DR.

RAM MANOHAR LOHIA NATIONAL

LAW UNIVERSITY, LUCKNOW

INTERNATIONAL TRADE LAW

Project
On
Article XX- GATT: Conservation of Natural Resources

SUBMITTED TO: SUBMITTED BY:

Ms. Kirti singh Sakshi

Asst. Professor Roll no. 111

RMLNLU sem.: - VII ( sec-B)

 TABLE OF CONTENTS

1. Research methodology
2. Introduction
3. Trade and Environment
4. Exhaustible natural resources and GATT article X(G)
5. Case laws- GATT & WTO decisions
6. Conclusion
RESEARCH METHODOLOGY

Statement of Problem: Article XX of GATT, 1994 allows general exceptions to WTO

members to the GATT rules. Two exceptions are of particular relevance to protect human,
animal, plant life or health [para. (b]), or to ensure conservation of natural resources [para
(g)]. Yet even these exceptions are qualified. If a country restricts trade to conserve
exhaustible natural resources under Article XX(g), such measures must relate strictly to
natural resources depletion, and domestic restrictions must also be instituted at the same time.
Any trade measures under this Article cannot be arbitrary or unjustifiable, as stated in the
introductory paragraph or the chapeau of Article XX. The main idea underlying behind this
project is that, the exceptions given under Article XX, GATT should be appreciated, but then
it should be very much done while considering the chapeau of the same because the
exceptions and the chapeau go hand in hand.

Hypothesis: GATT Article XX on General Exceptions lays out a number of specific

instances in which WTO members may be exempted from GATT rules. Article XX(g) says
that the member countries can adopt policy measures that are inconsistent with GATT in case
they are necessary for the conservation of exhaustible natural resources.

Research Questions:

1) What is GATT and what is its framework?

2) How are trade and environment related?
3) What does GATT Article XX(g) talk about?
4) What are the legal issues that have arisen between member countries under Article XX(g)?
5) What is the general approach followed by the Dispute Settlement Body to decide the
cases?
Objective: Objective of this research is to understand the functioning of GATT and its
regulations, to analyse article XX(g) of the GATT with the help of case laws.

Sources: The sources which were of help in making of this project are both primary and
secondary sources.

Primary sources- GATT and WTO and the various cases with respect to the topic

Secondary sources: books, articles and internet websites.

Scope / limitation: The scope of this project is limited to the GATT Article XX(g) and the
cases which have been decided by the dispute settlement body between the member
countries.

Mode of citation: Bluebook mode of citation.

INTRODUCTION

Natural resources are without a doubt an element to be reckoned with in international trade
relations as regulated today in the World Trade Organization (WTO). Their relationship to
one another is clear, with WTO law seeking to regulate trade in natural resources. When
applied to such trade, liberalization and non-discrimination, the core principle of the WTO,
are aimed at ensuring a fairer distribution of these resources throughout the world. Natural
resources are understood to be the overall potential offered by the natural environment, in
particular in the fields of energy, mining, forestry and water. They thus include fossil, plant,
wildlife and fishery resources, all of which are useful to mankind. They are genuinely scarce
resources, having been exploited abusively in a context marked by trade liberalization in
which no State is able to take steps to protect them without heed to legal constraints.

The environmental significance of natural resources was explicitly recognized in the

multilateral trade agreements with the establishment of the General Agreement on Tariffs and
Trade (GATT) in 1947. The GATT contained the general exception to WTO members in its
Article XX(g) justifying measures which, although deemed to be in violation of the GATT
rules, aimed at conserving 'exhaustible natural resources.'1 Since the creation of the GATT
1947, this exception has remained a central one. Well, specifically, GATT lasted until the
Uruguay Round Agreements, which established the World Trade Organization (WTO) on
January 1, 1995.2 Though the original GATT text i.e., GATT, 1947 is still in effect under the
WTO framework, subject to the modifications of GATT 1994.

The tension between trade and environment, including issues of exhaustible natural
resources, has comprised an essential controversy within several important GATT and WTO
decisions. Importantly, neither the GATT nor the WTO agreements have defined the exact

1
Article XX(g) of the GATT [hereinafter Article XX(g)].
2
Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, The Legal Texts: The
Results of the Uruguay Round of Multilateral Trade Negotiations 4 (1999).
meaning and scope of the phrase, 'exhaustible natural resources'. Various decisions were held
pertinent to the protection of exhaustible natural resources, where different forms of natural
resources were involved and a variety of interpretations and analytical approaches were
utilized. Hence, it is essential to examine the GATT and WTO cases that have this far
discussed and addressed issues pertinent to the conservation of natural resources. It is also
essential to demonstrate the main analytical approach or approaches and benchmarks of these
decisions and their treatments regarding the various categories of natural resources as
exhaustible resources.

