Topics handled by WTO committees and agreements
Issues covered by the WTO’s committees and agreements

ENVIRONMENT: DISPUTES 6
EU versus US: car taxes

A case brought by the EU against the US. The panel report was circulated in 1994, but not adopted.

Topics handled by WTO committees and agreements

United States — Taxes on automobiles

Not adopted, circulated on 11 October 1994

Three US measures on automobiles were under examination: the luxury tax on automobiles (“luxury tax”), the gas guzzler tax on automobiles (“gas guzzler”), and the Corporate Average Fuel Economy regulation (“CAFE”). The European Community complained that these measures were inconsistent with GATT Article III and could not be justified under Article XX(g) or (d). The US considered that these measures were consistent with the General Agreement.

The Panel found that both the luxury tax (which applied to cars sold for over $30,000) and the gas guzzler tax (which applied to the sale of automobiles attaining less than 22.5 miles per gallon (mpg)) were consistent with Article III:2 of GATT.

The CAFE regulation required the average fuel economy for passenger cars manufactured in the US or sold by any importer not to fall below 27.5 mpg. Companies that were both importers and domestic manufacturers had to calculate average fuel economy separately for imported passenger automobiles and for those manufactured domestically.

The Panel found the CAFE regulation to be inconsistent with GATT Article III:4 because the separate foreign fleet accounting system discriminated against foreign cars, and the fleet averaging differentiated between imported and domestic cars on the basis of factors relating to control or ownership of producers or importers, rather than on the basis of factors directly related to the products as such. Similarly, the Panel found that the separate foreign fleet accounting was not justified under Article XX(g); it did not make a finding on the consistency of the fleet averaging method with Article XX(g). The Panel found that the CAFE regulation could not be justified under Article XX(d).

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