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POLITICAL ANALYSIS

Issue

In present form, the DG XI Environment’s Waste from Electrical and Electronic Equipment Directive (WEEE) draft presents a technical barrier to trade that will adversely affect trade relations between the US and the EU, relations that account annually for a total of $700 billion.[1]  Recent decisions by the WTO DSP and Appellate bodies regarding beef and bananas have already caused a rift in trade relations between the US and the EU. The WEEE Directive targets, in a non-WTO consistent manner, the electronics industry, which is a $181 billion industry in the US with $40.6 billion in exports to the EU.  The beef and bananas industries are peanuts in comparison to the electronics industry, and US industry compliance would cost billions.  With the genetically modified organisms (GMO) issue already a source of conflict between the EU and the US, passage of the WEEE directive would create another trade war, the ramifications of which promise to be serious for businesses, governments and consumers alike.

Domestic Political Situation

The Departments of State and Commerce as well as the United States Trade Representative (USTR) and the Environmental Protection Agency (EPA) were briefed on the WEEE issue. USTR placed the issue on its discussion agenda with the EU and held a bilateral démarche with the DG I.  The EPA has also been following the issue closely. There presently is a divide within the administration between these two entities. 

The USTR represents industry’s interests in this matter. While the EPA is sympathetic to the efforts of DG XI, it may wish to take similar action to reduce WEEE.  It is important to form a consensus on this issue.  Not only is the administrative divide hampering government support, but it could also prompt the EPA to take action on its own.  A WEEE proposal in the US could cause subsequent problems.  What is needed is a harmonized effort to reduce WEEE in the most efficient manner possible.

European Political Situation

As the WEEE Directive is still contained within the Commission, so too are the interested players in the EU government.  DG XXIII Enterprise has voiced opposition to the proposal in its three drafts.  Based on consultations conducted by DG XV Internal Market, the impact on European businesses will be substantial, and in the view of DG XXIII, alternative methods for achieving DG XI’s objectives are merited.  

However, all members of government are aware of the politically sensitive nature with which Europeans view the environment.  Any perception of not taking the environment into account would create problems for European policy makers.  All suggestions for improving the draft must first and foremost address the benefits to the environment and the reduction of waste. 

WTO Dynamics

Within the WTO at the February meeting of the TBT Committee, representatives from the US, Canada, Japan and Australia raised concerns about the WEEE Directive.  All four countries are major trading nations in the electronic sector and all recognize that the provisions of the directive as it stands now are a threat to industry and in violation of the TBT agreement.  Apparently, the representative from the EU has solicited such criticism so that he may take it back to Brussels as leverage for dealing with DG XI.

International Political Situation

Early warning is a category of issues that could lead to trade disputes. At the Berlin Conference, the TABD identified the WEEE Directive as an issue for early warning and brought it, along with recommendations for resolution, to the attention high-level US and EU Administration officials.[2]  

Politically, the TABD carries a lot of weight.  It obliges governments to respond and its involvement has already raised the issue to a visible level. The TABD fully supports accelerating the Transatlantic Legislators’ Dialogue, which pairs legislators with their counterparts across the Atlantic to discuss matters of mutual interest.  There is a likelihood that the WEEE issue might be addressed in this forum if it emerges from the Commission unchanged for the better. 

LEGAL ANALYSIS 

Legality under International Trade Law of
Draft Directive on Waste from Electrical and Electronic Equipment

Prepared by Rod Hunter and Marta López Torres
Hunton & Williams, Brussels

August 17, 1999 

In July 1999,¹ the European Commission’s DG XI circulated for inter-services consultations a draft proposal for a European Parliament and Council Directive on Waste from Electrical and Electronic Equipment (WEEE) that would apply to virtually all electronic products placed on the Community market.  That proposal, if adopted in its current form, would cause the Community to violate its international trade law obligations. 

The proposal’s ban on electronic products containing lead, mercury, cadmium, hexavalent chromium and some brominated flame retardants would infringe GATT’s prohibition of quantitative restrictions and the Technical Barriers to Trade (TBT) Agreement. First, the bans are not designed to achieve a legitimate environmental protection purpose as would be necessary to justify such quantitative restrictions.  Secondly, the substance restrictions are not “necessary,” in that there are other less trade-restrictive alternatives to achieve the preferred policy objectives (e.g. selective landfill bans, eco-taxes). Thirdly, in view of the absence of adequate justification, the Commission would find it difficult to establish the proportionality of the trade measures as required under the TBT Agreement. The proposal’s ban should accordingly be removed. 

Furthermore, the proposal’s requirement that treatment facilities outside the European Community comply with the draft WEEE Directive’s treatment facility conditions would violate the GATT and the GATS. The proposal would make compliance with the EC’s environmental requirements in third countries a condition to export, and it would discriminate in favor of those WTO parties that have equivalent treatment standards to those in the EC. 

This memorandum explains the trade law concerns arising from the proposal.  Part I reviews the draft directive’s major elements.  Part II recapitulates, by way of background, relevant international trade law.  Part III examines how the draft directive would cause the Community to violate its trade law undertakings.

I.          Draft WEEE Directive 

In July 1999, DG XI issued a third draft for a Proposal for a Directive on Waste from Electrical and Electronic Equipment.  The draft legislation aims at “the prevention of waste [from] electrical and electronic equipment” and “minimizing the risks and impacts to the environment associated with the treatment and disposal of waste electrical and electronic equipment.”¹ The basic provisions of the draft directive, which is to apply to virtually all electronics products, may be described as follows. 

·        Substance bans:  Article 4(4) would ban the use of lead, mercury, cadmium, hexavalent chromium PBB and PBDEs as of January 2004, subject to exemptions contained in Annex II, to be revised through a comitology process.  

·        National design and material choice rules: Article 4(1)–(2) would require member states to encourage repair-ability, recyclable materials, reduction of numbers of plastics, reduction of the use of dangerous substances, etc. 

·        Collection obligations:  Articles 5, 7 and 8 would require producers to finance the collection, recovery, and disposal of used equipment from households. 

