THE INTERFACE BETWEEN INTERNATIONAL TRADE OBLIGATION AND PRO

In recent years, the linkage of human rights standards and trade measures has become a much discussed topic in international relations. Examples of human rights issues interfering with WTO principles and obligations are numerous. For instance, the right to health was encroached upon by the Thai Cigarettes case, the Hormone Beef case and the Asbestos case, as well as by the TRIPS agreement which obstruct poor people from access to affordable medicine, namely generic drugs, which are produced, imported or sold without respecting existing intellectual property rights as protected under the TRIPS agreement. Furthermore, human rights policies of WTO members are also impaired by WTO principles and obligations. The Burma law, enacted by the US State of Massachusetts to pressure Burma to improve its human rights conditions through restrictions of economic relations with Burma was at issue before the WTO, because it violated the nondiscrimination principle enshrined in the WTO Agreement on Government Procurement (GPA). The most controversial question is, whether trade-related measures are a feasible instrument to improve the human rights situation in the target country. From an ethical point of view, trade measures, e.g. the prohibition of the import of goods produced with child labor, seem to be justified. Whereas from an economic standpoint, the effect of such trade sanctions often harms the people in the target country more than it actually helps improve the human rights situation. In the WTO, the issue reflects a conflict of interests between industrialized and developing countries. While industrialized countries claim a need for a social clause in order to protect human rights and social standards, and avoid social dumping, developing countries fear that such demands are merely an excuse for industrialized countries to take measures to protect their national job market. From a legal point of view, discussion on the possibility of adopting trade-related human rights measures under the current WTO legal framework, or on necessary and feasible amendments, is again overshadowed by the underlying conflict of interests between industrialized and developing countries.

 

 

The goal of the present paper is to discuss the trade and human rights linkage from not only a legal, but also political and economic perspective, and to propose some feasible approaches to eventually achieve the goal of ‘improving standards of living’ for everyone. To this end, not only is the human rights situation, but also the economic well-being crucial. Firstly, I will introduce the kind of trade related human rights measures that exist. Secondly, I will describe the legal framework of the WTO and analyze under what conditions trade-related human rights measures are permitted under the current legal framework. Thirdly, I will examine whether trade-related human rights measures are a feasible instrument for improving the human rights situation. This approach is not only questionable from an economic point of view, but also corresponds with the WTO position that it is not the right forum to address human rights problems. Lastly, I will explore the trade and human rights discussions in the UN framework, which propose a ‘human rights approach’ to international trade and investment. I will describe some measures suggested by those institutions as a feasible way to improve the ‘human rights records’ of the WTO, and the limitations of the WTO in addressing this issue.

 

 

In recent years, states increasingly have adopted trade measures to address human rights concerns. For the purpose of this paper, trade measures are to be interpreted broadly to include all measures that affect international trade and thus potentially conflict with WTO agreements. These are not only trade measures strictu sensu, but also internal regulations, which affect trans-national trade. Human rights are also to be understood generally to encompass not only the rights contained in the ‘International Bill of Rights,’ but also basic social standards, as protected by the International Labour Organization (ILO). The goal of trade-related human rights measures is to improve the human rights situation in the target country through the prohibition or restriction of economic relations. There are a great variety of trade-related human rights measures. Measures can either be imposed upon a good related to a specific human rights violation (e.g. child labor), or they can generally address the human rights situation in the target state.

 

Trade restrictions can either be authorized as economic sanctions by the UN Security Council within the system of collective security under Chapter VII of the UN Charter, or they can be imposed unilaterally. Examples of economic sanctions imposed by the UN Security Council are sanctions issued against Iraq, Sierra Leone, or Somalia.Gross violations of human rights were specifically targeted by the sanctions against Haiti, Rwanda, and Congo. Under WTO law, such sanctions would qualify as discriminatory trade restrictions, which are prohibited according to Art. I and XI GATT. They are however covered by Art. XXI (c) GATT, which allows deviating from GATT obligations, if in pursuance of a Member State’s obligations under the UN Charter.

 

 The other possibility is that trade-related human rights measures are imposed unilaterally. This can be a unilateral trade embargo against a country where severe human rights violations take place.  In this case, the general human rights situation in a country is addressed. An example for such a trade related human rights measure is the Burma law, which the State of Massachusetts enacted in 1996 as a reaction to the long history of violence and severe human rights violations by the Burmese Government (now Myanmar).The law restricted the procurement of goods or services by Massachusetts public authorities from any person--whether US or foreign national— doing business with Myanmar. The law called for a 10 percent surcharge to bids from those companies. This restriction on government procurement violated various provisions of the WTO Government Procurement Agreement (GPA).The EC and Japan brought the case before the WTO;however, the US Supreme Court struck down the Massachusetts law in June 2000 as unconstitutional, in violation of the federal exclusive powers to regulate foreign affairs.

