This study discusses the ruling of the Appellate Body (AB) in the recourse to Article 21.5 of the DSU by Malaysia in the context of the US import prohibition of certain shrimp and shrimp products from a legal and economic perspective. The first part of the chapter (section 2) discusses the background of the case, and, in particular, presents the main issues at stake in the Panel and AB decisions in the original case as well as their main findings. Section 3 discusses the key elements of the compliance panel and its subsequent appeal and identifies a few issues that are discussed in further detail. In section 4, in the context of a simple model, we first consider the consequences of making imports contingent on the adoption of environmental measures in exporting countries. We find that the attractiveness of such measures depends heavily on the characteristics of abatement technology and the range of policies available in the exporting countries. Finally, section 5 briefly discusses the trade-off between flexibility in the imposition of environmental standards and the enforcement of dispute settlements’ rulings.
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