Frequent commenter Charles Benoit has an article coming out in the Georgetown Journal of International Law entitled "Picking Tariff Winners: Non-Product Related PPMs and DSB Interpretations of “Unconditionally within Article I:1." The SSRN version is here. Here's the abstract:
This paper proposes how WTO Members seeking a proportional increase in the consumption of “sustainable” ethanol can defend a unilaterally introduced tariff advantage for ethanol conditioned on green house gas emission life-cycle assessments. This explanation applies a WTO-contextual taxonomy of non-product-related process and production methods to argue that life-cycle assessments should not be interpreted as a prohibited PPM, and in fact are supported by the text of the WTO Preamble and the WTO Dispute Settlement Body’s flexible interpretations of “unconditionally.” The purpose of the paper is to advance an emerging view of GATT Article I:1’s most-favored-nation principle, and as such there is no reliance on derogations of the MFN principle found in the GATT Article XX exceptions or the Enabling Clause.
Some key passages:
Ethanol is a volatile, flammable, colorless biofuel liquid with a specific molecular formula. The energy contained in ethanol is originally captured by the photosynthesis of various feedstocks, such as sugar cane or corn, which are then transformed into ethanol, which will have the same properties regardless of which feedstock was used. When ethanol is blended with gasoline, a vehicle’s green-house gas (“GHG”) emissions are reduced as compared to the vehicle’s use of non-ethanol blended gasoline. However, depending on the feedstock used to produce the ethanol, this reduction may just be an elaborate version of “hide the GHG ball.” This is because the energy required – and GHGs emitted – in certain ethanol production processes – for example, distilling ethanol from corn – can outstrip any GHG savings in vehicle emissions. To determine whether the ethanol blended gasoline will be a net GHG saver or contributor, i.e., “sustainable” for climate change purposes, one must look to the production process.
In order to promote sustainable ethanol, he proposes "a tariff advantage for ethanol imports conditioned on how effectively the ethanol reduces GHGs; i.e., its sustainability." In other words, higher tariffs for less sustainable ethanol and lower tariffs for more sustainable ethanol.
Of course, there's a GATT Article I:1 issue here, if the different types of ethanol are considered to be "like." But, relying on certain aspects of the jurisprudence, he thinks it can be done in a way that does not violate Article I:1:
it would be easy for a WTO Panel to find a tariff conditioned on a non-product related PPM to be inconsistent with the GATT, but this does not mean that it must. As seen in Canada-Autos, the MFN requirement need not mean that a condition cannot be attached to a tariff advantage. If the attacked measure seeks only to advantage ethanol blends that result in GHG savings, and this is done not by specifying the production process but simply through a LCA, it is not apparent why it must follow that the conditioned measure discriminates as to origin. Such a measure bears no resemblance to measures struck down in other Article I cases. And of course, the Panel would enjoy the considerable support of the WTO’s preamble, which can surely be read to encourage the development of Article I in a way that promotes sustainable development.
This would be a fascinating Article I:1 case, if it were ever to arise.
Putting aside the legal arguments, this all makes me think of the various income tax deductions designed to encourage certain activities. Should the tariff schedule be used as a policy tool in this way, by linking lower tariffs to various non-trade policies?
