Multinational Monitor

OCT/NOV 1999
VOL 20 No.10


Welcome to Seattle: Ministerial Meeting Debates the World Trade Organization's Agenda for the 21st Century
by Robert Weissman

Trading Away the Environment: WTO Rules Thwart Environmental Agreements, Punish Innovation
by Michelle Sforza

Trading Away Forests: Emerging and Current WTO Threats to Forest Protection
by Rory Cox, Paige Fischer and Victor Menotti

Trading Away Public Health: WTO Obstacles to Effective Toxics Controls
by Patti Goldman and
J. Martin Wagner


The WTO's Slow-Motion Coup Against Democracy
an interview with
Lori Wallach

WTO and the Third World: On a Catastrophic Course
an interview with
Martin Khor


Behind the Lines

Dismantle the WTO

The Front
Deregulating Finance - Calling for Cell Phone Safety

The Lawrence Summers Memorial Award

Names In the News


Trading Away Public Health: WTO Obstacles to Effective Toxics Controls

by Patti Goldman and J. Martin Wagner

The WTO has initiated a major expansion of trade rules into the realm of public health protection -- a matter traditionally within the purview of national and local governments. The new WTO rules collide with many public health and environmental protections and dictate the extent to which a country or state may ban or restrict the use of toxic chemicals to protect public health.

The WTO erects obstacles to government restrictions on exposure to toxic chemicals by:

  • Seeking to move toxics standards to the lowest common denominator throughout the world;
  • Rejecting the Precautionary Principle with requirements that governments provide definitive proof of harm before acting;
  • Foreclosing the most effective means of protecting public health and the environment; and
  • Prohibiting restrictions designed to prevent toxic effects of production. The WTO currently and under proposed expansions may increasingly stand in the way of:
  • The consumer right to know which products are environmentally friendly;
  • The government right to restrict its purchases of environmentally harmful products; and
  • Government regulation of foreign investors to protect public health and the environment.

Downward Harmonization

Many initiatives to protect people and the environment from toxic pollution have been the result of citizen initiatives at the local level, which have, in turn, prodded higher levels of government to take action. International bodies tend to move more slowly and lag behind cutting edge initiatives to protect health and the environment.

The WTO threatens to block these grass roots initiatives. It promotes "downward harmonization" of health and environmental standards. Under the WTO, countries must base their standards on relevant international ones. If a country adopts a food safety or product standard that is more protective of public health than the international norm, its standard must satisfy a battery of cumbersome WTO tests.

Existing international standards, however, are generally established with extensive industry input and without the scientific rigor and public participation that characterize U.S. standard-setting. The preferred food safety standard-setting body -- the Codex Alimentarius Commission -- has standards that tend to lag behind U.S. standards, for example. In the early 1990s, Codex allowed residues of DDT on numerous foods, in sharp contrast to the U.S. ban on DDT imposed in the early 1970s.

In August 1999, the U.S. Environmental Protection Agency (EPA) announced a ban on numerous uses of the pesticide methyl parathion, soon to be followed by a prohibition on residues of this pesticide on these foods.

Just two months prior to EPA's cancellations, Codex concluded its review of methyl parathion and continued to allow residues on many of the foods subject to the EPA cancellations, including cherries, plums and carrots. The United States participated in the Codex meeting that adopted the methyl parathion standard, but did not object. The existence of the Codex authorization will make it harder for the United States to prevail in any future challenge to its bans.

The WTO's foray into public health and environmental standard-setting shifts decision-making power away from local, state and national governments to international trade bureaucrats resolving WTO disputes in secret in Geneva, Switzerland, and to Codex, an obscure international standard-setting organization in Rome, Italy.

Jettisoning the Precautionary Principle

The Precautionary Principle allows countries to protect their citizens based on scientific evidence of risk, but before the scientific proof of harm is conclusive. Under the Precautionary Principle, for example, studies showing that a chemical causes cancer in animals should be sufficient evidence to allow governments to prevent human exposure to it. As a matter of public policy, the Precautionary Principle holds it is more prudent and generally more cost-effective to prevent toxic contamination and exposure rather than try to clean up the mess or treat the injured people after the fact.

