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GATT/WTO Cases


WTO Report of the Appellate Body: European Communities –Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R (Mar. 12, 2001) available at (last visited Mar. 15. 2001).
WTO Report of the Appellate Body: Australia – Measure Affecting Importation of Salmon, WT/DS18/AB/R (Oct. 20, 1998) available at (last visited Mar. 15, 2001).

WTO Report of the Panel: Argentina - Measure Affecting the Export of Bovine Hide and the Import of Finished Leather, WT/DS155/R (Dec. 19, 2000), available at (last visited Mar. 15, 2001).


WTO Report of the Appellate Body: Korea - Measures Affecting Imports of Fresh, Chilled, and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R (Dec. 11, 2000), available at (last visited Mar. 15, 2001).
WTO Report of the Panel: European Communities –Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R (Sep. 18, 2000) available at (last visited Mar. 15. 2001).
WTO Report of the Panel: Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R (Mar. 17, 2000), available at (last visited Mar. 15, 2001).
WTO Report of the Appellate Body: Chile - Taxes on Alcohol Beverages, WT/DS/87/AB/R, WT/DS/110/AB/R (Dec. 13, 1999), available at (last visited Mar. 15, 2001)
WTO Report of the Appellate Body: Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R (Feb. 22, 1999) available at (last visited Mar. 15, 2001).
WTO Report of the Panel: Japan – Measures Affecting Agricultural Products, WT/DS76/R (Oct. 27, 1998) available at (last visited Mar. 15, 2001).
WTO Report of the Appellate Body: United States-Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R (Oct. 12, 1998), reprinted in 38 I.L.M. 118 (1999).
WTO Report of the Panel: Australia – Measure Affecting Importation of Salmon, WT/DS18/R (Jun. 12, 1998) available at (last visited Mar. 15, 2001).
WTO Report of the Panel: United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R (May 15, 1998), reprinted in 37 I.L.M. 832.
WTO Report of the Appellate Body: EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (Jan. 16, 1998), available at (last visited Mar. 15, 2001).
WTO Report of the Panel: EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/R/USA (Aug. 18, 1997), available at (last visited Mar. 15, 2001).
WTO Report of the Appellate Body: United States – Shirts and Blouses from India, WT/DS33/AB/R (Apr. 25, 1997), available at http://www.wto.org (last visited Mar. 15, 2001).
WTO Report of Appellate Body: Japan -Taxes on Alcohol Beverages, WT/DS8/AB/R. WT/DS10/AB/R, WT/DS11/AB/R (adopted Nov. 1, 1996), available at (last visited Mar. 15, 2001).
WTO Report of the Appellate Body: United States-Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R (Apr. 29, 1996), reprinted in 35 I.L.M. 603 (1996).
WTO Report of the Panel: United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/R (Jan. 29, 1996) available at (last visited Mar. 15, 2001).
GATT Dispute Settlement Panel Report: United States- Restrictions on Imports of Tuna, GATT Doc. DS 29/R (June 16, 1994) (not adopted), reprinted in 33 I.L.M. 839 (1994).
GATT Dispute Settlement Panel Report: United States- Restriction on Imports on Tuna, GATT Doc. DS21/R (August 16, 1991) (not adopted), GATT BISD (39th Supp.) 155 (1993).
GATT Dispute Settlement Panel Report: United States - Section 337 of the Tariff Act of 1930 (adopted on 7 November 1989) GATT BISD (39th Supp.) 345.
GATT Dispute Settlement Panel Report: Canada - Measures Affecting Exports of Unprocessed Herring and Salmon (adopted on 22 March 1988), GATT BISD (35th Supp.) 98.



* Third Secretary, Embassy of Japan in the United States; LL.M., Harvard Law School (2001). A draft of this paper was presented to the Jean Monnet Seminar on the European Union, NAFTA and the WTO: Advanced Issues in Law and Policy, at Harvard Law School, in March 2001. This author thanks Professor Joseph. H.H.Weiler and the participants to the Seminar for their very useful criticism and comments. This author also expresses appreciation to Professor Bruce L. Hay, Harvard Law School, for his comments from economic viewpoints. The views expressed in this Article are the author’s and do not represent the official position of the Government of Japan. Comments on this paper should be sent to kohei.saito@mofa.go.jp

1 Convention on International Trade in Endangered Species of Wild Fauna and Flora, Mar. 3, 197, 27 U.S.T. 1087, 993 U.N.T.S. 243 [hereinafter CITES].

2 General Agreement on Tariffs and Trade, Oct 30, 1947 T.I.A.S. No. 1700, 55 U.N.T.S. 194 [hereinafter GATT 1947].

3 See HAKAN NORDSTROM & SCOTT VAUGHAN, TRADE AND ENVIRONMENT 8 (WTO Special Studies 4, 1999) (stating that “trade was not perceived to be an environmental issue as such, neither among policy makers nor the public at large”).

4 See GATT Dispute Settlement Panel Report: United States- Restriction on Imports on Tuna, GATT Doc. DS21/R, August 16, 1991 (not adopted), GATT BISD (39th Supp.) 155 (1993). [hereinafter Tuna/Dolphin I]

5 See The Marine Mammal Protection Act, 16 U.S.C.§ 1371 (a) (2) (1994) [hereinafter MMPA].

6 With regard to the early history of the “trade and environment” discussion, see Daniel C. Esty, Greening the GATT: Trade, Environment and the Future (1994).

7 See GATT Dispute Settlement Panel Report: United States- Restrictions on Imports of Tuna, GATT Doc. DS 29/R, June 16, 1994, reprinted in 33 I.L.M. 839 (1994) [hereinafter Tuna/Dolphin II].

