NATIONAL UNIVERSITY OF HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW ASSESSMENT TASK 3 TRẦN THỊ MỸ LINH Qumar is a middleincome developing country Member of the WTO. It pursues an active diversification policy away from its traditional exports of oil and agricultural products, and is fast developing a successful car industry, producing petrol and diesel cars, primarily for export. Cars now account for a large share of Qumar’s export revenues. These products are subject to strict regulatory controls in Qumar, in order to ensure that they meet international environmental, safety and quality standards for cars. These cars have gained a large market share in Averna. However, since last year car producers in Qumar have complained of increasing regulatory barriers to trade that they face in Averna, a developed Member of the WTO. They believe that these barriers aim to protect Averna’s struggling car industry, producing (expensive) hybrid and electric cars, from competition. In particular, FastCar, Qumar’s main producer of cars for export, has approached the government to complain of the following measures: ...
NATIONAL UNIVERSITY OF HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND LAW ASSESSMENT TASK STUDENT: TRẦN THỊ MỸ LINH ID: K195021967 CONTENTS The first legal issue: Whether the labeling regulation of Averna creates an unfair discrimination against Qumar’s cars compared to Averna’s cars, which is inconsistent with Article III:4 of GATT? Is Averna’s measure within the scope of regulation of Article III:4 of GATT?4 Whether the petrol, diesel cars and hybrid, electric cars are “like products”? Does this labeling regulation accord less favourable treatment for Qumar than Averna? Conclusion: The second legal issue: Is this regulation an exception under Article XX(b) of GATT? Is the labeling regulation issued in purpose of protecting human, animal or plant life or health? Is the measure of labeling on cars necessary to achieve the purpose? Does this measure constitute a means of arbitrary or unjustifiable discrimination, or a disguised restriction on international trade? Conclusion: The third legal issue: Whether has Averna discrimiated cars imported from Qumar with ones imported from Letebia which violate Article I:1 of GATT? Is Averna's measure falls within the scope of Art I:1? Does the measure accord to Letabia an advantage? Are Letabia and Qumar cars the “like products”? Whether the advantage at issue is accorded ‘immediately and unconditionally’ to all like products concerned, irrespective of their origin or destination? Conclusion: Solving Problem: Qumar is a middle-income developing country Member of the WTO It pursues an active diversification policy away from its traditional exports of oil and agricultural products, and is fast developing a successful car industry, producing petrol and diesel cars, primarily for export Cars now account for a large share of Qumar’s export revenues These products are subject to strict regulatory controls in Qumar, in order to ensure that they meet international environmental, safety and quality standards for cars These cars have gained a large market share in Averna However, since last year car producers in Qumar have complained of increasing regulatory barriers to trade that they face in Averna, a developed Member of the WTO They believe that these barriers aim to protect Averna’s struggling car industry, producing (expensive) hybrid and electric cars, from competition In particular, FastCar, Qumar’s main producer of cars for export, has approached the government to complain of the following measures: A new carbon emissions labelling regulation has been introduced by Averna under its Promotion of Sustainability Act Under this regulation, a specific label reflecting the level of carbon emissions must be attached to all new cars Only cars that produce carbon emissions within a specific maximum level laid down in the Promotion of Sustainability Act, may be marked with a green ‘Low Carbon Emissions’ label Cars exceeding this maximum level, which include petrol and diesel cars, may still be sold in Averna, but must be marked with the red ‘High Carbon Emissions’ label To avoid consumer confusion, no alternative carbon emissions labelling schemes for cars are permitted in Averna As most Avernan domestic car producers produce hybrid or electric cars, that all meet the maximum carbon emissions requirement in the Promotion of Sustainability Act, their cars may be marketed with the green ‘Low Carbon Emissions’ label Petrol and diesel cars produce emissions exceeding the maximum level and must therefore be marked with the red ‘High Carbon Emissions’ label As Avernan consumers are increasingly environmentally conscious, it is expected that the new ‘traffic light’ labelling regulation will decrease sales of petrol and diesel cars, such as those of FastCar, in favour of hybrid and electric cars FastCar has complained about this labelling regime to the Qumari government, arguing that its cars are all carbon neutral, as certified by the Verus Carbon Neutral Seal, under which producers may compensate the carbon emissions of their products and production processes by conducting environment-friendly activities As this independent certification system covers carbon emissions in the whole lifecycle of the product, including production, use and disposal, Fastcar argues that its cars are therefore more climatefriendly than those of Averna In its view, the traffic light labelling regime under Averna’s Promotion of Sustainability Act is misleading as it does not provide accurate information to consumers about the full climate impact of the cars they purchase It also views the ‘traffic light’ approach as unnecessary as it does more than inform consumers, but actually dissuades them from buying the ‘red’ labelled cars in favour of those with ‘green’ labels Fastcar also complains about the fact that Averna allows cars from Letabia, its former colony, to be marketed under the green ‘Low Carbon Emissions’ label, based on their producers’ self-declaration of compliance with Averna’s maximum carbon emissions requirements Qumar is concerned that it had no opportunity to discuss the possibility for recognition of the Verus Carbon Neutral Seal under Averna’s Promotion of Sustainability Act as Averna, citing the urgency of the measure, did not provide a comment period when notifying its Promotion of Sustainability Act to the WTO You are a member of the legal team of Qumar’s Permanent Representative in Geneva You have been asked to advise the Permanent Representative on the issues raised above In particular: briefly advise the Permanent Representative of Qumar on whether the measure at issue could also be challenged under the rules of the GATT 1994, and if so whether this would be likely to lead to a different outcome Solving Part: Averna has caused tension for Qumar for issuing a regulation on labeling carbon emissions on cars saled in Averna Under this rules, a green label shall be sticked in cars releasing carbon emissions lower or equal to the highest level in Promotion of Sustainability Act, while a red label shall be attached in ones exceeding this highest level Accordingly, Qumar will face many difficulty in producing cars for export and saling them in Averna Qumar is only unable to compete with Averna cars but also with the Letabia’s ones, since Averna allows cars from Letabia to be marketed under the green label, based on their producers’ self-declaration of compliance with Averna’s maximum carbon emissions requirements The best way to encourage Averna to change or even remove the labeling regulation is to analysist issues in respect of GATT since Averna and us are both WTO members and has been conducting international trade together The first legal issue: Whether the labeling regulation of Averna creates an unfair discrimination against Qumar’s cars compared to Averna’s cars, which is inconsistent with Article III:4 of GATT? To deal with this issue, we need to answer these following inquiries respectively: First, is Averna’s measure within the scope of regulation of Article III:4 of GATT? Article III:4 of GATT stated that: “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use …” Accordingly, the scope of this Clause includes laws, regulations of an import country The word “affecting” is not only about the sale and use of products 1, but also the modification of competitve conditions of products in the internal market Italy – Agriculture Machinery US – FSC (Article 21.5 – EC)) The labeling measure written in Promotion Sustainability Acts as described, is obviously a regulation of Averna Besides, this regulations will also impact on sale of petrol and diesel cars Hence, Averna’s measure is within the scope of regulation of Article III:4 of GATT Second, whether the petrol, diesel cars and hybrid, electric cars are “like products”? GATT does not give any specific rules to determine whether products are “like products”, so we find the rules through case laws instead In case of Japan – Alcoholic Beverages II, the Apellate Body (AB) borrowed image of an accordion to decribe “the likeness” of products The “likeness” as the width of the accordion, is flexible and different from each cases Namely, the spectrum of likeness in Article III:4 is defineds as the rule in EC – Asbestos This case stated that “like products” here can be broader than the first sentence of Art III:2, but certainly not broader than the combined product scope of the two sentence