulation of the Environment - Research Paper Example

GATT, WTO AND THE REGULATION OF THE ENVIRONMENT INTRODUCTION The GATT/WTO has signally failed to protect environment, under the auspices of the extant system of free trade. The aim of GATT was to have in place a transparent and orderly framework that would gradually excise trade barriers, whilst expanding international trade. Periodic multilateral negotiating rounds were conducted within the GATT, in order to promote the liberalisation of trade. This is a very important system in the GATT, and it has been conducted on eight occasions. 1 The first of these rounds was the Geneva Round of 1947, which established the GATT. The final round was the Uruguay Round of 1993, in which the WTO was established. Without exception, the various negotiating rounds had been seized with ensuring multilateral tariff reductions. In addition, it has been the objective of these rounds to extend such reductions to all of its members, on the basis of the most favoured nation clause. 2 Subsequent to the formation of the World Bank and the IMF in 1944, the General Agreement on Tariffs and Trade (GATT) was established. This important event transpired in the year 1947. The GATT continued as an agreement that was not supported by a formal organisation to enforce it. This untenable situation continued till the year 1994, the year of concluding the Uruguay Round Agreement, wherein the World Trade Organization (WTO) was established.3 National Treatment is a basic principle of the WTO, which promotes non – discrimination. This policy is aimed at precluding protectionism by means of domestic policy instruments. In this context, this principle requests a nation to accord the same treatment to an imported product that is more or less similar to a domestic product. The practical implementation of this principle of National Treatment is critically dependant on the allocation of burden of proof. 4 The GATT trade rules are similar to the rules of the North American Free Trade Agreement (NAFTA), with regard to trade restrictions that are in conflict with environmental concerns. For instance, a report emanating from the GATT secretariat had made it very clear that GATT rules did not prohibit a country from adopting measures to protect its environment against damage from imported goods. 5 However, such prohibition of imports should not be discriminatory with regard to domestic or imported products. EFFECT OF GATT RULES ON THE ENVIRONMENT Under the provisions of Article III of the GATT, its parties have to accord the same status as domestic products to imported products. In most of the instances of imposition of unilateral trade embargoes aimed at protecting the marine environment, there is likely to be an assertion by the importing state that its action is compliant with this provision of GATT. 6 There is a major difficulty associated with the interpretation of Article III of the GATT. This was highlighted by the GATT Dispute Settlement Panel Report on United States Restrictions on Imports of Tuna. In this instance, the panel came to the conclusion that in a trade embargo based on environmental considerations, it was inappropriate to resort to the provisions of Article III of the GATT. 7 The reason stated for the inapplicability of Article III of the GATT was that it demanded a comparison between the manner in which domestic and imported products of the same type were to be treated. There was no direction in this article to compare the practices and policies of the importing nation and the country of origin.8 In general, initiatives aimed at according protection to the environment, via a trade embargo; endeavour to compel other countries to undertake harvesting techniques that are conservative to a greater extent. In most of the instances of oceanic harvesting, there is a predominance of the use of nets. 9 Therefore, the nation enforcing an environmental protection initiative can be expected to demand a change in the type of nets being employed by the harvesting country, or alterations to the harvesting policies of the target nation. Consequently, Article III of the GATT cannot apply in such situations; because there is a specific demand to alter the harvesting policies and practices of the importing country, which contravenes the provisions of the GATT. 10 In the 1960s, the world woke up to its responsibility to preserve the environment. Much prior to this, the GATT had been formed, and there had been a modicum of effort to extend the mandate of the GATT to encompass environmental concerns. 11 EFFORTS OF EUROPEAN FREE TRADE ASSOCIATION (EFTA) TO PROTECT THE ENVIRONMENT During preparations for the Stockholm Conference on the Human Environment, in the year 1971, the GATT constituted a Working Group on Environmental Measures and International Trade. Thereafter, until the year 1990, none of the contracting parties expressed a desire for the meeting of this entity. This state of affairs compelled the European Free Trade Association (EFTA) countries had to make an explicit request in this context. 