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4

Splendid Isolation’s Progeny

The Intersections of Trade and Human Rights

4.1 Central Dilemma: Lack of Purposeful Correlation

Having presented in the opening segments the foundational principles of international law-making and the basic concepts of both trade and human rights norms and structures, this chapter turns to an overview of the relationship between human rights and international trade. The chapter begins by exploring the philosophical differences in the approach of the two disciplines and their structural placement in public international law in order that the reader may gain a better understanding of their commonalities. In searching for resolution of conflict, the chapter next analyzes the hierarchy of these fields under international legal principles. To prepare the reader for the particular lessons of trade’s intersection with the subjects of the chapters to follow, the final section firmly reminds governments that trade agreements alone cannot inculcate a human rights consciousness into their leadership.

4.2 Philosophical and Structural Divides

(A) Introduction

Commentators perceive a fundamental tension between international human rights law and international trade law based on their supposed commitment to different values. For example, international trade law is utilitarian—devoted to the most economically efficient outcome and to the satisfaction of market preferences—while human rights law is deontological—premised on minimum standards of treatment that recognize the moral worth of each individual.1 For example, the WTO TRIPS Agreement employs a cost-benefit approach to balance the need to encourage invention (by giving patent holders monopolistic rights) against the conflicting need to ensure wide dissemination of technology to permit fast development in the Third World and deliver lifesaving medicines to the sick (by allowing compulsory government licensing and actions against anticompetitive practices). The WTO’s SPS Agreement balances the interest in food safety against the policy of unrestricted trade by requiring solid scientific evidence to justify import restrictions.

Even so, characterizing the WTO as utilitarian and human rights law as doctrinal is far too simplistic to withstand scrutiny. Human rights law is indeed deontological, in that exploitative child labor does not become valid when the scale of economic benefits reaches a certain point—for example, by attracting foreign direct investment that otherwise would not bring its job-creating project. Torture cannot be justified under human rights treaties by the importance of the information to be obtained. But this does not mean that human rights law is immune to trade-offs, as most clearly demonstrated in the environmental protection movement. The concept of “sustainable development” itself, which is the central paradigm of the mainstream environmental protection movement, assumes that growth will continue, if for no other reason than to eliminate poverty.

One also should characterize as compromise on the part of human rights law the acceptance, and even promotion, of market systems and economic growth in democratic societies, despite the imperfections of globalization in realization of human rights goals.2 The human rights policies given priority over trade’s fundamental maxims by GATT Article XX, including health, public morals, and natural resources, put the lie to claims that trade policies cannot be normative and nonutilitarian. Hence, the purpose of this volume: to show that it is neither trade’s utilitarianism nor human rights’ humanitarianism that governments and civil society should pursue as if they were unrelated. Rather it is the utilitarianism and idealism of both, working with their synergies and strengths, that should be the focus of policy development. These are disciplines that, when approached together, can indeed make the world a better and more prosperous place.

(B) WTO as Separate Entity from UN Structure

One also is asked to accept that the WTO’s ideological placement, spinning unfettered outside the protective galaxy of the UN system, where human rights law revolves around a unifying centrality, severely handicaps trade’s ability to act with human rights motivation. To be sure, the three legs of the Bretton Woods “stool” of international economic and financial entities were established outside the firmament of the United Nations by conscious design, with the Bretton Woods entities as the private, economic arm to the public, political United Nations. Architects of post–Second World War international institutions saw great danger in the decisions by politicians following the First World War to erect high tariff barriers, manipulate exchange rates, and otherwise create the isolation that made possible the rise of demagogues amid the squalid economic conditions of the Great Depression.3 Thus, the political institutions whose charge was to secure the peace revolved around the public United Nations, while the international economic institutions of the World Bank, the IMF, and GATT would be established as private entities with a purely economic role and run by technocrats, not diplomats.4

One might also identify a critical difference in the evolution of trade and human rights rules. Within a very few years after the Second World War, the modern human rights regime had mushroomed into a comprehensive, revolutionary, holistic codification of human rights that an outside observer might characterize as burdened with unrealistically high expectations. Trade rules began with humble promises and built their foundation with small steps over fifty years of nearly continuous rounds of multilateral negotiations, each proclaiming slightly more ambitious measures to counteract the natural inclination of states to protect their national industries. In addition, because the trade rules began without an institution to house them (the WTO created in 1995 is the deferred realization of the “International Trade Organization” first proposed in 1947), the institutional framework that emerged a half century later boasted an effectiveness born of five decades of experience with administering global trade rules without an infrastructure.

