For those of you who get excited about PPMs (process and production methods), on one side or the other, I just came across two such issues.
1. In a policy paper about sustainability standards for biofuel products, economists Harry de Gorter and David R. Just make the following point:
28. Are there any issues regarding international trade law and biofuel sustainability standards?
There are several. A sustainability standard means nonsustainable ethanol is treated less favorably than sustainable ethanol. This is problematic because the WTO prohibits members from discriminating between domestic and imported products based on the processes or production methods used to produce them. Imposing a higher tax on imported nonsustainable ethanol, as compared to a lower tax (because of the tax credit) on domestic sustainable ethanol blended with gasoline—a domestic-like product—would seem to violate General Agreement on Trade and Tariffs Article III(2)’s first sentence. The ethanol products, qua products, are the same, but they are taxed differently.
Privileged treatment for the blender’s tax credit would probably also be discriminatory and violate GATT ’94, Article I, if ethanol imported from at least one other country qualified for the tax credit. The U.S. would then be guilty of discriminating between like ethanol imported into the United States from two different countries, a violation of the most-favored nation principle of Article I.
The biofuel sustainability mandate runs afoul of GATT Article XI, which prohibits all quantitative restrictions on imports. Because the mandate’s sustainability criterion would seem to be an internal regulation that discriminates against unsustainable ethanol, it might seem to violate Article III(4)’s prohibition on discriminatory regulations. Since the regulation (the sustainability criterion attached to the mandate) regulates the process of making the ethanol and not the qualities of the ethanol itself, however, WTO decisions have indicated that the discrimination provisions of Article III(4) do not apply. Instead, because the sustainability criterion would operate to reduce the flow of unsustainable ethanol into the United States, it would constitute a quantitative restriction on unsustainable ethanol imports and, accordingly, violate Article XI.
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2. A Vancouver Sun article on possible U.S. restrictions on "dirty" oil from Canada notes :
Attempts by U.S. politicians to curb imports of oilsands and "dirty" energy from Canada could face a challenge under World Trade Organization rules, the author of a survey into U.S. protectionism said Monday.
According to Helmut Mach, director of the Western Centre for Economic Research at the University of Alberta School of Business, American attempts to restrict imports of higher-carbon fuels such as oilsands could be illegal under international trade rules because it would discriminate against how a particular product — in this case oil — is manufactured.
In that sense, climate bills before the U.S. Senate and Congress could be construed as protectionist measures, Mach said in an interview.
"Normally, under international trade rules, how a product is produced is irrelevant," he said. "PPM's (process and production methods) are not supposed to be a determining factor in purchasing decisions. It has the potential to become very controversial and complicated factor in the climate-change debate."