12 This group had consented to analyse some of the environmental issues; such as the transparency to be found in the environmental regulations of countries; the relation between GATT rules and the extant international environmental agreements; the transparency of environmental regulations of a nation with trade influences; and the effect on trade, due to the environmental requirements of packaging and labelling. 13 Past contaminations of the environment have wreaked havoc; however this has seldom been addressed by the previous international environmental agreements. These agreements have chiefly dwelled upon preventing present and future emissions. 14 With regard to the contamination of the arctic, it would be futile to expect a single international agreement to address the various facets of the issue. Any attempt at cleaning this area would have to envisage the high costs involved. This could result in serious internal political strife for the nations that are asked to undertake measures to clean up the arctic. 15 CASE STUDIES The reality is that there have been few GATT disputes, wherein environmental measures have been contested. One instance of such challenge was the tuna – dolphin episode. In this incident, it was ruled by a GATT dispute resolution panel in the year 1991 that its provisions had been violated by the US. 16 The latter had proscribed the import of a certain species of fish from Mexico, on the grounds that the fishing practices of that country frequently caused the accidental death of dolphins. As this practice was not followed in the US, the GATT panel ruled that none of its members could restrict trade on the grounds of protecting the environment external to its territory. 17 This ruling raises the possibility that quite a few of the international conventions and protocols concerned with protecting the environment could be breaching the provisions of the GATT. Some of these are; the 1987 Montreal Protocol on ozone depleting substances; the 1989 Basel Convention on the transport of hazardous wastes; and the Convention on International Trade in Endangered Species of Wild Fauna and Flora of 1973. 18 It has been observed that some 150 odd international treaties and agreements have implications for the protection of the environment. A score of these unequivocally consider the imposition of trade sanctions for enforcing protection of the environment. 19 In the year 1992, a GATT report was published, which contended that environmental policies enjoying the support of the world community would not be blocked by it. This was due to the fact that the GATT rules could be altered or even set aside by a two – thirds majority voting in favour of such action, by the member countries. Consequently, there is every possibility for setting aside trade considerations and permanently changing the GATT, via international consensus on environmental issues. 20 There had been no challenge to an international environment agreement on trade grounds. However, a nation that had been subjected to discrimination on such grounds could obtain a favourable GATT ruling and undertake GATT approved retaliatory trade measures. In order to ensure that international agreements, which are aimed at resolving critical environmental issues, are not subjected to destabilisation; it is imperative to specify the order of priority between GATT and these agreements. 21 Furthermore, the GATT adopts an intractable attitude towards international environmental agreements; and these are in conjunction with a number of broad groups of latent environmental problems that incorporate trade agreements modelled on the GATT. Some of these are problems relating to standards, subsidies, investment, growth, permissible uses of trade initiatives, institutional modifications and governance at the national level. 22 Although MEA negotiations facilitate the stronger developed nations to influence the weaker developing nations, these stronger countries are constrained to act within the limits set by the treaty making process. This mitigates domination to a considerable extent and reduces the stigmatic effect of unilateral trade measures. This difference was taken cognisance of by the WTO Appellate Body’s decision in the Shrimp – Turtles case. 23 In this case, the Appellate Body held that the US, which had imposed a trade measure, should not have enforced the unilateral trade measure, prior to attempting bilateral negotiations. However, there is no certainty regarding the decisions that the WTO tribunals arrive at, whilst dealing with a MEA trade measure. In addition, whether WTO tribunals will permit unilateral measures that are not obligatory under MEAs, is a question that has not been resolved. 