The WTO - a force for good

What annoys me the most about critics of the WTO is when they assert that the WTO stops member states from pursuing their own non-trade objectives, such as environmental goals. For example, it is often asserted that it is not possible under the GATT for nations to ban imports of certain fish products if their harvesting results in the killing other living species, such as turtles, or dolphins.

This is completely untrue.

There have been a number of cases before the WTO’s Appellate Body in which it has been held that the GATT does afford space to individual member states to restrict trade in the pursuit of non-trade objectives.

The cases revolve around two main articles of the GATT 1994. The first is the requirement in Article IV that all member states must apply the “Most Favoured Nation” (MFN) principle in relation to trade with other member states. MFN requires each state to accord to a third state any advantage it accords to another state. It requires states to prevent discrimination and ensure equal treatment for like products. Likewise, the “National Treatment” principle, enshrined in Article III of the GATT, prohibits discrimination between products produced domestically and those imported from other member states. The two articles operate as constitutional principles of the WTO and are the basis of trading relations between WTO members.

But Article XX of the GATT provides a general exception to both MFN and National Treatment. It lists a number of policies that a member may pursue and as long as the measure is necessary for, or relates to, the pursuit of that policy, then it is possible for the member state to discriminate between products from different nations. The policy objectives include, inter alia, the protection of public health, protection of the environment, protection of public morality and restricting imports of products produced by the use of prison labour.

In the US - Import Prohibition of Certain Shrimp and Shrimp Products Case which came before the Appellate Body in 1998, the US argued that it was entitled to impose a measure that only allowed foreign shrimp to be imported into the US if an importer could show that the harvesting did not pose a risk to certain species of turtles.

The report delivered by the Appellate Body was ground-breaking for international environmental law. Referring to the United Nations Convention on the Law of the Sea, the Convention on the Conservation of Migratory Species of Wild Animals, and the Convention on International Trade in Endangered Species of Wile Fauna and Flora, for the first time it was held that natural resources included living species, such as sea turtles, and that therefore, it was a legitimate policy goal of nations to preserve living species as “resources”. This conclusion was in accordance with the preamble of the GATT 1994 which explicitly acknowledges the objective of sustainable development.

The Appellate Body did declare, however, that the US was in violation of the GATT. The crux of its decision however, was based on rule of law considerations: the Appellate Body held that US was using an arbitrary process to determine which imports of shrimps supposedly involved harming turtles. There was no transparent or predictable process that the US government followed to make this determination. It was an ex parte enquiry in which there was no formal opportunity for the country concerned to be heard and there was no formal, written, reasoned decision given by US officials outlining why the imports had been denied. Furthermore, there was no way that an importing country could seek review of, or appeal against, the decision.

So while the WTO Appellate Body was happy for the US to pursue a policy to protect sea turtles, the problem was with the method the US was using to determine which imports involved causing harm to sea turtles.

This was an excellent decision by the Appellate Body, demonstrating its ability to apply the GATT in the context of developments in other areas of international law, and balance non-trade objectives.

Moreover, in the EC - Asbestos Case, the WTO Appellate Body held that when a state was pursuing a policy goal, such as the protection of human life and public health, it was up to the individual member to set the level of risk it thought was acceptable. The WTO would not undertake a review of a member’s chosen level of health protection. In that case, the Appellate Body held that, under Article XX, France was entitled to enact a measure prohibiting imports and manufacture of asbestos fibres and products containing them.

The WTO Appellate Body, has however, tempered the broad flexibility that Article XX of the GATT accords by requiring that countries prove that the measure was necessary. In the Thailand - Cigarettes case, Thailand had prevented imports of foreign cigarettes, but had accorded a licence and monopoly to the Thai Tobacco Monopoly which continued to mass-produce and sell cigarettes within Thailand. The measure was subject to a complaint based on violation of MFN and National Treatment. Thailand alleged that it was entitled to impose such a measure under Article XX, for the protection of public health.