To be sure, this classical view of the separation of economic institutions from public international law held little promise for integration of human rights, as reflected by the Articles of Agreement of the World Bank, which provide that loans shall be used only for “economy and efficiency and without regard to political or other non-economic influences or considerations.”5 In the early days, the Bank’s General Counsel went so far as to opine that the Bank was prohibited from compliance with UN decisions on human rights because the objectives of the International Bill of Human Rights were contradictory to the Bank’s financial and economic mandates.6 The IMF reached a similar conclusion.7

Of course, these views have dramatically changed. The World Bank’s definition of poverty is evidence of the transformation (see epigraph to Chapter 12). Yet, these early traditional views are similar to those of the GATT classicists, who hold that the WTO is a self-contained entity that human rights advocates must allow to pursue its free trade mission unburdened by other public international law, including human rights claims.8 This view was difficult to maintain even at GATT’s beginning, because it was forced to coexist with the inescapable reality that GATT’s drafters had accorded overriding importance to certain explicitly exempted human rights policies, such as protection of public health, prisoner rights, and the environment.9 Nonetheless, the private, classical view received further impetus from the failure of the International Trade Organization to receive approval, which meant that until 1995, the GATT existed as a contract instead of a treaty.10

With this isolationist structure built into their foundations, each of the economic institutions has been forced to take sometimes wrenching measures to reverse course on the role of human rights. Even so, the World Bank and the IMF have taken notable recent steps to polish their human rights reputations.11 As to the WTO, in its first decision, the Appellate Body of the Organization debunked the notion that trade treaties operate in a vacuum separate from other public international law by pointing out that “the GATT is not to be read in clinical isolation from public international law.”12 Like international human rights law, WTO law is a branch of public international law,13 which is sufficient to dismiss the classical view that the WTO is a self-contained body of law that constitutionally can ignore human rights.

The origin of the WTO and the other economic institutions in a non-UN context surely has handicapped their human rights records, but only in the sense that history has delayed their recognition of the need to come to terms with the human rights consequences of their actions. The Bretton Woods entities may no longer claim a constitutional or other legal debarment from human rights concerns.

(C) Statist WTO Structure Versus Individualistic Human Rights Regime

The WTO assumes without inquiry that a state’s titular leaders are the appropriate representatives for the state. WTO’s rules directly impose disciplines on states, so the officials who can implement these prescriptions are accepted at the WTO. The result is that any form of political or social organization is acceptable to the WTO, as well as any treatment of a state’s citizens. Many WTO Members were—and still are—communist, socialist, and even fascist. This result follows from the fact that protection of individuals is not the central focus of WTO rules, which instead regulate the conduct of states.

Human rights treaties, similarly, address actions of a state and require a state to limit its intrusion into individuals’ sphere of existence (with negative rights) as well as mandate the state to take certain actions to ensure human well-being (with positive rights). Because of the supra-sovereign nature of human rights, however, the discipline also looks to what goes on inside the state vis-à-vis individuals. Thus, as human rights concerns travel across state lines, this deterritorialization of authority over human rights oversight translates to acceptance as legitimate only those state leaders whose treatment of their citizenry accords with basic human rights norms. To be sure, the UN Charter gives sovereignty to states, but on the assumption that sovereign national authority ultimately must yield to the power of the people whom state leaders purport to represent. A critical limitation on the legitimacy of state leaders is their respect for the human rights of their civil society.14

Yet the lines drawn are not so clear. For example, the CEDAW, which aims at women’s equality, is replete with reservations—indeed, it is the most reserved-against treaty in history—that entrench women’s subordinated status. The legitimacy of the reservations is rarely, if ever, questioned. Similarly, there was nary an outcry when one of the proposed constitutions for Iraq disenfranchised women, with the world, by its tacit response, ostensibly accepting institutionalizing broadly proscribed discrimination.

