Download Chapter IV EMERGING CONFLITS BETWEEN INTERNATIONAL

Chapter IV
EMERGING
CONFLITS
BETWEEN
INTERNATIONAL
TRADE
LAW
AND
INTERNATIONAL LAW
I. Introduction.
In the previous chapter I dealt with some basic concepts in the field of international trade law. It was
seen that although these concepts may appear to be similar to other international legal concepts, in fact they
serve different objectives. This suggests that apparent similarities between international trade law and the
general field of international law have to be scrutinized closely. This is particularly important in areas where
there appears to be overlap or conflict between international trade law and international law.
The obvious example of an area where this conflict occurs is that of the environment, but similar
problems occur in the relationship of trade with labour standards and more generally with human rights. In
each of these areas, environment, labour and human rights, we are confronted with conflicts between different
legal regimes — a- body`-of law (international law relating to trade) purporting to deal with matters that are
also dealt with in a different body of law (international law relating to the environment).
International law has some ways of dealing with these conflicts. For example, to the extent that the
regime is treaty-based, as international trade law and much of international environmental law are, then, as
mentioned earlier, Article 30 of the Vienna Convention on the Law of Treaties is relevant. But Article 30
hardly provides a satisfactory answer. While a "later-in-time" rule might be a way to resolve competing
obligations under treaties entered into by the same parties, or to regulate the relationship between States that
are parties to both treaties, where the earlier and the later treaties do not have identical parties there is a
potential for multiple and varying types of obligation between parties to the same treaty (231).
Moreover, the problems that occur in such areas as trade and the environment are not the result of
inadvertent overlap between treaty obligations, as if the States concerned had somehow overlooked the fact
that they had already dealt with the same subject matter else-where. Rather, the conflict between international
trade law and inter-national environmental law represents fundamental differences about competing values
that often mirror differences within the States themselves over the balance to be achieved between
environmental regulation and economic activity.
In short, the issues involved in the trade and environment, or trade and labour standards, or trade and
human rights, debate are too fundamental to be resolved by a procedural device designed to deal with
inconsistency.
2. Regime Conflicts: Some Underlying Considerations
Conflicts between trade disciplines and other areas of international law are inevitable. The proper
functioning of the principle of comparative advantage requires not only-that border barriers to the flow of
goods be eliminated, but also that production reflect true social -costs. If production costs are distorted, then
efficiency is impeded. In principle, the range of distorting factors is unlimited; many types of government
regulation might be regarded as distorting actual production costs. Of course, the view that government
regulation per se impedes efficiency takes the matter to an absurdity. In the absence of a variety of kinds
government regulation, no production could take place. Production depends on laws relating to ownership, or
laws that ensure that transactions can be effected, and laws that enable financial services to be provided.
But an important point remains. The implication of the economic rationale for the legal regime of
international trade is that certain types of regulation adopted by States may constitute an unjustifiable
interference with efficient production and of voluntary exchange and thus impede the operation of comparative
advantage. And if a right to challenge government regulation is taken seriously, it has two important
consequences. First, the area reserved to the domestic jurisdiction of States becomes even further curtailed.
Second, a claim to challenge government regulation on the ground that it impedes the efficient functioning of
the world trading regime is a claim that trade law be regarded as the benchmark against which other areas of
regulation are to be measured. Such a claim is particularly significant when, unlike other fields, trade law has
developed mechanisms that ensure that disputes go beyond the realm of claim and counter-claim. As we have
seen, the WTO has a dispute settlement mechanism that produces binding decisions.
This claim of the inteexnational trading regime to be the potential arbiter in respect of other areas of
international regulation — that it is to be able to measure the validity of international regulation by whether it
is consistent with trade law — and that it has mechanisms to give effect to that claim, is a source of irritation
to those working in the fields of the environment or human rights. Understandably, they would see the
situation as more appropriately reversed ; that is government policies in respect of trade ought to be assessed
against whether they are compatible with environmental regulation or with whether they comply with human
rights norms (232). The market should not be the arbiter of environmental quality or of fundamental human
values.
Why has the field of international trade law been able to assert this role as arbiter? Why are issues
relating to the environment cpm ing before trade dispute settlement mechanisms, but trade issues are not being
ruled on in environmental or human rights fora? In part, no doubt this is due to the fact that although such
mechanisms have been developed in the trade law field, they are less well developed, or non-existent, in other
areas. By why is this so? In short, why has international trade law become, relatively speaking, a developed
legal regime, whereas other areas of international law with equal claims to legitimacy and importance are still
in the process of development? Yet all of these areas — environmental law, human rights law and trade law —
share a common objective of seeking to impose limitations on the behaviour of States, to compel them to
legislate or to refrain from legislating, in order to achieve certain policy objectives.
One explanation for this disparity in institutional development can be found in traditional notions of
sovereignty. States do not have to relinquish authority in respect of environmental and human rights matters ;
they only do so when they consider it appropriate or in their interests to do so. In the area of trade, as I pointed
out earlier, States collaborate because in a very real sense they do not have the control over economic activity
that they have in respect of other areas. States can treat human rights or environmental matters as their own
domestic concern, notwithstanding international pressure to view them differently. However, it is no longer
possible to retreat behind borders and ignore the rest of the world as far as international trade is concerned. In
short, the incentives for States to act collectively on trade matters are much stronger than they often are in
other areas.
The domestic pressure within States for multilateral action on trade issues also differs from that which
exists in respect of environmental issues. The beneficiaries in the short term from trade liberalization are those
who are able to produce efficiently or who are able to move capital or production around the world. Trade
liberalization is likely to attract the attention of powerful economic interests, in particular multinational
corporations, that-are able to exert consider-able political influence on States. There is no such equivalent
direct beneficiary of environmental or human rights standards. The pressure on Governments to act in
pursuance of environmental or human rights objectives often comes from less politically influential and more
fragmented interests and frequently is based on moral and less obviously pragmatic grounds.
