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2016 | OriginalPaper | Buchkapitel

4. States’ Regulatory Autonomy to Protect Societal Values by Legitimate Regulatory Distinctions

Finding the Balance in the WTO Agreement on Technical Barriers to Trade Through Adjudication

verfasst von : Denise Prévost

Erschienen in: Judging the State in International Trade and Investment Law

Verlag: Springer Singapore

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Abstract

Trade disputes in which public policy regulation is challenged have been among the most difficult and controversial of those before the adjudicatory bodies of the WTO. They have showcased the crucial role of adjudication in achieving an appropriate balance between the sovereign autonomy of States to regulate to protect important societal values on the one hand and trade liberalization on the other. Nowhere is this more clearly apparent than in the line of case law by the WTO Appellate Body, interpreting the non-discrimination obligation in Article 2.1 of the WTO Agreement on Technical Barriers to Trade (TBT Agreement). Despite its limited mandate, the Appellate Body has shouldered its responsibility to give appropriate meaning to this badly drafted provision. Thereby it has averted the risk of unacceptable limitations on the regulatory autonomy of States. However, since in order to do so, the Appellate Body has had to read into this provision a flexibility not apparent in its wording, no negotiated criteria for its availability exist. Thus, to ameliorate the risk of abuse of this new flexibility, the Appellate Body has itself established some criteria limiting its use. This contribution examines these legal developments against the background of the limited mandate of the adjudicatory bodies of the WTO. After sketching the new legal framework for technical regulations resulting from the Appellate Body’s case law on Article 2.1 of the TBT Agreement, it illustrates the dangers of such case law driven solutions to legal problems. It does so by focusing on one of the criteria laid down by the Appellate Body for the availability of the flexibility it has carved out of Article 2.1, namely the Appellate Body’s exclusion of cases of de jure discrimination from the possibility to use this flexibility. This exclusion is examined to determine whether it has the potential to close the door to legitimate public policy regulation. A way forward is then proposed.

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Vorheriges Kapitel WTO, State and Legal Capacity Building

Nächstes Kapitel Investor-State Arbitration Distorted

Article IX of the WTO Agreement. While in the absence of consensus, decision-making by voting is provided for, the WTO bodies, in practice, take decisions by consensus.

Compared to the ambitious agenda of the Doha Round negotiations, as set out in the Doha Ministerial Declaration, the outcomes achieved in the almost 15 years that this Round has been ongoing (adopted at Ministerial Conferences in Bali in 2013 and Nairobi in 2015) are very limited. The most significant of these are the adoption of the Trade Facilitation Agreement and the agreement reached on the elimination of export subsidies for agricultural products. On other important issues, such as non-agricultural market access, services liberalization, reform of the rules on trade remedies, and dispute settlement reform, no agreement has been reached.

Farewell speech of Appellate Body Member David Unterhalter, 22 January 2014, available at https://www.wto.org/english/tratop_e/dispu_e/unterhalterspeech_e.htm.

Article 3.3 of the Dispute Settlement Understanding (DSU).

Article 3.2 of the DSU.

Peter Van den Bossche, The WTO at 20: A Glass Half Full, Half Empty or Broken?, in, Settlement of International Trade Disputes: Achievements and Challenges (KNVIR, Asser Press, The Hague, 2015,) 12.

Article 3.2 of the DSU.

Michael Lennard, Navigating by the Stars: Interpreting the WTO Agreements, 5 JIEL (2002) 17–89, 44.

Sol Picciotto, The WTO’s Appellate Body: Legal Formalism as a Legitimation of Global Governance, Working Paper 14, 2005, University College of London, 16.

Article 3.2 of the DSU.

Appellate Body Report, US – Gasoline (1996), 15–16 and Appellate Body Report, Japan – Alcoholic Beverages II (1996), 104.

For an interesting discussion on the role of customary international law principles of treaty interpretation in WTO disputes, see Graham Cook, A Digest of WTO Jurisprudence on Public International Law Concepts and Principles (CUP, Cambridge, UK, 2015), 275–324.

Appellate Body Report, Chile – Alcoholic Beverages (2000), [79].

Appellate Body Report, US – Continued Zeroing (2009), [306].

The Appellate Body's approach has been called 'semantic textualism', see Zang, Textualism in GATT/WTO jurisprudence: lessons for the constitutionalization debate, 33 Syr JILC (2006) 393, 413–438.

Appellate Body Report, EC – Hormones (1998), [181] (emphasis added).

Appellate Body Report, India – Patents (US) (1998), [45].

Farewell speech of Appellate Body Member David Unterhalter, 22 January 2014, available at https://www.wto.org/english/tratop_e/dispu_e/unterhalterspeech_e.htm.