8 See Id. Para. 3.7; Tuna/Dolphin I, supra note 4, at para. 3.33, 40.

9 See Tuna/Dolphin I, supra note 4, at para. 5.31.

10 See Id. at para. 5.32.

11 See Tuna/Dolphin II, supra note 7, at para.5.15-20.

12 Id. at para. 5.26.

13 See e.g. Richard J. McLaughlin, Sovereignty, Utility, and Fairness: Using U.S. Takings Law to Guide the Evolving Utilitarian Balancing Approach to Global Environmental Disputes in the WTO, 78 OR. L. REV. 855, 872-74(1999).

14 WTO Report of the Appellate Body: United States-Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R (Apr. 29, 1996), reprinted in 35 I.L.M. 603 (1996) [hereinafter Gasoline AB Report].

15 WTO Report of the Appellate Body: United States-Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R (Oct. 12, 1998), reprinted in 38 I.L.M. 118 (1999) [hereinafter Shrimp/Turtle AB Report].

16 Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts 6 (1994).

17 McLaughlin points out that the reason why the AB introduced a new balancing approach would be: “(1) the change in the WTO dispute settlement regime from a non-binding to a binding system; (2) the establishment of a permanent appellate body with a mandate to review errors of law; and (3) consensus among the most powerful members of the WTO that international environmental protection must be recognized by the trade organization as a legitimate area of concern.” See McLaughlin, supra note 13, at 890.

18 Id. at Preamble.

19 See Shrimp/Turtle AB Report, supra note 15, at para. 129-130.

20 “Trade measures” here is not limited to those in which a tax and regulation is exclusively applied to traded goods at a country’s border; the application of the GATT is not limited to those measures. A “domestic” tax or a regulation which is applied to both domestic and foreign products also affect international trade by modifying the competitive relationship between the domestic and foreign products and therefore are within the scope of the GATT (for example, Article III of the GATT). These domestic measures are also within the domain of the trade measures which will be discussed in this paper. See Steve Charnovitz, Trade Measures and the Design of International Regimes, 5 J. Env’t & Dev., No. 2, 168, 171(1996).

21 See e.g. HAKAN NORDSTROM & SCOTT VAUGHAN, supra note 3, at 13-27; Howard F. Chang, Trade Measures to Protect the Global Environment, 83 Geo. L.J. 2131, 2146 (1995) [hereinafter Chang 1995]; David Pearce, The Greening of the GATT: Some Economic Considerations, in Trade & Environment: The Search for Balance, Volume I, 20, 29-33 (James Cameron et al. eds. 1994),

22 See Jeffrey L. Dunoff & Joel P. Trachtman, Economic Analysis of International Law, 24 Yale. J. Int’l Law 1, 15 (1999).

23 G. Hardin, The Tragedy of the Commons, in Managing The Commons (San Francisco: W.H. Freeman, 1977).

24 See e.g. Chang 1995, supra note 21; Howard F. Chang. Carrots, Sticks, and International Externalities, 17 Int’l Rev. L & Econ 309 (1997) [hereinafter Chang 1997]; Robert Howse & Michael J. Trebilcock, The Fair Trade-Free Trade Debate: Trade, Labor, and the Environment, 16 Int’l Rev. L. & Econ 61. (1996); McLaughlin, supra note 13; Pearce, supra note 21 (arguing that, even though the GATT seems to distinguish the externalities derived from the consumption of a product in the importing countries, for example the risk arising from the use of imported asbestos, from the externalities derived from the production of a product in the exporting countries, for example the harvest of shrimps by turtle-unsafe methods, by scrutinizing the latter more stringently than the former, there is no economic justification for this distinction.); Arvind Subramanian, Trade Measures for Environment: A Nearly Empty Box?, World Econ., Jan. 1992, 135.

25 See e.g. Subramanian, supra note 24 (arguing that, “in relation to domestic environmental problems, the use of trade measures is flawed because it is largely protectionist in intent… [I]n relation to transboundary environmental problems,… trade interventions were inefficient instruments in correcting the market failures creating the environmental problem”[emphasis in original]).

26 See e.g. Chang 1995, supra note 21; Chang 1997, supra note 24 (arguing that the use of “sticks”, i.e. trade measures, is more likely to enhance global economic welfare than the “carrot only” approach, i.e. subsidy).

27 See e.g. John Whalley, The Interface between Environmental and Trade Policies, 101 Econ. J. 180, 186-88 (1991).

28 WTO Report of the Panel: European Communities –Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R (Sep. 18, 2000), available at (last visited Mar. 15, 2001) [hereinafter Asbestos Panel Report]; WTO Report of the Appellate Body: European Communities –Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R (Mar. 12, 2001), available at (last visited Mar. 15, 2001) [hereinafter Asbestos AB Report].

29 Agreement on the Technical Barriers to Trade, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, World Trade Organization, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations 163 (1999) [hereinafter the TBT Agreement].

30 Agreement on the Application of Sanitary and Phytosanitary Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, World Trade Organization, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations 59 (1999) [hereinafter the SPS Agreement].

31 The TBT Agreement, supra note 29, at preamble.

32 The SPS Agreement, supra note 30, at preamble.

33 In the discussion concerning “trade and environment” in the context of the GATT, GATT Article XX is not the only relevant provision. For example, environment-oriented measures which affect international trade would be deemed to be consistent with GATT Article III. In Asbestos, the AB found that a French decree which prohibited the use, manufacture, sale, and import of asbestos and asbestos-containing products was not inconsistent with GATT Article III, reversing the Panel’s findings that chrysotile asbestos fibres and PCG fibres, non-asbestos fibres some of whose end-uses are similar to those of chrysotile asbestos fibres, were like products. See Asbestos AB Report, supra note 28. Furthermore, the AB noted that “even if two products are ‘like’, that does not mean that a measure is inconsistent with Article III:4. A complaining Member must still establish that the measure accords to the group of “like” imported products ‘less favourable treatment’ than it accords to the group of ‘like’ domestic products”[emphasis in original]. Id. at para. 100. With regard to the implication that the use of the word “group” might have, see infra note 103. Therefore, it is possible that environmental regulations designed to “internalize” the externalities derived from environmental problems does not have to be scrutinized by the judicial tests invoked under GATT Article XX. However, this paper limits the scope of the discussion to Article XX except for a few occasional references to GATT Article III; if we want to expand our discussion to GATT Article III, we need to conduct a careful analysis of the Article III non-discrimination principle, and such an analysis is too involved an issue to be treated here in detail.