 

Trade measures can also involve specific import bans against products linked to the targeted human rights violation, for instance an import ban for products produced by children, or by workers without basic labor or social rights. Trade-restrictive measures may also be used to protect human rights in the country imposing the restriction, e.g. the import ban of cigarettes, hormone beef or asbestos, as measures to protect public health — one aspect of the right to health.

 

The common denominator of these cases is that the use of trade measures is linked to human rights considerations. The legal problem is, however, that international human rights law and international trade law have ‘developed in splendid isolation’,even though both sets of rules were created roughly at the same time, and pursue the same goal, namely ‘higher standards of living’ for everyone. The convergence of these areas of law and the potential conflicts in legal obligations stemming from the WTO and human rights instruments have only become apparent with increasing globalization and interdependence on all levels, i.e. globalizing markets, but also the globalizing information and civil society, which points its fingers on the issues.Although international human rights instruments generally ensure compliance through monitoring and in some cases through individual complaint mechanisms, there are no strong enforcement measures, let alone trade measures, to make states comply with international standards. Thus states use trade-sanctions to enforce human rights violations. As the measures to enforce human rights are trade-related measures, they have to comply with

WTO standards, yet neither the WTO nor the former GATT mentions human rights.

 

The rules of the WTO aim at the creation of a stable and predictable trading system, which consists of fair and transparent trade rules for all participants in international trade. The areas covered are trade with goods and services and also intellectual property. According to the theory of comparative advantage, the underlying economic model of the WTO, each country should produce what it can do best, and trade that good with the products other countries are able to produce best. With the profit from exports, countries can buy goods that they cannot reasonably produce themselves. This increases trade and promotes the economic performance of all Member States, which eventually raises the standard of living, and ensures full employment and the growth of real income. Following this economic theory, all countries participating in the international trading system will be better off.

 

The rules of the WTO aim at the reduction of barriers to trade. Besides periodic tariff negotiations to lower tariffs, any other barriers to trade, such as quotas, or import and export restrictions are prohibited.National trade regulations have to comply with GATT principles. The core principle is the principle of non-discrimination, which is enshrined in all WTO Agreements and has two components. According to the principle of most-favored-nations treatment, goods from different countries must be accorded the same treatment at the border, when entering the country. Following the principle of national treatment, foreign products must be accorded the same treatment as national products once they are in the country. The GATT also contains rules to avoid disguised trade restrictions, i.e. national rules, non-discriminatory on the surface, which constitute a de facto discrimination of foreign products. The most important examples of these are technical standards and sanitary standards, which have to comply with the Agreement on Technical Barriers to Trade (TBT Agreement) and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).The principle of non discrimination applies to ‘like products,’ meaning products with the same properties, nature and quality, function, or end-use in the market.

 

The GATT provides for some exceptions, which allow states to deviate from the WTO principles in order to pursue specifically defined political interests.The possibilities for states to restrict trade in order to pursue such interests are limited, and strict requirements contained in the exception clauses need to be satisfied. The reason for the narrow scope of possible exceptions is that Member States often try to justify protectionist measures with the need to protect non-economic concerns.

 

Art. XX GATT is the general exception clause, which lists specific public policy reasons that justify the deviation of GATT principles. Those relevant for trade-related human rights measures are the protection of public morals (para. a), the protection of human, animal or plant life or health (para. b), measures relating to prison labor (para. e), and the conservation of exhaustible natural resources (para. g). In addition to fulfilling the requirements of the specific policy goals, the protective measure has to fulfill the general requirements of Art. XX (‘chapeau’): it must comply with the principle of non-discrimination, and must not constitute a disguised restriction to international trade.

 

If trade-related human rights measures are imposed unilaterally on a country, such measures have to comply with the rules of the GATT. Under Art. I of the GATT, providing for most-favored nations treatment, trade measures must not discriminate between like products from different countries. A trade embargo for products from a specific country will violate Art. I, since the human rights situation does usually not influence the quality of the products. An import ban on a specific product, e.g. goods produced with child labor or under very hard working conditions in violation of basic working standards, violates Art. XI, which prohibits all trade restrictions but tariffs. An alternative to an import restriction would be to allow the import, but impose a specific tax on either all products from a specific country or on all products produced under certain conditions. This would be a violation of the national treatment principle in Art. III GATT, as a similar tax is not imposed on like national products.

 

Unilateral trade embargoes may be justified by the general policy exception of Art. XX GATT. As states are fairly inventive in finding 'non-economic reasons' as excuses for protectionist measures, the difficult task of the WTO Dispute Settlement institutions is to examine whether the measure aims to genuinely protect the non-economic concern or rather to protect the national industry. States have often tried to fit trade-related measures under Art. XX to protect certain public policy goals. So far this was mainly done for environmental or public health measures. In order to keep up with GATT principles, the Panels and Appellate Body have always interpreted Art. XX very strictly, which led to the WTO’s reputation of failing to respect human rights, environmental, or social standards.

