Trade Rules and the Environmental Exception
Chapter Thirty-Eight
Syllabus topic 2, "Sustainable Development."
Pages 111 to 113 of 663
In one line
Trade law lets a State keep out a product to protect the environment, and the whole difficulty is proving that the measure is genuinely about the environment and not about the competitor.
In exam wording: the general exceptions in Article XX of the General Agreement on Tariffs and Trade 1994 permit measures necessary to protect human, animal or plant life or health under paragraph (b), and measures relating to the conservation of exhaustible natural resources if made effective in conjunction with restrictions on domestic production or consumption under paragraph (g), subject to the chapeau requirement that they are not applied so as to constitute arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade.
Why an environmental paper studies trade law
Because MU asks it directly: "How Globalization and Interest of Trade will adversely affect on Environment. What are the Regulatory mechanisms to protect the Environment?" And because the enforcement mechanism of the Montreal Protocol, the Basel Convention and CITES is a trade restriction, so the compatibility of those restrictions with trade law is a live question for every one of them.
The structure of the exception
Article XX has two parts and a candidate must handle them in order.
Step one: does the measure fall within a paragraph?
- Paragraph (b): necessary to protect human, animal or plant life or health. "Necessary" is the demanding word: is there a reasonably available alternative that is less trade-restrictive and achieves the same level of protection?
- Paragraph (g): relating to the conservation of exhaustible natural resources, if made effective in conjunction with restrictions on domestic production or consumption. "Relating to" is a looser link than "necessary", and the second limb requires even-handedness: you cannot restrict imports and leave your own producers alone.
Step two: does it survive the chapeau?
The measure must not be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. This is where most measures have failed. The question is not what the measure is for but how it is applied.
The two propositions that decide most problems
One: exhaustible natural resources include living resources. The phrase was once read as meaning minerals. It is now read to include living species, in the light of the modern law's concern with sustainable development.
Two: a State may take a measure concerned with conservation outside its own territory, at least where there is a sufficient nexus with it, such as a migratory species that passes through its waters. Whether a measure may be based purely on the process by which a good was made in another country, with no such nexus, remains the most contested question in this area.
Trade Rules and the Environmental Exception
The pattern that emerges from the decided cases
Rather than reciting case names a student may not be able to verify, state the pattern, which is settled and examinable.
- A unilateral measure that dictates the exporting State's regulatory programme, and gives it no chance to negotiate, fails the chapeau.
- The same measure, redesigned to be flexible, to allow comparable rather than identical programmes, and applied after genuine negotiation with the affected States, passes.
- What condemns a measure is usually procedural: no notice, no hearing, no appeal, different treatment of comparable countries.
- A multilateral measure is far safer than a unilateral one, which is the strongest practical argument for putting a trade restriction inside a treaty rather than in a national statute.
Rio Principle 12 states the same idea from the environmental side: trade measures for environmental purposes should not constitute arbitrary or unjustifiable discrimination or a disguised restriction, and unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided, with environmental measures addressing transboundary or global problems based as far as possible on international consensus.
Where this leaves the environmental treaties
| Treaty | The trade measure | Why it is defensible |
|---|---|---|
| Montreal Protocol article 4 | Bans trade in controlled substances with non-Parties | Multilateral, negotiated, applied uniformly, with the Article 5 grace period and the Multilateral Fund as the flexibility |
| Basel Convention article 4, paragraph 5 | Prohibits export to and import from a non-Party | Multilateral, and article 11 permits bilateral arrangements with non-Parties on equivalent terms |
| CITES Articles III to V | Permit system for listed species | Multilateral, species-by-species, with scientific determinations |
None of these has been successfully challenged. The reason, in each case, is row four of the pattern above.
Worked example
State G bans imports of shrimp caught by a method that kills sea turtles. State H, an exporter, objects.
- Paragraph (g)? Sea turtles are an exhaustible natural resource on the modern reading, and they migrate through G's waters, so there is a nexus.
- Even-handed? Only if G imposes the same requirement on its own fleet.
- The chapeau. Has G negotiated with H? Does it accept a programme comparable to its own rather than identical? Does it give H notice, a hearing and an appeal? Does it give H time to adjust?
- If all four are yes, the measure is defensible. If G simply certified some countries and not others without process, it fails, and it fails on the chapeau rather than on the environmental purpose.
What it does NOT mean
It does not mean trade law overrides environmental law. The two are separate regimes; a measure may be lawful under a multilateral environmental agreement and challenged under trade law, and no tribunal has yet had to resolve a direct conflict between the two.
Trade Rules and the Environmental Exception
It does not mean unilateral measures are forbidden. They are permissible, and they are the hardest to defend.
It does not mean the chapeau is about intention. It is about application. A well-intentioned measure applied arbitrarily fails.
Quick revision
- Article XX(b): necessary to protect life or health. Article XX(g): relating to conservation of exhaustible natural resources, with domestic restrictions too.
- The chapeau: no arbitrary or unjustifiable discrimination between countries where the same conditions prevail; no disguised restriction.
- Exhaustible natural resources include living species.
- Measures usually fail on process, not on purpose: negotiate, be flexible, give notice and appeal, allow time.
- Rio Principle 12; multilateral measures are far safer than unilateral ones.
Test yourself
1. What is the difference between "necessary" in paragraph (b) and "relating to" in paragraph (g)? "Necessary" requires that no reasonably available less trade-restrictive alternative would achieve the same level of protection. "Relating to" requires only a substantial relationship between the measure and the conservation objective, with the added condition that domestic production or consumption is restricted too.
2. Why have the trade restrictions in the Montreal Protocol never been successfully challenged? Because they are multilateral, negotiated, applied uniformly, and accompanied by a grace period and a fund, so they do not discriminate arbitrarily between countries where the same conditions prevail.
3. What does Rio Principle 12 say about unilateral measures? That unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided, and that measures addressing transboundary or global problems should as far as possible be based on international consensus.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.