GATT Article XX on General Exceptions lays out a number of specific instances in which
WTO members may be exempted from GATT rules. One of the exceptions, which is of
particular relevance to the protection of the environment, is paragraph (g) of Article XX.
Pursuant to this paragraph, WTO members may adopt policy measures that are inconsistent
with GATT disciplines, but necessary for the conservation of exhaustible natural resources
(paragraph (g)).

GATT Article XX on General Exceptions consists of two cumulative requirements. For a

GATT-inconsistent environmental measure to be justified under Article XX, a member must
perform a two-tier analysis proving,

 First, that its measure falls under at least one of the exceptions (e.g. paragraphs (b)
and (g), two of the ten exceptions under Article XX) and, then,
 that the measure satisfies the requirements of the introductory paragraph (the
'chapeau' of Article XX), i.e., it is not applied in a manner which would constitute "a
means of arbitrary or unjustifiable discrimination between countries where the same
conditions prevail", and is not "a disguised restriction on international trade."3

TRADE AND ENVIRONMENT

International trade and the environment have a multifaceted and a complicated relationship,4
around which discussion has traditionally been "highly emotive and polarized," according to

3
https://www.wto.org/english/tratop_e/envir_e/envt_rules_exceptions_e.htm (14/10/2017, 12:20 pm)
4
Barrett, S. Environment and Statecraft, 'The Strategy of Environmental Treaty-making,' New York, Oxford
University Press, Chapter 12, (2003);
Michael Trebilcock and Robert Howse.5 This is because many environmentalists have linked
free trade with ungoverned economic growth that is damaging to the environment, while
many supporters of liberalized trade disregard these concerns, proclaiming them
unreasonable and/or a veiled form of protection. In fact, the link between trade and the
environment, while admittedly posing challenges to global governance, also provides plenty
of opportunity. Trade mechanisms can also be an effective means of achieving environmental
goals.6

A. THE INTERNATIONAL TRADE SYSTEM

It is important to review the main characteristics of the multilateral trade system:

1. The General Agreement on Tariffs and Trade (GATT)

In the aftermath of the World War II, in 1947, 23 countries negotiated a multilateral
agreement for tariff reductions. The outcome of this negotiation was the genesis of the
General Agreement on Tariffs and Trade (GATT).7 The GATT entered into operation in
January 1948 on a provisional basis. It came into operation as an international treaty that
contained a series of over 200 hundred agreements, protocols and other documents. It dealt
almost entirely with trade in products. Although, it intended to be an agreement to organize
international trade in goods, since its creation, the GATT has been the central international
multilateral trade treaty, and operated as an organization. The GATT’s establishment sought
to achieve several purposes, and one of the most essential purposes being to improve
worldwide economic growth and to free and liberalize global trade. These goals were
assumed to be achieved by disallowing governments from imposing or continuing a variety
of measures which restrain or distort international trade, such as tariffs, quotas, internal taxes
and regulations.

The GATT contains significant basic provisions that regulate international trade with respect
to government actions:
the "Tariff schedules" provision, where each country commits to limiting its tariffs to a
negotiated level on particular items;
the "Non-discrimination obligation" principle, which includes the 'Most Favored Nation'

5
Trebilcock, M. and Howse, R. 'The Regulation of International Trade', (Routledge, 3 ed., 2005), at p.n 507.
6
Nordström, H. and Vaughan, S. 'Trade and Environment,' Special Studies No. 4, World Trade
Organization,1999.
7
General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-11, T.I.A.S. 1700, 55 U.N.T.S. 194.
clause, which imposes on a country the duty to provide equal treatment to all the countries it
imports from;
the "National Treatment" clause, which rules that imported goods shall be treated no worse
than domestically produced goods and;
the "prohibition on quotas" principle, which prohibits quantitative restrictions on import and
export of goods. In addition to these substantive provisions, the GATT includes a number of
general and particular exceptions.

2. The World Trade Organization (WTO)

The WTO was established in 1994 by the Marrakesh Agreement and replaced the GATT in
January 1995.8 The Uruguay Round results led to the creation of the WTO as a developed
international organization and treaty structure, which includes almost 30 legal agreements
and supplementary decisions. All its members become subject to all of the annexed
agreements as a single package, except the bilateral agreements. Currently, the WTO has 164
Member States, which are subject to the WTO rules and agreements in their direct and
indirect international trade conducts. The WTO was founded as an improved successor of the
GATT, and it was intended to be a very developed system for facilitating and unifying
international trade, with the aim of eliminating protectionism and promoting free and
globalized trade.

In addition, it should be emphasized that the WTO has the most powerful inter-governmental
dispute resolution mechanism of any international agreement. In joining the WTO, Member
States are held to the prescribed procedures and subject to mandatory jurisdiction, pursuant to
the terms of the Dispute Settlement Understanding (the DSU). The DSU is, 'obligatory on all
members' and comprises (for the first time) a 'unitary dispute settlement mechanism covering
all the agreements listed in Annex 1' of the Marrakesh Agreement establishing the WTO.
Typically, a complaint would be followed by consultations, possible arbitration, the
formation of a panel of experts, and the Panel ruling. If the decision of the Panel is not
appealed, it becomes binding after being adopted by the Dispute Settlement Body (DSB),
which is a WTO body that rules on dispute settlement cases under the DSU. If the decision of
the Panel is appealed, then the Appellate Body hears the appeal and its final decision
becomes a binding decision, after being adopted by the DSB.