 

The approach of the Dispute Settlement institutions of recognizing and balancing these non-trade aspects with WTO law can provide insight on how the WTO may deal with possible trade-related human rights measures. In general, the panel did not reject environmental or public health measures per se, but rejected the way the measures were formulated or applied. Several legal concepts provided under the GATT, as written in the text of the WTO agreements, and further developed by the Panel and Appellate Body practice pose restrictions for trade-related human rights measures. Besides the strict interpretation of the criteria of Art. XX GATT, the most important questions are whether a state may treat products differently depending on the process and production methods

(PPMs), whether the national standard may be applied extraterritorially, and what the relevant international human rights standard is.

 

Art. XX and similar provisions in other WTO agreements, such as Art. XXIII GPA does not contain a human rights or social clause. Some human rights violations could however be covered by the existing specific exceptions. The legal bases for the implementation of social or human rights standards through trade measures could be the public morals exception (para. a), the protection of human, animal or plant life or health exception (para. b), the prison labor exception (para. e) or measures relating to the conservation of exhaustible natural resources (para. g). Whereas paras. (a) And (e) have hardly been applied or mentioned in any reports of the Dispute Settlement institutions, paras. (b) and (g) have often been invoked to justify environmental or public health measures.

 

Art. XX para. (e) allows measures relating to the products of prison labor, and covers measures directed at goods produced by prison labor. The exception could probably be extended to workers’ situations, which are similar to enslavement. Another potential legal basis is the public morals exception contained in para (a) which could be interpreted as prohibiting e.g. pornographic material produced under the serious mistreatment of women or even children. Other gross violations of human rights could similarly be covered by para. (a). Both exceptions could serve as a justification for trade restrictions on goods related to a violation of these standards.

 

Of relevance for the human rights protection could also be Art. XX para. (b) which allows measures necessary to protect human life and health. This exception could be used to justify public health measures, which are an aspect of the human rights to health. One example is the Asbestos case, where the import ban of asbestos containing substances was a justified measure to protect public health. Similarly, measures to prevent extremely dangerous working conditions could be covered by para (b).The exception for the protection of living and non-living natural resources (para. (g)) could probably be used to justify measures to protect the right to food.

 

Art. XX (a) and (b) contain a necessity test that requires that measures pass a ‘weighting and balancing test,’ which evaluates a series of factors to determine whether a measure is necessary to achieve the intended goal. The factors evaluated include the importance of the interest or value that is protected by the measure; the extent to which the measure contributes to the realization of the intended goal; and the trade impact of the challenged measure. Measures that are consistent with WTO rules are preferable, and if such measures are not available, the least trade restrictive means possible to reach the goal must be applied. What is questionable is whether an import restriction is the least restrictive trade measure to achieve e.g. the goal of fighting child labor. An import ban will probably not only worsen the situation of the children concerned, but perhaps is not the least trade restrictive measure, as other means, such as product labeling, may be sufficient and more effective.

 

If the trade-related human rights measures fall under one of the specific exceptions, they must fulfill the requirements of the chapeau of Art. XX. Thus, the measure must not be applied in a manner which constitutes an arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or which forms a disguised restriction to international trade. The purpose of the requirements in the chapeau is to avoid the abuse of the exceptions of Art. XX. Demonstrating that the requirements of the chapeau have been fulfilled, is generally a difficult task, and existing case law regarding environmental matters and public health concerns shows that the Dispute Settlement institutions have so far been quite restrictive in their jurisprudence. General sanctions against a country for its human rights violations will most likely be qualified as an arbitrary and unjustifiable discrimination. For example, the sanctions against Burma would be justified for other countries where a similar human rights situation exists, and therefore, are arbitrary and discriminatory. Moreover, sanctions against products produced in disregard of basic social standards will very likely be qualified as a disguised trade restriction, as the purpose is very often to protect the national industries.

 

Human rights are often violated through working conditions. In WTO language, this would be a process and production method (PPM). Examples are child labor or workers working in slave-like situations or without enjoying basic worker’s rights. A method to fight such conditions is through import restrictions on products manufactured under such conditions. This is done through the prescription that imported goods be produced in a way that satisfies national or international production/process norms.

 

According to GATT jurisprudence, PPMs violate the principle of non-discrimination, which applies to ‘like products.’ The likeness of a product is determined through the quality, function, or end-use in the market. As the process and production method do not usually influence the quality of the product, a different treatment due to PPMs is not allowed, if the quality of a product is the same. This doctrine was established when environmental measures were at stake. In the Tuna Dolphin II case, a differentiation between tuna which was caught with dolphin excluding devices and tuna which was caught without protecting dolphins, was prohibited, as there was no different quality of the products. A similar situation occurs concerning child labor or the granting of basic labor standards to workers: a state, who wants to prohibit the import of products produced with child labor through an import ban or an additional tax, violates Art. III or XI GATT, as there is no difference in quality, function or end-use between e.g. a sneaker produced by an adult worker and a child.

