Jean Monnet Center at NYU School of Law


IV. The Essence/Application Dichotomy

In analyzing ETMs' compatibility with the WTO, the choice of "trade-off devices" is not the only important issue. The AB&P's posture vis-à-vis ETMs also is also influenced by other factors such as the essence/application dichotomy and the allocation of burden of proof. In this Chapter, we analyze the essence/application distinction that the AB&P has made.

The AB&P have elucidated that the objects of the individual paragraphs of GATT Article XX are measures as a gestalt and those of the chapeau are applications of the measures. In Gasoline, the AB upheld the baseline establishment rule of the U.S. finding that the measure is "primary aimed at" the preservation of clear air. However, in its chapeau analysis the AB denounced the application of the U.S. measure, noting that the application was discriminatory against foreign refiners and the discrimination could have been reasonably avoided.196 In Shrimp/Turtle, the AB found that there was a close relationship between the purpose of sea turtle protection and the contents of Section 609.197 The AB criticized the application of Section 609 through the 1996 guidelines together with administrative practice, noting that it resulted in unjustifiable and arbitrary discrimination.198 In its chapeau analysis, the AB emphasized the legitimacy of Section 609 on the one hand, and the unjustifiable and arbitrary character of its administrative implementation on the other hand.199 In Bovine Hide, the Panel found that, "in their general design and structure", the Argentinean measures, the collection of income and value-added taxes upon importation of goods, were "necessary" for securing compliance with the Argentinean taxation laws.200 However, the application of measure resulted in "unjustifiable discrimination" since the government could have reimbursed forgone interest to importers.201 Thus, we can clearly see a general trend in which ETMs satisfy the requirement under individual paragraphs and then are struck down under the chapeau analysis. In other words, as mentioned above, when the object of a test analysis is a measure as a whole, as opposed to those components which cause deleterious effects on international trade, the test is inclined to be more deferential to the measure concerned.

Furthermore, the essence/application dichotomy limits the scope of analysis in the chapeau scrutiny. What a complaining party can do in the chapeau analysis is to argue that the measure could have been applied so that it would be less harmful to trade. But it cannot insist that there are less trade restrictive measures than the measure actually invoked. For example, in Gasoline, the AB condemned the U.S by finding that the baseline establishment rule could be applied less trade restrictively by cooperating with the Venezuelan Government or applying the statutory baseline to both domestic and foreign refiners.202 The AB did not mentioned other schemes which could prevent air pollution and could be inherently less trade restrictive than the baseline establishment rule (for example subsidies). The AB scrutiny was based on the presumption of the validity of the baseline establishment rule under the GATT.

Moreover, the essence/application dichotomy renders the AB&P's findings more acceptable for parties whose ETMs are struck down by the AB&P. This acceptability is exemplified by the response of Barshefsky, the U.S. Trade Representative at that time, to the Appellate Body Report in Shrimp/Turtle. After the issuing of the Shrimp/Turtle Panel decision, in which the Panel struck down the U.S. measure as a "threat to the multilateral trading system", Barshefsky remarked, "we believe that the WTO Panel reached the wrong decision".203 On the other hand, Barshefsky responded to the Appellate Body decision as follows:

The Appellate Body has rightly recognized that our Shrimp-Turtle law is an important and legitimate conservation measure, and not protectionist.... The Appellate Body report does not suggest that we weaken our environmental laws in any respect, and we do not intend to do so. We will evaluate our options in light of what best achieves our firm objective of protecting endangered sea turtles.204

By so stating, the U.S. clearly pronounced its intent to implement the Shrimp/Turtle findings. As this example shows, the essence/application dichotomy has the function of making the AB&P's decision more acceptable for losing parties.

In sum, the essence/application dichotomy would be able to enhance the perceived legitimacy205 of the WTO dispute settlement process by avoiding denying environmental measures completely and rendering the findings more acceptable for the parties and environmentalists.206

The essence/application dichotomy functions in a similar way as the idea/expression dichotomy in the U.S. copyright law does. Under the U.S. copyright law, as Section 102 (b) of the 1976 Copyright Act provides, only expressions, as opposed to the idea, are copyrightable.207 Some considers that the idea/expression dichotomy serves "as a means of balancing the public's interest in stimulating creative activity, as embodied in the Copyright Clause, against the public's need for unrestrained access to information", even though this point of view has never been considered by the U.S. Supreme Court.208 The essence/application dichotomy also works for balancing the regulatory autonomy of measure-imposing countries and the trade interests of other countries. By expanding the scope of "application", the regulatory autonomy of WTO Members would be more respected and vice versa.