4.3 Legal Hierarchy of Trade and Human Rights Norms

(A) Generally

Given the actual relationship between these fields, it is relevant to explore the legal hierarchy of human rights and trade norms in international law. That is, which should prevail in the event of conflict, which may and does occur in the cases both of silent indifference and of direct contradiction in terms? In fact, conflicts likely will intensify as the cultural heterogeneity of the WTO proceeds apace and the Third World’s reliance on trade for economic progress grows.15 Given that human rights norms are indisputably the foundational, widely shared standards of justice and right conduct, human rights norms intuitively should prevail over trade norms, which, at bottom, govern the movement of widgets across borders, not the right treatment of the individual in society.

Law is not, of course, founded on intuition. Moreover, the bases of trade laws, too, are central principles of public life, including nondiscrimination and the rule of law, that describe elemental standards of justice and underpin societal values far weightier than simple economic efficiency.16 In large part because of their intersection with a wide range of human rights, trade rules profoundly affect almost all segments of society and find relevance in almost all other rules of international law.17 Through their mandates to states of transparency, accountability, and due process,18 trade rules “require governments to have a conscience and to hold a mirror to themselves” in their treatment of civil society.19

Nonetheless, even if we could agree that human rights law occupies the higher moral rank, we cannot for this reason alone conclude that human rights law trumps trade law from a legal perspective. As a matter of international law, neither policy presumptively prevails in the event of conflict. The lack of a formal hierarchy in international law follows from its origin in the consent of states: it is a law of coordination, not subordination, because the creation of international law relies on the explicit or implicit consent of states, which are complete equals in the creation of law.20

Chapter 1 explained that one type of international law—jus cogens—governs over any other conflicting rule of international law, whether sourced in custom or treaty. At a minimum, such practices by the state as genocide, torture, slavery, and systematic racial discrimination fall into this category. A dispute settlement panel, whether convened under authority of a trade or human rights treaty, should find that such norms “trump” any conflicting international rules of a lesser status.

(B) Application of International Law’s Hierarchy to WTO Cases

As with other international treaties, WTO rules form part of the larger body of public international law: “Each new state, and each new treaty, is automatically born into” that wider corpus of law,21 which includes human rights law whether sourced in treaty or in custom. The WTC acknowledged in its first decision that the WTO “is not to be read in clinical isolation from public international law.”22 A WTO panel correctly has observed that custom applies generally to the economic relationship among Members unless a particular provision of a WTO Agreement contracts out of the custom.23

With respect to treaties, other international law norms govern the relationship among WTO Members subject to pacta tertiis. That is, the non-WTO treaties bind only WTO Members that are parties to them.24 Customary international law, on the other hand, binds states regardless of whether they have given written consent. Freedom from torture is a human right so widely accepted as a legal obligation in the practice of nations that it has become customary international law. WTO Agreements thus need not explicitly provide a “torture” exception to justify a WTO Member’s successfully pleading the custom before a WTO dispute settlement panel in defense of a violation of the Four Pillars. For some customs, the WTO could “contract out” of the custom by a later disavowal of the principle.25 Nothing in the WTO Agreements suggests that the WTO has done so with respect to any fundamental human right. Moreover, a party cannot contract out of a jus cogens norm. In the example above, given that the prohibition against torture is jus cogens, regardless of whether a particular WTO Member has signed the Convention Against Torture, no WTO Member could contract out.