8
Article II of the GATT.
The “GATT 1994” is the basic set of trade rules, largely taken over from the GATT 1947,
that in conjunction with the other agreements in Annex 1A to the WTO agreement now
represents the goods related obligations of WTO members. The GATT 1947 is no longer in
effect. However, it is still necessary to read it. Its successor, the GATT 1994, is defined only
by a brief agreement1 that, although entitled “General Agreement on Tariffs and Trade
1994”, is little more than a series of references to other texts.9

B. ENVIRONMENT IN THE GATT/WTO

1. Past and Present Interaction

The trade and environment regimes began separately with different goals. While trade rules
aimed to eliminate protectionism and promote free and globalized trade, environmental
measures sought to facilitate conservation or protection of the environment and its basic
components. However, the goals of trade and environment have clashed in many aspects, like
environmentalists argue that free trade will eliminate or limit the protection of the
environment and cause negative environmental effects, while free traders claim that strict
environmental measures will most likely restrict the market. Typically, international trade
law controversies appear when environmental measures, implemented either to protect an
importing country’s environment, or in response to the environmental policies of another
State, are claimed to threaten trade liberalization under the WTO.

Compared to the GATT, the WTO has taken greater account of environmental issues. During
the Uruguay Round, more attention was given to environmental matters, and certain
environmental issues were included in the WTO and its cover agreements. And, to prove this
we can consider first and foremost, the preamble of the Marrakesh Agreement which
highlights the importance of 'sustainable development': "[T]heir relations in the field of
trade and economic endeavour should be conducted with a view to raising standards of
living.… while allowing for the optimal use of the world’s resources in accordance with the
objective of sustainable development, seeking both to protect and preserve the environment
and to enhance the means for doing so in a manner consistent with their respective needs and
concerns at different levels of economic development." The importance of trade’s
contribution to efforts on sustainable development and the environment has been recognized
in such forums as the 1992 Rio summit, 2002 Johanesburg Summit and 2005 UN World
Summit.

9
The WTO agreement series 2, p n. 12.
Additionally, the establishment of the WTO incorporated the establishment of the Committee
on Trade and Environment (CTE).10 Its duties are to study the relationship between trade and
the environment, and to make recommendation about any changes that might be needed in
the trade agreements. Its tasks are to study when environmental policies have a significant
impact on trade.

When the GATT was drafted in 1947, environmental protection was not a major global
concern for the drafters. The GATT focused on the liberalization of trade, while the
protection of the environment was not among its objectives. The commitment of WTO
members to sustainable development and the environment can also be seen in WTO rules.
WTO rules including specialized agreements such as the Agreement on Technical Barriers to
Trade and SPS measures provide scope foe environment objectives. WTO rules set uo the
appropriate balance between the right of members to take regulatory measures, including
trade restriction, to achieve legitimate policy objectives (e.g. protection of human, animal or
plant life or health, and natural resources) and the rights of other members under basic trade
disciplines. For example, GATT Article on General Exceptions lays out a number of specific
instances in which members may be exempted from GATT rules. Environment related
exceptions are Article XX(b) and Article XX(g). It is important to note that GATT-Article
XX(g) permits measures 'relating to the conservation of exhaustible natural resources.' The
provision seeks, among other things, to ensure that environmental measures are not applied
arbitrarily and are not used as disguised protectionism.11

EXHAUSTIBLE NATURAL RESOURCES AND GATT ARTICLE XX(G)

The phrase "exhaustible natural resources" is a central component of Article XX (g) of the
GATT. Originally, the term "natural resources" was intended to cover 'raw material', 12 and
the term "exhaustible natural resources" referred to stock resources, such as metal or oil,
especially since these resources are capable of being depleted or exhausted.13 This traditional
approach considered only minerals as exhaustible natural resources, while 'living resources'

10
https://www.wto.org/english/thewto_e/whatis_e/tif_e/bey2_e.htm
11
https://www.wto.org/english/tratop_e/envir_e/envt_intro_e.htm ( 3:03 pm,-14-110-2017)
12
Charnovitz, Steve, 'Exploring the environmental exceptions in GATT Article XX', 25 J. World Trade
37(1991) at p45.
13
Ibid.
such as animals and plants were considered inexhaustible resources since they are renewable
and can reproduce.