 

Some commentators argue that Art. XX (e) GATT would suggest that PPMs are allowed, as measures relating to the products of prison labor are a valid exception, and this standard constitutes a PPM standard, which does not influence the product properties. The historical context however suggests that the object and purpose of this provision is not a humanitarian one, i.e. to prohibit prison labor in general, but to protect competition of national products produced with regular work force, which is of course more expensive than products produced with prison labor. Others conclude from Art. XX (e) GATT ad minore ad majus that if the protection of competition is a legitimate goal, then a fortiori the protection of human rights must be recognized.So far, this provision has never been invoked or dealt with by the Dispute Settlement Body. However, in the

US Shrimp case, the Appellate Body stated in a footnote, that the provision does not allow Member States to make the import of products conditional on the exporting country’ policy on prison labor, hence the provision would very likely be interpreted restrictively.

 

Generally, Art. XX GATT allows a state to protect the non-economic concerns only in its own country. This means that e.g. measures to protect public health in the country imposing the measure would be allowed under the WTO rules. An example for this is the EC - Asbestos case, where the goal of the import ban for asbestos containing substances was the protection of the health of workers in France. However, many trade-related human rights measures, like the Burma law, or an import restriction to avoid child labor, concern human rights violations in the target country.

 

The WTO Dispute Settlement institutions established jurisprudence that is fairly restrictive to extraterritorial measures. The US – Tuna case I stated that measures with extraterritorial effects are prohibited, as they would allow Member States to unilaterally determine the life and health policies other Member States have to adopt, to enjoy their rights under the GATT agreement. In Tuna Dolphin II, the Panel recognized the application of a national standard extraterritorially in principle, but the measure was considered too strict, and thus in violation of criteria set forth under Art. XX (b) and (g), as it forced other countries to adopt the US policy, but did not recognize other forms of protecting dolphins.In the Turtle Shrimp case, the conservation measure for sea turtles was accepted, as there was at least a potential territorial effect, because sea turtles are a migratory species. However, it did not fulfill the criteria of the chapeau of Art. XX, as the conservation measure was again too restrictive. This jurisprudence is consistent, because it addresses the concern of the Dispute Settlement institutions in preventing states from using trade-restrictive measures to force other WTO Members to apply the imposing state’s national standards, which may make a product more expensive. Similar concepts would most likely be applied, if Member States tried to force other states to implement certain health, social, and/or labor standards.

 

Looking at the territorial scope of human rights obligations, we have a similar coverage. States human rights obligations have to be granted to all persons present in a country, but there is generally no obligation to promote or protect human rights extraterritorially, i.e. to enact laws, which have effect beyond one’s national jurisdiction. Thus, the prohibition of child labor is applicable for all children on the territory of the Member State. The extraterritorial application of national laws is also problematic under general international law, as it interferes with the sovereignty of other countries.

 

Some human rights conventions contain however a more generalized obligation to promote human rights through international cooperation. The UN Declaration on the Right to Development contains even an explicit obligation to promote human rights on the international level, which means that it is more focused on international cooperation and the work of international organizations. One possible interpretation of this is that states have an obligation to consider the promotion of human rights when acting in international organizations, such as the WTO. However, this does not authorize the enforcement of national laws extraterritorially, which violates the national sovereignty of other states.

 

 

Closely related to the question of extraterritorial application is what standard of human rights to apply when trade-related human rights measures are adopted. This may be the national or the international human rights standard. As the extraterritoriality debate above has shown, it will have to be the international human rights standard, which has to be applied, if at all. Yet, the problem is to define the applicable human rights standards. Although all WTO Member States have ratified at least one human rights treaty, not all WTO Members are parties to the same conventions.

 

The exact scope of the ‘international human rights standard’ is a disputed subject between human rights lawyers as well. The determination is however necessary to analyze the claim that the WTO endangers or ignores human rights. As those discussions usually occur in the context of industrialized country’s measures against the human rights situation in developing countries, we have to examine the universal human rights standard. The human rights system of the UN consists of the Universal Declaration of Human Rights 1948 and the two 1966 UN Covenants, which today comprise the 'International Bill of Rights.' In addition, there are a number of specialized UN conventions protecting the rights of especially vulnerable groups, such as women or children.

 

Although all human rights are recognized as being equal, interdependent and indivisible,meaning that all human rights are equally important, there is a difference de facto. There is a clear distinction between civil and political rights on the one hand, and economic, social and cultural rights on the other hand, and also within those groups. There are different levels of obligations, a broad leeway for states to implement their human rights obligations, and different means of enforcement.

