Anti-deforestation npr-PPMs and Carbon Border Measures: Thinking About the Chapeau of Article XX GATT in Times of Climate Crisis

Abstract

This article enquires into the extent to which the elusive Chapeau of Article XX of the General Agreement on Tariffs and Trade (GATT) may constrain the ability of regulating Members to tackle environmental externalities via unilateral regulatory action. It employs an analysis of recent European Union regulatory measures to assess the rationale of different ‘indicators’ of compliance with the Chapeau and unpack their implications. The article illustrates that a good faith–centred interpretation of the Chapeau criteria helps identify aspects in the practical application of a measure that may afford protection to domestic products or result in country-based discrimination. It also preserves the margins of action of regulating Members and can improve the regulatory design and environmental effectiveness of unilateral measures. An expansive interpretation of ‘situational’ discrimination and ‘coercion’, by contrast, captures significant distortions of competitive opportunities between ‘like’ products, broadening market access and stretching the Chapeau beyond a good faith–centred focus. Furthermore, this interpretative approach can indirectly impact the regulatory design of the measures and undermine their environmental effectiveness. Against this backdrop, the article argues that the dispute settlement organs should carefully delimit the scope of the Chapeau conditions and adhere to a good faith–centred interpretative approach.