Now, the phrase “exhaustible natural resources” under Article XX(g) has been interpreted
broadly to include not only “mineral” or “non-living” resources but also living species which
may be susceptible to depletion, such as sea turtles. For example, resources that have been
termed as "exhaustible natural resources" include tuna, salmon and herring stocks, dolphins,
clean air, migratory sea turtles, and certain forms of raw material.14 To support this
interpretation, the Appellate Body noted, in the US — Shrimp case, that modern international
conventions and declarations made frequent references to natural resources as embracing
both living and non-living resources. Moreover, in order to demonstrate the exhaustible
character of sea turtles, the Appellate Body noted that sea turtles were included in Appendix
1 on species threatened with extinction of the Convention on International Trade in
Endangered Species of Wild Fauna and Flora (“CITES”).15

For a measure to be “relating” to the conservation of natural resources, a substantial

relationship between the measure and the conservation of exhaustible natural resources needs
to be established. In the words of the Appellate Body, a member has to establish that the
means (i.e. the chosen measure) are “reasonably related” to the ends

The introductory clause of Article XX (its chapeau) emphasizes the manner in which the
measure in question is applied. Specifically, the application of the measure must not
constitute any 'means of arbitrary or unjustifiable discrimination' or a 'disguised restriction on
international trade.' The chapeau requires that the measure should not constitute an abuse or
misuse of the provisional justification made available under one of the paragraphs of Article
XX, that is to say, is applied in good faith. In other words, Article XX embodies the
recognition by WTO members of the need to maintain a balance between the right of a
member to invoke an exception and the rights of the other members under the GATT.

CASE LAWS – GATT AND WTO DECISIONS

14
https://www.wto.org/english/tratop_e/envir_e/envt_rules_exceptions_e.htm
15
There are about 20 of these provisions that can affect trade: for example they ban trade in certain products, or
allow countries to restrict trade in certain circumstances. Among them are the Montreal Protocol for the
protection of the ozone layer, the Basel Convention on the trade or transportation of hazardous waste across
international borders, and the Convention on International Trade in endangered species (CITES).
This section examines treatments and assays that were given to exhaustible natural resources
in preceding cases considered by the GATT Panels and WTO Appellate Body. The common
denominator of all the GATT and WTO precedents which examined restricting measures
with respect to exhaustible natural resources is that all these decisions examined the validity
of the measures under one of the environmental exceptions, i.e., under Article XX (g)16.

GATT DECISIONS
1. US – Tuna (Canada)17

This was the first GATT decision that discussed the conservation of exhaustible natural
resources under the coverage of Article XX (g). In this case, the US imposed prohibitions on
imports of tuna and tuna products from Canada according to US law. This US prohibition
was pursuant to a seizure of US fishing vessels by Canada, after Canada found these vessels
fishing in waters it regarded as being under Canadian jurisdiction. Canada argued that the US
prohibition on import of tuna products from Canada was inconsistent with GATT rules.
However, the US considered its action, i.e., prohibiting tuna imports from Canada, as
justified according to Article XX (g).

The Panel found the US prohibiting measure to be in violation of Article XI:1. Then, the
Panel examined the applicability of Article XX (g) according to the traditional approach, by
starting with the chapeau of Article XX. The Panel found that the US prohibition did not
violate the chapeau of Article XX. The Panel then examined subsection (g), and considered
tuna stocks as exhaustible natural resources 'in need of conservation management.'

However, the Panel found that the requirement in subsection (g) "made effective in
conjunction with restrictions on domestic production or consumption" was not satisfied by
the US. The Panel noted that the US has not proved any domestic restrictions on consumption

16
This Article states - "Subject to the requirement that such measures are not 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, nothing in this
Agreement shall be construed to prevent the adoption or enforcement by any Member of measures:
(g) Relating to the conservation of exhaustible natural resources if such measures are made effective
in conjunction with restrictions on domestic production or consumption."

17
GATT Panel Report, United States – Prohibition of Imports of Tuna and Tuna Products from Canada, L/5198,
adopted 22 February 1982, BISD 29S/91 (US – Tuna from Canada).
or production of tuna and tuna product. Therefore, the Panel found subsection (g)
inapplicable to the US measure. The result of this case is a violation of Article XI:1 by the
US measure, meanwhile Article XX(g) was found not to be applied and the measure was not
justified.

2. Canada – Herring and Salmon18

In this case, the GATT Panel rejected the applicability of Article XX(g) to a Canadian
restricting measure. The Canadian law imposed prohibition on export of unprocessed herring
or salmon from Canada. Processed herring or salmon were not subject to this ban. The US
argued that this prohibition and restriction on export of unprocessed herring or salmon was in
violation of Article XI:1. Canada's counter argument cited several GATT exceptions,
particularly Article XX(g), claiming that its measure was valid under this exception since it
aimed at the conservation of natural resources.

The Panel found, based upon the parties' agreement, that the Canadian prohibitions on the
export of unprocessed herring and salmon were in contradiction with Article XI:1. Regarding
the applicability of Article XX(g) to the Canadian prohibitions, the Panel dealt first with
subsection (g) and not the chapeau, examining the meaning of the requirement 'relating to'
based on the context and purpose of Article XX. The Panel found that the most appropriate
interpretation of the requirement 'relating to' is that a measure must be 'primarily aimed' at the
'conservation of exhaustible natural resources.' The Panel also discussed the interpretation of
the condition 'in conjunction with restrictions on domestic production or consumption' in
subsection (g) and again determined that a measure must be 'primarily aimed' in order to be
an effective measure meeting this requirement.