of Art III:2 Therefore, we only need to consider if these products is directly competitive or substituable prodcuts as the second sentencet of Art III:2 or not Accordingly, the are four factors to determine “like products” of Art III:4, include: (i) The products’ properties, nature and quality; (ii) Tariff classification; (iii) The products’ end-uses; and, (iv) Consumers’tastes and habits, For the first factor, although there are differences in the type of fuel used to operate the petrol, diesel cars with hybrid, electric cars, this is still not enough to make a clear distinction in the appearance of the car, the way it is used Consumers cannot immediately distinguish these two kinds of cars Next, these two kinds of vehicles have the same tarriff classification of 87.03 Especially, both petrol cars and electric cars have the same purpose of using as means of transportation Finally, in spite of the increasingly environmental concern of people, there is no clear difference between the tastes and habits of consumers towards the two types of cars To conclude, these two kinds of cars are like products under Art III:4 of GATT Third, does this labeling regulation accord less favourable treatment for Qumar than Averna? GATT does not explain clearly what “less favourable treatment” means, so we keep finding it out through case laws Namely, in US – Section 337, AB found that no less favourable treatment call for effective equality of opportunities for imported products Moreover, in Korea – Various Measures on Beef, no less favourable treatment is provision on equal conditions of competition to both domestic and foreign like product Besides, formally different treatment to imported products does not per se violate Article III:4 7; the less favourable treatment can only be determined if such detrimental effect is explained by factors 3AB Report, Japan – Alcoholic Beverages II (1996), para.114 AB Report, EC – Asbestos (2001), para 99 AB Report , US – Section 337, para 5.11 AB Report, Korea – Various Measures on Beef, para 16 AB Report, Korea – Various Measures on Beef , para 136 related to the foreign origin of the product In this case, because of being hybrid and electric vehicles, Averna’s cars will be produce low carbon Then, Averna's cars will always be labeled green Meanwhile, Qumar's gasoline and diesel cars are likely to emit more carbon than the maximum, so they will be labeled red On the other hand, people in Averna are more and more concerned about the environment, so such labeling will affect people's sale intentions, whereby people will prefer to buy cars with green labels, i.e Averna's cars Since then, Qumar's car sales will be severely reduced As a result, this labeling regulation accords less favourable treatment for Qumar than Averna � Conclusion: The labeling regulation of Averna inconsistent with Article III:4 of GATT The second legal issue: Is this regulation an exception under Article XX(b) of GATT? Article XX(b): “[…] measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade […]: […] (b) necessary to protect human, animal or plant life or health.” To consider a measure with this Article, we will go from the sub-paragraph to the Chapeau The second issue will be lightened through analysist these following sub- issues: First, is the labeling regulation issued in purpose of protecting human, animal or plant life or health? Clause b of Art XX give exceptions about ensure of the life and health of creature on Earth Meanwhile, the labeling regulation is inlduded in Averna’s Promotion Sustainability Acts to provide information of carbon emissions of different kinds of cars to people Which also means Averna want to warn people which car type is harmful environment as well as their health Hence, the regulation has a clear purpose of protecting human, animal or plant life or health Second, is the measure of labeling on cars necessary to achieve the purpose? The “necessary” is explained in Brazil – Retreaded tyres, it is a composite assessment of the interests at stake due to the application of the measure with the good objectives and values the measure brings At the same time, it is necessary to consider whether there are other measures that can still achieve the stated objectives but less trade restriction than the current measure.9 With the goal of reducing carbon emissions to protect the health and lives of people and animals, labeling is a direct and clear way to achieve this goal The measure is quite likely to have a strong influence on consumer demand With people's growing environmental concern, low-carbon vehicles will quickly become more popular Thus, the environment will be cleaner, the health and life of people and creatures will be more secure So, the measure of labeling on