Do WTO rules and dispute rulings menace the environment, health, and safety?

Because these claims are often thrown at the WTO together, they will also be dealt with together here. But they need to be disentangled.

Let’s look first at what really happened in a number of widely — and sometimes inaccurately reported WTO dispute cases, and then at what the rules say on the issues of environment, health and safety. Let’s consider also whether the WTO is the right or wrong place to handle these burning issues.

In doing so, we should also remember that well-publicized disputes between members make good headlines. The vast majority of disputes are settled without fanfare, or public contention. Moreover, only 1 per cent of trade between the United States and the European Union, for example, has been the subject of disputes.

The WTO and the environment

Three separate dispute cases have been brought against the United States by developing countries who felt they were being unfairly treated by the way in which US laws to protect the environment were being applied against them. Each time, the developing countries concerned won their case.

• US standards for gasoline (complaints by Venezuela and Brazil)

Under the US Clean Air Act, the government set standards for gasoline, to reduce pollution. Venezuela and Brazil complained to the WTO, and won, because the standards applied to gasoline exported by them to the United States were more burdensome than the standards applied to domestic refineries. In certain circumstances, even though a domestic refiner and a foreign refiner refined gasoline with identical chemical composition, the foreign refiner did not meet the standard whereas the US refiner did. No environmental justification was provided for this.

The dispute judgement by the WTO Appellate Body specifically upheld the right of the United States to adopt the highest possible standard to protect its air quality, provided it applied this standard in a way that was not unjustifiably discriminatory or a disguised restriction on international trade.

• The tuna-dolphin case (complaint by Mexico)

This case was brought and decided in 1991, under the rules and dispute procedures of the GATT. It arose from an embargo imposed under the Marine Mammals Protection Act on US imports of tuna from Mexico, because the technique used by Mexican fishing fleets to catch tuna was resulting in the incidental death of a larger number of dolphins than the Act permitted.

A complicating factor was an additional embargo on imports of tuna from other countries that could not prove the tuna had not come from Mexico. Mexico won because the dispute panel did not accept that in this case other GATT rules overrode a basic prohibition on import restrictions.

The trade problem was later resolved by cooperation between the United States and Mexico to improve fishing methods.

• The shrimp-turtle case (complaints by India, Malaysia, Pakistan, Thailand and the Philippines)

Somewhat similar to the tuna-dolphin case, this involved restrictions on imports of shrimp from the complainant countries because the shrimp were caught by methods that incidentally caught sea turtles, an endangered species.

On appeal, the WTO Appellate Body stated that WTO members may take measures “relating to the conservation of exhaustible natural resources”, including sea turtles. However, these measures may not be applied in a way that is arbitrary or unjustifiable or constitutes a disguised restriction on international trade.

In this case, the US measure failed to meet these requirements because, in applying it, the United States treated some WTO members less favourably than others, did not accept sea turtle protection programmes of other members that were equivalent to the US programme, and banned imports of shrimp, even if harvested in a way that complied with US regulations, if the country of origin of the imports had not been certified under the US regulation.

Charlene Barshefsky, the United States Trade Representative, emphasized in a statement in October 1999 that “the United States has not relaxed any environmental law or health or safety law in order to comply with any WTO ruling”. She explained that where changes have been made, this was to equalize treatment of US and foreign companies.

Article XX of the GATT specifically allows member governments to act to protect human, animal or plant life or health, and to conserve exhaustible natural resources. Under other WTO agreements, subsidies are permitted for environmental protection, and environmental objectives are recognized in agreements dealing with product standards, food safety and intellectual property protection. The dispute cases just discussed arose because the protection measures treated foreign suppliers less favourably than domestic suppliers, or discriminated among foreign suppliers.

Environmental issues remain controversial in the WTO, basically for two reasons. The first is that some developing countries fear that environmental measures may be used, deliberately or not, to create barriers to their exports. They also argue that they need economic growth to raise their own environmental standards. The second is that work in the WTO, in its Committee on Trade and Environment, does suggest some risk that conflict could arise between provisions in multilateral environmental agreements permitting trade measures and WTO rules. No such conflict has yet happened. The discussion will certainly be carried forward in Seattle.

What about the argument that trade itself damages the environment? Any economic activity can damage the environment when environmental resources are undervalued. Whether trade is damaging, or actually helps the environment, will depend on such factors as the production technology used. Sweeping generalizations, positive or negative, are wrong. Some points:

• Most pollution arises from production processes, not trade (although some can be associated with the transport of goods).
  
  
• Poverty is a major enemy of the environment. Without trade, developing countries will find it difficult to achieve the economic growth and higher living standards that will generate the necessary resources for and promote interest in the defence of the environment.
  
  
• The contribution of an open, equitable, non-discriminatory and predictable multilateral trading system to achieving the objectives of sustainable development was recognized at the Rio Earth Summit in 1992.
  
  
• There is little evidence for the claim that polluting industries tend to migrate from developed to developing countries to reduce environmental compliance costs.
  