Putting observation to practice, a number of WTO panels have applied rules of general international law independent of interpreting a particular WTO provision, for example, in deciding the role of amicus curiae briefs, drawing adverse inferences, and deciding a panel’s jurisdiction.26 The question must be asked, however, How does the human rights norm at issue enter the field of play? One noncontroversial instance is to aid textual interpretation. A panel may examine later treaties to give present meaning to inherently dynamic treaty terms. For example, the WTC found that the term “natural resources,” in GATT Article XX(g), is inherently evolutionary, citing to an ICJ decision as support for application in the WTO case of this general international law principle. The WTC proceeded to search current multilateral environmental treaties to justify its conclusion that the term includes living resources and not solely the mineral products that the GATT’s drafters had in mind in 1947.27

For other treaties to find relevance in defining WTO terms, they must reflect the “common intentions” of the Members.28 These other sources of international law, whether custom, general principles, or other treaties, need not explicitly bind all WTO Members to give meaning to WTO Agreement provisions, but all WTO Members must at least implicitly tolerate the other source (it must be “applicable in the relations” among WTO Members).29 With respect to customary human rights law of a peremptory nature, WTO Members are bound; if the human rights norm is not jus cogens, WTO Members are bound unless a WTO Agreement has opted out of such custom—either explicitly (rare) or by adoption of a later in time, clearly conflicting provision (discussed in section 7.5(B) in respect to the Precautionary Principle).

The Vienna Convention recognizes in Article 30(3) a possible additional test to resolve conflict between two rules of international law. Because all such rules have the same status, the later in time—lex posterior—overrules an earlier expression of state consent. Major difficulties nonetheless exist in applying lex posterior to international law in general and in particular to the international human rights and trade norms addressed in this book. States periodically revise both human rights law and trade law through treaties that both confirm prior norms and either expand them or provide detail as to particular aspects.30 In these circumstances, deciding which norm was created later in time is fraught with difficulty, making lex posterior an interpretive principle of lessened value. This is only problematic with respect to clearly conflicting norms, however, because another rule of interpretation urges that rules be constructed as consistent with each other whenever possible.

One final Vienna Convention rule may be relevant to resolve conflict. Even though an established custom can overcome an earlier conflicting treaty provision, or vice versa, the earlier provision still may prevail if it qualifies as lex specialis, a specific rule on the subject as compared with a more general norm.31 As compared with general principles of international law, the detailed and arcane rules of the GATT/WTO may in particular circumstances qualify as lex specialis, although that fact certainly makes no case for the proposition that the WTO is a self-contained system outside the general corpus of public international law.

(C) Beyond Textual Interpretation?

At the other extreme from using non-WTO law to aid textual interpretation, a WTO dispute settlement panel has no jurisdiction to entertain a claim that arises from a human rights treaty or norm, such as an EU complaint against U.S. treatment of terrorist suspects whose gravamen is the Convention on Torture.32 The difficult remaining question is whether a panel may use the Convention Against Torture and other human rights norms only to interpret WTO provisions—for example, the Public Morals Clause of GATT’s General Exceptions—or whether a country, say France, successfully could plead the Convention Against Torture as a defense, for example, to an import ban on U.S. beef. If, in applying the Vienna Convention rules for determining the hierarchy of international legal norms, the human rights law occupies the higher plane, the answer should be in the affirmative.

For the human rights addressed in this volume that intersect with trade’s legal regime and trump trade law, however, the question may be unnecessary. In these cases, the breadth of the human rights policies addressed in the General Exceptions of both the GATT and the GATS, as well as in other provisions of WTO Agreements that are in the nature of exceptions,33 human rights law is the natural and often only other international law relevant to interpretation of the noneconomic policy at issue. This fact will stand out repeatedly as this volume interrogates the intersections of human rights and trade law.

One example may be instructive. If France justifies its violation of GATT’s MFN Clause based on the necessity to protect “public morals” under Article XX(a) of the GATT, a WTO dispute settlement panel should take notice of the jus cogens status of torture in deciding whether public morality is involved. U.S.-Gambling is a case involving the meaning of the Public Morals Clause in the WTO’s GATS34 where the United States had banned cross-border supply of gambling services. The WTC accepted the initial panel’s definition of public morals as referring to “standards of right and wrong conduct maintained by or on behalf of a community or nation.” The panel recognized that “Members should be given some scope to define and apply for themselves the concepts of ‘public morals’ and ‘public order’ in their respective territories.” The panel acknowledged that Members would find interpretation of the terms to be a sensitive undertaking and that the concepts will “vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical and religious values.”