The WTO precludes use of the Precautionary Principle. Instead, the WTO requires conclusive scientific evidence of a risk before trade in food products may be restricted. As a WTO panel stated in a ruling against an Australian ban on salmon that might contaminate local stocks with alien species, a country must have identified a probability, not simply a possibility of harm before it can regulate in a way that restricts trade.

In the most notable case blocking a government from acting on the basis of the Precautionary Principle, the WTO in 1997 and 1998 sided with the United States in its challenge to a European Union ban on beef treated with growth-inducing hormones that have been scientifically linked to cancer and other serious diseases. Although the EU asserted that the ban was necessary to achieve its chosen degree of protection -- zero risk to consumers from exposure to hormone-treated meat -- the WTO dispute resolution and appellate panels rejected an absolute right to prohibit all such risk. The fact that the hormones caused cancer in laboratory animals -- a scientific as well as common-sense basis for suspecting a risk in humans -- was not a sufficient basis for a ban on their use in human food, the panel held. By requiring proof of harm, the WTO removed the ability of governments to take precautionary action to protect against risks strongly suggested, but not proven, by scientific evidence. The WTO has granted the United States permission to impose retaliatory trade sanctions until the EU rescinds the ban. The United States recently imposed more than $120 million in trade sanctions for this year.

The WTO's hostility to the Precautionary Principle puts numerous public health protections at risk, including the following examples in the United States:

  • Pesticide safeguards for children and uncertainties. In 1996, Congress unanimously passed the Food Quality Protection Act, which requires that extra protection be built into U.S. pesticide standards where scientific evidence is incomplete and to account for risks to children. A National Academy of Sciences study showing that children are more susceptible to adverse impacts from pesticides because of their size, metabolism, age and rate of growth precipitated the added protection for children. This extra protection is not based on definitive scientific evidence of harm from the particular pesticide, but rather on the lack of studies deemed necessary to decide whether the pesticide residues will be harmful to children. The Act also calls for extra protection for other gaps in the scientific evidence of harmful effects from a particular pesticide.
  • Bans on carcinogens in food. The U.S. Delaney Clause prohibits color and food additives that cause cancer in animals. The ban extends to artificial sweeteners, preservatives, chemical processing aids, animal drug residues and packaging materials that leach into food. The zero-risk Delaney Clause standard is based on a policy decision in the face of uncertainties about cancer risks from the consumption of carcinogens even in small amounts. The Delaney Clause constitutes a political determination made by Congress about whether carcinogens should be introduced into our nation's food supply. The European Union has threatened to challenge the Delaney Clause as an unfair trade barrier.
  • Proposition 65. California's Proposition 65, an initiative adopted in 1986 by a nearly two-to-one majority of California voters, requires a clear warning before exposing anyone to chemicals that cause cancer or reproductive toxic effects. A limited exception to Proposition 65's warning requirement is provided if the one responsible for the exposure can demonstrate that it results in "no significant risk" of cancer and or reproductive harm. Proposition 65 imposes a more stringent public health standard than U.S. federal law. Because of Proposition 65, many products, including cigars, household pest strips, lead ceramic tableware and paint strippers, now contain health warnings. Other products, such as typewriter correction fluids containing a reproductive toxin and a spot remover containing a carcinogen, have been reformulated to remove the listed substances. Proposition 65 precipitated fetal alcohol syndrome labels on alcoholic beverages, which, in turn, spurred the federal government to establish such labeling requirements.

The European Union has identified Proposition 65 as a trade barrier. Because Proposition 65 places the burden of proof on industry to demonstrate the safety of known carcinogens or reproductive toxins in their products, including foods with pesticide residues, it could be challenged for violating the WTO's rules against instituting precautionary measures.

