EMBARGOES TO CHANGE POLICIES OF OTHER COUNTRIES ILLEGAL

6:24 AM Jun 14, 1994

EMBARGOES TO CHANGE POLICIES OF OTHER COUNTRIES ILLEGAL
Geneva 13 Jun (Chakravarthi Raghavan) -- No contracting party to GATT, in pursuing its environmental objectives, can use trade embargoes to secure changes in policies that other contracting parties pursue within their own jurisdiction, a GATT panel has said in ruling against the US in what has come to be known as the second tuna-dolphin case.

The second panel was headed by Ambassador Winfried Lang of Austria and had as its other two members, George A. Maciel, former veteran Brazilian representative to the GATT who headed some negotiating groups in the Uruguay Round and Alan Oxley Australia's former GATT Ambassador.

The panel report, leaked in Washington by the US Trade Representative to US environment groups (who in turn publicised some aspects, namely, that the panel has endorsed right of countries to take 'extra-territorial' measures to safeguard environment), has just been circulated to the GATT contracting parties and thus is unlikely to come up formally before the GATT Council's net meeting on 21 June.

But some related issues and controversies are bound to be raised in the Council atleast under the item 'other business'.

Many contracting parties are incensed over the US action in not only leaking the report as also the pleadings of third parties (which generally are not even made available to other contracting parties) to the US NGOs. They have been even more upset that the entire panel process and impartiality of such processes have been perhaps vitiated. Several of them have had information that the some environment NGOs, particularly in Europe, had met with the chairman of the panel who had discussed the panel report and ruling with them.

Some confirmation of this came at the Trade and Environment symposium organized by the GATT last week (10-11 June) when some of the European NGOs, who had a copy of the report, spoke highly at the symposium of Lang's role in pushing the environment view on the panel and having got the panel to accept that countries can exercise 'extra-territorial jurisdiction' to protect the environment and his difficulties in getting the panel to go beyond. They mentioned this in 'demanding' inclusion in future GATT panels of 'environmentalists'.

The way these NGOs spoke at the symposium about the internal discussions in the panel and the difficulties that Lang had in providing leadership and getting other panellists to see his viewpoint left little room for doubt (among the GATT cps present and other participants familiar with GATT's ways) that it was based on briefings by one of the panel members. These cps found it difficult to conceive of the other two panellists telling the NGOs of how they had been forced to yield and depart from GATT practice by Lang.

Privately, and on an non-attributable basis, some of the NGOs conceded to other participants at the symposium that they had been in touch with Lang, though it was not clear at what stage -- during the panel proceedings, before the report was given to the US and EC or after it was leaked out in the US.

The panel's report as well as the US arguments before it, depart in some areas from the first tuna panel, and involves some circulatory and convoluted logic in an attempt to please 'environmentalists'. Nevertheless it went on to declare GATT illegal the US actions.

The panel, in its concluding observations, noted that the objective of sustainable development, which includes the protection and preservation of the environment, has been widely recognised by the contracting parties to the GATT, but that the issue in the dispute (before it) "was not the validity of the environmental objectives of the US to protect and conserve dolphins," the panel said.

"The issue," the panel observed, "was whether, in the pursuit of its environmental objectives, the United States could impose trade embargoes to secure changes in the policies which other contracting parties pursued within their own jurisdiction.

"The Panel therefore had to resolve whether the contracting parties, by agreeing to give each other in Article XX the right to take trade measures necessary to protect the health and life of plants, animals and persons or aimed at the conservation of exhaustible natural resources, had agreed to accord each other the right to impose trade embargoes for such purposes. The Panel had examined this issue in the light of recognized methods of interpretation and had found that none of them lent any support to the view that such an agreement was reflected in Article XX."

"The Panel further observed that the dispute settlement procedures cannot add to or diminish rights of contracting parties under the General Agreement. It noted that other procedures existed under the General Agreement that permit the obligations of a contracting party to be waived. The Panel noted that the relationship between environmental and trade measures would be considered in the context of preparations for the organization of the World Trade Organization".

In its findings, the panel ruled that the US 'primary nation embargo' and the 'secondary nation embargo' on tuna imports from countries not following its own policies, were GATT illegal -- not being covered by the Art. III (national treatment of imported products) requirements, were contrary to Art XI:1 on quantitative restrictions and were not covered by the exceptions in Art XX (b), (g) or (d) of the General Agreement.

Art. XX (b) enables 'measures necessary', contrary to the GATT obligations, to protect human, animal or plant life or health. Art XX (d) enables necessary measures to secure compliance with customs enforcement, enforcement of monopolies granted under the GATT provisions, protection of patents, trade marks and copyrights and prevention of deceptive practices.

Art XX (g) enables 'measures necessary' relating to the conservation of exhaustible natural resources, and taken in conjunction with restrictions on domestic production or consumption.

The dispute arose out of the restrictions on tuna imports mandated by the US Marine Mammal Protection Act of 1972 which prohibits "taking" of any marine mammals, whether directly or indirectly in harvesting of fish. It relates to the use of 'purse sein nets' used in commercial deep sea fishing. In terms of yellowfin tuna (found in eastern tropical Pacific and generally swimming below dolphins swimming at or near the surface), the purse sein nets which gather in tuna also bring into the net dolphins and resulting in incidental killing or serious injury to the dolphins. The US law prohibits any commercial imports harvested by a method that results in incidental kill or serious injury to marine mammals in excess of US standards.