The Panel held that herring and salmon stocks are 'exhaustible natural resources' according to
subsection (g), but noted that Canadian export prohibitions did not constitute a conservation
measure per se. It found that the Canadian prohibiting measure was unnecessary to collect
statistical data, since in other cases Canada had collected statistical data pertaining to a
variety of fish species, including salmon, without applying any export prohibition.

In addition, it found that the prohibitions restricted access to unprocessed herring and salmon
supplies only for foreign processers and consumers; the restrictions did not apply

18
Panel Report, Canada-Measures Affecting Exports of Unprocessed Herring and Salmon, L/6268, adopted 22
March 1988, BISD 35S/98.
domestically. Therefore, the Panel held that the Canadian measure was not 'primarily aimed
at the conservation of exhaustible natural resources', and was not justified by Article XX (g).

3. The Tuna-Dolphin Saga19

The Tuna-Dolphin saga is an example of the clash between trade and environment in general,
and of trade and exhaustible natural resources in particular.

A unique phenomenon in the Eastern Tropical Pacific is that mature yellow fish tuna swim
underneath groups of dolphins. This has prompted fishing vessels to find schools of
underwater tuna by locating and chasing dolphins on the ocean surface; they are then
encircled with purse seine nets to catch the tuna below. This technique, known as "setting on
dolphins," was first used by the U.S. fleet in the 1950s and 1960s, and is only used in the
ETP, as this link between tuna and dolphins has not been observed elsewhere. While this
hugely raised the efficiency of the tuna catch, it also increased the level of incidental dolphin
mortality. In response to concerns regarding the high rate of dolphin mortality, the U.S.
Congress passed the Marine Mammal Protection Act in 1972, which prohibited 'the taking' of
marine mammals.

3.1. US - Tuna-Dolphin I (Mexico)

This case dealt with the US Marine Mammal Protection Act 1972 (MMPA). The MMPA
prohibited the import of yellowfin tuna fish and yellowfin tuna products from Mexico that
resulted in the incidental killing of marine mammals in excess of US standards, unless
explicitly authorized. The US Marine Mammal Protection Act sets dolphin protection
standards for the domestic American fishing fleet and for countries whose fishing boats catch
yellowfin tuna in that part of the Pacific Ocean. If a country exporting tuna to the United
States cannot prove to US authorities that it meets the dolphin protection standards set out in
US law, the US government must embargo all imports of the fish from that country. There
were two embargos:

1) the first was a 'direct embargo' on Mexico, and

2) the second was an 'intermediary-nations embargo' applied to other countries.

19
The Tuna-Dolphin saga refers to a trilogy of cases, i.e., two GATT cases and one WTO case.
Mexico claimed that the US embargos stemming from the MMPA were inconsistent with
various GATT rules, especially Article XI:1, while the US claimed that its measures were
valid under GATT exceptions, particularly Article XX(g). The Panel also noted that Mexico
had argued that the United States measures were not justified under the exception in Article
XX(g) because, inter alia, this provision could not be applied extra jurisdictionally. Mexico
argued that the US could not embargo imports of tuna products from Mexico simply because
Mexican regulations on the way tuna was produced did not satisfy US regulations. (But the
US could apply its regulations on the quality or content of the tuna imported.)

The Panel found the US restricting measures contrary to Article XI:1, and denied the
applicability of Article XX(g). Importantly, the Panel noted that Article XX(g) applies to
measures to restrict production or consumption only in the country's jurisdiction. Since in this
case the restrictions related to production and consumption located outside US jurisdiction,
the Panel rejected its applicability to US measures. Despite the treatment of dolphins as
exhaustible natural resources, the Panel decision did not allow for the applicability of Article
XX(g) to dolphins. After carefully examining the relationship between United States
measures and its goal of dolphin conservation, the panel came to the conclusion that banning
the tuna would not in itself conserve the dolphins; only policy changes would, which they felt
was not within the original purpose of the GATT. The GATT was only supposed to deal with
member states' products, not their processes or policies.

If the US arguments were accepted, then any country could ban imports of a product from
another country merely because the exporting country has different environmental, health and
social policies from its own.

3.2 US - Tuna-Dolphin II (EEC)

The US prohibited imports of tuna from secondary nations engaging in trade on tuna with
primary nations that were prohibited from exporting tuna to the US. The exception was if the
secondary nation could provide 'reasonable proof' that it had ''not imported products subject
to the direct prohibition within the preceding six months.' The European Economic
Community (EEC) and Netherlands challenged the secondary embargo, arguing that it
violated GATT rules, including Article XI:1, and that it was not valid under GATT
exceptions, specifically Article XX(g). The US argued that the secondary embargo was valid
under Article XX(g).
While examining the secondary embargo, the Panel accepted the EEC argument and found its
prohibition to be in violation of Article XI:1.