The difficult part of the essence/application dichotomy is how we distinguish between a measure as such and the application of the measure. For example, in Shrimp/Turtle, the AB thought of Section 609 as the "measure" in issue and its guidelines associated with administrative prabctice as the "application". However, it would also have been possible to consider a "country-by-country" import ban, as opposed to a "shipment-by-shipment" import ban, as the "measure" of the case by "expanding" the domain of "measure" just a little.209 If the AB had considered it in this way, the "measure" could have not been regarded as "relating to" sea turtle protection and could have not fallen under the scope of GATT Article XX (g) because a "country-by-country" import ban was "difficult to reconcile with the declared policy objective of protecting and conserving sea turtles."210 In sum, the distinction between the essence and the application of a measure is inherently arbitrary.211, 212

The idea/expression dichotomy under the U.S. copyright law also has the same problem: "the most challenging aspect of applying the idea-expression dichotomy is determining where to draw the line between idea and expression".213 Judge Hand stated that "the level of abstraction" is the key factor distinguishing idea and expression:214 the higher the level of abstraction of a thing, the closer it is to the idea of the thing. This "level of abstraction" approach could be utilized for the essence/application distinction: the more general a policy option is, the closer to a "measure" it is. But how can the AB&P determine the appropriate "level of abstraction" at which to draw the line? This arbitrariness in the border between essence and application renders the findings of the AB&P somehow unpredictable.

However, since the idea/expression dichotomy has existed for more than one hundred years despite the value-laden arbitrariness of the distinction, the arbitrariness itself could not be the single reason why the essence/application dichotomy should be discarded if there exist certain advantages in keeping the dichotomy. Furthermore, it should be noted that, in any case, regardless of the findings with respect to the domains of "measure" and "application", all the trade measures have to be subject to the chapeau analysis so as to be justified under GATT Article XX. The task of showing compatibility with the chapeau requirement is not an easy task for defending parties to satisfy, as the precedents such as Gasoline, Shrimp/Turtle, and Bovine Hide show. It is not very likely that the measures which would be struck down if there were no essence/application dichotomy would be upheld under the chapeau analysis. Therefore, the harms derived from the arbitrariness of the essence/application would be less significant than those derived from the arbitrariness of the idea/expression dichotomy, which is one of the critical factors when deciding whether copyright protection is granted.

In conclusion, the essence/application dichotomy has certain benefits for enhancing the legitimacy of the WTO Dispute Settlement System in the context of a GATT Article XX analysis. In spite of the inherently arbitrary nature of the essence/application distinction, these benefits are likely to exceed the costs derived from the ambiguousness of the border between the essence and the application of a measure.

196 See Gasoline AB Report, supra note 14, at 15, 22-27.

197 See Shrimp/Turtle AB Report, supra note 15, at para. 135-142.

198 See id. at para. 161-186.

199 See id.

200 See Bovine Hide, supra note 42, at para. 11.305-7.

201 See id. at para. 11.316-328.

202 See Gasoline AB Report, supra note 14 at 22, 25, and 26.

203 See Joseph Robert Berger, note, Unilateral Trade Measures to Conserve the World's Living Resources: an Environmental Breakthrough for the GATT in the WTO Sea Turtle Case, 24, Colum. J. Envtl. L. 355, footnote 77 (1999).

204 See id. at 371.

205 "Legitimacy" here means a consequential one which is gained through the the activities of the AB&P when entities other than the AB&P accept the results of activities as appropriate. It does not mean a procedual one, namely democratic legitimacy.

206 Weiler points out that there are two dimensions to the legitimacy of the WTO dispute settlement system: "internal" legitimacy which is perceived by "the WTO itself and its principal institutional actors" such as the Delegates and the Secretariat and the AB&P, and "external" legitimacy which is perceived by "the universe outside the formal Organization" such as Members' constitutional organs (for example, Parliaments) and NGOs. See Joseph. H. H. Weiler, The Rule of Lawyers and the Ethos of Diplomats: Reflections on the Internal and External Legitimacy of WTO Dispute Settlement, Harvard Jean Monnet Working Paper No.9/00, 3-4 (2000), available at <> (visited April 26, 2001). According to Weiler, there is a kind of zero-sum game relationship between the external and internal legitiamacies: the process of internal legitimization is done at the price of undermining the external legitimacy. See id. at 4. In this regard, we can consider the essence/application dichotomy as a rare case in which the external and internal legitimacies are simultaneously enhanced; as a result of the introduction of the essence/application dichotomy, the decisions of the AB&P become more acceptable for the outside world and complete "victories " or "defeats" for one of the parties are avoided. See id at. 8 (stating that "in talking to panelists of [the old GATT era] one gets...the impression, difficult to prove empirically, of an ethos which favored 5:4 outcomes rather than 9:0"). By the same token, it is also possible to say that the essence/application dichotomy is able to enhance legitimacy despite its nature as a "standard". See Trachtman supra note 163 (noting that a standard, a law which does not, in advance, specify in detail the conduct required or proscribed, normally has to suffer higher costs of the lack of legitimacy than a rule, a law which specifies the content in detail ex ante).

