PROCESSES AND PRODUCTION METHODS (PPMs) IN WTO LAW
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1 PROCESSES AND PRODUCTION METHODS (PPMs) IN WTO LAW Interfacing trade and social goals CHRISTIANE R. CONRAD CAMBRIDGE UNIVERSITY PRESS
2 List of figures and tables, page xv Preface and acknowledgements xvii Table ofgatt 1947 Reports xix Table of WTO Reports xxi List of abbreviations xxvi Introduction 1 I Foundations: the relevance of NPA measures at the interface of domestic regulation, economic globalization and world trade law 7 1 Setting the stage for legal analysis Brief introduction to the topic The crucial cases Tuna-Dolphin I (1991) Tuna-Dolphin II (1994) Shrimp Turtle (1998) The Panel Report The Appellate Body Report Shrimp Turtle - Article 21.5 (2001) Overview of the PPM debate Emergence of the PPM debate Developments in academia and practice Concepts and terms central to the'ppm debate The product-process distinction Processes and production methods 'Product-related'and'non-product-related'PPMs Unanswered questions and legal uncertainty Identification of key legal issues Customs tariffs Article II The relevance of international rules Obligation to most-favoured-nation treatment Import prohibitions or other quantitative restrictions 36 vii
3 Vlll CONTENTS Non-tax internal regulation Internal taxes and other internal charges Indirect taxation and NPAs Direct taxes and NPAs Border tax adjustment Imports Exports Anti-dumping duties Subsidies Subsidies linked to NPAs Low standards as illegitimate subsidization General exceptions The particular exceptions The introductory provision of Article XX Technical barriers to trade and sanitary and phytosanitary measures Summary Delineation and foundations of the legal analysis Scope of the analysis General object of research: trade in goods Scope of the legal analysis Terms and concepts NPA measures :2 Processes and production methods or'ppms' 62 2 Putting the debate into perspective: analysis of the socio-economic context National regulation and NPAs Overview of regulation General domestic regulation The notion of social regulation Different modes of regulation Differences and similarities in regulatory cultures: the example of the United States and Europe Regulation in the United States Regulation in Western Europe Assessment of differences and similarities The economic case for state intervention Basic considerations on free markets and the economic role of governments Categories of economic rationales for regulation Regulation to safeguard competitive markets Regulation addressing market failure Regulation in pursuit of distributional or social objectives Preliminary conclusion 91
4 IX 2.2 International trade and NPA measures Design parameters of the multilateral trading system Object and purpose of the WTO Agreements Identification Relevance Economic rationales of the multilateral trading system The interface of domestic regulation and international trade The general debate on domestic regulation NPA measures and international trade in goods Political arguments in the international debate Effective and efficient protection of national or foreign objects 104. _ Sovereignty and extraterritoriality Unilateralism Competitiveness and effective regulation Summary 113 II Legal analysis: reviewing the status of NPA measures delegelata Preliminary considerations: applicability of WTO law and other international law to NPA measures Applicability of WTO law to NPA measures The relevance of conventional international law in WTO dispute settlement No closed self-contained regime General applicability of international law Conflicts with other international treaties and instruments Existence of a conflict of norms Applicable conflict rules Asymmetrical conflicts Symmetrical conflicts Conflicts of norms, NPAs and the example of CITES NPA measures and the law on state responsibility Conclusion Consistency with GATT obligations The scope of the national treatment obligations The use of specific terms Narrow interpretation: products Broad interpretation:'affecting' Preliminary conclusion Comparison of Article 111:2 and Measures 'of the same nature' Summary and conclusion 161
5 4.2 The principle of non-discrimination and the 'like products' concept Introduction to the principle of non-discrimination General problems inherent to the principle Clear prohibition of origin-based discrimination Non-discrimination and NPAs Interpreting the 'like products' concept with special consideration of NPAs The DSB approach: 'objective' determination Main features Relevant factors Varying importance of factors 174 *- "" Degree of'likeness'under different provisions Relevance of NPAs Processes and production methods Output and producer characteristics Price National policies and regulatory regimes Relevance of'minor'physical differences Editorial content Environmental impacts Toxicity and risk Genetic modifications Summary The 'aim and effects' theory Rationales and main elements The criteria Scope and relevance Diversity of opinions Significance for NPA measures The 'aim and effects' theory in WTO adjudication US - Malt Beverages (1992) US - Taxes on Automobiles (1994) Japan - Alcoholic Beverages (1996) and / EC - Bananas (1997) Subsequent jurisprudence Critique Market-based or economic approaches Rationales and main elements Significance for NPA measures Relevance in WTO adjudication Critique Summary Detrimental treatment and NPA measures Conclusions 244
