Analysis of the WTO Appellate Body's Decision in Shrimp/Turtle

Clinical Professor Chris Wold & Glenn Fullilove, IELP Law Clerk

February 24, 2000

The Shrimp/Turtle dispute symbolizes the controversy between proponents and opponents of the World Trade Organization (WTO). Supporters of the WTO downplay the significance of the Shrimp/Turtle decision by claiming that the Appellate Body ruled only that the United States failed to apply its ban on shrimp imports in a nondiscriminatory way. In contrast, critics of the WTO often cite Shrimp/Turtle as proof that the WTO completely ignores the environment to promote liberalized trade. Both views are only partially correct. In truth, the Appellate Body interpreted the rules of the General Agreement on Trade and Tariffs (GATT) very narrowly. While the Appellate Body found that the United States applied its ban on shrimp imports discriminatorily, it also imposed interpretative hurdles that make it virtually impossible for a WTO Member to impose trade measures to protect the environment or natural resources.

In Shrimp/Turtle, several Asian countries complained that Section 609 of the Endangered Species Act constituted an impermissible restriction on trade under the GATT. Section 609 and its implementing regulations prohibited the importation of shrimp into the United States unless a country's shrimping program requires shrimpers to use turtle excluder devices (TEDs) comparable in effectiveness to those used in the United States and the country has in place a credible enforcement effort. Shrimp may not be imported into the United States unless U.S. officials have certified that the importing nation has implemented a turtle conservation program that is "comparable" to U.S. restrictions.

The Shrimp/Turtle dispute again highlighted the inability of a Member to tax or regulate products differently based on the way the product is produced. Products with the same or similar physical characteristics or end uses are "like products" and must be taxed and regulated the same. Under Section 609, however, the United States regulated shrimp differently based on the way they were caught, not based on any physical differences in the shrimp itself. Just as in Tuna/Dolphin, Shrimp/Turtle found that the United States was impermissibly regulating shrimp from countries that use TEDs differently from countries that did not use them. According to the panel, shrimp is shrimp, regardless of the manner in which it is produced, and must be treated the same.

Shrimp/Turtle confirms that any measure that taxes or regulates a product differently because of the way it is produced, caught, or otherwise brought to market, will be deemed inconsistent with the rules of the GATT. The Fact Sheet prepared by the New Democrat Coalition thus incorrectly states that Shrimp/Turtle did not rule against the restrictions.

After finding that Section 609 violated the GATT, the Appellate Body further ruled that Section 609 could not be justified under the GATT's Article XX exception for measures relating to the conservation of exhaustible natural resources. Although the Appellate Body found that Section 609 fell with the category of measures protected this exception, it ruled that Section 609 did not meet the requirements of the "Chapeau" to Article XX.

The Article XX Chapeau states that a measure otherwise inconsistent with the GATT may be permissible, provided that the measure does not constitute (1) a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or (2) a disguised restriction on international trade. On its face, the Chapeau permits some discrimination but the discrimination must not be unjustifiable or arbitrary. In ruling that Section 609 constituted unjustifiable discrimination and arbitrary discrimination, the Appellate Body made the test for determining whether the measure constitutes unjustifiable or arbitrary discrimination exceedingly difficult to meet, in part because of its inconsistent reasoning.

On the one hand, the Appellate Body found that application of Section 609 constituted unjustifiable discrimination and arbitrary discrimination, because the United States required all importing countries to adopt a comprehensive regulatory program that was essentially the same as the U.S. program, without inquiring into the appropriateness of that program for the conditions prevailing in the exporting countries. Appellate Body Decision, paras. 164, 177.

The Appellate Body thus ruled that treating all Members the same constitutes discrimination and that this discrimination is unjustifiable and arbitrary. While treating all foreign and U.S. shrimpers the same may be unfair, it cannot be called discriminatory. In trade, "discrimination" is the failure to treat all products alike. See, e.g., Black's Law Dictionary, page 467 (6th ed. 1990); see also American Heritage Dictionary: New College Edition (1979) ("discrimination" means "to make a clear distinction"). The Appellate Body makes clear that the United States must inquire into the "appropriateness of the regulatory program for the conditions prevailing in those exporting countries." Appellate Body Decision, para. 165. In essence, it suggests that the United States must treat countries differently.

On the other hand, however, the Appellate Body ruled that treating Members differently also constitutes unjustifiable and arbitrary discrimination. It ruled that the failure of the United States to reach an international agreement with the complaining WTO Members was "unjustifiable discrimination," because the United States completed an agreement to protect sea turtles with Latin American countries. Appellate Body Decision, paras. 171, 172. Although the United States made attempts to negotiate with the complaining Members, the Appellate Body found that the United States failed to act as quickly with the Asian countries as it did with the Latin American countries. Appellate Body Decision, para. 166. The Appellate Body concluded that the "failure to have prior consistent recourse to diplomacy as an instrument of environmental protection policy ... produces discriminatory impacts on countries exporting shrimp to the United States with which no international agreements are reached or even seriously attempted." Appellate Body Decision, para. 167.

The Appellate Body's findings are of concern for at least four reasons. First, whereas the Appellate Body first ruled that treating Members the same constitutes unjustifiable and arbitrary discrimination (where the Member fails to account for the conditions prevailing in a given country), it later ruled that treating Members differently also constitutes unjustifiable and arbitrary discrimination.

Second, the Appellate Body's conclusion that the failure to negotiate an international agreement with all relevant Members "is plainly discriminatory and, in our view, unjustifiable" makes the use of unilateral measures virtually impossible. To save Section 609, then, the United States must attempt, at a minimum, "serious negotiations" with all countries that are currently not certified as having comparable legislation to protect sea turtles before it imposes trade sanctions against that nation. This requirement imposes a very serious obstacle to the use of trade measures to protect the environment and is without support in any language of any WTO agreement.

Third, the Appellate Body stated that the U.S. sea turtle agreement with Latin American countries suggests that those countries "marked out the equilibrium line" between environmental and trade goals and that "multilateral procedures are available and feasible." Appellate Body Decision, para. 170. However, just as the Appellate Body noted that conditions may differ in some countries, a country's willingness to negotiate an international treaty, and to include similar provisions in that treaty, may also differ. The Appellate Body used the successful negotiation of one treaty to conclude that the United States and Asian countries could successfully negotiate a treaty with provisions that similarly balance trade and environmental goals. That conclusion is far from obvious, however.

Fourth, the decision is discouraging because all international treaties and institutions with jurisdiction over sea turtles consider all species of sea turtles to be threatened or endangered. The critical status of sea turtles worldwide suggests that action must be taken sooner rather than later. The Appellate Body decision, however, suggests that just the opposite is required to be consistent with the rules of the WTO.

The reasoning of the Appellate Body and the four concerns highlighted in this analysis indicate that the Fact Sheet of the New Democrat Coalition understates the impact of Shrimp/Turtle. The Fact Sheet suggests that the U.S. must merely treat all countries fairly in order to remedy Section 609. The Appellate Body's interpretation of unjustifiable and arbitrary discrimination makes plain, however, that all WTO Members will have great difficulty saving trade-related environmental measures through GATT's Article XX exceptions.