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By
Prabhash Ranjan,
Visiting faculty to the Indian Law Institute, New Delhi, India and former research officer, Centad
The dispute between the United States on one side, and India, Malaysia, Pakistan and Thailand on the other, on the importation of shrimp and shrimp products from the latter countries to the former (popularly known as the ‘shrimp-turtle dispute’) is a landmark case in the World Trade Organisation (WTO).
For the first time, it enunciated the interplay between trade and the environment. It brought to the surface the fact that trade and environmental interests could clash, and posed the difficult challenge of reconciling this clash with the multilateral trading regime.
The case also played an important role in galvanising developing countries against the US. Third, and most importantly, it set out a new kind of trade jurisprudence that will continue to guide many WTO disputes in future, especially ones involving links between trade and the environment.
Facts of the case
Consultations: The US imposed a ban on the importation of shrimp and shrimp products from India , Malaysia , Pakistan and Thailand , under Section 609 of US Public Law 101-162. This law restricts the entry of shrimp and shrimp products into the US from countries that kill turtles whilst catching shrimp. In other words, shrimp of only those countries that use turtle-friendly technology is allowed unrestricted entry into the US .
However, an exception was allowed under this law. It allowed the importation of shrimp (in cases where turtles were killed) provided the concerned country had a programme aimed at conserving turtles or controlling the incidental deaths of turtles whilst catching shrimp, similar to the one the US had. Further, those countries that did not have a programme aimed at conserving or controlling turtle deaths were allowed to export shrimp to the US provided they used turtle excluding devices (TED) similar to ones used in the US. India, Pakistan, Malaysia and Thailand neither used TEDs nor had a programme aimed at conserving or controlling the deaths of turtles.
Subsequent to the ban, India, Pakistan, Malaysia and Thailand requested consultations with the US.
Panel formation: On January 9, 1997, Malaysia and Thailand requested the formation of a panel. On January 30, 1997, Pakistan made a similar request. A panel was established on February 25, 1997. On the same day, India too made a request for the establishment of a panel on the same matter, and another panel was established. On April 15, 1997, the two panels were merged to form a single panel.
Panel report: The panel’s report was circulated on May 15, 1998. The panel found that the US ban on shrimp was in violation of its obligations under Article XI.1 and Article XX of GATT.
Appellate body (AB) report: the US challenged certain provisions of the law, as interpreted by the panel, before the appellate body (AB). The AB circulated its report on October 12, 1998 . It reversed the findings of the panel -- that the US measure was not within the scope of measures permitted under Article XX of GATT 1994. However, it concluded that the US measure, although qualifying for provisional justification under Article XX (g), failed to meet all the requirements of Article XX.
Adoption of the report: On November 6, 1998 , the disputes settlement body (DSB) adopted the AB report and the panel report, as modified by the AB report.
Ruling of the panel
The panel held that the ban imposed by the US on the import of shrimp from these four countries was in violation of Article XI of GATT. Article XI prohibits countries from maintaining quantitative restrictions (QR) on imports. Article XI.1 states that countries cannot impose any prohibitions or restrictions on imports coming from other countries, either in the form of quotas or import/export licences. The only form of restriction that a country can employ is the imposition of tariffs. In other words, countries are not allowed to impose non-tariff barriers except in certain cases such as critical shortages of foodstuff, the application of food standards, or to safeguard any balance of payment problems, etc.
In this case, the panel found that the ban imposed by the US on shrimp was like a quantitative restriction and hence conflicted with its obligations under Article XI of GATT. This ruling was not contentious and was not even challenged by the US . However the panel's other ruling, where it said that the US measure was not justified under Article XX of GATT, created a stir.
The panel said that the ban imposed by the US on the import of shrimp and shrimp products did not come under Article XX of GATT. Before we understand the panel's ruling it is important to understand what Article XX of GATT says. Article XX of GATT gives the ‘general exceptions' whereby countries can restrict the importation of a particular product into their territories based on certain non-trade concerns like protection of public morals or protection of the life and health of humans, animals and plants. However, this restriction will only be valid provided the following conditions are satisfied:
- The restrictions are not applied in any manner which would arbitrarily or unjustifiably discriminate between countries that have the same conditions.
