The WTO Impact on Internal Regulations: A Case Study of the Canada-EC Asbestos Dispute

The WTO is facing increasing criticism. This was highlighted during the third ministerial meeting in Seattle, where massive street protests disrupted the conduct of the conference. Apart from demonstrations, a series of groups used the Seattle ministerial meeting to articulate a range of views on the future of the trading system, in most cases far more subtle than a blanket or dogmatic rejection of globalisation or even the WTO. Non-governmental organisations and public policy-makers from all over the world met to analyse WTO policies and their potential impacts. Amongst the most common criticisms was the WTO’s alleged role in impeding national governments from granting adequate protection to the environment, or addressing consumer interests and national health and safety concerns. Different understandings concerning the extent to which WTO rules constrain domestic regulatory autonomy have manifested themselves in recent high-profile trade controversies. In the famous Beef Hormones case, the USA successfully challenged the EC’s ban on beef injected with natural and synthetic growth hormones. The regulatory measure in question had been adopted in a response to European consumers’ concerns about potential health effects of such hormones being present in foodstuffs. Similarly, in the case of genetically modified organisms (GMOs), European consumers’ reluctance towards genetically modified foods triggered the European institutions to adopt detailed regulations regarding risk assessment, release authorisation, subsequent monitoring and labelling of GMOs. The WTO consistency of this regulatory framework was repeatedly the subject of controversy in the TBT Committee. So far the European scheme has not been subject to dispute settlement at the WTO. Although there have been few cases where domestic regulations on health, safety or the environment have been directly challenged and found in violation of WTO law, the WTO rules may already be having a chilling effect on the strengthening or development of such domestic regulatory schemes in other WTO members, thereby constraining or impeding democratic choices. If the WTO is to regain citizens’ confidence, it has to prove its ability to balance the freedom of governments to pursue legitimate domestic objectives with the need to secure the benefits of trade liberalisation. Given the economic experiences prior to the Second World War, the legal framework created by the founding fathers of the GATT focused on the elimination of discriminatory practices, either explicit border measures such as tariffs and quotas or domestic regulations and policies that discriminate against imports. Thus, the fundamental constraint on domestic regulations in the original GATT was that such regulations must not discriminate either against imports or between different GATT member states [National Treatment and Most-Favoured-Nation Treatment (MFN)]. With the increasing success of the GATT in the elimination of discriminatory measures, attention eventually came to focus on non-facially discriminatory policies and regulations thought to have negative impacts on trade. Sometimes, the existence of different regulations in different countries might in itself increase the transaction costs of trade, requiring producers to adapt products to the regulatory environment in different national markets. Also, and perhaps more importantly, protective discrimination might be hidden or structurally embedded in regulatory schemes that themselves do not explicitly contain nationality-based distinctions. For example, domestic regulations might require a particular technology on safety grounds to which domestic producers had already adapted their production, while a variety of technological approaches might in principle be possible to satisfy the regulatory concern at issue. Because of the possibility that countries might simply shift protectionism from explicit facially discriminatory measures to regulatory schemes that were covertly or structurally discriminatory, the GATT jurisprudence evolved so as to encompass protective discrimination not reflected in explicit facial classifications on the basis of national origin, and in particularly the test of ‘like products’ in the National Treatment obligation of the GATT, came to be interpreted in such a manner as to provide some scrutiny of non-nationality-based regulatory distinctions, to ensure that those distinctions were not merely surrogates for (obviously illegal) nationality-based ones.

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