Trade and Morality: Preserving "Public Morals" without Sacrificing the Global Economy
Gonzalez, Miguel A., Vanderbilt Journal of Transnational Law
The World Trade Organization (WTO) exists for the purpose of promoting and facilitating trade amongst its member nations. When those member nations acceded to the WTO'S agreements, however, they acknowledged that sometimes trade barriers are useful tools in protecting themselves from certain evils. This Note addresses one of those useful tools--the public morals exception--which allows a member nation to maintain trade barriers with respect to certain goods or services.
Since the WTO agreements have been in effect, the public morals has lacked two critical things: a definition and boundaries. This Note will attempt to define the public morals exception in a way that preserves the spirit of the WTO agreements. Furthermore, this Note will propose a test that will allow future WTO panels to decide whether a country's law or regulation, justified under the public morals exception, can legitimately fall within the ambit of the WTO agreements.
TABLE OF CONTENTS I. INTRODUCTION II. DEFINING THE BOUNDARIES OF THE "PUBLIC MORALS" EXCEPTION A. The Vienna Convention Approach B. Decisions in International Trade Law Cases 1. The Tuna/Dolphin Cases i. The Controversy Behind the Tuna/Dolphin Regulations ii. Factual Background of the Tuna/Dolphin Cases iii. Relevant Arguments Raised by Parties iv. May a Nation Impose Regulations on Objects Outside of its Territorial Jurisdiction? v. The Meaning of "Necessary" vi. Conclusions of the Panels 2. United States--Cross-Border Gambling and Betting Services i. The Panel Decision a. Motives for the Regulation of Gambling b. Factual Background c. Relevant Arguments Raised by the Parties 1. The Meaning of "Necessary" 2. The Meaning of "Public Morals" 3. The Requirement of WTO Consistency d. Conclusions of the Panel ii. The Appellate Body Decision C. The Usage of "Public Morals" 1. The United States 2. Pakistan 3. Latin America 4. Australia 5. Canada 6. Hong Kong 7. United Kingdom III. THE "PUBLIC MORALS" CATCH-ALL DILEMMA IV. A TRADE-PROMOTING AND SOVEREIGNTY-PRESERVING DEFINITION FOR "PUBLIC MORALS" V. CONCLUSION I. INTRODUCTION Mr. [U.S. Senator] GRAMM: His amendment also deems exempt those State and local laws and ordinances related to a series of issues--such as health, safety, environment, or public morals, whatever that is (1)
The WTO's lofty ambition is to "usher in a new era of global economic cooperation, reflecting the widespread desire to operate in a fairer and more open multilateral trading system for the benefit and welfare of their peoples." (2) Through the WTO, representatives from 124 countries (3) sought "to resist protectionist pressures of all kinds" (4) and pledged that they would not adopt trade measures that would "undermine or adversely affect" (5) the agreements reached during the Uruguay Round negotiations that lasted from 1986 to 1994. In pledging so, the leaders of the nations involved in the creation of the WTO recognized that free trade was an important means of raising global living standards, "ensuring full employment," promoting the growth of the volume of real income and effective demand, "expanding the production of goods and services," preserving the environment, and using the world's resources at optimal levels. (6)
One of the tools the WTO used in promoting this goal is the most favored nation (MFN) principle. Article I of the General Agreement on Tariffs and Trade of 1947 (GATT) states that any benefit that a country confers upon the goods of another country "shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all contracting parties." (7) Similarly, Article II of the General Agreement on Trade in Services (GATS) requires each member to immediately and unconditionally accord to all contracting parties a treatment that is no less favorable than the treatment it accords to like services and service suppliers from any other country. (8) Finally, Article IV of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) places a similar requirement on contracting members where the article in question is intellectual property. (9) In short, the MFN principle requires the member nations of the WTO to treat each other equally.
