TO: Mayor and Town Council
SUBJECT: Information Provided by Seth Landau on World Trade Organization
DATE: May 8, 2000
At the February 14, 2000 Town Council meeting, Seth Landau, a student representative of a coalition that opposes the World Trade Organization, petitioned the Council. Mr. Landau requested that the Council pass a resolution against the World Trade Organization and its power to affect healthcare, education, social services, and government procurement. He stated that the World Trade Organization does not take the interests of developing countries into account, or the democratic sovereignty of the United States. Mr. Landau asked for permission to formally present these arguments for Council consideration at a later date.
The Council requested that Mr. Landau provide information about all of the implications of doing what he has asked. Mr. Landau submitted the attached report on April 24, requesting a future open forum to discuss these issues with the Council. Mr. Landau asks that the Council “petition the federal government to not participate in WTO negotiations regarding the sovereignty of our communities to protect our environment, our labor laws, and our procurement programs.”
1. Report from Seth Landau (p. 2)
2. Original Sample Resolution from Seth Landau (p. 23)
To the Town Council of Chapel Hill,
We apologize for the tardiness of this response. For the last couple of months, we have been busy planning the events that went on in Washington DC the weekend of April 16th. This document describes a few of the various reasons to oppose the World Trade Organization (WTO), and for the Town of Chapel Hill to petition the federal government to not participate in WTO negotiations regarding the sovereignty of our communities to protect our environment, our labor laws, and our procurement programs. The coalition which has been formed to oppose the World Trade Organization and other institutions that facilitate corporate dominance over the democratic sovereignty of citizens within the US and abroad, has and will be active within the community dealing with issues such as sweatshops, labor rights, environmental rights, etc. Currently, the coalition is comprised of individuals representing Internationalist Books, the Student Environmental Action Coalition, the Globe Committee on Human Rights, Students for Economic Justice, and many more. If you have any questions, feel free to call at either :
Seth Landau 933-8548 or
Kristine Soriano 960-4470 or
Internationalist Books 942-1740
Thank you, and we hope to hear from you soon.
Sincerely,
Seth Landau
On behalf of the coalition for global justice.
1.The WTO only serves the interests of multinational corporations
The WTO is not a democratic institution, and yet its policies impact all aspects of society and the planet. The WTO rules are written by and for corporations with inside access to the negotiations. For example, the US Trade Representative relies on its 17 "Industry Sector Advisory Committees" to provide input into trade negotiations. Citizen input by consumer, environmental, human rights and labor organizations is consistently ignored. Even requests for information are denied, and the proceedings are held in secret
2.The WTO is a stacked court
The WTO's dispute panels, which rule on whether domestic laws are "barriers to trade" and should therefore be abolished, consist of three trade bureaucrats who are not screened for conflict of interests. For example, in the tuna/dolphin case that Mexico filed against the US, which forced the US to repeal its law that barred tuna from being caught by mile-long nets that kill hundreds of thousands of dolphins each year, one of the judges was from a corporate front group that lobbied on behalf of the Mexican government for NAFTA.
3.The WTO tramples over labor and human rights
The WTO has refused to address the impacts of free trade on labor rights, despite that fact that countries that actively enforce labor rights are disadvantages to countries that consistently violate international labor conventions. Many developing countries, such as Mexico, contend that labor standards constitute a "barrier to free trade" for countries whose competitive advantage in the global economy is cheap labor. Potential solutions to labor and human rights abuses are blocked
by the WTO, which has ruled that it is: 1) illegal for a government to ban a product based on the way it is produced (i.e. with child labor); and 2) governments cannot take into account the behavior of companies that do business with vicious dictatorships such as Burma.
4.The WTO is destroying the environment
The WTO is being used by corporations to dismantle hard-won environmental protections, who call them barriers to trade. In 1993 the very first WTO panel ruled that a regulation of the US Clean Air Act, which required both domestic and foreign producers alike to produce cleaner gasoline, was illegal. Recently, the WTO declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device that allows endangered sea turtles to escape. The WTO is currently negotiating an agreement that would eliminate tariffs on wood products, which would increase demand for timber and escalate deforestation.
5.The WTO is killing people
The WTO's fierce defense of intellectual property rights-patents, copyrights and trademarks-comes at the expense of health and human lives. The organization's support for pharmaceutical companies against governments seeking to protect their people's health has had serious implications for places like sub-Saharan Africa, where 80 percent of the world's new AIDS cases are found. The US government, on behalf of US drug companies, is trying to block developing
countries' access to less expensive, generic, life-saving drugs. For example, the South African government has been threatened with a WTO challenge over proposed national health laws that would encourage the use of generic drugs, ban the practice of manufacturers offering economic incentives to doctors who prescribe their products and institute "parallel importing," which allows companies to import drugs from other countries where the drugs are cheaper.
6.The US adoption of the WTO was undemocratic
The WTO was established out of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) negotiations. On December 1, 1994, Congress approved GATT under Fast Track during a lame duck session of Congress. Fast Track limits public debate by not allowing amendments. The approval of the WTO required entire sections of US laws to be rewritten to conform with the WTO rules, similar to the way that treaties often redefine how the US will interact with other states. Had the agreement been voted on as a treaty, requiring a two-thirds majority in the Senate, it would have been defeated.
