Part Two: The possibility to solve the conflict between environment and trade under existing WTO framework.

WTO is a trade organisation, which was founded to limit discriminatory trade practice and help trade flow as freely as possible. However, there are some environmental considerations in WTO. The preamble of states “seeking both to protect and preserve the environment”7. Actually Article XX of GATT does recognise the ability of a country to place other concerns ahead of obligations under the GATT, especially sub-article (b),(g)8. Such article was regarded as “environmental exception” or “Green Exception”.

Although there are black letters in white paper, it is another issue whether they are working. So next we would like to introduce some of the leading cases handed down by the Dispute Resolution Panel of the GATT/WTO, which are specific related to environmental protection. Then we can see whether the trade organisation really concerns about environmental protection.

1. Tuna-dolphin case9

Under the U.S. Marine Mammal Protection Act, countries seeking to export tuna to the U.S. had to show that they had a tuna fishing regulatory program comparable to that of the U.S. and the dolphins taken incidentally by their tuna fishing boats was no greater than 1.25 times the US rate. The U.S. argued the “green exception” allowed it to do so. However the GATT dispute panel found that the measures in the Act were not “necessary” to the protection of animal life within the reservation of ArticleXX(b). The decision was criticised by lots of environmentalists for its narrow interpretation of Article XX. One commentator felt that this decision “jeopardised the future efficacy of international environmental treaties” and argued the decision put free trade a “far higher priority than environmental protection”.10

2. Reformulated Gasoline case

In order to protect clean air, the USA amended the 1990 Clean Air Act. Under the new rule, only “reformulated” gasoline was allowed to be sold. The dispute stemmed from the fact that domestic refiners had three different standards that they could use to meet the requirement of the regulation, whereas foreign refiners has only one.

Although both the Panel and the Appellate Body ruled against the U.S., the reason was a bit different. The Panel found that the regulation must be “primary aimed at"11 the conservation of exhaustible natural resource in order to be upheld under Article XX. The Appellate Body, on the contrary, recognised the action was “primary aimed at” protecting the environment and should be viewed as such for Article XX(g) purposes. But it ruled the regulation of the U.S. discriminated between domestic and foreign producers12.

In the following case, the decisions between the Panel and Body were much different.

3. Shrimp—Turtle case

According to USA regulation, beginning on May 1, 1996, all shipments of shrimp and shrimp products into the US were required to have a declaration that the shrimp was harvested in a manner that did not adversely affect sea turtles. India, Malaysia, Pakistan, Thailand challenged the regulation was inconsistent with the GATT.

In the first instance, the Panel ruled against USA, it stated that “ when considering a measure under Article XX, we must determine not only whether the measure on its own undermines the WTO multilateral trading system, but also whether such type of measure, if it were to be adopted by other Members, would threaten the security and predicability of the multilateral trading system.”13

This was a very bad decision. According to this test, whether an environmental protection action cold be fallen into Article XX exception or not, firstly it should pass the “threat to the multilateral trading system” test. In other words, under the WTO’s dispute settlement system, trade always prevails the environment in case of conflict.

However, the Appellate Body ruled that the Panel’s legal analysis was in error, noting that to maintain the multilateral trading system “is not a right or an obligation, nor is it an interpretative rule which can be employed in the appraised of a given measure under the chapeau of Article XX”14.

Finally the Appellate Body found against the U.S. on its discriminatory "implementation" of the Act, but not the Act itself15. Indeed the Body spent a full paragraph to emphasize a need to protection for sea turtle:

“We have not decided that the protection and preservation of the environment is of no significance to the Members of the WTO. Clearly, it is. We have not decided that the sovereign nations that are Members of the WTO cannot adopt effective measures to protect endangered species, such as sea turtles. Clearly, they can and should. And we have not decided that sovereign states should not act together bilaterally, plurilaterally or multilaterally, either within the WTO or in other international organisations, to protect endangered species or to otherwise protect the environment. Clearly, they should and do.”16

It is worth noting that the Appellate Body did not explicitly prohibit US from regulating production methods for shrimp harvesting outside its own jurisdiction. So some observers argued that this case opened the theoretical possibility for extrajurisdictional environmental regulation to be consistent with WTO rules. However, in practice it would be quite difficult for extrajurisdictional unilateral environmental regulation to pass scrutiny17.

From above we can see that under existing WTO dispute settlement system, none of trade measures to protect environment was successful. Although there were some environmental points or values recognised, it was far from the expectations of environmentalists.

Meanwhile, On October 14,1999, the Secretariat of the WTO issued a report on “Trade and Environment”18. The report was widely perceived to be an effort by the WTO Secretariat to put international trade in a more favourable light, so-called “Olive branch”19. But the report asserts without proof that the gains from trade are sufficient to repair any environmental damage, which made many environmentalists unhappy20.
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