- The restrictions are not disguised restrictions on international trade. In other words, such restrictions should not be used as protectionist measures in the name of safeguarding public morals or the life and health of humans, animals or plants, etc.
These conditions are referred to as the chapeau of Article XX. The US argued that its measure to impose a ban on the import of shrimp and shrimp products from these four countries was justified under Article XX (g), which allows a ban on imported products related to the conservation of exhaustible natural resources -- which is one of the non-trade concerns given in Article XX of GATT. The panel disagreed. But it is important to note that the disagreement was not based on the issue of whether banning the import of shrimp to save turtles from being killed was a measure justifiable under Article XX (g). Rather, it was based on whether or not use of a unilateral measure to restrict imports was the right approach.
The panel argued that the chapeau of Article XX of GATT allowed countries to derogate from the GATT provisions provided they do not undermine the multilateral trading regime. Further, according to the panel, if countries started using unilateral measures or policies to restrict or condition market access for a given product, GATT and WTO agreements could no longer serve as a multilateral framework for trade among members, as there would be no security or predictability. The panel, it seems, thought that the US ban on shrimp in the name of protecting turtles was a unilateral environmental policy that it wanted to impose on other countries. This, according to the panel, could give rise to a precedent where other countries will also start using unilateral policies to restrict market access to countries.
Hence, the panel found that the US measure to ban the importation of shrimp and shrimp products violated Article XX of GATT and was therefore illegal. The US challenged this finding and so the matter came to the AB. Ruling of the appellate body
The panel's finding, that imposing such unilateral measures to restrict importation was illegal, received flak from many quarters. The principal reason was that the case represented a conflict between trade and the environment. Since the panel had decided in favour of trade, the environmental lobby was up in arms against the ruling.
Actually the panel seems to have relied on the jurisprudence that emerged out of the tuna-dolphin dispute in GATT, days before the WTO came into existence (United States-Restrictions on Imports of Tuna (1991) 30 ILM 1594. The panel ruling was not formally adopted by the GATT council). According to this jurisprudence, any conflict between a trade and non-trade issue should be resolved in favour of the former.
Reversing the panel’s finding
The appellate body reversed the findings of the panel. To start with, the AB said that use of unilateral measures could not be considered to be per se inconsistent with the principles of the multilateral trading regime. The AB not only overturned the panel’s decision in this case, it also rejected the jurisprudence that had developed out of the tuna-dolphin dispute. However this does not mean that the AB found the US ban on shrimp vis-à-vis the four countries legal. The reason for finding the move illegal, given by the AB, was different from the panel’s reasoning. This is discussed below.
The AB provided a substantive explanation for the dispute between the US and the other four countries, which Robert Howse and Michael Trebilcock call a new legal baseline for the trade and environment debate ( ‘Trade and the Environment' in The Regulation of International Trade by Trebilcock and Howse).
The AB said that the panel had adopted a flawed methodology to determine whether the US measure was in violation of Article XX. According to the AB, there are two parts to assessing the validity of a measure vis-à-vis Article XX. The first part is the measure itself. In other words, it first needs to be determined whether the measure adopted by a country falls under any one of the paragraphs given in parts (a) to (j) of Article XX.
Once it has been determined that the particular measure falls under one of these items, the second part is to see whether or not it has been applied in accordance with the chapeau of Article XX. In other words, according to the panel, the chapeau of Article XX only offers guidance regarding the manner in which a particular measure can be applied. The basic purpose is to see that the conditions given in the chapeau of Article XX are honoured while applying a respective measure. According to the AB, while assessing a measure on the touchstone of Article XX, first it needs to be determined whether the measure falls under any of the exceptions given in Articles XX (a) to (j). If the measure does not fall under any of these exceptions then the enquiry will stop and the measure will be considered a violation of Article XX. However if the measure falls under any of these exceptions, the next step is to find out whether they are applied in a manner that does not arbitrarily or unjustifiably discriminate between countries where the same conditions prevail, or do not constitute disguised restrictions to international trade (that is, they are not protectionist measures). The panel did not follow this sequence. It tried doing the second step first and hence its methodology was incorrect.