In examining the applicability of Article XX(g) to justify the violating measure, the Panel
suggested a three-step analysis to determine:

(i) whether the measure fell within the scope of conservation of exhaustible natural resources;

(ii) whether the measure was 'related' to the conservation of exhaustible natural resources and
was 'made effective in conjunction with restrictions on domestic production or consumption';
and

(iii) whether the measure was compatible with the requirements of the chapeau.

The Panel applied these three steps analysis to the US measure. As in the Tuna-Dolphin I
case, the Panel considered dolphins to be exhaustible natural resources. It also found that the
US measure to protect dolphins fell within the range of policies aimed at conserving
exhaustible natural resources. In contrast to the Tuna-Dolphin I case, in the Tuna-Dolphin II
case, the Panel rejected the argument that Article XX(g) did not apply extra-jurisdictionally,
and concluded that it has an extra-jurisdictional applicability.

In the second step, the Panel examined whether the secondary embargo was related to
conservation according to Article XX(g), and found that the US measures forced other
countries, 'to change their policies, and that were effective only if such changes occurred',
therefore it could not be considered primarily aimed. Since the measure did not satisfy the
second step, the Panel did not examine the third one. Accordingly, the Panel concluded that
Article XX(g) did not apply to the US import prohibitions on tuna.

WTO DECISIONS
20
1. US - Gasoline

The Tuna-Dolphin II case was the last GATT decision, and the Gasoline case was the first
environmental case at the WTO.

This case dealt with the implementation of a US federal act, the Clean Air Act 1990 (CAA).
The CCA aimed to prevent and control air pollution in the US caused by the combustion of

20
Panel Report, United States-Standards for Reformulated and Conventional Gasoline, WTO Doc. WT/DS2/R
(Jan. 29, 1996); Appellate Body Report, United States-Standards for Reformulated and Conventional Gasoline,
WT/DS2/AB/R (Apr. 29, 1996).
gasoline by motor vehicles. According to the authorization of the CAA, the Environmental
Protection Agency (EPA) determined and promulgated the Gasoline Rule aiming at reducing
air pollution. This rule includes new regulations on the compositions and emissions effects of
gasoline. The Gasoline Rule applied to all the refiners, blenders and importers in the US.
According to the Gasoline Rule, domestic refiners were required to incorporate an
independent baseline that represented the quality of gasoline produced by the refiners in
1990. In addition, the Gasoline Rule required gasoline importers to establish an independent
baseline, when only the statutory baseline was available to them, with the exception of using
the first method available to the domestic refiners.

Notably, while the gasoline importers were automatically assigned the statutory baseline, the
domestic refiners were not allowed to choose this statutory route. As a result, in the context
of the individual baseline, sales conditions for imported gasoline were less favourable than
those of domestic gasoline. Venezuela and Brazil contended that the US Gasoline Rule
derived from the CAA, violated GATT rules. Venezula said it is unfair because US gasoline
did not have to meet the same standards, while the US argued that even if the Gasoline Rule
was found to be in violation of GATT rules, it was still valid mainly according to Article
XX(g).

After finding that the Gasoline Rule did violate GATT rules, the WTO Panel discussed the
applicability of Article XX(g) from the top down, by analysing the chapeau of Article XX,
and then analysing the components of subsection (g). The Panel concluded that the methods
at issue were not primarily aimed at the conservation of exhaustible natural resources,
therefore subsection (g) was not met and as a result Article XX(g) did not apply.

The Appellate Body rejected the Panel framework. In respect of the US defence under Art.
XX(g), the Appellate Body modified the Panel's reasoning and found that the measure was
related to (i.e., primarily aimed at) the conservation of exhaustible natural resources and thus
fell within the scope of Art. XX(g). However, the measure was still not justified by Art XX
because the discriminatory aspect of the measure constituted 'unjustifiable discrimination'
and 'a disguised restriction on international trade' under the chapeau of Art. XX.

The Panel had found in its report that clean air was an exhaustible natural resource within
the meaning of subsection (g), mainly since clean air could be depleted. The Appellate Body
also treated clean air as an exhaustible natural resource, and accepted the Herring-Salmon
case interpretation that 'relating to the conservation' means 'primarily aimed at'. As a result,
the Appellate Body confirmed that the CAA policy to reduce the depletion of clean air as an
exhaustible natural resource had a substantial relationship and was primarily aimed at the
conservation of exhaustible natural resources. There should also be at least some identical
restrictions applying to domestic products. These findings led the Appellate Body to
conclude that the baseline establishment rules in the Gasoline Rule, in their application,
constitute unjustifiable discrimination and a disguised restriction on international trade.