7. The WTO undermines local development and penalizes poor countries
The WTO's "most favored nation" provisions require all WTO member countries to treat each other equally and to treat all corporations from these countries equally regardless of their track record. Local policies aimed at rewarding companies who hire local residents, use domestic materials, or adopt environmentally sound practices are essentially illegal under the WTO. Under the WTO rules, developing countries are prohibited from following the same polices that developed countries pursued, such as protecting nascent, domestic industries until they can be internationally competitive.
8. The WTO is increasing inequality
Free trade is not working for the majority of the world. During the most recent period of rapid growth in global trade and investment--1960 to 1998--inequality worsened both internationally and within countries. The UN Development Program reports that the richest 20 percent of the world's population consume 86 percent of the world's resources while the poorest 80 percent consume just 14 percent. WTO rules have hastened these trends by opening up countries to foreign investment and thereby making it easier for production to go where the labor is cheapest and most easily exploited and environmental costs are low. This pulls down wages and environmental standards in developed countries which are having to compete globally.
9.The WTO undermines national sovereignty
By creating a supranational court system that has the power to economically sanction countries to force them to comply with its rulings, the WTO has essentially replaced national governments with an unelected, unaccountable corporate-backed government. For the past nine years, the European Union has banned beef raised with artificial growth hormones. The WTO recently ruled that this public health law is a barrier to trade and should be abolished. The EU has to rollback its ban or pay stiff penalties. Under the WTO, governments can no longer act in the public interest.
10.The tide is turning against free trade and the WTO!
There is a growing international backlash against the WTO and the process of corporate globalization over which it presides. Movement-building by coalitions such as People's Global Action against the WTO in Europe and the Citizen's Trade Campaign in the US are growing fast, as public support for corporate-managed free trade dwindles. Recent polls show that 58 percent of Americans agree that foreign trade has been bad for the US economy, and 81 percent of Americans say that Congress should not accept trade agreements that give other countries the power to overturn US laws. (Too late!) This is why tens of thousands of people from all walks of life converged in Seattle Nov. 29-Dec. 4 to confront the World Trade Organization head on at its ministerial meeting.
Case Studies: Released by Global Exchange
The European Union and Japan have challenged the WTO-legality of Massachusetts' selective purchasing law on Burma. The case is still pending. After a brutal military dictatorship took over Burma in 1988, some two dozen US municipal and county governments and the state of Massachusetts implemented policies terminating purchasing contracts with companies doing business in Burma. The selective purchasing laws were designed to keep public money from supporting a regime taxpayers find repugnant. Many of the purchasing laws were passed after Aung San Suu Kyi, Burma's dissident Nobel Peace Prize winner, called for a South Africa-style divestment from Burma.
In response to the Massachusetts law, in the summer of 1997 the EU and Japan filed a challenge against the US with the WTO. Their claim: the law violated the Agreement on Government Procurement, which compels governments to follow WTO rules; prohibits preferences for local companies; and prevents the use of environmental, human rights or labor practices to be considered as criteria in awarding public contracts.
Meanwhile, the free-trade pressure group USA*Engage challenged the measure in Massachusetts state court as a violation of the US Constitution, arguing that the law interfered with the federal government's exclusive authority to conduct foreign policy. The Massachusetts state court ruled in favor of USA*Engage in 1998, and in June of 1999 an appellate court upheld the ruling. The case is now headed for the Supreme Court. The EU and Japan have suspended their WTO challenge, pending the ruling of the domestic case. Should the Supreme Court rule in favor of the Massachusetts law, the EU and Japan would likely reopen their challenge.
Even before the case is concluded, however, the WTO challenge to Massachusetts' law has created a chilling effect on other domestic human rights policies. When Maryland was considering a selective purchasing law targeting Nigeria, the Clinton Administration dispatched US State Department Deputy Assistant Secretary David Marchick to testify before a Maryland legislative committee that was considering the legislation. Marchick warned of another WTO suit were the legislation to become law. The bill was expected to pass, but the State Department's lobbying effectively convinced the Maryland legislature to reject the proposed legislation by a single vote.
This is an obvious infringement upon the sovereignty of states, and even communities such as Chapel Hill and Carrboro, wherein selective purchasing laws have been adopted in the past (i.e. Burma Solidarity and anti-Apartheid measures.)
The US successfully challenged an EU rule protecting the banana exports of their former colonies in the Caribbean. The European Union has for many years provided preferential tariffs to former colonies in Africa, the Caribbean and the Pacific. The so--called Lomé Convention favored some of the poorest countries in the world, the Caribbean Island producers, which produce just 3 percent of the world's bananas and hold only 8 percent of the EU market. The Lomé agreement favored these countries by providing them with a 7 percent guaranteed market access license at a lower tariff rate. The convention was designed to benefit poor farmers in countries dependent on banana exports. In many Caribbean countries, it is small farmers rather than large corporations which harvest bananas for export, eking out a tiny profit. These nations are heavily dependent on banana exports, which account for upward of 50 percent--and sometimes as high as 91 percent--of export earnings. In order to support their former colonies, the EU created a two-tier tariff quota--essentially guaranteeing that Caribbean bananas would be cheaper than their competitors in the European market.
In 1996, the United States challenged the EU, claiming the Lomé banana regime was WTO-illegal. The US itself does not produce a single banana for trade, but it acted on behalf of Chiquita Brands International, a massive and powerful company that controls half of the EU banana market. (Perhaps coincidentally, Chiquita contributed $500,000 to the Democratic Party just days before the complaint was filed.) Although the WTO had previously granted the EU a waiver for its banana policy, the WTO ruled with the US. The EU appealed the decision. A WTO appellate body later sustained the earlier decision and clarified: the special tariff quotas that the EU provided to Caribbean banana producers had to be applied to all countries or eliminated. Of course, that would make convention meaningless.
