AGREEMENT ON TECHNICAL BARRIERS

TO TRADE – SCOPE OF A TECHNICAL

INTRODUCTION

The TBT Agreement came into force in the year 1995. The objective behind the enactment of
such an agreement is to ensure that states while introducing technical regulations, standards and
conformity assessment procedures do not create unnecessary obstacles to international trade.
This agreement recognizes the right of the member states to protect plant, animal and human life,
environment and consumer interests whilst ensuring that such measures do not act as a disguised
restriction on international trade. All products, including industrial and agricultural products,
shall be subject to the provisions of this agreement.1

WHAT IS A TECHNICAL REGULATION?

Article 1.1 of the TBT Agreement defines a technical regulation as Document which lays down
product characteristics or their related processes and production methods, including the
applicable administrative provisions, with which compliance is mandatory. It may also include or
deal exclusively with terminology, symbols, packaging, marking or labeling requirements as they
apply to a product, process or production method.

Therefore, a measure constitutes a technical regulation when:

(i) it is a document: It was held by the Appellate Body of the WTO in the US Tuna-II case that a
document is something written which furnishes evidence or information upon any subject.2

(ii) it applies to an identifiable product or group of products: An example of this is that only
those products prepared from Sardinia pichardus could be marketed or labeled as preserved
sardines.3

(iii) the document must lay down one or more characteristics of the product, prescribed or
imposed in either a positive or a negative form, or their related process and production methods.

1
TBT Agreement, Article 1.3
2
ABR, US – Tuna II (Mexico), [185].
3
ABR, EC – Sardines,
An example of this would be that only those packaging materials can used which are recyclable
and environment friendly. Thereby, this measure lays down the characteristics of the product by
specifying that they should be recyclable.

(iv) The compliance with technical regulations is mandatory. Any violation of such a regulation
is reported to the Dispute Settlement Body.

Contemporary environmental issues:

A contemporary issue confronting the international trading system is the harmonization of the
international trade laws and the environmental protection. It is a known fact that the
environmental deterioration has been taken place at an exponential rate. Therefore, it falls upon
the WTO to make certain that the laws adopted by the members of the WTO are environmental
friendly.

ECO-LABELING

It is the process of marking products with a distinctive label indicating their environmental safety
and performance to make the consumers aware of the product they are buying. Eco-labeling
schemes have gained prominence in the recent years due to the increasing environmental
deterioration.

However, even this measure has certain drawbacks. In certain cases, labeling of products may
not produce a desired outcome. It is also true that voluntary labeling schemes produce
insufficient results. An example of this would be the egg labeling scheme introduced by the EC.
The third world countries had to indicate whether the eggs were produced in a cage, barn or free
range system. This was a voluntary scheme, however, since the EC found a need to make it
mandatory reflects the insufficiency of the voluntary labeling schemes. However, the EC rejected
even the mandatory labeling scheme for the reason that it would be difficult to implement.

It is pertinent to note that both mandatory and voluntary labeling schemes are permitted within
the TBT Agreement.

NPR- PPM’s

A technical regulation has been defined as a document that lays down product characteristics
or their related processes and production methods ....4

The Appellate Body in the EC-Asbestos case held that the heart of the definition of a technical
regulation is that a document must lay down product characteristics. Product characteristics
include not only any objectively definable features and qualities intrinsic to the product, such as
a product’s composition, size, hardness, flammability and density, but also “distinguishing

4
Annex 1.1, TBT Agreement.
marks” of a product, such as the means of identification, the presentation and the appearance of a
product.5

Going by the aforementioned definition and interpretation, it is clear that only those processes
and production methods that reflect in the characteristics of the product have been addressed by
the TBT Agreement.

In the EC Seal Products the term ‘their related ppm’s’ indicates that the subject matter of a
technical regulation may consist of a PPM that is related to product characteristics. In order to
determine whether a measure lays down “related” PPMs, a Panel will have to examine whether
the PPMs at issue have a sufficient nexus to the characteristics of a product in order to be
considered related to those characteristics.6

During the Uruguay Round negotiations, Mexico proposed to insert “their related” before the
processes and production methods. In introducing its proposal, Mexico made it clear that the
intent was to exclude PPMs unrelated to the characteristics of a product from the coverage of the
TBT Agreement, so that the TBT Agreement only addresses a narrow selection of PPMs.
Mexico’s proposal was adopted in the final TBT text. 7

Many a times countries mandate that a product is to be produced in a particular manner which is
environment friendly. However, such a production process does not reflect as a distinguishable
characteristic in the final product. These are known as non-product related process and
production methods.

