Reformulated Gasoline

Reformulated gasoline in Global Commerce Policy

In this regard, reformulated gasoline is: a case brought before the WTO by Brazil and Venezuela against the United States in 1995. The entries on trade policy are here. In 1990 the United States Congress directed the Environmental Protection Agency (EPA) to issue new regulations on the composition and emissions effects of gasoline through an amendment to the Clean Air Act (CAA) of 1963. The objective was to improve the air quality in the most polluted areas of the country by reducing vehicle emissions of toxic air pollutants and ozone-forming volatile organic compounds. The CAA roughly divides the United States into two parts: nine large heavily polluted areas accounting for about 30% of the gasoline market where only “reformulated gasoline” may be sold, and the rest of the country where “conventional gasoline” may be sold. Both types of gasoline have prescribed compounds, the difference being that certain components are not permitted in reformulated gasoline. The entries on trade policy are here. Additionally, the rules ensure that harmful components not permitted in reformulated gasoline are not diverted into conventional gasoline. Brazil and Venzuela complained that these rules discriminated against imported gasoline, especially if it originated from producers that had entered the market more recently. The panel concluded that imported and domestic gasoline were like products. The entries on trade policy in the Encyclopedia are here. Under the baseline establishment method, imported gasoline was effectively prevented from enjoying the same favourable sales conditions as were given to domestic gasoline through an individual baseline tied to the producer of a product. The entries on trade policy are here. Imported gasoline was therefore treated less favourably than domestic gasoline. The most extensive part of the panel’s findings concerned the consistency of the gasoline rule with GATT Article XX (General Exceptions). The panel noted the United States argument that air pollution, in particular ground-level ozone and toxic substances, presented health risks to humans, animals and plants, but it did not consider that the methods used by the United States were necessary to achieve the aims of the gasoline rule. The United States had not shown that the same aims could not be achieved by measures consistent with the GATT. The panel then went on to consider the United States arguments concerning Article XX(d). This provision permits WTO members to suspend their obligations under the GATT to the extent that is necessary to enforce legislation otherwise consistent with the GATT. The entries on trade policy are here. It observed that if the system of baselines was by itself consistent with the GATT, the United States scheme might constitute a law or regulation “not inconsistent” with the GATT. The entries on trade policy are here. It had found, however, that discrimination between imported and domestic gasoline did not secure compliance with the baseline system, a necessary aspect of Article XX(d). The methods employed were not an enforcement mechanism. The entries on trade policy are here. As far as Article XX(g) (conserving an exhaustible natural resource) was concerned, the panel declined to see a direct connection between less favourable treatment of imported gasoline that was chemically identical to domestic gasoline, and the objective of improving air quality in the United States. Hence it could not be said that the measures applicable to imported gasoline were primarily aimed at the conservation of natural resources. The United States would be free to regulate for whatever air quality it wished to obtain through the use of non-discriminatory conservation policies. The United States appealed against this decision. The Appellate Body found in favour of the United States on some technical aspects of the panel’s decision, in particular that the panel should have considered whether United States regulations on conventional and reformulated gasoline could be justified under Article XX(g) of the GATT, but it upheld the view that the United States measures were not consistent with the national treatment principle. See also general exceptions.[1]

Reformulated gasolinein the wold Encyclopedia

For an introductory overview on international trade policy, see this entry.

Resources

Notes and References

1. Dictionary of Trade Policy, “Reformulated gasoline” entry (OAS)

See Also