34 See Gasoline AB Report, supra note 14, at 22.

35 See Shrimp/Turtle AB Report, supra note 15, at para. 119.

36 See WTO Report of the Panel: United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R (May 15, 1998), reprinted in 37 I.L.M. 832, para 7.28 [hereinafter Shrimp/Turtle Panel Report].

37 See Shrimp/Turtle AB Report, supra note 15, at para. 120.

38 GATT Dispute Settlement Report: United States - Section 337 of the Tariff Act of 1930 (adopted on 7 November 1989) BISD (39th Supp.) 345, para. 5.26.

39 With regard to the objection to this interpretation of “necessary” by the AB&P, see Thomas J. Schoenbaum, International Trade and Protection of the Environment: the Continuing Search for Reconciliation, 91 Am. J. Int'l L. 268, 276-278 (1997).

40 See Shrimp/Turtle AB Report, supra note 15, at para. 115-116.

41 Joel P. Trachtman, Trade and ... Problems, Cost-benefit Analysis and Subsidiarity, 9 Eur. J. Int'l L. 32, 69 (1998) [hereinafter Trachtman Cost-Benefit Analysis].

42 See WTO Report of the Panel: Argentina - Measure Affecting the Export of Bovine Hide and the Import of Finished Leather, WT/DS155/R (Dec. 19, 2000), available at (last visited Mar. 15, 2001) [hereinafter Bovine Hide].

43 See id. at para. 11.299-11.308.

44 See id. at para. 11.316-11.328.

45 See Clean Air Act Amendments of 1990 (Pub.L. 101-549, Nov. 15, 1990, 104 Stat. 2399).

46 See WTO Report of the Panel: United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/R (Jan. 29, 1996) para. 3.11-16, 23-29,33, available at (last visited Mar. 15, 2001) [hereinafter Gasoline Panel Report].

47 See id. at para.6.5-16.

48 See GATT Dispute Settlement Panel Report: Canada - Measures Affecting Exports of Unprocessed Herring and Salmon (adopted on 22 March 1988), BISD (35th Supp.) 98, para. 4.6.

49 See Gasoline Panel Report, supra note 46, at 6.39.

50 See Gasoline AB Report, supra note 14, at 17.

51 See id. at 18-19.

52 See Shrimp/Turtle AB Report, supra note 15, at para. 135.

53 See id. at para. 138.

54 See id. at para. 139-40.

55 Id. at para. 141.

56 See Gasoline AB Report, supra note 14, at 15 (stating that “one problem with the reasoning [of the Panel analysis regarding Article XX (g)]… is that the Panel asked itself whether the ‘less favourable treatment’ of imported gasoline was ‘primarily aimed at’ the conservation of natural resources, rather than whether the ‘measure’, i.e. the baseline establishment rules, were ‘primarily aimed at’ conservation of clean air. In our view, the Panel here was in error in referring to its legal conclusion on Article III:4 instead of the measure in issue…. The chapeau of Article XX makes it clear that it is the ‘measures’ which are to be examined under Article XX(g), and not the legal finding of ‘less favourable treatment’).

57 Shrimp/Turtle AB Report, supra note 15, at para. 115-6.

58 See Gasoline AB Report, supra note 14 at 20.

59 See id. at 22.

60 See id.

61 See id. at 22,25,26.

62 See id. at 26.

63 See id. at 26.

64 See id.

65 See id. at 27.

66 See Shrimp/Turtle AB Report, supra note 15, at para. 176.

67 See id. at para. 161-163.

68 See id. at para. 164.

69 See id. at para. 165.

70 See id. at para. 166-167.

71 See id. at para. 168.

72 See id. at para. 171.

73 See id. at para. 172.

74 The Inter-American Convention, 37 I.L.M. 1246 (opened for signature Dec 1. 1996).

75 See Shrimp/Turtle AB Report, supra note 15, at para. 173.

76 See id. at para. 174.

77 See id. at para. 175.

78 See id. at para. 177.

79 See id. at para. 180.

80 With regard to the Gasoline case, see e.g. Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System: International Law, International Organizations and Dispute Settlement 115-16 (1997); Sungjoon Cho, Gasoline: United States - Standards for Reformulated and Conventional Gasoline 9 Eur. J. Int’l Law 192 (1998), available at (visited Mar. 14,2001); Jeffery Waincymer, Reformulated Gasoline under Reformulated WTO Dispute Settlement Procedures: Pulling Pandora out of a Chapeau, 18 Mich. J. Int’l L. 141,175 (1996); with regard to the Shrimp/Turtle case, see. e.g. Joel P. Trachtman, United States - Import Prohibition of Certain Shrimp and Shrimp Products, 6 November 1998, 10 Eur. J. Int’l Law 192 (1999), available at (visited Mar. 14, 2001).

81 See McLaughlin, supra note 13, at 885-6.

82 See, Note, Carry Wofford, a Greener Future at the WTO: the Refinement of WTO Jurisprudence on Environmental Exceptions to GATT, 24 Harv. Envtl. L. Rev. 563, 576-7 (maintaining that the analysis of “other options” in Gasoline was quite different from LTRA test).

83 See Shrimp/Turtle AB Report, supra note 15, at para. 120.

84 WTO Report of the Appellate Body: United States – Shirts and Blouses from India, WT/DS33/AB/R (Apr. 25, 1997) 15-16, available at (last visited Mar. 15, 2001) [hereinafter Shirts and Blouses AB Report].

