Some proponents of free trade decry the possible acceptance of trade policy geared to achieve environmental protection measures outlined by MEA’s to the WTO code. Such arguments claim that any trade restrictions inhibit economic growth and cause an inefficient use of resources, in addition, such arguments say the acceptance of trade measures for environmental goals will cause them to be applied in other areas, increasing their numbers and decreasing their effectiveness (Brack, 1998). There are several flaws with this argument, however, that present the trade provisions in a misunderstood way. When examined closer, and compared to existing WTO policy, the use of trade measures to achieve environmental goals can be seen in some cases to be an effective way of achieving environmental protection.
One of the first arguments against such trade policies is that they inhibit free trade. It the WTO were to adopt the policy of allowing trade restrictions geared at achieving environmental policy, the work of the last fifty years of building an increasingly liberalized international trading system would be set back. However, what free trade advocates do not always admit is that in the current international trade system, states are not working to achieve "free" trade, which would imply a totally unregulated market without taxes, laws, or international agreements (Anderson, et.al, 1995). Rather the goal is towards the removal of barriers that impede the flow of goods and cause inefficiency.
Both GATT and the WTO rules allow for the use of trade restrictions under certain specific circumstances in order to achieve specific aims. As far as incorporating trade policy with environmental considerations; in principle, there need not be any conflict between the environmental considerations and liberalized trade, because both have the same goal, which is to "use and distribute the resources available to society in the most efficient manner" (Anderson, et.al. 1995). The WTO already recognizes the need for some level of trade restrictions, and such policies are outlined within the articles of both the GATT and the WTO.
In discussing the argument of whether or not new policy allowing for environmental considerations should justify creating trade restrictions, examining the current system of non-discrimination and exceptions to free trade will be useful in providing a basic framework outlining WTO policy. As stated earlier, the WTO’s primary policies include the elimination of discriminatory treatment in international trade relations, which is achieved through the use of most-favored nation (MFN) policy, which states that: "a member state may not discriminate as between other countries against a like product originating in or destined for any other member country" (Qureshi, 1996). This policy does allow for some trade restrictions, provided they meet certain requirements, the foremost being their application in a non-discriminatory manner.
By adhering to this non-discriminatory policy, the system of international trade works towards enforcing a system of comparative advantage between states. Comparative advantage is an economic theory that states "if nations specialize in those areas in which they have a comparative cost advantage and trade where that advantage is lacking, there will be an overall increase in world production of the products in question" (Qureshi, 1996). It is not clear whether this idea accepts whole scale environmental degradation or lack of any environmental regulation as a state’s comparative advantage, although both of these policies will lower the producer’s costs of production.
Furthermore, Article III of the GATT, adopted by the WTO describes the policy of "national treatment", which forces states to treat imported goods in the same way as similar domestic products with regard to regulation and taxes. This policy applies to "like products" regardless of the production processes used to make them (Uimonen & Whalley, 1997, last 2). This furthers the idea of non-discrimination from the products between two separate states to include the relation between both domestic and imported goods.
However, other articles within the WTO code outline exceptions to the principle of non-discrimination, with strict conditions on the use of those exceptions. Most of these exceptions are outlined in Article XX of the GATT, and are adopted under the WTO, called the "rule of exceptions" (WTO, 2001). The measures under this article are only to be applied in a non-arbitrary or necessarily discriminatory method between states and must meet the conditions of being necessary to protect human, animal or plant life or health, and relating to the conservation of exhaustible natural resources, the measures must be in conjunction with similar restrictions on domestic production or consumption (Anderson, et.al. 1995).
Such policies are labeled under the Sanitary and Phytosanitary measures of the GATT, however, protection of the environment itself, without regard to health or conservation of useable resources, is not specifically mentioned. These Sanitary and Phytosanitary measures were created to protect states from external environmental risks such as pests, disease-carrying organisms, and diseases carried by plants or animals (Qureshi, 1996). It is very important to note that these measures are only applicable in certain cases and that strict criteria must be met for their use. Article XX is not an open door for states to impose frivolous trade restrictions. A set of specific measures that must be equally enforced between members and based on international standards are necessary to prevent disguised restrictions on a particular state’s products. In addition, the measures must be based on accepted scientific principles, and although domestic states are at liberty to formulate higher standards for their own products, such standards cannot create a protectionist system of restrictions (Qureshi, 1996).
