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You cannot restrict trade in a good based on how it is produced.

What's wrong with the WTO?
You cannot restrict trade in a good based on how it is produced.

"Production & processing methods" can't be considered in trade rules, even if they damage people or the environment.
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Opinions

"WTO rules run roughshod over local laws and regulations. The WTO agenda relentlessly pursues the elimination of any strictures on the free flow of trade, including how a product is made, by whom it is made, and what happens when it is made. By doing so, the WTO is eliminating the ability of countries and regions to set standards, to express values, or to determine what they do or don't support. Child labor, prison labor, forced labor, and substandard wages and working conditions cannot be used as a basis to discriminate against goods. Nor can environmental destruction, habitat loss, toxic waste production, and the presence of transgenic materials or synthetic hormones be used as the basis to screen or stop goods from entering a country. Under WTO rules, the boycott of South Africa would not have existed."

—Paul Hawken, director, Natural Capital Institute, U.S.

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"GATT dispute resolution panels have ruled that products cannot be treated differently on the basis of how they are produced or harvested. The ability to distinguish among production methods is essential to environmental protection and environmentally sensitive economic policies. A key component to setting sustainable policies is the ability to change the conditions and processes under which goods are produced and commodities grown, harvested and extracted to more environmentally friendly ones. Trade rules that forbid the differentiation between production methods make it impossible for governments to design effective environmental policies."

—Lori Wallach & Michelle Sforza, Public Citizen Global Trade Watch, U.S.

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"Trade agreements also can be used behind the scenes by governments to attack food labeling requirements that enjoy widespread support among consumers. For example, the USTR claimed that the EU's 1998 requirement for labeling foods containing genetically modified corn or soybeans is a barrier to international trade because 'the United States believes that such labeling is unnecessary, in the absence of an identified and documented risk to safety or health.' Public opinion polls, however, show that most Americans (as well as Europeans) favor labeling of genetically engineered food."

"In an analogous case, EU officials asserted that the mandatory nutrition labeling required by the United States is a trade barrier. The U.S. requirement was instituted to help Americans improve their diets and reduce their risk of heart disease and cancer. Nonetheless, the European Commission has claimed that the U.S. labeling law favors American producers and is a barrier to trade. Consumer surveys, however, show that more than two-thirds of Americans rely on nutrition labeling and European consumer groups are actively seeking similar requirements. Clearly in these instances, the United States and the EU are attempting to use trade agreements to challenge food labeling regulations that enjoy the popular support of consumers on both sides of the Atlantic."

—Bruce Silverglade, Director of Legal Affairs, Center for Science in the Public Interest, U.S.

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"Various efforts have been made by industry leaders in past years to limit the use of voluntary labels. Timber and paper corporations have sought to ban labels such as 'sustainably harvested' and 'recycled' by getting them declared WTO-illegal on the basis that they unfairly prejudice consumers towards certain products based on methods of production. World Trade Organization rules do not allow differential treatment of a product based on its method of production. But these labels are voluntary, not obligatory, and they are as important for consumer choice as product content and nutritional information."

"Don't we have a right to know if a product we buy was produced in a sweatshop or with living wages? We have the right to know how a product affects our own bodies, so shouldn't we have the right to know how it affects the earth and how it affects the people who produced it? Shouldn't companies that voluntarily follow sustainability and social justice criteria be legally able to communicate that message to consumers eager to make consumer choices according to their beliefs about the importance of living wages?"

—Deborah James, Global Exchange, U.S.
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Several GATT and WTO decisions have established that the methods used in producing, harvesting or processing a good cannot be invoked as reasons to restrict trade in that good. This means in practice that the environmental, health, labor and social side effects of a product, firm or industry are off-limits in determining whether its products violate trade regulations. It sets up barriers against efforts by societies to impose their values on the international economy.