This image of an imperialistic reach of international trade law — the idea that international trade law is
the arbiter in respect of all areas of international regulation — is, of course, a caricature. What is at stake is a
much more modest claim. The primary mechanism in the GATT/WTO system for ensuring that efficient
production can occur is the principle of non-discrimination. Measures that are applied to both domestic and
foreign suppliers equally generally should not conflict with the disciplines of international trade law. So when
it is said that other areas of international regulation have to be assessed in the light of trade law rules, what is
meant is that they must be assessed in the light of a principle of non-discrimination. In the abstract, that seems
unobjectionable. Human rights, labour or environmental standards surely should all be applied in a manner
that is not discriminatory.
But, this is not all that is at stake in the trade and environment, or trade and human rights debate. There
is also a more complicated issue about the operation of the principle of comparative advantage that is also
central to this debate. This will be dealt with further below.
3. Trade and the Environment
What are the conflicts that arise in the area of trade and the environment, how are they being dealt
with, and what lessons can be learned from the interaction of the disciplines of trade and environmental law
(233) ?
(1) The policy issue
From the perspective of the international trading regime, trade and environment conflicts arise where
trade restrictions are claimed to be permissible because their objective is environmental protection. These
measures may be inadvertently trade restrictive, or they may be deliberately trade restrictive for the purpose of
bringing pressure in support of the environmental objective. They may be the result of multilateral action taken
by States, such as the Montreal Protocol on Substances that Deplete the Ozone Layer (234). Or such measures
may be the unilateral action of an individual State, as in the case of the measures adopted by the United States
under the Marine Mammals Protection Act that gave rise to the Tuna/Dolphin dispute (235)
At one level the debate is seen as a clash of philosophies — environmentalists against free traders. Free
trade itself is seen as encouraging growth — growth that unless limited is itself harmful to the environment
(236). The clash between trade and the environment is in this sense a dispute about society's ability to protect
the environment in a market economy where a premium is placed on individual autonomy rather than on
imposed regulation.
But to cast the matter solely in terms of more or less regulation would be misleading. For at another
level, the debate over trade and the environment is a debate over who regulates. Are environmental policies
and standards to be established at the nation State level, or are they to be the result only of multilateral
negotiation ? And if it is to be the latter, will the standards adopted only be those of the lowest common
denominator — standards that everyone can agree to, not standards reflecting the level of environmental
protection of the State with the highest environmental standards. This is often described as the "race to the
bottom". Multilateral solutions, it is believed, simply mean lower standards (237).
There is, however, a more fundamental issue involved in this debate that goes to the nature and scope
of the whole idea of comparative advantage. To illustrate this, let me take an example of two States that both
produce lumber and whose production costs are essentially identical. That production, we will assume, is not
sup-ported by any subsidies and thus lumber companies sell their products at essentially identical prices in the
markets of the two States. Now suppose that one country (country A) introduces legislation to protect a bird
species that inhabits its forests and that the effect of that legislation is to increase the cost of lumber production
in Country A.
If the other country (country B) which has the same bird species in its forests decides not to enact
measures to protect it (although it is equally endangered) then lumber companies in country B will not have to
assume the extra cost incurred by protecting the species. As a result, instead of costs and prices being equal
between the lumber companies of the two countries, there would be a difference in production costs and no
longer equality in competition between the lumber companies of country A and country B. Lumber companies
from country A will either get less profit or they will be forced to sell lumber at a higher price and thus are
likely to lose their market share.
How do we characterize this problem?
One approach would be to regard country A as having made a choice to adopt environmental–
standards that it is perfectly free to adopt. Country B has chosen to adopt different environmental standards,
and it is equally free to do that. In this light, complaints by country A about country B's failure to legislate to
protect the bird species is simply an attempt to force country B to share the costs of country A's decision to
adopt stricter environmental standards. Country A's position is a form of protectionism, protecting against the
consequences of more burdensome regulations. This might be described as "reverse protectionism". But
however it is described, it has the effect of denying the effective operation of the principle of comparative
advantage.
However, an alternative approach might be to characterize country B's failure to legislate to protect the
bird species as a subsidy by country B to its lumber industry. It certainly has an impact on country B's
comparative advantage. The effect on exports of lumber from country B to country A of B's decision not to
legislate to protect the bird species is no different from what would occur if country B did enact such
legislation and then provided an export subsidy to its lumber industry to offset the effect of the increased costs
of environmental protection. Why should the "subsidy" of failing to enact environmental legislation be
regarded as any different from a government grant to offset the economic effects resulting from the enactment
of environmental legislation? Yet one would be regarded in trade law as a permissible exercise of government
authority and the other would be regarded as an impermissible trade distortion (238).
The underlying question is, why does the international trading regime protect some values on the
ground that they have an impact on comparative advantage (freedom from the trade distortion resulting from
subsidies) but not protect other values that also have an impact on comparative advantage (protection of the
environment)(239)
(2) The approach in GATT and the WTO
Obviously, the protection of the environment did not engender the concern in 1947 that it does today.
