Trade Body Threatens Democracy (WTO)

by Chris McGinn

from Pubic Citizen website

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 rule-making 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 superseded 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.

Sea Turtles At Risk

The most recent WTO dispute, a challenge to provisions of the U.S. Endangered Species Act which protect endangered sea turtles from certain shrimp harvesting methods, similarly demonstrates how the WTO can circumvent democratic policy making.

Under U.S. law, shrimp sold in the U.S. must be caught using "turtle excluder devices" (TEDs) contraptions which allow sea turtles to escape the otherwise deadly nets used by shrimp fishers. A TED is a metal grate that fits snugly within the mouth of a modern fishing net and prevents turtles from being trapped in the net.

Shrimp nets entangle and kill as many as 150,000 turtles each year. Inexpensive TEDs can reduce sea turtle mortality from shrimp trawling by as much as 97 percent.

But India, Malaysia, Pakistan, and Thailand joined forces to challenge the U.S. law, arguing that WTO rules prohibit limitations on imports, especially in situations where limitations are based on the way products are produced. Under this argument, all shrimp are equal regardless of whether the shrimp was caught using methods that kill sea turtle sand therefore must be allowed into the U.S. The argument fails to take into account the importance of distinguishing the different methods of production, processing, and harvesting that are essential in protecting the environment.

"This is one place where the United States should draw the line and say, `No longer will we allow the short-term benefits of trade to cause the extinction of a species,'" says James Spotila, Director of the Center for Biodiversity and Conservation at Drexel University. "This is not an economic issue, it is a survival issue for sea life on this planet," he adds.

The case will be heard this February by WTO dispute resolution panelists. In this case, the panelists include representatives from Hong Kong, Germany, and Brazil who are trade experts with no particular background in science or species protection. The panelists are not required to obtain scientific information before rendering their decisions.

The panelist from Brazil, Carlos Cozendey, is an official with the Brazilian Ministry of External Relations, Trade Policy Division. He was included in the case despite the fact that Brazil was previously embargoed by the U.S. for failing to implement regulations to protect sea turtles from shrimp trawling. Under WTO rules, the dispute process is completely secret and not subject to outside appeal. Citizen groups are not allowed to participate.

The WTO's decision is expected to establish a binding precedent concerning the right of countries to implement species protection laws. An adverse ruling would authorize the imposition of trade sanctions against the U.S. until the law is changed.

The growing evidence of WTO damage has spurred an international citizens' movement against the organization and its rules. Concerned citizens in the U.S. received a boost last summer. In July, Congress passed a bill sponsored by Representative Bernie Sanders (I-Vt.) which appropriates $1 million from the budget of the Department of Commerce to the office of the U.S. Trade Representative for tracking the effects of WTO challenges on U.S. local, state, and federal laws.

Public Citizen will continue its work to educate lawmakers, activists, academics, and the general public on the WTO's real life threat to our laws.

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