Another trade-promoting device is the principle of national treatment. In Article III of the GATT, the members agree to enjoin themselves from using internal taxes and other internal regulations to favor domestic products and production over imported products. (10) Article 17 of the GATS further requires that nations give domestic services and service suppliers the same regulatory costs and benefits that they give to foreign services and service suppliers. (11) Finally, Article 3 of the TRIPS agreement requires nations to give the same protection to intellectual property of foreign and domestic entities. (12) Because of this national treatment principle, a nation must extend the same benefits and burdens to foreign goods, services, and intellectual property that it extends to the domestic equivalents.
Yet the principles of national treatment and MFN alone do not govern free trade: schedules of concessions play a critical role in the WTO. Under the GATT and GATS Agreements, member nations may choose which goods and services are committed to the principles of those agreements. Under GATT Article II(a), in a schedule of concessions, member nations guarantee that they will negotiate tariffs for certain goods and bind themselves to charge all member nations the negotiated rate. (13) This does not mean that tariffs will be eliminated, and it does not guarantee that an agreement will be reached for all goods. (14) The services equivalent appears in Article XVI of the GATS. (15) Essentially, members of the GATS are to create a list of the services that they will subject to liberalization. (16) If a member nation selects a certain service for trade liberalization, then the member nation barred from limiting the amount of suppliers of that service, placing quotas on the total value of service transactions, limiting output, limiting the supply of labor to the supply of that specific service, forcing suppliers to sell to particular entities, and limiting foreign shareholding. (17)
Any given good or service may be denied lower tariffs by a simple failure to negotiate. Even if a category is negotiated, however, a good or service may fail to enjoy the benefits of a lower tariff if a country chooses to invoke one of three exceptions with respect to a specific good or service. Specifically, this Note addresses a provision that allows a member nation to discriminate to preserve its "public morals." The GATT provision, which is substantially similar to the equivalent GATS provision, (18) reads, in pertinent part:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
(a) necessary to protect public morals; ... (19)
The GATS provision adds "or to maintain public order" after the word "morals." (20) Along these lines, Article 27(2) of the TRIPS agreement notes that "[m]embers may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public ..." (21)
The WTO has never ascertained the definition of "public morals." (22) This Note will attempt to give meaning to this term in a manner that preserves the spirit of the agreements that form the WTO. Part II of this Note will consider various means that could be used to determine the meaning of the public morals exception. Part III will first consider which of the definitions extracted from the devices discussed in Part II are consistent with the general principles of the WTO and then the implications of abuse of the public morality exception. Finally, Part IV will suggest a workable approach to scrutinizing laws and regulations justified on the grounds that they are aimed at protecting public morals.
II. DEFINING THE BOUNDARIES OF THE "PUBLIC MORALS" EXCEPTION
A. The Vienna Convention Approach
The meaning of the public morality exception remains unsettled as of today. (23) Multilateral treaties require creative and nuanced drafting so that the interests of all negotiating parties may be satisfied. (24)
The Vienna Convention on the Law of Treaties (Vienna Convention) was adopted in 1969 to settle disputes arising from treaties made between states through peaceful means and in "conformity with the principles of justice and international law." (25) Accordingly, the Convention applies to the WTO agreements. (26) Under the Vienna Convention, there are four important considerations in treaty interpretation: (27) (1) interpret the treaty in good faith and in accordance with the ordinary meaning of the terms of the treaty in context and in light of its object and purpose; (28) (2) interpret the treaty in context; (29) (3) interpret the treaty in light of subsequent agreements, practice, and applicable laws; (30) and (4) interpret the treaty consistent with any special meanings intended by the signing parties. (31) An interpreter may also consider the travaux preparatoires (preparatory work)--essentially the treaty's legislative history--and the context in which the treaty was drafted, to confirm the meaning that is ascertained using the above methods, or to further interpret the treaty if the meaning that is ascertained using the above methods would lead to absurd results. (32)
The public morals provision has been considered through the lens of the Vienna Convention. This analysis has conclusively demonstrated that the precise meaning of the public morals exception is at best difficult, but likely impossible to ascertain based on the methodology of the Vienna Convention. (33) Looking at the Vienna Convention sources has only yielded two answers: the drafters knew what the term meant (thus, they said little about what it encompassed) and they intended for the term to include regulations aimed at regulating alcohol. (34)
B. Decisions in International Trade Law Cases
There is no principle of stare decisis in the WTO. (35) Nevertheless, the cases below provide guidance on how the WTO has interpreted the provisions. These cases also present the various policy and definitional choices that future panels may make.