So it is perhaps surprising that GATT dealt with it at all. Yet Article XX which lists the circumstances under
which a State is permitted to take measures that would otherwise be restrictions on trade in violation of its
GATT obligations includes environmental exceptions. These are contained in paragraph (b) of Article XX
which refers to measures "necessary to protect human, animal or plant life or health", and paragraph (g) which
refers to measures, "relating to the conservation of exhaustible natural resources". Although there has been
debate in the past over whether these provisions were intended to be all-encompassing exceptions concerning
the environment(240), in practice they serve that function (241)
(i) Paragraph (b) — measures "necessary to protect human, animal or plant life or health"
The key question in determining whether a measure qualifies under this exception is the meaning of
the word "necessary". In the Thai Cigarette case (242), a GATT panel took the view that "necessary" under
paragraph (b) had the same meaning as the word "necessary" in paragraph (d) of Article XX. An earlier GATT
panel had concluded that under paragraph (d) a measure could be considered "necessary" only if there were no
alternative measures consistent with the GATT, or less inconsistent with it, that the Government could
reasonably be expected to employ to achieve its objectives (243). Since the panel in the Thai Cigarette case
concluded that there were other non-discriminatory methods that could have been used by Thailand to achieve
its health policy objectives, it concluded that the requirements of paragraph (b) had not been met.
Such a requirement involves a somewhat intrusive enquiry by a GATT or WTO panel into alternative
measures that might be taken by Governments to achieve environmental goals. Article XX (b) requires
Governments to use the least trade restrictive measure avail-able if they are to meet the "necessary" test. This
poses its own problems. Although a panel established under the WTO may have some expertise in deciding
whether a measure is more or less trade restrictive, it is not clear that panels will always be in a position to
determine whether measures are equivalent in their ability to achieve the relevant environmental goals.
As we shall see, similar concerns arise over the interpretation of Article XX (g).
In the first of the controversial Tuna/Dolphin cases (244), the panel suggested that there was a further
limitation implicit in paragraph (b). This was that only measures concerned with the protection of human,
animal, plant or health life within the territory of the State enacting those measures could be covered.
Measures designed to operate extraterritorially could not come within the scope of Article XX (b). However,
that position was not endorsed by the second Tuna/Dolphin panel (245). The issue is of particular importance
where the measures concerned relate to the protection of the environment beyond national jurisdiction (246)
(ii) Paragraph (g) — measure "relating to the conservation of exhaustible natural resources"
Although the language of Article XX (g) may be somewhat obscure, the intent is reasonably clear.
States are to be permitted to take trade restrictive measures for the conservation of exhaustible natural
resources, provided that they are equally restricting their own domestic production or consumption (247). The
cost of such conservation is not meant to fall solely on foreign trade or on foreign traders.
The ambit of Article XX (g) is, however, unclear. While the words "exhaustible natural resource" may
bring to mind such things as minerals and fish, rather than acid rain, in fact GATT practice indicates that
Article XX (g) is a more general reservation in respect of conservation measures. This has been reinforced by
the recent decisions of a WTO Panel and of the Appellate Body which have made clear that "clean air" falls
into the category of an "exhaustible natural resource" within the meaning of Article XX (g)(248).
But Article XX (g) contains within it the seeds of the whole debate over trade and the environment.
How is it to be determined which conservation measures will fall within its provisions? Which trade
restrictions will be "justifiable" because of overriding considerations of environmental protection and which
will not? And when will a measure be regarded as constituting "arbitrary or unjustifiable discrimination
between countries" or a "disguised restriction on international trade"?
Article XX (g) defines permissible conservation measures as those that are "relating to" the conservation of
exhaustible natural resources. Does the term "relating to" give any precision in helping to define which
measures will be justifiable? A certain degree of clarification can be obtained from Article XX itself. The term
"relating to" used in Article XX (g) stands in contrast to the term "necessary" used elsewhere in Article XX.
As we have seen, paragraph (b) of Article XX requires that the "measures" in question must be "necessary" for
the protection of animal or plant health or life in order to meet the requirements of that paragraph. Similarly, a
State wishing to show that a trade restrictive measure is justified on the ground that it is designed to protect
public morals (Article XX (a)), must show that such a provision is necessary for the protection of public
morals (249)
Does the use of the words "relating to" in Article XX (g) rather than the word "necessary" imply that
States are to have some flexibility in deciding what measures they will adopt to pursue their conservation
objectives? In the Herring and Salmon case (250) between the United States and Canada, a GATT panel said
that a measure would be regarded as "relating to" conservation if it was "primarily aimed at" conservation.
Applying that test the panel had little difficulty deciding that a Canadian regulation requiring all herring and
salmon to be processed before export was not "primarily aimed at" conservation.
But what does "primarily aimed at" mean ? To determine whether a trade restrictive measure
that a State claims to have been adopted for conservation purposes is "primarily aimed at" conservation, is not
a simple matter of legal or logical deduction. It is not a straightforward question of treaty interpretation. The
concept of “primarily aimed at” suggests that there may be other aims as well that are not oriented towards
conservation. But is the “aim” of a measure to be determined by looking at intention o by looking at effect? If
the latter, then Article XX (g) would seem toimply some kind of balancing test.
Those who consider that GATT panels have not been sufficiently sensitive to environmental
concerns point out that assessing the real objectives of measures that are alleged to have conservation as their
primary aim is not a judgment that international trade lawyers are necessarily particularly well equipped to
make (251). It involves some scientific expertise to establish whether a measure has a real conservation
objective, and if some sort of assessment is to be made between various and competing measures, then again
such scientific expertise is necessary.
The need for such expertise was recognized in principle in the Understanding on Dispute Settlement
that emerged form the Uruguay Round. Provision is made in Article 13 and Appendix 4 for the creation of
“expert review groups” which can provide advisory reports to panels on scientific or other technical matters.
However, in the first case before a panel and before the Appellate Body in the WTO , which raised clearly the
question of whether a measure was primarily aimed at conservation (252), neither body took the opportunity of
seeking such scientific or technical advice.
Although much of the controversy over the trade and environment issue has focused on the
Tuna/Dolphin decision, in fact the Reformulated Gasoline case may have a more long-term impact on the
interrelationship of trade and environmentallaw. In part, this is because it is the first decision of the WTO
Appellate Body, but also because it purports to establish a definitive approach to the interpretation of Article
XX (g).
