WTL Project

8/2/2019 WTL Project

1/8

RELEVANCEOF APPELLATE BODYS INTERPRETATIONOF

ARTICLE XX OFGATTINLIGHTOFPROTECTIONIST

APPROACHFORNON-TRADECONCERNSBYDEVELOPING

COUNTRIES

- WORLD TRADELAWPROJECT

Submitted by:

NIVEDITA SEN

ID 208028

4th Year, 8th Semester

W. B. National University of Juridical Sciences, Kolkata


2/8

Index

2


3/8

Introduction

The term developing country has not been defined under the World Trade

Organization (WTO) Agreement, however there exists a World Bank classification

system, which is loosely imported by the WTO to understand the concept of developing

countries.1 Developing countries played a very limited role in the foundational stages of

General Agreement on Tariffs and Trade (GATT). However, their role under the aegis

of the WTO, which was established in 1994, has increased manifold. Majority of the

WTO countries today are developing countries. Often the WTO becomes a political

battleground of developing and developed countries where each side pushes for policies

that will further their national interests.

Article XX of GATT is the provision encompassing general exception that permits

Member States to deviate from the obligations provided. It encompasses both trade and

non-trade provisions. Non-trade provisions are conditions that help States to promote or

protect important non-trade societal values even though they are inconsistent with

GATT.2 Such values include public health, consumer safety, environment, national

security, labour and economic development. Since different nations have different

standards of compliance with respect to these values, often countries conflict over this

provision. Therefore, the WTO Panel and Appellate Body had to interpret these

provisions in light of conflicting interests of States.

Protectionist Approach for Non-Trade Concerns by Developing Countries

In general, developed countries have placed greater political priority on environmental,

labour and sustainable development concerns in trade negotiations as compared to

developing countries.3 Developing countries strategies have generally been defensive

in this regard. They attempt to resist changes in trade measures to conform to these

1 MITSUO MATSUSHITA, THOMAS J. SCHOENBAUM & PETER C. MAVROIDIS, THE WORLD

TRADE ORGANIZATION: LAW, PRACTICEAND POLICY 763(London, 2nd Ed., 2006).2 PETER VAN DEN BOSSCHE, THE LAWAND POLICYOF WORLD TRADE ORGANIZATION- TEXT, CASESAND

MATERIALS, 616 (New York, Cambridge University Press, 2nd Ed., 2008).3

For a detailed analysis on this, see BERNARD HOEKMAN, AADTIYA MATTOO & PHILIPENGLISH, DEVELOPMENT, TRADEANDTHE WTO- A HANDBOOK 475 (New Delhi, Atlantic Publishers for

the World Bank, Indian Ed., 2005).

3


4/8

concerns.4 The reasoning is that developed countries have higher environmental and

labour standards that cannot be enforced in developing nations. Therefore, it is

perceived that developed countries may use this as a disguised form of protectionism to

unilaterally withdraw from trade obligations.5

Such protectionism, however, is difficult to infer since it pertains to non-trade concerns.

It occurs if a State on the outset is attempting to balance the playing field by enforcing

similar regulatory and legislative requirement to all suppliers of a particular product.

However, the reality is that the sanctioning State (generally the developed State) is, in

effect, depriving the target State (generally the developing State), of a regulatory

comparative advantage.6 Therefore, the normal cost of production in the developing

State, over and above the cost of labour, material and so on, also includes the cost of

complying with the applicable regulation.7 This cost will not have to be borne by the

sanctioning State due to inherently favourable conditions prevailing in that State.

Therefore, if a sanctioning State is rigid in its approach while enforcing the regulatory

scheme on its non-domestic trading partners, especially if the State fails to take into

consideration specific conditions that prevail in the exporting countries, a presumption

of protectionism may automatically arise.

Appellate Body Interpretation of Article XX

Article XX (b) of GATT,8 was interpreted by the Appellate Body in theEC-Asbestos

case.9 Although, this case did not have any developing country as a party, its

4Id.5

See Alan O. Sykes, Regulatory Protectionism and the Law of International Trade, 66 University ofChicago Law Review 1 (1999); Mansoor Farkhanda Zia, Trade versus Peace: A Contextual Analysis of

Core Labour Standards in the Global Trading Community, 5 Asper Review of International Business &Trade Law, 133 (2005), pg 139.6

Ari Afilalo & Shiela Foster, The World Trade Organization's Anti-Discrimination Jurisprudence:

Free Trade, National Sovereignty, and Environmental Health in the Balance, 15 Georgia International

Environment Law Review 633 (2002-2003).7Id.8GATT, Art .XX Subject to the requirement that such measures are not applied in a manner which

would constitute a means of arbitrary or unjustifiable discrimination between countries where the sameconditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be

construed to prevent the adoption or enforcement by any contracting party of measures..

(b)necessary to protect human, animal or plant life or health.9Appellate Body Report, European Community- Measures Affecting asbestos and asbestos Containing

Products, WT/DS135/AB/R (Apr. 5, 2001).