These standards will be considered as not in excess of US standards if the fish exporting country provides the US evidence that it has a comparable regulatory approach and comparable dolphin-kill rate -- 1.25 times the average of the US vessels rate in a year, and no more than 15% of total dolphins of eastern spinner dolphin and no more than two percent of costal spotted dolphin.

Arising out of this 'primary nation embargo', the US law also mandates bans from any 'intermediary nation' that exports yellowfin tuna or yellowfin tuna products to the US and which imports such tuna from other nations subject to the US 'primary nation embargo'.

The first tuna-dolphin dispute was on a complaint of Mexico over the 'primary nation' ban on tuna imports from Mexico. The panel ruled against the US and said that the US actions were not covered by the exceptions to the GATT Art. XX and that any restriction must relate to similar restrictions on a domestic 'product' in the US, and could not be related to the 'process'.

Environment groups in the North have been generally arguing that countries, and local communities, should be able to ensure a better quality of environment by restricting products and processes for production, and that in order to ensure this and enable continued competitivity of their industries, they should be able to impose restrictions on imports of products based on their process of production -- the so-called PPMs.

These groups do not see that by such trade restrictions they are merely shifting the burden of adjusting to the higher quality of life in the North to the communities in the South.

In their initial reactions to the second panel ruling, they generally viewed it as enabling countries to exercise 'extra-territoriality' over environment measures, but attacked the panel for not enabling PPMs and not taking into account 'environmental' issues and guidelines set elsewhere than in the GATT.

The US argument (in both disputes) is that its actions under its Marine Mammal Protection act is aimed at conserving natural resource (dolphins) and protecting this species, and thus an exception to the GATT obligations covered by the subclauses (b) and (g) of Art XX -- measures for protecting human, animal or plant life or health; and measures for conservation of exhaustible natural resources in conjunction with restrictions on domestic production or consumption.

The first panel ruled against the US, but that report has never come before the GATT Council because the US reached an agreement with Mexico to resolve the problem between them.

The second dispute, on which the new panel has now ruled, relates to what is technically known as 'secondary nation' embargo -- namely banning imports of tuna or processed tuna from countries, who might themselves be following for their own fleets the same restrictions as the US and exporting such tuna, but do not apply the same 'primary nation' embargo against those nations whose own tuna exports to the US are banned under its law for protection of dolphins and other sea mammals.

As is normal practice, the report of the second panel had been made available confidentially to the parties to the dispute (US and EC) on 20 May and has just been circulated officially to the CPs. It will still remain a 'restricted' document until its adoption by the GATT Council or atleast until the Council decides to derestrict it.

But without waiting for its circulation to the GATT CPs, the US Trade Representative, Mickey Kantor appears to have made it available to the US environment groups in Washington who in turn made it available to other environment groups abroad.

Some of the US environment groups and their allies abroad in other industrialized countries have been selectively citing the panel's views and using it to mount a campaign against the GATT/WTO and calling for changes in the dispute settlement processes.

Views of several of these proponents, who quoted selectively from the panel ruling, were aired last week at the GATT symposium on trade and environment -- embarrassing the handful of developing country diplomats who were present but had not had a chance to read the second ruling.

The GATT diplomats from countries other than US and EC actually got the report this week.

Interestingly, several of the Northern NGOs who cited from the second tuna panel report, and who also favoured the GATT and WTO actions on exports of hazardous goods which are banned or severely restricted domestically, did not cite the fact mentioned in the second panel ruling that the US had blocked action on this front, but had sought to use the draft decision of a working group on this issue for its own purposes.

The US had blocked action on exports of domestically prohibited or hazardous products, demanding that any such GATT action should exempt pharmaceuticals and chemicals as well as automobile spare parts.

The argument of the Northern NGOs appeared to be that on environment matters, the GATT panels should be 'advised' by environment experts, that the GATT panels in ruling on such matters should be guided not by the GATT rights and obligations of the parties, but also take into account other sources of international law.

Some have also been taking the view that in any dispute between a contracting party complaining of the actions of another claiming its actions to be for 'environmental' reasons, the complaining CP should not only be obliged to show that the other cp was imposing trade restrictions contrary to the GATT obligations, but also that the measures complained of are not for 'environmental' but are protectionist purposes. This would mean that the moment any contracting party placing restrictions put on the 'environment hat', then the entire burden of proof would be cast on the others.

The panel said that Art XX provided an exception to the obligations under GATT and hence the exception provisions had to be interpreted narrowly and in a manner preserving the objectives and principles of the General Agreement.

If Art XX were to be interpreted to permit cps to take trade measures so as to force other cps to change their policies within their jurisdiction, including their conservation policies, the balance of rights and obligations among cps, in particular the right of access to markets, would be seriously impaired, the panel said.

Under such an interpretation the General Agreement could no longer serve as a multilateral framework for trade among contracting parties.

Measures taken to force other contracting parties to change their policies and which would be effective only if such changes occurred, could not be primarily aimed either at conservation of an exhaustible natural resource nor at rending effective restrictions on domestic production or consumption envisaged in Art XX (g). The US impost prohibitions on tuna and tuna products were thus inconsistent with Art XI:1 and not justified by XX (g).

On similar grounds (of measures to change policies of other countries), the panel also ruled against the US claim that the ban was justified in terms of XX (b), namely, measures necessary to protect human, animal or plant life or health.

As for the US contention that these secondary nation embargoes were necessary to ensure compliance with its primary nation ban, and thus a justified exception under XX (d), the panel ruled that the primary nation embargo was a violation of Art XI:I of the General Agreement, and thus could not serve as a basis for justification of the secondary nation embargo.