85 See Asbestos Panel Report, supra note 28, at para. 177-8.

86 Id. at para. 179.

87 See id.

88 Id. at para. 182.

89 Even though in the appeal Canada argued that the application of LTRA test by the Panel was inappropriate, it did not appeal the Panel’s findings regarding the allocation of the burden of proof in the Article XX (b) analysis. See Asbestos AB Report supra note 28, at para. 165.

90 WTO Report of the Panel: Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R (Mar. 17, 2000) para. 7.60, available at (last visited Mar. 15, 2001) [hereinafter Pharmaceutical Products].

91 See Richard A. Posner, An Economic Approach to the Law of Evidence, 51 Stan. L. Rev. 1477, 1503 (1999). See also Thomas R. Lee, Pleading and Proof: the Economics of Legal Burdens, 1997 B.Y.U. L. Rev. 1,6-11, 28-30 (1997) (pointing out that it would be economically justifiable that the party who bears the burden of pleading (complaining parties in the LTRA and chapeau tests) is different from the party who bears the burden of proof (defending parties in the LTRA and chapeau tests)).

92 See Asbestos Panel Report, supra note 28, at para.8.204-8.222.

93 Id. at para.8.228.

94 See the SPS Agreement, supra note 30, at Paragraph 1 of Annex A.

95 See WTO Report of the Panel: EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/R/USA (Aug. 18, 1997) para. 8.42, available at (last visited Mar. 15, 2001) [hereinafter Hormones Panel Report].

96 See the SPS Agreement, supra note 30 at Preamble, Article 1, and Article 2.

97 See e.g. Gary R. Sampson, Trade, Environment, and the WTO: the Post-Seattle Agenda 69 (2000); Charnovitz, supra note 20, at 171.

98 See e.g. Terence P. Stewart & David S. Johanson, The SPS Agreement of the World Trade Organization and International Organizations: The Roles of the Codex Alimentarius Commission, the International Plant Protection Convention, and the International Office of Epizootics, 26 Syracuse J. Int'l L. & Com. 29 (1998). However, Victor maintains that international standards have little impact on the contents of obligations under the SPS Agreement. See David G. Victor, The Sanitary and Phytosanitary Agreement of the World Trade Organization: An Assessment After Five Years, 32 N.Y.U. J. Int’l L. & Pol. 865, 869.872,926-29 (2000).

99 See Asbestos AB Report, supra note 28, at para.98,99,113.

100 See WTO Report of the Appellate Body: Korea - Measures Affecting Imports of Fresh, Chilled, and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R (Dec. 11, 2000) para. 141-8, available at (last visited Mar. 15, 2001).

101 See WTO Report of the Appellate Body: Chile - Taxes on Alcohol Beverages, WT/DS/87/AB/R, WT/DS/110/AB/R (Dec. 13, 1999) para. 67, available at (last visited Mar. 15, 2001).

102 See Steve Charnovitz, The World Trade Organization, Meat Hormones and Food Safety, 14 Int'l Trade Rep. (BNA), No. 41, at 1781-87 (Oct. 15, 1997).

103 In Asbestos, the AB stated that “a Member may draw distinctions between products which have been found to be ‘like’, without, for this reason alone, according to the group of ‘like’ imported products ‘less favourable treatment’ than that accorded to the group of ‘like’ domestic products”[emphasis added]. See Asbestos AB Report, supra note 28, at para. 100. The use of the words, “the group”, may imply that an examiner should compare the entire group of like domestic products with that of like foreign products when examining a regulatory measure affords like foreign products “less favourable treatment” than like domestic products. That is, the mere fact that a foreign product, for example an imported genetically-modified soybean, is less favorably treated than a domestic product, for example a domestic conventional soybean, does not constitute “less favourable treatment”. The examiner should scrutinize whether the regulatory measure as a whole have disparate impact on foreign products.

104 See Asbestos Panel Report, supra note 28, at para.8.179.

105 See WTO Report of the Appellate Body: EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (Jan. 16, 1998) para.214, available at (last visited Mar. 15, 2001) [hereinafter Hormones AB Report].

106 Id. at para. 217.

107 See WTO Report of the Appellate Body: Australia – Measure Affecting Importation of Salmon, WT/DS18/AB/R (Oct. 20, 1998) available at (last visited Mar. 15, 2001) [hereinafter Salmon AB Report].

108 See Victor, supra note 98, at 916-7.

109 The situation in which an SPS measure itself amounts to arbitrary or unjustifiable discrimination or disguised restriction on trade would be in violation of Article 2.3 of the SPS Agreement, which constitutes one of the basic obligations under the SPS Agreement. Article 5.5 elaborates a part of the obligations under Article 2.3. Article 2.3 of the SPS Agreement states that “Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would constitute a disguised restriction on international trade.” See Hormone AB Report, supra note 105, para. 212. Violation of Article 5.5 becomes automatically a violation of Article 2.3. See Salmon AB Report, supra note 107, para. 217.

110 See Salmon AB Report, supra note 107, at para. 146, 151-7.

111 See Hormones AB Report, supra note 105, at para. 235.

112 See id. at para. 226.

113 Id. at para. 245.

114 See Victor, supra note 98, at 917 (noting that the AB’s intent in Hormones is that, only when trade harms derived from the difference in SPS protection levels are clear and severe, the distinction amounts to “discrimination disguised restrictions on international trade”).

115 See Salmon AB Report, supra note 107, at para. 177-8.

116 See id. at 161-2.

117 See id. at 163-4.

118 See id. at 165-6.

119 See id. at 170-3.

120 See id. at 174-6.

121 See Reinhard Quick and Andreas Bluthner, Has the Appellate Body Erred? An Appraisal and Criticism of the Ruling in the WTO Hormones Case, 2 J. Int’l Econ. L. 603, 622 (1999) (pointing out that the AB in Hormones took into account various criteria without clearly defining “discrimination or a disguised restriction on international trade”, whereas the AB in Salmon did not seem to have taken those various criteria into consideration).