The case involved mechanisms established under the Clean Air Act in the United States for ensuring
certain quality levels in gasoline. However, although domestic refiners were entitled to use three alternative
methods for determining their 1990 “baselines” according to which gasoline quality was to be measured,
foreign refiners had to comply with a statutory baseline. This was challenged by Venezuela and Brazil as a
denial of the national treatment principle. The WTO panel agreed that there was a violation of GATT Article
III and rejected the United States contention that the measures in question were saved by Article XX (g). In the
view of the panel, since there was no “direct connection” between less favourable treatment of imported
gasoline and improving air quality then the measures in question could not be regarded as “primarily aimed at
conservation” (253).
This approach was rejected by the Appellate Body. In its view, a panel had to look not at the trade
restrictive aspects of the measures in question, but at the measures themselves and ask whether they were
measures that were “primarily aimed at”conservation. This led the Appellate Body to the conclusion that the
baseline rules were “primarily aimed at “conservation, because without baselines of some kind the objective of
preventing the deterionration of air quality would be frustrated. Thus, the Appellate Body concluded, the
baseline
rules
were
in
fact
“primarily
aimed
at
“
conservation
(254).
Although the Appellate Body considered that there was a "substantial relationship" between the
measures (baseline rules) and the objective (clean air), it went on to say that these measures "cannot be
regarded as merely incidentally or inadvertently aimed at the conservation of clean air" 255. If, then, this is the
test to be applied in the future — whether a-measure-can-be-'regarded as merely incidentally A or
inadvertently aimed at" conservation, then this is certainly a new test, and one that has no basis in previous
GATT jurisprudence256. In effect, the Appellate Body would seem to have read the term "primarily" out of
the concept of "primarily aimed at". Any measure that plays a role in a scheme for the abatement of air
pollution would seem to meet the Appellate Body's test. The result may be that the Appellate Body has in
practice eliminated the "primarily aimed at" test and set a much lower threshold to be met when determining
whether a law or regulation that contravenes GATT Article XI or GATT Article III is a measure "relating to
the conservation of exhaustible natural resources".
Such an approach may indicate a degree of flexibility in the application of GATT law, an indication
that conflicts between trade rules
and environmental rues can be readily accommodated. Trade rules,
it might be argued, are not going to override environmental objectives as a matter of course. And such
a view would be reinforced by the concluding remarks of the panel :
"WTO Members have a large measure of autonomy to determine their own policies on the
environment (including its relationship with trade), their environmental objectives and the environmental
legislation they enact and implement."(257)
But such optimism is quickly dispelled when the remainder of the Appellate Body's decision is
scrutinized.
(iii) The chapeau to Article XX —"unjustifiable discrimination" and "disguised restriction"
In addition to the substantive provisions of Article XX, a chapeau to the Article also establishes
standards that must be met. The opening phrases of Article XX provide that measures that meet the
requirements of that Article are not to be applied in a way that would "constitute a means of arbitrary or
unjustifiable discrimination between countries where the same conditions prevail" nor are they to constitute a
"disguised restriction on international trade". The ambit of these requirements has never been clearly defined
in GATT law, although the position taken in the Tuna case (258) that a restriction that d publicly cannot be a
"disguised" restriction on trade has never been given much credence.
The Appellate Body's approach to the interpretation of the provisions of the chapeau to Article XX
concerning "arbitrary or unjustifiable discrimination between countries" and "disguised restriction on
international trade" was to equate the two for interpretative purposes. poses. That is, the considerations
relevant to showing that something is a disguised restriction on trade are also relevant to showing that the
measures concerned constitute arbitrary or unjustifiable discrimination. Both, in the Appellate Body's view,
have the purpose of avoiding "abuse or illegitimate" use of the Article XX exceptions (259)
In determining whether the tests had been met, the Appellate Body looked to see whether there were
alternatives open to the United States for checking and verifying data, the problem that the United States had
identified that led it to choose the particular base-line rules applied to Venezuela. The panel and the Appellate
Body both concluded that there were other means available including collaborative arrangements with
Venezuela and Brazil. Also, the Appellate Body concluded that while the United States had assessed the costs
to its domestic suppliers of the baseline rules to be applied to them, it had not assessed the costs that would
accrue to foreign suppliers. There was therefore both unjustifiable discrimination and a disguised restriction on
trade 26°.
However, in looking to see whether there were alternative means available to the United States for
achieving its conservation objectives, the Appellate Body appears to have applied the criteria applicable to
deciding whether a measure is "necessary" under paragraphs (b) and (d) of Article XX. Again, this seems to be
a significant rewriting of Article XX. Moreover, it is difficult to understand how a measure that is a "disguised
restriction on international trade" is nevertheless "primarily aimed at conservation". Something that is a
disguised restriction on trade obviously is primarily aimed at restricting trade, not at conservation.
What the Appellate Body appears to have done is open the door very widely in its interpretation of
"primarily aimed at" so that it may not be very difficult in the future to meet that test, but closed the door
almost completely in its interpretation of the chapeau to Article XX. Implicitly, the Appellate Body's
interpretation of "unjustifiable discrimination" and "disguised restriction on international trade" has made it
extraordinarily difficult for measures that are discriminatory within the meaning of GATT Article III ever to
come within the scope of Article XX (g) (261). Yet that defeats the purpose of an environmental exception —
Article XX (g) is meant to apply precisely to measures that are otherwise discriminatory. And it is meant to
give States some leeway in the formulation of their own environmental policies.
