Flipper gets axed by the WTO
Today, U.S. efforts to reduce dolphin deaths by corporate tuna fishers through dolphin-safe labels on tuna were found to violate the WTO. This follows last week's ruling that U.S. efforts to reduce teen smoking violated the trade organization's rules. These smackdowns of major consumer regulations will be followed by a third in the near future, when the WTO is expected to rule against country of origin labeling for beef.
What this ruling means for consumers and dolphins
The U.S. will have to get rid of the dolphin-safe labels, or water down the policy to Mexico's satisfaction. Mexico's long-standing position (reiterated in this case) is that it should get to receive a dolphin-safe label, even though tuna corporations there use methods to capture tuna that are dangerous for dolphins.
The U.S. currently defines "dolphin-safe" as tuna not caught using dangerous purse-seine nets anywhere in the world. For tuna caught in the Eastern Pacific, a unique region where dolphins and tuna swim together, additional steps are required to earn the label.
Shipping fleets of the U.S. and many developing countries (like Ecuador) operating in the Eastern Pacific have been able to meet these higher standards, thereby giving greater assurance to consumers that their tuna purchases are not harming dolphins.
In contrast, much of the Mexican fleet has chosen not to take such steps. Mexico has advocated use of a distinct standard that even the WTO acknowledges is weaker than the U.S. standard. The WTO ruling wrote of that distinct standard:
... taken alone, it fails to address unobserved adverse effects derived from repeated chasing, encircling and deploying purse seine nets on dolphins, such as separation of mothers and their dependent calves, killing of lactating females resulting in higher indirect mortality of dependent calves and reduced reproductive success due to acute stress caused by the use of helicopters and speedboats during the chase. 7.739 We also note that, to the extent that the AIDCP standard addresses setting on dolphins and not other fishing techniques that may also result in adverse effects on dolphins, it would also not provide an effective or appropriate means of fulfilling the US objectives in this respect.
Nonetheless, the WTO ruled against the U.S. standard. (We explore more of the details of the ruling below.)
Initial reports indicate that the Obama administration will appeal the ruling, although the track record of successful appeals is very limited and the WTO rules against challenged policies 90 percent of the time.
The broader worry is that this ruling leaves the door wide open to attacks on similar environmental and consumer policies - not only in the U.S., but all WTO member countries.
What this ruling means for trade policy
All three of these cases have something in common: none of them related to efforts by the U.S. to intentionally discriminate against foreign goods, nor to protect our own producers. Indeed, in the beef and dolphin cases, no discrimination could even be proved. (In the smoking case, a finding of "discrimination" was established in a biased analysis we detail here.) This alone would suggest that a trade organization has no business passing judgment on such policies.
But we are in a new era of trade policy, where even non-discriminatory, reasonable, even-handed, popular policies (some with virtually no impact on international trade) can be ruled against.
What's more, all three consumer policies could be considered very "free market"-oriented. Rather than the big old government telling Americans what they can and can't consume, the dolphin and beef policies simply require honesty in labeling, so that the consumer can decide on their own free will what to consume, and let the market works its magic.
We've long known that more interventionist government policies (like import bans) can run afoul of trade rules. Indeed, the two adverse rulings at the WTO's predecessor organization in the early 1990s against the U.S. ban on dolphin-unsafe tuna led to the eventual removal of that effective and popular policy tool. Now, with today's ruling, we learn that even regulation by more "free market" means is on the WTO chopping block.
This is going to make it harder for the Obama administration to sell similar anti-consumer trade initiatives like the trade deals with Korea, Panama and Colombia to free-marketeers and environmentalists across the political spectrum.
The long saga of protecting dolphins
After passage of various dolphin protection laws in the 1980s, the U.S. fishing industry abandoned the cruel and environmentally devastating practice of surrounding dolphins with mile-long purse seine nets to trap the schools of tuna fish swimming under the hunting mammals. The practice had led to the death of millions of dolphins in the Eastern Tropical Pacific, where dolphins accompany schools of tuna. The U.S. laws forbid the sale of tuna caught with purse seine nets.
In 1991, a General Agreement on Tariffs and Trade (GATT) tribunal ruled that this ban violated GATT rules forbidding discrimination. With the debate over NAFTA’s passage raging, Mexico decided not to impose trade sanctions when the United States maintained the laws. The U.S. prohibition was again successfully challenged under GATT by the European Union in 1994.