122 See Hormones AB Report, supra note 105, at para. 239.

123 See Salmon AB Report, supra note 107, at para. 192; WTO Report of the Appellate Body: Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R (Feb. 22, 1999) available at (last visited Mar. 15, 2001) para. 95 [hereinafter Apple AB Report].

124 See Trachtman, Cost-Benefit Analysis, supra note 41, at 69.

125 See WTO Report of the Panel: Australia – Measure Affecting Importation of Salmon, WT/DS18/R (Jun. 12, 1998) available at (last visited Mar. 15, 2001) para. 8.168 [hereinafter Salmon Panel Report].

126 See Apple AB Report, supra note 123, at para.96.

127 See Hormones Panel Report, supra note 95 at para.79-89.

128 See id. at para.86.

129 See id.

130 See Hormones AB Report, supra note 105, at para. 104.

131 See id.

132 See id.

133 See id. at para. 108.

134 See Steve Charnovitz, Environment and Health under WTO Dispute Settlement, 32 Int’l Law. 901 (1998), 914-5.

135 See Hormones AB Report, supra note 105, at para. 235.

136 See id. at para. 228-34.

137 See WTO Report of the Panel: Japan – Measures Affecting Agricultural Products, WT/DS76/R (Oct. 27, 1998) para. 8.84, available at (last visited Mar. 15, 2001) [hereinafter Apple Panel Report].

138 See id. at para. 8.91, 95 and, 98.

139 See id. footnotes 328, 332 and 333.

140 See Apple AB Report, supra note 123, para.126.

141 See id. at para. 133.

142 See id.

143 See id. at para. 137.

144 See id.

145 See id.

146 See Asbestos Panel Report, supra note 28, at para. 8.72.

147 See Asbestos AB Report, supra note 28, at para. 64.

148 See id.

149 See id. at para. 70.

150 See id. at para. 72.

151 See id at para. 74.

152 See Trachtman, Cost-benefit Analysis, supra note 41.

153 Robert S. Pindyck and Daniel L. Rubinfeld, Microeconomics 588 (4th ed, 1997).

154 See Ronald Coase, The Problem of Social Cost, 3 Journal of Law and Economics 1 (1960).

155 See Richard A. Posner, Economic Analysis of Law 14 (5th ed 1998).

156 See J.R. Hicks, The Foundations of Welfare Analysis, 49 Econ. J. 696 (1939); Nicholas Kaldor, Welfare Propositions in Economics, 49 Econ. J. 549 (1939). See also Lucian Arye Bebchuk, The Pursuit of a Bigger Pie: Can Everyone Expect a Bigger Slice, 8 Hofstra L. Rev. 671, 671 n.2 (1980). Some works regarding “trade and environment” implicitly use PPE as the standard of efficiency. See e.g. Chang 95, supra note 21, at 2189 (stating that “the critical issue is whether the global economic benefits of the measure outweigh its global economic costs”); Daniel A. Farbar & Robert E. Hudec, Free Trade and the Regulatory State: A GATT’s-Eye View of the Dormant Commerce Clause, 47 Vand. L. Rev. 1401, 1405 (1994). (noting that “in a community consisting of several smaller untis of government (a United States consisting of individual states, or a GATT consisting of individual nations), the ultimate question is whether the gain of the regulation for insiders outweighs the harm it causes to outsiders”).

157 See Trachtman, Cost-benefit Analysis, supra note 41, at 53.

158 In this Chapter, we assume the trade-off relationship between trade and environment values by limiting the analysis of efficiency to static efficiency as many prior studies did. See id. at 33 (stating that “we are forced to choose the extent to which each value is to be implemented, to make tradeoffs among these values.”) At the level of dynamic efficiency, it would be possible that the invocation of ETMs would result in the promotion of free trade since the threat by ETMs would give incentives to improving the cost performance of exporters. However, even if there exist ETMs which enhance both environment protection and free trade at the same time at the level of static efficiency, this fact itself does not negate the efficacy of the discussion in this Section since ETMs which ETM-imposing countries actually invoke tend to derogate from the optimal ones insofar as there is a divergence between measure-invoking countries’ and world interests.

159 Here, we assume that trade-off relationship between administration resources and trade values, on the one hand, and environmental values, on the other hand. That is, environmental benefits can be obtained through using administrative resources and/or giving up trade benefits.

160 As PPE suggests, we assume here that all of benefits and costs are measurable and commensurable.

161 We assume here that the ETM-invoking countries produce “the reduction of environmental harm”, using “trade harm” and “administration cost” as “production factors”. If we think like this, thinking about EB as an “output” and about AC and HT as “inputs”, we can draw the isoquant curve, the curve which shows the possible combinations of the inputs (AC and HT) that yield the same output (EB=40). In this example, the equation of the isoquant curve is AC2+HT2=402. Measures A, B, and C are points on the isoquant curve. B is the most efficient combination of “inputs” (AC and HT) to produce 40 “outputs” (EB). By doing such an analysis, we are assuming that “the law of diminishing returns” holds for AC and HT and the isoquant curve is concave up and the combination of AC and HT in which the sum of AC and HT is minimized is located in somewhere middle of the isoquant curve (AC=11.7 HT=11.7 in this example).

162 See Coase, supra note 154.

163 But cf. Joel P. Trachtman, The Domain of WTO Dispute Resolution, 40 Harv. Int’l L.J. 333, 354-5 (1999) (pointing out that, when the entitlement of a property is ex ante unclear, bargaining is likely to occur because person A who actually does not possess the entitlement may credibly threaten to take it and this threat provides the person B with an incentive to give A the information which clarifies the real entitlement of the property).

