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What the WTO actually does
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TAXPAYER ASSETS PROJECT - NATURAL RESOURCES POLICY ADVISORY
(please distribute freely)
February 20, 1996
I thought ther list might be interested in the following
editorial. The WTO decision has obvious effects on environmental laws in
the U.S., but the effect the WTO has on the management of publicly owned
assets, especially timber and fisheries, could be devastating. The
following post came from a listserver on federally-funded pharmaceuticals,
so you can see the effect on publicly owned assets could be tremendous.
* * * * * * * * * *
This posting concerns a WTO decision about EPA standards, but it is also
a chilling review of what to expect when the WTO begins to look at
country rules on pharmaceutical drug patent policies. jamie
The following is the manuscript for an editorial that was published in the
January/February 1996 issue of the Multinational Monitor (with minor
editoral changes). It was written by Robert Weissman (firstname.lastname@example.org),
who graduated from Harvard Law school last spring. It is beyond me why
the establishment (right and left) think it is so important to maintain
that the WTO doesn't reduce national sovereignty on a wide range of
regulatory issues. Some may think this is GOOD, some may think it is BAD,
but its a fact of life under the new GATT era. It is posted with
_ _ _ _ _
Multinational Monitor Editoral, January /February 1996, page 5.
The WTO Strikes
The World Trade Organization has struck its first blow -- sure to
be the first of many, unless the United States withdraws from the
organization -- against U.S. democracy, sovereignty and environmental
In mid-January, a World Trade Organization (WTO) panel ruled that
an important implementing regulation of the U.S. Clean Air Act violated
global trade rules. Everything about the ruling is bad: it overrides an
important environmental protection regulation; it establishes reckless and
restrictive interpretation of key General Agreement on Tariffs and Trade
(GATT) rules; and it demonstrates the ability of the WTO to subvert
The ruling came in response to a challenge filed by Venezuela and
Brazil to Environmental Protection Agency (EPA) regulations that set
standards for gasoline designed to reduce emissions that cause smog and
air pollution. The EPA rules require each refiner to meet or beat the
standards it maintained in 1990. Domestic refiners which cannot provide
full data for 1990 are required to estimate their 1990 baseline
performance according to one of two formulas; domestic refineries that
opened after 1990 are held to a statutory baseline of the 1990 average
U.S. gasoline quality. The EPA rules specify that foreign refiners which
cannot provide full 1990 data are automatically held to the statutory
baseline. This requirement reflects the EPA's conclusion that most
gasoline importers cannot provide reliable data on which to base estimates
of their 1990 performance.
The WTO panel ruled that the EPA regulations discriminated against
foreign gasoline producers, and thus violated GATT rules.
The panel dismissed as irrelevant the U.S. claim that the EPA
regulations treat similarly situated parties -- those who can document
their 1990 performance fully, or provide reliable data upon which to
estimate 1990 performance -- alike. It also dismissed the U.S.
contention that foreign producers on the whole were treated the same
as domestic gasoline producers, since most foreign refiners would be
held to the average standard of the entire U.S. industry.
Although the United States intends to appeal the panel decision,
it is generally accepted that the decision will not be overturned.
Final adoption of the panel decision will leave the United States
with two basic options: pay or obey. The United States could negotiate
trade benefits for the plaintiff countries equivalent to their claimed
losses from the EPA rule (Venezuela alone claims to lose $150 million
in sales annually as a result of the rule), or face trade sanctions of
equal amount. Alternatively, the United States could revise the EPA
regulations, allowing dirtier gasoline into the country.
More significant in the long term will be the precedents set by
the gasoline ruling.
The panel rejected the U.S. argument that the EPA regulations
should be upheld under a GATT exception that allows some discriminatory
measures where necessary to secure compliance with valid goals, such as
environmental protection. The panel's very narrow interpretation of what
constitutes an enforcement mechanism will dramatically limit the ability
of regulators to choose feasible means to attain environmental, consumer
or worker protection goals.
The panel also narrowly construed a GATT exception that allows
countries to undertake some discriminatory measures relating to the
conservation of exhaustible natural resources. Focusing only on the
discriminatory provision of the EPA regulations, and ignoring how they
fit in the overall regulatory scheme, the WTO panel rejected the
eminently reasonable U.S. claim that the EPA regulations "related to"
conservation. The panel's ruling that "relating to" conservation
really means "primarily aimed at" conservation, and that each element
of a regulatory initiative must satisfy this test in isolation,
shrinks the resource-conservation exception to near irrelevance.
Most disturbing about the gasoline decision is its confirmation of
WTO critics' worst fears about the new organization's impairment of
national democracy and sovereignty.
Industry pounded at the Clean Air Act at every stage of the
law-making process: in congressional hearings, in congressional
drafting of the legislation, in the EPA's protracted rule-making
process, in threatened lawsuits. Venezuela was well represented too,
by the elite Washington, D.C. law firm of Arnold & Porter.
Yet citizen pressure and commitment to clean air ultimately led to
a bill providing at least some minimal air quality protections. Now
foreign countries representing commercial interests have done an end-run
around the U.S. democratic process, successfully appealing to an outside
forum over which U.S. citizens can exert no direct influence.
While trying to downplay the impact of the decision, the Office of
the U.S. Trade Representative has asserted that the WTO is still a good
deal for the United States. That claim is untrue. An Essential Information
analysis of GATT disputes since 1980, when GATT rules expanded to cover
non-tariff issues, shows that the United States is a defendant more often
than a plaintiff.
More significantly, the Essential Information analysis shows that,
while the United States normally prevails as a plaintiff, it normally
loses as a defendant. In other words, countries tend to succeed when
they challenge other nation's regulations -- to protect health,
safety, the environment or other interests -- under GATT.
With the WTO now empowered to enforce GATT rules with a secretive,
inflexible adjudicative process backed by substantial sanctions, the
dilemma the United States now faces over revising the EPA gasoline
rules is likely to become commonplace. The environment, health and
democracy are certain to suffer in the process.
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