After NAFTA’s passage, the Clinton administration launched an intense effort to change the U.S. law to bring it into compliance with the initial ruling, while Mexico threatened a new WTO case to enforce the old ruling. After a lengthy battle with Congress, the Clinton administration managed to pass a new policy that removed the ban on U.S. sales of tuna caught with purse seine nets.
However, an attempt by the Clinton and Bush II administrations to weaken the related labeling law defining what could be labeled “dolphin safe” was reversed after a series of U.S. court cases.
In the compromise that removed the ban in 1997, Congress had insisted that the executive branch conduct a series of scientific tests to demonstrate that dolphin protection wouldn’t be weakened by the change requested by Mexico.
Rather than fulfill this requirement, political appointees from the Clinton and Bush II administrations bullied career civil servants and scientists to make favorable findings.
In a drawn-out legal battle, environmentalists successfully sued to insist that Congress’ instructions be followed. Courts ordered the government to release thousands of pages of documentation that showed the weak to non-existent efforts on the part of the administrations to live up to the letter of the law. The judge that ruled in favor of maintaining the strong, scientifically backed labels deemed the government’s arguments in the case “Orwellian” and said that in his 24 years on the bench, he had never “reviewed a record of agency action that contained such a compelling portrait of political meddling.”
(All this history and rulings by Earth Island Institute and its allies can be reviewed here and here.)
The ruling was that rarest of happenings where justice, democracy, science and the environment all won.
What today's ruling says
Nonetheless, some of Mexico’s tuna fleet, as well as ships from other countries, continued encirclement fishing. Despite this, Mexico has been importing canned tuna into the U.S. for over a decade, with sales mainly for institutional and restaurant use.
Today's ruling in favor of Mexico's challenge of the U.S. dolphin-safe labels can be read here.
The panel found that the policy violated the WTO's Agreement on Technical Barriers to Trade, Article 2.2, which reads:
2.2: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products.
In addition to this rule, which disciplines "technical regulations," the TBT also has requirements related to what are called "technical standards." "Technical regulations" are mandatory to comply with, while "technical standards" are not mandatory. The latter are generally subjected to fewer WTO requirements.
But compliance with the dolphin-safe labels is not mandatory: tuna companies from Mexico or any other country that wishes to export dolphin-killing tuna to the U.S. market are free to do so.
So Mexico advanced, and the WTO accepted, a bizarre argument that the labels were "mandatory" because a tuna corporation couldn't get the label unless it met the requirements. But as one of the three WTO panelists stated in a scathing dissent (on this one point):
"7.150 According to the ordinary meaning of the term, labelling requirements are requirements that must be fulfilled in order to be allowed to use a certain label. Any labelling scheme foresees such requirements – in fact, if such requirements would not exist and if a certain label could be used independent of whether specific requirements are fulfilled, the label would become meaningless."
So, we're only at the very beginning of the panel's analysis and already they've over-reached in a direction that puts corporate interests ahead of other considerations. Too bad the dissent doesn't change the overall ruling.
This was the first time that a WTO panel has found a violation of this provision, which has long troubled consumer groups, environmentalists and others. There has been widespread concern that the provision empowered a WTO panel to second-guess the U.S. Congress, courts or public, by elevating the goal of maximizing trade flows over consumer and environmental protection. The ruling shows that consumers’ concerns were well founded.
Part of Mexico's argument was that, by focusing its labeling compliance efforts on the Eastern Pacific, the U.S. was not doing enough to reduce dolphin deaths elsewhere. The WTO agreed.
The finding is absurd, and the logic perverse. Mexico has among the world’s least dolphin-friendly policies, and is now claiming that the high-quality U.S. dolphin protections don’t go far enough. The fact is, dolphin mortalities have plummeted because of the U.S. ban and labeling requirements. Mexico pointed to the improved but still inadequate fatality statistics to argue against the necessity of the measures that helped achieve the improvements, measures that Mexico has systematically undermined at the GATT and WTO.
U.S. courts upheld the strong dolphin-safe label because of the lack of scientific evidence that Mexico’s approach was reducing unobserved dolphin deaths. The WTO today allowed Mexico to flip the burden of proof to its benefit, with disastrous consequences for dolphin protection.
Mexico produced no compelling evidence that dolphin deaths were a serious problem in tuna fishing outside of the Eastern Pacific, or that tuna caught in those regions was wrongly being labeled dolphin-safe. The U.S. was then asked to do the impossible and prove a negative: that Mexico’s propositions were not true. Indeed, the WTO has made very clear that it will reject the precautionary principle when it comes to consumer protection. What is says with this ruling is that it will utilize the precautionary principle when it benefits corporate interests.
