ENVIRONMENTAL LAW PROJECT PAPER

TOPIC: CRITIQUE OF POZZOLI CASE (INVENTIVE STEP TEST) AND

COMPARISION WITH INDIAN LAW

VIDIT HARSULKAR

ID NO: 2015-021

THIRD YEAR
INTRODUCTION
The General Agreement on Tariffs and Trade1 was opened for the invitation of signatures of
willing member states on 30th October 1947, with the final entry into force being in January
1948. The present day counterpart of this body is the World Trade Organization (WTO). The
establishment of a uniform international regulatory regime of commercial conduct was the
guiding objective at the time of the drafting of the GATT. The issue of trade and its interplay
with the environment was never a component of the initial rounds of the GATT. 2 An equally
notable body, The International Union for the Conservation of Nature and Natural Resources3
was formed in 1947.

Contemporaneous with the genesis of an international body to regulate trade was a shift in the
international legal consciousness to establish a body to regulate the environment. Thus, even in
the absence of direct talks on concomitant issues, the probability of such trade regulating body
being called in for the protection of the environment was clearly plausible. The allegation that
the GATT was formed in an era where environmental consciousness did not exist is a farce.4

The chance of this probability did later on proceed to a realisation in the present age with
measures being included in the GATT5. The realization that there existed an extremely relevant
and important impact of international trade practices upon the environment thus came to be. This

1
Hereinafter referred to as the GATT.

2
However, it has to be noted that a number of important environmental treaties were being created during the phase
of these discussions. The following are some of the most notable conventions adopted during this time:
CONVENTION FOR THE REGULATION OF MESHES IN FISHING NETS, 1946; INTERNATIONAL CONVENTION FOR THE
REGULATION OF WHALING, 1946; INTERNATIONAL CONVENTION FOR THE NORTHWEST ATLANTIC FISHERIES, 1949;
CONVENTION FOR THE ESTABLISHMENT OF THE TROPICAL TUNA COMMISSION, 1949; INTERNATIONAL CONVENTION
FOR THE PROTECTION OF BIRDS, 1950.

3
Hereinafter referred to as the IUCN.

4
Steve Charnovitz, The World Trade Organisation and the Environment, (1998) 8 YIEL 98. Also see Gary
Sampson & John Whalley eds., THE WTO, TRADE & ENVIRONMENT, Williston, Elgar, 2005.

5
Exceptions contained under Article XX (b), (d), (g) & the Chapeau.
paper shall first seek to trace historically how the WTO evolved measures to safeguard the
environment, while the second part of this paper will attempt an analysis of the environmental
protection measures enshrined in the WTO as it stands today. This analysis will be supported by
the adoption of relevant case law which has emerged from the decisions of the Dispute
Settlement Body.

LITERATURE REVIEW
Are international trade and environmental protection compatible or in conflict? This question has
provoked a lively debate between academics, environmental campaigners and free trade
advocates. It has focused on two types of causal links between trade and environment: the first
concerns the effect that trade liberalization has on environmental quality in a given country or
worldwide; the second reverses the perspective and addresses the impact that environmental
protection policies have on international trade. At the risk of oversimplifying a complex debate,
free trade supporters generally argue that liberalizing trade has a mostly positive effect on the
environment, but some environmental measures pose a protectionist threat to the free trade order
(Bhagwati 2004; Bhagwati and Srinivasan 1996; Hettige et al. 1998). In contrast,
environmentalists assert that free trade is one of the main causes of the global environmental
crisis, and that environmental policy should rightly limit free trade where it harms environmental
quality (Daly 1993; Goldsmith and Mander 2001). Closer examination of the empirical evidence
behind these claims reveals a more nuanced picture (for an overview, see Neumayer 2001).