1. The Tuna/Dolphin Cases
The Tuna/Dolphin cases occurred prior to the existence of the WTO. As such, these cases were decided by GATT panels. (36) Mexico filed the first Tuna/Dolphin Case against the United States in 1990. (37) The European Economic Community (EEC) and the Netherlands filed the second Tuna/Dolphin Case against the United States in 1992. (38) Both cases concerned measures adopted by the United States to curtail the incidental taking of dolphins by tuna fishermen.
i. The Controversy Behind the Tuna/Dolphin Regulations
Moral outrage--a notion that "radical action" must be taken to "defend life that cannot defend itself"--frequently inspires many protectors of the environment. (39) Impassioned appeals are common. For example, one editorialist noted that
[f]ew mammals are so agreeable when murdered, imprisoned or taught how to leap 20 feet, dunk a basketball and snatch the trainer's dead fish on the way down.... Their brains are bigger than ours, suggesting the far-out possibility of an intelligence as yet outside the limits of human understanding. (40)
The issue in the Tuna/Dolphin cases, therefore, struck a chord with some. (41)
Even though such a compelling issue was involved, some feared that the trade measures were inspired by protectionism and not by legitimate moral outrage about gross wrongdoings. A commentator in the early 1990s noticed a phenomenon of "strange bedfellows" during GATT negotiations: "While creating new wealth and opportunities, free trade destroys jobs in an economy's least competitive sectors and forces the overall economy to become more efficient. As a result, free trade will always generate powerful enemies." (42) This preceded a statement that is central to the issue of the interpretation of public morals in the context of the WTO agreements: '"These enemies have wrapped themselves in a green banner and have stepped forward as protectors of the environment.' Says one U.S. trade official: 'The environment could well become the new hidden trade barrier behind which protectionists will all run to hide.'" (43)
U.S. business concerns became unusually aligned with the sentiments of morally outraged environmentalists determined to stop "the killing of dolphins" (44):
The U.S. tuna fishing industry, for example, helped persuade Washington to block imports of Mexican-caught tuna, on the grounds that Mexicans were not as careful as U.S. tuna fishermen to avoid snaring dolphins in their nets. As soon as Mexican tuna was embargoed in February, U.S. tuna fishermen moved to hike their prices by 10%. (45)
ii. Factual Background of the Tuna/Dolphin Cases
The disputes brought by Mexico and the EEC (hereinafter, "the Tuna/Dolphin complainants") against the United States in 1990 and 1992, respectively, dealt with restrictions imposed on the importation of certain tuna products. (46) At the time the Tuna/Dolphin complainants filed the disputes, commercial fishermen employed the practice of catching tuna using large "purse seine" nets. (47) To use this method a fishing vessel deploys a smaller boat that unfurls a net around a school of tuna. (48) When the boat has fully encircled the school of tuna, a mechanism on the larger boat traps the contents of the net in what is akin to a "purse." (49)
The measures adopted by the United States sought to curtail the use of this method of fishing in the Eastern Tropical Pacific Ocean (ETP). (50) The United States targeted that region because experts had long observed a peculiar association between tuna and dolphin in that region. (51) Indeed, studies indicated that the purse seine method killed legions of dolphins in the ETP since the 1960s. (52)
In response to these startling numbers, the United States passed the Marine Mammals Protection Act in 1972 (MMPA). (53) Congress enacted the MMPA when it found that "certain species and population stocks of marine mammals are, or may be, in danger of extinction or depletion as a result of man's activities." (54) In addition to the ecological reasons for protecting the mammals, (55) Congress found that it should protect marine mammals because of their great "esthetic [sic] and recreational" value. (56)
The MMPA regulated tuna fishing by U.S. fishermen and by those operating within the jurisdiction of the United States. (57) Under the MMPA, fishermen were obligated to employ fishing techniques that would "reduce the taking of dolphin[s] incidental" to the tuna-fishing activities. (58) The federal government licensed U.S. vessels under the condition that the entire fleet could not exceed an incidental taking of 20,500 dolphins per year in the regulated region. (59) The U.S. government also "ban[ned] the importation of commercial fish or products from fish caught" using techniques that resulted in incidental killings. (60)