The WTO ruled that Congress’ reasonable efforts to focus compliance energies in the Eastern Pacific were not "necessary". To top it all off, Mexico used as support for its arguments the statements and actions from the Clinton and Bush II administrations that the U.S. courts had deemed “political meddling.” If there was ever need for a more compelling reason to keep trade lawyers out of consumer and environmental protection issues, this WTO panel ruling provides it.
The panel rulings is nearly 300 pages long, so it will be days before all the implications are clear. Among some of my observations:
- Mexico convinced the WTO that the U.S. court ruling that sided with the environmentalists was a part of the WTO-incompatible U.S. policies. Will the executive branch have to overturn a court ruling in order to comply? Will this result in an inter-branch battle?
- This ruling takes another swipe at "softer regulatory approaches," in this case, cost-benefit analysis. The U.S., having no information that tuna and dolphin associate in significant numbers outside of the Eastern Pacific, reasonably focused its dolphin protections there. Neither the WTO nor Mexico produced substantial evidence to the contrary. Instead, they appeared to argue that, when a dolphin is killed outside of the Eastern Pacific, it is equally traumatic for that dolphin as a killed dolphin in the Eastern Pacific. (see paras. 7.538-543, 552, 560-561) The implication seems to be that the U.S. has to regulate everywhere (no matter the cost), or nowhere. These panelists are not exactly political science geniuses, are they? Or maybe they are: the practical implication is that states will face incentives not to regulate.
- Mexico griped that it was complying with the admittedly lesser dolphin protection standards under the international Agreement on the International Dolphin Conservation Program (AIDCP). While the WTO noted that the AIDCP standards don't achieve all of the U.S. objectives, the panel nonetheless seemed convinced by Mexico's arguments that the U.S. should be doing more to inform its consumers about steps Mexico was taking under the AIDCP, including perhaps through a separate label. In language that would make Joe Stiglitz proud, the panel writes:
7.575 Moreover, the Panel notes that Mexico goes beyond simply suggesting that the use of the AIDCP dolphin safe logo be allowed in the US market. Mexico submits that the coexistence of the US and the AIDCP dolphin safe labels, would permit US consumers to be "fully informed of all aspects of dolphin safe fishing methods" (emphasis added) so that "they [could] choose accordingly when purchasing tuna products from US retailers". The Panel understands Mexico's suggestion as advocating the inclusion of more information on the dolphin safe labels allowed in the US market on the actual and potential fishery-related adverse effects on dolphins. The Panel considers that such addition would contribute to informing consumers about the precise dolphin safe characteristics of the various techniques used to harvest tuna. In our view, this would enhance the ability of the dolphin safe labels to remedy market failures arising from asymmetries of information between tuna producers, retailers and final consumers in the US market. Well informed consumers would be in a better position to use their purchasing power to influence the way tuna fisheries and canners operate.
- After 253 pages of anti-consumer anti-environment nonsense, the WTO panel now invokes the consumer interest as a reason to water down the meaning of dolphin-safe labels. Brilliant! And despite the invocation of economics terminology, the panel made pretty clear its indifference to honest economic analysis of the costs and benefits of regulating.
- Tuna catch represents 0.008% of Mexico's GDP. If Mexico were willing to engage in decades of trade wrangling over such a puny sector, imagine Panama's motivations for (say) using the pending U.S.-Panama trade deal to attack our efforts to fight their tax havens. Finance represents over 8 percent of Panama's GDP.
Okay, and just to round this out, let me quote some of the debate on the 1997 bill that contemplated relaxing the labeling law to allow Mexico's methods to be considered dolphin-safe. Maybe an interesting preview of these members' reactions to this latest WTO ruling and the pending unfair trade deals:
“Mr. FARR of California. Mr. Chairman, I thank the gentleman for yielding. I want people to take a look at what they are being asked to do. They are being asked to vote for a bill and the title of the bill is the International Dolphin Conservation Program Act. Now, what it is all about is the strength of American markets. The reason we have practices that say we have to fish safe for dolphins is because of these cans that we sell in American grocery stores, and on them is a symbol that says, dolphin-safe. What we want to do by this law is to change that. We want to change truth in labeling. [TIME: 1545] This is all about labeling, Mr. Chairman. This is about the U.S. market, this is about the U.S. consumers, this is about us. What it is about is that this bill says because of a 1991 trade dispute, that we ought to let that dispute dictate how we sell products in American stores. This is all wrong, because what this bill recognizes is that in the process of doing that we will double the number of dolphin that will be killed. This is about access to American markets. It is about corporations who are using the American markets to sell their product, the tuna that are caught in the oceans far off our coastline, but because the American public buys so much tuna, they know they can only sell it in this country if they do it the way the consumers want to do it. Along comes a law and says, hey, let us change that. Let us change the labeling on the can, let us change the practices, so in fact we can go out and in the process we may kill more dolphins. That is not what the American public wants. The consumer does not want to be tricked, does not want to be cheated. Remember, the consumers are the ones that started this process. I urge a `no' vote on the bill.” ...