The Reformulated Gasoline case confirms some of the concerns about the adequacy of the rules and
processes of the WTO when dealing with the intersection of trade and the environment. Not only did both the
panel and the Appellate Body purport to make judgments about ways of achieving environmental objectives
without any reference to bodies with scientific or technical expertise, they also suggested that it was
appropriate for the United States to condition the achievement of its domestic environmental objectives —
clean air in American cities — on co-operation with another State. Such a result will appear as the dominance
of trade rules over environmental standards and fuel the "race to the bottom" claims (262).
4. Labour Standards and Human Rights
In many respects, considerations similar to those discussed in respect of trade and the environment also
apply to labour standards and human rights. However, unlike environmental issues, labour and human rights
issues are just beginning to find their way onto the agenda of the WTO. Although the issue was in the minds of
the drafters of the ITO (263), GATT said little about labour standards, refer-ring only to the products of prison
labour (264). The issue of a social clause was raised at the end of the Uruguay Round although nothing was
included in the final agreements (265). Yet like environmental issues, the intersection of labour and human
rights issues with trade disciplines is inevitable, if only because trade sanctions appear as an attractive means
to bring about changes in labour standards or in human rights within particular countries.
But, once again the issue is more fundamental: it is not just a matter of choosing a device to enhance
enforcement of labour standards. The issue goes to the heart of the nature of a liberal trade order which is
predicated on the assumption that measures that inhibit efficient production — for example, measures that give
an advantage to domestic over foreign production (and thereby encouraging inefficiency) or measures that
give advantage to one foreign producer over another (again encouraging inefficient production) — in principle
should be avoided.
How does this relate to labour standards. or to human rights ? Each State, it might be argued, should be
free to determine how individuals within its country should be treated in terms of employment. Labour
standards that reflect a particular State's view of how employment should be organized within its own territory
should not in principle come into conflict with international trade rules. But, of course, the idea of absolute
freedom in the setting of domestic labour standards would not be in accordance with international law. Where
labour standards do not meet minimum standards of human dignity, international human rights standards come
into 'play. Slavery, child labour and certain working conditions all come up against international minimum
standards in the treatment of individuals. Such standards are not meant to be subordinated to some idea of a
reserved domain of domestic jurisdiction. Slavery is not a matter on which a State can claim freedom of
individual choice. Thus, trade that involves the violation of internationally accepted labour or human rights
standards cannot claim to be solely a domestic issue for the States concerned.
Labour and human rights standards may have an impact on trade in another way. Where a State wishes
not only to establish labour standards for its own citizens, but insists on those standards being applied in
countries with which they trade, then it is no longer a domestic issue. As in the case of trade and the
environment, such measures may be sought to be justified on the basis of the principle of non-discrimination.
As long as everyone is being treated in the same way at the border and within the domestic market, then in
principle no trading rules should be regarded as contravened. But since States tend to object to any suggestion
that their domestic standards, whether relating to labour or some other area, can be dictated by another State,
such issues are often perceived in terms of sovereignty.
Again we are faced with the dichotomy of approaches mentioned earlier in the context of the
environment. Let me illustrate again with the example of the lumber industry. This time assume that country A
adopts a law that sets minimum wages for employees in the lumber industry. The effect is to increase lumber
production costs in country A. Country B sets no such standards ; the costs of lumber production has led to
considerable dissatisfaction in the environmenty with the way agreements have been interpreted and principles
have developed. Moreover, although Article XX (g) contains language relating to conservation on which a
coherent body of law relating to trade and the environment might be developed, there is no equivalence the
WTO relating to labour standards or to human rights. Thus, there is no real basis on which such a body of law
could be built.
A second approach would be to link certain international conventions expressly to the WTO and use
these as a basis for determining what States rights and obligations are in respect of human rights and labour
standards and making compliance with those obligations a commitment under the WTO. The Agreement on
Trade-Related Aspects of Intellectual Property (TRIPS) does this by incorporating the obligations of the Paris,
Berne and Rome conventions, rather than by establishing its own separate set of intellectual property rules
(268). States are required to adhere to their obligations under those conventions. A similar approach to
international labour conventions developed under the ILO or international human rights conventions could be
taken under the WTO.
This, too, has its difficulties. Which human rights conventions should be included? Moreover, although
the International Labour Organisation has sponsored a wide variety of conventions on inter-national labour
standards, the level of signature and ratification is not uniform. Alternatively, a set of "core labour standards"
such as those proposed by the OECD (269), which consist of freedom of association, the right to organize and
bargain collectively, prohibition on forced labour, elimination of child labour exploitation, and nondiscrimination in employment, might be incorporated in the WTO.
A third approach is that embodied in the North American Free Trade Agreement (NAFTA). In
response to considerable public pressure on the issue of labour standards at the time of the signing of the
NAFTA, the parties entered into a side agreement under which an allegation that there had been a "persistent
failure" by a party to enforce its labour standards can be referred to a binational arbitral panel (270). An
adverse finding by such a panel could lead to the levying of a fine (271). Thus, the approach involves the
submission of the application of domestic laws to oversight by a binational panel.
5. Conflicts between International Trade Law and International
Law: towards a Concept of "Unfair Trade"(272)
There are two fundamental policy questions in this area. First, on what basis is governmental action or
inaction that affects efficient production of goods and services, and hence the operation of the principle of
comparative advantage, to be determined permissible or impermissible. Second, in what forum should these
determinations be made? In the present context, these questions can be addressed only in broad and
speculative terms.
(1) The appropriate standard
_ The justification for protecting environmental, labour and human rights standards notwithstanding
their seeming contravention with trade disciplines is because of the importance of the values in them-selves or
because they are essential for the proper functioning of a liberal trade order. "Unfair trade" must be limited to
those circumstances where a State is failing to uphold market mechanism standards or failing to protect agreed
human dignity or environmental standards. Beyond this, there ought to be scope for each State to make its own
choices about environmental and labour standards provided that they do so in a non-discriminatory way.