·        Treatment obligations:  Article 6 would require treatment facilities to obtain a waste permit and store and treat electronic waste in compliance with Annexes III and IV. Used equipment may be exported from the EC for treatment, provided that the non-EC treatment facilities are “certified under equivalent conditions” as those set out in the draft directive. 

II.            International Trade Law — GATT and TBT Agreement 

Three World Trade Organization (WTO) agreements are particularly relevant to the analysis of the draft WEEE Directive under international trade law — the General Agreement on Tariffs and Trade (GATT), the Technical Barriers to Trade (TBT) Agreement, and the General Agreement on Trade in Services (GATS). 

            A.            GATT 

                        1.            Quantitative Restrictions and National Treatment 

Of particular importance to the draft WEEE Directive, the GATT prohibits quantitative restrictions, including import and export bans (article XI), and forbids discrimination against imported products (the so-called “national treatment” principle, article III).  GATT panel reports have interpreted these GATT provisions broadly as applying to all measures affecting imports.  Measures need not have an effect on the volume of trade or impair the trade benefits of other contracting parties to fall subject to article XI(1)’s ban on trade restrictions and to article III’s national treatment clause.² 

Trade restrictions contravening article XI and article III may nonetheless be permissible where justified pursuant to article XX, which lists the general exceptions to GATT principles.  Article XX provides only a limited and conditional exception from GATT obligations.  Panels have interpreted article XX narrowly, “in a manner that preserves the basic objectives and principles of the GATT.”³ A contracting party invoking an article XX exception bears the burden of proof in demonstrating that: (1) the contested measure falls under one of the ten categories of exceptions listed in the article, and (2) the measure satisfies the requirements of the preamble of the article (the so-called “chapeau”).⁴ In accordance with the chapeau, article XX exceptions apply under the following conditions: 

·        Measures complying with the requirements of article XX may not be applied in a way that would constitute “a disguised restriction on international trade.” 

·        Measures justified under article XX may not be applied “in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail.” 

Article XX does not contain a general environmental clause.  However, the article XX list of ten legitimate justifications for trade restrictions does include two relevant grounds.  First, article XX(b) countenances exceptions for measures “necessary to protect human, animal or plant life or health.”  Secondly, article XX(g) foresees exceptions for measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.” 

Under article XX(b) (protection of health), the party bearing the burden of proof must demonstrate: (1) that the policy in respect of the measures for which the provision was invoked falls within the range of policies designed to protect human, animal or plant life or health; (2) that the inconsistent measures for which the exception is being invoked are “necessary” to fulfil the policy objective; and (3) that the measures are applied in conformity with the requirements of the chapeau of article XX.⁵ 

Under the exception of article XX(g) (conservation of exhaustible resources), the party invoking the exception must demonstrate that: (1) the policy for which the provision was invoked is related to the conservation of exhaustible natural resources; (2) the measures for which the exception is invoked are related to the conservation of exhaustible natural resources; (3) the inconsistent measures are made effective in conjunction with restriction on domestic production or consumption; and (4) the measures are applied in conformity with the requirements of the chapeau of article XX.⁶ 

                        2.             Non-discrimination 

The GATT, article I(1) states that: “with respect to all rules and formalities in connection with importation and exportation…any advantage, favor, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.” 

This so-called Most-Favored Nation (MFN) clause prohibits discrimination in treatment between the contracting parties and requires equal treatment for all GATT parties. In general, MFN treatment means that when a country lowers a trade barrier or opens up a market, it has to do so for similar products from all trading partners. Conversely, a contracting party may not impose trade restrictions discriminating between like products from GATT parties.  In the same vein, application of article XX exceptions is subject to the non-discrimination principle to the extent that they may not be applied “in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries were the same conditions prevail.”⁷ 

                        3.            Nullification and Impairment 

The GATT, article XXIII.1(b), creates a remedy for situations in which parties to the Agreement undermine the value of a tariff, trade concession, or any other trade benefit through the application of legislative measures, whether they violate GATT obligations or not.  This “nullification or impairment” of accrued trade benefits entitles a GATT party to bring the measures before a WTO panel.  Under article XXIII(1)(b), a country may not implement measures, unexpected when trade concessions were negotiated, to impair another party’s benefits.⁸  

            B.            TBT Agreement 

The TBT Agreement is meant to ensure that technical regulations and standards be applied equally to imported and domestic products, and that unnecessary obstacles to international trade are avoided.  The substantive rule of the TBT Agreement is article 2.2 which requires that “technical regulations shall not be more trade-restrictive than necessary to fulfill a legitimate objective, taking account of the risks non-fulfillment would create.”  Among such legitimate objectives, article 2.2 lists the “protection of human health or safety, animal or plant life or health, or the environment.”  

Article 2.2 seeks to minimize the trade-restrictive effects arising from Members’ pursuit of legitimate objectives.  For a technical regulation imposing trade restrictions to be justified under article 2.2, three conditions must be met: 

·        The policy in respect of the measure must correspond to legitimate policy objectives.

·        Technical regulations must not be more trade-restrictive than “necessary” to fulfil the legitimate objective. 

·        Trade-restrictive technical regulations must be proportional to the objectives pursued by a legitimate policy by taking account of the risks that non-fulfillment would create.  Article 2.2 cites as relevant considerations for assessing such risks “available scientific and technical information, related processing technology or intended end-uses of products.” 

Mirroring the equivalent provision in the GATT, article XX, the preamble to the TBT Agreement establishes that measures necessary for the protection of human, animal, plant life or health, or of the environment are “subject to the requirement that they 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.”  

The TBT Agreement further provides for instruments to ensure monitoring of compliance of technical regulations. The Agreement’s provisions include notification procedures, and the requirement that Members preparing or adopting technical regulations explain “upon request of another Member … the justification for that technical regulation in terms of the provisions of [article 2].”⁹  

In short, under the TBT Agreement, technical regulations must be developed in accordance with the principles outlined in the agreement (particularly non-discrimination). They must not be more trade restrictive than necessary, they must be monitored and reviewed, reflect international standards, be performance based, they must develop transparently, and the compliance procedures adopted must not create unnecessary obstacles to trade. 

