SUNS #4301 Wednesday 14 October 1998


SHRIMP-TURTLE RULING AGAINST US OF NO BENEFIT TO SOUTH

Geneva, 12 Oct (Chakravarthi Raghavan) -- The Appellate Body of the World Trade Organization handed down a ruling Monday, holding as illegal and violative of WTO rules US trade restrictions against import of shrimps from several Asian countries that did not receive US certification of adopting the US method of using TED devices on shrimp-boats to ensure sea turtles are not caught while shrimp fishing.

The appellate body panel consisted of Mr. Feliciano of the Philippines as the presiding member, and Messrs Bachus (US) and Lacarte-Muro (Uruguay).

The Appellate body ruled that the US law and guidelines were valid restrictions to conserve an "exhaustible natural resource", that this term applied not merely to mineral resources, but biological and animal life and varieties, that when combined with restrictions on its own producers, the measure was not a protectionist measure but one covered by the GATT "exceptions", but that in its application, the US unilateral import bans were "discriminatory" and "arbitrary", based on the source of imports and thus a violation of the WTO/GATT obligations.

The ruling, while rejecting an US appeal against the panel ruling, set aside some panel findings, and instead gave some new findings (on matters the panel had not dealt with) and upheld some the trade rights of the Asian countries.

In fact though, it has carried further forward the ruling in the US gasoline case (relating to imports of gasoline from Venezuela and other countries) and has opened the way for the United States to adopt national measures operating beyond its legal jurisdiction to protect environment and conserve "natural resources" and enforce them through trade barriers, provided it goes through a process of getting countries to negotiate with it on bilateral, regional or multilateral environmental agreements.

The ruling also opens the way for non-governmental organizations to file briefs before the WTO's dispute settlement body on disputes, and for these to be brought to the attention of the dispute panels (by the WTO secretariat and/or by any of the parties to the dispute) and for the panels to take notice of such briefs.

At a press conference after the 2nd Ministerial meeting of the WTO in Geneva, Director-General Renato Ruggiero had indicated that the secretariat was already making available to panels the "briefs" and views of NGOs on disputes involving environment issues.

But the appellate body ruling goes further by in effect enabling the secretariat to take on a more active role, and persuade or enable the panel to take note of these briefs.

A note circulated by the WTO secretariat to the DSU (for its ongoing review of the DSU) shows that not only are the WTO secretariat's legal division and that of the appellate body involved in servicing the dispute settlement processes, but also the substantive divisions of the secretariat in the various rules areas covered by disputes.

But what may appear at first sight to be opening the way for outside concerns of NGOs concerned with "environment and sustainable development" to be reflected in the WTO process, will in course of time enable other interests and pressure groups, whether of industry or labour, also to use this route. And over time, lobby groups and lobbyists on a scale that may rival those in Washington will spring up around Geneva and the WTO.

Many of the international environment NGOs and their activities are funded by corporate donors, and this method of indirect influencing may now increase.

In the short run the ruling may take the heat off the WTO system, which is facing some growing opposition from a variety of non-government groups, particularly from Europe and North America, which are much more vocal and command media attention.

But NGOs from the South have generally not been particularly impressed with the WTO "opening" its doors through periodic consultations with the secretariat or opening and access to panel processes, but have been demanding that the transparency they seek is over the negotiating processes and the proposals sought to be negotiated -- something that neither the US, EC nor any of the majors, and perhaps not even some of the developing country trade negotiators would support.

For the trade negotiators, the WTO process by which they can negotiate in private, reach agreements for rules, and use it to get a handle over other economic ministries and parts of their own governments, is something that brings us some domestic benefit in their turf battles.
But this will accentuate the process already beginning in some of the major developing countries where movements, both of NGOs and domestic enterprises, are building up against the WTO system and its rule-making power over the domestic policies of countries.

Panel rulings and that of the appellate body are automatically binding, and within a month of adoption the US has to advise the WTO whether it will implement and how. It could also take the route of "compensating" the countries or "inviting" them to retaliate by withdrawing equivalent
concessions!