This causes a rising concern among the developing countries, who argue that environmental
concerns of the developed concerns are borne by the developing countries. They also raise a
concern that they do not have the requisite technological knowhow to shift environment friendly
production methods. This impedes international trade. Moreover, many countries allege that
these eco-labeling schemes lack transparency and that there needs to be a greater clarification of
rules in this regard.

Another rising concern is whether these eco-labeling and NPR-PPM schemes fall within the
aegis of the TBT Agreement. Therefore, there seems to be little agreement on whether NPR
PPM’s fall within the ambit of the TBT Agreement. While some state that only those processes
and production methods are covered which reflect in the final product, others argue that even
NPR PPM’s which are non-detectable fall within the TBT Agreement.

The definition of standards in the TBT Agreement also gives no guidance as to this issue.

5
ABR, EC-Asbestos [67]
6
ABR, EC-Seal Products [5.12]
7
WTO Secretariat, “Negotiating History of the Coverage of the Agreement on Technical Barriers to Trade with
regard to Labeling Requirements, Voluntary Standards, and Processes and Production Methods Unrelated to Product
Characteristics”, WTO Doc. WT/CTE/W/10, 29 August, 1995, [146].
The definition of standard has been given in Annex 1.2 of the TBT Agreement. It has been
defined as:

“Document approved by a recognized body, that provides, for common and repeated use, rules,
guidelines or characteristics for products or related processes and production methods, with
which compliance is not mandatory. It may also include or deal exclusively with terminology,
symbols, packaging, marking or labelling requirements as they apply to a product, process or
production method.”

The difference between a technical regulation and a standard is that while a technical regulation
is mandatory to comply with, standards are voluntary in nature.

PROVISIONS FOR THE ENVIRONMENT PROTECTION IN THE TBT AGREEMENT

The Preamble of the TBT Agreement provides for the protection of the environment as a
legitimate policy objective, so long as the measure does not cause arbitrary or unjustified
discrimination between countries where the same conditions prevail or act as a disguised
restriction on international trade.8

Similarly, Article 2.2 of the TBT Agreement requires that technical regulations (a) pursue a
legitimate policy objective and (b) not be more trade-restrictive than is necessary to fulfill a
legitimate objective keeping in mind the risk that non-fulfillment would create.9 Article 2.2 of
TBT outlines that protection of human health and protection of environment is a legitimate
objective.

The trade restrictiveness of a measure can be scrutinized in two-steps. First, it is examined if

Furthermore, a measure is said to be necessary within Art. 2.2 when (a) the measure is
indispensable; and (b) no other alternative measure existed which were less inconsistent with the
provisions of the GATT, and which could have been reasonably adopted by the respondent
country.12

8
Recital 6, Preamble, TBT Agreement.
9
PR, US-Clove Cigarettes, [7.333].
10
ABR, Brazil — Measures Affecting Imports of Retreaded Tyres, [156]
11
PR, US — Tuna, [7.455].
12
AB Korea — Beef, [164,170]; AB, EC-Asbestos, [164].
In the US Clove Cigarettes case, the Appellate Body held that TBT Agreement and GATT, 1994
overlap and share similar objectives. It was also held that TBT being a specialized legal regime,
GATT, 1994 can be used to interpret various provisions of the TBT Agreement.13

Article XX of GATT, 1994 and Article 2.2 of the TBT agreement seem quite similar prima facie.
However, GATT, Article XX is used when a measure has found to be violating any provision of
GATT. Meanwhile, Article 2.2 of the TBT Agreement is in the form of a positive obligation
where members while pursuing a legitimate policy objective have to ensure that their regulations
do not create any unnecessary obstacles to international trade. An important consideration in this
provision is the risk of non-fulfillment of the measure.