            C.            GATS  

The GATS applies to “all measures affecting trade in services.”¹⁰ While the GATS provides no definition for “services,” it does define the concept of “trade in services” to include the following four circumstances involving “the supply of a service:”  

·        From the territory of one member into the territory of any other member (cross-border services) 

·        In the territory of one member to the service consumer of any other member (consumption abroad) 

·        By a service supplier of one member, through commercial presence in the territory of any other member (commercial presence) 

·        By a service supplier of one member, through presence of natural persons of a member in the territory of any other member (presence of natural persons).¹¹  

These activities cover “any service in any sector except services supplied in the exercise of governmental authority.”¹²  The “supply of a service” includes the production, distribution, marketing, sale and delivery of a service.¹³  The standard classification list, annexed to the GATS, lists eleven broad sectors including environmental services such a sewage, disposal and sanitation.  

1.           Non-discrimination 

Under article II of the GATS, “with respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favorable than that it accords to like services and service suppliers of any other country.”  This provision is equivalent to the MFN clause contained in article I of the GATT, discussed above. 

                        2.             Exceptions 

The rules of the GATS are subject to the general exceptions contained in article XIV, which mirror the provisions of the GATT, article XX. Among these exceptions are measures “necessary to protect human, animal or plant life or health.” As with the GATT, the application of the exceptions is subject to the requirement that (1) they are not “applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail,” (2) they do not constitute a disguised restriction on international trade in services, and (3) they are “necessary.”¹⁴ Several WTO panel reports have ruled that GATT jurisprudence applies to the interpretation of equivalent provisions in the GATS.¹⁵ Consequently, analysis of the GATT principle of non-discrimination exceptions (see above) apply to relevant GATS provisions. 

III.       Trade Legality of Draft WEEE Directive

The draft WEEE Directive’s material bans would infringe the GATT and TBT Agreement.  Also, the draft WEEE Directive’s provisions restricting exports of used equipment for treatment outside the EC would infringe the GATT and the GATS.  Further, while it will not become clear until national implementation, the draft directive’s provisions inviting member states to promulgate their own product standards could result in further violations. 

            A.            Substance Bans 

1.            GATT 

By banning the use of a number of substances, the draft directive, article 4(4), in fact imposes an import ban on all products containing the disfavored materials.  An import ban constitutes a quantitative restriction prohibited by the GATT, article XI(1).  The draft directive’s bans would not be justifiable under the GATT’s article XX exceptions from the prohibition on such quantitative restrictions.

Quantitative Restriction 

In the explanatory memorandum accompanying the draft WEEE proposal, DG XI asserts that “an internal measure restricting or banning the use of a product cannot be assimilated to a quantitative restriction within the meaning of GATT Article XI.”¹⁶  Although the argument is not further developed, the claim that the draft WEEE Directive’s substance bans do not constitute quantitative trade restrictions seems to rest on two grounds: (1) that the measures are “internal,” and (2) that they ban the “use” of the product. 

DG XI’s assertion regarding the scope of the GATT, article XI, is wrong.  It is the established jurisprudence of GATT and WTO panels that the provisions of article XI are to be interpreted extensively.  The WTO has consistently interpreted GATT’s basic obligation on restrictive measures as applying to “provisions establishing conditions of competition.”¹⁷  For example, a panel report found that a US measure prohibiting the public distribution in the US of work consisting of copyrighted non-dramatic material in the English language was a quantitative restriction within the meaning of article XI.  As to the draft WEEE Directive’s substance restrictions applying to the “use” of products, DG XI has not explained the meaning and scope of this term.  However, it is arguable that “use” would include marketing, and therefore import, of products containing the banned substances within the EC.  Even if import of these products was not restricted, importers would not be able to sell them in the EC, which de facto constitutes a restriction and thus, a measure that “establishes conditions of competition.”  The substance bans therefore constitute a quantitative restriction within the meaning of the GATT, article XI.

Article XX Exceptions 

The draft directive sets the somewhat vague objective for the entire piece of legislation as minimizing “the risks and impacts to the environment associated with the treatment and disposal of end-of-life electrical and electronic equipment.”¹⁸  The question would then be whether the bans are justified, as the explanatory memorandum claims,¹⁹ under (1) article XX(b) as a measure “necessary to protect human, animal or plant life or health,” or (2) article XX(g) as a “measure relating to the conservation of exhaustible natural resources.”

Article XX(b) — Health Protection  

As noted above, panel practice has determined that a party invoking the article XX(b) exception must prove that (1) the policy is designed to protect human, animal or plant life or health, (2) the measures are necessary to fulfill the policy objective, and (3) the measures fulfil the requirements of the article XX chapeau. The draft WEEE Directive’s substance bans fail to fulfil the requirements for application of article XX(b) exception for the following reasons: 

·        The policy does not protect human, animal or plant health.  DG XI’s justification in banning the use of heavy metals is that: “[d]ue to their hazardous content electrical and electronic equipment cause important environmental problems during the waste management phase if not properly prevented.”²⁰  However, DG XI has not provided evidence that the use of these substances in electronic and electrical products poses a threat to human health or the environment, or that alternatives (if available) could eliminate such risks.  Furthermore, even if one assumed that the use of these substances were damaging to the environment, there is no evidence showing that their use in the electronics industry gives rise to higher or different risks that in other types of products.  If scientific risk assessments carried out under Community chemical legislation showed that significant health and environmental risks were posed by the banned substances, the Community should impose restrictions on the materials as they appear in all consumer and industrial products.  As is, the ban of their use exclusively in electronic products, without the backing of a scientific risk assessment, does not appear to be part of a policy designed to protect health and the environment. 