Under certain circumstances, free trade can lead to more polluting production and greater
consumption of natural resources. This is the case in countries that specialize in the production of
pollutionintensive goods in response to trade liberalization, such as China which has seen a
dramatic rise in air and water pollution caused by the expansion of export-oriented
manufacturing (Economy 2004). In other contexts, free trade can promote greater efficiency in
production and the diffusion of environmental technologies and standards throughout the world.
For example, more globally oriented companies in the chemical and steel industries tend to adopt
and promote higher environmental standards than national companies (Garcia-Johnson 2000;
Reppelin-Hill 1999).
The empirical record is also mixed when it comes to the impact of environmental policies on
trade. Environmental protection efforts can disrupt international trade and often give rise to
accusations of disguised protectionism. Many developing countries, in particular, have accused
advanced economies of using environmental standards to protect their domestic markets against
foreign competition (OECD 2005). Other measures, however, can be compatible with the
international trading system. Abolishing subsidies for fossil fuel use, for example, would not
only help in the fight against global warming; it would also promote a level playing field in
international energy markets (Anderson and McKibbin 2000).

Overall, therefore, generalizations about the trade–environment nexus are problematic. Trade
liberalization and environmental protection can, but need not, be in conflict. Much depends on
the specific circumstances of the industrial sectors and national economies concerned, and the
specific environmental policies pursued by governments. A more useful way to think about these
connections is, therefore, to consider context-specific causalities and to identify particular
mechanisms by which trade impacts on the environment. Grossman and Krueger (1993) propose
three such mechanisms: scale, composition and technique. The scale effect occurs when
liberalized trade stimulates economic growth, which in turn leads to an increase in
environmentally harmful activities including increased resource consumption. The composition
effect leads to greater specialization between countries and, as a consequence of the shift in
economic activity, differential rates of environmental degradation. Countries with lower
environmental standards will see an expansion of environmentally harmful activity in response to
this trade-induced specialization effect. The technique effect involves changes in the
technologies for production and resource extraction. Where increased trade and competition
leads to improvements in the efficiency of production or the transfer of advanced technologies to
less developed economies, trade can raise the level of environmental protection worldwide.

Environmentalists add to this two further mechanisms, which are generally not well captured by
economic models. One such mechanism can be found in the cultural change in society which is
caused by an opening up to international trade. In this view, trade liberalization creates shifts not
only in production technologies but also in consumption patterns, due to a spread of consumerist
values and the greater availability of goods, leading to an ever-rising spiral of consumer needs.
Rising consumption may even outstrip any efficiency gains from more trade (Princen et al.
2002). Another mechanism is the so-called distancing effect. International trade creates longer
and more complex chains between geographically dispersed economic actors, from resource
extraction and manufacturing to international trade and retailing. As a consequence, consumers
are less able to identify and accept the responsibility for the consequences that their decisions
have on the environment in evermore distant locations (Princen 1997).

While free trade advocates and environmentalists continue to argue over the right way to
conceptualize the linkages between trade and the environment, international policymakers are
keen to stress the mutual supportiveness of trade and environmental policies, as was the case at
the 2002 World Summit on Sustainable Development. But whether trade and environmental
policymaking support each other or clash depends on how existing international norms and rules
are to be interpreted. We need to consider in particular how the rules of the GATT/WTO trade
system affect environmental policy and vice versa. Other bilateral and regional trade agreements
(such as NAFTA) also affect the trade–environment relationship (Gallagher 2004; Heydon and
Woolcock 2009), but the subsequent analysis focuses on the relationship between multilateral
trade rules and environmental policies and regimes.

AIMS AND OBJECTIVES

The project aims at studying the issues associated with the trade and the environment debate.
This paper begins with the genesis of the issue of trade and the environment and examines the
inter-relation between trade, environment and the WTO. The Paper further tries to examine the
relationship between certain Multilateral Environmental Agreements (MEAs) and the WTO
Agreements. The paper analyzes how environmental provisions have permeated into the
multilateral trading system, through the incorporation of environmental provisions under new
WTO agreements and the concern of the developing countries with regard to the MEAs. The
Project covers the basic conceptual issues, as well as the genesis of trade and environment as it
has been dealt with in the WTO. The ultimate objective is to understand the justification for
policy linkages between trade and the environment and the rationale for special trade rules to
reflect environmental concerns.
METHOD OF WRITING
The researcher has endeavored to use a combination of descriptive and analytical styles of
writing throughout this project. More emphasis has been placed on the analytical style of writing.