“[Page: H3133] Ms. ESHOO. Mr. Chairman, I rise today in opposition to H.R. 408, the International Dolphin Conservation Program Act. This bill is flawed on several counts. I have two primary concerns. First, the bill doubles the amount of dolphins allowed to be killed every year. Second, it makes a mockery of the dolphin-safe label used on all tuna sold in the United States.
* As a supporter of free trade, including NAFTA, I do not believe that trade should be a reason for the United States to change its definition of `dolphin-safe.' We can address the specific trade concerns raised by Mexico and other countries which are subject to tuna embargo because of their fishing practices which result in the death of dolphins, without denying or lying to the American consumer.
* If we pass H.R. 408, dolphin-safe will merely mean `no dolphin killed,' even though dolphins can be chased, encircled, injured, pulled onto a boat and dumped back in the ocean under this bill. This would be considered safe, as long as the dolphin is not seen dying on the boat or in the net. Mother dolphins can be separated from their feeding young, chased dolphins can be exhausted and fatigued to the point of death by cruel practices, but it will be called dolphin-safe under this bill.
* I urge my colleagues to reject this bill. Let's keep truth in labeling. Don't lie to the American consumer...
* Ms. PELOSI. Mr. Chairman, I rise in opposition to this legislation. H.R. 408 is a deeply flawed bill that threatens marine mammal populations to the benefit of foreign trading partners. This bill is bad for trade, bad for the environment, and bad for consumers.
* In 1990, environmental, animal and consumer activists won a victory with the advent of the dolphin-safe label for commercially sold tuna. From that time, no product could be labeled dolphin-safe if the tuna were caught by chasing, harassing, or netting dolphins. The dolphin-safe label has worked to preserve dolphin populations. After Congress adopted its ban of imported tuna caught using enclosure nets in 1992, the dolphin mortality rate dropped from 100,000 per year to 2,754 last year.
* The bill before us would change the meaning of dolphin-safe to allow activities that would include highspeed chases with boats and helicopters, the separation of mothers from their calves, the withholding of food from trapped schools and the deliberate injury of dolphins to prevent the school from escape.
* In fact, almost any fishing activity would be termed dolphin-safe provided that no dolphins were observed to die during the catch. Prior to the dolphin-safe label, dolphin populations had been depleted by as much as 80 percent. The dolphin-safe label stopped this trend and proved to be one of the most successful consumer initiatives in U.S. history. Americans care about what is left of our natural environment and the threatened creatures who inhabit it.
* Dolphin-safe must mean that dolphins are safe and not unnecessarily injured or killed in the hunt for tuna. H.R. 408 allows an increase in dolphin deaths and unlimited injury and harassment of dolphins. That is by no means dolphin-safe.
* Proponents of H.R. 408 would have foreign trading partners define our domestic markets without congressional oversight and without public scrutiny. H.R. 408 is designed to solve a trade problem defined by foreign fisheries--not an environmental problem defined by the American public. If enacted, this law would establish a precedent for other labeling laws designed to protect and inform American consumers.
* Americans rely on labeling information. We cannot allow foreign interests to determine our domestic priorities and relax our higher environmental standards. If foreign corporations are successful in relaxing our labeling laws, American consumers will not have information about the safety or origin of the products they buy. The dolphin label works and consumers have overwhelmingly supported dolphin-safe tuna at the market. H.R. 408 is an attempt by foreign interests to compete unfairly with American higher standards.
* Mr. Chairman, I urge our colleagues to vote against H.R. 408 which would enable us to keep the promise made to the American people. Trade agreements should not result in the weakening of U.S. environmental laws. I urge a `no' vote on the bill.