Article in Law / International / Human Rights Law
Latin American governments recently have enacted effective laws ensuring to civil society transparency and accountability in promulgation of regulations and decision making. In no small part, these laws result from windows opened by dispute settlement systems in dozens of regional trade agreements.
 
 
 

University of Miami Inter-American Law Review Symposium February 26, 2011

“The Human Element: The Impact of Regional Trade Agreements on Human Rights and the Rule of Law”

Stephen Joseph Powell – Managing the Rule of Law in the Americas

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© 2011 University of Miami Inter-American Law ReviewUsed only with express written permission

Symposium Announcement

Thanks to Nanci Schanerman and the other editors at the University of Miami Inter-American Law Review for arranging this forum to discuss a vital subject for which I hope to teach and little and expect to learn a lot.

International trade, as guided since World War II by the GATT and spurred on in 1995 by creation of the WTO, has worked enormous benefits to humanity by bringing affordable goods and services to most of the world. These advances, however, have not taken place without serious consequences to realization of the human rights guaranteed by a series of post-World War II treaties. Tellingly, finance ministers designed the GATT/WTO system at Bretton Woods to operate outside the UN system that shepherded the human rights treaties into force. The not-unpredictable result is that global trade rules and international human rights law developed in parallel, in fact, in what trade and human rights scholar Robert Howse dubbed “splendid isolation.”

The UN’s Universal Declaration of Human Rights and the General Agreement on Tariffs and Trade, each of which continues to be the defining document in its field, celebrated their 50th anniversaries in the same year at the end of the last century. Each document also has inspired an unending series of negotiations leading to increasingly broader jurisdictional reach, a complex web of regional and global institutions, and ever-tighter limitations on state action. Yet, as their subject matter increasingly overlapped and their dependency progressively tightened, treaties in these two fundamental fields of human endeavor showed, with rare exception, no hint of the existence of the other and even less evidence of a coordinated effort by the states negotiating them to make the world not only a richer, but a better place to live.

I spent almost 20 years in Washington negotiating and implementing trade agreements, but it was only when I began my second career in the academy that I studied the near complete disconnect between trade rules and human rights law. In terms of numbers, consider these data. While world trade increased at the astounding rate of nearly 400 percent over the past three decades, fully one-fourth of the world’s population subsists on less than one dollar per day and one-half survives on less than two dollars. Even as international trade has expanded to account for at least 20 percent of the GDP of every developed nation, despite their huge internal markets, the World Food Program of the UN expands to feed twice as many hungry people each year. As trade in the United States was expanding at three times the rate of its population increase, petroleum use—and with it climate-changing carbon emissions—grew by 20 percent. Virgin forests fast are disappearing. One child in five between the ages of five and fourteen remains in the workplace instead of in school. The gap between the richest and poorest nations has increased by more than 100 percent in the last 40 years. Someone dies of hunger every four seconds.

Faced with this alarming record, the International Trade Law Program at the University of Florida has explored in some depth the intersection of international trade rules and international human rights law. Our premise is straightforward. International trade laws allow countries to make full use of their comparative advantage by reducing government barriers to the free movement of goods and services. The WTO achieves this purpose primarily through its nondiscrimination provisions that require WTO Members to treat with equal advantage the products imported from any of its 153 Members and to treat these imported products “no less favorably” than they treat “like” domestic products.

Yet, these same nondiscrimination ground rules ensure that trade and human rights will unhappily intersect because enforcement of human rights laws relies on discriminating against governments that practice apartheid or torture, that permit devastation of their natural resources and toxic contamination of their air and water, that look the other way in the face of maltreatment of their workers, that deny their people a voice in their own governance. Thus, without malice aforethought but nonetheless inevitably, trade rules weaken the ability of governments to use the unique power of trade restrictions to promote sustainable development, to alleviate the widening gap between rich and poor, to ensure core labor rights for their workforces, to deter trafficking in women and farm workers, to address devastating levels of disease, to preserve indigenous and other cultural identities, and even to sustain democratic governance.

