Clearing the air: the Clean Air Act, GATT and the WTO's reformulated gasoline decision.

• Author: McCrory, Martin A.
• Position: World Trade Organization

I

INTRODUCTION

Over the last four decades, the growth in the amount and complexity of air pollution in the United States resulting from the increasing use of automobiles(1) (along with other sources) has resulted in mounting dangers to the public health.(2) The American Lung Association has estimated that people in the United States spend $40 billion per year in additional health care cost associated with air pollution.(3) The Clean Air Act was created to combat this; its goal has been to protect and enhance the United States' air resources.(4) In furtherance of this goal, the United States Environmental Protection Agency ("EPA") promulgated regulations governing gasoline formulation to ensure that polluting compounds in gasoline do not exceed 1990 levels.(5) However, Venezuela complained that the EPA regulations discriminated against foreign gasoline refiners who wished to sell their products in the United States. Accordingly, it filed a complaint with the World Trade Organization ("WTO"), claiming that the U.S. regulations subjected foreign gasoline to stricter standards than were imposed on domestic gasoline.(6)

The Venezuelan complaint suggested the possibility of a fundamental conflict between domestic environmental policy and U.S. obligations under international trade rules. Most importantly, it provided a stern first test for the World Trade Organization, the infant organization heralded as the world's most important economic body.(7) Created in 1995, after four years of preparations and seven more years of negotiations, the WTO has been described as the "most ambitious, comprehensive and geographically wide trade agreement ever attempted or reached."(8) It was the culmination of a series of multilateral trade negotiations, known as the Uruguay Round, that were part of the General Agreement on Tariffs and Trade ("GATT""(.9) GATT itself was viewed as a rather unwieldy process for reducing tariffs and resolving trade conflicts among its member nations."(10) "The Uruguay Round ... transform[ed] the GATT into a permanent international institution, the World Trade Organization, responsible for governing the conduct of trade relations among its members."(11) The Uruguay Round, through its creation of the WTO, produced one other notable institutional reform: "it strengthened the multilateral dispute settlement mechanism so that countries [would] be more likely to comply with [international trade] rulings .... "(12)

Without a doubt, an open global market is as much to be desired as a clean global environment. Yet, as environmental regulations increasingly impact products with greater trade flows (and vice versa), the conflict between environmental protection and trade liberalization is destined to grow in intensity.(13) The Venezuelan challenge highlights the effect of the WTO's liberal trade rules on domestic environmental policy, while simultaneously providing an opportunity to scrutinize the WTO's new dispute settlement mechanism in action. Specifically, this article uses the reformulated gasoline dispute as the centerpiece for an examination of the conflict between a strict, domestic environmental law, the Clean Air Act, and the liberal trade rules embodied in the WTO agreement.

Section I of this article provides a brief history of the Clean Air Act. Section II describes the 1990 Clean Air Act Amendments and the reformulated Gasoline Rules, including a discussion of the standards and baseline limitations which were at the center of the controversy in Venezuela's complaint to the WTO. Section III offers a brief history of the GATT, the WTO, and the new dispute settlement mechanism. Section IV describes the compromise regulations the EPA devised to bring the U.S. environmental rules into compliance with this country's obligations under international trade law. Finally, Section V provides an analysis of the rulings of the WTO dispute settlement panel. The article concludes that in the wake of the panel rulings, the international trade framework must be modified to better recognize the importance of environmental issues.

II.

HISTORY AND OVERVIEW OF THE CLEAN AIR ACT

In order to understand the interplay between the Clean Air Act and the GATT, one must first have a basic understanding of the two. Clean air enforcement has a long history in the United States.(14) It is thought that the first air pollution control laws were adopted in Chicago and Cincinnati in 1881.(15) During the early years of air regulation, air pollution control was typically left to state and local governments. By 1912, twenty-three out of the twenty-eight U.S. cities with populations over two hundred thousand had air pollution laws.(16) Yet, by 1950 the unprecedented growth of industry, especially in the eastern and midwestern United States, triggered a public outcry against air pollution.(17)

