Achieving sustainability while maintaining sovereignty: Do the United States Forest Act and European Union Deforestation Regulation violate the General Agreement on Tariffs and Trade?

Abstract

New policy instruments in the EU and US aim to combat global deforestation by requiring additional obligations on producers to show that commodities such as soy, cocoa, and rubber products were produced without contributing to deforestation. The approach proposed by the United States, the Fostering Overseas Rule of Law and Environmentally Sound Trade Act (commonly referred to as the "US Forest Act"), would allow countries to develop territorial compliance standards through the submission of country-wide action reports. The approach focuses narrowly on restricting commodities linked to illegal forms of deforestation. In contrast, the European Union Deforestation Regulation (EUDR) applies to all forms of deforestation, making no distinction between legal and illegal land use changes. Under the EUDR, all producers must demonstrate, through a detailed chain of custody that includes geolocation data and a substantial due diligence report, that their products do not originate from areas affected by deforestation, including forest degradation. A review of previous environmental rulings from the World Trade Organization (WTO) suggests that applying extranational constraints and environmental restrictions, as done in the EUDR, may violate the General Agreement on Tariffs and Trade (GATT). Although the WTO does not issue judicial opinions with the binding power of stare decisis, past rulings do serve as persuasive authority for future decisions. Thus, the precedent established in cases such as Dolphin-Tuna and Shrimp-Turtle indicates that the EUDR is inconsistent with GATT principles of least impact on trade. By contrast, the Forest Act, which limits its enforcement to commodities linked to illegal deforestation, is more likely to comply with GATT obligations.