  
• Trade agreements to cut subsidies to fishing and agriculture could be powerful instruments to reduce over-fishing, excessive use of fertilizers and farming on marginal or ecologically fragile land.
  
  
• Tariff cuts on imports of processed wood products by developed countries could encourage better forest management.
  
  Countries that now fell forests indiscriminately to export logs in bulk, or to use the land for farming, would see value in sustainable forestry if they could earn more by selling wood-based products like plywood and furniture.
  
  Freer trade in environmental goods and services would reduce costs of investing in clean production technologies and environmental management systems.

The WTO and health and safety

Health and safety standards

Two WTO agreements reached by the member governments during the Uruguay Round negotiations deal directly with these issues.

The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) sets out some basic rules for standard-setting for food safety, animal and plant health.

The Agreement on Technical Barriers to Trade (TBT) deals with other standards, for instance those which lay down safety requirements for automobiles and electrical equipment, as well as labelling requirements.

Both recognize that governments have the sovereign right to set standards as high as they think necessary. Their central objective is to prevent governments from using standards as disguised protection, by setting standards in ways that favour domestic producers, or discriminate against foreign goods and services.

The SPS agreement, unlike the TBT agreement, has proved somewhat controversial in its application, as is evident from the reactions to the dispute between the United States and the EU on the use of growth hormones in beef.

The SPS Agreement deals with matters about which people naturally care deeply. While the agreement leaves it to governments to decide what level of health risk it considers acceptable, it includes provisions designed to prevent action that is arbitrary, or disproportionate to suspected risks.

It identifies food standards established by Codex Alimentarius, a joint body of two UN specialized agencies (WHO and FAO) as reference standards. It also requires SPS measures to be based on an appropriate assessment of risks, taking into account available scientific evidence and such relevant factors as inspection and testing methods, and potential damage from the spread of a pest or disease.

In discussion of these issues, reference is often made to the “precautionary principle”, sometimes paraphrased as “better safe than sorry”. The reasoning behind it is that when information is incomplete, regulators should act in the face of suspected serious risks. Such action should, however, be based on what is known, and be proportionate to the suspected risks.

The SPS agreement allows for this: it specifically allows a government, in the absence of sufficient scientific evidence on which to base a measure, to take a provisional measure on the basis of the information it has. If such a measure is taken, the government must seek further information and review the measure in its light. No member has attempted to use WTO rules, for example, to challenge the restrictions imposed on imports of meat products from animals exposed to BSE, or “mad cow” disease.

The controversy about the SPS agreement mainly concerns three points:

• The first is the belief that the agreement, along with the TBT agreement, sets health and safety protection at particular levels, and prevents or discourages governments from giving higher protection.
  
  This is simply wrong. Both agreements support international standards, as a means of preventing unnecessary obstacles to trade. This does not imply, as is sometimes suggested, a “race to the bottom”: international standards are generally based on best practice in developed countries. But the agreements leave individual governments free to set higher standards.
  
  
• The second concerns one well-known dispute, the US/Canadian complaint against the European Union’s ban on imports of beef from cattle raised on growth hormones. The EU lost the case because it could not cite convincing scientific evidence to support the ban. (It did not argue that the ban was provisional.) Some EU governments, and many commentators, have suggested that the case shows that the SPS rules may themselves need review.
  
  
• The third point concerns biotechnology, and particularly genetically-modified foods and other organisms (GMOs). This issue has yet to reach the WTO, except for some discussion of labelling of GM foods. But the widespread alarm about possible risks from application of biotechnology, particularly in Europe, point to potential difficulties ahead.

TRIPS and public health

The WTO agreement on trade aspects of intellectual property protection (TRIPS) also arouses controversy, notably because of its rules on patent protection for pharmaceuticals.

The basic argument for patent protection is that, by rewarding inventors, it gives them the incentive to make discoveries from which the community benefits. The costs of developing new pharmaceutical products and bringing them to market, in terms of the research, development, testing and certification required, are colossal — expenditure of hundreds of millions of dollars is now quite normal before any sales are made.

A difficult balance has to be struck between encouraging the development of new medicines and ensuring that they are available widely and at reasonable cost to the people who need them. The TRIPS agreement tries to strike that balance, by requiring 20-year patent protection, but also leaving it to individual governments to decide whether some kinds of inventions (for instance, medical treatment methods) should be patentable, and allowing compulsory licensing, especially to counteract anti-competitive practices.

Moreover, the obligations of the TRIPS Agreement do not stand in the way of price controls and similar types of measures for pharmaceuticals.

The TRIPS Agreement explicitly states that if a country allows parallel imports — that is, imports of goods already put on the market in another country with the right holder’s authorization — those practices cannot be challenged under the Agreement. In bilateral discussions between governments on this subject, countries often invoke the TRIPS Agreement when they want to resist requests from trading partners to limit the use of these various forms of flexibility.

Is the WTO the place to discuss these issues?

Comments on such controversial issues as the shrimp/turtle case, and the ruling on EU imports of US beef, sometimes seem confused.