Modern global trade laws from their inception have recognized this dysfunctional relationship by providing in the general exceptions of the 1947 GATT’s Public Health and Welfare Clause limited shelter from its nondiscrimination premises. From the protection of public morals to measures aimed at ensuring public health to guarantees of a healthy environment, GATT Article XX, as interpreted broadly by the WTO’s world trade court, has set a positive path toward elevating human rights policies above economic ones. The world trade court’s ready embrace of the entire corpus of public international law to aid interpretation of WTO provisions adds further optimism by bringing into play customary and non-trade `treaty sources of human rights law. Fertile legal fields remain in these GATT and in other WTO Agreements to end the “splendid isolation” of trade and human rights over the past 60-plus years.

True to its sputtering launch in Doha, Qatar, in 2001, after a crash landing on take-off in the 1999 Battle in Seattle, no end yet is in sight to the present round of multilateral negotiations, nor are any issues on the table in the Doha Round that will advance the WTO’s progress toward broader recognition of human rights. In no small part because of this endless delay in opening new markets to satisfy globalization’s insatiable appetite, trade liberalization has shifted to the regional level. We are witnessing a boom in regional trade agreements, which now number over 400, including every Member of the WTO, with some Members, such as Mexico and Chile, participating in a spider web of dozens of such agreements. As a result, human rights advocates are now examining whether RTAs may be more effective and efficient avenues for human rights enforcement within the global trading system, given the impossibility that trade rules can any longer afford to ignore their widespread effects on human rights.

Adding materially to the human rights impact of these RTAs is the New Regionalism, which finds RTAs negotiated with a more comprehensive and multidimensional structure that includes not only economic objectives, but also environmental, political, social, cultural, and democratic aims. New regionalism in addition increasingly includes emerging markets in realization of what Fareed Zakaria, borrowing a phrase from Alice Amsden’s book, calls “the rise of the rest,” the strong participation of late-industrializing nations in the global market. While the New Regionalism often finds these emerging markets trading favors with fully industrialized countries, we encounter as well RTAs among emerging markets, such as most of those in Latin America, from the MERCOSUR to the Andean Pact to the CAFTA.

Many of the regional trade agreements promise, in the words of the preamble to Chile’s RTA with the CAFTA countries, to “promote economic development in a manner consistent with environmental protection and conservation and with sustainable development” Other agreements reaffirm the commitment to human rights values without further explanation or insight into how these commitments are associated with the core business of the agreement. Some agreements include provisions that set positive social standards in the territories of the parties.

We can identify a number of indirect or hidden human rights impact that RTAs have simply as a result of the nature of trade rules. In previous studies, we found that RTAs, by their necessary ground rules and quite without meaning to do so, have pronounced effects on attainment of rules-based governance. We found evidence that RTAs indeed contribute to enjoyment by civil society in general, and not solely by those involved in international trade, of rules-based governance. RTAs require governments to conduct their activities in a more transparent and expeditious manner, relying exclusively on written and accessible administrative records. These agreements mandate that government measures be subject to substantive review by an independent and accessible judiciary. They require transparency, accountability, and due process by governments. Dispute settlement systems in RTAs similarly promote timeliness, inclusive record keeping, and impartiality in the administrative decisional process.

In other words, RTAs contribute to the “rule of law,” which is, along with open and transparent civil institutions, among the trappings of democracy, affirmed as a human right by the United Nations in 1999. Nonetheless, the rule of law remains an inaccessible objective unless defined within the context of specific cultural premises and combined with the substantive norms that frame the concept for use in a particular society. Another truth we discovered was that FTAs cannot directly inject rules-based governance into a country. Only national governments can ensure the success of the rule of law for their citizens. Outside sources such as RTAs and other international treaties can only lend a “helping hand” to governments, as they transform these FTAs into legislation, regulations, policy guidance, and administrative measures, in contributing to previously established national objectives to promote rules-based governance.

