Democracy, science and free trade: risk regulation on trial at the World Trade Organization.

• Author: Howse, Robert

1. INTRODUCTION

   Among the most common critiques of globalization is that it increasingly constrains the ability of democratic communities to make unfettered choices about policies that affect the fundamental welfare of their citizens, including those of health and safety, the environment, and consumer protection. Traditionally, free trade rules were about constraining border measures such as tariffs and quantitative restrictions on imports. Increasingly, however, such rules include requirements and constraints addressed directly to domestic regulation. For example, a country's policies with respect to intellectual property rights or its regulatory approach to network industries, such as telecommunications, may now be fundamentally shaped by rules that are made and interpreted at the international level. One of the most visible and controversial areas where trade rules constrain regulatory diversity is that of food safety. The World Trade Organization ("WTO") Agreement on Sanitary and Phytosanitary Measures ("SPS Agreement"), negotiated in the Uruguay Round and enacted in 1994, requires that countries either adopt harmonized international standards or, if they choose to maintain stricter regulations, base these on risk assessment, scientific principles, and scientific evidence. The SPS Agreement also requires that the regulations adopted be the least trade-restrictive available to achieve the desired level of protection. The above provisions apply even to nondiscriminatory regulations that would not run afoul of the Most Favored Nation and National Treatment provisions of the GATT itself. The SPS Agreement also prohibits "arbitrary" and "unjustified" distinctions in levels of protection in situations that are comparable, where these distinctions lead to "discrimination" or "disguised restriction on trade."

   Such strictures appear to provide fuel for criticism that globalization suffers a "democratic deficit." As two critics put it, "[t]he essence of free trade is deregulation.... Trade regimes like NAFTA, the GATT, and the WTO already have enormous clout in determining environmental, agricultural, land-use, health and, food safety rules."(1)

   The beef hormones dispute between the United States and the European Union may seem to exemplify how the SPS provisions rob democratic communities of sovereign regulatory choices. The United States successfully challenged at the WTO an EU ban on beef injected with natural and synthetic growth hormones. The ban directly responded to widespread fears of citizens about the risks presented by such hormones, particularly if they might be present in foodstuffs at levels beyond those that would occur if the hormones had been administered in accordance with good veterinary practice. The ban, however, was found by a WTO panel not to be based on a risk assessment that followed scientific principles and procedures, a result upheld by the WTO Appellate Body (on narrower grounds to be discussed later in this essay).

   The present essay is intended as a response to the "democratic" challenge to the SPS provisions and their interpretation by the WTO dispute settlement organs. I argue that these provisions can be, and should be, understood not as usurping legitimate democratic choices for stricter regulations, but as enhancing the quality of rational democratic deliberation about risk and its control. There is more to democracy than visceral response to popular prejudice and alarm; democracy's promise is more likely to be fulfilled when citizens, or at least their representatives and agents, have comprehensive and accurate information about risks, and about the costs and benefits associated with alternative strategies for their control. If rational deliberation is an important element in making democratic outcomes legitimate, then providing some role for scientific principles and evidence in the regulatory process may enhance, rather than undermine, democratic control of risk. On the other hand, democracy also requires respect for popular choices, even if different from those that would be made in an ideal deliberative environment by scientists and technocrats, if the choices have been made in awareness of the facts, and the manner that they will impact on those legitimately concerned has been explicitly considered.

