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Article on the Legality of Orangutan and Forest Preservation Act 2007 (Cth) Trade Restrictions:

Executive Summary:

This report finds that both measures of the Orangutan and Forest Preservation Act 2007 (Cth) (the Act) breach GATT. Measure 1 breaches on the grounds of Article I and II and Measure 2 under XI. The application of XX(b) and (g) would fail for Measure 1, based on the rationale of the US Tuna-Dolphin Case. On the other hand, Measure 2 would be a borderline case, but the restrictive approach would indicate failure. Even so, the use of labelling to identify certification orangutan or forest-friendly coffee and timber would be acceptable, because the restrictions would be consumer based. It is important to note that if there was a multi-lateral agreement, in both cases, the Article XX exceptions would be successful.

Issues:

The provisions in the Act are problematic, because they are discriminatory against Kenya and other forestry-based economies, especially in regards to Measure 1. On the other hand, Measure 2 is not discriminatory against a specific country; however it raises questions whether the reason given is sufficient to restrict trade. In the case of Measure 1 the US Dolphin-Tuna Case is applicable, because it is a measure that directly restricts coffee from Kenya without appropriate certification. The certification that is required is that the plantation has not resulted from a forest clearance, since the implementation of the Act. On the other hand, Measure 2 directly relates to the US Shrimp-Turtle Case, because the measures are directed at the protection of an endangered species at a general scale. Thus, this second measure has a wider ambit of environmental protection and endangered animal conservation, which is not directly discriminatory against a specific country or region.

GATT Articles I, III and IX the Norms of International Trade:

Discrimination is at the heart of this discussion, because the basis of Article XX of GATT is that the fundamental non-discrimination of trade norms is applied in all cases. Knox identifies the basis of the GATT process lies on the “non-discrimination requirements, known as the most-favoured-nation (‘MFN’) and national treatment standards.” Knox states that the MFN standard in Article I requires each party “to treat products from every other party the same way it treats products from its most favoured trading partners” . Thus, when applying GATT provisions it is important to understand the non-discrimination principle in a general sense and then apply Article XX. Therefore, the following report will consider the norms of developed under GATT Articles I, III and IX and then consider Article XX’s exceptions.

Article I – Most Favoured Nation:

Article I of GATT identifies that there must be equal treatment of like products from all countries with respect to import and export fees of all types and that any preference given to products exported to or imported from one nation must be granted to like products exported to or imported from all other GATT signatory nations. Thus Article I places a positive duty to treat all countries the same, i.e. there cannot be a most favoured nation (MFN). The flip side of this argument is that a restraint on trade from a specific country or region will result in the most un-favoured nation(s) (MUFN), which must be treated as a breach of Article I.

The Canada-Autos case identifies that a breach of Article I occurs when there is an active and intentional act of discrimination; rather than an unintentional act that may cause a skew. Howse identifies that the central question that the WTO considers is “whether conditions attached to an advantage granted in connection with the importation of a product offend Article I(1) depends upon whether or not such conditions discriminate with respect to the origin of products”. In other words, there must be an element of intention in the application of MFN status (or in the case of restraints MUFN).

Article III – Likeness of Products:

Knox identified a second consideration in the application of a trade restraint, which is the ill-treatment of like products on their country of origin. The premise of this approach is that any product that is like another, either domestic or internationally produced and treated in a favourable manner will be a breach of Article III. The meaning of likeness under Article III is very broad. This means that the products do not have to be exactly the same; rather there must be a similarity in purpose and use to identify what is meant by like products. In addition, the application of Article III was also extended to like international and domestic products, which means the treatment of like domestic products cannot be treated any more favourably than their foreign counterparts. Therefore, it is essential that there is a broader consideration of the MFN and MUFN, because it is not only limited to international products and likeness is a far broader term than identical products.

Article IX – Quantitative Restrictions:

The bedrock of GATT is to ensure that there are open, accountable and transparent free trade provisions. This is also re-iterated in the case of Article IX, which will briefly be discussed in the following section. The article deals specifically with WTO member putting quantitative restrictions on imports or exports to a specific company. Thus the basis of this Article is to prevent the prohibitive restrictions of the quantity of goods imported or exported by national laws, which is identifiable in the Canada Unprocessed Herring and Salmon Case.

In this case the Panel considered that while the Canadian export regulations affected conservation, even though they were not explicitly conservation measures. Furthermore, they noted that the rules limited only unprocessed forms of certain salmon and herring, and only those from foreign suppliers and not domestic suppliers. Because of those facts, the Panel determined that the regulations were not primarily ecological in nature, and Article XX(g) could not justify these rules. The implication of this decision is if there is meant to be an exception based on conservation it is essential it is applied on both a domestic and international level. In other words, how can conservation be at the heart of the discussion if there are no restrictions at the domestic level? This rationale to quantitative restrictions has been applied in the case of Article I and III, in the case of Article XX exceptions. Therefore, the following discussion will now consider the WTO approach to exceptions GATT, in order to identify if the measures under the Act are proportionate.

