The WTO keeps coming under criticism for not doing anything about labor and environmental practices. I want to challenge that assumption.

The WTO manages trade between states, not the domestic production and laws of states. Activism should be directed at individual states to change their domestic laws and regulations,

GATT set conditions for lower international tariffs and prohibited the use of non-tariff barriers. This kept trade protectionism visible so states could respond – or retaliate – as needed.

GATT/WTO provides for environmental and public health exceptions to the non-state tariffs. States sometimes abuse these exemptions to pass disguised tariffs. The WTO provides means of evaluating and resolving non-tariff disputes.

This trade regime focused on the movement of products across state borders while generally ignoring the production side, inviting criticism for certain labor and environmental practices. The WTO included agricultural products to the trade regime further expanding the need for public health safety standards, since the GATT originally excluded foodstuffs. States regulate production at the domestic level, so very often two trading states use different safety standards (there are coordination problems in making sure regulations are equal)

Environmentalist groups and other anti-globalists criticized the WTO for ignoring their concerns or by favoring any trade regardless of environmental damage.

Well no, for two reasons.
First, states may regulate products imported for scientifically justified reasons
Second, it must have the same standard for foreign and domestic products

Here are the two articles in question.
GATT Article XX

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
“… (b) necessary to protect human, animal or plant life or health;

“… (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; …”

Article III Section 4,

The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements.

Article XX allows states to enact legitimate measures to protect the environment and public health, but requires that the state do so in a nondiscriminatory manner.

Environmentalists are generally incorrect in claiming that this regime cannot support or uphold their preferred policies. It can, provided that states act fairly and treat all products equally.

The WTO was created in 1994 to replace GATT. It added he Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Treaty)

The SPS agreement clarified the scientific principles required to properly judge products. A major issue that states found was conflicting concepts of scientific proof. When dealing with public safety, states pass domestic laws based on a cost/benefit analysis, so some laws may be out of proportion to the threat a product poses to the environment. Should such a law be upheld if it interferes with imports from a state with lower standards? Article 3.2 requires that state conform to “international standards, guidelines, or recommendations” in order to harmonize health policies as much as possible. Article 5 sets the minimum standards of scientific evidence to justify invoking Article XX to ban or limit products in a measured and cost-effective manner. Article 5.7 deals with the “precautionary principle” where a state can temporarily ban a product until it is proven scientifically safe. Typically a product needs to be proven harmful before a ban is justified, but the precautionary principle reverses the burden of proof in order to deal with uncertainties. States cannot permanently ban products solely on the basis of a safety first principle because it might constitute an unknown future danger, as this would result in a scientifically unjustified non-tariff barrier. Finally, in cases where the science itself is disputes between two states, Article 11 authorizes the DSB panel to convene experts to give advice on the scientific basis of these policies.

There are three common misuses of Article XX

1) States implement discriminatory environmental and health policies
2) States do not justify the policies on sufficient scientific grounds.
3) States attempt to unilateral enforce their domestic laws on foreign states.

Cases:
Tuna-Dolphin Case
The US passed the Marine Mammal Protection Act which banned or restricted tuna imports from Mexico due to non-compliance with the US environmental policy. The US policy served to minimize dolphin deaths from tuna fishing by requiring specialized fishing nets. The US had full authority to regulate tuna fishing inside its own maritime territory, but this act also banned the importation of tuna from foreign nations that did not use the same dolphin-safe fishing methods.

The WTO sided with Mexico citing the “product-process” doctrine. From the opinion: “A contracting party may not restrict imports of a product merely because it originates in a country with environmental policies different from its own”

As a matter of international trade tuna is tuna no matter how it is gathered. The process that makes the product is to be regulated by states. So while the US policy to protect dolphins might be justified on its own merits, this does not oblige Mexico to follow suit. The US could not unilaterally declare new environmental laws and force the rest of the world to obey.

Now here’s the catch. The WTO did not make any real recommendation about dolphins or the environment. It told the US it inappropriately made use of the WTO to create environmental laws. The US and Mexico then negotiated a bilateral diplomatic agreement to mandate the use of dolphin protection nets in tuna fishing in Mexico.

The chief issue here was America’s unilateral attempt to change Mexican fishing practices rather than the environmental policy itself.

Shrimp-Turtle Case
The US mandaded “turtle excluder devices” for shrimp fishing, to protect endangered species of turtles. The US then banned the imports of shrimp from countries that did not use TEDs.

The WTO ruled that the US discriminated against certain companies. One major issue for the panel was that the US applied a country-wide standard, so an Indian company that did use turtle excluder devices would still be prohibited from exporting to the US on the simple basis that India as a state did not require them.

The US violated its trade agreements by enforcing nation-wide bans instead of banning individual companies. Again, this is a more about the US unilaterally trying to force its domestic laws onto other states.

Reformulated Gasoline Case
The US raised environmental standards on imported gasoline… but not domestic gasoline. See the problem?

In 1993, the EPA created two separate standards for domestic and imported gasoline. The standards for imports were much higher than domestic gas. Dirty gasoline does indeed create higher pollution levels, so the United States argued that this limitation on imported gasoline was justified under Article XX. The WTO ruled that this was discriminatory a non-tariff barrier and was thinly disguised protectionism for US oil companies.

The United States had two options for bringing the EPA regulation into compliance with Article III and XX.
1) It could raise domestic gas standards to the same level as imported gas.
2) It could lower imported gas to the US domestic standard

The WTO could care less which choice the US makes, so long as it does not discriminate. The US choose to leave gasoline standards at the lowest level possible.

US vs European Communities – Hormones
The European Communities banned US cattle and beef imports claiming that added growth hormones might pose a public health risk to European consumers. They cited the precautionary principle. The EC member states banned domestic usage of the hormones along with their import ban, so the policy was non-discriminatory in nature in accordance with Article I.

The US and Canada challenge the scientific justification for the ban. The US made the case to the WTO dispute panel that there was no scientific proof that the hormones in question actually posed a public health risk. Essentially, the EU used the “precautionary principle” to ban the hormones on the assumption that they may be a risk as they have not yet been proven totally safe. The rationale behind the ban was the inverse of typical scientific proof where the danger must be proven.

The WTO panel convened five scientific experts and unanimously concurred with the Americans that the growth hormones posed no health risk to consumers. The WTO ruled against the ban.

The European Union completely ignored the WTO and continued the ban anyway. (This is not unusual, the compliance rate with WTO rulings is less than 50%).

In each of these cases, environmental groups went wild and protested the WTO for not ruling in favor of the environment. For starters, the cases were more complicated than that. Most disputes relating to environmental and free trade clashes occurred because a state created a discriminatory non-tariff barrier by favoring domestic over foreign products, or other such problems.

The WTO provides a trade regime and mechanism. Environmental and public health policies are beyond the scope of its authority. Nation-states can best determine environmental policies.

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