In the previous article we cited cases challenging U.S. and other countries’ laws deemed by foreign investors to be in violation of the NAFTA agreement. In this segment we will note several cases involving challenges by foreign countries to U.S. laws alleged to be in violation of the General Agreement on Tariffs and Trade (GATT) and its successor The World Trade Organization (WTO) provisions.
We should note that under GATT, negotiations between disputing parties was encouraged whereas, under WTO panel rulings the decisions are binding subjecting the offending country to retaliatory trade sanctions if the violation is not remedied.
Clean
Air Act Weakened by WTO Ruling
In 1996, the WT O ruled in favor of Venezuela and Brazil on the contention that the U.S. Clean Air Act violated trade rules by requiring reductions of additives in their gasoline sold in the U.S. at different levels required of some domestic refiners (a temporary provision meant to avoid transitory shortages). The case, one of the first brought before the WTO, was a wake-up call alerting environmentalists to the danger of an extra-national organization, adjudicating in secret, could make our environmental laws too costly to maintain. Rather than pay 150 million dollars each year in retaliatory tariffs,
the U.S. complied by weakening the Clean Air Act standards for reformulated and conventional gasoline designed to reduce aromatic additives found to increase ground level ozone responsible for sharp increases in respiratory diseases (i.e. asthma).
If
you are among the many who have an aversion toward eating dolphin meat with
your tuna fish salad sandwich, or just against killing them, you may be
surprised to learn that, thanks to GATT rulings, your chances of consuming
morsels of those playful, intelligent marine mammals are pretty good, and their
chance of survival pretty bad.
Prior
to 1997 the U.S. Marine Mammal Protection Act (MMPA) of l988, responding to
public and children’s protest, prohibited the sale of tuna caught with purse
seine nets because fishing with those very large nets had resulted in
indiscriminately trapping and killing millions of dolphins. However, subsequent to a 1991 GATT ruling in
favor of Mexico’s challenge of the U.S. MMPA prohibition and, a 1992 European
challenge which also resulted in a GATT ruling (1994) that the dolphin
protection law violated GATT’s Article III prohibiting discrimination of like
products produced domestically and abroad, the Clinton administration, faced
with the prospect of millions of dollars in trade sanctions, supported an
amendment to the MMPA law that practically nullified its intent. The new law permitting the importation of
tuna caught with purse seine nets was passed in 1997 and implemented in
1999. The only safeguard is that the
producers certify that no Dolphin deaths were observed during the catch.
In
a similar case, in 1998 the WTO ruled against the provisions of Section 609 of
the Endangered Species Act requiring all shrimps sold in U.S. must be caught
with nets containing turtle excluder devices.
The provision was adopted in an attempt to stave off the rapid decline
of turtle population due to drowning caused by shrimp netting. In arriving at its decision, the WTO
rejected the U.S. argument that under Article XX(b) laws protecting “human,
animal or plant life and health” were permitted as long as they applied to all
producers, stating, “…It was not our task to review generally the desirability
or necessity of the environmental objectives of the U.S. policy on sea turtle
conservation. In our opinion, Members
are free to set their own environmental objectives. However, they are bound to implement these objectives in such a
way that is consistent with their WTO obligation, not depriving the WTO
Agreement of its object and purpose.”
Thus establishing the primacy of trade over environmental and other
objectives.
Similar
cases involving challenges to environmental, safety and labor standards have
suffered the same fate. This has
occurred despite the language in the preamble of the agreement establishing the
WTO which, while promoting international trade, states that “….economic endeavour
should be conducted with a view to raising standards of living, ensuring full
employment and a large and steadily growing volume of real income and effective
demand, and expanding the production of trade in goods and services while
allowing for the optimal use of the
world’s resources in accordance with the objective of sustainable development,
seeking both to protect and preserve the environment ….”
Obviously
more than language is needed and, in our next article we will consider some
remedies that may stave off a race to the bottom.
Art
Peracchio
4-7-02