The EU, bolstered by the 74 percent of its citizens that say they would pay more for Fair Trade bananas as opposed to standard bananas, stood firm. In 1998, the Union announced that it would remedy some of the challenged policies, but that it would maintain the quota. The US responded with punitive tariffs against the EU. The result: the EU has recently announced it has no choice but to rescind the preferences, although the US and the Europeans continue to dispute the exact terms of the settlement. However it turns out, the small banana farmers of the Caribbean are expected to be the losers.
Gerber Food successfully threatened WTO action to force Guatemala to withdraw restrictions on the marketing of infant formula.
In 1983, Guatemala passed legislation to encourage breastfeeding and limit the use, and abuse, of infant formula, which has been linked to high infant mortality rates in developing nations. Guatemala's legislature followed the World Health Organization in developing guidelines that would be useful for illiterate consumers. One restriction prohibited the use of images of bottle-feeding babies in advertising or marketing. After the law went into effect in 1988, all of Guatemala's domestic and foreign suppliers of made the necessary changes to their packaging, and infant mortality rates dropped significantly. UNICEF held up Guatemala as a model in regulating the use of infant formula.
But one company, Gerber Food, refused to comply with the new regulations. The company continued to use a picture of a pudgy baby in its packaging and marketing. (Gerber allegedly violated the labeling law in several other ways as well.) The Guatemalan government for five years sought to compel Gerber to modify its labeling. In 1993, shortly before the Uruguay round of trade talks that would create the WTO, Gerber threatened the country with some sort of trade sanctions based on trademark infringement. (Though only nation-states that are members of the WTO can file challenges in the organization's trade court, challenges are usually prompted by companies in member countries.) By 1995, successfully intimidated, the Guatemalan government backed down and exempted Gerber from its infant food labeling policy.
Assuming Gerber had been able to persuade the US government to bring a WTO challenge--which is not at all certain--Guatemala's law might well have withstood such a complaint. The WTO intellectual property agreement contains a public health exception, and an epidemic of marketing-created infant mortality certainly could be considered an exception. But developing countries like Guatemala often lack the technical and financial means to defend themselves in international trade tribunals, and so can be successfully threatened by powerful corporate interests. Consequently, Guatemala was forced to sacrifice the well-being of its most vulnerable citizens to meet the demands of a multinational corporation.
WTO Rules Against
US in Turtle Case
MARCH 14, 1998
By MARTIN CRUTSINGER
AP Economics Writer
WASHINGTON (AP) -- A U.S. trade ban designed
to protect endangered sea turtles violates global trade rules, the World Trade
Organization determined in a preliminary ruling.
The draft decision by a three-member WTO hearing panel, if not changed, would
represent a victory for several Asian nations who challenged a U.S. ban on shrimp
imports from nations not adequately protecting sea turtles.
While the decision has not been made public, a consumer group reported the finding
Friday and U.S. officials, speaking on condition of anonymity, confirmed that
the preliminary ruling had gone against the United States.
These officials said the three-member WTO panel had ruled on very narrow grounds
and the United States planned to challenge the decision.
``We simply disagree with the reasoning applied in the case,'' one of the officials
said. ``We are going to fight the panel decision to gain an outcome that we
feel better represents the facts.''
The dispute involves a ban imposed by the United States on sale of shrimp caught
without special devices designed to protect endangered sea turtles.
Shrimp fishermen in the United States are required to use the turtle-excluder
devices on their trawl nets to prevent turtle drownings, the largest cause of
sea-turtle deaths. Environmentalists have contended that failure to equip shrimp
nets with the turtle-excluder devices results in the death of 150,000 turtles
a year worldwide.
Thailand, Malaysia, India and Pakistan challenged the U.S. ban in a case before
the Geneva-based WTO, the referee for global trade disputes. The four countries
claimed that the U.S. ban was being applied in a discriminatory manner and really
represented an unfair trade barrier.
Chris McGinn, Deputy Director of Public Citizen's Global Trade Watch, said the
turtle ruling is just the latest WTO decision that has gone against environmental
interests.
``This is one more attack by the WTO on environmental law. The WTO favors trade
over all other values,'' McGinn said. ``This puts the United States in the position
of changing U.S. law or facing economic sanctions.''
In its case, the United States argued that the trade embargo was necessary to
protect the turtles because they are threatened with extinction and other measures
do not provide sufficient protection.
The United States in 1996 lost another environmental fight before the WTO over
the issue of whether a U.S. regulation unfairly discriminated against imported
gasoline. In that dispute, brought by Venezuela and Brazil, the Environmental
Protection Agency ended up changing its regulations to end what the two countries
claimed was the discriminatory treatment.
Trade Body Threatens Democracy |
By Chris McGinn, of Public Citizen
The World Trade Organization (WTO) has been in operation for only three years, but the destructive impact of its policies on American families may be felt for years to come. Created three years ago in January with the passage of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), an international trade pact, the WTO is a powerful global bureaucracy where unelected trade bureaucrats are empowered to decide the fate of democratically-achieved laws. If any local, state, or federal law of a WTO member country is found to violate the organization's trade rules, the law must be changed, or that nation could face economic sanctions.