And while, at the meeting of the Dispute Settlement Body, countries concerned can be expected to make statements, which may or may not always be fully relayed to the media, it may have no influence on the future course of the dispute settlement process - unless these countries use the ongoing review of the DSU to make their voices heard and changes effected by holding out the threat of blocking other changes, whether in DSU or elsewhere, sought by major trading nations.

And, though the DSU makes clear that the dispute settlement process cannot add to or subtract from the rights and obligations of the members under the WTO and its annexed agreements, by a gradual process of citing earlier rulings and adopting them as their own, panels and the appellate body, are gradually extending the remit of the WTO rules and the "obligations" of developing countries while expanding the "rights" of the industrialized countries through an expanded
interpretation of the various exception clauses.

While some of the international environment groups who were dissatisfied with the WTO ruling on the import bans, welcomed the appellate body ruling, many developing countries and trade observers saw the ruling as essentially rewriting the rules of the WTO's Dispute Settlement Understanding by "interpretation".

The particular ruling that panels could receive and take note of briefs from NGOs has been achieved, as one trade observer put it, by reading a meaning into the english verb "to seek" as involving not only the "right" of a panel, subject to some procedural limitations, to seek information from other sources than parties to a dispute, but almost a duty to "receive" such information.

The original panel had upheld the complaints brought against the US by India, Malaysia, Pakistan and Thailand challenging the WTO validity of the US import restrictions, based on Section 609 of its Endangered Species Act and regulations issued under it requiring protection and conservation of sea turtles through use of TEDs, and banning imports of shrimps from countries not certified by the US to be using TEDs.

The original US guidelines and ban of 1991 limited the scope of the import ban to countries in the wider Caribbean/western Atlantic region, and granted the countries in the region a 3-year phase-in period. The 1993 guideline requiring use of TEDs and certification processes was limited to the same region, while shrimp imports from other regions were allowed without any certification of the use of TEDs and other guidelines. But a 1996 ruling of the US International Trade Court (at the behest of US NGO) extended this to shrimp imports from all regions. A US Federal Appeal court in June 1998 has vacated the trade court ruling, but the ban on imports from non-certified countries remains.

Under the guidelines put in place after the 1996 court ruling, the US State Department has to certify that various countries involved in shrimp fishing use the TEDs, and only imports from these countries are allowed to the valuable US market.

A procedural issue that cropped up before the panel was how far it could make use of information brought to its notice by amicus curiae briefs from some NGOs (which were circulated to the parties to the dispute, all WTO members and the secretariat, and panel members). The panel took the view that while under Art. 13 a panel "shall have the right to seek information and technical advice" from any individual or body it deemed appropriate, subject to its obligation to inform the authorities of the member from which the information was being sought, or "may seek" information from any relevant source or experts, a panel was precluded from using information sent to it by sources other than
parties and which the panel had not sought.

The panel however told the US (which at the final stage of the hearing, brought NGO briefs to the attention of the panel) that the US could adopt these briefs and present as its own, when the panel could consider it. The US brought on record as its own briefs from some of the NGOs (but not all) -- with the reservation that it adopted them to the extent these conformed to its own position before the panel.

The appellate body has ruled now that the DSU enables a panel to depart from or to add to the working procedures, in order to give "sufficient flexibility to ensure high quality panel reports". Also, the authority to a panel "to seek" information was comprehensive, that this authority includes one not to seek such information or advice, to accept or reject any information or advice it may have sought or received.

In this view of the broad authority conferred, the Appellate body report has said that the word "seek" used in Art. 13 must be read "in too literal a manner", that the meaning given by the panel is
"unnecessarily formal and technical", and that the "authority to seek information" is not properly equated with a prohibition on accepting information which has been submitted without having been requested by a panel. In this view, the appellate body said "the panel erred in its legal interpretation that accepting non-requested information from non-governmental sources is incompatible with the provisions of the DSU".