Provided that fundamental human dignity standards as they affect employment are met, then any advantage
secured because of differential labour standards cannot justify a claim that the trade is "unfair".
(i)
Market mechanism standards
There are certain standards whose preservation is necessary in a market economy and under a liberal
trading order because they make it possible for markets to function. These include laws that promote perfect
competition, laws that facilitate freedom of choice, laws that facilitate obtaining information, or laws that
otherwise prevent discrimination in market access 273. Failure to secure these values pre-vents the market
from working effectively ; thus States that do not protect such values are harming the trading order itself. The
consequences affect potentially all in a globalized trading system.
Thus, it seems appropriate to regard such failure as causing "unfair" trade and the actions of the State
concerned as being in violation of its trading obligations. And although there are many exceptions and
deviations for which there may be a variety of explanations, the basic thrust of trade disciplines is in this
direction. WTO rules regarding subsidies may be seen in this light. Moreover, the process of developing trade
disciplines under the aegis of the WTO is a process of enlarging on the range of goals whose achievement will
facilitate the functioning of a liberal trade order.
(ii)
Human dignity and global environmental standards
Certain standards, often recognized specifically in international instruments, are regarded as
fundamental to any society. The Universal Declaration on Human Rights, widely regarded as reflecting
customary international law, sets out a basic set of those standards. Equally, customary and treaty rules have
developed on generally accepted standards regarding conduct causing or likely to cause irreparable damage to
the environment and ultimately to human existence 274. The protection of these human dignity and human
existence values cannot be seen as contingent upon their compatibility with the legal imperatives of an
international trading regime, regardless of their effect on making market mechanisms work efficiently.
Slavery, or destruction of the ozone layer are unacceptable whether or not they would lead in the short term to
efficient production.
Outside of this category of fundamental values, there is a range of matters that on a case-by-case basis,
a determination could be made whether they do reflect fundamental values or whether they are matters of
choice for each State to decide as it thinks fit in light of its culture and other needs. The "core labour
standards" concept is an attempt to go beyond the traditional human rights area and establish such standards.
However, if a particular standard falls outside this category of fundamental standards, then it should be
regarded as appropriate for each State to make its own decision as to whether it will adopt such a standard. In
these circumstances, the fact that a State has or has not adopted such a standard should not be regarded as
constituting "unfair trade".
(2) The appropriate forum
While the WTO is clearly the appropriate forum for determining what is needed for the effective
functioning of an international tradin: regime, the question of fora for the elaboration of human dignity and
human existence standards and the conditions under which they are to be permitted to override trade rules is
more complicated. At present such standards are being developed in a variety of fora within the United
Nations, the Specialized Agencies and other inter-governmental and non-governmental bodies. At the very
least, there is a major co-ordination function to be undertaken.
What is clear, however, is that discussions about human rights, about labour standards and about
environmental standards at the international level cannot be isolated from a discussion about economic activity
; it cannot be isolated from trade. And in a globalized economy even discussions of these issues at the
domestic level have to take place against the background of the reality of international trade and trade law
disciplines. Perhaps one of the consequences of the development of international trade law since the Second
World War has been that a focal point or even framework has been provided for the analysis of issues relating
to labour, rights and the environment that otherwise may have seemed to lack a context. The stumbling block
to the effective implementation of international human rights and environmental standards by States has often
been portrayed in terms of sovereignty. Placing these issues in the context of their relationship to comparative
advantage allows a deeper understanding of the issues involved than a sovereignty debate allows.
There are, then, important consequences for the WTO. Although the WTO often is not perceived as
an appropriate forum for environment, human rights or labour issues — it is a trade organization only — it
would appear that at least by default, the WTO has a central role to play in this area. And this follows
inevitably from the centrality of trade and economic activity to the concerns of States, and the fact that WTO
panels have to determine the validity of the actions of States in adopting certain environmental measures in
order to carry out their mandate of interpreting and applying the obligations of States under the WTO.
Thus, the WTO has to be conceived of as an organization that is concerned with the environment, as
an organization that is concerned with labour standards, and as an organization that is concerned with human
rights. This is one of the inevitable results of recognizing the pervasiveness of economic activity for
individuals, for States and ultimately for international law.
This does not mean that there is no role for other organizations concerned with human rights, labour
or environmental standards. Outside of the fundamental standards referred to earlier, there is still a need for the
progressive development of these standards and for encouraging States voluntarily to assume standards that
may go beyond what are accepted as minimum or fundamental standards. Indeed, such a process is necessary
to avoid the "race to the bottom".
Finally, discussions about labour standards, human rights and environmental standards, particularly
when they relate to the voluntary acceptance by States of standards that go beyond internationally accepted
standards, assumes some kind of voluntary process by which States agree to higher or agree to lower
standards. Implicit in this is some idea of democratic choice within the State. It opens up a much broader
question of the extent to which a democratic form of government is, or should be, itself a right or an essential
condition for any contemporary notion of international law (275).
Conflicts between international trade law and other areas of inter-national law may be viewed in a
number of ways. They may be viewed as a clash of values. Free market versus environmental protection, or
free market versus government regulation in the social interest. Or they may be viewed in economic terms as a
debate over what should be taken into account in determining true social cost for the purpose of ensuring the
effective operation of comparative advantage.
The GATT, however, did not articulate the issues in this way. The protection of "exhaustible natural
resources" was seen as a legitimate exception to trade disciplines, but failure to protect natural resources, or
failure to protect the environment was not seen as "unfair trade" under the GATT. Similarly, failure to enforce
labour or human rights standards was not perceived under the GATT as trade-distorting behaviour. There were
no disciplines imposed by GATT for failure to enforce environment, labour or human rights standards.