Appellate Body Report, Japan – Alcoholic Beverages II (1996), 122–123.

Isabelle Van Damme, Treaty interpretation revisited, not revised, ILO Distinguished Scholar Series (2008), 22 <http://www.ilo.org/public/english/bureau/leg/include/home/van_damme.pdf>.

Appellate Body Report, Korea – Various Measures on Beef (2001), [137]. The measure at issue in this case, a Korean regulation explicitly requiring that imported beef be sold only in specialist stores or in separate sections of supermarkets, whereas domestic beef could be sold anywhere, provides an example of de jure less favourable treatment of imports. By contrast, the measure challenged in EC—Seal Products (2014), an EU ban on imports of seal products excluding, inter alia, those produced from traditional hunts by Inuit communities, regardless of their origin (the IC exception) is an example of de facto less favourable treatment. As held by the panel, in fact virtually all Greenlandic seal products are likely to qualify under the IC exception for access to the EU market, whereas the vast majority of seal products from Canada and Norway do not meet the IC requirements for access to the EU market. Consequently, the panel found that “in terms of its design, structure, and expected operation,” the measure at issue detrimentally affected the conditions of competition for Canadian and Norwegian seal products as compared to seal products originating in Greenland. Thus, de facto less favourable treatment was found to exist. See Panel Reports, EC – Seal Products (2014), [7.597].

Appellate Body Report, Korea – Various Measures on Beef (2001), [137].

Appellate Body Report, Canada – Autos (2000), [78].

See Panel Report, Japan – Alcoholic Beverages II (1996), [6.17], implicitly affirmed by the Appellate Body in Appellate Body Report, Japan – Alcoholic Beverages II (1996), 115. Most recently, the Appellate Body reiterated this view in Appellate Body Report, EC – Seal Products (2014), [5.117].

Appellate Body Report, US – Shrimp (1998), [156].

While the following discussion will focus on the national treatment obligation contained in Article 2.1 of the TBT Agreement, its analysis applies, mutatis mutandis, to the most-favoured nation treatment obligation in this provision.

Appellate Body Report, US – Clove Cigarettes (2012), [100].

Appellate Body Report, US – Clove Cigarettes (2012), [180].

Appellate Body Report, US – Clove Cigarettes (2012), [101].

Appellate Body Report, US – Clove Cigarettes (2012), [96].

Appellate Body Report, US – Clove Cigarettes (2012), [182].

The measure at issue in US – Clove Cigarettes was a US ban on flavoured cigarettes (including clove cigarettes), regardless of their origin, which as aimed at i.e. was instead of as reducing the incidence of youth smoking. The ban did not apply to menthol cigarettes, whether foreign or domestic. However, as menthol cigarettes consumed in the US were almost exclusively domestically produced, while the vast majority of clove cigarettes consumed in the US were from Indonesia, this ban had the effect of modifying the conditions of competition of cigarettes to the detriment of imports from Indonesia.

Appellate Body Report, US – Clove Cigarettes (2012), [100].

Appellate Body Report, US – Clove Cigarettes (2012), [179].

Appellate Body Report, US – Clove Cigarettes (2012), [94].

Appellate Body Report, US – Clove Cigarettes (2012), [95].

Appellate Body Report, US – Clove Cigarettes (2012), [96].

Appellate Body Report, US – Clove Cigarettes (2012), [174].

A technical regulation is defined in Annex 1.1 to the TBT Agreement as a document “which lays down product characteristics or their related processes and production methods … with which compliance is mandatory.”

See the second sentence of Article 2.2 of the TBT Agreement.

Appellate Body Report, US – Clove Cigarettes (2012), [181].

Appellate Body Report, US – Clove Cigarettes (2012), [182].

These limits are discussed in Sect. 2.4.

Panel Report, US – Sect. 337 Tariff Act (1989), [5.9].

Appellate Body Report, US – Clove Cigarettes (2012), [182].

ibid.

Appellate Body Report, US – Clove Cigarettes (2012), [224].

Appellate Body Report, US – Clove Cigarettes (2012), [225].

Appellate Body Report, US – Tuna II (Mexico (2012), [297].

Appellate Body Report, Brazil – Retreaded Tyres (2007), [232].

Appellate Body Reports, US–COOL (2012), [271].

Appellate Body Reports, US–COOL (2012), [347–349].

Paragraphs (a), (b), and (d) of Article XX of the GATT 1994 require that the measure at issue be “necessary” for the achievement of the relevant policy objective. Established case law interprets necessity as requiring a “weighing and balancing” of the importance of the societal value being protected, the trade restrictiveness of the measure and the contribution of the measure to achieving its objective. A highly trade restrictive measure that does not contribute much to the objective it aims to achieve is likely to be found not to be “necessary.”