SOURCES OF DATA
The main sources have been textbooks, articles and web-search.

RATIONAL AND SCOPE OF STUDY

The relationship between trade and environment is a complex and highly debated issue.
Addressing this relationship is fundamental in order to achieve sustainable
development.As a result of increasing global economic interdependence and further trade
liberalisation as well as growing pressure on the environment and the use of natural resources,
there is an ever growing inter-face between trade and environment. It is
widelyrecognised that trade and environment can be mutually supportive, but, differencesremain
on effective implementation. In fact, trade liberalisation and trade policy
have positive and negative impacts on the environment. However, a number of conditionsshould
be met to ensure that the net gains deriving from trade liberalisation will support and reinforce
the protection of the environment. The trade and environment debate is complex and varied, and
it involves some of the most fundamental WTO principles and rules, such as the concept of non-
discrimination and the definition of "like products". It is a horizontal issue that cuts across
manydisciplines in WTO. For example, Multilateral Environmental Agreements haveconsequenc
es for trade which may come into conflict with the general aim of the WTO to reduce trade
barriers. The WTO has no specific agreement dealing with the environment. However, the WTO
agreements confirm governments’ right to protect the environment, provided certain conditions
are met, and a number of them include provisions dealing with environmental concerns.

This paper shall first seek to trace historically how the WTO evolved measures to safeguard the
environment, while the second part of this paper will attempt an analysis of the environmental
protection measures enshrined in the WTO as it stands today. This analysis will be supported by
the adoption of relevant case law which has emerged from the decisions of the Dispute
Settlement Body.
RESEARCH QUESTION
- How has how the WTO evolved measures to safeguard the environment
- analysis of the environmental protection measures enshrined in the WTO as it stands
today

HYPOTHESIS
- GATT was formed in an era where environmental consciousness did not exist.

CHAPTERIZATION
TABLE OF CONTENTS

INTRODUCTION

1. THE EVOLUTION OF ENVIRONMENTAL PROTECTION UNDER THE WTO

I. Environmental Sensitisation of the GATT

II. The Tuna Dolphin Dispute (US/Mexico)

2. THE ARTICLE XX REGIME

I. Protection of Humans, Animals and Plants

II. Protection Exhaustible Natural Resources

CONCLUSION

BIBLIOGRAPHY

-Cases

-Articles and Reports

-Books and Treatises

BIBLIOGRAPHY
CASES

1. Brazil – Retreaded Tyres Case

2. Canada – Salmon and Herring Case
3. EEC – Asbestos Case
4. Thailand – Cigarettes Case
5. US – Automobiles Case
6. US – Canadian Tuna Case

ARTICLES AND REPORTS

- Jake Caldwell, Multilateral Environmental Agreements and the GATT/WTO Regime,

Washington Heinrich Boll Foundation, 2001
- NOTE BY THE SECRETARIAT OF WTO, WT/CTE/203, 8 MARCH, 2002.
- Oran R. Young, Global Governance: Drawing Insights from the Environment
Experience, Massachusetts, MIT, 1997
- Steve Charnovitz, The World Trade Organisation and the Environment, (1998) 8 YIEL
98
- Urs P. Thomas, Trade and Environment: Stuck in a Political Impasse at the WTO after
Doha and Cancun Ministerial Conferences, (2004) 9 Glo.Env.Pol.

BOOKS AND TREATISES

- Andreas F. Lowenfeld, INTERNATIONAL ECONOMIC LAW, Oxford, Oxford

University Press, 2003.
- Bernasconi – Osterwalder et al., ENVIRONMENT AND TRADE: A GUIDE TO WTO
JURISPRUDENCE, London, Earthscan, 2006
- Duncan French, INTERNATIONAL LAW & POLICY OF SUSTAINABLE
DEVELOPMENT, Manchester, Juris/Manchester Press, 2005
- Elli Louka, INTERNATIONAL ENVIRONMENTAL LAW: FAIRNESS,
EFFECTIVENESS & WORLD ORDER, Cambridge, Cambridge University Press, 2006