27 Apr GATT/GATS and the General Exceptions Quandry
When I teach International Trade, one of my favorite parts of the class is the discussion of trade linkages. How does a state balance competing concerns such as labor, the environment, and human rights? Typically the WTO accommodates those concerns through the General Exceptions that permit a state to violate the WTO rules if doing so is, say, “necessary” to protect “human health or life.”
One of the more curious aspects of the WTO General Exceptions is the differences the WTO has established for trade in services versus trade in goods. The regime for trade in goods allows a state to violate WTO rules if the measure “relates to the conservation of exhaustible natural resources.” Not so for trade in services. Thus, a state could prohibit the trade in products that contain CFCs because they cause ozone depletion, an exhaustible resource. It could also prohibit the importation of shrimp caught without devices that exclude endangered sea turtles. But a state could not, say, easily impose limits on the landing rights of jumbo jets because they contribute to global warming. Nor could Chile easily prohibit the docking of cruise ships at Cape Horn because they drop high-sulfer “bunker” fuel in the Antarctic Ocean. Instead, Chile would have to meet the more stringent requirement of proving that such restrictions are “necessary” to protect human, animal, or plant life or health. It seems that when it comes to the environment and trade in services, all concerns about natural resources are derivative.
On the other hand, trade in services can be restricted in order to protect public order, but trade in goods cannot. (Trade in goods must somehow offend a more value-laden public morals exception). China could, for example, have an easier time restricting Internet services that disrupt public order–such as pro-democracy websites, but have a harder time justifying its ban on the importation of pro-democracy T-shirts because their sale would disturb the peace. Or even more radical, if one takes the working language of the WTO seriously, then the GATS seems to have incorporated a general public policy exception (ordre public in French) for trade in services, but not for trade in goods.
I have yet to discover a satisfactory explanation for the disparate treatment that the WTO drafters have given to the general exceptions in GATT versus GATS.
Roger,
This is an issue I have pondered as well and touch upon briefly in my trade law course. With regard to the environmental question you raise, the draft services agreement of 1990 (Brussels) did contain bracketed text that would have included conservation of exhaustible natural resources in the exceptions clause GATS Art. XIV. However, according to an early CTE report:
“A very limited number of delegations supported the proposal to include an exception relating to conservation of exhaustible natural resources under Article XIV of the GATS . The need for this exception was justified largely on the grounds that it was necessary to parallel the obligations contained in GATT Article XX(g). The discussion, however, failed to reveal convincing arguments regarding the relevance of this proposal in the services trade context and it was concluded that an Article XIV exception on the conservation of exhaustible natural resources did not appear necessary for the GATS , since no additional cover would be obtained beyond that already contained in the GATT.”
After GATS went into effect, indeed almost immediately, the Council on Trade in Services tasked the CTE with studying whether GATS Art. XIV needed to be changed to address environmental concerns. The CTE largely dismissed the importance of the differences between GATT Art. XX and GATS Art. XIV. For example, one report of the CTE concluded: “It has been noted that there is no analog to GATT Article XX(g) in the GATS . A suggested approach is to identify restrictive measures applied to services trade, consider whether these could be justified by GATS provisions other than Article XIV (b), such as Article VI, VII and XIV(c), and examine whether Article XIV (b) is an adequate basis on which to address environmental concerns. One potential problem raised in this context is that invoking Article XIV (b) after a service supplier has invested and established in a domestic market could prove particularly disruptive and costly if the supplier is obliged to disinvest. Before the CTE conducts a separate analysis of this issue, Members have been asked to bring to its attention evidence they may have of measures which they feel may need to be applied for environmental purposes to services trade but which may not be covered by the GATS provisions and in particular Article XIV (b).”
Your air transport and cruise ship hypos obviously are potential measures. However, it is also important remember that GATS allowed for scheduling/reservations to national treatment whereas GATT 1994 does not allow countries to take reservations with respect to national treatment (and indeed eliminates virtually all grandfather rights that existed pre-WTO under the Protocol of Provisional Application of the GATT). Thus, a GATS reservation in a country’s schedule could have potentially taken care of some such measures. Further, it is interesting to note with regard to your air transport hypo that the Air Services Annex provides as follows: “2. The Agreement, including its dispute settlement procedures, shall not apply to measures affecting:
(a) traffic rights, however granted…
“Traffic rights” mean the right for scheduled and non-scheduled services to operate and/or to carry passengers, cargo and mail for remuneration or hire from, to, within, or over the territory of a Member, including points to be served, routes to be operated, types of traffic to be carried, capacity to be provided, tariffs to be charged and their conditions, and criteria for designation of airlines, including such criteria as number, ownership, and control.”
Be interested to hear other comments on the environmental related exceptions as well as the public order one.
Response…
Another interesting example of “linkages” was discussed in EC – Trademarks and Geographical Indications (United States) and (Australia), which dealt with TRIPS, GATT and TBT claims against a same EC IP measure dealing with the registration and protection of certain geographical indications. With respect to the relation between the GATT and TRIPS National Treatment claims, in EC – Trademarks and Geographical Indications (United States) (paras. 7.207-7-212) the EC argued that the interpretation of the national treatment provision in TRIPS Art. 3 “must take account of the absence in the TRIPS Agreement of a general exceptions provision analogous to Article XX of GATT 1994.”
The Panel then explained why TRIPS did not need to have a “general exceptions” provision like GATT Art. XX does. The Panel stated that the TRIPS Agreement “does not generally provide for the grant of positive rights to exploit or use certain subject matter, but rather provides for the grant of negative rights to prevent certain acts. This fundamental feature of intellectual property protection inherently grants Members freedom to pursue legitimate public policy objectives since many measures to attain those public policy objectives lie outside the scope of intellectual property rights and do not require an exception under the TRIPS Agreement.” The Panel then compared the GATT and TRIPS respective national treatment provisions and concluded as follows:
“The scope of the national treatment obligation in Article 3.1 of the TRIPS Agreement also differs from that of the national treatment obligation in Article III:4 of GATT 1994, as it is subject to certain exceptions in Articles 3.1, 3.2 and 5, one of which is inspired by the language of Article XX of GATT 1994. There is also a series of specific exceptions in the provisions relating to the minimum standards in Part II of the TRIPS Agreement and Part VII contains a provision on security exceptions analogous to Article XXI of GATT 1994, but none on general exceptions. For all these reasons, in the Panel’s view, the fact that a general exceptions provision analogous to Article XX of GATT 1994 was not included in the TRIPS Agreement has no impact on its analysis of Article 3.1 [of TRIPS].”
As part of my PhD thesis, I’m also looking at the relationship between the GATT and the WTO Agreement on Government Procurement (GPA), and particularly the application of the environmental exceptions in both agreements. I discovered that GPA Art. XXIII (general exceptions) contains the GATT XX(b) equivalent but not the (g) part, a case similar to what obtains as between the GATT and GATS mentioned in the initial post.
My questions are:
(1) There is currently no jurisprudence on the application of the GPA environmental exceptions. I’m considering the extent to which the massive jurisprudence on GATT Art. XX(b) and (g), could be used to found an opinion in a case of climate-friendly procurement measure.
(2) Whether someone has come across the negotiating history of the GPA Art. XXIII, as to why “conservation of natural resources” was excluded in the general exceptions.