UNITED STATES - STANDARDS FOR REFORMULATED

                                                                AND CONVENTIONAL GASOLINE

 

                                                              Appellate Body Report and Panel Report

 

                                                                Action by the Dispute Settlement Body

 

                At its meeting on 20 May 1996, the Dispute Settlement Body adopted the attached Appellate Body report on "United States - Standards for Reformulated and Conventional Gasoline" (WT/DS2/AB/R) and the attached panel report on "United States - Standards for Reformulated and Conventional Gasoline" (WT/DS2/R) as modified by the Appellate Body report.  The panel report should therefore be read in conjunction with the Appellate Body report.

 

                Both reports have been derestricted upon their adoption by the Dispute Settlement Body.

 

                 United States - Standards for Reformulated

                              and Conventional Gasoline

 

 

 

                                                    AB-1996-1

 

 

                                    Report of the Appellate Body

                             World Trade Organization

                                          Appellate Body

 

                                                                                                   

               

United States - Standards for Reformulated and Conventional Gasoline

 

 

 

United States, Appellant

 

Brazil

Venezuela, Appellees

 

European Communities

Norway, Third Participants

            AB-1996-1

 

 

 

 

 

                Present:

 

                Feliciano, Presiding Member

                                                                Beeby, Member

                Matsushita, Member

               

I.       Introductory

            The United States appeals from certain conclusions on issues of law and certain legal interpretations contained in the Panel Report, United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/R, 29 January 1996 (the "Panel Report").  That Panel had been established to consider a dispute between the United States, on the one hand, and Venezuela, later joined by Brazil, on the other.  The dispute related to the implementation by the United States of its domestic legislation known as the Clean Air Act of 1990 (the "CAA") and, more specifically, to the regulation enacted by the United States' Environmental Protection Agency (the "EPA") pursuant to that Act, to control toxic and other pollution caused by the combustion of gasoline manufactured in or imported into the United States.  This regulation is formally entitled "Regulation of Fuels and Fuel Additives - Standards for Reformulated and Conventional Gasoline", Part 80 of Title 40 of the Code of Federal Regulations, and is commonly referred to as the Gasoline Rule.

 

         

II.      Issues Raised In This Appeal

 

            A.        The Claims of Error by the United States

 

            It is important to focus upon the subject matter of this appeal.  We seek to do this first by identifying the issues which have been raised by the Appellant, the United States.  In what follows we highlight those same issues by listing certain other issues dealt with in the Panel proceedings but which have not been brought before the Appellate Body in this appeal, and which we accordingly exclude from consideration in this Appellate Report.

 

            In its Notice of Appeal, dated 21 February 1996, and its Appellant's Submission, dated 4 March 1996, the United States claims that the Panel erred in law, firstly, in holding that the baseline establishment rules of the Gasoline Rule are not justified under Article XX(g) of the General Agreement and, secondly, in its interpretation of Article XX as a whole.

 

            More specifically, the United States assigns as error the ruling of the Panel that the baseline establishment rules do not constitute a "measure" "relating to" the conservation of clean air within the meaning of Article XX(g) of the General Agreement.  Consequently, it is also the view of the United States that the Panel erred in failing to proceed further in its interpretation and application of Article XX(g), and in not finding that the baseline establishment rules satisfy the other requirements of Article XX(g) and the introductory provisions of Article XX.

 

            The sharply limited scope of this appeal is underscored by noting the number of findings which the Panel had made but which have not been appealed from by the United States.  Very briefly, the United States does not appeal from the findings or rulings made by the Panel on, or in respect of, the consistency of the baseline establishment rules with Article I:1, Article III:1, Article III:4, and Article XXIII:1(b) of the General Agreement and the applicability of Article XX(b) and Article XX(d) of the General Agreement and of the TBT Agreement.  Understandably, the United States has also not appealed from the Panel's ruling that clean air is an exhaustible natural resource within the meaning of Article XX(g) of the General Agreement.

 

V.        FINDINGS AND CONCLUSIONS

 

            For the reasons set out in the preceding sections of this report, the Appellate Body has reached the following conclusions:

 

            (a)        the Panel erred in law in its conclusion that the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations did not fall within the terms of Article XX(g) of the General Agreement;

 

            (b)       the Panel accordingly also erred in law in failing to decide whether the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations fell within the ambit of the chapeau of Article XX of the General Agreement;

 

            (c)        the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations fail to meet the requirements of the chapeau of Article XX of the General Agreement, and accordingly are not justified under Article XX of the General Agreement.

 

            The foregoing legal conclusions modify the conclusions of the Panel as set out in paragraph 8.1 of its Report. The Appellate Body's conclusions leave intact the conclusions of the Panel that were not the subject of appeal.

 

            The Appellate Body recommends that the Dispute Settlement Body request the United States to bring the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations into conformity with its obligations under the General Agreement.

 

            It is of some importance that the Appellate Body point out what this does not mean.  It does not mean, or imply, that the ability of any WTO Member to take measures to control air pollution or, more generally, to protect the environment, is at issue.  That would be to ignore the fact that Article XX of the General Agreement contains provisions designed to permit important state interests - including the protection of human health, as well as the conservation of exhaustible natural resources - to find expression.  The provisions of Article XX were not changed as a result of the Uruguay Round of Multilateral Trade Negotiations.  Indeed, in the preamble to the WTO Agreement and in the Decision on Trade and Environment, there is specific acknowledgement to be found about the importance of coordinating policies on trade and the environment.  WTO Members have a large measure of autonomy to determine their own policies on the environment (including its relationship with trade), their environmental objectives and the environmental legislation they enact and implement.  So far as concerns the WTO, that autonomy is circumscribed only by the need to respect the requirements of the General Agreement and the other covered agreements.

 

 

Signed in the original at Geneva this 22nd day of April 1996 by: