A news article out today from the McClatchy news service reports growing opposition in the United States against the WTO after a series of politically popular laws were found earlier this year to be inconsistent with international trade rules. It’s true that the federal government will face some tough decisions in 2013 as it attempts (or not) to bring currently discriminatory laws on tuna, beef, and cigarettes into compliance. But most of the outcry has come from the same usual suspects who have always opposed trade liberalization — progressive activists, anticompetitive industry associations, and lawmakers with wealthy business constituents seeking import protection.
These perennial opponents of the WTO rely on some very dangerous myths to make their case, and I’d like to point out two of them in this post that relate to the WTO’s dispute settlement process. The first is that bringing existing U.S. laws into compliance with WTO rules will necessarily weaken environmental and safety regulations. The second is that responding to a loss at the WTO by reforming U.S. law amounts to a transfer of sovereignty from the United States to international bureaucrats. These myths can have a strong impact on the public and lawmakers across the political spectrum, and they are both totally false.
The news article highlights in particular a ruling from earlier this year that the U.S. law regarding the dolphin safe tuna label violates WTO rules. Among those most vocally concerned about the ruling is Lori Wallach of Public Citizen’s Global Trade Watch. She is concerned that bringing the law into compliance will result in “Flipper murder” as U.S. consumers will no longer be able to choose dolphin friendly tuna at the super market.
I have written before about how the law, which defines dolphin safe by prohibiting the use of a label unless certain conditions are met, actually prevents consumers from making informed choices that protect dolphins and other sea life. But the WTO judicial bodies didn’t rule against the law because they believed that a free market is the best way to maximize the power of consumer choice, they did so because the definition of dolphin safe under the law is misleading and protectionist.
The federal dolphin‐safe label requirements that were found to violate WTO rules prohibit the use of such a label if tuna is caught in a particular part of the Pacific Ocean near Mexico where dolphins and tuna school together. As I wrote in May, the WTO found fault not with what the law prohibited, but with what it allowed:
What makes the law discriminatory and misleading is that tuna caught elsewhere, like the Western Central Pacific where U.S. fishing fleets operate, may be labeled dolphin safe without any certification that dolphins were not harmed. In the WTO case, the U.S. was given an opportunity to justify this different treatment by showing that the policy even‐handedly addresses different levels of risk for dolphins in different regions. But the WTO found that fishing techniques used in other parts of the ocean can also harm dolphins, and that excluding Mexican tuna from access to the label under especially strict terms was discriminatory.
Bringing the law into compliance does not require total repeal, although that is the best option. Alternatives include having a weaker requirement or having a stricter requirement. Another option would be to keep working with other countries involved in the International Dolphin Conservation Program to develop sustainable fishing practices that severely limit the incidence and consequence of dolphin bycatch.
One of the current law’s leading supporters, Representative Rick Larsen (D‑WA), is upset because he thinks any change would be bad for … his state’s tuna fishing industry. Protectionism is not a good way to save dolphins, and it’s definitely not the only way.
The second myth — that WTO rulings diminish U.S. sovereignty — is especially frustrating.
An association of cattle ranchers is actually suing the WTO and U.S government in federal court to prevent implementation of a ruling against mandatory country of origin labels for beef. Part of the 2002 Farm Bill, the country of origin label regulation was designed to make it more expensive to purchase Canadian cattle and to roll back the efficiency gains from NAFTA‐driven supply chain integration in the beef market. Carrying the banner of consumer information and safety, the ranchers have teamed up with other protectionists to blame the WTO instead of ‘fessing up when their frankly obvious scheme was exposed.
The WTO has no power to override U.S. law. Period. The dispute settlement process at the WTO allows countries to settle trade disputes by submitting their complaints to an independent panel of arbiters. If that panel finds a country’s law to be inconsistent with the promises it has made as a WTO member, then the complaining members are provisionally excused from their obligations toward the offender. No one is forced to engage in tit‐for‐tat retaliation, but the consequence of noncompliance is a loss of protection from such retaliation. Bringing the offending law into compliance puts a stop to the retaliation and restores the status quo.
Since the end of World War II, the primary character of U.S. trade policy has been to accept the benefits of trade liberalization only if other countries do the same. This awkward free‐trade mercantilism has fostered an international trading system governed by international laws which both restrict and harness the protectionist tendencies of national governments. The WTO dispute settlement system, and its remarkable success at ensuring compliance, is an example of how liberalization can be achieved by pitting special interests against each other.
The WTO has its faults, but calling out the U.S. for protectionist regulation isn’t one of them. I would be thrilled if the U.S. adopted a policy of unilateral trade liberalization and recognized that import barriers and protectionism harm U.S. consumers and businesses regardless of what other governments do. Until then, mooching industries and progressive activists will complain about the WTO installing world government and forcing us to kill dolphins against our will. And the WTO will continue to expose their protectionist schemes.