Nonetheless, in deciding whether U.S. limitations on gambling fell within the range of policies protected by the Public Morals Clause, the panel turned to other international law, including treaties and the common practice of other states.35 The panel implicitly recognized that resorting solely to the particular customs and cultures of one of the WTO’s diverse 150-plus Members might create an unfettered exception to GATT’s Four Pillars. The panel’s search for other international rights benchmarks to corral the broad Public Morals Clause opens the dispute panel door to human rights norms to interpret a standard that inherently sounds in the rights of the individual.36

(D) Does GATT Article XX Require a Trade Nexus?

An additional question is whether the WTO panel’s response will depend on whether the targeted practice (routine torture of prisoners) must affect trade between the Members to justify a restrictive border measure (the ban on beef imports).37 In most cases, banning beef imports from Country A bears a relatively distant relationship to Country A’s treatment of its prisoners. The trade nexus is weaker, for example, than a ban on radios made with prison labor, a border measure expressly permitted by GATT Article XX(e). On one level, the nexus issue implicates Article XX(a)’s “Necessity Test,” discussed in sections 2.4 and 6.5(B) and (C). From this perspective, the nexus/necessity question is how effective the beef ban must be in preventing torture by Country A’s leaders: the WTC has found that the measure of effectiveness depends on the importance of the value that the trade measure seeks to achieve. If the value is important, the border measure need only make a contribution to achieving its end; if low in priority, its effectiveness must be closer to indispensable in preventing the targeted action.38

If the ban was imposed by Country A’s principal importer of beef, the restriction might well meet even the strictest end of this continuum. If the measure seeks to prevent a jus cogens human rights violation (torture), its burden in meeting the Necessity Test should be no greater than a ban aimed at protecting against human deaths from cancer (EC-Asbestos).39

The trade nexus question also invokes the “Relationship Test,” which substitutes for the Necessity Test in the GATT Article XX exceptions for products of prison labor (Paragraph (e)) and for exhaustible natural resources (Paragraph (g)). Again, the test of how close the measure’s nexus/relationship to trade must be should respond to the importance of the measure’s ends in a common system of values. As when one views the nexus to trade through the lens of the Necessity Test, pursuit of human rights compliance favors a less demanding standard in a relationship/nexus context than an attempt to achieve solely economic objectives. In the absence of an explicit “Trade Nexus Test” in Article XX and given the importance of human rights in a common system of values, human rights policies should fare well in the balance with GATT’s Four Pillars. It ought not to matter whether a panel examines the trade nexus of a border measure undertaken for human rights purposes through the lens of the Necessity or Relationship tests.

Regional FTAs involving the United States consistently include an explicit Trade Nexus Test to introduce a human rights defense. The side agreements to the NAFTA on environment and labor rights require allegation that the violation is “trade-related” (environment) or involves sectors that produce goods or services “traded between the territories of the Parties.” Explicit Trade Nexus tests for worker rights and environmental protection in U.S. FTAs continue today.40 Despite differences in structure, the absence of an explicit Trade Nexus Test in GATT Article XX’s exceptions for environmental, labor, and other human rights measures may be one factor in arguing that no trade nexus dimension exists beyond those included in the Necessity and Relationship tests.41

(E) Preventing Conflict

In light of the complexity of finding a proper hierarchy among sources of international law, we may ask what positive steps states have taken in advance to avoid these conflicts. The surest way, of course, to avoid conflict, whether between provisions in a contract or norms in a treaty that are likely to intersect is to anticipate the situations that could cause conflict and describe in the contract (or legislation or treaty) which in fact will take priority.

To a limited extent, the GATT began that process in 1947 with Article XX, which provides that certain human rights objectives—those involving public health and welfare—can be accorded precedence by states over global trade rules if the state meets certain conditions. GATT’s drafters did not explicitly mention “human rights,” but several provisions of Article XX sound in human rights subjects, from guarding public morals, to protecting public health, to banning products of prison labor, to conserving exhaustible natural resources. States may under certain circumstances restrict importation of goods if the state acts on the basis of one of these listed purposes.