164 See Trachtman, Cost-benefit Analysis, supra note 41, at 72.

165 See Frank J. Garcia, The Global Market and Human Rights: Trading Away the Human Rights Principle, 25 Brook. J. Int'l L. 51 (1999) (pointing out that “the test evaluates measures favorably precisely insofar as their impact on trade is the least possible, despite the fact that more trade-impacting measures might be more effective in realizing the non-trade value. Not only does this trade-off mechanism fail to recognize the high priority which rights must hold in any policy determination, but in fact the necessity test turns this on its head, and privileges trade values over all other competing values”).

166 See Trachtman, Cost-benefit Analysis, supra note 41, at 72

167 See McLaughlin supra note 13, at 882 (stating that “it is impossible to predict exactly what effect… the [means and ends test] may have on future trade/environment disputes. While it took a less doctrinal approach to the article XX exception,…it provided little else in the way of guidance to future panels. Much of the decision's language can be characterized as either overly broad or exceedingly narrow. For example, criteria such as substantial relationship that is every bit as substantial and ‘not disproportionately wide’ are extremely broad and subject to discretionary interpretation”).

168 It is normally said that the “means and ends” test is more moderate than the LTRA test. See e.g. Cho, supra note 80. Theoretically speaking, this is, however, not necessarily accurate because these two tests utilize very different factors; the factors which are utilized in LTRA test are the absolute values of HT, AC, and BE, whereas the analysis of “means and ends” test is based on the relative relationship between HT and BE. To be sure, “second” or “third” least trade restrictive measures could be sustained under the analysis of the “means and ends” test. However, it is also likely that a least trade-restrictive measure is struck down under the “means and ends” test.

169 See Dunoff & Trachtman, supra note 22, at 44-45.

170 See Trachtman, Cost-Benefit Analysis, supra note 41, at 53.

171 See e.g. Jane B. Baron & Jeffrey L. Dunoff, Against Market Rationality: Moral Critiques of Economic Analysis in Legal Theory, 17 Cardozo L. Rev. 431 (1996); Steven Kelman, Cost-Benefit Analysis--An Ethical Critique, Regulation, January 1981, 33; Mark Sagoff, Economic Theory and Environmental Law, 79 Mich. L. Rev. 1393 (1981); Cass R. Sunstein, Incommensurability and Valuation in Law, 92 Mich. L. Rev. 779 (1994).

172 See Richard B. Stewart, International Trade and Environment: Lessons from the Federal Experience, 49 Wash. & Lee L. Rev. 1329, 1340-41 (1992).

173 Some argue that these “non-use” values should not be taken into account in cost-benefit analysis. See e.g. Paul Milgrom, Is Sympathy an Economic Value? Philosophy, Economics, and the Contingent Valuation Method, in Contingent Valuation: A Critical Assessment 417 (Jerry. A. Hausman ed., 1993). However, economics which try to maximize the social welfare function can not provide a basis for excluding these “non-use” value from consideration insofar as people obtain utilities from these non-use values.

174 See Sunstein, supra note 171, at 854.

175 See Jeffery L. Dunoff, Rethinking International Trade, U. Pa. J. Int’l Econ, L. 347, 366 (1998).

176 See Bovine Hide, supra note 42, at para. 11.316-11.328.

177 See Chang 1995, supra note 21, at 2190 (stating that “Environmental trade measures [for protecting the domestic environment] may be suspect not because they have an asymmetric impact on domestic and foreign producers, but because our environmental standards yield asymmetric benefits for our nationals when applied at home and abroad”).

178 See e.g. Asbestos Panel Report, supra note 28, at para. 8.179; Salmon AB Report, supra note 107, at para.199 (noting that “’the level of protection deemed appropriate by the Member establishing a sanitary…measure”, is a prerogative of the Member concerned and not of a panel or of the Appellate Body”[emphasis in original]).

179 See Trachtman, Cost-Benefit Analysis, supra note 41, at 73.

180 See Farber & Hudec, supra note 156, at 1432 (stating that “in GATT,… tribunal encounter much stronger objections to decisions about the regulatory benefits of the measures in quesiton. GATT tribunals have few credentials to assess the success or social value of reglatory measures and lack any recognized political mandate to do so”[emphasis in original]).

181 See Virginia Dailey, Comment, Sustainable Development: Reevaluating the Trade vs. Turtles Conflict at the WTO, 9 J. Transnat'l L. & Pol'y 331, 376 (2000); Garcia, supra note 165, at 51.

182 See id. at 70 (pointing out that “if the reasonableness test amounts to a requirement that the least trade restrictive alternative not be so costly as to countervail the benefits of the regulatory measure, then it bears some resemblance to [cost-benefit analysis]”).

183 See Beef AB Report, supra note 100, at para. 163,166.

184 See Asbestos AB Report, note 28, at para. 172-5.

185 In this regard, the magnitude of trade harms is evaluated based on the degree of the change of the competitive relationship between domestic and imported products, as opposed to the change of trade volume. See WTO Report of Appellate Body: Japan -Taxes on Alcohol Beverages, WT/DS8/AB/R. WT/DS10/AB/R, WT/DS11/AB/R (adopted Nov. 1, 1996) para. 109-110, available at (last visited Mar. 15, 2001) (noting that “Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products…. Article III protects expectations not of any particular trade volume but rather of the equal competitive relationship between imported and domestic products…”).

186 It would be possible to say that the AB did not recognize strongly that sea turtle is one of the global environmental resources since the AB pointed out that “the sea turtles here at stake…are all known to occur in waters over which the United States exercises jurisdiction”. See Shrimp/Turtle AB Report, supra note 15, at para. 133. However, it should be noted that the AB emphasized that the protection of sea turtles requires concerted and cooperative efforts among countries, citing several international documents such as Principle 12 of the Rio Declaration on Environment and Development, all of which underscore the importance of international cooperation for protecting the global environment. See id. at para. 168.