With about 35 exceptions, including China, Russia, and Vietnam, most nations in the world belong to the Geneva-based WTO. Taking advantage of WTO rules, corporations in various countries have gone after a cornucopia provisions; from measures to eliminate the use of leg-hold animal traps to laws protecting dolphins from unsafe tuna-catching practices. Establishment of the WTO was controversial all over the world as it placed the importance of international commerce and industry interests before all other values, including consumer safeguards, environmental and labor protections, food safety, and human rights. In the United States, a broad coalition of environmental, food safety, family farm, labor, and religious groups opposed the GATT Uruguay Round and the establishment of the WTO, citing, among other reasons, the threat that the WTO would pose to U.S. environmental and consumer protection laws.
The negative effects of the WTO are even worse than critics had originally feared. The WTO's very first ruling in early 1996 ordered the U.S. to eliminate its Clean Air Act regulation on gasoline cleanliness. The case proved that the WTO has the power to weaken U.S. environmental and health protections enacted by Congress. At issue was a 1993 Environmental Protection Agency (EPA) rule on gasoline contaminants that cause health-threatening air emissions. The regulation required the cleanliness of gasoline sold in America's most polluted cities to improve by 15 percent over 1990 levels, and all gasoline sold elsewhere in the U.S. to preserve at least 1990 levels. The rule was created to ensure that all gasoline sold in the U.S. met the standards. The Venezuelan government and oil industry had fully participated in the original rulemaking of the Clean Air Act when it was open for public comment and input. While many environmentalists considered the provisions of the Act to be too weak, the Venezuelan and U.S. oil industries regarded the rules as too stringent. Using democratic means provided by U.S. law, including a federal court challenge, the Venezuelan oil industry attempted to modify the rules to serve their best interests, but was unsuccessful.
The Venezuelan oil industry then took its case to the Venezuelan Government, which turned to the WTO. The Venezuelan government claimed that the U.S. foreign standard pertaining to so-called reformulated gasoline put Venezuelan domestic refiners at an unfair disadvantage by requiring that their product meet the average cleanliness of U.S. domestically refined reformulated gasoline. This rule was established because foreign refiners did not maintain the EPA data-keeping requirements that would have allowed them more discretion in setting standards. The WTO ruled that the U.S. regulation on the cleanliness of reformulated gasoline had to be changed because WTO rules forbid different treatment for foreign producers. The U.S. government appealed the ruling, which the WTO subsequently rejected. By spring 1996, the Clinton Administration notified the WTO it would comply with the ruling by changing the U.S. gasoline regulation rather than face the alternative: $150 million in annual trade sanctions. The Venezuelan oil industry had effectively superceded the democratic decision-making process in the U.S.
The case actualized the worst fears of environmental groups and other opponents of the WTO. The ruling required countries to conform to WTO rules: "WTO members were free to set their own environmental objectives, but they were bound to implement those objectives only through measures consistent with its [WTO's] provisions."
In April 1997, the EPA released proposed rules to implement the WTO order. The new rules, which will allow more dirty gasoline into the U.S. domestic market, are in fact identical to an oil industry proposal that the EPA had previously contended was unenforceable and too costly. The rules were enacted into law last August. Gas stations in U.S. cities with the poorest air quality, which used to be required under the Clean Air Act to sell only the most purified reformulated gasoline, will receive dirtier gasoline, and residents of these cities will suffer an increase in air pollution and inevitable damage to their health and the environment.
The World Trade Organization Ruling Against the Reformulated Gasoline Regulations of the U.S. Clean Air Act
The WTO ruling provides a real life example of the problems raised during the contentious WTO approval battle by WTO opponents across the political spectrum. In its outcome, tone, and reasoning, the first ruling of the World Trade Organization The World Trade Org. was established 1/1/95 under the terms of the GATT Uruguay Round. against U.S. clean air rules provides a real life example of the WTO's threat to environmental and health protections, democratic policy making and national sovereignty. In this case, three unaccountable trade bureaucrats at the WTO's Geneva headquarters second-guessed U.S. policy makers. The tribunal declared that the means the U.S. employed to implement public health improvements in U.S. air quality under the Clean Air Act were not acceptable under WTO rules. The WTO requires "each Member ensure the conformity of its laws, regulations and administrative procedures" WTO rules. agreement Establishing the WTO, Article XVI-4. Beyond a limited internal appeal to a WTO review panel, the U.S. faces only two undesirable choices: change the rule or pay $150 million in trade sanctions annually. It is the WTO that must be changed, not the U.S. policy.
The ruling illustrates WTO's curtailment of U.S. policy-makers to implement our laws. This WTO ruling would strip the U.S. government of some basic, practical enforcement tools: the ability to demand certain data from foreign producers about their products and to regulate the producer of a target product. The WTO declares the myriad enforcement and compliance issues that inevitably shape laws and regulations are irrelevant. The tribunal's report states: The WTO "does not allow less favorable treatment dependent on the characteristics of the producer and the nature of the data held by it." Panel Opinion, p. 35. This limitation calls into question how the U.S. can enforce any domestic law that requires provision of data for all producers -- that is domestic and foreign producers -- to ensure compliance. This limitation is an extension of the 1994 GATT ruling against provisions of the U.S. Corporate Average Fuel Economy standards (CAFE) in which a tribunal held that the U.S. could not distinguish between specific automobiles on the basis of the producer's average fuel economy even when a law was facially nondiscriminatory. The GATT was an international trade contract that preceded the WTO.