In fact, the issue generally arises under the WTO in a different way. States that take measures
ostensibly to protect the environment, or States that take measures to ensure that appropriate labour standards
are met, are liable to have those measures tested against their WTO obligations. It is this seeming obstacle
posed by trade disciplines to environmental protection and to the promotion and enhancement of labour and
human rights standards that has led to much of the controversy over the conflict between trade and the
environment and trade and labour or human rights standards.
So far, the development of WTO case law on the intersection of trade and the environment is
problematic. The uncertainties left over from the pre-WTO GATT panels have yet to be resolved by the WTO
Appellate Body which has demonstrated an ambivalent attitude towards the interpretation of Article XX (g).
Although it has liberalized the concept of "primarily aimed at" in paragraph (g), it appears to have created a
substantial hurdle to the acceptance of environmental measures that otherwise contravene the WTO with a
restrictive interpretation of the chapeau to Article XX.
In the area of trade and labour and trade and human rights standards, the lack of provisions within the
WTO agreements means that States will have to address these issues through multilateral negotiations . At
stake are broader issues relating to the ability of States to make choices about domestic standards, democratic
choice in setting standards, and the relationship of trade and development. It provides an example of the
increasing inroads of international trade disciplines into areas of domestic regulation, a matter that is the
subject of the next chapter.
NOTAS
231. This is indeed the consequence of Article 30 (4) which applies a "laterin-time" rule for those States that
are parties to both treaties, but preserves the obligations under the earlier treaty for those States that did not
enter into the later treaty. See generally Ian Sinclair, The Vienna Convention on the Law of Treaties, 2nd ed.,
Manchester, Manchester University Press, 1984, pp. 93-98.
232. See, e.g., Patti A. Goldman, "Resolving the Trade and Environment Debate : In Search of a Neutral
Forum and Neutral Principles", 49 Wash. & Lee LR 1279-1298 (1992), at 1279-1280.
233.
See generally Ernst-Ulrich Petersmann, International and European Trade and Environmental Law
after the Uruguay Round, Kluwer Law International, 1995; Shinya Murase, "Perspectives from International
Economic Law on Transnational Environmental Issues", Recueil des tours, Vol. 253 (1995), pp. 287-431; C.
Thomas and G. Tereposky, "The Evolving Relationship between Trade and Environmental Regulation", 27 (4)
J. World Trade 23 (1993) ; Steve Charnovitz, "Free Trade, Fair Trade, Green Trade : Defogging the Debate",
27 Cornell Intl LJ 459-525 (1994) ; John H. Jackson, "World Trade Rules and Environmental Policies:
Congruence or Conflict?", 49 Wash & Lee LR 1227-1278 (1992).
234.
26 ILM 1541 (1987).
235.
16 USC, paras. 1361-1421 (h).
236.
For a discussion of these issues, see Runge, "Freer Trade, Protected Environment", op. cit., pp. 1-7. See
also Herman Daly, "From Adjustment to Sustainable Development : The Obstacle of Free Trade", 15
Loy. LL Int'l & Comp. LJ 33 (1992) ; Tim Lang and Colin Hines, The New Protectionism: Protecting
the Future against Free Trade, London, Earthscan Publications Ltd., 1994, pp. 64-65.
237.
See, e.g., B. Sanders, "International Trade — Possible Undermining of US Pesticide and Food Safety
Laws by the Draft Text of the Uruguay Round of GATT Negotiations", 22 Georgia J. Int'l & Comp. L. 1
(1992). For a discussion of the lowering of environmental standards in the context of the Canada-United States
Free Trade Agreement and the NAFTA, see Bruce H. Jennings, "Economics and Environmental Justice:
Assessing the Regional Impact of NAFTA", in Michael Hodges, ed., The Impact of NAFTA: Economies in
Transition, London, Centre for Research on the USA, 1995, pp. 44-63.
238. The idea that a failure to legislate can constitute an unfair trade advantage as much as a government
subsidy or legislation specifically conferring an advantage is recognized in the WTO Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS). States must grant the protections for intellectual
property as required by the Agreement required by certain intellectual property conventions (Art. 2).
239.
As Professor Lowenfeld said in a different context after the Tokyo Round,
"So long as we are not willing to legislate world-wide uniformity in wage scales, exchange rates,
environmental controls, debtlequity ratios, depreciation, interest rates, and accounting techniques, and indeed
comparable relations between government and industry, what is fair and what is unfair is in large part
coincidence." Andreas F. Lowenfeld, "Fair or Unfair Trade: Does it Matter?", 13 Cornell Int'l LI 205-219
(1980), at 219.
240.
For a discussion of the negotiating history of Article XX, see Steve Charnovitz, "Exploring the
Environmental Exceptions in GATT Article XX", 25 (5) J. World Trade 37-55 (1991).
241.
The NAFTA parties made this clear when incorporating GATT Article XX exceptions into the
NAFTA. NAFTA Article 2101 provides:
"The Parties understand that the measures referred to in GATT Article XX (b) include environmental
measures necessary to protect human, animal or plant life or health, and that GATT Article XX (g) applies to
measures relating to the conservation of living and non-living exhaustible resources."
242.
Thailand — Restrictions on Importation of and Internal Taxes on Cigarettes, Report of the Panel
adopted on 7 November 1990, DS 10/R, BISD, 37th Supp. 200 (1991).
243.
United States — Section 337 of the Tariff Act of 1930, Report of the Panel adopted on 7
November 1989, BISD, 36th Supp. 345 (1990), at para. 5.26. See Thai Cigarette case, supra, at paragraph 75.
244.