From the human rights side, Article 103 of the UN Charter gives that document primacy over any conflicting other international obligation of a UN Member. The Charter obligates Members “to take joint and separate action” in cooperation with the United Nations to promote human rights and establishes objectives that run the gamut of human rights, including higher living standards and freedom from racial and sexual discrimination. The Charter does not itself resolve the hierarchy question, however, because the Charter leaves specific rules to the Universal Declaration and to human rights treaties.

Both the United Nations and the WTO thus recognize the potential for conflict, but neither attempts specific solutions if conflict occurs. If the contract itself—here the treaty—does not clearly resolve the conflict, how should we attempt to reconcile conflicting treaties? That we are faced with an “equal legitimacy” of trade and human rights norms places a premium on purposeful coordination of both sets of norms with those of the other field.42 The primary sources of international law are treaty and custom, the former of which binds only those who consent to be bound by signing the treaty, the latter binding on all who do not expressly contract out of the custom.

As we examine the many aspects of the human rights and trade intersection in later chapters, it will be useful to identify which human rights norms have been so generally accepted as to constitute customary international law. Some are clear: for example, genocide, slavery, systematic racial discrimination, and torture.43 Others, such as a living wage or freedom of association, trace their source solely to human rights treaties, while political philosophy underlies some concepts. Even if the human rights norm in question clearly is customary, and thus binds all, resolution of conflicts in actual cases usually requires additional steps.

We will ask repeatedly in this volume whether the intersection between trade and human rights must, of necessity, be characterized by conflict and indifference, as well as the consequences for the success of policies in both fields if the answer is yes.

4.4 Indispensable Role of Government

As Professor Powell has observed, trade rules cannot “directly inject rules-based governance into a country.” Observance of human rights for their citizens is an essential and irreplaceable role of national governments.44 As the leading advocate of “fair trade,” Oxfam, has succinctly observed, “Trade has the power to create opportunities and support livelihoods; and it has the power to destroy them.”45

Negotiators can structure trade agreements to create the economic opportunities sought, but national governments will succeed in creating societies committed to the rule of law and human rights in general only if they are prepared to intercede in the market to shape the effects of the economic growth created by trade.46 Trade, and capitalism in general, create the menu for improving social benefits, but both are inherently unstable and insensitive to unfairness. Without oversight and regulation, governments will squander trade’s opportunities for the advancement of human rights.47 This thesis is in tension with one of globalization’s premises: diminished government presence in the daily lives of civil society through privatization of government-owned infrastructure and lessened regulation.

In all cases, the essential concern with the hierarchy is the enjoyment of trade benefits without ignoring or trumping human rights norms. In that regard, it is important to emphasize that the WTO does not come into the world in a vacuum; there are existing norms—some domestic and some international—in the world that it inhabits. Thus, the agreements made pursuant to the WTO not only have to conform with trade’s premises, but also to those other domestic and international norms with which they coexist. This is not a novel concept. In Hartford Fire Insurance Co. v. California, the U.S. Supreme Court confronted the issue of whether, under international law, U.S. antitrust law could reach the conduct (conspiracy to set rates) of London reinsurance companies that had adverse effects in the United States. Although that case presented an issue of jurisdiction, it is instructive. The conduct in which the insurance companies engaged was legal in London, but it had effects in the United States where the same conduct would be illegal. The English norms were not in direct conflict with the U.S. norms; the insurance companies could have complied with both. They chose not to do so. Rather, they purposely opted to act the way they did, which breached U.S. antitrust law. Thus, the Court concluded, U.S. courts could, consistent with international law, exercise jurisdiction over the acts carried out in London, and the insurance companies were found liable.

This scenario is similar to the trade/human rights tension. Entities can enter into agreements pursuant to the WTO; yet they also must comply with human rights norms. If they enter into agreements that do breach those norms, then the entity that breaches the norm is held responsible to all its obligations.