24 CONFLICTS BETWEEN GATT AND INTERNATIONAL ENVIRONMENTAL AGREEMENTS International Environmental Agreements and the GATT entertain a few areas of potential conflict. These conflicts can be comprehended by examining the major principles that influence the various functions of GATT. The principle of the Most Favoured Nation (MFN) emerges from the provisions of Article I of the GATT. 25 This principle has the objective of ensuring that all the other contracting parties are accorded the same treatment by a contracting party, with regard to similar products that are imported or exported. Therefore, equal treatment has to be provided to products from other contracting parties, under the MFN. 26 The principle of National Treatment is established by Article III of the GATT. This principle enjoins upon a contracting party to accord the same treatment to imported products as domestic products, if these are similar. The idea behind this principle is to preclude discrimination against products that have been imported with a view to provide an undue advantage to the domestic product. 27 Furthermore, Article XI of the GATT prohibits quantitative restrictions and has the goal of preventing trade actions, such as embargoes, quotas and licensing schemes with regard to products that are imported or exported. A contracting party that has been accused of violating the above principles can defend itself under the GATT General Exceptions. Thus, Article XX(b) and (g) can be invoked if the issue involves natural and environmental resources. Moreover, Article XX (b) permits a contracting party to adopt measures that are indispensable for safeguarding animal, human or plant health or life. 28 In addition, Article XX (g) permits initiatives that relate to the conservation of natural resources that are exhaustible. However, such measures have to be effected along with suitable restraints on domestic consumption or production. 29 Article XXII of the GATT encourages contracting parties to undertake informal negotiations, in order to decide seemingly unresolvable trade disputes that arise between them. In instances, wherein there is failure to reach a rapprochement, the GATT Council can be requested to appoint a GATT Dispute Resolution panel to resolve the differences, in accordance with the provisions of Article XXIII of the GATT. 30 Those who promote the concept of protection of the environment have to envisage two important grounds that provide cause for concern. The first of these concerns the struggle between the GATT/WTO and the Multilateral Environmental Agreements (MEAs). There are three basic provisions of the GATT in the dispute settlement body of the WTO, and the MEAs are vulnerable to a challenge under these provisions. Such vulnerability is the outcome of the aforementioned conflict. 31 The second of these grounds poses an indirect threat to environmental protection. This ground promotes free trade and economic growth, which considerably increases the stress on the global environment. As noted by several scholars, a major function of the WTO promoted free trade is to facilitate economic growth. This has the consequence of escalating industrial activity, which in the absence of better pollution control measures will cause greater degradation of the environment. 32 A very disturbing conclusion that can be drawn from this scenario is that GATT/WTO may bring about a collective decline in environmental norms, as nations perceive that their policies and laws relating to the environment breach the GATT/WTO. This would bring about a dilution of standards, which would compel a disturbing lowering of environmental norms. 33 Ostensibly GATT and the protection of the environment are based on different paradigms. GATT discards restrictions and promotes non – discrimination in its endeavour to promote trade. On the other hand, a system of controls and regulations is adopted by the environmental protection treaties. 34 It can be contended that MEAs employ trade measures that are in conflict with the fundamental aims of the GATT/WTO. In fact, the number of environmental disputes, in which the dispute settlement mechanism of the GATT/WTO has been invoked is significantly more than the other dispute settlement systems. There is every likelihood of a continuance of this trend under the Dispute Settlement Understanding (DSU). This is due to the fact that the panel rulings of GATT/WTO have invariably been unfavourable to the environmental trade measure involved, and the panel’s finding of breach of GATT provisions. 35 However, there has been no GATT/WTO panel ruling related to a trade measure of the MEA. In general disputes have related to unilateral environmental trade measures and not the multilateral environmental trade measures. This is of considerable significance, because the MEAs have to be accorded treatment that differs substantially from that accorded to unilateral trade measures. MEAs tend to impart a greater sense of legitimacy, which may be present infrequently in unilateral trade measures. 36 This explains the proclivity of the international community to view unilateral restrictions with suspicion. In most of the instances involving unilateral trade measures, the affected nation is not permitted to be a participant during their formulation. On the other hand, MEAs are generally the result of a collaborative and democratic process that entails multilateral debate. 