cars is necessary AB report, US – Gasoline (1996) para 22 AB report, Brazil – Retreaded tyres, para 178 Third, does this measure constitute a means of arbitrary or unjustifiable discrimination, or a disguised restriction on international trade? In US – Shrimp, “arbitrary discrimination” is to adopt the same regulation without taking into consideration different conditions of other Member; “unjustifiable discrimination” is making no serious efforts to negotiate similar agreements with any other countries In the other hand, in US – Gasoline (1996), EC – Asbestos (2001) a ‘disguised restriction on international trade’ is to conceal the pursuit of trade restrictive objective Here, the labelling regime under Averna’s Act is misleading as it does not provide accurate information to consumers about the full climate impact of the cars they purchase It also views the ‘traffic light’ approach as unnecessary as it does more than inform consumers, but actually dissuades them from buying the ‘red’ labelled cars in favour of those with ‘green’ labels Therefore, this measure constitute a means of arbitrary or unjustifiable discrimination, or a disguised restriction on international trade � Conclusion: This regulation is NOT the exception under Article XX(b) of GATT The third legal issue: Whether has Averna discrimiated cars imported from Qumar with ones imported from Letebia which violate Article I:1 of GATT? Similar to the proof of the violation of Article III:4, first, we must see if Averna's measure falls within the scope of Art I:1? Article I:1 stated: “[…]with respect to all matters referred to in paragraphs and of Article III […]” Thus, the scope of Article I.1 includes the scope of Article III.4, which includes laws and regulations The fact that Averna allows Letabia to green label its own cars is a regulation Therefore, we can be quickly asserted that this measure falls within the scope of Art I:1 Second, does the measure accord to Letabia an advantage? "Advantage" is interpreted in Canada – Autos (2000) as “any advantage” granted to any like product from or for another country, not just to some advantages granted "with respect to" the subjects that fall within the defined scope of the Article I:1 10 The fact that Letabia is allowed to attachted green-label to its cars saves it from the pressure of being tested for carbon emissions directly from Averna Especially, it can export its car to Averna without worrying that they cannot be saled because of red labels as Qumar Hence, this measure does accord to Letabia an advantage Next, are Letabia and Qumar cars the “like products”? “Like product” is a crucial term of this Article As analyzed above, the “likeliness” of products is determined by context And here are also factors to determine: (i) The products’ properties, nature and quality: Letabia and Qumar's cars have different origins, but they don't differ in physical and chemical properties 10 AB Report, Canada – Autos (2000), para 79 (ii) (iii) (iv) Tarrif classification: having the same tarriff classification of 87.03 The products’ end-uses: being used for road traffic Consumers’tastes and habits: there is no difference in the habits and tastes of consumers In short, Letabia and Qumar cars are “like products” Finally, whether the advantage at issue is accorded ‘immediately and unconditionally’ to all like products concerned, irrespective of their origin or destination? Through case laws such as Belgium – Family Allowances, Indonesia – Autos, EC – Banana III, “immediately and unconditionally” is interpreted that no delay, no time difference and a contracting party needn’t to show any actual trade effects or the discriminatory intent of the measure at issue Here, Averna allowed Letabia to put green labels on their cars by themselve as long as it ensures in compliance with Averna’s requirement of carbon emissions, but did not allow Qumar to the same That is, the advantage Letabia has not been granted for Qumar immediately and unconditionally � Conclusion: Averna has violated the Article I:1 of GATT In general conclusion, the measures Averna has issued violated with Article I:1 and III:4 of GATT, and not falls within the exceptions in Article XX Therefore, we can confidently challenge these measures to Dispute Settlement Body, there is highly likely Averna shall remove or change its measures in our favor REFERENCES The General Agreement on Tarrif and Trade [1994] Italy – Agriculture Machinery US – FSC AB Report, Japan – Alcoholic Beverages II (1996) AB Report, EC – Asbestos (2001) AB Report , US – Section 337 AB Report, Korea – Various Measures on Beef AB Report, Korea – Various Measures on Beef AB report, US – Gasoline (1996) 10 AB report, Brazil – Retreaded tyres 11 AB Report, Canada – Autos (2000)