Challenging the WTO.
In late July, the U.S. government decided to get tough with the countries of the European Union - slapping 100 percent tariffs on $116.8 million worth of European imports, including fruit juices, mustard, pork, truffles, and Roquefort cheese. The European "offense" was its refusal to revoke a ban on the import of meat treated with growth hormones - a refusal that defied a World Trade Organization (WTO) ruling that the ban was [middle dot] an unfair barrier to U.S. and Canadian beef exports. The U.S. sanctions were greeted with widespread consternation in Europe, particularly in France, where a number of McDonald's restaurants were targeted for protests. In a symbolic tit-for-tat, the mayor of the French village of St. Pierre-de-Trivisy, which lies in the heart of Roquefort cheese country, decided to retaliate by doubling the price of Coca-Cola sold at the town's campground and recreation center.
This burgeoning transatlantic food fight is emblematic of a new kind of global trade conflict, in which various national health and environmental laws, rather than such traditional trade-war issues as tariffs, quotas, and the "dumping" of commodities like steel or wheat, are now at stake. The European Union (EU) insists the ban isn't an intentional trade barrier at all, but only a prudent response to public concern that eating hormone-treated beef might cause cancer and other health problems. So far, the EU has refused to back down.
The origins of today's brewing environmental trade battles can largely be traced back to December 1993, when negotiators struck a deal in the long-running "Uruguay Round" of global trade talks. The text of the agreement ran to an astounding 26,000 pages, and covered a bewildering array of issues, including agriculture, intellectual property rights, investment, and services. Perhaps most importantly, it stipulated the creation of a new World Trade Organization that would encompass the pre-existing General Agreement on Tariffs and Trade (GATT) as well as the new provisions resulting from the Uruguay Round. The WTO was charged with overseeing the implementation of the new rules of world trade, as well as with settling any disputes about these rules between nations. Member countries granted the new organization unprecedented powers for an international body, including a binding dispute resolution mechanism and provisions for stiff trade penalties to enforce its rulings.
The WTO quickly became a lightening rod. Although its creation was hailed by many in the business community, government, and academia as a key to global economic growth and prosperity, critics view the new organization as a dangerous supranational entity that elevates corporate rights to a new plane, while devastating local communities and the environment. Critics also decried the secrecy in which WTO activities are shrouded. Many important documents are unavailable to the public, and most WTO committees, as well as all dispute resolution proceedings, are conducted in closed sessions.
In a concession to the concerns of environmentalists, the preamble to the WTO agreement includes environmental protection and sustainable development among the organization's goals. The accord also included a commitment to create a Committee on Trade and Environment charged with analyzing the relationship between trade liberalization and environmental protection, and making recommendations on any changes to WTO rules that might be needed to make the two goals "mutually supportive." But more than five years later, the committee has produced much talk but no concrete action.
In early December 1999, trade ministers from around the world will gather in Seattle, where they will decide whether or not to launch a new "millennium round" of global trade talks. Thousands of nongovernmental activists are expected to also be on hand (see "Action on the Front Lanes," page 12). Five years after the conclusion of the Uruguay Round, the political backdrop for global trade negotiations has evolved. Nongovernmental organizations (NGOs) were emboldened by their successful campaign in 1998 to bring to a halt negotiations on another controversial international economic agreement, the proposed Multilateral Agreement on Investment. And in the United States, the failure of Congress to grant the Clinton administration "fast-track" trade negotiating authority has strengthened the hand of trade critics.
Many activists are hoping to use their new-found clout to stop the new round in its tracks - at least until the environmental impact of the rules established five years ago are better understood. Others, while not aiming to scuttle the WTO altogether, argue that the agenda for any new round should include a clear commitment to greening the rules of world trade. Although the outcome of the Seattle meeting is unpredictable, one thing is clear: reform is desperately needed to marry the rules of the global trading system with the imperative of reversing global ecological decline.