·        In the explanatory memorandum, DG XI cites a number of scientific studies carried out on the substances to be phased-out.²¹  While this “evidence” may at first sight seem voluminous, a closer look reveals that the group of studies falls short of a valid risk assessment to justify the draft WEEE Directive’s proposed substance bans.  The studies mentioned in the explanatory memorandum are not specifically devoted to the analysis of the risks posed by these substances in the waste stream.  Furthermore, DG XI has not found a single scientific study focusing primarily on risks posed by these substances as found in electrical or electronic waste.  Much of the proffered scientific evidence focuses instead on risks to workers in production plants — i.e., occupational health and safety.  As the draft WEEE Directive is not an occupational health and safety measure, this evidence is not relevant for the purposes of justifying measures aimed at minimizing risks arising from waste disposal.  

Take, for example, lead.  DG XI seeks support in the OECD Risk Reduction Monograph No. 1.²²  This report does not constitute a risk assessment on the risks posed by lead in the waste stream, and there is little in the study to justify the phasing out of lead in electronics.  The OECD monograph points out that it is difficult to assess accurately the composition and volume of post-consumer products disposed of in landfills or incinerators, as detailed sampling or monitoring data is not available.  However, in some countries where these estimates have been carried out, such as Germany, it has been found that thanks to collection and recycling schemes “the amount of lead in domestic and industrial waste streams is declining.”²³ According to the OECD study, “lead is one of the most recycled non-ferrous metals in the world,” and “post-consumer product scrap constitutes more than 80 per cent of the scrap supply for recycling.”²⁴  

·        The main concern with lead in the waste stream is the potential of drinking water contamination and thus ingestion by the population.  However, according to the OECD, “since elemental lead and lead compounds are stable, health concerns are minimal for a properly managed landfill with runoff and leachate controls.”²⁵  As for incineration, lead emissions from lead-containing materials presumably constitute a potential health risk.  However, the OECD opines that “lead emissions from combustible and non-combustible components of municipal solid waste can be controlled with 99 per cent or greater efficiency.”²⁶  The OECD report further reviews measures taken by OECD members to reduce risks from exposure to lead.  No OECD country has banned the use of lead in electronics as a means to counter-act a “potential” risk from the disposal of electronic goods.  Furthermore, in all of the European countries reviewed, the average concentration of lead and lead discharges to air, water and soil has decreased in recent years.  Thus, the OECD study (1) is not a valid risk assessment to support DG XI’s proposal to ban lead, and (2) in fact rebuts DG XI’s assertion that the risks posed by the disposal of lead-containing electronic products would require the phasing-out of this material from electronics.  

Given the lack of specific risk assessments, the Commission’s DG XI might seek to justify the phasing out of substances on the basis of an interpretation of the “precautionary principle.”  Indeed, the explanatory memorandum affirms that, “[d]ue to the inherent toxicity of these substances and the fact that they may reach the environment in a bioavailable form, associated risks are in any case substantial. It therefore seems appropriate to apply the precautionary principle.”²⁷  A recent judgement of the WTO Appellate Body on the Hormones Case, referring to the Sanitary and Phytosanitary (SPS) Agreement, examined this question.²⁸  According to the Appellate Body, the precautionary principle is not “a ground for justifying [sanitary and phytosanitary measures] that are otherwise inconsistent with the obligations of Members set out in particular provisions of that Agreement.”²⁹  Furthermore, “the precautionary principle does not, by itself, and without a clear textual directive to that effect, relieve a panel from the duty of applying the normal (i.e. customary international law) principles of treaty interpretation in reading the provisions of the SPS Agreement.”³⁰  These conclusions on the precautionary principle in respect to the requirements of the SPS Agreement are also applicable to similar provisions of the GATT and TBT Agreement.  Therefore, the precautionary principle may justify adoption of preventive measures if otherwise supported by scientific evidence; it may not be used as a “substitute” for the requirement to base trade restrictive measures on relevant risk assessments.  

The measures are not “necessary” to fulfill the policy objective.  Even if the policy goal were deemed legitimate, a trade restriction on all products containing the banned substances is not “necessary” to fulfill the environmental protection objectives.  The “necessity test” has become the crucial step in panel practice when examining the application of article XX(b).  Panels have interpreted the “necessity” requirement strictly.  So far, no panel called to apply article XX(b) has accepted the necessity of a measure otherwise inconsistent with other GATT provisions. 

The requirement of article XX(b) that exceptions to free trade rules are “necessary” has been interpreted as an obligation to choose the “least restrictive alternative.”  Hence, a contracting party may not justify a measure under article XX(b) “if an alternative measure which it could reasonably be expected to employ and which is not inconsistent with other GATT provisions is available to it.”³¹  Thus, the invoking party must prove that it has “exhausted all the options reasonably available … through measures consistent with the General Agreement.”³²  When a measure consistent with other GATT provisions is not available, a country is bound to use “among the measures reasonably available, that which entails the least degree of inconsistency with other GATT provisions.” In particular, panel practice has given special relevance to the existence of efforts to encourage international cooperative arrangements. 

According to the draft directive’s explanatory memorandum, “[a]ll measures in the proposed directive — phasing-out schedules …, etc. — have been designed in such a way as to minimize potential trade restrictions.  In fact, no alternative, less trade-restrictive measures are available to achieve the objectives of the Directive.”³³  The objective of the proposal, in respect to banning use of the substances, is arguably meant for “minimising the risks and impacts to the environment associated with the treatment and disposal of waste electrical and electronic equipment.”³⁴ In this context, “it is relevant to observe,” as the Appellate Body has pointed out, “that an import prohibition is, ordinarily, the heaviest ‘weapon’ in a Member’s armory of trade measures.”³⁵ Other less restrictive measures are conceivable as means to reduce risks posed by the banned materials: selective landfill bans, waste management regulation and enforcement recycling, eco-taxes, etc.   

First, a means to reduce disposal of heavy metals is to encourage recycling.  The draft WEEE Directive is in fact intended to do so by imposing collection obligations and ambitious targets for the recycling of electronic products.  Heavy metals such as lead are already recycled to high volumes and the technology for recycling is widely available throughout Europe.  The explanatory memorandum argues in favor of phasing-out certain substances, in particular brominated flame retardants, due to the environmental risks posed.³⁶  However, in respect of potentially damaging hazardous emissions to the air during recycling processes, DG XI admits that “[t]hese emissions could be significantly reduced by means of pre-treatment obligations.”³⁷  Such pre-treatment obligations are already included under the scope of the current draft for a WEEE Directive. 

