This is from a new paper by Markus Wagner on regulatory space in trade and investment law:
The situation with respect to the TBT Agreement has recently been clarified to a certain extent through a number of WTO decisions. These disputes arose in quick succession after a relative dearth of cases concerning the TBT Agreement. Although none of these cases has dealt with the issue of regulatory space in greater detail, a close reading of the cases reveals a general approach towards how the issue of regulatory space is to be dealt with under the TBT Agreement. The findings in these cases involved a balancing between the dual goals of liberalizing trade and preserving a member’s right to pursue legitimate policy objectives. The starting point for this analysis is Article 2.2 TBT Agreement, which includes helpful elements to identify the amount of regulatory space that WTO members have:
Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.
The provision entails elements that can be pursued in trying to identify the regulatory space that WTO members have: including that a technical regulation (1) pursue a legitimate objective, (2) is not to be prepared, adopted or applied so as erect unnecessary obstacles to trade, (3) is no more trade restrictive than necessary, and (4) Members take account of the risk that non-fulfillment may create.
When thinking about regulatory space under the TBT Agreement, I would add Article 2.1 to the discussion. In my view, Article 2.1 does a pretty good job with balancing trade liberalization and other legitimate policies. Basically, you can pursue whatever policies you want to, as long as you are not being protectionist.
Article 2.2, on the other hand, is complicated and controversial. We know, in the abstract, what the standard is (Markus explains it above). But what does it mean when applied to specific cases? How much regulatory space does it leave?
So far, the Appellate Body has left plenty of regulatory space under Article 2.2, because it has not found any violations. The problem will be when, or if, it ever does find a violation. If it does find an Article 2.2 violation, in a case where there is not also an Article 2.1 violation, the issue of whether it has afforded adequate regulatory space will be extremely controversial.