The ruling demonstrates the WTO's threat to popular democracy, national sovereignty. This case is a classic example of the WTO's democracy threat because the losing rule had withstood all challenges available through the U.S. democratic process. The rule's domestic and foreign opponents had lobbied Congress in the Clean Air Act debate, had participated in the rule making, had threatened the resulting rule with a lawsuit and had lobbied Congress to make later changes. Venezuela was represented in the process by the high-powered D.C. law firm of Arnold & Porter. During the extended battle against the rule, the U.S. refineries had available to them the same U.S. democratic procedures -- lobbying, rule making and the courts -- as available to Venezuela. Once these options were exhausted, the U.S. refiners began implementing the law with the expectation that they would amortize the cost over the many years in which all gasoline in the U.S. market would face similar costs. Meanwhile, the Venezuelans were able to go to a different, international jurisdiction without the same due process guarantees and with a different substantive rule of law and successfully attack the rule. The U.S. refineries which had strongly opposed the rule during its creation, but have since spent billions implementing it, are now demanding that the rule continue to be applied to foreign refineries. From a business perspective, they argue, the WTO's sovereignty threat undermines their ability to make business plans.
The WTO ruling limits future use of WTO defenses on natural resources and health. There are several limited exceptions to WTO rules for certain domestic laws that conserve natural resources or protect human, animal or plant life. This ruling drastically narrowed the exception for measures "relating to the conservation of exhaustible natural resources." This exception had been viewed as more widely applicable. Unlike other GATT exceptions, it does not requires a defending party to prove its domestic law is "necessary," a term interpreted in GATT to mean the "least trade restrictive" option regardless of political, economic or other feasibility concerns. This WTO tribunal ignores the WTO rules to conclude the U.S. does not qualify for the exception because it has not proved the rule was "necessary" for conservation. As well, the tribunal applies a very strict "necessary" test in relation to the exception for measures "necessary to protect the health and life of humans, plants and animals." The tribunal describes the least trade restrictive test in a manner that makes it logically impossible to prove: a defending party must prove the negative, that somewhere, somehow, a less trade restrictive measure does not exist.
If implemented, the ruling would result in dirtier U.S. air quality.
The result of U.S. implementation of the WTO ruling would be dirtier air. Implementation would allow the $150 million annually in Venezuelan gasoline too dirty to now enter into U.S. markets. Interestingly, in the years during which the current rule has been in force, Venezuelan imports of gasoline to the U.S have increased. If Venezuela were excused from meeting the reformulated gasoline standard, an additional $150 million annually of gasoline would be allowed into the U.S. which is more highly contaminated with polluting elements called "aromatics."
The WTO's secretive tribunal second guessed the best way to implement U.S. policy.
The ruling vividly demonstrates what occurs when the WTO authorizes foreign bureaucrats with no stake in promoting the best interests of the U.S. nor expertise in U.S. health or environmental goals to oversee implementation of U.S. domestic policy. The ruling states: "...WTO Members were free to set their own environmental objectives, but they were bound to implement those objectives through measures consistent with its [WTO's} provisions..." WTO Panel Report on Venezuela and Brazil's Challenge of the U.S. reformulated Gasoline Rules, January 16, 1996, p. 46. (Hereinafter "Panel Report.") This is the WTO rule of "say what you want, but do only what we say." The ruling subordinates the many real world difficulties of policy-making to the WTO's imperative of trade uber alles -- putting trade expansion as the primary goal always.
Thus, dismissed as unfortunate are the grounds presented by the U.S. as to why the U.S. EPA created this rule. The WTO tribunal engages in second-guessing, noting that the U.S. could have required all refineries to meet the same contamination baseline. However, during the rule's creation through the Administrative Procedure Act's democratic processes, this very option was ruled out. It was determined to have unacceptable costs: causing major disruptions in gasoline production and thus shortages and consumer price hikes. It was argued to be a nation security problem. Also, Clean Air Act opponents argued that a uniform standard would necessitate a very long phase-in and a significantly lower standard than what could be achieved using other methods. The tribunal also advised that the U.S. could have allowed every refiner to set its own baseline. Interestingly, U.S. refineries had urged for just that. This method would have kept foreign-refined gasoline entirely out of U.S. markets. Foreign refiners have not been required to keep the detailed data required of U.S. refineries that would have been needed to calculate individual baseline. When EPA suggested that foreign refineries could try to provide data to set their own baseline in a proposed 1994 reformulated gas rule change, Venezuela and Brazil did not support the proposal. They argued the data requirements were too cumbersome. Thus, the EPA used its judgement to craft a compromise allowing some flexibility for refineries with data to set their own baseline. The EPA concluded it could not ensure reliability of foreign data nor did it have foreign police powers to sanctions falsified foreign data. Thus, U.S. refineries with the needed data could set individual baselines. U.S. refineries that had not been operating for six months (and thus did not have good data) and foreign refineries were given a statutory contamination level. That level was the actual average of all of the refineries for which data were available, ensuring that foreign refiners as a group were treated identically to domestic refineries as a group.
The U.S. has only 3 options to the WTO ruling: Appeal to an internal WTO review board, change the rule or pay $150 million annually to Venezuela in trade sanctions. The WTO, not the U.S. policy needs to be changed. Although appeals are limited to an internal review board, the U.S. must appeal this case because it establishes dangerous precedents which could be used to attack other U.S. conservation and environmental laws. As well, the U.S. would be setting a bad precedent in simply accepting this far ranging ruling which is packed with extraneous, ad hoc rule-making on issues that this case does not raise and that could be used against a wide range of other domestic policies far beyond environmental and health issues. As a policy matter, the U.S. must draw a line: international trade law cannot be made by secretive panels on an ad hoc basis. This ruling bristles with out of context quotes pulled from past GATT cases used to substantiate points the panel seems to have created out of whole cloth. In trying to claim some victory, the U.S. trade office has bragged that it won a real victory in getting the WTO to consider clean air as an exhaustible natural resource!
