¹ See the report of the panel in United States: Standards for Reformulated and Conventional Gasoline, WTO Doc. No. WT/DS2/R, submitted to the Dispute Settlement Body (DSB) on Jan. 29, 1996, reprinted in ( 1996) 35 Int’l Leg. Mat. 274; and the report of the Appellate Body in United States: Standards for Reformulated and Conventional Gasoline, WTO Doc. No. WT/DS2/AB/R, submitted to the DSB on Apr. 29, 1996, adopted May 20, 1996. See WTO Doc. No. WT/DS2/9. To distinguish between the two reports, hereinafter they will be referred to, respectively, as the “panel report” and the “Appellate Report.” The dispute as a whole will be referred to as the Reformulated Gasoline case.

² For an analysis of how the new dispute settlement mechanism works, see Vermulst, E. and Driessen, B., “An Overview of the WTO Dispute Settlement System and its Relationship with the Uruguay Round Agreements: Nice on Paper but Too Much Stress for the System?” (1995) 29:2 J. of World Trade 131Google Scholar; and Young, M. K., “Dispute Resolution in the Uruguay Round: Lawyers Triumph over Diplomats” (1995) 29 The Int’l Lawyer 389.Google Scholar

³ The panel report dealt with a number of substantive and procedural issues, some of which were also raised with the Appellate Body. However, because the Appellate Report focused primarily on Art. XX(g) and the preamble of Art. XX, and because its treatment of these two issues is the more novel aspect of the dispute from a substantive perspective, this comment will not examine all of the issues raised in either report.

⁴ Canada: Measures Affecting Exports of Unprocessed Herring and Salmon, BISD (35th Supp.), adopted Mar. 22, 1988, at 98. The panel in that dispute established the “primarily aimed at” test for Art. XX(g).

⁵ The “primarily aimed at” test has been applied in the two tuna/dolphin cases and in the U.S. Taxes on Automobiles case, none of which has been adopted by the WTO/GATT Council. See United States: Restrictions on Imports of Tuna, DS21/R, Sept. 3, 1991 (unadopted), reprinted in (1991) 30 Int’l Leg. Mat. 1594; United States: Restrictions on Imports of Tuna, DS29/R, June 16, 1994 (unadopted), reprinted in (1994) 33 Int’l Leg. Mat. 839; and United States: Taxes on Automobiles, DS31/R, Oct. 11, 1994 (unadopted), reprinted in (1994) 33 Int’l Leg. Mat. 1397.

⁶ The legislation is formally entitled the Air Pollution Prevention and Control Act, 42 U.S.C, ss. 7401–671 (1988 and Supp. V, 1993), as amended by the Clean Air Act Amendments of 1990, Pub. L. No. 101–549, s. 219, 104 Stat. 2492–500 (1990) (codified at 42 U.S.C, s. 7545(k) (1988 and Supp. V, 1993).Togive effect to the amended legislation, the U.S. Environmental Protection Agency passed a gasoline regulation: Regulation of Fuel and Fuel Additives: Standards for Reformulated and Conventional Gasoline, 40 C.F.R. 80, 59-Fed. Reg. 7716 (Feb. 16, 1994).

⁷ This is an important distinction because the controversy that surrounded the two tuna/dolphin panel reports, and the basis for the two panels’ findings, was prompted in large part by the fact that in those cases the subject matter (the fishing practices of the Mexican tuna fleet) lay outside U.S. territory. Such issues of extrajurisdictionality did not play the same role in the gasoline dispute. In fact, the U.S. pointedly noted in its submissions to the panel that in focusing on the importer of foreign gasoline: “The United States was not attempting to regulate the conduct of foreign companies or those of other overseas entities.” See Reformulated Gasoline case, panel report, supra note 1 at 281, para. 3.18. See also the two tuna/dolphin cases, supra note 5.

⁸ Reformulated Gasoline case, panel report, ibid., 278, para. 2.6.

⁹ In fact, the regulation provided that an importer could use one of the three methods if it had imported into the U.S. at least 75 per cent of the total volume of gasoline produced at its foreign refinery in 1990. Of course, the EPA anticipated that very few importers would be able to meet this requirement. Ibid., 279, para. 2.8.

¹⁰ Ibid.

¹¹ Art. I provides, in relevant part, that:

Any advantage, favour, privilege or immunity granted by any [WTO Member] to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other [WTO Members].

¹² There was evidence that gasoline from Canada was, in effect, treated more favourably than the gasoline originating with the two complainants. See Reformulated Gasoline case, panel report, supra note l, at 280, para. 3.6.