  • Banning toxic chemicals. To address the pernicious effects of toxic contamination and exposure, many public health officials have embraced prevention as the best strategy. Rather than impose lead poisoning upon children, countries around the world have decided to phase out many of uses of lead. Instead of contributing to future toxic waste sites, many governments are instituting bans on persistent toxic chemicals. To avert toxic poisoning of birds, like that precipitated by DDT, governments have severely restricted or banned pesticides that kill birds.

The WTO superimposes a rule on toxics measures that may preclude many bans and phase-outs. Under the WTO, a country must use the least trade-restrictive means of achieving its public health or environmental protection goals. When a country decides to protect its citizens by banning a chemical, that decision may be called into question, since bans are the most trade-restrictive measures available.

For example, Canada is challenging a French ban on asbestos, arguing that requiring protective clothing and other measures that limit exposure would be less burdensome on trade than a ban. Under this same logic, the United States has objected to a proposed European Union ban on heavy metals in electronics products, arguing that other less trade-restrictive alternatives are available. The industry has suggested landfill restrictions and eco-taxes as a viable alternative to bans on toxic chemicals and government subsidies for recycling and purchasing policies as alternatives to manufacturer responsibility for these products' waste.

Other countries might lodge challenges to bans on residues of harmful pesticides on the grounds that labeling, washing or limiting the residues permitted on foods for consumption would be less restrictive ways to protect public health -- even if such alternatives would not be as effective as a ban in protecting public health.

Disclosure requirements could also be challenged, particularly where they are mandatory or used by governments to guide their purchases. Indeed, both Japan and the European Union have already made claims that the U.S. mandatory nutritional labeling requirements are an unfair trade barrier. They have argued that voluntary labeling, as provided for in Codex guidelines, would suffice or that not all foods need to be covered by mandatory requirements.

State and local standards that go further than national requirements would be vulnerable under the least trade-restrictive test. In fact, a trade dispute panel concluded that a tax law in place in only five U.S. states was not "necessary" because other states had found "alternative, and possibly less trade restrictive ... ways of enforcing their tax laws." This rationale could be devastating if it were applied to the federal pesticide regulatory scheme, which permits, but does not require, states to provide greater health or environmental protection than the federal government.

Blinded to Harm from Toxic Production Processes

Many toxic chemicals are used in the production process or become toxic waste that needs disposal after production or use of a product. To reduce exposure to such chemicals, it is necessary to curb the harmful byproducts of the production process and to limit the creation of toxic waste.

The WTO prohibits discrimination between products based on how they are produced. If the physical attributes of two products are the same, the one produced in a manner that depletes natural resources or pollutes the air and water must be treated the same as the one that does not cause such pollution. By extension, many have argued that the WTO prohibits "cradle-to-grave" eco-labeling because the label is based on how a product is produced.

Some toxics restrictions are put in place to protect the environment or workers during the production process. For example, in the United States, bans have been imposed on pesticide use to protect farm workers and water quality. If the United States restricted imports of food produced using these pesticides, it could run afoul of WTO rules because the restrictions would not be based on some tainted characteristic of the food, but rather would be designed to protect workers or the environment where the food was grown.

Obstacles to Eco-Labeling

Consumers are increasingly choosing to use their purchasing power to promote environmentally sound practices. Eco-labeling distinguishes between products based on their relative impact on the environment in an attempt to influence consumer purchasing decisions in favor of "environmentally friendly" products.

Under the WTO, an eco-label that reflects how a product is produced would be vulnerable to challenge. Similarly, an eco-label could be contested based on its scientific underpinnings, its effect on imports or its stringency.