Secondly, as mentioned above, the OECD has found that controlled landfill sites and incinerators reduce the risks posed by heavy metals to the point where health concerns are negligible.  It would thus appear that available less trade-restrictive measures would include enforcement of technical requirements for landfill sites and incineration plants, and selective landfill bans.  Indeed, the EC has recently adopted a Directive on Landfill³⁸ and is currently in the process of promulgating a Directive on Waste Incineration,³⁹ which will supplement existing European rules on waste disposal.  The explanatory memorandum recognizes that “[s]ignificant impacts could be prevented in those cases where WEEE is put in controlled landfills respecting environmentally sound technical standards.”⁴⁰  However, it observes that the practice of disposing waste in uncontrolled landfills still takes place in some EC countries (for example, Greece) and that Eastern European candidates for EC accession have not yet imposed equivalent landfill regulations.  These circumstances, however, only beckon EC legislation to ensure the environmentally sound functioning of landfills.  Indeed, the EC has not “exhausted” all the options reasonably available, as the new directives on landfill and incineration of waste have yet to be tested in their practical implementation. Further, the fact that a high standard of landfill and incineration control has been achieved in most European countries proves that this is a feasible enterprise and that “less-restrictive” measures are thus available to target the hypothetical risks posed by heavy metals at the disposal stage.  As for accession-candidate countries, their situation is of no relevance to the drafting of EC legislation in a manner that complies with the Community’s international obligations, given that these countries are not yet EC members.   

In conclusion, DG XI has provided no evidence that it has exhausted all alternatives available to it before resorting to a total import ban — arguably the most restrictive measure.  Furthermore, there is no evidence of efforts to encourage international cooperation on the matter.  On the contrary, OECD countries have not implemented substance bans to deal with potential problems posed by electronic waste, and OECD studies on this matter do not encourage the adoption of such measures.  Therefore, the substance bans do not appear to be “necessary” in relation to the draft directive’s policy goals and do not satisfy the requirements for the application of the article XX(b) exception. 

Article XX(g) — Conservation of Exhaustible Resources 

According to DG XI, trade restrictive substance bans could be justified under GATT, article XX(g) as measures “relating to the conservation of exhaustible natural resources.”⁴¹

A party invoking article XX(g) must demonstrate that: (1) the policy relates to the conservation of exhaustible natural resources, (2) the specific measures for which the exception is invoked are related to the conservation of exhaustible natural resources, (3) the inconsistent measures are made effective in conjunction with restriction on domestic production or consumption, and (4) the measures are applied in conformity with the requirements of the chapeau of article XX.⁴² The substance bans of the draft WEEE Directive fail to fulfill the requirements for the application of the article XX(g) exception for the following reasons. 

The substance bans do not fall within the range of measures covered by article XX(g). From the point of view of their effects on the conservation of natural resources, the draft directive’s substance bans have an extraterritorial effect.  Many electronics sold in Europe are produced elsewhere, or, even if produced in Europe, are produced from components and materials from elsewhere.  Imposing a substance restriction would not preserve natural resources in the Community, but rather would preserve the resources where they have been extracted, which in most cases is outside the Community.   

The Appellate Body Report in the Shrimp-Turtle case (mentioned by DG XI in the explanatory memorandum) did state that measures justified under the provision may affect jurisdictions outside that of the invoking country.⁴³  However, it also stated that “it is not acceptable, in international trade relations, for one WTO Member to use an economic embargo to require other Members to adopt essentially the same comprehensive regulatory program, to achieve a certain policy goal, as that in force within the Member’s territory.”⁴⁴ The extraterritoriality of a measure covered by article XX(g) may be justified only under exceptional circumstances.  It is understood that for a transboundary measure to be justified under article XX(g), four conditions must be met: 

·        The measure must be justified under exceptional circumstances (e.g., because the protected resources are migratory animals moving across jurisdictions) 

·        The measure must not be more trade restrictive than required to protect the globally-shared environmental resource 

·        The measure must be directly connected to the environmental objective 

·        The member must have made genuine efforts to enter into cooperative environmental agreements with other members.⁴⁵ 

The draft WEEE Directive’s substance bans do not meet these requirements for the following reasons:  (1) there are no exceptional circumstances that could justify the transboundary impact of measures banning the use of heavy metals in electronics; (2) an import ban is the most restrictive trade measure and DG XI has not showed that other less restrictive measures, i.e. encouraging recycling, are not available; (3) it is not at all clear how the measure relates to the conservation of natural resources; and (4) there is no evidence to date of attempts to cooperate on this matter with third countries before resorting to unilateral measures.  Thus, the extraterritorial effect of the substance bans, hypothetically aimed at the protection of third country’s resources, are not justifiable under article XX(g). 

The substance bans do not address the conservation of exhaustible natural resources.  WTO panel practice has determined that for a trade-restrictive measure to be justified under article XX(g), it has to be “primarily aimed” at the conservation of an exhaustible natural resource.⁴⁶  According to the draft WEEE Directive, its objectives are the prevention of waste, and minimizing the risks associated with the treatment and disposal of waste.  There is little evidence, if any, in the text of the draft directive to suggest that the substance bans are “primarily aimed” at the protection of natural resources.  Conversely, evidence is abundant that DG XI prepared the bans with a view principally towards reducing risks posed by the disposal in landfill and incinerators of consumer electronics.  Thus, it is not plausible to argue that the proposed substance bans are “primarily aimed” at the conservation of exhaustible natural resources, as required by article XX(g). 

2.         TBT Agreement 

The TBT Agreement, article 2.2, requires that technical regulations, such as the draft directive’s bans, do not create unnecessary obstacles to international trade.  The draft WEEE Directive substance bans do not meet the requirements of the TBT Agreement.