187 See id. at 135-142.

188 See id. at 161-4.

189 See id. at 165.

190 See e.g. Jagdish Bhagwati, Trade and the Environment: The False Conflict?, in Trade and the Environment: Law, Economics, and Policy 159,170 (Durwood Zaelke et al. eds., 1993) (arguing that the usage of trade measures implies that measure-imposing countries “force others into accepting [their]own idiosyncratic choice of ethical concerns”).

191 Andreas F. Lowenfeld, Lawrence F. Ebb, International Business: Regulation and Protection (1964) (St. Paul: West Publishing Co.), 78 Harv. L. Rev. 1699, 1703- 04 (1965) (book review).

192 See Jeffrey L. Dunoff, Reconciling International Trade with Preservation of the Global Commons: Can We Prosper and Protect?, 49 Wash. & Lee L. Rev. 1407, 1449-50 (1992).

193 See Trachtman, Cost-Benefit Analysis, supra note 41, at 80.

194 In this regard, see supra note 167; Garcia, supra note 165, at 51.

195 As to the LTRA test, in Asbestos, the AB found that not only administrative difficulties but also the possibility of realizing the regulatory purpose pursued should be taken into account in determining the reasonable availability of an alternative. However, the AB did not clarify how difficult implementing the alternative has to be or how sure one must be that the alternative can achieve the regulatory purpose so as to consider the alternative to be reasonably available. See Asbestos AB Report, supra note 28, at para. 170-5. As for the “means and ends” test, in Shrimp/Turtle, the AB avoided elucidating the threshold of the proportionality standard by stating that “[the] relationship [between Section 609 and sea turtle protection]…is every bit as substantial as that which we found in United States - Gasoline between the EPA baseline establishment rules and the conservation of clear air in the United States”. See Shrimp/Turtle AB Report, supra note 15, at para. 141

196 See Gasoline AB Report, supra note 14, at 15, 22-27.

197 See Shrimp/Turtle AB Report, supra note 15, at para. 135-142.

198 See id. at para. 161-186.

199 See id.

200 See Bovine Hide, supra note 42, at para. 11.305-7.

201 See id. at para. 11.316-328.

202 See Gasoline AB Report, supra note 14 at 22, 25, and 26.

203 See Joseph Robert Berger, note, Unilateral Trade Measures to Conserve the World’s Living Resources: an Environmental Breakthrough for the GATT in the WTO Sea Turtle Case, 24, Colum. J. Envtl. L. 355, footnote 77 (1999).

204 See id. at 371.

205 “Legitimacy” here means a consequential one which is gained through the the activities of the AB&P when entities other than the AB&P accept the results of activities as appropriate. It does not mean a procedual one, namely democratic legitimacy.

206 Weiler points out that there are two dimensions to the legitimacy of the WTO dispute settlement system: “internal” legitimacy which is perceived by “the WTO itself and its principal institutional actors” such as the Delegates and the Secretariat and the AB&P, and “external” legitimacy which is perceived by “the universe outside the formal Organization” such as Members’ constitutional organs (for example, Parliaments) and NGOs. See Joseph. H. H. Weiler, The Rule of Lawyers and the Ethos of Diplomats: Reflections on the Internal and External Legitimacy of WTO Dispute Settlement, Harvard Jean Monnet Working Paper No.9/00, 3-4 (2000), available at (visited April 26, 2001). According to Weiler, there is a kind of zero-sum game relationship between the external and internal legitiamacies: the process of internal legitimization is done at the price of undermining the external legitimacy. See id. at 4. In this regard, we can consider the essence/application dichotomy as a rare case in which the external and internal legitimacies are simultaneously enhanced; as a result of the introduction of the essence/application dichotomy, the decisions of the AB&P become more acceptable for the outside world and complete “victories “ or “defeats” for one of the parties are avoided. See id at. 8 (stating that “in talking to panelists of [the old GATT era] one gets…the impression, difficult to prove empirically, of an ethos which favored 5:4 outcomes rather than 9:0”). By the same token, it is also possible to say that the essence/application dichotomy is able to enhance legitimacy despite its nature as a “standard”. See Trachtman supra note 163 (noting that a standard, a law which does not, in advance, specify in detail the conduct required or proscribed, normally has to suffer higher costs of the lack of legitimacy than a rule, a law which specifies the content in detail ex ante).

207 See 17 U.S.C. § 102 (b) (providing that “in no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery regardless of the form in which it is described, explained, illustrated, or embodied in such work”). The idea/expression dichotomy originated in a U.S. Supreme Court decision in 1879. See Baker v, Selden 101 U.S. 99, 105 (1879) (finding that “the description of [an] art in a book, though entitled to the benefit of copyright, lay no foundation for an exclusive claim to art itself.”).

208 Miller v. Universal City Studio, 650 F. 2d 1365, 1371 (CA5 1981). See also Sid and Marty Krofft Television v. McDonald’s Corp., 562 F.2d 1157, 1170 (9th Cir. 1977); Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 626 F. 2d 1171, 1178 (5th Cir. 1980) (Brown J. concurring). With regard to the social costs involved in the grant of copyright to ideas, see William M. Landes and Richard A. Posner, An Economic Analysis of Copyright Law, 18 J. Leg. Stud. 325, 344-53 (1989).

209 See Trachtman, supra note 163, at 362 (pointing out that, in Shrimp/Turtle, the AB could have found that the U.S. measure did not fall within the scope of Article XX (g) since the AB could have construed the U.S. measure as aimed at changing the exporting countries’ policy, rather than at directly protecting turtles).