It seems that the one common pattern that existed between these antediluvian laws and their more modern federal counterparts was the virtual lack of compliance by industry and enforcement by government agencies. A pivotal event illuminating the noncompliance occurred in 1948 in Donora, Pennsylvania.(18) Twenty people died as a direct result of air pollution caused by an inversion.(19) Moreover, almost half of the town's 14,000 inhabitants were stricken ill.(20) As a result of this tragedy, the next year the United States Department of Health, Education and Welfare ("HEW") initiated research into the causes and effects of air pollution.(21) In 1955, Congress realized that air pollution was a growing national concern and authorized the United States Surgeon General to investigate the problem and gather information.(22) Nonetheless, Congress made it clear that the United States' role was purely investigatory and informational.(23) Primary enforcement responsibility remained squarely with the state and local governments.(24)

Eight years later, Congress attempted to add teeth to the air pollution law, albeit very weak teeth, by passing the Clean Air Act of 1963.(25) This was the federal government's first attempt to actually regulate air pollution. Congress granted the federal government enforcement authority to abate air pollution "which endangers the health or welfare of any person.(26) Despite this language, the statute still allowed state and local governments to retain primary enforcement authority.(27) The federal government was relegated to the role of advisor and could only act with the express concurrence of the state and local governments.(28) Nevertheless, with this statute, the federal government began in earnest its movement toward centralizing air pollution control at the national level.

In 1965, Congress began its foray into the area of motor vehicle emission control.(29) Congress passed the 1965 Clean Air Act Amendments which allowed the Secretary of HEW to prescribe standards governing vehicle emissions.(30) The law required the standards to be based upon the economic and technical feasibility of compliance.(31) The Secretary was authorized to prescribe standards for new domestic and imported motor vehicles and engines, and to certify the vehicles and engines based upon prototype testing.(32) The vague language of this statute and the resulting lack of emission control standards led to Congress passing the 1970 Clean Air Act.(33)

If properly applied, the 1970 Act would have been one of the strongest steps toward curbing mobile source pollution in the history of the United States. The Act specifically required a ninety percent reduction in emissions of hydrocarbons, carbon monoxide ("CO"), and nitrogen oxide ("[NO.sub.x]") by 1975.(34) Unlike the 1965 Act, the amended law's standards were not technology based.(35) On the contrary, the standards were specifically based upon emission reduction.(36) Thus, instead of allowing technology to drive the law, the statute's mandatory emission reductions would force the development of new pollution control technology.(37) The 1970 Clean Air Act also authorized EPA (newly founded in 1970) to test vehicles for compliance or require the manufacturer to test the vehicles.(38) For the first time, the law also set standards for the chemical composition of gasoline, specifically lead. Despite its laudable goals, the law specified requirements that EPA was unwilling to enforce.(39)

The 1970 Act was a watershed, prodding industry (and the entire country) into thinking seriously about air pollution reduction.(40) However, just as its antecedents, the 1970 Act was doomed to fail because of the utter lack of serious enforcement.(41) Twenty years after the passage of the 1970 Act, mobile sources were still the leading cause of air pollution in the United States.(42) By 1989, mobile sources accounted for fifty percent of the nation's volatile organic compounds ("VOCs"), forty-three percent of the [NO.sub.x], and over ninety percent of the CO (in urban areas).(43) In response, in 1990 President Bush signed into law arguably the strongest environmental statute in history, the 1990 Clean Air Act Amendments.

In the forty years the federal government has been involved in clean air regulation, mobile sources (primarily automobiles) have become the largest single source of air pollution in the United States.(44) In response to this threat, Title II of the 1990 Clean Air Act Amendments ("1990 Act") was enacted to ensure strict regulation of vehicle emissions.(45) Toward that end, the 1990 Act included, inter alia, a new section that regulated the composition of gasoline.(46) Specifically, Section 211(k) of the 1990 Act required the EPA Administrator to promulgate regulations governing gasoline characteristics (i.e., its reformulation) necessary to assure vehicle emission reductions.(47) On February 16, 1994, EPA published its Final Rule governing this subject matter, entitled, "Regulation of Fuels and Fuel Additives: Standards for Reformulated and Conventional Gasoline.(48)

III.

THE CLEAN AIR ACT AMENDMENTS...