Many of the disputes brought before the WTO have consisted of one state challenging another state’s implementation of trade restrictions allowed under Article XX. This is because the types of bans on products that affect health or resources were not clearly defined as being necessary. As states have challenged trade restrictions contrasting rationales for limiting the use of Article XX exceptions have been produced by DSB panels (Uimonen & Whalley, 1997). Clearly, work needs to be done to clarify and establish fixed guidelines as to the use of measures under Article XX, however, given the enormous scope of the international trading system and the numbers of environmental influences, such a system of clarifications seems difficult.
Two cases provide an excellent opportunity to examine some of the questions about proper implementation of Sanitary and Phytosanitary trade restrictions. Both cases were brought before the GATT, not the dispute settlement body of the WTO, but the fundamentals of the cases still provide us with a relevant topic of study. The first case examined is the 1990 case of the United States challenging a ban on the importation of cigarettes by Thailand. The defense presented by Thailand claimed the import ban was "necessary" under Article XX in order to protect public health (Uimonen & Whalley, 1997). At first glance, such a reason would seem to fit the criteria needed to justify use of trade restrictions, as cigarettes do pose a scientifically acknowledged health threat. However, the problem with Thailand’s ban was in the inconsistency of its restriction policy. Thailand banned import of cigarettes, yet did not restrict the domestic output of a national cigarette monopoly, and therefore, due to the discriminatory nature of their policy, the DSB found the measures to be inconsistent with GATT rules (Uimonen & Whalley, 1997). In order for Thailand’s policies to be acceptable, their policy towards imported cigarettes would have needed to be the same as the policy held towards domestic cigarettes.
The second case that is often used to illustrate the enforcement of GATT rules is the famous tuna-dolphin dispute between Mexico and the United States. The case has its beginnings in the Marine Mammal Protection Act enacted by the US in 1972, a law that placed an import ban on tuna caught using methods that did not comply with US standards to prevent dolphin by-kill (Anderson, et.al, 1995). This consisted of using a specifically designed net that would allow dolphins to escape while retaining the tuna catch. For some time, the law was allowed to stand due to lack of enforcement by US customs, however, in 1991, Mexico challenged the Act in the GATT after the US enforced an import ban on tuna caught using dolphin-unsafe nets (Uimonen & Whalley, 1997). The US argued before the GATT panel that its trade restrictions were allowable under Article XX of the GATT. The US also claimed that under the rules of Article III, there was no discriminatory treatment between domestic and imported goods, that both had to be held to the same standards with regard to use of dolphin-unsafe nets (Anderson, et.al., 1995). Again, it would appear that the necessary measures needed to legitimately enact trade restriction had been met under the rules of the GATT.
However, the dispute settlement body of the GATT ruled against the US claims, finding them in violation of GATT rules. The panel based its judgments on the following rule; that the US could not restrict importation of tuna based on the method in which it was caught because that violates Article III of the GATT, which prevents the imposition of trade measures based on production processes. In addition the panel found that the US could not claim restrictions under Article XX because the natural resources being protected were extraterritorial, meaning that the dolphins traveled through the waters of more than one state, while the protection offered under Article XX is for domestic resources (Esty, 1994). Based on the United States’ imposition of a unilateral and extrajurisdictional law, the GATT ruled against allowing restrictions under Article XX. Both of these decisions angered groups in the United States, who claimed that the US had every right to protect the environmental resources through law.
However, this case provides an excellent example of several things related to rules and dispute settlement in the free trade system. One is the fact that the dispute settlement system could work in favor of smaller, developing states, rather than a large economic player. Second, that the GATT would enforce very strict guidelines as to what could legitimately be issued as a trade restriction under Article XX. And third, that the GATT would strongly enforce the rules against unilateral action and product production controls. One area where the GATT supported action by the US in the tuna-dolphin dispute was in the United States’ use of a "dolphin safe" tuna labeling system, which was found to be non-discriminatory, and therefore permissible (Esty, 1994).