Technical Regulations 

In the explanatory memorandum to the draft WEEE Directive, DG XI notes that “a measure banning the use of a product or a substance having detrimental effects on human health or the environment is not a technical regulation subject to the TBT Agreement.”⁴⁷  Yet whether a substance is detrimental for health or the environment is irrelevant to the question of whether substance bans are “technical regulations” within the meaning of the TBT Agreement. 

The TBT Agreement, Annex I.1, defines a “technical regulation” as a “document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory.”  To this date, no WTO panel has examined the scope of this definition. 

The EC’s own Technical Standards Directive defines “technical regulation” as “technical specifications [i.e. a specification contained in a document which lays down the characteristics required of a product] … including the relevant administrative provisions the observance of which is compulsory, de jure or de facto.”⁴⁸  This definition is remarkably similar to that contained in the TBT Agreement.  The Community has consistently interpreted that substance restrictions are specifications laying down product characteristics, thus substance bans constitute “technical regulations.”  For example, on February 1999, the Danish government notified to the Commission as a technical regulation a draft order banning the use of lead from a number of applications.⁴⁹  There is little reason to believe that this interpretation is not defendable in the context of the TBT Agreement.  A measure banning the use of a particular substance in electrical and electronic products is quite clearly a measure “laying down product characteristics…with which compliance is mandatory” within the meaning of the TBT Agreement. 

By defending that the substance restrictions do not constitute technical restrictions to trade, DG XI contradicts its own assertion, expressed in the recitals of to the WEEE Directive and elsewhere, that “diverging national approaches as to standards for ‘design for recycling,’ including the phase-out of specific substances, constitute technical barriers to the trade of electrical and electronic equipment.”⁵⁰

Justification 

Under the TBT Agreement, a trade-restrictive technical regulation is justified if it satisfies the following conditions: (1) it fulfills a legitimate objective such as “the protection of human health or safety, animal or plat life or health, or the environment,” (2) it is not more trade-restrictive than “necessary” to fulfil the legitimate policy goal, and (3) it takes account of risks non-fulfillment would create.  The draft WEEE Directive’s substance bans do not meet these requirements for the following reasons: 

·        They do not fulfill a legitimate objective.  As noted above, DG XI has not provided adequate evidence that use of these substances in electronic and electrical products poses a threat to human health or the environment.  Furthermore, even if one assumes that use of these substances is damaging to the environment, there is no evidence that their use in the electronics industry gives rise to higher or different risks that in other industries.  DG XI has thus failed to demonstrate that the measures fulfill a legitimate objective such as the protection of human health or the environment.  

·        The bans are more restrictive than necessary to fulfill the legitimate objective.  Even if the policy goal were deemed legitimate, a trade restriction on all products containing the banned substances is not “necessary” to fulfill the environmental protection objectives.  The concept of “necessity” in article 2.2 of the TBT Agreement must be interpreted in the same way as in the GATT, article XX(b), as a requirement to choose the “least restrictive alternative.” Consequently, the arguments advanced in respect to legality of the measure under the GATT are equally valid to the assessment of its legality under the TBT Agreement, article 2.2.  A technical regulation is more restrictive than necessary when the objective can be achieved with less disruption to trade. The Commission’s DG XI has not demonstrated that it has exhausted all alternatives available, before imposing an import ban — the most trade-restrictive measure possible.  Furthermore, it has not encouraged international negotiations on the issue.  Therefore, the substance bans appear to be more trade-restrictive than necessary to achieve the policy goals. 

·        The substance bans are not proportional to the objectives pursued by the policy.  Article 2.2 of the TBT Agreement requires that account is taken of “the risks non-fulfillment would create,” when adopting a technical regulation that affects trade.  Under this provision, even if there are no alternative measures available, a measure could still be considered more restrictive than necessary when its effects on trade are disproportionate to the risks in question.  To assess these risks, one must take into consideration all available scientific evidence and technical information, related processing technology and the intended end-uses of the products.⁵¹  DG XI has provided no substantial evidence on how the absence of the ban would risk the fulfillment of its policy to prevent waste and minimize the risks to the environment associated with the disposal of electrical and electronic equipment.  Furthermore, DG XI has carried out no specific and exhaustive scientific or technical study on available alternatives to the banned substances.  An assessment of the “risks of non-fulfillment” would require a systematic evaluation of the environmental, health and safety risks and/or advantages of possible substitutes.  DG XI has failed to provide this evidence.  The substance bans therefore appear disproportionate in relation to the objectives of the draft WEEE Directive.

Treatment Operations           

The draft WEEE Directive, article 6, would require that electrical and electronic equipment be treated prior to re-use, recovery or disposal.  Treatment must include, at a minimum, “the removal of all fluids and a selective treatment according to Annex III.”⁵²  Establishments undertaking treatment operations must obtain a waste permit and must comply with the Annex IV technical requirements.  These requirements include the use of waterproof covering in sites for storage, balances to measure the weight of the treated waste, containers for storage of batteries, PCB and PCT and hazardous substances, and equipment for the treatment of water, including rainwater.  Further permits would take into account conditions necessary for compliance with the recovery targets set by article 7. 

The draft directive would allow used equipment to be sent to treatment by handling waste to treatment facilities outside the EC, subject to compliance with the EC Shipment of Waste Regulation.⁵³  However, producers may “deliver” the equipment only to facilities which are “certified under equivalent conditions as those set out in this article [6].”⁵⁴  This requirement would violate the GATT, articles I and XI, and the GATS, article II.  First, the requirement would constitute an illegal export ban.  Secondly, the provision would result in discrimination among GATT contracting parties, and among service suppliers from GATS contracting parties.

GATT 

A.            Quantitative Restriction  

The draft WEEE Directive bans all exports of waste for treatment to countries where treatment facilities do not comply with the conditions imposed by the draft directive itself for establishments within the Community.  An export ban constitutes a quantitative restriction prohibited by the GATT, article XI(1).  The ban would not be justified under the GATT, article XX(b), as a measure to protect human, animal or plant health, for the following reasons. 