Foreign governments could only market their tuna in the United States upon showing that their "regulatory regime regarding the taking of marine mammals" was similar to the regime employed by the U.S. government. (61) To make this showing, countries had to demonstrate that the average rate of taking of marine mammals was not greater than "1.25 times the average incidental-taking rate of United States vessels operating in" the regulated region. (62) If the United States banned a foreign government's tuna because that government's regulatory regime did not meet the minimum standards, then all other nations were required to ban tuna originating from that foreign government in non-compliance or face an embargo from the United States. (63) If a primary or intermediary nation remained embargoed for six months, it faced the risk of a U.S. embargo on all of its fish and wildlife. (64) Another act, the Dolphin Protection Consumer Information Act (DPCIA), regulated the use of the "Dolphin Safe" label on tuna cans. (65)
iii. Relevant Arguments Raised by Parties
In response to Mexico's complaints, the United States maintained that the MMPA was consistent with its obligations under the GATT. (66) Most importantly for defining the scope of the public morals exception, however, was the U.S. argument that "even if these measures are not consistent with Article III, they were covered by the exceptions in Article XX(b) and XX(g)." (67) Article XX(b) exempts measures "necessary to protect human, animal or plant life or health" (68); similarly, Article XX(g) exempts measures "relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption." (69) Although the purpose of this Note is to define the scope of the public morals exception, the arguments in the Tuna/Dolphin cases are relevant because they present a definition of the term "necessary"--an important qualifier to the public morals exception. Additionally, Article XX(b) (as well as Article XX(g)) raises the question of whether one government can create laws affecting objects outside of its territorial jurisdiction.
iv. May a Nation Impose Regulations on Objects Outside of its Territorial Jurisdiction?
The Tuna/Dolphin complainants argued that Article XX confined its enumerated exceptions to measures that "contracting parties could adopt or apply from within their own territory." (70) In Tuna/Dolphin I, Mexico's precise objection was that if the United States could impose trade restrictions on the resources of another country, then it would introduce the concept of extraterritoriality into the GATT in violation of its principles. (71) In both Tuna/Dolphin I and II, the United States disagreed with this argument, stating "a government could prohibit imports of a product in order to protect the life or health of humans, plants or animals outside its jurisdiction" (72) and that the location of the object of conservation was irrelevant. (73) The United States noted that trade measures necessarily have effects outside of a nation's borders, but that the MMPA was not extraterritorial legislation. (74)
A further argument, raised by the United States in Tuna/Dolphin II, is that the GATT contemplated that countries could regulate objects located outside of their borders because another provision implied as much. (75) Specifically, Article XX(e) of GATT excludes regulations "relating to the products of prison labour." (76) The United States contended as follows: because that subsection explicitly allowed regulation of objects outside of the country's territorial jurisdiction, and was adjacent to subsection (b), then it had to follow that the entire section permitted the regulation of objects outside of the country's territorial jurisdiction. (77)
The Meaning of "Necessary"
The Tuna/Dolphin cases provide helpful analysis on the meaning of "necessary." This insight is significant because, similar to Article XX(a), Article XX(b) requires that the proposed measure be "necessary." (78) The definition of "necessary" is not a settled issue and has been inconsistently interpreted. (79)
In Tuna/Dolphin I, the United States argued that the MMPA embargo was necessary to protect the life and health of dolphins. (80) According to the United States, the appropriate test of necessity required consideration of whether an alternative measure was available or had been proposed, "that could reasonably be expected to achieve the objective of protecting the lives or health of dolphins." (81) The United States stated that without the implementation of the MMPA, purse seining would continue to encircle schools of tuna and dolphin, resulting in the unnecessary death of dolphins. (82)
Mexico responded, in Tuna/