Tuna & Dolphins to Shrimp & Turtles
Widespread concern about the environmental impact of the GATT dates to September 1991, when a GATT dispute resolution panel shocked U.S. environmentalists by ruling that an embargo against Mexican tuna imposed under the U.S. Marine Mammal Protection Act violated the GATT agreement. The United States had imposed the embargo after determining that Mexican fishermen were trawling the ocean for tuna with "purse-seine" nets that often have the unintended effect of ensnaring dolphins along with tuna. In reaching their conclusion that the tuna embargo breached GATT rules, the panelists emphasized a key though controversial distinction between import restrictions aimed at the characteristic of products themselves, versus those having to do with production processes. The panelists decreed that the U.S. law was GATT-illegal because it was the process by which the tuna was harvested, rather than the tuna itself, that was being rejected by the United States.
Although the GATT agreement - and later the WTO - contains a specific provision that ostensibly protects the right of countries to pursue environmental protection policies that might otherwise contradict trade rules, the panelists ruled that this exception pertains only to efforts by countries to protect the environment within their own borders. Because the Mexican tuna fishing took place outside of U.S. waters, the panelists viewed the embargo as tantamount to the U.S. imposing its environmental laws and values on the rest of the world. This point of view resonated with many people, particularly in the developing world, who look to the rule-based WTO as a check on the U.S. tendency to wield its economic power unilaterally.
But the ruling exposed some glaring inconsistencies between the rules of the world trading system and emerging international environmental principles and practices. Particularly worrisome was the ruling's failure to acknowledge the right of countries to take action to protect the atmosphere, the oceans, and other parts of the global commons - a failure that raised questions about the GATT-legality of an array of other environmental policies besides the one aimed at protecting dolphins. What would become of policies aimed at reducing the use of harmful drift nets in fishing, protecting primary forests, or staving off ozone depletion or global warming? By the panel's reasoning, it seemed that even provisions of international environmental agreements designed to protect global resources could be ruled GATT-illegal. This clash between two different spheres of international law presented the world with a major legal challenge, as it is not always clear which agreement trumps another in cases where two treaties are in conflict.
The trading system's aversion to process-related trade restrictions struck many environmentalists as particularly arbitrary, as environmental policy is moving increasingly toward focusing on the environmental impacts of products throughout their "life-cycle" - including production, distribution, use, and disposal. Products such as gold or timber may be harmless or beneficial as products, but enormously costly to human or environmental health in the ways they are processed - with gold extraction leaching cyanide into groundwater, or clear cutting reducing vast swaths of primary forests to wastelands. Reform of extraction and manufacturing processes are essential to making real environmental advances, yet trade rules could pose a significant impediment to pursuing such efforts in a world economy that is becoming steadily more integrated.
Despite the furor over the tuna-dolphin decision, the WTO struck again in 1998, ruling against a U.S. law aimed at reducing unintended sea turtle mortality as a byproduct of shrimp trawling. This conflict had been set in motion back in 1996, when the U.S. Court of International Trade ordered the U.S. government to begin enforcing certain provisions of the U.S. Endangered Species Act that were intended to protect sea turtles. Sea turtles are both extremely endangered and highly mobile, making international action to protect them a high priority. According to the California-based Sea Turtle Restoration Project, some 150,000 turtles are ensnarled in fishing nets each year. The provisions of the law in question closed the lucrative U.S. shrimp market to countries whose shrimpers are not required to use "turtle excluder devices" (TEDs). A TED is a simple but highly effective piece of equipment that prevents turtles from getting ensnared in shrimp nets. Their use has been required for U.S. shrimpers since 1988. If employed properly, TEDs reduce turtle mortality in shrimp trawling by 97 percent or more, according to U.S. government studies. Spurred by the U.S. embargo, 16 nations, including 13 Latin American nations and Indonesia, Nigeria, and Thailand, have by now moved to require the use of TEDs.
