Heavy Fuel: Trade and Environment in the GATT/WTO Case Law

Date01 November 2014
AuthorPetros C. Mavroidis,Aaron Cosbey
Published date01 November 2014
Heavy Fuel: Trade and Environment in the GATT/
WTO Case Law
Aaron Cosbey and Petros C. Mavroidis*
This article discusses the evolution of case law regard-
ing the treatment of cases that the authors qualify as
‘trade and environment’ in the case law of the General
Agreement on Tariffs and Trade (GATT) and the
World Trade Organization (WTO). The main argu-
ment is that, as in many domestic jurisdictions, GATT/
WTO courts moved from an original ‘hostile’ position
towards environmental protection that incidentally
affected trade flows to a more nuanced, even friendly
attitude towards those measures that were legiti-
mately ‘green’. WTO courts, like other courts before
them, saw the signs of times. They did not have to
‘make’ law, though, in order to change their attitude
towards environmental concerns. They only had to
correct a clear mistake they committed in the late
1980s in the notorious tuna-dolphin dispute, and start
interpreting the GATT/WTO as it was meant to be by
its framers: societal preferences, to the extent they are
non-discriminatory, trump obligations to liberalize
MOVED . . . A LOT)
The framers of the General Agreement on Tariffs and
Trade (GATT),1for reasons that have adequately been
explained in the literature,2focused on the disciplining
of trade instruments (e.g., import and export quotas,
tariffs). Domestic instruments (e.g., environmental
policies) would be designed in national capitals and,
unlike tariffs, would not be the subject matter of
international negotiations. The only legal rule that they
should observe would be non-discrimination: they
would apply in the same way to both domestic as
well as imported ‘like’ goods. By contracting non-
discrimination with respect to domestic instruments in
the GATT, the framers wanted to avoid the erosion of
the value of tariff concessions negotiated internation-
ally. Indeed, what would be the value of lowering an
import duty on cars to 5%, if ‘Home’ could subsequently
impose a consumption tax of 0% on domestic cars,
while without any further justification imposing a con-
sumption tax on imported like goods of 25%? And why
would ‘Foreign’ pay consideration for Home’s import
tariff on cars without some insurance policy that it
would receive what it paid for?
Non-discrimination with respect to domestic instru-
ments was conceived as akin to the insurance policy
that Foreign was looking for. Home retains discretion
to regulate in an area, but retains no discretion as to the
class of products that would come under its regulations:
all domestic and imported ‘like’ goods would be
subjected to the same fiscal or non-fiscal regulatory
Uncertainty persists, for example, with regard to the
level of taxation that Home will choose to impose on
cars. There is no uncertainty nevertheless, with respect
to the class of products that will be subjected to it.
Foreign, when negotiating import tariffs with Home,
knows that whatever level it negotiates will be the
maximum imposition that its products will be burdened
with beyond and above the impositions on Home’s own
like goods. Protection, an elusive notion by any reason-
able benchmark, thus becomes negotiable, and this is
the magic of the GATT.
Following their tariff negotiation, Home and Foreign
can go back to the drawing board and design any envi-
ronmental policy they wish. All they have to do is
ensure it applies in an even-handed manner to domes-
tic and foreign ‘like’ goods. This is the quintessential
attitude of the world trading system towards environ-
mental policies (and all other domestic instruments
indeed), and it does sound simple, trivial indeed. How
can it be then, that the panels of the GATT and the
World Trade Organization (WTO) could not get it right
from day one?
It is, of course, anything but easy to define the indepen-
dent variables here. Some Panels lost sight of the forest
described above by insisting on the understanding of
specific trees. Should ‘like products’ be understood as
* Corresponding author: Email: pm2030@columbia.edu.
1General Agreement on Tariffs and Trade 1994 (Marrakesh, 15 April
1994; in force 1 January 1995).
2See, e.g., J.H. Jackson, World Trade and the Law of the GATT
(Bobbs-Merrill, 1969); R.E. Baldwin, Non-tariff Distortions in Interna-
tional Trade (Brookings Institution, 1970); K. Bagwell and R.W.
Staiger, The Economics of the World Trading System (MIT Press,
2002); D.A. Irwin, P.C. Mavroidis and A.O. Sykes, The Genesis of the
GATT (Cambridge University Press, 2008).
Review of European Community & International Environmental Law
RECIEL 23 (3) 2014. ISSN 2050-0386 DOI: 10.1111/reel.12089
© 2014 John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

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