4


5/8

interpretation is of interest to them. It states that to prove that a measure is enacted to

protect health and environment, it must be necessary. However, necessary must be

interpreted in a flexible and not restrictive manner, as a measure that is reasonably

available.10

The Appellate Body of the WTO has extensively interpreted Article XX (g) relating to

exhaustible natural resources.11 The term natural resources has been interpreted to

include rare or endangered resources like gasoline and sea turtles. Although the term

relating to in this provision does not have similar implication as necessary in Article

XX (b), but previous Panel decision had interpreted it as primarily aimed at

conservation.12 However, in the case of US- Reformulated Gasoline,13 the Appellate

Body stated that such interpretation was an unwarranted amendment of Article XX. 14

The term in conjunction with in this provision was also interpreted in this case as

together with or jointly with.15 This requires an even-handedness approach,

however, not identical treatment as long as restrictions on either domestic production or

consumption is available.16

The US-Shrimp Turtle case,17 is the most significant Appellate Body decision on this

provision with respect to protectionist measures taken by developed nations. This case

involved a trade ban by US on imported shrimps from countries that did not necessity

their fishermen to harvest shrimps using methods that were not dangerous for

endangered sea turtles. The Appellate Body stated that the measure was reasonably

related to the end purpose of protecting sea turtles. This decision also gave

extraterritorial scope to this provision by applying to domestic resources as well as

10

Id172. The Appellate Body had developed the flexible test for necessity in the case of AppellateBody Report,Korea- Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R,

(Jan. 10, 2001).11

GATT Art. XX (g): Relating to the conservation of exhaustible natural resources if such measures

are made effective in conjunction with restrictions on domestic production or consumption.12

Panel Report, Canada- Measures Affecting Unprocessed Herring and Salmon, L/6268 - 35S/98,

Mar. 22, 1988.13 Appellate Body Report, United States- Standard for Reformulated and Conventional Gasoline,

WT/DS2/AB/R (May 20-1996).14Id, 19.15Id, 20.16

Id, 21.17Appellate Body Report, United States- Import Prohibition of Certain Shrimp and Shrimp Products,

WT/DS58/AB/R (Nov. 6, 1998).

5


6/8

resources outside national jurisdiction.18

The existence of lesser trade restrictive measures must be considered while determining

whether an exception may apply or not. In Brazil-Retreaded Tyres case the Appellate

Body has confirmed that an alternative measure cannot reasonably be expected to be

taken by a State if that measure does not allow it to take the desired level of protection

with respect to the policy object pursued. Therefore, it must be analyzed if the lesser

trade restrictive measure will achieve the objective.19

Preventing Protectionism

The chapeau of Article XX functions as a sieve that prevents the passing of disguised

restrictions to international trade20 The Appellate Body, in the US-Shrimp Turtle case,

held that while the ban was legitimate, US had applied the measure arbitrarily and

unjustifiably, since it was imposed on countries like India, Thailand and Pakistan but, it

was not imposed on other importing countries where US provided technical assistance

to comply with the measure. Thereby de-novo the facts of the case were applied to

make a finding on a legal issue that was not addressed by the Panel and the anti-

discrimination jurisprudence was evolved.21 Therefore, the Appellate Body has

resorted to judicial activism to protect developing countries from arbitrary non-trade

protectionist measures of developed countries.

The purpose of the chapeau is to prevent abuse of the exceptions, and the Appellate

body has interpreted the substantive provisions in light of this, so as to prevent non-

18

Id,para 132-133. For examples of the effect of such a scope,see Robert Howse,Back to Court AfterShrimp/Turtle? Almost but Not Quite Yet: Indias Short Lived Challenge To Labour and EnvironmentalExceptions in the European Unions Generalized System of Preferences, 18 A. University International

Law Review 1333 (2002-2003).19See Sebastien Thomas, Trade and environment under WTO rules after the Appellate Body Report in

Brazil-Retreated Tyres, Journal of International Commercial Law and Technology, Vol.4 Issue 1

(2009).20 Jonathan Skinner,A Green Road to Development: Environmental Regulations and Developing

Countries in the WTO, 20Duke Environmental Law Policy Review 245 (2010), pg 255.21 Veena Jha, Judicial Activism and the Shrimp-Turtle Case, STRENGTHENING RESEARCH AND

POLICY-MAKING CAPACITY ON TRADE AND ENVIRONMENT IN DEVELOPINGCOUNTRIES- Draft Discussion Paper (Philippines, 2nd Workshop, Nov. 11-13, 1999), pg 4; Ari

Afilalo & Shiela Foster, supra note 6; For an opinion that criticizes the decision see Robert Howse,The Appellate Body Rulings in the Shrimp Turtle Case: A New Legal Baseline for the Trade and

Environment Debate, 27 Columbia Journal of Environmental Law 491 (2002).

6


7/8

trade protectionist measures to be cloaked under the general exception clause.22

Therefore, there exist checks to control sweeping measures designed to protect non-

trade values that violate GATT obligations.23

Conclusion

Under the WTO mechanism, environmental, health, labour, public morals conflicts are

caused because of developing countries protests against trade restrictive conditions

imposed by developed countries. It often becomes a disguised form of protectionism by

the developed nations, and therefore their trade weapon. While sometimes such

protectionist measures are permissible under Article XX of GATT, the abuse of power

has concerned the WTO Appellate Body. It has tried to achieve a balance of interest

between genuine non-trade concerns and unilateral protectionism. In good faith, a State

must negotiate multilateral solutions to ensure that a measure does not become

arbitrary, unreasonable and unjustifiable barrier to international trade. Sovereignty no

longer remains an impenetrable wall and the decisions of the dispute settlement bodies

reflect that an arbitrary, discriminatory and trade restrictive measure will be struck

down.

22 For detailed analysis,see Jonathan Skinner,supra note 20.23

Id.,pg 256.

7


8/8

Bibliography

8

WTL Project

Documents

Transcript of WTL Project