The fact that the Clinton Administration declared victory in the WTO's decision to consider air a natural resource is a devastating indictment of the WTO's antiquated view of the world. It seems inconceivable that the U.S. would have agreed to submit its domestic health and environmental laws to review by such a backwards organization. The notion that any international agency would question whether clean air is a renewable natural resource would be comical, except the WTO has the power of trade sanctions to push its backwards notions of the world into nations' domestic policies.
Further Reading:
For an excellent description of how trade disputes are settled, go to
http://www.citizen.org/pctrade/gattwto/Cases%20&%20Tribunalists/beef.html#The EU's Ban on Trade 3
Where it describes a case between the U.S. and Europe regarding beef treated with growth hormone and the precautionary principle. For interests of length, it is not included in the packet.
National Sierra Club’s Comments to the Trade Policy Staff Committee,
United States Trade Representative
Washington DC, May 20, 1999
|
On behalf of the Sierra Club’s more than 500,000 members, we would like to thank the US Trade Representative for inviting public testimony on the World Trade Organization (WTO). For nearly ten years, the Sierra Club’s Responsible Trade Campaign has educated the Club’s members and the general public about the need for environmentally responsible trade policies. Such policies would ensure that freer trade does not damage the web of life on which healthy communities and a sustainable economy depend.
At the upcoming WTO Ministerial in Seattle, the United States and its trading partners will make decisions that will affect not only the economy, but the environment, for generations to come. We urge that you take as your guiding principle the need to mainstream environmental considerations into all the deliberations, agreements, and actions of the WTO. In particular, we believe that this Summit should launch a comprehensive review and reform of current WTO rules rather than conclude new trade agreements or launch new trade talks.
 |
I. The Health and Environmental Impacts of Existing WTO Rules
With establishment of the North American Free Trade Agreement (NAFTA) and the 134-nation World Trade Organization (WTO), our governments sharply increased the rate at which international trade is fusing the world’s economies into a single, homogeneous market. Current trade policy promotes global economic competition, the mobility of capital, the conversion of untouched natural resources into marketable commodities, the spread and deepening of consumer values, an increase in cross-border investment, the erosion of political, ecological, cultural, and social boundaries, and limitations on the role of government worldwide to define the public good.
It is then no wonder that trade ranks among today’s most important environmental issues. Some of trade’s environmental effects are positive. For instance, trade may help to convey some less-polluting technologies from wealthier to poorer countries. And, by promoting growth, trade may provide the wealth needed to clean up certain pollution problems. But the environmental damage caused by unregulated free trade on the terms fostered by current trade rules may be even greater than the benefits.
A. A Race to the Bottom
By promoting economic growth without adequate environmental safeguards, trade increases the overall scale and pace of resource consumption; promotes adoption of high-consumption, high-polluting lifestyles; and prompts countries to seek international advantage by weakening, not raising, environmental protections. Since the implementation of NAFTA, each of the NAFTA countries has weakened basic environmental protections despite a commitment to strengthen environmental standards under NAFTA’s environmental side agreement. For instance, British Columbia, Canada recently relaxed environmental standards for its forestry sector in order to compete more effectively for export markets.
B. Eroding Democracy
Economic globalization erodes democratic values, hampering the ability of citizens and democratic governments to protect public health and the environment. Challenges to democratically enacted environmental and public health rules under the WTO are heard by tribunals of trade experts operating behind closed doors. The harmonization of environmental standards between and within countries occurs within international trade bodies closed to public participation. The number and variety of trade institutions making critical decisions about environmental rules threatens to overwhelm the resources of citizen watchdog groups accustomed to operating in more transparent domestic fora.
As capital becomes more mobile in a global market, communities lose control over their resources. For instance, after Boise Cascade moved mills from Oregon and Idaho to Mexico, a company spokesman stated, "How many more mills will be closed depends on what Congress does.... The number of timber sales [from national forests] will determine our decision to move south."
C. Undermining Health and Environmental Standards
The WTO shows a distinct bias against the environment and public health in dispute settlement proceedings. Standards have been weakened as a result. For instance:
· The State Department weakened U.S. turtle-safe shrimp regulations in 1998 after a successful challenge in the WTO. Before the challenge, U.S. regulations required all shrimp-exporting nations that traded with the U.S. to equip their shrimp trawlers with turtle excluder devices. These could save 97 percent of the 150,000 sea turtles that drown in shrimp nets each year. But after the dispute panel ruling, the State Department modified the regulations to apply only to those individual foreign trawlers selling shrimp to the U.S. market. The new regulations are unenforceable because turtle-deadly shrimp can easily be passed off as turtle-safe.
· Canada was forced to roll back its ban on MMT, a gasoline additive that is a suspected neurotoxin. MMT’s U.S. manufacturer used a NAFTA dispute process to charge that Canada’s ban had defamed the company’s good name and hurt its profits in violation of NAFTA provisions barring the partial "expropriation" of investor property. Under the precedent established in this case, virtually any environmental law that affects the profits of a foreign investor can be challenged as a NAFTA violation.