  • The European Union has threatened to challenge U.S. nutritional labeling requirements, which are among the most advanced in the world, as well as California's Proposition 65, which goes further than the national standards and shifts the burden of proof. Because organic labeling reflects how the food is produced, the final U.S. organics standard may be vulnerable to a WTO challenge.
  • At the behest of the U.S. paper industry, the United States objected on WTO grounds to a proposed EU eco-label for paper. The industry argued that the EU could not base the label on the environmental effects of the production process. The U.S. government claimed the eco-label would unfairly disadvantage U.S. paper products because it favored recycling, while U.S. producers use virgin timber for pulp and paper production, and it was based on EU pollution standards that were stronger than those in the United States.
  • More recently, the United States has objected to initiatives to require labels on foods produced with genetic engineering. "Providing information regarding the method of production on the food label would be highly impractical and inequitable," the United States argued in a 1999 submission to Codex. The United States would require that the food undergo some change in nutritional value or its use before a label could be required.

Stopping Green Procurement

Green procurement is a mechanism for reducing consumption and its harmful environmental effects. In recent years, government procurement has increasingly been used to reduce production of paper, which is the third largest industrial consumer of energy and a large contributor to both air and water pollution. In the United States, federal, state and local governments have extensive recycled paper requirements. Some cities and states direct that some government paper purchases must consist of paper that has not been bleached with chlorine. These government procurement laws are at risk from current WTO rules and a potential expansion of these rules. By way of example, a trade threat surfaced in connection with recycled paper requirements in the early 1990s. Canada threatened a trade challenge to Minnesota's requirement for recycled paper content in state paper procurement bids. Canada claimed that the requirement had a discriminatory effect on Canadian suppliers because Canada relies on virgin timber and has a smaller supply of recycled paper. To avert a trade challenge, Minnesota allowed nonconforming bids from Canadian suppliers.

A Call for a Moratorium

Environmentalists are demanding that the WTO be reformed, not expanded, so that it cease jeopardizing strong environmental and health protections. Specifically, environmental groups are demanding that the WTO be reformed to protect: (1) the right to have strong environmental standards that use the Precautionary Principle to protect citizen health and the environment; (2) the right to limit the harmful effects of production, such as pesticide poisoning of workers and toxic air and water pollution from factories; (3) the consumer right to know which products are environmentally friendly; and (4) the right to use government purchasing power to protect the environment.

No country should be forced to abandon strong toxics standards because they are ahead of the international status quo or, in the view of trade officials, too restrictive of trade. To ensure that no further damage is done before the much-needed reforms are made, a moratorium should be imposed on WTO challenges to food safety, health and environmental protections.

Patti Goldman is managing attorney of the Earthjustice Legal Defense Fund's Northwest Office. J. Martin Wagner is director of international programs for the Earthjustice Legal Defense Fund.

The WTO and the Right to a Safe Workplace: The Asbestos Case

Asbestos is the leading known cause of occupational cancer in human populations all over the world. France, following the lead of a number of other European countries, has decided to ban all uses of all kinds of asbestos entirely. Canada, the world's leading exporter of asbestos, is employing the WTO in an effort to block France from providing an example to the rest of the world, especially Third World countries.

In 1998, Canada filed a formal WTO challenge to the French ban, arguing that banning asbestos is a disproportionate and an unnecessarily extreme measure, because regulation ("controlled use") of asbestos can render the remaining hazards to workers and society "undetectable" and, hence, acceptable.

How the WTO decides the case, especially if it rules for Canada, will set an important precedent for the balance, or lack of balance, the trade agency establishes between trade and human health and for the power of countries -- especially developing countries -- to intervene effectively to control hazardous working conditions and environmental health hazards in their territories.

A decision is expected in March 2000.

The United States has sided with the European Union against Canada in asking the WTO panel to dismiss this complaint, saying that it is the right of each nation to determine the acceptable degree of risk that is tolerable in its territory and to determine the appropriate level of protection for its citizens. There is probably not a single large corporation left in the United States that cares what happens to the asbestos industry in the next century, because liability and regulation have all but ended the use of asbestos in the United States.

