World Trade and the Environment: The CAFE Case

This Note examines the CAFE case in the context of the debate over trade and the environment. It argues that the panel decision has aspects that support the notion that the international trading system can be compatible with efforts to protect the environment, and also has aspects that demonstrate that these do indeed clash, limiting efforts to protect the environment. Part I of this Note describes the CAFE law and places it in the context of domestic and international efforts to prevent global warming. Part II examines the panel’s decision, arguing that the panel acted well within the scope of past practice in interpreting Article III, and notes how that practice can result in a situation in which imported products are given better treatment than domestic products. Part II also examines the panel’s findings with regard to the exceptions under Article XX. It points out that the panel’s suggestion that part of the law that violates Article III could be saved represents an important breakthrough in GATT panel interpretation. Part III of this Note describes what the CAFE law would look like if the United States were to make it compatible with the GATT. This demonstrates that if the United States had to change the law to comply with the panel’s recommendation, the CAFÉ law might not survive. Part IV presents a proposal to change GATT interpretation of Article XX(g). It argues that previous panels have interpreted the exception too narrowly because they have examined individual provisions of the law in isolation from the overall effect. By examining the overall effect of the law on trade – and providing that it does not discriminate on balance – panels can make the exception viable while protecting against protectionism.