India, Malaysia, and Pakistan chose a different tack, however - deciding to launch a WTO challenge rather than meet the U.S. requirement. Thailand joined them in this effort as a matter of principle, even though it had adopted TEDs. Although the environmental effectiveness of the U.S. law was clear, the WTO dispute resolution panel concluded in April 1998 that the measure violated WTO rules. A subsequent WTO appeals panel upheld this conclusion. From an environmental standpoint, the legal reasoning employed by the appeals panel was an improvement over earlier rulings, as it acknowledged that countries may in some circumstances be justified in using trade measures to protect global resources. But the panel took issue with the way in which the U.S. law had been implemented, arguing that it was applied in an arbitrary manner that failed to treat countries even-handedly. The bottom line was that the U.S. law would have to be changed in order to comply with WTO rules.
This outcome was particularly alarming, as the Uruguay Round had strengthened the rules of dispute resolution proceedings to make the adoption of panel reports essentially automatic - along with the imposition of trade retaliation in cases where countries are unwilling to adhere to their findings by changing offending laws. In response to the ruling, the U.S. government altered the way it was implementing the law, without seeking any changes to the statute itself. The new guidelines provide for the import of specific shipments of shrimp that have been approved as turtle-safe even if the country as a whole has not met the certification requirements.
Many U.S. environmentalists take issue with this approach. Their primary concern is that the "shipment-by-shipment" method will be less effective in safeguarding turtles than the earlier blanket restriction, as it will not compel countries to mandate the use of TEDs when fishing for shrimp not destined for the U.S. market. They also worry that the new policy may facilitate the entry of "laundered" turtle-deadly shrimp into the United States. The WTO appeals panel, on the other hand, maintains that "nation-by-nation" certification is a transparent attempt to influence the domestic policies of other countries. The "shipment-by-shipment" method, in contrast, can be defended as merely regulating the environmental impact of goods to be consumed within U.S. borders.
Several environmental groups protested the U.S. government's action by filing suit at the U.S. Court of International Trade. They contend that the government is failing to adequately enforce the Endangered Species Act. In a preliminary ruling in April 1999, the U.S. Court of International Trade sided with the environmental groups, placing national law and international trade rules on a possible collision course.
Food and Forestry Fights
Another controversial component of the package that comprised the original WTO was an "Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures" that imposes new restrictions on laws designed to protect human, animal, and plant health. The ostensible reason for these new limitations was to prevent countries from using health and safety standards as disguised trade barriers. Trade specialists argued that legislators were passing disingenuous laws that lacked a scientific rationale, with the primary goal of keeping foreign products off of their shelves. In order to prevent this kind of presumed interference with free trade, the SPS agreement encourages countries to "harmonize" a range of relevant standards at the international level. Food safety requirements are high on this list.
Although the agreement permits countries to maintain national laws that are tougher than international standards, it confronts them with sizable legal hurdles if they choose to do so. For instance, if an environmental law is challenged, the country defending the law must demonstrate that it is scientifically justified and based on risk assessment. Environmentalists and consumer groups argue that the new restrictions promote "least common denominator" policymaking - adoption of policies that are weak enough to be acceptable to the least environmentally protective member countries. The worry is that vested interests will exploit any scientific uncertainty surrounding a protective law (and in science there are always uncertainties) as a reason to limit preventative environmental action.
The need for such action is embodied in the "precautionary principle" - an emerging principle of international environmental law that is steadily gaining ground. The Rio Declaration on Environment and Development, for example, which was agreed to at the June 1992 Earth Summit, declares that: "Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation." The new WTO provisions, on the other hand, shift the burden of proof by in effect requiring that all chemicals and other food additives be proven harmful before their use can be restricted. The problem with this formulation is that we know from painful experience that extensive testing, sometimes over a period of years, is required to know if a substance has long-term cumulative effects that might cause cancer, damage to the immune system, or other serious ailments.
As the Uruguay Round negotiations were wrapping up back in 1993, the European Community and the United States were already embroiled in their long-simmering dispute over the EU's beef-hormone ban, which is only now coming to a full boil. Since it was first promulgated in the late 1980s, the European law has always applied equally to domestically raised and imported livestock, and has thus passed the WTO's bedrock test of "non-discrimination." But the hormone-hooked U.S. livestock industry was threatened by the law, which stood to block hundreds of millions of dollars worth of U.S. beef exports, and it prevailed upon the U.S. government to take up its cause. The "SPS" agreement provided added ammunition for this longstanding U.S. campaign to use international trade rules to overturn the disputed European law.