· After a complaint by the United States, a WTO panel ruled against Europe’s ban on beef from cattle treated with growth hormones. The precedent established in this case could haunt American consumers, forcing us to adopt international health and safety standards that are lower than our own. Ironically, as a result of the WTO dispute, European Union scientists have conducted new studies establishing a cancer risk from hormone-treated beef. American consumers may question the safety of their own food supplies as they learn about these results.
In addition to direct challenge in the international trading system, business lobbyists, regulators, and trade officials have weakened or blocked proposed laws and regulations as violations of trade rules. The "chilling effect" of trade rules on environmental law can be more powerful than the direct impact of formal dispute resolution. To cite several recent examples:
· In 1995, the U.S. Animal and Plant Health Inspection Service (APHIS) refused to mandate the strongest options for controlling pests on imported wood, pleading that it "cannot establish regulations that would contravene other laws and policies associated with trade...." Under its proposed pest regulations, scientists estimate a 50 percent chance that the Douglas fir forests of the Pacific Northwest could be wiped out by pests imported on raw logs from Siberia. The Sierra Club is concerned that trade interests will prevail when APHIS sets new standards for tree pests carried in solid wood packing material.
· The Maryland state senate rejected a bill banning contracts with firms doing business in Nigeria after the State Department testified that the legislation violated international trade rules. Under the WTO’s Agreement on Government Procurement, states and localities could be barred from procurement aimed at promoting environmental protection, human rights, and other causes. Maryland activists had promoted the legislation, modeled word-for-word on anti-apartheid legislation adopted by Maryland in the 1980s, to focus attention on the plight of Nigeria’s Ogoni people. The Ogoni have been severely persecuted by the Nigerian government for protesting the pollution of the Shell Oil Company.
· The United States Trade Representative (USTR) is now lobbying the European Commission to reject proposed new regulations aimed at cleaning up the computer industry. The USTR and the American Electronics’ Association charge that the proposed regulations, including a hazardous materials phase-out and a recycled plastics requirement, violate WTO rules. At last years WTO Summit in Geneva, President Clinton stated, "We should be leveling up [environmental protections], not leveling down." The Sierra Club hopes that US regulators would seize this opportunity to raise US standards for electronic equipment rather than lower the proposed European standard.
· The Commerce Department is also lobbying Japanese environmental officials to block improvements in Japan’s guidelines on motor vehicle fuel efficiency, charging the regulations would hurt U.S. auto exports. Japan’s new regulations could help protect American citizens from the perils of global warming pollution. Yet the Commerce Department launched its pressure campaign without seeking public comment.
 |
II. New Trade Talks
Despite growing evidence that U.S. trade policy has a number of serious, adverse environmental impacts, new trade negotiations are proceeding with few indications of a course correction.
The United States played host to a Summit of the World Trade Organization in Seattle from November 30 to December 3, 1999. The Summit could be used to conclude a series of agreements reducing industrial tariff reductions and to launch a sweeping new, "millennial round" of trade negotiations. The proposed new agreements could have serious environmental or public health implications.
A. Advanced Tariff Liberalization
At the Summit, the United States hopes to complete tariff-elimination agreements in eight industrial sectors, including energy, fisheries, and forest products, among others. US officials have insisted that the forest products agreement would not have adverse environmental impacts. Yet a recent industry study predicts that the agreement could increase world-wide wood consumption by 3 - 4 percent. A rise in forest products consumption could easily translate into more logging on the ground. The Sierra Club believes it is essential to conduct a thorough, open, and balanced environmental impact assessment before completing any of the agreements to eliminate tariffs.
B. A Millennium Round?
In addition, the Summit could sweep together a series of on-going and new trade negotiations to launch a new "millennium round" of trade talks. Many of these talks raise serious potential environmental concerns.
· Agricultural talks could foster the worldwide sale of bioengineered seeds that contain natural pesticides built into their genes. By ensuring that insect pests will consume a steady diet of the pesticide, these seeds guarantee the development of resistant insects within a few decades. Farmers could then lose an important tool for safely controlling insect pests without synthetic pesticides.
· Intellectual property talks could require countries to enforce patents over plants and animals. Such patents could hurt agriculture or health in poor countries by eliminating control over local genetic resources and by restricting access to foreign seeds and pharmaceuticals.
· Investment talks could globalize strict standards against the partial "expropriation" of property. Such standards in the NAFTA were used to eliminate Canada’s ban on MMT. Given global effect through the WTO, such rules could undermine environmental safeguards world-wide.
· Government procurement talks could strengthen trade disciplines that bar governments from basing procurement on non-market criteria. The new rules could eliminate government procurement as a tool to promote zero-emission vehicles, solar energy, organic foods, sustainable wood, and labor or human rights.
· Cooperative arrangements with the International Monetary Fund and the World Bank could authorize these international agencies to condition their loans on compliance with WTO rules. Doing so would delegate WTO enforcement powers, undermining the minimal procedural safeguards in the WTO’s dispute settlement process.
 |
III. The State of Environmental Reform
On a few issues, the Unites States has been a leader in promoting environmental reform of the World Trade Organization, but on many other issues it has lagged behind our trading partners. In any case, the proposed reforms fall well short of what is necessary for ecologically sustainable international trade.
A. Transparency
The United States has lead efforts to expand the range of WTO documents available to the public and continues to promote broader de-restriction of documents, including dispute panel reports. We welcome these US proposals, but they are far from sufficient to make the WTO a truly accountable institution.