After the full ruling was published, no action was taken by the United States with regards to the GATT’s specific rulings; however, the US did eventually negotiate with Mexico for a bilateral moratorium on the dolphin-unsafe purse seine nets (Anderson, et.al., 1995). This action on the part of the US demonstrates that as an enforcement mechanism, the GATT was rather weak. The WTO today has only slightly more ability to impose trade sanctions in the case of non-compliance. The threat to a nation’s sovereignty is much smaller than many groups would encourage us to believe, as the imposition of a WTO decision is only binding to that state under the specific terms of the state’s signature treaty with the WTO, and with no force over domestic law given to the WTO (Hocking & McGuire, 1999). Still, as cases such as the tuna-dolphin dispute show, decisions passed by the dispute settlement body of the WTO can influence a state to corrective action, without the need of a directly coercive enforcement mechanism. In addition to the policies allowed under the Sanitary and Phytosanitary measures of Article XX, states may place similar trade restrictions based on other Agreements under the WTO code.
One such agreement is the Technical Barriers to Trade agreement, which facilitates the development of international standards to promote trade. In many cases similar to the items under Article XX, technical regulations must be necessary and based on scientific requirements relating to "national security requirements, prevention of deceptive policies, protection of human health or safety, or plant and animal life" (Qureshi, 1996). It is important to note that although these technical regulations pertain to a product’s characteristics, they must pertain to a product’s performance, not the method in which it was produced or designed, and where pre-existing international standards on the product in question exist, states should base their regulations on the international standards, rather that create their own restrictions (Qureshi, 1996). Again, these allowances for trade restrictions are not an open door for states to impose unnecessary barriers to trade, but a way to make allowances for restrictions necessary for health and safety.
Under both Article XX and the Technical Barriers to Trade, special provisions are given to developing countries. The WTO recognizes that the restrictive measures created to protect health and safety can still have an adverse impact on international trade, and therefore cause an undue burden on developing states that would need to comply with such rules (WTO, 2000). To accommodate this, developing countries are allowed to accord "differential and more favorable treatment" to other developing states, without being required to extend their treatment to developed nations (Qureshi, 1996). By allowing this, it is only one of the ways the WTO helps to accommodate developing countries with regard to achieving liberalized trade without sacrificing the chance for economic growth.
In addition to the two previously mentioned cases of allowable trade restrictions, there is a set of quantitative restrictions allowed under the WTO code. Some of these are already mentioned under the Sanitary and Phytosanitary measures, such as the conservation of exhaustible natural resources or the protection of human, animal, or plant life. Yet others include restrictive measures relating to:
* Products of prison labor, which can fall under human health and welfare
* Restrictions to protect intellectual property rights, which fall under their own WTO agreement (TRIPS)
* Restrictions to protect a state’s public morals and national treasures
* To control the flow of gold and silver
Also, under certain circumstances, import restrictions on agricultural or fish products in order to reinforce government markets are allowed if similar action is taken to control domestic resources. Justification of the restrictive measures taken under these guidelines may be difficult as a state is required to have transparency in its restrictive actions, and must therefore show the restrictions to be necessary, not arbitrary, and non-discriminatory.
It is very clear then, after examining the allowed exceptions to trade restriction policy; that provided a state could clearly show it has met the necessary guidelines outlined in the WTO Articles, a state may impose restrictions on international trade. An example of an acceptable restriction would be the banning of European meat and agricultural products due to the threat of hoof and mouth disease by the several countries including the United States, under the provisions of Article XX. Due to the threat to animal health and life, the restrictions are allowed under WTO code.
The GATT and WTO recognize and allow this impediment to free trade, because of the importance of the measures towards the health and safety, among other reasons, of the state. Therefore, the WTO does not exist to create a system of absolute free trade, but rather a system of carefully monitored and increasingly liberalized trade, a system that takes into account and supposedly adheres to the idea of sustainable development. This sustainable development is accomplished through wise use of resources for economic growth in a way that protects the usage of resources for the future.
Copyright 2001 by Stacy Schumacher