Tuna/Dolphin I, (1991) 30 ILM 1594; Tuna/Dolphin II, (1994) 33 ILM 839.
245.
See Torsten Strom, "Another Kick at the Can: Tuna/Dolphin II", 33 Canadian Yearbook of
International Law, 149-183 (1995) at 157-158, 163-164.
246.
See Murase, "Perspectives from International Economic Law on Trans-national Environmental
Issues," op. cit., Chap. III.
247.
Paragraph (g) covers measures "relating to the conservation of exhaustible natural resources if
such measures are made effective in conjunction with restrictions on domestic production or consumption."
248.
United States — Standards for Reformulated and Conventional Gasoline, Report of the Panel,
WT/DS2/R, 29 January 1996 ; Report of the Appellate Body, 29 April 1996, AB-1996-1 (WTIDS21AB/R).
249. The term “necessary” is also used in Article XX (d) (compliance with laws and regulations).
250. Canada- Measures Affecting Exports of Unprocessed Herring and Salmon, 22 March 1988, BISD
35S/98.
251. See generally David A. Wirth, “The Role of Science in the Uruguay Round and NAFTA Trade
Disciplines”, 27 Cornell Int´l LJ 817-859.
252. Reformulated Gasoline, supra.
253.Report of the Panel of 29 January 1996. WT/DS/R, at para.6.40.
254. WT/DS2/AB/R, p. 19.
255.
WTIDS2/AB/R, p. 19
256.
Neither of the Tuna/Dolphin cases provided any help in the application of the "primarily aimed at" test.
Tuna/Dolphin 1, supra, based its decision partly on the notion that Article XX (g) could not apply to
conservation measures applied to areas outside of the territorial jurisdiction of the State and Tuna/Dolphin 11,
supra, took the view that something could not be "primarily aimed at" if it was not effective in securing its
objective. According to the Tuna/Dolphin II Panel, attempting to get other States to change their
environmental regulations could not be regarded as an effective conservation measure and hence could not be
"primarily aimed at" conservation. A panel established under the Canada-United States Free Trade Agreement
interpreted the "primarily aimed at" test in a way that required the conservation gain from the regulatory
measures in question to outweigh the commercial inconvenience, looking to see whether the Government in
question would have adopted the measure if the burden had fallen exclusively on its own producers : In the
Matter of Canada's Landing Requirement for Pacifie Salmon and Herring, Report of the Panel 16 October
1989, CDA-89-1807-01. See Daniel A. Farber and Robert E. Hudec, "GATT Legal Restraints on Domestic
Environmental Regulations", in Jagdish N. Bhagwati and Robert E. Hudec, eds., Fair Trade and
Harmonization: Prerequisites for Free Trade ?, Cambridge, MIT Press, 1996, pp. 59-94 at p. 82.
257.
Reformulated Gasoline, supra, p. 30.
258.
United States — Prohibition on Imports of Tuna and Tuna Products from Canada, 22 February 1982,
BISD, 29th Supp. 91 (1983), para. 4.8.
259.
Reformulated Gasoline, supra, p. 25
260.
Reformulated Gasoline, supra, pp. 25-29.
261.
Since the United States had said that it would have been too costly to apply the Venezuela baseline
rules to its own industry (Report of the Panel, para. 3.52), it is not clear why this of itself was not taken as
evidence that the measure was not "primarily aimed at" conservation. Such an approach was taken by the panel
set up under the Canada-United States Free Trade Agreement in Salmon and Herring, supra.
262.
Additional concerns about the adequacy of approaches under the GATT to environmental issues arise
out of the interpretation in the Tuna/Dolphin cases of the national treatment obligation in Article III to apply to
"products" only and not the "production and processing methods". On this question, see Murase, "Perspectives
from International Economic Law on Transnational Environmental Issues", op. cit., pp. 336-344.
263.
Article 7.1 of the ITO Charter provided : "The Members recognize that unfair labour conditions,
particularly in production for export, create difficulties in international trade ..."
264.
GATT Article XX (e) permits the adoption of measures "relating to the products of prison labour" that
would otherwise contravene GATT obligations.
265.
The United States and France proposed that trade and labour standards be placed on the agenda of the
WTO towards the end of the Uruguay Round : Jackson, Davey and Sykes, Legal Problems of International
Economic Relations, op. cit., p. 998.
268.
TRIPS Arts. 2 and 3.
269.
OECD, Trade Employment and Labour Standards, COMJDEELSA/TD (96)8/FINAL (1996) ; OECD,
Trade and Labour Standards, COM/DEELSATD (95)5 (1995).
270.
North American Agreement on Labour Cooperation, Art. 29. The Agreement establishes a procedure
of ministerial consultations, the creation of an Evaluation Committee of Experts and an evaluation report
before a complaint of a "persistent pattern of failure" by a party to effectively enforce the standards in question
leading to the creation of an arbitral panel can be made : see Agreement, Part 4.
271.
See North American Agreement on Labour Cooperation, Annex 39, "Monetary Enforcement
Assessments".
272.
The issues dealt with here are explored in detail in the essays in Jagdish N. Bhagwati and Robert E.
Hudec, Fair Trade and Harmonization: Prerequisites for Free Trade ?, Vol. 2: Legal Analysis, Cambridge,
MIT Press, 1996.
273.
This would include as well measures relating to restrictive business practices; see Jackson, The World
Trading System, op. cit., pp. 211-213.
274.
See generally Patricia W. Birnie and Alan E. Boyle, International Law and the Environment, Oxford,
Oxford University Press, 1993.
275. Langille, "General Reflections on the Relationship of Trade and Labor", op. cit., p. 252. See also Thomas
Franck, "The Emerging Right to Democratic Government", 86 Am. J. Int'l L. 86 (1992).