Here is an excerpt from some comments by the U.S. at the January 11th DSB meeting, focusing on the Appellate Body report in US - Tuna but also having broader implications:
• Although the United States agrees with and welcomes the conclusion of these reports that the U.S. dolphin safe labeling measure is consistent with U.S. WTO obligations, we are disappointed that it has taken more than a decade to resolve this matter.
• In the course of this dispute, the Appellate Body developed increasingly demanding legal standards under Article 2.1 of the TBT Agreement and Articles 1:1 and III:4 of the GATT 1994. These legal standards were not based on the text of the relevant provisions, and negotiators did not agree to them. In this dispute, the United States was forced to expend considerable resources over nearly a decade trying to defend successfully what was always an environmental measure with no element of protectionism.
• It is unclear how many other Members would have been able to invest such resources. Other Members faced with similar multiple, protracted dispute settlement proceedings might be forced to abandon their legitimate objective and withdraw their measures rather than face suspension of concessions by another Member.
• Indeed, under the standard the Appellate Body has developed, it seems likely that only Members with significant resources to devote to the effort will be able to defend legitimate public policy measures that have any effect on trade.
• At previous meetings addressing this dispute and others, the United States has expressed concerns with the Appellate Body's interpretations of the non-discrimination provisions of the TBT Agreement and the GATT 1994.8
• While welcoming the ultimate outcome in this dispute, the United States highlights the real cost to Members of these incorrect interpretations that narrow the policy space afforded to Members and increase the likelihood of protracted litigation over nondiscriminatory public policy measures.
A much longer explanation follows, and it is worth a read.
I have some thoughts on several aspects of this.
First, I think it's fair to say that most people have some objections to the Appellate Body's reasoning under either TBT Agreement Article 2.1 or GATT Articles III/XX. I certainly do. But that is to be expected, and the Appellate Body can't make everyone happy, especially given the confusingly worded text it has been handed. Whether, how, and when to look at the intent/aim/purpose and effect/impact of the measure is open to interpretation based on that text. Personally, I think the Appellate Body usually gets to the right result in these cases, although I think its specific legal standards are difficult to apply, and it does not always look at each element in the place that makes the most sense to me. But there are a wide range of views on this, and the Appellate Body's approach to these provisions is certainly within the scope of what is reasonable.
I'm not sure what to make of the U.S. criticism that the Appellate Body's legal standards "were not based on the text of the relevant provisions, and negotiators did not agree to them." Since 1947 (in the case of the GATT), there have been a number of interpretations that elaborate on the meaning of these provisions ("conditions of competition" under Article III is one of the most famous). There is no way around elaborating on the meaning of the words of the text by using other words. I'm not sure how dispute settlement can work any other way.
But we can and should debate these specific legal interpretations. On an issue like this one, I would say to the U.S. trade officials: What exactly do you think the standard should be under each of these provisions? It would be helpful to offer up the clearly worded interpretation that you want, and try to convince everyone. Perhaps in this regard, the U.S. says this in its DSB statement:
As the United States has expressed in the past, Articles I:l and III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement are, in fact, concerned with origin based discrimination, not with achieving a perfect fit between a measure's effect and its objectives.
I'm not completely sure what they mean here, but the reference to "origin based discrimination" sounds like perhaps they mean that only measures that discriminate against foreign goods on a de jure basis could violate these provisions. Now, if that's really what they mean, they could try to convince everyone else that this is the right standard, but I have trouble believing they really mean that, because that goes against everything that everyone understands about non-discrimination, including the negotiating history and U.S. arguments in past cases, such as the various alcohol cases. If that's not what they mean, though, they should clarify exactly what they do want to see in these standards. Later in the DSB statement (p. 13), the U.S. seems OK with de facto findings of violation, which leaves me even more confused about what they think the Appellate Body is doing (I would have said the Appellate Body was making findings of de facto discrimination in Tuna) and what they want done instead. Along the same lines, if they don't want to examine the fit between a measure's effect and its objectives, what do they want? How exactly should this kind of analysis be done? Walk us through it, perhaps using a U.S. measure and a non-U.S. measure as examples. In my view, there is a continuing lack of clarity about what exactly the legal standard is and should be under the various GATT Article III/TBT Article 2.1 legal standards, and a discussion of all this would be helpful.
And my suggestion is not just for the U.S. Other governments should do this as well. These are foundational provisions and principles, and governments should continuously advocate for their view of the scope, even -- and perhaps especially -- outside the context of cases they are working on. Should the non-discrimination standard be based on "aim and effect," or "design, structure, and architecture," or "detrimental impact that stems exclusively from a legitimate regulatory distinction," or something else entirely? And how exactly do these standards relate to one another? And where does the burden of proof lie? I'm surprised governments do not have more to say about all this. Perhaps they prefer a vague standard, which they can then bend in a particular direction depending on whether they are on offense or defense in a case?
In terms of the tuna measure that was at issue here, I have always supported the U.S. view of this case, and I would say that, taking into account the design, structure and architecture of this measure -- or whatever standard you want to use -- over its entire history, this measure should not have been found in violation of the non-discrimination provisions. But I would not say there is no "element of protectionism." There were definitely hints here and there that part of the reason this was done was to favor domestic industry. Looking at all aspects of the measure together, however, my view has been that the measure should not be found in violation.
As for the resources needed to defend the case, as I watch how other governments defend their own measures in WTO dispute settlement, it doesn't seem to me that any Members who participate in WTO disputes would have had much trouble. Maybe some least developed countries would struggle, but no one brings complaints against them.
Finally, with regard to "policy space" and "litigation over non-discriminatory public policy measures," TBT Agreement Article 2.1 and GATT Articles III/XX are somewhat marginal issues here. In the vast majority of these cases, there is not much threat of a "non-discriminatory public policy measure" being found in violation. The real concern in relation to "policy space" is provisions such as TBT Agreement Article 2.2 and the SPS obligations that require a scientific-basis for measures. At least on their face, these provisions are very likely to lead to findings that non-discriminatory public policy measures violate WTO obligations, although I would argue that the Appellate Body has bent over backwards to ensure that TBT Agreement Article 2.2 does not lead to this (and in doing so, it has preserved domestic policy space -- in this regard, note that the original tuna panel found that the U.S. measure was in violation of Article 2.2, and the Appellate Body reversed this finding). Along the same lines, there was some panel reasoning under GATT Article III that relied on individual product comparisons, which were extremely broad and of great concern for governments' policy space (I'm thinking here of Asbestos), and the Appellate Body's reversal helped ensure appropriate policy space. So yes, policy space is an important issue, and we should talk about it. But when you look beyond the non-discrimination provisions, I would say the U.S. has been pushing pretty hard to limit policy space (for example, in its pursuit of certain SPS cases and by supporting SPS-plus obligations in its bilateral trade agreements). As with the interpretation of the non-discrimination provisions, I would say to the U.S. and other governments, yes, "policy space" is an important topic and we should talk more about it. The question for all of these governments is: What exactly is your view of how trade agreements should constrain certain trade practices while preserving policy space?
