Q13 -evolution of the WTO case law pertaining to GATT article XX (b) and (g) since US- Gasoline

Question 1

US-Gasoline

Answer 1

This dispute concerns the Clean Air Act, a law designed to prevent and control air pollution in the US. Following a 1990 amendment to the Clean Air Act, the Environmental Protection Agency (EPA) promulgated the Gasoline Rule on the composition and emissions effects of gasoline to ensure that pollution from the combustion of gasoline did not exceed 1990 levels. From 1 January 1995, the Gasoline Rule permitted only gasoline of a specified cleanliness (“reformulated gasoline”) to be sold to consumers in the most polluted areas of the country. In the rest of the country, only gasoline no dirtier than that sold in the base year of 1990 (“conventional gasoline”) could be sold.

Question 2

Panel findings in Gasoline

Answer 2

The US measure treated foreign gasoline “less favorably” than “like” domestic gasoline, in violation of Article III:4 of the GATT 1994; and that it was not justified under any of three exceptions in GATT 1994 Article XX (paragraphs (b), (d) and (g)) that were invoked by the US. The US appealed the Panel Report but limited its appeal to the Panel’s interpretation of Article XX of the GATT 1994.

Question 3

Appellate body findings in Gasoline

Answer 3

The US law fell within the terms of Article XX(g). However, the Appellate Body then found that the law was not justified by Article XX, because the law did not satisfy the requirements of the Chapeau.

Question 4

Fundamental way to interpret art. XX GATT

Answer 4

1. Look into the preamble of WTO agreement
   US-Shrimp Case, the Appellate Body said that, the WTO preamble “gives colour, texture and shading to the rights and obligations of Members under the WTO Agreement”, .
   • Right to take measures to protect the environment
   In US-Gasoline. WTO Members have the right to favour policies other than trade, as long as they meet the conditions of Art. XX.
   In the two US-Shrimp, right Members to take unilateral trade restrictive environmental measures so long a balance is maintained between “the right of a Member to invoke the exceptions of Art. XX” and “the substantive rights of other Members under GATT 1994”.
   • Right to determine the level as they consider appropriate.Right for each Member to determine their own level of risk that it is willing to accept in the circumstances and the level of protection it considers appropriate in a given situation (even zero-risk EC-Asbestos Case)
2. The two-tier analysis
   In US-Gasoline, the Appellate Body adopted the two-tier analysis to see whether a measure is meet the conditions of Art. XX: both the condition in paragraph b and g, and the chapeau of this article. The former ensures that the measure is actually “necessary for” or “relating to” the goal of environment protection, while the latter guarantees that the right is not being abused for protectionist purposes.

Question 5

The main evolution of the conditions in GATT Art. XX (b) and (g)

Answer 5

1. What kind of objectives may legitimately be pursued by a government measure

In US-Shrimp, the Appellate Body interpreted “exhaustible natural resources” in a dynamic and evolutionary manner, it could include all the living resources, rather than just non-living resources. In this way, the Appellate Body ensured that the entire range of policy goals commonly referred to as environmental protection objectives will fall within the combined scope of Art. XX (b) and (g).

2. The required relationship between the measure adopted and the objective pursued- are different in paragraph (b) and (g): “necessary” and “relating to”.
   (b) Very evolutionary.

Korea Beef- three elements to be considered in the weighing and balancing test for “necessary:

• The importance of the common interests or values that the measure pursues.
• The extent to which the measure contributes to the realization of the goal pursued.

c. The extent to which the measure produces restrictive effects on international trade.

Brazil-Tyres - The measure will be sufficiently linked to an objective if it is “apt to make a material contribution to the achievement of its objective”.

(g) US-Gasoline, the Appellate body interprets that “relating to” in principle means “reasonably related to the ends”.
3. The requirement that no WTO-consistent alternative to the measure is reasonably available.

US-Gambling, which is a GATS Art. XIV case, the Appellate Body held that an alternative measure is not “reasonably available” not only where “it did not achieve the respondent’s chosen level of protection”, but also “where it is merely theoretical in nature, or where the measure imposes an undue burden on that Member, such as prohibitive costs or substantial technical difficulties.”

Brazil-Tyres Case, the alternative should be technically and financially feasible.

4. The requirement that the actual application of the challenged measure reflects authentic environmental concerns

In US-Gasoline, the report shows that this burden of proof rests on the responding party.

In US-Shrimp, the Appellate Body indicates that in the chapeau of Art.XX, discrimination is not prohibited unless it’s “arbitrary or unjustifiable” between “countries where the same conditions prevail”.