Illegal timber logging - Australia's law is shaping up

I had earlier blogged about a proposed Australian legislation dealing with illegal timber logging titled the "Illegal Timber Logging Prohibition Bill 2011" which was passed by the lower house of the Australian parliament a few days back and has reached the Senate. An anonymous comment to this blogpost brought me back to this topic.

Does the Bill treat imported timber less favorably than local timber products? Is it more onerous for imported timber products to establish legality than local like products? Even if the legislation does not de jury discriminate between imported and local products on terms of applying equally to both products, is there a de facto discrimination since there is a greater probability of "illegal" timber coming from certain countries than others? Does the legislation modify the conditions of competition for imported timber products and is thus discriminatory and in violation of the national treatment principle under GATT? What are the contours of the Article XX general exceptions GATT in the present dispute? Do they justify the measure?

A recent study by Duncan Brack on the compatibility of the proposed Australian legislation with WTO law seemed to suggest that Article XX would save the legislation.The longer version of the study is found here.

"It is impossible to know precisely how the proposals in the Australian legislation relate to these WTO rules, as the details of the proposals are not yet finalised. In particular, we do not know exactly which products will fall into the category of “regulated timber products” for the purpose of the due diligence requirements, or many of the details of those requirements themselves - including, importantly, which legality verification, forest certification, or other existing or evolving systems for identifying legality are likely to be regarded as placing their products into low-risk categories. 

However, as long as the basic WTO principle of non-discrimination is respected - as reflected in Article XX(g) and the headnote to Article XX - it seems likely that Article XX(g) of the GATT could provide a justification for trade-restrictive measures aimed at excluding illegal timber from international trade, should a WTO dispute ever be brought. The main arguments against this position, as expressed in one of the submissions to the Senate Committee inquiry, seemed to rest on the assumption that any products that enter trade must be treated in the same way, regardless of their status under national laws (i.e., that legal and illegal timber are “like products”). Taken to its logical conclusion, this would require all countries to have exactly the same laws - which seems likely to be a misreading of the GATT."

Commenting on this article, Lorand Bartels feels that the interpretation of the general exception under Article XX GATT would be the focal point of a challenge and its defense:

"... More promising is the notion that there is a ‘nexus’ between logging and Australia in terms of climate change. In my view, the territorial scope of Art XX GATT should be assessed in terms of the rules on public international law on legislative jurisdiction. It might be argued, along these lines, that Australia has a right to regulate activities abroad (ie logging) in order to mitigate the effects of climate change on its own territory. (From your summary, it does not appear that Australia is also regulating the domestic marketing of such products, which would add a basis for territorial regulation).

But even so, what about the facts? To what extent can this measure be justified in terms of climate change? And what does ‘legality’ have to do with it? Is this connected with climate change? In short, is there really a causal link between the measure and this objective?"

Increasingly, national measures would not be blatantly discriminatory. The intent and the impact of the measures would have to be considered. Do they have a de facto impact on adversely affecting imported products? Are they designed to discriminate between imported and local products? Are the conditions so onerous that it is more likely that imported products, from less developing countries, will be impacted?

While the measure itself would apply to both imported and local products in actuality the impact on the trade on imported goods would be so high that it could amount to a discrimination. Another ground for a challenge, inspite of the defense of Article XX, could be the non-fulfilment of the chapeau requirements. Does it constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade? Would the imports of Indonesian timber be adversely affected by the legislation? Is more illegal timber logged in Indonesia or would it be difficult to comply with the conditions of due diligence that the legislation demands? WIll Indonesian timber become less competitive and more expensive if the conditions mandated are complied with? Will it lose its competitive edge?

One would have to wait for the legislation to be passed and a possible Indonesian challenge at the WTO for some of these questions to be answered. Till then, timber logging would remain an uncontested topic in WTO dispute settlement.