Note, however, that Article 2.2 of the TBT Agreement incorporates a requirement that the technical regulation at issue be not more trade restrictive than necessary to achieve a legitimate objective. Mavroidis and Kamal therefore argue that this issue should rather have been addressed under Article 2.2. See Mavroidis C Petros & Saggi Kamal, What Is Not So Cool about US–COOL Regulations? A Critical Analysis of the Appellate Body's Ruling on US–COOL, 13 WTR, 299–320, 315.

For example, a government may be vulnerable to pressure from the automotive industry to adopt regulations that shield this industry from foreign competition by being formulated in a way that accords with domestic production standards and thus creates a heavier adaptation burden on imported than on domestic cars.

GATT Panel Report, EEC – Imports of Beef from Canada (1981), [4.2 and 4.3].

Appellate Body Report, US – Clove Cigarettes (2012), [179].

See Appellate Body Report, Brazil – Retreaded Tyres (2007), [232].

Appellate Body Report, US – Clove Cigarettes (2012), [182 and 215].

Appellate Body Report, Canada – Aircraft, [166–167]; Appellate Body Report, Canada – Autos, [100]. Appellate Body Report, US – FSC (Article 21.5 – EC) (2002), [116].

As noted by the Appellate Body, proving de facto export contingency is a much more difficult task as the existence of such contingency “must be inferred from the total configuration of the facts constituting and surrounding the granting of the subsidy, none of which on its own is likely to be decisive in any given case.” Appellate Body Report, Canada – Aircraft, [167].

Panel Report, US-FSC (21.5 – EC) (2002), [ 8.159].

The Act at issue, the US Foreign Sales Corporations Replacement and Extraterritorial Income Exclusion Act, creates a tax exemption for corporate income under certain conditions. One of these conditions is the “fair market value rule” which places an express maximum limit of 50 % on the extent to which the value of a product can be attributable to imported input products. No such limit exists for like domestic input products. Thus, for purposes of satisfying the fair market value rule and ensuring the availability of the tax benefit, a real and substantive advantage was found to attach to the use of domestic input products, and a corresponding disadvantage to the use of like imported products. Appellate Body Report, US-FSC (21.5 – EC) (2002), [218].

The Appellate Body in this case, while not referring to the concept of “de jure by necessary implication” agreed with the panel that the measure at issue accorded “less favourable treatment” to imported products than to like domestic products within the meaning of Article III:4 of the GATT 1994. Appellate Body Report, US – FSC (Article 21.5 – EC) (2002), [220].

Forest Stewardship Council (FSC) is an independent, non-profit, non-government organization established to support environmentally appropriate, socially beneficial, and economically viable management of the world‘s forests. Labels bearing the FSC trademark may only be used on wood products by producers if they have met the requirements for FSC certification. These labels indicate that their products meet the standards set by the FSC.

While the WTO dispute settlement mechanism has no formal precedent system, its objective of providing security and predictability to the international trading system has been held to imply that an adjudicatory body will resolve the same legal question in the same way in a subsequent case, unless there are “cogent reasons” to deviate. See Appellate Body Report, US – Stainless Steel (Mexico) (2008), [160].

As noted by former Appellate Body Member David Unterhalter, “Of course there are decisions that have not won universal acceptance and some that have been controversial. But, in the round, the body of law that has been developed is well regarded. It is a body of jurisprudence that has mostly proceeded step by step; it strives for coherence and clarity in the interpretation of negotiated texts; it has applied WTO law to diverse systems of domestic law; it has sought to strike the right balance between the imperatives of domestic policy and the disciplines of WTO law; and has navigated its way through large, complex disputes that have often seemed intractable.” Farewell speech of Appellate Body Member David Unterhalter, 22 January 2014, available at: https://www.wto.org/english/tratop_e/dispu_e/unterhalterspeech_e.htm.

It is estimated that in about 85 % of WTO disputes, the respondent complies with the recommendations and rulings of the Dispute Settlement Body.

Appellate Body Report, EC – Seal Products (2014), [5.129].

Titel: States’ Regulatory Autonomy to Protect Societal Values by Legitimate Regulatory Distinctions
verfasst von: Denise Prévost
Verlag: Springer Singapore
Buch: Judging the State in International Trade and Investment Law
Print ISBN: 978-981-10-2358-3

Electronic ISBN: 978-981-10-2360-6

Copyright-Jahr: 2016
DOI: https://doi.org/10.1007/978-981-10-2360-6_4

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