 

Although all states are parties to at least one human rights convention, and bound by the customary international law principles of the Universal Declaration on Human Rights, all States have slightly different obligations. Human rights may be restricted through reservations to human rights treaties, which are often quite far-reaching. In addition, the treaties themselves allow for the restriction of most human rights in states of emergencies. Further, many human rights provisions have a built-in exception that permits the restriction of the rights where necessary for the protection of certain public policy interests. Furthermore, the enjoyment of human rights may be restricted by other peoples’ enjoyment of human rights. For example, the freedom of speech is limited by the right to privacy and personal integrity of another person. The criteria for balancing the scope of both rights is the principle of proportionality.

 

In addition, the degree of states’ obligations varies, and has to be determined on the basis of each individual human right. The ‘International Bill of Rights’ contains the obligations to respect, protect and promote human rights. There is a clear distinction in state obligations between 1st generation (civil and political rights) and 2nd generation (economic, social and cultural rights) rights in terms of obligation to implement. States have an obligation to refrain from interfering with civil and political rights, while states must take positive action to grant economic, social and cultural rights in a progressive manner. Also important is that the measures states must take to implement specific human rights are generally not prescribed by the human rights instruments, but states have considerable leeway in implementing different rights.

 

Another crucial difference is the various methods of enforcing human rights. Whereas all states are obliged to implement their human rights obligations, the monitoring of compliance is different for civil and political rights and economic, social and cultural rights. All human rights instruments provide for periodic state reports, where states describe the human rights situation and the steps needed to implement those obligations. The reports are then examined by a committee and discussed with the state concerned. Instead of using an enforcement mechanism, the method is to monitor implementation and raise awareness for human rights, with the expectation that the state will improve the situation in order to avoid similar complaints on the next report.

 

Regarding the enforcement of human rights, the main way to ensure the observance of human rights standards is through state reporting, and monitoring, since changes to Member States’ legal systems through awareness-raising has in the long run been considered to be more appropriate than sanctioning individual violations. If the human rights community wanted the enforcement of standards through trade restrictions, this would have been established through the existing human rights instruments,68 not in an entirely different organization - whose task is to promote fair trade. Whereas Art. XXI GATT permits the enforcement of gross human rights violations through economic sanctions enacted by the UN Security Council, the possibility to enforce human rights is fairly limited under any other GATT exception. It is doubtful whether the WTO should be more responsive to trade-related human rights measures, since this would mean that Member States could unilaterally determine what human right standard to apply. Further more, this would most likely be a one-way enforcement of human rights, as developing countries do not usually have the economic strength to effectively make use of the possibilities under the Dispute Settlement Understanding (DSU) to enforce their rights. Multilateral human rights action seems more convincing, as it is more impartial and credible than unilateral action, which is often guided by political motives rather than true human rights concerns.

 

A technical question is whether the Dispute Settlement Understanding (DSU) allows applying international law resources other than WTO law. According to Art. 3.2 of the DSU, the Dispute Settlement institutions’ jurisdiction is limited to the clarification of the existing provisions of the WTO agreements, which may be interpreted in accordance with the customary rules of interpretation of international law, as provided for in the Vienna Convention on the Law of Treaties. Unclear is, in how far the Panels and the Appellate Body have jurisdiction to apply other international law obligations of the Member States, and the practice has so far been restrictive in applying other sources of international law.

 

In some cases, the WTO agreements explicitly recognize extra-WTO legal resources. The

Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and the Agreement on Technical Barriers to Trade (TBT Agreement) apply the Codex Alimentarius as the binding standard. The Codex Alimentarius is a non-binding instrument that contains standards for producing and processing food. The standard is one of the accepted guidelines for technical, sanitary, as well as Phytosanitary standards permitted under the SPS and TBT Agreement. Apart from explicit references in the WTO Agreements, the kind of international standards of relevance is questionable. In the US Shrimp case, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES Convention) was used as reference for determining whether sea turtles are an ‘exhaustible natural resource.

 

Although some commentators criticize that the WTO applies international sources selectively and unequally, i.e. is restrictive and does not recognize e.g. human rights instruments, the difference between the just mentioned standards and the human rights standards is that the Codex Alimentarius as well as the CITES Convention contain clear obligations, and a detailed list of recognized items protected by the convention. This makes the application of those instruments and the use for interpretation much easier than the standards of the human rights conventions, which do not contain clearly formulated and explicit standards.

 

The discussion on the relationship between trade and human rights reflects the conflict of interest between industrialized and developing countries. The divergent views are also the cause for the lack of agreement as to how to address the issue properly within the WTO. There are various reasons why a state decides to adopt trade measures to enforce human rights. From an ethical point of view, it seems justified that a state prohibits the import of products produced with child labor or interrupts economic relations with countries that commit severe human rights violations, in order to avoid supporting the regime. The true motives of such allegedly selfless trade measures are however very often economic or political reasons and human rights concerns many times merely masquerade measures that serve other goals.

