Note: This webpage is prepared by the Secretariat under its own responsibility and is intended only to provide a general explanation of the subject matter it addresses. It is in no way intended to provide legal guidance with respect to, or an authoritative legal interpretation of, the provisions of any WTO agreement. Moreover, nothing in this note affects, nor is intended to affect, WTO members' rights and obligations in any way.

> For a more in-depth discussion of environment-related disputes, see Environment-Related Disputes

> WTO Analytical Index on GATT Articles I, III and XI
 

Certain measures taken to achieve environmental protection goals may, by their very nature, restrict trade and thereby impact on the WTO rights of other members. They may violate basic trade rules, such as the non-discrimination obligation and the prohibition of quantitative restrictions. This is why exceptions to such rules, as contained in Article XX, are particularly important in the trade and environment context. Article XX being an exception clause, it comes into play only once a measure is found to be inconsistent with GATT rules.

The principle of non-discrimination

First, the principle of non-discrimination stipulates that a member shall not discriminate:

• between “like” products from different trading partners (giving them equally “most favoured-nation” or MFN status, GATT Article I); and

• between its own and like foreign products (giving them “national treatment”, GATT Article III).

“Like” products

If trade-related environmental or health measures are to be consistent with WTO rules, they cannot result in discrimination between “like” products. Therefore, the principle of non-discrimination raises two key questions: Are products at issue “like” products? If so, is the foreign product treated less favourably than the domestic product or than another foreign product?

To take an example from public health protection, in the EC — Asbestos case, which dealt with measures (prohibiting the import, sale and use of asbestos) to address the dangers posed to human health from an exposure to asbestos and products containing asbestos, Canada — the complainant — had to prove that products (containing asbestos) imported from Canada to France were like French domestic substitutes (PVA, cellulose and glass fibres) and that the French regulation accorded imported products “less favourable treatment” than like domestic products.

In fact, in this case, the Panel found that domestic and imported products were “like”. However, the Appellate Body reversed this finding and explained that several criteria should have been taken into account by the Panel in the determination of likeness, including the competitive relationship between products, but also the “risk” to health posed by the two products, due to their different physical characteristics.

If two products are found to be “like”, the question remains whether imported products are treated in a less favorable manner than domestic products. In the US — Gasoline case, for instance, the Panel ruled that a US measure aimed at regulating the composition and emission effects of gasoline in order to reduce air pollution in the United States violated Article III of the GATT: imported gasoline was effectively prevented from benefiting from sales conditions as favourable as domestic gasoline; therefore, the Panel found that imported gasoline was treated less favourably than domestic gasoline.

A related question: the issue of processes or production methods (PPMs)

An important question in relation to environmental measures is whether products may be treated differently because of the way in which they have been produced even if the production method used does not leave a trace in the final product, i.e. even if the physical characteristics of the final product remain identical (referred to as non-product-related processes and production methods).

When comparing two products, different processes or production methods (PPMs) used in the manufacture of such products do not per se render these products “unlike”.

For instance, governments may want to discriminate between wood products derived from sustainably grown forest and wood where the production method is unknown. Under such a scenario, the determination of the likeness of the two types of wood may be particularly challenging. For such reasons, the analysis of likeness between two products should be carried out on a case-by-case basis, as pointed out by the Appellate Body in EC — Asbestos.

Although not dealing with such questions in the context of GATT Articles I or III (the measure was an import ban found to be inconsistent with Article XI), the dispute in US — Shrimp provides an interesting example of a justifiable discrimination between products on the basis of PPMs. The dispute concerned the manner in which fishermen harvested shrimp. Certain production methods, involving the use of fishing nets and shrimp trawl vessels, resulted in a high rate of incidental killing of sea turtles, as turtles can be trapped and drowned by the nets used to harvest shrimp. The United States aimed to reduce the killing of turtles by imposing an import ban on shrimp harvested by methods which may lead to the incidental killing of sea turtles. In order to avoid the ban, exporters were required to demonstrate the use of TEDs (which limit the incidental catch of endangered sea turtles), or similar equipment, when harvesting shrimp. The Appellate Body viewed the United States' measure as directly connected to the policy of conservation of sea turtles. The measure was thus considered to be provisionally justified under Article XX(g).

The prohibition of quantitative restrictions

Certain environmental measures (such as bans) may also violate the second key discipline of the GATT, which is contained in Article XI and provides, among other things, that restrictions on the importation or sale of products from other WTO members are prohibited. In the US — Shrimp case, the US embargo was found to be inconsistent with Article XI: the United States had prohibited the import of shrimp originating from non-certified countries, i.e. countries that did not use a technology known as TEDs.

> Introduction
> GATT exceptions
> Other relevant WTO texts
> Environment-related disputes
 

Criteria for the determination of like products

In WTO case law, four criteria have been used in determining whether products are “like”:

(i) the physical properties of the products;

(ii) the extent to which the products are capable of serving the same or similar end-uses;

(iii) the extent to which consumers perceive and treat the products as alternative means of performing particular functions in order to satisfy a particular want or demand; and

(iv) the international classification of the products for tariff purposes.

TEDs?

A TED (turtle excluder device) is a trapdoor installed inside a trawling net which allows shrimp to pass to the back of the net while directing sea turtles and other unintentionally caught large objects out of the net.