6 Limits to the justification of NPA measures under the general exceptions Particularities in interpreting Article XX Relevance of international law for interpretation Basic framework of interpretation GATT and WTO case law Signatories-based approach Congruence within disputes Incongruence within disputes Objective approach The nature of interpretation *4.2 Relevance of international instruments Summary Excursus: inter se understanding on interpretation Other interpretative questions No restrictive interpretation Static or evolutionary interpretation? Summary General concerns regarding justifiability of NPA measures Vagueness of basic objections Review of arguments against justifiability Irreconcilability with WTO objectives and purpose Per se violation of the chapeau Violation of the sovereignty principle Result The scope of Article XX The geographical scope and the problem of extraterritoriality Insufficient GATT and WTO case law The text of the particular exceptions Direct references to the geographical scope Indirect reference: the means-end relationship 'necessary' 'relating to'and'imposed for" Implications for the geographical scope Indirect reference in exception (g): domestic restrictions History and relevant case law Distinction between foreign and shared resources Object and purpose Negotiating history Alternative approaches to extraterritoriality Conclusions on the geographical scope Subject coverage of the particular exceptions Exclusivity of listed policies 310 XI
7 Xll CONTENTS Coverage of other policies Protection of the environment Human rights and labour standards Summary Special consideration of the public morals exception Open subject coverage Standards of right and wrong The geographical scope Location of moral standards Location of the threat Preliminary conclusions ^Requirements relating to the means-end relationship Motivation for moral NPA trade measures Suitability Necessity 'Relative'and'absolute'necessity WTO jurisprudence on 'weighing and balancing" Other approaches Conclusions for an adequate 'necessity' test Step Step Step Summary The chapeau and other requirements regarding the application of measures A'balancing process'under the chapeau? The requirements Introductory remarks General requirements and principles An'unavoidable'standard of justifiability? Relevance of different conditions in countries Special and differential treatment The principle of SDT Relevance of SDT for the chapeau Due process and general principles 359 / Specific problem fields No prohibition of unilateral measures Are serious negotiations obligatory? Specific requirements for NPA measures Relevant characteristics of NPA measures Consultations and negotiations Implementation periods Transfer of technologies, administrative and financial support Conclusions 372
8 Xlll 6 The status of PPM measures under the TBT Agreement and the SPS Agreement Introduction The TBT Agreement and PPMs Applicability of the TBT Agreement Categorization of relevant norms linked to unincorporated PPMs Technical regulations and standards Labelling requirements The EU regulatory framework on egg labelling Coverage with respect to labelling of PPMs "and NPAs Labelling of unincorporated PPMs Other NPAs Substantive provisions No perse illegality Substantive requirements on technical regulations and standards Overview of substantive requirements The distinction between regulations and standards Legitimacy of the objective pursued: special consideration of consumer information Consumer information as an internationally recognized value Consumer information as precondition for the functioning of markets Preliminary conclusions Necessity The relationship of the TBT Agreement and the GATT Special and differential treatment The SPS Agreement Result 421 III Outlook: new perspectives on the legal status of NPA measures The interface of international trade and public policies: an overview over existing proposals for reform Review Denial of competence? Changes at WTO level Substance Procedure Institutional changes and governance-related suggestions 440
9 XIV CONTENTS Institutional changes Governance in a multi-level system Comment A regulation-based perspective on NPA trade measures Regulatory problems linked to international trade Side-effects of international trade The regulatory dilemma Effectiveness of unimpaired national regulation Effectiveness of impaired national regulation Market failure and the lack of international institutions Regulatory failure is not in line with objectives and key rationales of the WTO Conclusions Applying the regulation-based perspective Deduction of the regulation-based approach Categorization of national regulation Category 1: Regulation reducing market imperfections Category 2: Regulation addressing market failure Category 3: Distributive regulation General conditions of consistency General requirements National regulation and SDT Conclusions 483. Summary and concluding remarks 485 Bibliography 494 Index 513
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