·        The measure does not fall within the range of measures covered by article XX. According to the explanatory memorandum, the justification for this measure is that exporting waste for treatment in third countries “should not lead to shipments of WEEE to non-EU countries where no or lower treatment standards than in the EU exist.  Accordingly, producers shall deliver WEEE only to those establishments and undertakings, which comply with the treatment and recycling requirements set out in the Proposal.  Producers shall verify the compliance with this Article through adequate certifications.”⁵⁵ 

·        The draft directive’s export ban has an extraterritorial effect.  By requiring that treatment facilities outside the EC comply with EC legislation and policy preferences, the draft WEEE Directive would be “protecting” the environment of third countries.  Imposing a ban on waste exports for treatment would not prevent hypothetical environmental risks within the EC, but rather in those countries where treatment operations are carried out.  However, as explained above, a country may not invoke the exceptions of article XX to justify measures that affect environmental and health protection outside its own jurisdiction.  

B.            Discrimination 

The export ban on waste would not apply to EC exports of WEEE towards countries where facilities comply with equivalent requirements to those imposed by the draft WEEE Directive.  The directive would thus discriminate in favor of countries adopting equivalent standards to those of the EC, in contravention of the GATT, article I.  Under the GATT, article I, any trade advantage granted to products from one country must be automatically granted to products from all other contracting parties.  For the reasons outlined above, the exception provided for in the GATT, article XX(b), would not justify violation of one of GATT’s substantial obligations. 

C.        GATS 

GATS contracting countries outside of the EC supply waste-treatment services to consumers in the EC. This activity constitutes one of the categories of trade in services (consumption abroad) within the meaning of the GATS.⁵⁶  The draft WEEE Directive, by prohibiting European and other companies from making use of the waste treatment services provided for in other GATS contracting parties, affects trade in services, and thus falls within the scope of the GATS. 

The draft directive would exclude some countries from the export ban, on the grounds that their treatment facilities comply with equivalent conditions to those established by the draft WEEE Directive.  This would contravene the GATS, article II. The proposed measure discriminates in favor of GATS countries that provide services for the treatment of waste originating in the EC, while service suppliers from other third countries are precluded from doing so. 

The analysis of the equivalent GATT provisions (namely article I and the article XX exceptions) are equally applicable here. As noted before, the jurisprudence on the interpretation of the GATT applies to the interpretation of parallel GATS provisions.

National Design and Material Choice Rules 

The draft WEEE Directive’s provisions concerning national design and material choice measures may not be illegal, for they are merely instructions to member states to take their own product-standards measures.  However, these provisions are an invitation to further trade disputes, for any such national product standards will run the risk of trade law violations.  Furthermore, article 7(6), inviting member states to “encourage producers to integrate an increasing quantity of recycled or used material in electrical and electronic equipment” and asking that member states “take this requirement into account with regard to national legislation on public procurement,” could result in infringements of the WTO Agreement on Public Procurement.

Nullification and Impairment 

The provisions of the draft WEEE Directive would nullify or impair trade benefits accruing other contracting parties of article XXIII(1)(b) of the GATT.  The European Community has made concessions over the past fifty years on most products covered by the draft directive.  Furthermore, under the Information Technology Agreement, negotiated in the context of the Uruguay Round, the European Community committed to the elimination of trade barriers on a number of products that would be affected by the draft WEEE Directive, such as computers and semi-conductors. 

These tariff concessions have been agreed in successive tariff negotiations.  The measures that would be introduced by the draft WEEE Directive affecting these products could not be anticipated by other GATT contracting parties at the time when tariff concessions were made: the first draft proposal had not yet been produced when the Uruguay Round negotiations ended.  Any provisions of the draft WEEE Directive that affect the import of products on which tariffs and other GATT concessions have been agreed could impair the benefits of other GATT contracting parties.  The substance bans, the recycled content rule, and the national design and material choice rules would substantially alter conditions of competition in the Community so that third countries’ trade benefits are impaired or nullified altogether. 

¹ Draft WEEE Directive, art. 1.

² 1984 Panel Report on “Japan-Measures on Imports of Leather,” L/5623, adopted on May  15/16, 1984, 31S/94.

³ 1994 Panel Report on “United States-Restrictions on Imports of Tuna,” DS29/R, not adopted, at par. 5.26.

⁴ See GATT/WTO Dispute Settlement Practice Relating to Article XX, Paragraphs (b), (d) and (g) of GATT, Note by the Secretariat, WT/CTE/W/53/Rev.1, Oct. 26, 1998, at par. 5.

⁵ 1996 Panel Report on “United States-Standards for Reformulated and Conventional Gasoline,” WT/S2/9, adopted on May 1996, at par. 6.20 and 1994 Panel Report on “United States-Restrictions on Imports of Tuna,” DS29/R, not adopted, at par. 5.29.

⁶ 1996 Panel Report on “United States-Standards for Reformulated and Conventional Gasoline,” WT/S2/9, adopted on May 1996, at par. 6.35.

⁷ GATT, art. XX.

⁸ 1998 Panel Report on “Japan- Measures Affecting Consumer Photographic Film and Paper.” WT/DS44/R, adopted on 1998, at par. 10.76.

⁹  TBT Agreement, art. 2.5.

¹⁰ GATS, art. I. In parallel with similar provisions in the GATT, the GATS applies to all measures “which may adversely modify the conditions of competition.” (1997 Panel Report on “European Communities - Regime for the Importation, Sale and Distribution of Bananas,” WT/DS27, adopted on Sep. 25.)

¹¹ GATS, art. I(2).

¹² GATS, art. I(3)(b).

¹³ GATS, art. XXVIII(b).

¹⁴ GATS, art. XIV.

¹⁵ 1997 Panel Report on “European Communities - Regime for the Importation, Sale and Distribution of Bananas,” WT/DS27, adopted on Sep. 25, 1997.

