Executive-branch rulemaking and dispute settlement in the World Trade Organization: a proposal to increase public participation.

• Author: Smith, Aubry D.

On March 23, 1994, the Environmental Protection Agency (EPA) announced a proposed agreement with Venezuela to alter the Clean Air Act rule.(1) The agreement would have eliminated a discrepancy between the regulatory treatment of Venezuelan and American oil producers, thus facilitating Venezuelan exports to the United States.(2) At the same time, however, it would have led to a slight increase in pollution levels in the northeastern United States and would have made it more difficult for the EPA to monitor the compliance of Venezuelan producers with the Clean Air Act rule.3 The EPA offered the rule change in return for Venezuela's promise not to pursue a complaint alleging that the Clean Air Act rule violated U.S. obligations under the General Agreement on Tariffs and Trade GATT).(4)

The details of this negotiated settlement had been hammered out during the course of secret meetings between Venezuela, the EPA, the Energy Department, and the office of the U.S. Trade Representative.(5) Congress and the public learned of the compromise after the leaking of a confidential cable from Secretary of State Warren Christopher to the U.S. Ambassador to Venezuela.6 Shortly thereafter, Congress forced the EPA to abandon the deal by inserting a rider in a subsequent EPA appropriations bill that precluded the rule change.(7)

After the EPA abandoned the rule change, Venezuela relodged its complaint, this time before a dispute-settlement panel of the World Trade Organization (WTO).8 The United States has had a difficult time defending its policy under the rules of the GATT.(9) The policy would reduce pollution in the United States,(10) but it clearly would discriminate against foreign producers. The United States must prove that this discrimination is necessary - not in the view of U.S. regulators but under the terms of the GATT - to promote environmental protection."

The dispute with Venezuela - referred to as the "Reformulated Gasoline Case" - is just one in a series of conflicts between environmental protection and free trade arising in the context of the world's multilateral trade regime, first under the GATT and now under the WTO.(12) But the Reformulated Gasoline Case also exemplifies two broad consequences that global interdependence has had for the U.S. government. First, fewer matters of policy can be determined solely by reference to domestic preferences. An increasing range of national policies derives not from internal government but from government's interaction with foreign powers. This interaction leads to the second consequence of global interdependence - a change in the nature of government. Domestic policymaking traditionally has been shared among the three branches and opened to public scrutiny, while the government of foreign affairs has tended to be concentrated in the Executive Branch(13) and conducted in secrecy.(14) With the rise in global interdependence, matters of domestic government and foreign affairs overlap, and the domestic mode of government tends to give way to that of foreign affairs.

As the Reformulated Gasoline Case suggests, this encroachment threatens the democratic integrity of our domestic policy. It well may be that national rules often fail to reflect the legitimate concerns of foreign powers. This Note proceeds on the premise, however, that it would be against the public interest for executive-branch agencies to seek to accommodate those concerns by negotiating with foreign powers in utter secrecy without engaging in some form of systematic consultation with the range of domestic parties concerned.(15)

Although the denouement of the Reformulated Gasoline Case appears as something of a triumph for popular sovereignty and open government, the forces that halted the rule change in that case do not operate consistently. Concern for environmental protection will not always comport with the interests of the U.S. oil industry, and thus congressional opposition will not always rise to the level it did in the Reformulated Gasoline Case.(16) In the absence of a high-profile concern, Congress rarely will interfere with executive-branch rulemaking, and therefore the administrative agency responsible for a particular issue will control the development of policy. This is troubling because the general requirements ensuring public participation in agency rulemaking currently do not apply when that rulemaking is pursuant to an international agreement.(17) Given the rise in global interdependence, this foreign-affairs exception could result in a steady erosion of direct democratic control over domestic regulatory policies that conflict with free-trade rules.