WTO’s Application of Article XX Exceptions:

The application of Article XX exceptions has been partially considered under Article IX where it has been identified that conservation measures must be equal across national and international provisions, which has been confirmed in the Canada Unprocessed Herring and Salmon Case. The US Shrimp-Turtle and the US Dolphin-Tuna Cases provide the cornerstone in applying conservation measures under Article XX(b) and XX(g). Article XX(b) states that exceptions can be legitimate is they are “measures necessary to protect human, animal and plant health and life” and XX(g) allows restrictive “measures relating to the conservation of natural resources”. The first case illustrates the need for there to be allowances in the protection of specific species health and life; whereas the second was aimed at the wider preservation of natural resources.

Article XX(g) has been discussed to illustrate that protections, on the basis of conservation, must be treated equally at a national and international basis. However, Article XX(b) has been treated in a different manner, especially if directed at a specific species. The Reformulated Gasoline Case was confirmed and clarified in the US Shrimp-Turtle Case to provide the framework that identifies an allowable exception. Galantucci identifies the test that was formulated is that there needs to be “provisional justification under the relevant Article XX exception… [It] must show that its ban is…to protect human, animal or plant life or health; (2) necessary to achieve these ends; and (3) consistent with the Article XX Chapeau. In the case of the US Shrimp-Turtle Case the decision was decided on conservation grounds; in that the restrictions would protect the species. However, discrimination was identified because the US was providing aid to provide the necessary equipment to certain regions and not others. Thus, this case could provide a strong precedent on XX(b) grounds if the restriction was considered general in its application, i.e. not a species defined in a specific territory. In other words, aquatic animals that have a broad territory would be more likely to be protected under this provision because there has not been consideration of territory under XX(b) .

This leads one to consider the US Tuna-Dolphin Case, which was decided under XX(b) and resulted in a negative application of conservation provisions. This case held that the import restriction of Mexican tuna was a breach of GATT provisions because it was country specific. In addition, no less restrictive options were undertaken, most specifically a multi-lateral approach (i.e. a treaty). Finally, in relation to a XX(g) application the restriction failed on the grounds of economic national interests, i.e. jobs and national industry. The main benefit of the second panel was it did not limit the XX(b) and (g) territory to the state’s own jurisdiction. The overall finding deemed the measure arbitrary on the basis that:

  1. Mexico cannot exceed the “taking rates” of dolphins of US fisheries;
  2. No international treaty was considered.

However, the requirement for dolphin-friendly labelling was not a breach of GATT Rules, and the Thai Cigarette Case confirmed that this a proportionate response. Thus, appropriate certification can used to identify the source of the goods, which allows the consumer to decide to buy goods that conserve or not. Therefore, the following section will apply these provisions to the Act to identify if they are proportionate or not. Application to Orangutan and Forest Preservation Act 2007 (Cth):

Measure 1:

This measure is a clear breach of Article I and III, because it discriminates a product on the basis of its country of origin if it is not grown in an appropriate plantation. Thus, it is allowing a restriction that is against the fundamental protections of the GATT, which means that there must be a reliance on an Article XX exception. In this case it can be argued under both XX(b) and (g), because the provisions are focused on the conservation of the orangutan species and the forests that they reside. The problem that Australia faces is that there is not a multilateral agreement or other actions have been taken to promote orangutan friendly approaches. Therefore, applying the US Dolphin-Tuna Case a prohibition of this nature would be a breach. However, labelling of the goods according to certification would not, i.e. requirement to define the impact of the coffee on orangutans would not be a breach.

Measure 2:

This measure would also be a breach of GATT, but on the grounds of Article IX, because it is no country specific. Thus, on this basis it is a prohibition of quantities due to a specific condition. On this basis, it is similar to the US Shrimp-Turtle and US Dolphin-Tuna Case. On this basis, it would probably fail on the basis of XX(b) the preservation of a species because it would test the territory application, which may then identify that it is unfair on Kenya. However, the general conservation of forests with the aim to protect species, such as orangutans, would be a legitimate restriction like the US Shrimp-Turtle Case. The problem in this case is that it may be linked to protecting Australian forestry, or not considering multi-lateral action. Therefore, due to the restrictive nature of XX exceptions it is more than likely it will fail; however the labelling process will be supported. Even so, this is a borderline case an may pass under XX(g).