37 The GATT/WTO has signally failed in its attempts to provide economic and social benefits to the people of the world. This exemplified by the indiscriminate and reckless harm being caused to the environment, under the aegis of the extant system of free trade. Several mature criticisms have originated from reputed commentators, which relate to the projected outcomes of the GATT system. 38 There are quite a few irrefutable contentions, which have established without an iota of doubt that the GATT mechanism has expanded free trade beyond its optimal limits, thereby bringing about attenuation in the general standards of living and also causing human dislocation on a very large scale.39 The number of responsible commentators on trade and its effect on the environment, and who oppose all manner of international trade from the perspective of the environmentalist, are a mere handful. With the advent of increased coercive powers and legalism in the GATT the doubt arises as to whether the new system can be of any appreciable benefit to the environment or the economy. A related query is whether the present environmental damage resulting from the production and transport of exports should be permitted to continue at the existing rate. 40 The present levels of production and transportation of goods is alarming. A major portion of this activity is unnecessary and despite the seemingly inexhaustible capacity of the earth to absorb such activity, the situation is grim. In fact, the irrational and manic preoccupation with producing goods and services for export, which is supported by the GATT/ WTO can only end in environment unsustainability.41 This deplorable situation rarely finds mention among the prominent commentators. Such unfettered trading activity consumes an enormous amount of energy, which these individuals do not regard as being crucial to the well – being of the global environment. The extant debate on trade and the environment is principally seized with inducing the developing countries to adopt the supposedly high environmental norms of the industrialised countries of the West. 42 This is truly ironic, as the industrial nations of the developed world are the chief cause of pollution. At this juncture it is to be noted that there is a real danger of the export wars being transferred to the developing world. Such transfer is certain to nullify the modest gains achieved in the area of regulation during the previous four decades. Moreover, it could result in an insupportable level of economic activity at the global level. 43 DOCTRINE OF COMPARATIVE ADVANTAGE International intra industry trade on large scales is very difficult to justify from the economic and welfare perspectives. This is in contrast to inter commodity trade, which entails the exchange of distinct goods and addresses real needs by making good the deficit in a specific economy. In this context, it has to be clearly understood that the doctrine of comparative advantage is dated as well as naïve. This doctrine fails to put forth reasons for promoting the unbridled liberalisation of trade. However, most of the scholarly works on the GATT refer to the doctrine of comparative advantage as being the very foundation of free trade. 44 A major concern of the environmentalists is that the GATT/WTO panels can render national environmental protection measures invalid. Moreover, these individuals genuinely and rightly apprehend that international trade constitutes a system of delivering goods and services to people in a manner that is harmful to the environment. 45 The modus operandi adopted by GATT is characterised by the following; it stipulates a binding list of trade concessions that in general assume the form of maximum tariff rates, which are granted by each of the contracting parties. Moreover, GATT functions as a body of multilaterally agreed upon norms. These standards relate to trade in goods. In addition, GATT functions as a forum for conducting trade negotiations. 46 The GATT consists of the General Agreement, which is a compendium of 38 Articles and various Associated Agreements or codes. These encompass the rules of conduct in non – tariff areas Some of the basic principles underlying the GATT articles are the principle of most favoured nation, the notion of national treatment, tariffs as a means of achieving protection, and the provision of trade with a stable basis. Although Article XX of the GATT permits exceptions to its general principles, it has to be realised that these principles are intrinsically incompatible with environmental concerns. 47 The principles of GATT invariably seek to promote an ever increasing liberalised trade. During the Uruguay Round, the WTO has come forth with certain observations, namely that free market trade promotes environmental safety. The reasons stated by it for this contention are that trade barriers are in general harmful for the environment; the competitiveness consequences of environmental regulations are insignificant with regard to the majority of the industries; and that there is empirical evidence to demonstrate that polluting industries do not select places to conduct their operations, on the basis of environmental regulations that are not stringent. 