 

Political interests that industrialized countries pursue through human rights measures are two-fold. On the one hand, there is the true human rights concern, i.e. the conviction that child labor is bad; that workers should enjoy basic labor standards, and/or that a regime like the Burmese government should not be supported. Such concerns are also endorsed by labor unions and NGOs. On the other hand, there is the interest to protect national industries, which is also backed by labor unions. Industrialized countries are afraid that by ‘social dumping’ their products become uncompetitive with respect to developing countries’ products, due to higher production costs resulting from higher wages and social standards. As a result, the labor standards and wages will have to be lowered. In addition, their work places and standards are endangered through cheaper labor conditions in other countries, which might form an incentive for companies to move the production there. As there is no other possibility to effectively enforce human rights and labor standards, this should be done through trade measures. If trade-related human rights measures were prohibited by the WTO system, the world trading system would punish countries with high social and human rights standards.

 

The developing countries arguments are that low labor costs and social standards are their competitive advantage. The claim from developed countries for higher human rights and social standards is merely a hidden form of protectionism and aims to decrease the competitive advantage of developing countries. What developing countries need is economic development which leads to a higher income and produces a positive effect on the standard of living and enjoyment of human rights. The imposition of human rights standards from the outside through trade measures hampers the human rights situation more than it helps, and hinders economic development.

 

From an economic standpoint, two questions need to be addressed. The first question is, whether and to what extent the granting of certain minimum social standards or human rights standards and international trade— i.e. the competitiveness of products on the international market— relate to each other. Various economic studies show that the mutual impacts are not as strong as asserted. A study from Hermann Sautter finds that the actual increase in labor costs, if social standards are met, forms an insignificant part of the overall production costs, which will hardly influence the competitiveness of the products on the international market. Although products from low-wage countries may be cheaper than products from high-wage countries, they only count for a small portion of total imports of industrialized countries. These studies conclude that the impact of lower social standards in developing countries on the wages and working conditions in industrialized countries is less than proponents of the trade and social standards connection like to assert.

 

Another argument advanced by industrialized countries is that foreign investment is attracted by lower social standards, which results in loss of jobs in industrialized countries. Neither is this argument supported by studies. The level of wages and social standards does not seem to be the only decisive factor for companies to move production to low level standard countries. Other factors such as the political stability, infrastructure, legal certainty, as well as the education of workers are as important for an investment decision. As higher social and working standard are conducive to the political stability and security in a country, foreign investors are likely to accept higher standards and wages, and also grant such standards to their workers in order to enhance productivity and satisfaction of their employees.

 

This leads us to the second question, whether trade-measures are actually a feasible instrument to enforce human rights standards. Experience has shown that trade-related human rights measures aimed at changing human rights policies often do not have their intended effect and, on the contrary, aggravate the situation. For example, general economic embargos usually harm the population of the target country by reducing the supply of their economic needs, whereas the political elite, who is responsible for the violations, maintains the necessary monetary resources and ways to overcome such embargoes. A different example is the restriction of the import of goods produced by child labor. This trade-restrictive measure ideally leads to a reduction in child labor; however, in practice there are few alternatives to sending children to work, which helps to feed the family, or finance schooling for other children of the family. Thus such measures, if unaccompanied by suitable schooling programs including stipends, can lead to more poverty in the target country.

 

Another aspect is that social and human rights conditions can be raised by international trade,therefore, trade sanctions are counter-productive. Through increased exports, the economic welfareof developing countries and standard of living will rise. Jobs provided for by foreign investors arean alternative to no jobs. Further, a study has shown that the wages and social standards in theexporting industry are generally higher that in companies producing for the local market (agricultural and services sector).Thus, trade restrictions to enforce human rights will harm, ratherthan help improve the human rights situation in a country, as the target industries are not the perpetrators.

 

History has proven that the imposition of certain human rights and social standards from the outside has almost always been a failure. Raising human rights standards can only work if the target country’s institutions and politicians are involved and feasible programs, which consider the countries’ needs are drafted. This goal will not be reached through unilaterally imposed sanctions, which are usually unwelcome by the state including the population, which tend to perceive them as interference with national sovereignty. A true improvement can only work, if all parts of society cooperate. A mere imposition of minimum standards from outside, in the form of minimum wages or other benefits will lead to a loss of jobs in the long run, unless the productivity of the workers is improved as well.

 

The above considerations show that trade-related human-rights measures are neither a suitable instrument to improve the human rights situation in a country, nor are they apt to protect the economy of the state imposing the trade sanction. Furthermore, the level of human rights and social standards in a country has only a marginal influence on the economic performance and exports of that country. Human rights and social standards neither influence the price of a product sufficiently to displace industrialized country products, nor is the lack of minimum social standards a danger for the social standards and job market of industrialized countries. In addition, trade measures cannot usually be targeted in a way that helps reach the goal.