This effort culminated in February 1998 when a WTO appeals panel ruling paved the way for the imposition of retaliatory sanctions this past July by upholding an earlier dispute panel ruling that the European law violated WTO rules. The appeals panel overturned some elements of the original findings, but affirmed that the European law was WTO-illegal because it was based on inadequate risk assessment. The panel also rejected the EU's claim that the import restriction was justified by the precautionary principle. Environmentalists were aghast at the decision. The U.S. consumer group Public Citizen charged that: "Through the dispute over hormone-treated beef, the WTO inappropriately inserted itself as a major arbiter of domestic health and safety policy. The WTO's beef hormone decision undermines countries' democratic prerogatives to safeguard their citizen's health and well-being."
The beef hormone controversy is widely viewed as just a warm-up for a more serious trade controversy now brewing over genetically modified organisms (GMOs). Once again, the European Union and the United States are the primary antagonists. Prompted by public concern over the health and ecological effects of GMOs, the EU passed legislation in 1998 requiring all food products that contain genetically modified soybeans or corn to be labeled as such. Several other countries, including Australia, Brazil, Japan, and South Korea, are now following suit. A large share of food products made by U.S. companies - breads, baby food, and ice cream, among them - now contain GMOs. Many European producers, in contrast, are steering clear of GMOs in the face of public opposition. U.S. companies complain that the labeling requirements amount to trade barriers, and both the U.S. and Canadian government are now propounding this view at the WTO and in other international forums.
Last February, a proposed "biosafety" protocol to the UN Convention on Biological Diversity became the first major victim of the growing international trade war over GMOs. Negotiations had been underway for a few years, aimed at putting in place a system of prior consent for the transport of genetically engineered seeds and products. The talks were scheduled to wrap up in Cartagena, Colombia in February, but six major agricultural exporting countries - Argentina, Australia, Canada, Chile, the United States, and Uruguay - put a monkey wrench into these plans by blocking adoption of the accord. One of the main U.S. arguments against the protocol was a claim that its provisions ran counter to the rules of the WTO. Negotiators are still hoping to bridge the differences.
These chills in transatlantic relations over food safety are only the tip of the iceberg of trade conflicts over agricultural policy as a whole. The Marrakesh accord that created the WTO in 1994 stipulated the launch of new negotiations on agriculture at the end of 1999. The United States and other agricultural exporters, including many from the developing world, are pushing hard for more access to overseas markets than they were able to secure through the Uruguay Round. But some food importers, including Japan and South Korea worry that cheap imported grain will put their own farmers out of business. "To follow the Uruguay Round with another round of agricultural liberalization that serves mainly the interests of the U.S. agricultural dumping lobby and a small elite of Asian agro-exporters will drive the [Asian] region's small farmers over the edge," warns Walden Bello of the Bangkok-based Focus on the Global South.
Trade in forest products is also likely to loom large as an issue in Seattle in November. Under a controversial proposed agreement, most developed countries would eliminate tariffs on forest products such as paper and wood by 2000, and developing countries would do so by 2003. The precise effects are difficult to predict, but environmentalists warn that the lower prices for forest products expected to result from the proposed pact would boost demand. A study commissioned by the Washington, DC-based American' Forest and Paper Association confirms this contention, finding that the elimination of all tariffs would increase global wood consumption by 3 to 4 percent. With so little of today's timber industry based on sustainable practices, increased consumption and production would likely translate into increased forest destruction.
Although the proposed accord would initially take aim at tariffs alone, its scope might well be expanded in the future to include "non-tariff barriers to trade." Over the longer-term, these provisions might pose an even greater threat to the health of the world's forests, and to the diversity of species that inhabit them. Even under existing agreements, concern is rising that laws designed to minimize the introduction of harmful exotic species will run afoul of WTO rules. Pests and other species introduced through trade are one of the greatest threats to native species and ecosystems, and impose massive economic costs as well.