Beyond these unplanned effects on enjoyment by civil society of UN-guaranteed human rights, RTAs in the New Regionalism contain explicit protection in three general areas: worker rights, environmental protection, and protection of the intellectual property of indigenous populations. I will provide an illustrative example in each of these human rights policy areas.

The 1998 ILO Declaration on Fundamental Principles and Rights at Work was the International Labor Organization’s response to the WTO’s Ministerial Declaration two years before that committed the WTO to core worker rights in trade agreements while noting that it was the task of the ILO to decide exactly which rights must be considered fundamental in the trade context. While many bemoan the brevity of the list, which was issued by unanimous declaration, the effect of the Work Declaration on RTAs was specific and immediate.

Freedom of association, protection against forced and the worst forms of child labor, freedom from discrimination at work, and the right to collective bargaining were proclaimed first by MERCOSUR in its Socio-Labor Declaration and began to appear in RTAs with the USA soon thereafter. These RTAs, with Chile, Peru, CAFTA and the Dominican Republic, and others not only expressly required compliance with the ILO Work Declaration, but made violations subject to the regular dispute settlement mechanism of the agreement, a large step up from NAFTA’s mostly-precatory side agreement on labor cooperation. Nothing short of a groundswell in legislation to improve treatment of workers has occurred in Latin America and other parts of the world because of RTAs and the ILO Work Declaration.

Sustainable development and other forms of environmental protection logically followed worker rights into RTAs as a result of trade’s outsized effects on the use of finite resources and its extreme polluting effects on our air and water. RTAs present excellent opportunities for environmental cooperation by the very fact of their regionality. The geographical proximity of their members meant that their shared ecologies would benefit from environmental protection because the environmental behavior in one country will directly affect its neighbors. This is especially true for South America, where the Amazon Rainforest encompasses regions belonging to nine countries.

Predictably, NAFTA was the first RTA to link the environment with trade in a tangible way, although the Commission for Environmental Cooperation suffered from the same side agreement constitutional defects as the worker rights chapter. While MERCOSUR has attempted a coordinated environmental protection program, beginning and essentially ending with a Framework Agreement on the Environment signed in 2001, environmental protection suffered from the absence of a single international organization that can be entrusted to declare the core environmental standards that trade rules must follow, the role served by the ILO for worker rights. The strong EU environmental regime results from its independent adoption of sustainable development and the precautionary and polluter pays principles.

In the Americas, the most successful environmental protection provisions in RTAs have been those in which the parties partnered to undertake large environmental projects that could not easily be accomplished alone, such as the Peru-USA RTA Annex on Forest Sector Governance that promotes cooperation in fighting illegal logging and wildlife trafficking. To that end, USAID started a $45 million program to build conservation capacity and commitment across the Amazon Basin in Bolivia, Colombia, Ecuador, and Peru for effective stewardship of the region’s globally important biological diversity.

Strong protection of intellectual property with respect to pharmaceutical and other chemical patents was one of the most surprising successes of the Uruguay Round that created the WTO. The Agreement on Trade-Related Aspects of Intellectual Property Protection, or TRIPS, makes patent protection available only to inventions that are new, inventive, and capable of industrial application. These Western standards essentially ignore the identities and collective rights of indigenous peoples, whose traditional knowledge of natural medicines may be hundreds of years old, has been passed down as folklore rather than “invented” by a single person, and of course would not have been applied on a industrial basis. The result has been what is called “bioprospecting” in polite company, “biopiracy” elsewhere, misappropriation of nonpatentable traditional knowledge by medical companies.

Although the 2001 Doha Declaration launching the present round of WTO negotiations charged the TRIPS Council with studying that agreement’s relationship with the UN’s Convention on Biological Diversity, with its recognition of the close connection between biodiversity and traditional knowledge, RTAs have not been helpful as to these human rights of self-determination. Driven by the transnational US pharmaceutical houses, USA RTAs have given dire meaning to the term, “WTO-plus,” that is, that all RTAs among WTO Members must take the WTO agreements as a starting point and build toward freer trade from there.