¹⁶ Draft WEEE Directive, Explanatory Memorandum, at p. 23.  As support for this argument the memorandum refers to the EC submission to the WTO panel on Asbestos (Canada v. the EC), as yet a restricted document.  It may be worth noting that the Canadian submission (also a restricted document) argues that the French ban on asbestos is a quantitative restriction violating the GATT, article XI (See European Communities - Measures affecting Asbestos and Products Containing Asbestos, Request for the Establishment of a Panel by Canada, WT/DS135/3, Oct. 9, 1998).

¹⁷ 1990 Panel Report on “European Economic Community - Payments and Subsidies to Processors and Producers of Oilseeds and Related Animal-Feed Proteins,” L/6627, adopted on Jan. 25, 1990, 37S/86, at par. 150.

¹⁸ Draft WEEE Directive, art.1.

¹⁹ Id., Explanatory Memorandum, at p. 23.

²⁰ Id., at p. 4.

²¹ These studies include: OECD, Risk Reduction Monograph No. 1 Lead - Background and National Experience with Reducing Risk, OECD Paris, 1993; OECD, Risk Reduction Monograph No. 5 Cadmium, Background and National Experience with Reducing Risk, OECD Paris, 1997; Järup, Lars and others, Health Effects of Cadmium Exposure - A Review of the Literature and Risk Estimate, Scand J Work Environ Health 98; Vonkeman, Gerrit H., Environmental Impacts of Cadmium, 1995; Parkman, Helena and others, Cadmium in Sweden - Environmental Risks, 1997; Brenner, Knies, BASF, Formation of Polybrominated Dibenzofurans (PBDF’s) and Dioxins (PBDD’s) during Extrusion Production of a Polybutyleneterephtalate (PBTP), Glassfibre Resin Blended with Decabromodiphenylether (DBDPE)/Sb2O3. Product and Workplace Analysis, 1986; Sellström, Ulla, Polybrominated Dyphenyl Ethers in the Swedish Environment, Stockholm 1996; Sjödin et al., Flame Retardants Exposure - Plybrominated Diphenyl Ethers (PBDEs) in Blood from Swedish Workers, Stockholm, 1999; and OECD Risk Reduction Monograph No. 3, Selected Brominated Flame Retardants - Background and National Experience with Reducing Risk, OECD Paris 1994.

²² OECD Risk Reduction Monograph N°1, Lead (as above).

²³  Id., at p. 62.

²⁴  Id., at p. 60.

²⁵  Id., at p. 63 (emphasis added).

²⁶  Id. (emphasis added).

²⁷  Draft WEEE Directive, Explanatory memorandum, at p. 37.

²⁸ 1998 Appellate Body Report on “European Community - Measures concerning Meat and Meat Products,” WT/DS26/AB/R, adopted on Jan. 16, 1998, 37S/86.

²⁹ Id. at par. 124

³⁰  Id.

³¹ 1990 Panel Report on “Thailand - Restrictions on Importation of and Internal Taxes on Cigarettes,” DS10/R, adopted on Nov. 7, 1990, 37S/200.

³² 1991 Panel Report on “United States-Restrictions on Imports of Tuna,” 39S/155, not adopted, at par. 5.27.

³³  Draft WEEE Directive, Explanatory Memorandum, at p. 23.

³⁴ Draft WEEE Directive, art. 1.

³⁵ 1998 Appellate Body Report on “United States-Import Prohibition of Certain Shrimp and Shrimp Products,” WT/DS58/AB/R, circulated on October 12, 1998, at par. 171.

³⁶ Draft WEEE Directive, Explanatory Memorandum, at p. 12-13.

³⁷ Id., at p. 13

³⁸ Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste, O.J. L 182 (July 16, 1999).

³⁹ Amended proposal for a European Parliament and Council Directive on the incineration of waste, COM (1999) 330 final (July 12, 1999).

⁴⁰ Draft WEEE Directive, Explanatory Memorandum, at p. 11.

⁴¹ Id., at p. 23.

⁴² 1996 Panel Report on “United States-Standards for Reformulated and Conventional Gasoline,” WT/S2/9, adopted on May 1996, at par. 6.35.

⁴³ In reaching this conclusion, however, the Appellate Body gave particular importance to the fact that the protected turtles were migratory species that moved across jurisdictions, which could justify a rule having an extraterritorial dimension.

⁴⁴ 1998 Appellate Body Report on “United States-Import Prohibition of Certain Shrimp and Shrimp Products,” WT/DS58/AB/R, circulated on October 12, 1998, at par. 164.

⁴⁵ European Communities’ submission to the Shrimp-Turtle Appellate Body Report, 1998 Appellate Body Report on “United States-Import Prohibition of Certain Shrimp and Shrimp Products,” WT/DS58/AB/R, circulated on October 12, 1998, at par. 68.

⁴⁶ 1988 Panel Report on “Canada-Measures Affecting Exports of Unprocessed Herring and Salmon,” 35S/98, adopted on March 22, 1988, at par. 4.6.

⁴⁷ Draft WEEE Directive, Explanatory Memorandum, at p. 23.  DG XI again supports this assertion on the EC submission to the Asbestos panel.  In its submission, Canada argues that measures banning use of asbestos violate the provisions of the TBT Agreement.

⁴⁸ Directive 98/34/EC of the European Parliament and of the Council Laying Down a Procedure for the Provision of Information in the field of Technical Standards and Regulations, June 22, 1998, O.J. L 204 (July 27, 1998), art. 1.

⁴⁹ It is worth noting that the Danish order is still under examination by the Commission services following complaints from some EC member states (namely Austria, Germany and the UK) arguing that the ban on lead was not based on specific risk assessments and thus constituted an unjustified restriction to trade.

⁵⁰ Draft WEEE Directive, 6th Recital.  See also Explanatory Memorandum at p. 5 and 20.

⁵¹ TBT Agreement, art. 2.2.

⁵² Id. , art. 6(1).

⁵³ Council Regulation 259/93 of 1 February 1993 on the supervision and control of shipments of waste within, into and out of the European Community, O.J. L 030, 6.2.1993, p. 1.

⁵⁴ Draft WEEE Directive, art.6(5).

⁵⁵ Id., Explanatory Memorandum, at p. 48.

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