In what may be a foreshadowing of controversies to come, the Chinese government (which is not yet a member of the WTO) has complained that a ban on the import of wooden packing crates, imposed by the United States in late 1998, amounts to an unfair trade barrier. The U.S. government imposed the ban after determining that Chinese packing crates were a primary culprit in the recent introduction to U.S. territory of the Asian long-horned beetle, a voracious tree-devouring invader that poses a major threat to hardwood forests. Forest certification initiatives, aimed at creating a market for sustainably harvested timber, could also run head-on into WTO rules in the years ahead.
As opposition to the WTO continues to mount, many governments are beginning to acknowledge - rhetorically, at least - that reforms are desperately needed to make the world trading system environmentally sound. In an address commemorating the 50th anniversary of the GATT in 1998, U.S. President Bill Clinton conceded that: "We must do more to make sure that this new economy lifts up living standards around the world, and that spirited economic competition among nations never becomes a race to the bottom in environmental protections, consumer protections, and labor standards." And at the G8 summit meeting of industrial powers held in Koln, Germany in June 1999, world leaders agreed "that environmental considerations should be taken fully into account in the upcoming round of WTO negotiations." But governments have for the most part been vague about exactly how this should be done.
One key question is whether or not governments are prepared to amend existing WTO rules to buffer environmental laws from trade challenges. NGOs are particularly adamant that eco-labeling programs be protected, to insure that there is no undermining of consumers' right to know about the health and environmental impact of products they purchase. NGOs would also like to see the WTO formally recognize the precautionary principle, as well as provide some deference to multinational environmental agreements in cases where they conflict with WTO rules. The European Union has voiced general support for these ideas, but the United States appears lukewarm about writing any new environmental guarantees into the WTO. Ongoing controversies over beef hormones and GMOs undoubtedly color the U.S. view.
On the more positive side, the WTO could conceivably be enlisted in an effort to reduce environmentally harmful subsidies. World trade rules have long discouraged subsidies, as they distort the economic playing field. The United States and six other nations have suggested building on this tradition by making the elimination of fishing subsidies an objective for the upcoming round of trade talks. These subsidies, which add up to some $14-20 billion annually, help propel overcapacity in the world's fishing fleet, which is itself a powerful driving force behind today's depleted fisheries. Other environmentally harmful payouts could also be tackled at the WTO - including multi-billion dollar agricultural and energy subsidies.
The question of how the World Trade Organization itself operates will also be on the table in Seattle. The recent spate of environmentally related trade disputes has opened the WTO to intense scrutiny, with critics charging that its secretive ways pose a basic threat to democracy. Procedural changes are imperative if the WTO is to garner the public support it needs to stay in business. Even The Economist, which normally pushes a free-trade agenda with near religious zealotry, acknowledges that: "The four-year old WTO is at a crossroads. It has become a quasi-judicial body, an embryo world government ...Yet it is now being asked to arbitrate on matters that are intensely political. It lacks the legitimacy to do so." The Indian activist Vandana Shiva makes essentially the same point, although she carries it a step further: "The WTO is basically the first constitution based on the rules of trade and the rules of commerce. Every other constitution has been based on the sovereignty of people and countries. Every constitution has protected life above profits. But [the] WTO protects profits above the right to life of humans and other species."
The thousands of citizen activists who gather in Seattle this November will make clear their opposition to international governance based on such a narrow conception of the global interest. Building more democratic and environmentally attuned international governance structures will be a preeminent challenge in the early part of the 21st century.
Hilary French is vice president for research at the Worldwatch Institute. This article is based on her forthcoming book, Vanishing Borders: Protecting the Planet in the Age of Globalization, to be published by W.W. Norton & Company in March 2000.
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|Title Annotation:||World Trade Organization|
|Date:||Nov 1, 1999|
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