In fact, what the US has done is to fill in some of the discretion left to emerging market countries by insisting that generic medicine providers would not have access to the safety data used by the patent holder for a period of 5 years, which made production of generics more difficult. On the positive side, we see in the Peru-US RTA the first linkage in a trade agreement of biological diversity and the traditional knowledge practices of indigenous populations that are, in fact, the protectors of some 85 percent of the remaining biodiversity on Earth.

This brings me to the present empirical portrait of my latest paper, written with Dr. Ludmila Ribeiro. Given this background, and recalling that the “rule of law” is basic to enjoyment of human rights in general, our purpose was to test our early hypothesis that international trade agreements, by their necessary ground rules and quite without meaning to do so, assist state parties in promoting timeliness, inclusive record keeping, and impartiality in the administrative decisional process. In the article’s words, “to interrogate whether international trade dispute settlement assists in converting the visions of law as an operative system and justice as a moral construct into an integrated reality.”

We compiled extensive data on 74 WTO dispute settlement cases involving two Latin American Members or one Latin American Member and the USA. We included 24 cases between Mexico and the USA under NAFTA Chapter 19’s binational panel system for review of national investigations under the anti-dumping and countervailing duty, or anti-subsidy, laws. Finally, we added 10 cases for which data were available that were heard by the MERCOSUR dispute settlement system. The data array we created was the first of its kind and yielded dozens of original conclusions. While not all were directly relevant to the study’s hypothesis, they nonetheless are interesting and useful information about the nature of international trade dispute resolution.

For example, we found that for WTO disputes involving a Latin American country, 60 percent found the United States as the other party, 74 percent of the time as respondent. The percentage of cases involving the United States rose during the first 6 years of the WTO and has been decreasing since 2002 as more Latin American cases are resolved through RTAs such as the MERCOSUR as these dispute settlement systems become acceptable alternatives to the sophisticated WTO system. The USA was 7 times more likely to appeal a case involving a Latin American country than was the Latin American country, no doubt in part because the USA was, as noted, respondent the great majority of the time and thus was more likely to sustain a loss.

Trade remedy cases, that is, those involving anti-dumping, countervailing duties, or safeguards, which account for 59 percent of the cases, are 20 percent more likely to be settled prior to a panel decision than challenges to internal taxes or regular tariffs.

In MERCOSUR, Argentina is by far the most litigious member and Uruguay, despite being the RTA’s smallest member, has managed to appear as either respondent or complainant in nearly half the challenges.

These are but a few of the conclusions gleaned from our database and noted in the paper. I return now to our first test of “the rule of law” hypothesis, in which we asked whether trade dispute settlement is managing its own legal regime effectively, that is, are governments administering the dispute systems and dispute panels hearing the challenges producing outcomes in accordance with their own obligations to issue decisions within the time frames set by the trade agreement? The answer for both the WTO and NAFTA Chapter 19 is a resounding No. For MERCOSUR, we respond with a tentative Maybe.

With respect to the WTO, the initial panel process consumed 43 percent more time than demanded by the Dispute Settlement Understanding, 672 versus 468 days. We hypothesize from experience that trade negotiators are driven by political pressures to agree to unrealistically short deadlines for panel decisions. In order to convince industry leaders whose companies will be most affected by panel decisions that dispute settlement under a trade agreement is an improvement on litigation or arbitration methods otherwise available to resolve commercial disputes, the decision process must be squeezed to an absolute minimum. The price, however, as shown by our research, is that in the real world, ad hoc panels cannot function under these inordinately short deadlines. We find some panels brazenly and without a shred of legal authority announcing that they will delay their decision for 3 months, 6 months, or even longer.

We are heartened somewhat by the fact that, although the mean times rose precipitously during the WTO’s first five years to over 800 days, and again in 2003 to 650, they have begun in the last 5 years to stabilize at about 580 days, or 20 percent longer than permitted. Moreover, the Appellate Body has generally been successful in meeting its 60 to mostly-90-day deadline, although by a tactic unavailable to the initial panel of tracking the case from its first appearance on the Dispute Settlement Body’s docket, even prior to the first panel meeting.

