Managing the Interface between International Trade Law and the Regulatory State: What Lessons Should (and Should Not) Be Drawn from the Jurisprudence of the United States Dormant Commerce Clause
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Increasingly, the application and interpretation of international trade law engages the dispute settlement organs of the World Trade Organization with the contemporary regulatory state in its full complexity. Whether in determining if required risk assessment procedures for health and safety regulations have been followed in interpreting the TBT and SPS codes, or deciding if a Member has respected the criteria for compulsory licensing of patents in the TRIPs Agreement, including “adequate remuneration” to the patent holder, or in the application of Art. XX of the GATT to environmentally-based trade measures, WTO panels cannot avoid making complex trade-offs between free trade and other public values. This raises fundamental issues of democratic legitimacy, far beyond those implicit in what might have appeared to be the character of the multilateral trading order in the past—a bargain about tariff reductions, with a code of conduct to help ferret out cheating on the bargain. From the perspective of the traditional trade policy elites, under the GATT domestic regulation tended to fall on one side or the other of a bright line, dividing entirely evil “cheating” from entirely benign “normal” domestic regulations. Not entirely surprisingly, the difficulty with such an approach became apparent once GATT panels were faced with determining whether measures that violated trade rules could be justified on the basis of other objectives and values, as provided for in Art. XX of the GATT. In the Tuna/Dolphin disputes, GATT panels, somehow intuitively sure that unilateral measures to protect the global environmental commons didn't fit within their image of the “normal” regulatory state, resorted to a number of spurious distinctions, unsupported by the text of the General Agreement, to avoid directly facing a conflict of values. In the Thai Cigarette case, shortly before the Tuna/Dolphin decisions, a panel had applied a least restrictive means test in order to find that Thai measures targeted at foreign cigarettes could not be justified as “necessary” for the protection of human life and health under Art. XX(b) of the GATT: the panel dreamed up a range of hypothetical less trade-restrictive measures that could have been chosen (such as anti-smoking advertising campaigns), with no sensitivity to and little interest in the real policy world in which the Thai regulators lived. A legal economist can always imagine a hypothetical welfare-maximizing regulatory instrument that achieves a public purpose without resort to trade restrictions; the logical conclusion is that the choice of any other instrument is due to protectionist pressures. It is easy to see why such a construct would be attractive to trade diplomat panelists, for it avoids the impression that there is any need to adjudicate competing values at all. Yet in the real world, the “first best” instrument may create serious compliance problems; cultural norms may make Western-style ad campaigns ineffective; a tax may be more efficient than command-and-control regulation but may face constitutional problems or may skew more general fiscal policies. In the real world of regulation, policy makers face hard choices, and need to address difficult normative trade-offs. With the WTO Appellate Body now requiring rigor and consistency in the interpretation of WTO legal instruments, the free manipulation of legal concepts and texts by trade diplomats to produce results that correspond to their own intuitions about what is protectionism and what is normal regulation is increasingly less viable. In any case, where dispute settlement rulings fail to take into account legitimate public values other than trade liberalization itself, this will risk provoking even more severe legitimacy crises than those provoked by the Tuna/Dolphin rulings—more severe at least in part because under the negative-consensus rule of the WTO DSU, the safety valve of non-adoption through a veto of the losing party is no longer available. Where then to tum in order to educate WTO panelists (and to some extent the Appellate Body, too) in the kind of institutional sensitivity appropriate to review of domestic regulation in the context of adjudicating potentially competing values? One rather obvious place might be to the internal economic integration jurisprudence of federal states. The courts in the United States, for example, have passed through, as it were, their era of “Lochnerism,” where they acted as protectors of some kind of natural, laissez-faire baseline against what were viewed as the intrusions of a growing regulatory state. They have developed a set of techniques for engaging in constitutional and administrative law review of regulatory action, which show a degree of appreciation for the need for democratically legitimate institutions to trade off competing values. In addition, there is a body of sophisticated legal scholarship which addresses itself to the institutional strengths and weaknesses of courts in relation to other agencies, in addressing the various empirical and conceptual questions that surround the rationality of and justification for regulatory action.
Source Publication
Regulatory Barriers and the Principle of Non-Discrimination in World Trade Law
Source Editors/Authors
Thomas Cottier, Petros Constantinos Mavroidis, Patrick Blatter
Publication Date
2000
Recommended Citation
Howse, Robert L., "Managing the Interface between International Trade Law and the Regulatory State: What Lessons Should (and Should Not) Be Drawn from the Jurisprudence of the United States Dormant Commerce Clause" (2000). Faculty Chapters. 884.
https://gretchen.law.nyu.edu/fac-chapt/884
