Dolphins!!!

The WTO ruled against dolphin-safe labels for the fourth time today. The ruling continues a growing trend of WTO Appellate Body willingness to scrutinize even the most microscopic aspects of national regulatory methods.

A bit of background. In the Eastern Tropical Pacific, tuna swim with dolphins. Tuna fishers know this, so they chase, encircle and throw purse-seine nets on dolphins (who are easy to spot) to get the tuna (who are not). Needless to say, this process hurts and often maims dolphins.

The US had responded to this phenomenon in a number of ways.

• First, facing pressure from environmentalists and animal rights advocates in the early 1990s, the US banned dolphin-unsafe tuna. Mexico (where purse seine methods are common) complained to the GATT (a pre-WTO dispute settlement body) that the measure violated US obligations. The GATT body agreed.
• During the Clinton years, the US went for lighter touch regulation, and gave consumers the power to “vote with their dollars”. Labels were introduced to inform consumers about whether their tuna was “Dolphin-safe”. It was not and is not a mandatory regime: tuna canners can decide to apply for the label or not; consumers can buy tuna with the label or not. Ecuador and other nations’ tuna fisheries shifted to more humane tuna fishing practices to get the label, but Mexican industry did not.
• The Clinton and Bush administration then tried to go even lighter touch, arguing that Mexican tuna should get the label, even if tuna is caught with purse-seine nets. Environmentalists fought this watering down, and got a US court to agree in a 2007 ruling.
• Shortly thereafter, Mexico launched a WTO case against the US, asking for the labels and court ruling to be set aside. The case has lasted seven years. A lower panel ruled with Mexico against the US in 2011, and the Appellate Body came to the same conclusion (albeit on different legal grounds) in 2012. The US made several changes to its labeling regime in an effort to comply. Mexico was still not satisfied, so requested a WTO compliance  panel. This panel sided with Mexico in April of this year, and the Appellate Body backed it up today.

At a superficial level, the WTO’s approach in these cases is a boon to animal rights. They didn’t fault the US for wanting to reduce dolphin mortality. Instead, they ruled that the WTO’s Technical Barriers to Trade agreement (TBT) requires consideration of both trade promotion and regulatory objectives.

One way to read the Appellate Body decisions is the following: if the US is going to clamp down on harmful fishing methods (and thereby restrict trade), it needs to go whole hog. Ban the same methods everywhere, ban the same injury everywhere, enforce the same standard everywhere in the same way with the same resources. Again, this has a surface appeal. Equality before the law, protect Flipper around the globe, etc.

But there’s one catch. Tuna and dolphin don’t swim together elsewhere outside of the Eastern Tropical Pacific, and (therefore) purse-seine nets aren’t economical.

Consequently, it is not economical for the US to require fishing inspectors to check for these things outside of the Pacific region. So the US applies slightly lighter touch regulation to other fisheries. Namely,

• Scenario 1: Tuna vessels in the Eastern Pacific need the captain and an observer to both certify that there (1) was no purse-seine nets used and (2) no dolphin injury.
• Scenario 2: Captains of tuna fishing vessels in other regions that sometimes use purse-seine nets must certify both things.
• Scenario 3: Captains of vessels that don’t use nets and aren’t in the region must only certify that no dolphins were injured.
• However, the US can require an observer in scenarios 2 and 3 if there is evidence of harm to dolphins that needs to be addressed. Also, there are slightly different verification and record-keeping requirements for the different scenarios.

The Appellate Body faulted the US on these distinctions, insisting that one standard was needed to avoid a discrimination finding.* Indeed, while the April panel only faulted for the US for its certification and verification practices, today’s ruling flipped that and said that the eligibility distinctions per se were discriminatory (para. 7.230, 7.238).

These rulings present a real challenge to sloganeering around neoliberalism. According to the standard left narrative, the WTO is part and parcel of a Reaganite free market fundamentalist movement that includes diminishing regulation at the national level.

But in today’s and some of its other recent rulings, the Appellate Body seems to be suggesting the opposite. Countries that trade should not only regulate, they should regulate the hell out their economies. They should regulate without regard for cost-benefit analysis, without consideration of empirical evidence,** and without consideration of the burden regulation places on business.

In this worldview, governments cannot go half-way. If they do, they risk a situation where some businesses get slightly lighter touch regulation than the light touch regulation everyone else gets. This differential may sometimes burden suppliers from different countries differently, even if this outcome was not intended nor even particularly germane to the regulatory distinction.

So, while today’s ruling has some nods to the importance of regulation, the practical takeaway is that countries are more likely to get WTO sign-off when they totally deregulate or totally regulate. From a domestic administrative science perspective, this binary choice is no choice at all.

Now, one significant caveat here. To be ruled against at the WTO is not automatically the most consequential thing in the world. Mexico is going to have to put some numbers on the costs its fishers incur from the slightly stronger administrative burdens they face under the US labeling regime. This is unlikely to be a big number, which means the WTO will only authorize a minor trade sanction that the US can easily ignore.

But this in itself poses its own risks, even if mostly philosophical. Today’s decision shows an international legal system that is rigid in its assessment of legal obligations, but toothless in its enforcement capacity. The combination risks undermining legitimacy with both those who put environmental policy above open markets, and those that prefer the reverse.

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* As I write here, the WTO will only accept “detrimental impacts on competitive opportunities [that] stem[] exclusively from legitimate regulatory distinctions”. In practice, this seems to mean that a regulation must achieve its objectives 100%. The existence of “discrimination” in the first instance was also strange: the Mexican fleet made its own decisions about how to fish. Two-thirds fished using nets. The US and Ecuadorian industry also chose, most not using nets. How each industry fared under the labeling regime was a result of its own choices, although this distinction didn’t seem to matter much to attribution to the government of the discrimination. For legal wonks, discrimination is quickly becoming the vague catch-all standard that “fair and equitable treatment” is in the investment context.

** This is particularly confounding throughout the case. The various panels and Appellate Body members never seemed to present any real evidence to suggest comparable dolphin mortality issues outside of the ETP or with other methods. (I am going to give a closer read to be sure.) In some parts of its analysis, the Appellate Body seemed to fault the US for not producing enough evidence of dolphin mortality (para 7.161). In other places, it dismissed the relevance of evidence (Para. 7.187). Maybe a trade lawyer can explain this approach to me, but as a social scientist, the only things I don’t understand are the underlying ontology, epistemology or methodology. But besides that, I’ve got no problem with it!