There is no serious dispute about the health risks of asbestos, one of the most thoroughly studied toxic dusts ever breathed. Canada contends that strictly applied "controlled use" use of asbestos (mainly used in building panels and pipes and vehicle brakes, hazardous uses where safer substitutes are available) could reduce the risk to workers and the public to an "acceptable" level, though it would not eliminate the risk.

France contends that "controlled use" is unworkable in practice. Governments across Europe have already rejected the argument that "controlled use" of asbestos-cement products in building construction, maintenance and demolition can work satisfactorily in practice. "Controlled use" would also require that government regulators assure that tens of thousands of brake mechanics all stop grinding brakes and start using compressed-air hoses in doing brake repairs.

And there is a broader question at stake than the workability of the controlled use regulation: What are the limits that the WTO agreements impose on countries wishing to keep out of their territory products which are known to be dangerous, even when their controlled use, if strictly applied, could reduce substantially but not eliminate the risk to workers?

The WTO panel's decision will have serious implications for any WTO country wishing to ban asbestos in its territory. A decision in Canada's favor would threaten national bans across Europe and beyond. But Canada cannot expect to resume significant exports of asbestos to France or to most other industrialized countries even if successful in the case.

The implications are greatest for the Third World, mainly Asian countries that are the major importers of Canadian asbestos today. Although the WTO panel will not be taking testimony about the technical feasibility of applying "controlled use" of asbestos in Asia, Africa and Latin America, where uncontrolled use is the norm, the ruling in the French case will establish a precedent for these countries. Moreover, if the European countries are permitted to proceed with plans which would see all EU nations ban asbestos by 2005, Third World countries may ask why they should continue to allow the product to be used in their borders.

-- Barry Castleman

Foreign Investor Rights and Protections Against Toxics

A growing trend in international trade is to grant foreign investors unprecedented power to bring legal challenges against trade restrictions that affect the value of their investments. The North American Free Trade Agreement (NAFTA) grants the most far-reaching investor rights, including the power to sue governments for money damages for violations of those rights.

Some foreign investors have used this power to seek compensation for investment losses resulting from what they believe to be unjustified environmental or health regulations. The NAFTA track record illustrates the threat that a global investment agreement advocated by the EU for inclusion in the WTO would pose to protections from toxic chemicals.

In a recently filed NAFTA investor claim, Methanex of Canada is challenging California's ban on a toxic gasoline additive (MTBE) that may cause cancer and that has been found in ground water supplies, resulting in human exposure through water used for drinking, cooking and bathing. The Canada-based Methanex Corporation is seeking $970 million from the United States for losses, including a decline in stock prices, it attributes to California's ban. Methanex claims that the ban is not based on definitive proof that the additive is a human carcinogen and is too restrictive of trade because California should be required to take other, less trade-restrictive actions to try to prevent gasoline from leaking into groundwater.

Several other NAFTA investor cases further illustrate the impact a global investment agreement could have on toxic controls. In 1997, U.S.-based Ethyl Corporation filed a claim seeking $250 million for Canada's ban on another fuel additive based on studies showing that it could lead to a failure to detect high levels of pollutant emissions. Canada eventually settled with Ethyl, rescinding the ban and paying Ethyl $13 million, including approximately $4.5 million in legal fees.

In 1997, the U.S.-based Metalclad Corporation filed a claim against the Mexican government for a local government's denial of a permit for a toxic waste facility with a history of contaminating groundwater.

In July 1998, U.S.-based SD Myers, Inc. sought $10 million for Canada's 15-month ban on the export of PCBs to the United States based on concern that U.S. regulations would not require the PCBs to be disposed of in a manner that would avoid risk to health and the environment. These latter two challenges are still pending.

Investor rights provisions give foreign investors what might charitably be called a bargaining chip or, less charitably dubbed, a device for extortion. If some WTO members have their way, the WTO will grant foreign investors worldwide the powers they are given under NAFTA, which would have a profoundly negative effect on a country's ability to ban or restrict the use of toxic chemicals.

-- P.G. & J.M.W.


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