 

However, one should not conclude that it is not worthwhile to improve the human rights situation and social standards, as mandated in international human rights instruments. From an economic point of view, it is a ‘wise investment’ that will pay off in the long run. An increase of social standards, such as limited work hours, basic social benefits, or education for workers has a positive impact on the overall attractiveness of a country for foreign investors, as the productive capacity of labor forces who enjoy basic human rights and social standard, will raise, which will benefit the economic performance of an enterprise and the economy of a state in general. Therefore, the additional costs related to the creation of a stable investment climate are outweighed by the complete ignorance of social and human rights standards that leads to political instability, scares off investors, thereby harming the economic development.

 

To sum up, even though the improvement of human rights standards is also desirable for economic reasons, trade measures are an inappropriate means to achieve that goal. Hence, from an economic point of view, the authorization of trade-related human rights measures within the WTO legal framework should not be supported.

 

 

While the WTO has so far not been very receptive to the discussions on the trade and human rights relationship, UN human rights bodies, under the auspices of the Economic and Social Council (ECOSOC), have been very active in researching the topic. Numerous studies focus on the relationship between trade liberalization and human rights and analyze the impact of trade liberalization on the human right situation. These studies propose expedient action that could be taken in the WTO context to avoid the negative impacts of trade liberalization on the human rights situation. Interestingly, those studies hardly suggest the use of trade-restrictive measures to improve human rights situation, but rather propose other means to mainstream human rights into the work of the WTO.

 

 

The trade and human rights debate within the UN started in the wake of the Vienna Human Rights Conference of 1993, which stressed the indivisibility and interdependence of human rights. To realize human rights and better integrate human rights in the work of the UN institutions, the office of the UN High Commissioner of Human Rights was established.89 At the time, economic development was characterized by neo-liberalism. Neo-liberalism is not only reflected in the reform of national economic policies, liberalization of national trade and investment laws, deregulation and privatization, but also in increased international economic integration at the universal and regional level (Andean Community, Southern African Development Community, European Union, WTO. This development led to globalized markets, increasing international trade and investment, and accelerating the interdependence of states.

 

Very soon, the shortcomings of liberalism without any flanking policies became obvious. Civil society and NGOs pointed to environmental, social and human rights deficits. Various UN Conferences addressed the negative impacts of economic globalization on the enjoyment of human rights. The International Monetary Fund (IMF) and World Bank reacted to international criticism by incorporating human rights, social and environmental standards in their lending and structural adjustment programs. The failure of the Multilateral Agreement of Investment in 1998, negotiated within the framework of OECD, can be traced back to increased activities of the anti-globalization movement. The WTO Ministerial Conference in Seattle in 1999 eventually showed that the trading regime of the WTO also produces negative effects on the poor, especially in developing countries, and that the WTO legal framework to a certain extent restricts economic and social policies. In the wake of Seattle, the WTO increasingly became the target of international critique.

 

At that time, the UN human rights institutions started to examine the effects of globalization on the enjoyment of human rights, and the relationship and interaction between international economic law and human rights. The institutions concerned with the question are subsidiary bodies of the Economic and Social Council (ECOSOC), namely the Sub-Commission on the Promotion and Protection of Human Rights and the Committee on Economic, Social and Cultural Rights, whose main task is the implementation of the CESCR.

 

Two recent studies describe how the WTO could contribute to the improvement of the trade and human rights relationship, and avoid, as far as possible, the negative human rights impacts of trade liberalization. Robert Howse100 analyzes the scope and obligations of the right to development, which comprises not only economic development, but also the realization of human rights, especially economic, social and cultural rights. Howse states that the realization of the right to development is unlikely to be achieved through judicial or other centralized enforcement, but requires a wide range of public policies and actions on the domestic, as well as international level. The same is true for an improved human rights situation. The main obligation lies however with the individual states, which also have the obligation to realize human rights on the international arena. These findings are supported by a study by Paul Hunt, which analyzes the right to health and the relationship to WTO Agreements.

 

The debate on how trade, investment and finance interfere with human rights has led to a successful dialogue with economic institutions, such as World Bank and IMF, which have already reacted and now incorporate certain human right standards in their work. The WTO however has been quite reluctant to open up the trade regime to non-trade concerns. The WTO position has for a long time been dominated by the ‘watertight compartment’s view’, i.e., the WTO is a trade organization, not a human rights organization. If there are human rights concerns, these should be addressed in the relevant fora.

 

The findings of the aforementioned studies support the WTO position to the extent that it cannot serve as an organization to enforce human rights. Nevertheless, these studies show that the WTO should be more receptive to proposals to scrutinize its activities and to a ‘human rights mainstreaming process.’ Since the Member States of the WTO must guarantee that their human rights obligations are realized, and the WTO is a member-driven organization, it is up to the Member States to ensure that the WTO decisions and rules do not negatively impact on the human rights situation in the WTO Member States.