Completing the legal analysis
The AB, after clarifying the legal position regarding how to implement Article XX, applied the law to the facts. It first tried to find out whether the ban imposed by the US on shrimp imports from the four countries fell under one of the exceptions (Article XX (a) to Article XX (j)) of Article XX.
The US had invoked Article XX (g) to justify the ban imposed on shrimp imports. Article XX (g) allows countries to take measures ‘relating to conservation of exhaustible natural resources'. Hence, in this case, the AB needed to find out whether imposing a ban on the import of shrimp because shrimp could be caught only by killing turtles (in countries that did not follow turtle harvesting techniques or did not use TED) fell under ‘conservation of exhaustible natural resources'. In other words, was the measure aimed at conserving sea turtles a measure that falls under ‘conservation of exhaustible natural resources'?
The AB held that this particular measure of the US did fall under Article XX (g). It is interesting to see how the AB reached this conclusion. India, Pakistan and Thailand argued that reasonable interpretation of the term ‘exhaustible’ was that it refers to ‘finite resources such as minerals, rather than biological or renewable resources’. Malaysia argued that sea turtles could only be considered under Article XX (b) (adopting measures aimed at protecting the life and health of humans, animals and plants), since XX (g) was meant only for ‘non-living exhaustible natural resources’.
The AB rejected these arguments. It argued that Article XX (g) was not limited to the conservation of ‘mineral' or ‘non-living' natural resources. Living resources too are finite and hence exhaustible. The AB emphasised the principle of sustainable development given in the preamble of the WTO and argued that both living and non-living things could be exhaustible natural resources. Further, the AB held that sea turtles were included in Appendix 1 of the Convention on International Trade in Endangered Species of Wild Fauna and Flora, which lists all species that are threatened with extinction and affected by trade.
Hence, the AB reached the conclusion that sea turtles fall under the category of ‘exhaustible natural resources' and since the US ban on shrimp imports was a measure related to conserving sea turtles, it qualified as an exception under Article XX (g).
After having determined that the ban on shrimp products fell under one of the exceptions of Article XX, the AB went on to find out whether this exception was in accordance with the chapeau (the two conditions given above) of Article XX.
The AB argued that the conditions given in the chapeau of Article XX were meant to ensure that the exceptions given in Article XX were not misused or abused for protectionist purposes. Here, the AB found that application of the US measure was in violation of the conditions given in the chapeau , that is, it constituted ‘unjustifiable discrimination' and ‘arbitrary discrimination' for three reasons.
First, US conservation of sea turtles required all countries to adopt a similar regulatory scheme to conserve sea turtles as adopted by the US . The AB held that the US could not impose a condition on all member countries of the WTO for similar regulatory programmes to those that it followed without taking into consideration the different conditions that may prevail in different countries.
Second, the AB struck down the US 's policy of not allowing shrimp imports from countries that, although they had used TED technology comparable in effectiveness to that of the US , had caught the shrimp from waters that were not certified by the US . This policy of the US conveyed that the principal reason behind banning shrimp imports was not the conservation of sea turtles but to impose a similar regulatory mechanism in countries with different conditions.
Third, the AB held that the US measure constituted ‘unjustifiable discrimination' because it did not negotiate with the four complaining countries, whereas it did negotiate with countries of the Western Hemisphere for the protection and conservation of sea turtles. Implementation of the decision
On January 27, 2000 , the US stated that it had implemented the rulings of the AB. It had issued fresh guidelines for implementing its shrimp-turtle law. It introduced greater flexibility in assessing the turtle-harvesting programmes of other countries, keeping in mind the different conditions that prevailed in those countries. It had also started pursuing active negotiations with countries that lacked turtle-harvesting technology.
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