¹³ Art. 111:4 provides, in relevant part, as follows:

The products of the territory of any [WTO Member] imported into the territory of any other [WTO Member] shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

¹⁴ Reformulated Gasoline case, panel report, supra note 1 at 279, para. 3.1.

¹⁵ Ibid. For the complete text of the agreement, see WTO Doc. No. MTN/FA II-A1-6 [hereinafter the TBT Agreement].

¹⁶ Ibid., 279–80, para. 3.4.

¹⁷ Ibid., 295, para. 6.16.

¹⁸ Ibid., 295–96, para. 6.19.

¹⁹ Usually the party seeking to justify its trade barriers in these types of cases asserts under Art XX(b) that the measures are necessary because there are no other means reasonably available to achieve the objectives of the policy that lie behind the trade measure. Additionally, it is often asserted under Art. XX(g) that the measures are primarily aimed at the conservation of an exhaustible natural resource and are undertaken to render domestic restrictions on production or consumption effective.

²⁰ See the arguments of the U.S. in Reformulated Gasoline case, panel report, supra note I at 285, para. 3.42, and at 287, para. 3.52.

²¹ Ibid.

²² Ibid., 297, para. 6.26.

²³ Ibid., 297, para. 6.27.

²⁴ Ibid., 298, para. 6.28.

²⁵ Ibid., 300, para. 6.40.

²⁶ Ibid., 300, para. 6.41.

²⁷ Reformulated Gasoline case, Appellate Report, supra note 1 at 11.

²⁸ Reformulated Gasoline case, panel report, supra note 1 at 300, para. 6.41.

²⁹ Reformulated Gasoline case, Appellate Report, supra note 1 at 19–20.

³⁰ Ibid., 19–20.

³¹ Ibid., 20.

³² Ibid.

³³ (1969) 8 Int’l Leg. Mat. 679. The general rule of interpretation, found in Art. 31 of the convention, provides that:

The Appellate Body also referred to Art. 111:4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, which directs panels to have regard to the “customary rules of interpretation of public international law” as justification for resorting to the Vienna Convention.

³⁴ Reformulated Gasoline case, Appellate Report, supra note 1 at 22.

³⁵ Ibid., 22.

³⁶ Ibid., 23.

³⁷ The Appellate Body placed great emphasis on a passage found in Canada: Measures Affecting Exports of Unprocessed Herring and Salmon, supra note 4, at 114, para. 4.6, where the panel stated that the purpose of Art. XX was “to ensure that the commitments under the General Agreement do not hinder the pursuit of policies aimed at the conservation of exhaustible natural resources.” It seems likely that this passage influenced the Appellate Body’s view of the scope of the exception found in Art. XX(g).

³⁸ Reformulated Gasoline case, Appellate Report, supra, note 1 at 23.

³⁹ Ibid., 23–24.

⁴⁰ Ibid.

⁴¹ “[If] such measures are made effective in conjunction with restrictions on domestic production or consumption.”

⁴² Reformulated Gasoline case, Appellate Report, supra, note 1 at 25 [emphasis in original].

⁴³ Ibid., 26. The Appellate Body does note, however, that even if the effect of a measure is not normally the yardstick for determining compliance with Art. XX(g), there may be situations where, if a challenged measure “cannot in any possible situation have any positive effect on conservation goals, it would very probably be because the measure was not designed as a conservation goal to begin with” (Ibid., 27).

⁴⁴ The preamble to Art. XX reads as follows:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any [WTO member] of measures.

⁴⁵ Reformufated Gasoline case, Appellate Report, supra note 1 at 27.

⁴⁶ Ibid., 28.

⁴⁷ Ibid. The Appellate Body further observed that, to meet the test under the preamble, the challenged measures had to be “applied reasonably, with due regard both to the legal duties of the party claiming the exception and the legal right of the other parties concerned” (Ibid). Steve Charnovitz has suggested that these words may represent a balancing test that weighs the policy objective underlying the measure against the substantive rights of other WTO members. See Chamovitz, S., “New WTO Adjudication and Its Implications for the Environment” (1996) 19 Int’l Env’t Rep. 851 at 853.Google Scholar

⁴⁸ Reformulated Gasoline case, Appellate Report, ibid., 29.

⁴⁹ Ibid., 31.

⁵⁰ Ibid., 28.

⁵¹ Ibid., 28. The Appellate Body further noted that “[t]he provisions of the [preamble] cannot logically refer to the same standard(s) by which a violation of a substantive rule [such as Art. 111:4] ’s determined to have occurred.” This approach, when combined with the Appellate Body’s findings concerning Art. XX(g) and the Art XX preamble, appears to create a hierarchy of standards, with the standard for substantive rules being the most strict the standard for meeting one of the specific exceptions in Art XX the least strict and the standard for the Art. XX preamble somewhere in between.