B. Other Issues
On other issues, the United States has lagged behind. According to news reports, at a high-level symposium of trade and environment officials in Geneva earlier this year, the Administration indicated that it would not seek to revise existing trade rules to better safeguard the environment. Instead, reports indicate, the Administration would rely on trade dispute panels to re-interpret trade rules in ways that are more environmentally benign. The Sierra Club agrees that the recent appellate body opinion on the shrimp/turtle case avoided some of the egregious errors of the past. But the panel still interpreted trade rules in ways that needlessly restrict environmental protection. Moreover, without changes to underlying rules, the WTO will still exert a powerful chilling effect on health and environmental safeguards.
 |
IV. Recommendations: Review and Reform
Despite its name, the World Trade Organization exerts powerful influence on many issues other than trade. Experience shows that the WTO has a profound impact on health and environmental laws as well as on democratic governance. Given the relative novelty of the WTO and the scope of its known impacts, it would be a mistake to expand its powers by concluding or launching additional trade negotiations at the Seattle WTO Summit. Such agreements could have far-ranging harmful impacts on the environment and public health for generations to come.
Instead, the Summit should be used to launch a thorough environmental, social, and legal review of the WTO with a view to reforming existing WTO rules to protect public health and the environment.
The United States should set an example by conducting a review to assess the impacts of the WTO agreements on specific sectors and for representative developed and developing countries. In addition, the WTO and national governments should begin a review of the environmental impact of proposed agreements and new negotiations. Such assessments should include a comprehensive scoping of impacts involving extensive comment from the pubic and affected government agencies, a draft assessment with another opportunity for outside comment, and a final assessment.
In addition, negotiators should use the WTO Summit to begin adoption of significant trade rule reforms. The United States should call a moratorium on all challenges to health and environmental laws until such changes are in place. The following preliminary recommendations are meant to be suggestive, not comprehensive.
A. Transparency, Public Participation, and Accountability
To ensure genuine public participation in the WTO and increase its legitimacy in the eyes of the public, several reforms are needed. Citizens’ groups should be allowed to make direct submissions to WTO negotiating committees and working groups as well as to the General Council. Governments should provide notice and an opportunity for public comment on submissions to the WTO. Meetings of minutes should be made public. And the public should have ready access to working documents.
Reform of the dispute settlement mechanism is essential to create a neutral forum to weigh environmental and public health issues. For example, dispute panels on environmental issues should include panelists with demonstrated environmental expertise. On issues involving multilateral environmental agreements, consultations should be required with the MEA secretariats. Questions of environmental fact and law should be delegated to other relevant bodies, including the secretariats of MEAs. Interested parties, including officials of subnational governments and representatives of citizens organizations, should be allowed to provide oral and written testimony. National submissions should be developed after public notice and comment. Dispute panel reports should be publicized on the Internet upon release.
B. Trade Rule Reforms
To overcome the WTO’s demonstrated biases against the environment, trade rules should be amended to incorporate environmental principles. Moreover, all WTO committees should be required to consider such principles in their deliberations and open their proceedings to environmental organizations and government agencies. The following recommendations are, again, suggestive, not comprehensive. In particular, we urge reform of the WTO with respect to:
· Trade measures in MEAs. Without the ability to use trade measures, international environmental law will be permanently relegated to second class status. For instance, trade measures against non-members of an MEA could be granted a "safe harbor" in cases when the MEA does not exclude any country able to join.
· The precautionary principle. Allow countries to enforce protective standards for public health and the environment in the absence of complete scientific information. Shift the burden of proof from the challenged country to the challenger.
· Upward harmonization. Ensure upward harmonization in reconciling differences in the levels of health or environmental protections between countries. Ensure that harmonized standards are floors, not ceilings in order to avoid stopping environmental progress.
· Science. Ensure that WTO dispute panels do not substitute their own scientific judgement for the judgement of domestic regulators when a scientific basis exists for a given level of protection.
· The consumers right to know. Require that recognized standard-setting bodies under the WTO are open, participatory, and balanced. Standards for ecolabels developed by bodies that do not meet these criteria would not be allowed to prevail in trade disputes, ensuing that standards for ecolabels are developed in an open and participatory, and manner.
· Production and process methods. Ensure that countries can regulate imports based on the way products are made as long as standards are non-discriminatory on their face and are developed in an open, transparent manner.
· Investment. The WTO should not negotiate further agreements on international investment. In an era of increasing capital mobility, it is vital to develop enforceable standards of investor responsibility before developing new standards of investor rights.
 |
V. Will this Summit be Fair?
The Seattle WTO Summit offers a choice: will US trade policy follow a path that erodes environmental sustainability or will we start a comprehensive review and reform of the WTO that protects the environmental values on which a high quality of life depends?
Initial indications about the Summit’s direction are troubling. In particular, the Sierra Club is deeply concerned that the Administration has chosen to fund this Summit from private sector contributions rather than from the federal budget. As the Los Angeles Times editorialized, "Privatizing the meeting...does not serve the interests of either the WTO or the United States."
Private financing, in our view, compromises the Summit as an impartial forum for deciding issues of vital importance to both industry and ordinary citizens. We urge you to replace the private financing with federal funds to ensure citizen confidence in these proceedings.
For further detailed insight into the World Trade Organization’s activities, go to www.citizen.org, where it is possible to order the book Whose Trade Organization on the Public Citizen Web Site.