The Jean Monnet Program

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This paper uses an economic perspective to analyze the WTO Panel and Appellate Body Reports regarding “Trade and Environment”. In particular, this paper focuses on a tendency that, when a country restricts international trade to protect the environment, the trade-restricting country puts a heavy burden on other countries because the measure-invoking country does not have an incentive to take into account the interests of other countries. This paper evaluates the use of judicial tests such as the “least trade restrictive alternative” test and the “means and ends” test by the Panel and the Appellate Body in terms of whether the invocation of these tests appropriately corrects the behavior of the measure-invoking countries. This paper also analyzes the essence/application dichotomy, which the Panel and the Appellate Body have invoked in the context of GATT Article XX interpretation, and the allocation of the burden of proof in the “trade and environment” cases. The paper concludes that, in general, the jurisprudence of the Panel and the Appellate Body is economically justifiable even though some modifications and clarifications should be done.

The Jean Monnet Program 1

Professor J.H.H. Weiler 1

European Union Jean Monnet Chair 1

Jean Monnet Working Paper 14/01 1

Kohei Saito 1

Yardsticks for “Trade and Environment”: 1

ISSN 1087-2221 2

Kohei Saito 2

Abstract 4

List of Tables 8

List of Abbreviations 9

WTO The World Trade OrganizationI 10

Introduction 10


II 20

Recent Cases Regarding “Trade and Environment” 20

A. Article XX of the GATT 20

1. Paragraph (b): Measures Necessary to Protect Human, Animal, or Plant Life or Health 22

2. Paragraph (g): Measures Relating to the Conservation of Exhaustible Natural Resources. 24

3. Chapeau of Article XX: Unjustifiable or Arbitrary Discrimination or Disguised Restriction to Trade 28

4. Burden of Proof 33

B. SPS Agreement 39

1. Introduction 39

2. Article 5.5: Arbitrary or Unjustifiable Distinctions 43

3. Article 5.6: LTRA Test 49

4. Burden of Proof 52

C. TBT Agreement 57

III 61

Economic Analysis of Judicial Tests 61

A. Potential Pareto Efficiency (PPE) 61

B. Costs and Benefits of ETMs 63

C. Analysis of the LTRA and “Means and Ends” Tests 71

D. Evaluation of AB&P’s Use of the LTRA and “Means and Ends” Tests 74

1. Critiques of PPE 75

2. The LTRA Test 77

3. The “Means and Ends” Test 83

4. Conclusion 86

IV 89

The Essence/Application Dichotomy 89


V 97

Allocation of the Burden of Proof 97

A. Burden of Proof 97

B. Burden of Pleading 104


VI 107

Conclusion 107


Bibliography 109

Books and Articles 109

GATT/WTO Cases 114

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