⁵² Ibid., 32, quoting from the submissions of the U.S. (para. 55).

⁵³ Ibid., 31–32.

⁵⁴ In the light of the Appellate Body’s conclusions, this raises the important question of what level of discrimination is justifiable. In what is arguably the major omission in its Report, the Appellate Body does not answer this question. This aspect is considered later.

⁵⁵ See United States: Restrictions on Imports of Tuna, supra note 5 at 1620, para. 5.28.

⁵⁶ See Reformulated Gasoline case, Appellate Report, supra note 1 at 34. In Tuna/Dolphin I, the panel found that the U.S. was not justified in taking unilateral measures under Art. XX(b) — even if that provision allowed for extrajurisdictional measures — because it had failed to pursue less GATT-inconsistent means, such as “international cooperative arrangements” to achieve its objective of protecting dolphins in the Eastern Tropical Pacific. See United States: Restrictions on Imports of Tuna, ibid.

⁵⁷ Reformulated Gasoline case, Appellate Report, ibid., 35.

⁵⁸ Ibid., 36.

⁵⁹ The preamble to Art. XX has previously been considered in the following GATT disputes: United States: Prohibition of Imports of Tuna and Tuna Products from Canada, GATT Doc. L/5198, BISD (29th Supp.), adopted Feb. 22, 1982, 91; United States: Imports of Certain Automotive Spring Assemblies, GATT Doc. L/5333, (BISD (30th Supp.), adopted May 26, 1983, 107.

⁶⁰ Nevertheless, the Appellate Body retained the wording of the “primarily aimed at” test in applying the provision to the measure. At least one commentator has suggested that the Appellate Body’s findings may lead to an explicit challenge of the “primarily aimed at” test the next time Art. XX(g) is raised before a WTO dispute settlement panel. See S. Charnovitz, supra note 47 at 852.

⁶¹ That is, it did not — at least overtly — attempt to divine the intention of the Canadian government in enacting the offending measure.

⁶² The panel in that dispute suggested that the goals sought to be achieved by the Canadian measure could be reached without resorting to mandatory processing prior to export: Canada: Salmon and Herring case, supra note 4 at 115–16, para. 4.7.

⁶³ In other words, if the measure, in its operation, contributes to the achievement of the policy objective in a manner that is more than “incidental” or “inadvertent,” it will meet the test.

⁶⁴ Reformulated Gasoline case, Appellate Report, supra note 1 at 36.

⁶⁵ Ibid.

⁶⁶ See Charnovitz, S., “Exploring the Environmental Exceptions in GATT Article XX” (1991) 25:5 J. of World Trade 37 at 43-44, 47.CrossRefGoogle Scholar

⁶⁷ See Jackson, J. H., “World Trade Rules and Environmental Policies: Congruence or Conflict?” (1992) 49 Wash. & Lee L. Rev. 1227 at 1240.Google Scholar

⁶⁸ Reformulated Gasoline case, Appellate Report, supra, note l at 31.

⁶⁹ Steve Charnovitz has questioned this approach, suggesting that, by “conflating ’discrimination’ with ’disguised restriction,’ the Appellate Body would encourage the WTO to accuse a government of having an ulterior motive whenever there is a regulation deemed ’unjustifiable’ or ’arbitrary’ by a WTO panel.” See Charnovitz, supra note 47 at 853.

⁷⁰ Professor Hudec has pointed out the problems with trying to screen out purely protectionist measures from those with genuine environmental objectives. The primary problem, as Professor Hudec sees it, is that the vast majority of measures coming under scrutiny are likely to have a valid environmental objective as their underlying rationale, even while they may be skewed by the political process to favour the goals of protectionist interests. Thus, WTO panels are faced with the difficult task of finding a happy medium where the environmental objective is respected without at the same time conceding too much ground to the protectionist interests. See Hudec, R. E., “GATT Legal Restraints on the Use of Trade Measures against Foreign Environmental Practices,” in Bhagwati, J. and Hudec, R. E. (eds), Fair Trade and Harmonization: Prerequisites for Free Trade? Vol. 2, Legal Analysis 95 at 149 (Cambridge, Mass.: MIT Press, 1996).Google Scholar

⁷¹ On this issue, Charnovitz points out that anti-dumping proceedings are often criticized because of the dubious quality of the data used to establish whether dumping is occurring, and to what extent. In his view, it is questionable whether the Appellate Body should rely on this example as justification for adopting the panel’s reasoning on this point. See Charnovitz, supra note 47 at 853.