The GATT Tuna Case I

This was the first case to test the legitimacy of an environmental regulation under the WTO
jurisprudence. The trade and environmental controversy results from the use of particular tuna
fishing techniques, such as small and medium gauge driftnets, that have high dolphin mortality
rates. The PPM issue is therefore the result of tuna and dolphins being, when certain types of
catch techniques are used, effectively joint products, so giving rise to significant negative
environmental externalities through high dolphin mortality rates. The US therefore, enacted the
Marine Mammal Protection Act (hereinafter MMPA)

On 5 November 1990, Mexico complained to the GATT that its tuna exports to the United States
had been prohibited because it refused to comply with the MMPA. The primary basis for the
Mexican complaint was the extra-territorial application of the US MMPA. The failure of Mexico
and the United States to resolve the issue within 60 days led to the establishment of a GATT
Panel on 6 February 1991. The Panel’s findings were published on 16 August 1991. The MMPA
regulations were found to constitute a quantitative restriction under Article XI.1 such that the
MMPA was GATT-incompatible14

The US in argued that the MMPA could be justified by Article XX, General Exceptions,
Paragraphs (b) and (g) of GATT. With respect to XX(b), the issue was whether the MMPA
provisions could be applied extra-territorially. The Panel found that the US measures did not
meet the requirement of necessity, that it had not exhausted all reasonable options to ensure
consistency with the GATT and that the calculation of the permitted dolphin mortality rates was
unpredictable (GATT, 1991, 5.28). With regard to Article XX(g), the Panel rejected the extra-
territorial US application of nationally determined conservation policies (GATT, 1991, 5.32).
Further, it stated that, even if these were acceptable, the unpredictable dolphin mortality rate
would not be a GATT consistent measure.

13
AB,US- Clove Cigarettes [90, 100]
14
ABR, US-Tuna I [5.19]
The 1991 GATT Panel Report on tuna however, was never adopted in spite of strong support
from the EU and many other intermediary countries. This was because Mexico and the United
States agreed a bilateral solution outside the GATT. There was no consensus therefore in favour
of adopting the Report such that the Panel Decision in the first tuna case did not become part of
formal WTO decision.

The GATT Tuna Case II

The second GATT tuna case resulted from a complaint by the EU on 11 March 1992 against the
original tuna Panel Decision. The Netherlands then complained on 3 July 1992 and joined the
EU as co-complainant on 14 July. A second tuna GATT Panel was established on 25 August
1992. The EU had been affected by the US MMPA as an intermediary processor and sought the
removal of the US restrictions on imports of ‘dolphin-safe’ tuna after the failure to adopt the first
GATT Panel Report. The reason for their complaint was that the United States had not amended
the MMPA, such that the inconsistencies identified in the original complaint by Mexico and
ruled upon in the first (unadopted) Panel Report remained with respect to third countries.

The Panel proceedings were suspended in the autumn of 1992 after the United States made
several amendments to the MMPA and passed the International Dolphin Conservation Act into
law. The latter was enacted as part of the Conservation of Dolphins Agreement, known as the La
Jolla Agreement, under the auspices of the Inter-American Tropical Tuna Commission. The ten
signatories of the La Jolla Agreement, including Mexico and the United States, agreed limits on
dolphin mortality rates together with requirements for observation and monitoring along with
penalty provisions.

The United States was one of eleven signatories, along with Mexico, of the 1995 Declaration of
Panamá. This called for a lifting of the US embargo on tuna imports from other signatory
countries in return for a legally binding treaty on a variety of dolphin conservation measures. The
United States agreed to lift the embargo once the Declaration had been ratified by four countries.
In preparation for this, the US Congress passed the International Dolphin Conservation Program
Act (IDCPA) in mid-1997. President Clinton thus amended the MMPA to comply with the
second GATT Panel ruling and thereby avoided a complaint under the WTO DSU.

In attempting to redefine ‘dolphin-safe’ tuna to include net-caught fish with zero dolphin
mortality however, the IDCPA has split the environment movement.

US-Shrimp Case

The 1973 US Endangered Species Act required US shrimp trawlers and other shrimp vessels in
US waters to use turtle-excluder devices (TEDs) ‘when fishing where there is a likelihood of
encountering sea turtles’. TEDs are now regarded as the international standard for protecting
turtles because of their low cost, effectiveness and ease of use. In 1996, India, Malaysia, Pakistan
and Thailand lodged a WTO complaint against the US embargo on the grounds that such import
bans cannot be applied extra-territorially. The US defence, unlike in the tuna cases, rested upon
GATT Article XX exceptions alone rather than incorporating Article III on national regulations.