207 See 17 U.S.C. A7 102 (b) (providing that "in no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery regardless of the form in which it is described, explained, illustrated, or embodied in such work"). The idea/expression dichotomy originated in a U.S. Supreme Court decision in 1879. See Baker v, Selden 101 U.S. 99, 105 (1879) (finding that "the description of [an] art in a book, though entitled to the benefit of copyright, lay no foundation for an exclusive claim to art itself.").

208 Miller v. Universal City Studio, 650 F. 2d 1365, 1371 (CA5 1981). See also Sid and Marty Krofft Television v. McDonald's Corp., 562 F.2d 1157, 1170 (9th Cir. 1977); Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 626 F. 2d 1171, 1178 (5th Cir. 1980) (Brown J. concurring). With regard to the social costs involved in the grant of copyright to ideas, see William M. Landes and Richard A. Posner, An Economic Analysis of Copyright Law, 18 J. Leg. Stud. 325, 344-53 (1989).

209 See Trachtman, supra note 163, at 362 (pointing out that, in Shrimp/Turtle, the AB could have found that the U.S. measure did not fall within the scope of Article XX (g) since the AB could have construed the U.S. measure as aimed at changing the exporting countries' policy, rather than at directly protecting turtles).

210 See Shrimp/Turtle AB Report, supra note 15, at para. 165.

211 Another possible criticism of the essence/application dichotomy from a textualistic viewpoint is its inconsistency with the interpretation of "applied" in GATT Article III. In the context of GATT Article III:2, second sentence, the AB&P interpretation states that the objects of the inquiry about whether dissimilar taxation of the directly competitive or substitutable imported and domestic products is " as to afford protection" are "the design, architecture, and structure of" the taxation in question. See Pisco AB Report, supra note 101, at para. 66. On the other hand, in the context of GATT Article XX, the AB&P have strictly distinguished "the general design of a measure" from its application. See Shrimp/Turtle AB Report, supra note 15 at para. 115-6. The AB&P have never provided the reason why they give different meanings to the word "applied" in the contexts of Article III:2 and Article XX.

212 212 With regard to the introduction of the essence/application dichotomy to the SPS Agreement and the TBT Agreement, as mentioned above, in the analysis of Article 5.5 and 5.6 of the SPS Agreement in Hormones, Salmon, and Apple, the AB&P did not seem to be aware of the distinction between measures as such and the application of measures even though a measure itself seemed to be the object of analysis. There are two possible justifications for not introducing the essence/application distinction into the SPS Agreement and the TBT Agreement. One is the difference of the structures of the provisions in GATT Article XX, on the one hand, and in the SPS and TBT Agreements, on the other hand. GATT Article XX has a two-tier structure and the AB&P have stated that the function of the chapeau analysis is to prevent the abuse of the rights under Article XX, and they have considered that the burden of satisfying the requirements under the chapeau is heavier than that for the individual paragraphs of Article XX. Since the SPS and TBT Agreements do not have such a two-tier structure, the introduction of the essence/application would not be necessary. The other is that, if we interpret the SPS Agreement from a strict textualistic perspective, the introduction of the essense/application dichotomy would result in an absurd interpretation of the provisions of the SPS Agreement. For example, if we apply the essense/application dichotomy to the SPS Agreement, with regard to two Articles both of which provide for the LTRA requirement, Article 2.2 is about the application of a measure, and the object of Article 5.6 is the measure as such. With regard to Article 2.3, measures as such cannot arbitrarily or unjustifiably discriminate between domestic and foreign products, and the application of the measures cannot amount to "a disguised restriction on international trade". It would be very difficult to justify these peculiar distinctions. See the SPS Agreement, supra note 32, at Article 2.2, 2.3, and 5.6.

213 Robert P. Merges et al., Intellectual Property in the New Technological Age 379 (2nd ed. 2000).

214 See Nichols v. Universal Pictures Corp., 45 F. 2d 119, 121 (2d. Cir., 1930).




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