⁷² According to the Appellate Body, the U.S. provided no indication that it had sought to reach a co-operative arrangement with Brazil or Venezuela to overcome the problems that it cited as justification for using a statutory baseline standard for imported gasoline. Moreover, in the Appellate Body’s view, the U.S. had failed to give adequate consideration to the costs that it was imposing on foreign producers by imposing the statutory baseline, ibid., 34–35.

⁷³ The Appellate Body indicated that the preamble existed to prevent abuse of the enumerated exceptions and thus constituted a stricter standard than the requirements of those exceptions, ibid., 28.

⁷⁴ E.g., in her analysis of the panel’s findings with respect to Art. XX(b), Cynthia Maas suggests that domestic issues of equity and political acceptability should be considered as well: Maas, C., “Should the WTO Expand GATT Art. XX: An Analysis of United States Standards for Reformulated and Conventional Gasoline” (1996) 5 Minn. J. of Global Trade 415Google Scholar at 436. Arguably, her views would extend to the preamble if the relevant portions of the “least trade-restrictive” test are extended to that part of Art. XX.

⁷⁵ The Appellate Body states that the burden of proving that the measure meets the test in the preamble is “a heavier task than that involved in showing that an exception, such as Art. XX(g), encompasses the measure at issue”: Reformulated Gasoline case, Appellate Report, supra note 1 at 28.

⁷⁶ The word “necessary” is used in Art. XX(a), (b), and (d). Previous GATT panels have established the “least trade-restrictive” interpretation to apply to at least Art. XX(b) and (d). Arguably it also applies to Art. XX(a).

⁷⁷ E.g., the word “unjustifiable” can be taken to require a balancing of objectives. The Appellate Body could have established a test for balancing the importance of the objective that underlies the discriminatory measure against the cost of its trade restrictive effect.

⁷⁸ E.g., the Appellate Body pointedly remarked earlier in its Report that the proscription on discrimination in the preamble cannot be set at the same Standard as the non-discrimination requirements of Arts, I and 3. “To proceed down that path would be to empty the chapeau of its contents and to deprive the exceptions in paragraphs (a) to (j) of meaning”: See Reformulated Gasoline case, Appellate Report, supra note 1 at 28.

⁷⁹ See, e.g., Thailand: Restrictions on Importation of and Internal Taxes on Cigarettes, GATT Doc. DS10/R, BISD (37th Supp.), adopted Nov. 7, 1990, 200 at 222-23, paras. 73-74; and the unadopted United States: Restrictions on Imports of Tuna, supra note 5 at 1620, para. 5.27. See also, Trebilcock, M.J. and Howse, R., The Regulation of International Trade 336–38 (London: Routledge, 1995).Google Scholar

⁸⁰ See, e.g., United States: Restrictions on Imports of Tuna, supra note 5 at 1620, para. 5.28; and Thailand: Restrictions on Importation of and Internal Taxes on Cigarettes, ibid., 225, para. 81.

⁸¹ Reformulated Gasoline case, Appellate Report, supra note I at 31 (emphasis added). This appears to be a dig at previous GATT panels, which had interpreted “disguised restriction” as being limited to trade measures that were not publicly announced. See, e.g., United States: Prohibition on Imports of Tuna and Tuna Products from Canada, GATT Doc. L/5198, BISD (29th Supp.), adopted Feb. 22, 1982, 91 at 108, para. 4.8.

⁸² Reformufated Gasoline case, Appellate Report, ibid.

⁸³ Ibid.

⁸⁴ As is mandated by Art. 31 of the Vienna Convention, supra note 33.

⁸⁵ Note, however, that these types of measures, because of their objective to influence the environmental policies of other governments, are unlikely to survive scrutiny under any of the specific Art. XX exceptions. This point assumes that the findings of the panels in Tuna/Dolphin I and II will be upheld by future panels when the issue arises. Professor Hudec has noted that 39 of the 40 WTO members that have expressed their views on the matter have endorsed the findings of the Tuna/Dolphin I report, the U.S. being the sole dissenting voice. Furthermore, although the U.S. vetoed adoption of the Tuna/Dolphin II report, it also proceeded to change its regulations with regard to tuna products. See Hudec, supra note 70 at 117.

⁸⁶ It used the words: “The resulting discrimination must have been foreseen.” See Reformulated Gasoline case, Appellate Report, supra note 1 at 36.

⁸⁷ See, e.g., Shenk, M. D., “Comment on United States: Standards for Reformulated and Conventional Gasoline” (1996) 90 Am. J. Int’l L. 669Google Scholar at 672; Goldberg, D. M., “GATT Tuna-Dolphin Π: Environmental Protection Continues to Clash with Free Trade,” Centre for International Environmental Law, Part II (CIEL) Brief No. 2 (June 1994), 1 at 3, available on internet at http://www.econeLapc.org/ciel/issue2b.htm.Google Scholar