The WTO shrimp Panel Report, found that the measures were discriminatory in that the United
States took no account of methods other than TEDs used to protect sea turtles. Further, prior
certification, technical and financial assistance along with longer transition periods were only
negotiated with selected countries, mainly in the Caribbean. The prohibition of imports of shrimp
from non-certified WTO Member countries therefore constituted a quantitative restriction under
Article XI of GATT.15 The US argument that the ban on non-certified shrimp imports fell within
the remit of Article XX(g) was rejected by the Panel on the grounds that sea turtles are not an
exhaustible resource and that such ‘unilateral measures could jeopardise the multilateral trading
system’. The Article XX(g) finding conflicted with that of the second GATT tuna Panel (GATT,
1994) but the latter had no basis in WTO case law because neither tuna Decision was adopted.

The United States appealed against the Panel Decision on the grounds that sea turtles are
endangered and should be regarded as exhaustible under Article XX(g) and that its import
restrictions were therefore justified. The WTO Appellate Body Report, published 12 October
1998, reversed the original Article XX(g) Decision in finding that endangered sea turtles are an
‘exhaustible resource’ and therefore that environmental and conservation objectives are a
legitimate trade measure. The Appellate Body however, found that the US protective measures
were ‘arbitrarily’ discriminatory and thus inconsistent with the chapeau to Article XX and
therefore illegal under Article XI of GATT.

In response to the findings of the Appellate Body, the United States amended its Endangered
Species Act and, in March 1999, published its Revised Guidelines for shrimp imports. In
October 2000, the United States was then subject to a DSU Article 21.5 complaint from
Malaysia concerning the compliance of the US Revised Guidelines with the Appellate Body
ruling and the failure of the United States to negotiate a WTO-compatible multilateral agreement
on sea turtle conservation. The Panel Report, published in June 2001, found that the US Revised
Guidelines violated Article XI but were justified under Article XX(g).The Panel refused to rule
on US intentions with respect to securing a multilateral sea turtle agreement.

Although the United States lost the WTO shrimp–turtle case, it did so because its measures were
discriminatory and not because it sought to protect the environment The shrimp–turtle case
therefore represents a landmark decision in WTO case law since the Appellate Body recognised
the validity of the US Endangered Species Act. US Trade Representative (USTR) Robert
Zoellick stated that the Decision ‘shows that the WTO as an institution recognizes the legitimate
environmental concerns of its Members’. The US State Department has since intensified its
efforts to negotiate a multilateral agreement on sea turtle protection in the Indian Ocean and
Southeast Asia.

15
ABR, US-shrimp [7.16].
The issues involved in the WTO shrimp turtle case are broadly similar to those of GATT tuna–
dolphin. Both sets of cases arose because of significant negative environmental externalities
resulting from the joint production of tuna/dolphins and shrimps/sea turtles respectively. XX(g)
as including conservation, first developed in the second GATT tuna case. This interpretation was
based upon the broader application of the meaning of exhaustible resources in Article XX(g) to
include all living beings, but particularly endangered species, in the light of the objective of
sustainable development as laid down in the Preamble to the WTO Agreements (1998c, 134).

In all these cases, there is no consensus on whether these measures fall within the scope of a
TBT Agreement. It has only been recognised and acknowledged that there is a dire need to
protect the environment and the exhaustible natural resources.

CONCLUSION

Many countries rely on older and traditional technology since they do not have sufficient
resources to shift to more environment friendly technology. The developing countries are deeply
skeptical about the introduction of Non-product related processes and production methods. They
believe that this would result in impediment of international trade. It also doesn’t help that there
is a lot of ambiguity with regard to NPR-PPM’s. Protection of environment has been recognized
as a legitimate concern in both GATT and the TBT Agreement. However, there are no clear
guidelines in the WTO jurisprudence about the implementation of mandatory environmental
regulations. The time has come for WTO as an institution to give clear guidelines in relation to
protection of environment. Trade and environmental concerns need to be harmonized for a better
future.