2. TRADE RULES THAT CONSTRAIN DOMESTIC REGULATION: THE CHALLENGE TO THE CONVENTIONAL CASE FOR FREE TRADE

   There are many respects in which enhanced access to foreign markets can require regulatory changes in those countries, and there are also the various transaction costs to trade from regulatory diversity.(2) The entanglement of trade liberalization commitments with explicit strictures on domestic regulation, however, raises important challenges to the conventional case that trade liberalization, generally speaking, enhances both domestic and global welfare. It had often been argued that a country effectively can pursue any given regulatory goal by means other than protectionist trade restrictions such as tariffs, and thus, the removal of such restrictions in no way reduces the capacity of governments to achieve welfare-maximizing regulatory outcomes for their citizens.(3)

   Thus, in commenting on the original General Agreement on Tariffs and Trade ("GATT") Agreement, conventional trade law scholars characteristically have emphasized the extent to which free trade commitments do not reduce regulatory heterogeneity.(4) The main obligation of the GATT with respect to domestic regulations is that they be nondiscriminatory either between GATT/WTO Members (Article I: MFN Treatment) or between domestic and imported products (Article III:4: National Treatment). The nondiscrimination requirement would seem to leave enormous room for domestic regulatory autonomy;(5) moreover, in those hard cases where some kind of discriminatory regulation is necessary for legitimate public policy purposes, it might be justified under Article XX of the GATT, which allows the maintenance of otherwise GATT-inconsistent measures that are, inter alia, "necessary" for the protection of human or animal health or life (XX(b)) or the protection of public morals (XX(a)).

   Something like a nondiscrimination requirement would seem essential to sustain a trade liberalization bargain, even on tariffs and other traditional "border" measures; if countries can "cheat" on trade liberalization concessions by creating the same protective effect through domestic regulations, then confidence in such a bargain will likely be weak. The classic economic case for trade liberalization referred to above tends to downplay such considerations, since that case suggests that even unilateral liberalization is economically rational. In as much as international trade law, however, reflects the notion that I should expect a reciprocal benefit for a concession I confer on others (even if it would have been in my interests to confer it absent the concession), some conventions about what constitutes legitimate domestic regulation versus "cheating" on concessions seem to be required. "Nondiscrimination" has proven to be a relatively robust convention in this regard, because protectionism implies discriminatory treatment.(6) Once discrimination has been extended, however, to include disparate impact, or de facto discrimination, as it has been in GATT jurisprudence, the nondiscrimination norm begins to seem like a less stable criterion for distinguishing legitimate regulations from protectionist "cheating" on tariff and related concessions.(7)

3. SCIENCE, DEMOCRACY, AND THE SPS AGREEMENT

   On one view of the SPS provisions, requiring that regulations be based on scientific principles and evidence and on risk assessment, addresses the challenge of finding a criterion more stable than nondiscrimination by making "science" the authority that decides whether regulations stricter than international standards are legitimate. This approach, however, removes the ultimate power of decision from the democratic communities that the regulations purport to protect. Walker expresses this view as follows: "The central strategy of the SPS Agreement is to use science to distinguish between those sanitary measures consistent with the Agreement and those in violation of the Agreement."(8) Along similar lines, David Wirth suggests that "scientific tests lie at the core of the trade disciplines established in the new Uruguay Round SPS Agreement."(9) If one accepts this understanding of the SPS Agreement then there is an inevitable cost to democracy in protecting the trade liberalization bargain. If this cost to democracy is genuinely required for trade liberalization, then the notion that liberalization will generally maximize both domestic and global welfare becomes questionable. One answer, which finds strong support in one branch of the trade policy literature, is to say that, especially with respect to trade regulations, "democratic" outcomes typically reflect capture of the regulatory process by concentrated interests. Thus, hand-tying of the political process by international rules, or by an apolitical authority such as "science," actually may enhance domestic welfare and even result in regulatory outcomes that reflect more closely the preferences of most citizens.(10) Aside from the questionable empirical basis for the "capture" thesis,(11) there is another criticism: if citizens place a value on the capacity for self-government, paternalistic or technocratic responses even to admitted defects in the democratic process may well not result in overall gains to democratic welfare. Another response is to argue that "scientific" constraints on democratic regulatory choices be regarded as de minimus substantive requirements.(12) Judgments by the WTO dispute settlement organs about what constitutes de minimus scientific evidence, however, would themselves entail substantive judgments of value concerning the regulatory process, begging the question of which...