This Note argues that, because the Executive Branch increasingly will be promulgating domestic regulatory rules intended to comply with the rules of the world-trading system, it is necessary to increase formal oversight of the Executive Branch's role in that context. Part I argues that the United States' participation in the WTO implies a substantial increase in the impact of foreign policy on domestic policy. Part Il points out a loophole in Congress's attempt to compensate for this increase by installing various devices to ensure political oversight of the Executive: the Executive Branch is subject, under the Uruguay Round Agreements Act (URAA),(18) to formal oversight during the WTO dispute-settlement process only in connection with adjudicated settlements, not in connection with negotiated settlements. Part III proposes that Congress expand the application of provisions of the Trade Act of 1974 that currently require the U.S. Trade Representative to consult private-sector representatives representing both trade and nontrade interests while negotiating settlements. This Part also argues that Congress should extend the URAA procedures currently applicable to rulemaking pursuant to adjudicated settlements to rulemaking pursuant to negotiated settlements.

1. THE IMPACT OF THE WORLD TRADING SYSTEM ON

   U.S. DOMESTIC POLICY

   This Part argues that the expanding scope of law issued under the auspices of the WTO is cause for concern because the dispute-settlement process may fail to consider the full range of national interests in the domestic government policies it affects. Section I.A describes the potentially vast scope of international trade law and how it can spill over into traditional domestic policy areas. Section I.B asserts that the WTO's dispute-settlement process, which determines the concrete impact of international trade law on domestic law, is biased in a way that threatens the integrity of domestic policy.

   1. The Expanding Scope of International Trade Law

      The range of issues affected by international trade law has expanded greatly for three reasons. First, in recent years, the international trade regime has sought to broaden the scope of trade-related issues that are regulated. Originally, that regime was based on the founding GATT treaty, which only sought to alleviate restrictions on trade in goods.(19) With the completion of the last round of multilateral trade negotiations, the general scope of the WTO's regime has broadened to include the trade in services.(20) The treaty on services creates a framework within which WTO members may commit to open their markets in the service sectors of their choice and to the degree that they specify. Commitments can involve arrangements such as the mutual recognition of professional qualifications, operating licenses, such as banking licenses, and standards, such as solvency ratios and other prudential regulations.(21)

      The second cause for the expanding impact of international trade law is the increased rigor of the regime. International trade law is now far less tolerant of measures that, though not designed to regulate trade, nonetheless impede it - so-called nontariff barriers. Initially, the international trade regime was concerned mainly with altering or eliminating national laws whose sole purpose was to regulate trade, such as the laws setting tariff rates and restricting imports and exports through the use of quotas. Recently, however, as a consequence of international trade law's, increased attention to nontariff barriers, few regulatory fields have escaped the reach of the international trade regime.

      Naturally, the more vigorously the architects of the international regime have sought to free trade from the various national regulations that hamper it, the more their efforts have tended to impinge on the designs of other regulators. Conflict with the regulation of environmental law has been most controversial,(22) but health-and-safety rules also have been affected. For example, the United States has claimed that a European Union ban on the use of hormones in beef production, enacted following a vigorous campaign by consumer groups, violated the Agreement on Technical Barriers to Trade, which prohibits nondiscriminatory measures that constitute unnecessary barriers to trade.(23) Similarly, U.S. health rules came under fire in a transatlantic dispute over procymidone residues in French and Italian wines. United States officials banned these wines because the Food and Drug Administration (FDA) had not yet established tolerance levels for procymidone in wines. Though scientific studies suggested that procymidone is a carcinogen and a reproductive toxin, Europeans prevailed upon the FDA hastily to set tolerance levels by accusing the United States of a trade violation similar to that alleged by the United States in the hormones dispute.(24)

      Third, the reach of trade law is often expanded, not through specific treaty language, but rather through a case-specific application of broad treaty prohibitions. For example, the WTO's general prohibition against discrimination in trade can lead to far-reaching consequences similar to those resulting from the expansive interpretation of the Dormant Commerce Clause and Article 30 of the Treaty of Rome.(25) Though the adjudicators of a WTO...