210 See Shrimp/Turtle AB Report, supra note 15, at para. 165.

211 Another possible criticism of the essence/application dichotomy from a textualistic viewpoint is its inconsistency with the interpretation of “applied” in GATT Article III. In the context of GATT Article III:2, second sentence, the AB&P interpretation states that the objects of the inquiry about whether dissimilar taxation of the directly competitive or substitutable imported and domestic products is “applied…so as to afford protection” are “the design, architecture, and structure of” the taxation in question. See Pisco AB Report, supra note 101, at para. 66. On the other hand, in the context of GATT Article XX, the AB&P have strictly distinguished “the general design of a measure” from its application. See Shrimp/Turtle AB Report, supra note 15 at para. 115-6. The AB&P have never provided the reason why they give different meanings to the word “applied” in the contexts of Article III:2 and Article XX.

212212 With regard to the introduction of the essence/application dichotomy to the SPS Agreement and the TBT Agreement, as mentioned above, in the analysis of Article 5.5 and 5.6 of the SPS Agreement in Hormones, Salmon, and Apple, the AB&P did not seem to be aware of the distinction between measures as such and the application of measures even though a measure itself seemed to be the object of analysis. There are two possible justifications for not introducing the essence/application distinction into the SPS Agreement and the TBT Agreement. One is the difference of the structures of the provisions in GATT Article XX, on the one hand, and in the SPS and TBT Agreements, on the other hand. GATT Article XX has a two-tier structure and the AB&P have stated that the function of the chapeau analysis is to prevent the abuse of the rights under Article XX, and they have considered that the burden of satisfying the requirements under the chapeau is heavier than that for the individual paragraphs of Article XX. Since the SPS and TBT Agreements do not have such a two-tier structure, the introduction of the essence/application would not be necessary. The other is that, if we interpret the SPS Agreement from a strict textualistic perspective, the introduction of the essense/application dichotomy would result in an absurd interpretation of the provisions of the SPS Agreement. For example, if we apply the essense/application dichotomy to the SPS Agreement, with regard to two Articles both of which provide for the LTRA requirement, Article 2.2 is about the application of a measure, and the object of Article 5.6 is the measure as such. With regard to Article 2.3, measures as such cannot arbitrarily or unjustifiably discriminate between domestic and foreign products, and the application of the measures cannot amount to “a disguised restriction on international trade”. It would be very difficult to justify these peculiar distinctions. See the SPS Agreement, supra note 32, at Article 2.2, 2.3, and 5.6.

213 Robert P. Merges et al., Intellectual Property in the New Technological Age 379 (2nd ed. 2000).

214 See Nichols v. Universal Pictures Corp., 45 F. 2d 119, 121 (2d. Cir., 1930).

215 See Bruce L. Hay, Allocating the Burden of Proof, 72 Ind. L. J. 651, 654 (1997). See also Lee, supra note 91,at 4-5 (1997).

216 See Hay, supra note 215, at 657-8.

217 See id. at 659-60.

218 See id. at 660-73

219 See id. at 676-7. See also Bruce L. Hay & Kathryn E. Spier, Burdens of Proof in Civil Litigation: An Economic Perspective, 26 J. Legal Stud. 413, 425 (1997).

220 See Hay, supra note 215, at 677-8. Lee points out another possible reason why the default rule is to impose the burden of proof on a plaintiff. He points out that a judgment for the plaintiff provokes the increase in process costs which does not occur when the judgment is for the defendant; the court has to calculate the amount of damages and enforce the judgment. Therefore, he argues that the defendant should bear the burden of proof only when the decrease in error costs outweighs the increase in process costs when courts impose the burden on the plaintiff. See Lee, supra note 91, at 12-14. See also William Chris. Sanchirico, The Burden of Proof in Civil Litigation: A Simple Model of Mechanism Design, 17 Int’l Rev. L. & Econ. 431 (1997) (arguing that the burden-of-proof rule functions as a single by which all potential plaintiffs, who have superior information regarding their cases, self-select to bring the only cases worth hearing for the society).

221 See Hay supra note 215, at 677. See also Lee, supra note 91, at 15-27.

222 Lee notes that ‘there are at least two categories of issues where defendant's access to proof is likely to be superior. First are issues involving conduct of the defendant where the plaintiff may not have been involved. … The second category of issues for which defendant has greater access to proof involves interactions between the two parties for which the defendant has superior incentives to keep records of the transaction.” ETMs normally fall into the first category. See Lee, supra note 91, at 16-17.

223 For example, imagine a case where Country A estimates that it can increase the amount of its exportation to Country B by $10 million if Country A successfully strikes down one of Country B’s SPS measures. The probability that Country A prevails before the AB&P is 10 percent and that the amount at stake is $10 million. Country A is willing to complain about Country B’s SPS measure to the DSB if the cost for the “litigation” is less than $1 million ($10 million x 10%). Furthermore, if Country B also estimates that the probability that they lose is 10 percent and the costs of Country B for presenting evidence which shows the consistency of its measure with the SPS Agreement is more than $1 million, Country B has an incentive to settle the case prior to the establishment of the Panel. This shows that a Member might have motivation to bring a complaint to the WTO even if its claim is not so meritorious.

224 See Salmon AB Report, supra note 107, at para. 192.

225 See Lee, supra note 91, at 6.

226 See id. at 28.

227 See id. at 28-29. See also Hay and Spier supra note 219, at 428

228 See Lee, supra note 91, at 7.

229 See id. at 7.

230 According to Hay and Spier, the reason why courts are divided on the issue of who should bear the burden of proof in the context of contributory negligence would be the “timing” of scrutinizing plaintiffs’ level of care. If the courts examine both the plaintiffs’ and defendants’ levels of care simultaneously, there is no reason to assume that the plaintiff took due care. However, if the courts should examine the parties’ levels of care sequentially (first, the defendants’ levels, then the plaintiffs’ levels), it could be assumed that the plaintiffs took due care when the incidents happened. For it is unlikely that the plaintiff was not careful, given that the courts find that the defendants were negligent. See Hay and Spier, supra note 219, at 428-9.

See Asbestos Panel Report, supra note 28, at para.8.204-8.222.

231 Id. at para.8.228.



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