Some trade observers were "astonished" at the ruling, noting that the dictionary meaning of the verb transitive "seek" in English has several usages, but all of them involve the subject taking an active role to get the information, and not being a "passive recipient". The ruling in effect means that "to seek" includes "to receive" -- though the panel is still left with the discretion as to what use it is to make of such "received" information.

On substance, the panel considered the US plea that its shrimp import ban was covered by the exceptions to Art XX, particularly XX (b) -- measures necessary to protect human, animal or plant life or health -- and (g) -- measures relating to conservation of exhaustible natural resources if they are made in conjunction with restrictions on domestic production or consumption. It ruled that any recourse to an exception had to satisfy the requirements of the "chapeau" of Art XX of GATT 1994
in that it should not be applied in a manner constituting an "arbitrary or unjustifiable discrimination" between countries where the same conditions prevail or a "disguised restriction on international trade".

The panel ruled that this chapeau allowed derogations from WTO obligations only so long as members did not undermine the WTO multilateral trading system, and that the type of unilateral measures (as that of the US) may appear a to have a relatively minor impact on the system, but may raise a serious threat to the system if similar measures are adopted by the same or other members. In the view of the panel if the chapeau were to be interpreted to permit measures to
condition market access by a Member upon adoption by the exporting member of certain policies, including conservation policies, the GATT 1994 and the WTO could no longer serve as a multilateral framework for trade, that market access could become subject of an increasing number
of conflicting policy requirements for the same product and would rapidly lead to end of the WTO multilateral trading system.

The panel further held that the US measure (under Sec. 609 of its endangered species Act) was one conditioning access to its market for a given production on the adoption by an exporting member of conservation policies that the US considers to be comparable to its own, and that it was an "unjustifiable discrimination" between countries where the same conditions prevail and thus not a valid measure covered by the chapeau of Art. XX.

The appellate body set this aside as a serious error of legal reasoning, arguing that the panel did not examine the ordinary meaning of Art XX (unlike in the Indonesia national car project ruling, there is no discussion whether this means the "substance" of the provisions or the entire Article), nor look at the application of the measure, but rather focused on the design of the measure and addressed "a particular situation where a Member has taken unilateral measures which, by their
nature, could put the multilateral system at risk." The panel formulated a broad standard and test for appraising measures coming under the excluded measures, and found the US shrimp ban as falling
under this class because it imposed conditions for market access based on the exporting country adopting conservation policies prescribed by the US.

The appellate accepted the US argument that Art XX (g) about exhaustible natural resources, applied not merely to mineral resources, but also to living natural resources. The appellate body has held that the treaty interpreter must interpret the treaty in the light of contemporary concerns of the community of nations about protection and conservation of the environment, and that while Art XX of GATT 1947 (reflecting the understanding of mineral and living resources of that time) was not modified by the GATT 1994 in the Uruguay Round, the WTO preamble has added "the objective of sustainable development" in its own preamble, and thus the term "natural resource" used in Art XX (g) is not static but "by definition, evolutionary".

In justification of the wider meaning to be given to "natural resource" in Art XX (g) used in GATT 1947 (incorporated by reference as GATT 1994), the appellate body has cited the UNCLOS treaty, the CITES, and other bilateral and multilateral actions to protect living natural resources and adopted GATT 1947 panel rulings that fish was an "exhaustible natural resource". In this view, the appellate body has held XX (g) as covering both living and non-living natural resources.

One may wonder whether treaty interpreters are not also required to look into and answer the implications of why, if by 1994 WTO treaty the negotiators were aware of the distinction between "environment" and "sustainable development" and living and non-living natural resources, they did not modify the GATT article XX itself (by an understanding) and whether their failure to change the actual treaty language, but merely contented themselves by making references to sustainable
development in the WTO preamble.

The appellate body found the US measure itself as falling within the exception covered by Art XX (g), but went on to examine whether it was precluded by the prohibitions of the chapeau as "a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail" or a "disguised restriction on international trade."