2. US - Shrimp-Turtle21

The WTO Shrimp-Turtle dispute is arguably the most important environment related dispute
to come before the trade body tribunals. The background of the Shrimp-Turtle case is similar
to that of the Tuna-Dolphin cases. The case stemmed from the US efforts to protect the
world's endangered sea turtles. The US act concerning endangered species is the Endangered
Species Act of 1973 (ESA), which prohibited the harming of any of the seven protected
species of turtles. Section 609 of Public Law 101-102 (1989) prohibited importation to the
US of shrimp harvested with commercial fishing technology that may have adversely affected
sea turtles. In addition, Section 609 stated that countries exporting shrimp to the US had to
adopt regulatory programs governing the incidental sea turtle death comparable to that of the
US. Moreover, Section 609 required that all imported shrimp to the US be accompanied by a
declaration (Shrimp Exporter's Declaration Form) stating that the imported shrimp was
harvested in waters within the jurisdiction of a certified country, or in conditions that did not
adversely affect sea turtles.

Several countries including India, Malaysia, Pakistan and Thailand lodged a joint complaint
at the WTO challenging Section 609 as a violation of a number of WTO rules. The US
argued that Section 609 was justified according to Article XX(g).

The WTO Panel found that Section 609 violated Article XI:1 of the GATT and, unlike the
analytical framework used in the Gasoline case, the Panel examined Section 609 according to
the chapeau of Article XX. The Panel concluded that Section 609 was unjustified within the
meaning of the chapeau, hence, it did not address subsection (g). Interestingly, although the
Appellate Body reached the same conclusion to the effect that Section 609 did not comply
with the chapeau of Article XX.

21
Panel Report, United States- Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R, (May
15, 1998); Appellate Body Report, United States- Import Prohibition of Certain Shrimp and Shrimp Products,
WT/DS58/AB/R (98-3899) (Oct. 12, 1998). https://www.wto.org/english/tratop_e/envir_e/edis08_e.htm
The US lost the case, not because it sought to protect the environment but because it
discriminated between WTO members. It provided countries in the western hemisphere —
mainly in the Caribbean — technical and financial assistance and longer transition periods for
their fishermen to start using turtle-excluder devices. It did not give the same advantages,
however, to the four Asian countries (India, Malaysia, Pakistan and Thailand) that filed the
complaint with the WTO.

3. China - Raw Materials22

The case addresses export restraints that China imposed on the exportation of raw materials.
When China joined the WTO in 2001, like any acceding member, it accepted the WTO
'single-package' and undertook to apply WTO rules. In addition, according to China Protocol
of Accession, Paragraph 11.3, China was obligated to eliminate all export taxes and charges,
except those related to measures compatible with Article VIII of the GATT, and for a list of
raw materials that was provided in Annex 6 of its Protocol of Accession. These additional
commitments incorporated in the Protocol of Accession are known as WTO-plus
commitments. Also, in the same Protocol, China committed to eliminate and not to introduce
export quotas. However, from 1994 to 2010, China imposed a complex of measures that
included four types of export restraints on certain raw materials: (i) export duties; (ii) export
quotas; (iii) minimum export price requirements; and (iv) export licensing requirements.

The complainants, the US, Mexico, and the EU confronted these four types of export
restrictions on raw materials through the WTO DSS. They argued that China's restricting
measures were in violation of WTO rules (especially Article XI:1 of the GATT), and were
inconsistent with China’s commitments under the Protocol of Accession. The complainants
argued that the application of these measures raised the prices of raw materials in the
international market, whilst China's domestic market would benefit, especially through a
sufficient supply of raw materials and lower prices. China, however, justified its export
restrictions on some raw materials by relying heavily, inter alia, on Article XX(g). It argued
that the restricting measures related to 'the conservation of exhaustible natural resources.'

The Panel examined the text and context of Paragraph 11.3, and found that unlike Paragraph
5.1 of the Protocol of Accession, Paragraph 11.3 does not include any reference to Article

22
Panel Report, China-Measures Related to the Exportation of Various Raw Materials, WT/DS394/R,
WT/DS395/R, WT/DS398/R (July 5, 2011); Appellate Body Report, China- Measures Related to the
Exportation of Various Raw Materials, WT/DS394/AB/R, WT/DS395/ AB/R, WT/DS398/AB/R (Feb. 22,
2012).
XX of the GATT. It also found that Paragraph 11.3 does not have any introductory clause
that preserves China's right to invoke GATT exceptions. Therefore, based upon the wording
and the context of Paragraph 11.3, the Panel concluded that China does not have the right to
invoke Article XX(g) as justification for the violations of Paragraph 11.3 of China’s Protocol
of Accession.

The second issue dealt with the applicability of Article XX(g) to China's measures, which
restricted the export of raw materials and violated GATT provisions. The panel found that a
series of measures operated collectively (export restrictions imposed on the exportation of
particular raw materials) was inconsistent with Article XI:1 of the GATT.