As to NAFTA Chapter 19 disputes, the most striking data are that, on average, resolution takes 672 days, as with the WTO 43 percent longer than the treaty-mandated 315 days. Not only has no case involving Mexico and the USA met the treaty deadline of 315 days, but nearly as much time is absorbed in remand proceedings after the panel’s final decision is issued (279 days on average) as the treaty anticipates for the entire dispute settlement process. Strictly from a rule of law perspective, taking an average of two and one-half years longer than required by a binding international treaty, whatever the reason, shows an astounding lack of legal mindfulness of basic due process entitlements.

We cannot confidently draw conclusions about MERCOSUL’s compliance with treaty deadlines because of the difficulty in teasing data out of the scarce resources available. However, available evidence suggests a vigorous process that averages but 141 days from start to finish, with AD/CVD and tariff cases taking far less time (75 and 101 days, respectively), with the substantial extra time for safeguards cases (240 days) expanding the mean. The fact that we were unable to calculate timelines for MERCOSUR is itself a rather clear disregard of the transparency required by the treaty of its members in their trade activity.

Of course, getting the decision right weighs more heavily in our measure whether trade dispute settlement systems contribute to management of the rule of law in Latin America. Even so, the delay of justice to the parties and their constituents shown by our data builds a creates a shaky platform upon which to build a model for broader compliance with the rule of law by members of these trade agreements.

Fortunately, we also found that legislation in Latin America in the midst of this swirl of dispute panel jurisprudence has been strongly supportive of the rule of law. We identified recent laws in 9 Latin American countries that require transparency and accountability in government rulemaking. These laws were coincident with the decisions studied, most in 2007 and 2008, and make explicit what we had theorized was an incidental impact of regional trade agreements and their dispute settlement systems.

The early Mexican law has the broadest reach and Brazil’s opens only banking transactions, but each works toward managing the rule of law by requiring transparency, accountability, and due process by governments. These national rules make obligatory what before were the unwritten and indirect effects of implementation of the agreements themselves. They promote timeliness, inclusive record keeping, and impartiality in the administrative decisional process of rulemaking, improvements that, taken with transparency and accountability, are key elements of democratic governance and, in turn, the rule of law.

We find these results even more compelling in verifying our hypothesis in light of the fact that the studied challenges, after all, are about technical trading measures, such as the delay in issuing import licenses, not matters of constitutional import, such as an effort by an authoritarian ruler to extend the term of the presidency. For example, concerning Argentina’s success in overturning Brazil’s ban on importation of used tires, Brazil simply repealed the noncompliant aspects of the measure banning retreaded tires. While this step alone will not likely affect many people or companies not engaged in producing or distributing retreaded tires, except perhaps in the cost of such tires in the marketplace, Brazil’s further legislation in support of open governance will indeed have broader impact on its civil society.

In other words, our study shows that the plethora of fairly decided, well reasoned dispute panel decisions have worked together with these visible overseers of government trade measures, the dispute settlement systems themselves, to instill a culture of rule-driven resolution of cross-border disputes. No one decision triggered this result. The growing pattern of transparency and accountability in government flows from the corpus of these decisions.

We would also point to the multiple root causes for these new laws, including increased participation in the global market on all levels. Additional study is needed to formulate specific recommendations to policy officials on a country-by-country basis. Nonetheless, from the nature of the disputes studied and of the laws enacted to open governmental regulatory processes, we are confident that trade dispute settlement systems were an important underpinning for these examples of “managing the rule of law,” that is, the arduous process of strengthening the infrastructure of democratic governance to withstand any threat to its continuance.

I look forward to an instructive exchange with the commentators and our audience, which I thank for your attention.

 

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About the Author 

Stephen Joseph Powell
Former US negotiator of trade and fisheries agreements and chief counsel of a large division of the US Department of Commerce implementing f

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