Under the US 1996 guidelines, the appellate has found, the application of the US measures required WTO members to adopt a regulatory program that is not merely comparable, but rather essentially the same as that applied to the US shrimp trawl vessels, and thus established a rigid
and unbending standard by which US officials determine whether or not countries will be certified and thus which of them had a right to export to the US. Other specific policies that countries might adopt for conserving sea turtles were not taken into account in practice.

"It is not acceptable," the appellate ruling said, "for one WTO member to use an economic embargo to require other members to adopt essentially the same comprehensive regulatory programme, to achieve a certain policy goal, as that in force within a Member's territory, without taking into consideration different conditions which may occur in the territories of these other Members."

The US measure in its application is more concerned with effectively influencing WTO members to adopt essentially the same comprehensive regulatory regime as that applied by the US to its domestic shrimp trawlers, even though many of the members may be differently situated.

The US has also failed to engage the appellants, as well as other Members exporting shrimps to the US, in serious, across-the-board negotiations with the objective of concluding bilateral or multilateral agreements for the protection and conservation of sea turtles, before enforcing the import prohibition against shrimp exports of other members. The appellate body notes in this connection the Congressional mandate in the legislation to negotiate such arrangements, the Rio
declaration against unilateral actions, and the relevant provisions of Agenda 21, the language used in the Convention on Biological Diversity and that on Conservation of Migratory species of wild animals and the report of the WTO Committee on Trade and Environment to the Singapore Ministerial Conference.

The appellate body also notes that the US did in fact negotiate a regional agreement, the Inter-American convention - signed so far by five countries and the US, but not ratified by any, and with four of the signatories certified under the US S. 609 of the US as adopting the same or similar measures to conserve sea turtles.

This, the appellate body says, shows that the US seriously negotiated with same WTO members but not all, and the policies for use of particular kinds of TEDs were shaped by the US State Department without the participation of exporting members. And while 14 Caribbean and Western Atlantic ocean countries had been given a 3-year phase-in, when the ban was extended to all exporters, the other exporting countries got only a four-month phase-in period. The explanation that by this time of the extended application the TED technology had been well developed is found by the appellate body as less than persuasive, and not bearing in mind the administrative and financial costs and difficulties of governments of the exporting countries to put in place necessary regulations and their credible implementation. There were also differing treatments in the transfer of the TED technology as between the original 14 Caribbean and Western Atlantic nations and the rest of the WTO members.

There was thus unjustifiable discrimination  within the meaning of the chapeau of Art XX. It was also arbitrary in terms of the certification process - where the process adopted and no transparent and predictable certification process was followed by the competent US government officials, nor any formal opportunity by the appellant countries to be heard or respond to arguments made against them.
The certification process followed seemed to be singularly informal and casual and conducted in a manner that could lead to negation of the rights of WTO members, with no certainty for them that even the guidelines were being applied in a fair and just manner. The US actions were thus both "unjustifiable discrimination" and "arbitrary discrimination."

In words clearly addressed to the environment lobbies, the appellate body said: "However we have not decided that protection and preservation of the environment is of no significance to WTO members. Clearly it is. We have not decided that the sovereign nations that are members of the WTO cannot adopt effective measures to protect endangered species, such as sea turtles. Clearly, they can and should.
And we have not decided that sovereign states should not act together bilaterally, plurilaterally or multilaterally, either within the WTO or in other international forma, to protect endangered species or to otherwise protect the environment.

"What we have decided in this appeal is that: although the measure of the US in dispute in this appeal serves an environmental objective that is recognized as legitimate under paragraph (g) of Art XX of GATT 1994, this measure has been applied by the US in a manner which constitutes arbitrary and unjustifiable discrimination between Members of the WTO, contrary to the requirements of the chapeau of Art XX."

For all these reasons, the US measure does not qualify for the exemption under Art XX of the GATT. But WTO members are free to adopt their own policies to protect the environment as long as they fulfil their obligations and respect the rights of other WTO members.