Additionally, the Panel addressed the term 'conservation' with respect to China's sovereignty
over its natural resources. The Panel found that although China has sovereignty over its
natural resources, once it joined the WTO, it was obliged to exercise its right to regulate trade
and export of natural resources according to WTO rules. Hence, the fulfilment of sovereignty
over natural resources is subject to the WTO rights and obligations. With regard to the issues
mentioned above, the Appellate Body approved the Panel discussion.

CONCLUSION FROM THE CASES

As is obvious from the GATT and WTO case laws, the elements of Article XX(g) have received diverse
treatments in the various decisions of the GATT and WTO tribunals, with additional sub-
requirements being imposed along with the basic requirements of Article XX(g).

For satisfying subsection (g), the measure has to meet three main components: firstly, that it refers
to an exhaustible natural resource; secondly, that it relates to the conservation of exhaustible
natural resources; and thirdly, that it is in conjunction with restrictions on domestic production or
consumption.

CONCLUSION

The WTO’s committee says the most effective way to deal with international environmental
problems is through the environmental agreements. It says this approach complements the
WTO’s work in seeking internationally agreed solutions for trade problems. In other words,
using the provisions of an international environmental agreement is better than one country
trying on its own to change other countries’ environmental policies.
The committee notes that actions taken to protect the envi.ronment and having an impact on
trade can play an important role in some environmental agreements, particularly when trade
is a direct cause of the environmental problems. But it also points out that trade restrictions
are not the only actions that can be taken, and they are not necessarily the most effective.
Alternatives include: helping countries acquire environmentally-friendly technology, giving
them financial assistance, providing training, etc

It is very clear that the conservation of exhaustible natural resources has been a critical debate
and central issue within the GATT and WTO decisions. Indeed, there has been no unified and
consistent approach in determining whether a measure satisfies the elements of Article
XX(g).

The WTO has a decisive role to play in the area of improving the Conservation of Natural
Resources and it is one that should focus on the law and on institutions. There needs to be a
closer match between rules on natural resource conservation and the rules of international
trade. It is not just a question of establishing cooperation with the organizations competent in
environment matters; the implications of resource conservation for trade need to be
highlighted clearly, if necessary by embodying the measures concerned in legal provisions.

The WTO should avoid lagging behind current practice by taking steps to compile an
inventory of natural resources in general and forest resources in particular and identify the
means of conserving them through international trade. This might include the classification of
exhaustible resources, the introduction of measures to determine tradable quantities and the
definition of rules to differentiate between sustainably exploited timber and timber exploited
without regard for the rules.

The WTO bodies that hear disputes relating directly or indirectly to natural resources could
be bolder in their rulings. This would enhance the clarity of the relevant WTO rules. Yet it is
precisely where they should act as dominant interpreter for the dominated interpreters that
these bodies retreat.

BIBLIOGRAPHY

Primary Sources:
 General Agreement on Trade & Tariff, 1947
 GATT/WTO DISPUTES:
 "United States – Prohibition of Imports of Tuna and Tuna Products from
Canada", (Panel Report) Report adopted on 22 February 1982, GATT, BISD
29S/91 (US – Tuna from Canada).

 "Canada – Measures Affecting Exports of Unprocessed Herring and Salmon",

(Panel Report) Report adopted on 22 March 1988,GATT, BISD 35S/98.
 "United States – Standards for Reformulated and Conventional Gasoline", (Panel
Report) WTO Doc. WT/DS2/R (Jan. 29, 1996);
 "United States-Standards for Reformulated and Conventional
Gasoline",(Appellate Body Report) WT/DS2/AB/R (Apr. 29, 1996).
 "United States- Import Prohibition of Certain Shrimp and Shrimp Products",
(Panel Report) WT/DS58/R, (May 15, 1998);
 "United States- Import Prohibition of Certain Shrimp and Shrimp Products",
(Appellate Body Report) WT/DS58/AB/R (98-3899) (Oct. 12, 1998).
 "China-Measures Related to the Exportation of Various Raw Materials",
WT/DS394/R, WT/DS395/R, WT/DS398/R (July 5, 2011);
 "China- Measures Related to the Exportation of Various Raw Materials",
(Appellate Body Report) WT/DS394/AB/R, WT/DS395/ AB/R,
WT/DS398/AB/R (Feb. 22, 2012).
Secondary sources:
 Barrett, S. Environment and Statecraft, "The Strategy of Environmental Treaty-
making," New York, Oxford University Press, Chapter 12, 2003.
 Trebilcock, M. and Howse, R., "The Regulation of International Trade,"
Routledge, 3 ed., 2005.
 Nordström, H. and Vaughan, S., "Trade and Environment," Special Studies No. 4,
World Trade Organization,1999.
 Charnovitz, Steve, "Exploring the environmental exceptions in GATT Article XX,"
25 J. World Trade 37(1991).
 https://www.wto.org/english/tratop_e/envir_e/edis07_e.htm
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 http://papers.ssrn.com/sol3/papers.cfm?abstractid=2257745
 http://www.oas.org/dsd/Toolkit/Documentos/MOduleII/GATT%20WTO%20Disp
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