For example, you must treat a carpet or soccer ball produced using child labor the same as one produced without violations of human rights. And you must treat tuna caught with methods that kill dolphins the same as dolphin-safe tuna. Laws of WTO-signatory countries cannot make a distinction in either case. This makes it very difficult to design effective human and environmental protection policies, because these often require altering how goods are produced or processed.

Even the market-driven approach of eco-labeling—for example, "dolphin-safe" on canned tuna or "organic" on produce—has run into criticism in the WTO. The Clinton administration challenged as illegal restraints of trade the European Union's law mandating the labeling of food containing genetically modified organisms and its proposal to label hormone-treated beef. The U.S. has even called country-of-origin labels potentially WTO-illegal because they allow consumers to discriminate against countries whose policies they don't like. These arguments, if successful, would deny consumers the right to vote with their dollars for values that matter to them, and prohibit businesses from appealing to customers based on how their production methods affect these values.

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Legal Basis

These treaties are enforced by the World Trade Organization.

General Agreement on Tariffs and Trade 1947 (GATT 1947)

See GATT page.

Article I - Most Favored Nation Treatment (non-discrimination between products of different countries).
"Like" products of different countries must be treated the same, and "like" products cannot be distinguished based on how they are produced or harvested.

Article III - National Treatment (non-discrimination between domestic and foreign products).
III.4
"The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product."
[Emphasis added]

Agreement on Technical Barriers to Trade (TBT)

See TBT page.

Article 2 - Preparation, Adoption and Application of Technical Regulations by Central Government Bodies.
Especially 2.1, 2.2 and 2.3.

Agreement on Government Procurement (AGP)

See AGP page.

The Agreement on Government Procurement (AGP) prohibits members who have signed it from withholding government contracts on basis of labor, human rights or environmental standards. Companies or nations who violate these cannot be discriminated against in procurement.

Some exceptions to the non-discrimination principles of national treatment and most-favored nation status have become widely accepted around the world. For example, government procurement practices have not been covered by previous trade agreements. Although some procurement standards may violate non-discrimination principles, they generally do this in order to further legitimate policy goals such as fair employment, a living wage, or encouraging local businesses in poor communities.

The AGP, however, turns these exceptions into illegal trade barriers. It also prohibits withholding government contracts from companies or nations that violate labor or human rights or environmental standards. Under it, government support for the international boycott against South African apartheid probably would have been illegal.

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Cases & Controversies

GATT

  • Mexico v. U.S. on Marine Mammal Protection Act protections of dolphins
    See Tuna/Dolphin Case I page
  • EEC v. U.S. on Marine Mammal Protection Act protections of dolphins
    See Tuna/Dolphin Case II page
  • Thailand, Pakistan, India, and Malaysia v. U.S. on shrimp caught without sea turtle excluder devices
    See Shrimp/Sea Turtle Case page
    Ruled that the U.S. Endangered Species Act was theoretically protected by Article XX, but that the law's certification requirements were not because they affected other governments, not private producers.
  • Canada v. France on asbestos
    See Asbestos Case page

TBT

  • U.S. & Canada v. EU on hormone-treated beef
    See Hormone-Treated Beef Case page
    The U.S. argued that labelling artificial hormone-treated beef is illegal under the Agreement on Technical Barriers to Trade (TBT), which requires that technical criteria be based on product performance rather than design or descriptive characteristics. The dispute-settlement panel found that TBT prohibited labeling of beef based on how cattle are raised, which is analogous to GATT prohibitions against discriminating on the basis of production and processing methods.
  • U.S. v. Europe, Japan and Australia on labelling of genetically modified foods
    See Genetically Modified Foods Controversy page
  • U.S. and Canadian efforts to limit voluntary eco-labeling in the WTO Committee on Technical Barriers to Trade
    See Eco-Labeling Controversy page
    The U.S. and Canadian governments have argued that labelling products as environmentally friendly is a technical regulation that should be scrutinized under TBT.

AGP & TBT
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Resources

Non-governmental

Governmental

Official WTO Web site

By Peter Costantini ~ Seattle ~ November 2001
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