On one hand, WTO dispute settlement panels are accused of being irresponsible faceless bureaucrats, and the organization itself of trampling on national sovereignty and placing trade concerns over other important economic and humanitarian objectives.

On the other, the perceived strength of the WTO dispute procedures leads to suggestions that WTO dispute panels should rule on non-trade concerns.

Both can’t be right. In fact, neither is.

The “faceless bureaucrats” on dispute panels are government trade officials or outside experts chosen for their knowledge of the trade rules and their impartiality.

They hear evidence and then make rulings that are restricted to the question of whether the action complained against broke rules in one or more of the WTO agreements. They do not consider other issues, because they are not asked or qualified to do so.

The Appellate Body, which is usually requested by the losing party to review the conclusions reached, consists of a small number of highly distinguished legal professionals. Its sole task is to review, and if necessary correct, the legal reasoning in panel reports. However, it has sometimes — as in the shrimp/turtle case — also underlined the limited reach of WTO obligations.

The idea that panels should take it on themselves to judge, for instance, whether food products involve unacceptable levels of risk for the environment is equally wrong.

Judgements by international organizations have to be based on whether or not specific rules and commitments have been broken. If the aim is to have tribunals pass judgement on environmental issues, you first need agreed environmental rules, and agreed mechanisms for handling disputes about them.

There may well be a case for establishing multilateral rules and mechanisms to deal with environmental issues similar to those which the WTO provides for trade. There is no compelling case for giving the job to the WTO rather than to a more specialized agency.

Ultimately, the responsibility comes back to governments. It is they that must recognize when new developments and concerns raise problems in international relations. It is they that must, when appropriate, seek new agreements. When trade and non-trade objectives conflict, it is they that should find agreed solutions among themselves.

With so much at stake, the WTO must respond to its critics

Yes, it must and not all our critics are wrong. The system can be improved. What system created by people cannot be improved?

The days are long gone when trade negotiators wrangled only over tariff cuts, and made secrecy a top priority to prevent leaks of information from which speculators might profit. Even then, governments had a responsibility to carry national public opinion with them in seeking to cut trade barriers.

Today they deal in the WTO with a much wider range of subjects, reaching even into areas previously outside the scope of international trade agreements. WTO negotiations and rules touch people’s lives, present and future, in fundamental ways.

As President Clinton said recently, such questions cannot be left to a “private priesthood for experts”, particularly in an open world “where anybody can get on the Internet and say anything”.

The WTO has to reach out to its critics, demystify what it is doing, and provide civil society with information it needs to reach informed views that can then be brought to bear on governments.

This is not quite as straightforward as it may appear. The WTO is a government-to-government organization. Many members feel that they alone should bring direct influence to bear on discussions in the WTO.

Elected sovereign governments, they say, have a legitimacy that no non-governmental organization can claim. They accept that national interests should be defined within each country by debate in which everyone can participate, including nongovernmental organizations of all kinds, from private corporations to defenders of consumers and the environment.

But they insist that those interests, once defined, can be represented in the WTO only by governments.

One consequence is that governments have repeatedly said that they themselves have the main responsibility for enhancing public understanding of the WTO. Another is that there are limits to how far many members are prepared to go in allowing non-governmental organizations and individual private citizens into the workings of the WTO, for instance by observing meetings and dispute proceedings.

In the latter case, arguments about government responsibilities are not the only factor. Some members, particularly the smaller ones, fear that if acknowledged WTO meetings are thrown open, decisions affecting their interests will be taken in unacknowledged meetings to which they are not invited.

The debate on how far the WTO should open up is in full swing, and will no doubt continue at the Seattle meeting.

Meanwhile, however, much has already been done:

• Public access to WTO documentation — proposals, discussions and decisions — has been enormously improved. Documents are no longer routinely kept confidential for long periods: most are now issued without restriction, and posted to the WTO’s Internet site (www.wto.org) immediately. The texts of most proposals for the Seattle meeting, for instance, can be consulted now by anyone, any time.
  
  
• Relations with non-governmental organizations have been greatly strengthened. Some 750 of them will be represented at the Seattle meeting, and will attend plenary sessions. On the eve of the meeting, the WTO is organizing a large full-day symposium at which NGOs will debate with government representatives on international trade issues for the next century. Similar symposia have been held at WTO headquarters in Geneva, including two in March 1999 on environmental and development issues.
  
  
• The press service of the WTO has been strengthened to keep pace with a huge and continuing increase in media interest.
  
  
• The Secretariat publishes a regular newsletter (“WTO Focus”) on activities, as well as guides to the WTO agreements, reports, videos, and other publications — of which this is one — to help understanding of the WTO. It maintains the WTO website as a comprehensive source of up-to-date information on the WTO.
  
  
• The Director-General of the WTO, like his predecessors, uses frequent public statements and meetings with parliamentarians, non-government organizations and the general public to spread understanding of trade issues, and of what the WTO is doing about them.

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