48 AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY MEASURES With the establishment of the WTO, the SPS Agreement or Agreement on the Application of Sanitary and Phytosanitary Measures came into force. This agreement relates to the implementation of regulations in the area of food safety, and animal and plant health. Phytosanitary and sanitary interventions could restrict trade, and this has been accepted by all the nations. Nevertheless, countries are on occasion compelled to employ sanitary and phytosanitary regulations to protect local producers from having to face competition.49 These pressures have been predicted to escalate, as the Uruguay Round agreements have considerably diminished the number of trade barriers. Restriction of the sanitary or phytosanitary kind, constitute an effective measure of protection, when they are not really warranted. In such instances, a truly misleading and problematic impediment comes into play, which proves difficult to contest. The principal objective of the SPS Agreement is to preserve the sovereign right of a nation to ensure the level of health protection that it considers necessary.50 However, during this exercise, this agreement is seized with ensuring that no misuse aimed at protectionism transpires and that no uncalled for hurdle is placed in the way of international trade. CONCLUSION The underlying principles behind the WTO relate to trade. Trade policies exert considerable influence on the policies related to the protection of the environment and vice versa. Nevertheless, their objectives are poles apart and irreconcilable. 51 The GATT promotes the avoidance of protectionism regardless of injury that could be caused to the environment and to labour standards. This is immoral and reprehensible. The true colours of the GATT panels were disclosed in the Tuna – Dolphin decision. This decision invalidated environmental protection measures on specious grounds of preventing protectionism. Nevertheless, the environment and economic growth are correlated in a complicated manner. Thus, it could be contended that sustainable and healthy economic growth could even promote the interests of the environment. However, the absence of legal restrictions in conjunction with rapid economic growth is certain to prove detrimental to the interests of the environment. It can be surmised that WTO/GATT norms have not accorded greater importance to the protection of environment. This is due to their preoccupation with promoting trade and economic growth under the guise of comparative advantage. As such the WTO/GATT norms have dismally failed to protect the environment to the fullest extent. BIBLIOGRAPHY A Articles/Books/Reports Caldwell, Douglas Jake, ‘International Environmental Agreements and the GATT: An Analysis of the Potential Conflict and the Role of a GATT “Waiver” Resolution’ (1994) 18 The Maryland Journal of International Trade Law 173 Dillon, Sara, ‘Trade and the Environment: A Challenge to the GATT/WTO Principle of “Ever – Freer Trade”’ (1996) 11 St. John’s Journal of Legal Commentary 351 Gavin, Joseph G, ‘Environmental Protection and the GATT’ (1992) 27(3/4) Columbia Journal of World Business 74 Horn, Henrik, ‘The burden of proof in trade disputes and the environment’ (2011) 62(1) Journal of Environmental Economics & Management 15 Kelly, Andrew J, ‘The Gatt Obstacle: International Trade as A Barrier to Enforcement of Environmental Conservation on the High Seas’ (1998) 12 Florida Journal of International Law 153 Mikesell, Raymond F, ‘GATT Trade Rules and the Environment.’ (1993) 11(4) Contemporary Economic Policy 14 Perkins, Patricia E, ‘An overview of international institutional mechanisms for environmental management with reference to Arctic pollution’ (1995) 160/161 Science of the Total Environment 849 Winter, Ryan L, ‘Reconciling the GATT and WTO with Multilateral Environmental Agreements: Can We Have Our Cake and Eat It Too?’ (2000) 11 Colorado Journal of International Environmental Law and Policy 223 Yoon, Jane I, ‘The World Trade Organization: Environmental Police?’ (2001) 9 Cardozo Journal of International and Comparative Law 201 B Cases Appellate Body Report, United States — Import Prohibition of Certain Shrimp and Shrimp Products , WTO case Nos 58 (and 61) (6 November 1998) GATT Panel Report, United States – Restrictions on Imports of Tuna, DS21/R, (3 September 1991, unadopted) GATT BISD 39S/155 C Treaties Agreement on the Application of Sanitary and Phytosanitary Measures 1995 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal 1989 Convention on International Trade in Endangered Species of Wild Fauna and Flora of 1973 Montreal Protocol on Ozone Depleting Substances 1987 D Other Agreement on Technical Barriers to Trade 1979 European Free Trade Association 1960 GATT Working Group on Environmental Measures and International Trade 1971 General Agreement on Tariffs and Trade 1947 North American Free Trade Agreement 1994 Sharma, R, Agriculture in the GATT: A Historical Account (2000) Understanding the WTO Agreement on Sanitary and Phytosanitary Measures (May 1998) World Trade Organization World Trade Organization 1995 Read More