 

 

One way to avoid negative impacts of trade regulation on the human rights situation in the Member States is through a ‘human rights impact assessment’ of WTO decisions and rules. This should already be done at the negotiating stage, as well as the implementing stage. Human rights impact assessment considers the likely impacts of trade rules on the enjoyment of human rights. The criteria have to be established for all human rights separately. For the right to health, criteria such as the availability, accessibility and quality of health goods, services and facilities, could be considered when new regulations are negotiated (e.g. the GATS regulations regarding trade in services). Art. XIX of GATS authorizes the Council for Trade in Services to assess the trade rules. Similar assessments could also be done by the other Councils and Working Groups in charge for other WTO agreements.

 

The existing Trade Policy Review Mechanism (TPRM) could also carry out an important function in the human rights impact assessment of trade regulation. The task of the TPRM is to assess the impact of a Member’s trade policies and practices on the multilateral trading system. The Member States have to present their national trade policies, and the Trade Policy Review Body assesses the impact on the functioning of the world trading system. According to the preamble of the WTO, one of the goals of the world trading system is to raise the standard of living and sustainable development. As stated earlier, the right to development comprises also the enjoyment of basic human rights standards. Thus, it can be deduced from the preamble that the WTO mandate extends to ensure economic development, which does not impair the human rights situation in a country. This could be done through the inclusion of the human rights impact of trading rules in the state reports for the Trade Policy Review. The Trade Policy Review Body could then examine how the national trade policies contribute to the creation of a fair and transparent trading system, and in particular, whether those trading rules comply with the criteria of sustainable development and raising standards of living.

 

 

In order to avoid a conflicting situation in exceptional circumstances, it is possible to interpret WTO rules in conformity with Member States’ human rights obligations. This interpretation would enable the Dispute Settlement institutions to allow trade measures, which avoid, or minimize human rights violations. An example where such a non-economic concern was accepted without much discussion was the EC - Asbestos case, where the import prohibition of asbestos-containing substances for public health reasons was accepted by the Panel without thoroughly examining whether the restriction would be justified under Art. XX. Seen from a human rights angle, this decision favors a Member State’s implementation of the right to health, i.e. to protect its inhabitants from dangers to their health.

 

Similarly, the Dispute Settlement institutions could consider human rights concerns when interpreting other disputes. In the case of the US – Shrimp case, the CITES Convention was brought as an argument to justify the measure in question, and the Panel was ready to examine it. Although the Dispute Settlement institutions have some leeway within the existing legal framework to address human rights considerations in their work, as yet no complaining party or defendant has brought up human rights as a justification for trade measures. The Panels cannot be expected to bring up human rights concerns on their own, and an obligation to do so cannot be inferred from the human rights obligations of the WTO Member States.

 

 

Another way to promote human rights is through trade incentives. This method has been pursued for years by the EU and the US. The EU has a long tradition of adding human rights clauses to cooperation agreements with third countries. Trade preferences are offered to countries for the promotion of human rights generally, or for programs directed at a specific aspect of human rights. In this manner, the improvement of the human rights situation is not reached through coercive measures, but through the voluntary compliance with certain human rights standards, which is rewarded by trade preferences.

 

The European Communities’ (EC) General System of Preferences (GSP) scheme was recently challenged by India, Thailand and other WTO Member States. Under this scheme, the EC offered, in addition to the general system of preference program accessible for all developing countries, a number of special preferential treatment programs, on the condition that the receiving country implement certain labor, environmental standards, or measures to combat drug trafficking. Viewed from a human rights perspective, these measures could be seen as promoting human rights in the targeted state. These special programs were challenged by India, as they were not accessible to all developing countries but only to the countries chosen by the EC. Consequently, India complained that the EC’s GSP scheme discriminated between different developing countries. Regarding the drug arrangement, the Panel held that it constituted a violation of Art. I GATT. The Panel ruled that, under Art. I GATT, countries had to extend most-favored nation (MFN) treatment to products from all Members equally, not to individual or selected developing countries. Moreover, the different treatment could not be justified by the Enabling Clause,123 which allows developed countries to maintain GSP programs that provide "differential and more favorable treatment to developing countries without according such treatment to other contracting parties." Thus, GSP schemes must be offered to all developing countries equally and under the same conditions.

 

The EC appealed against the Panel Report and claimed that the Enabling Clause provides an exception to Art. I GATT. The Appellate Body modified the Panel Report and ruled that the EC may grant additional preferences to developing countries with particular needs, as long as such preferences are consistent with other provisions of the GATT and the Enabling Clause. Nonetheless, the Appellate Body found that the EC’s GSP scheme is inconsistent with WTO rules, because although the drug arrangement is allegedly available to all developing countries that are similarly affected by a drug problem, it fails to set out clear criteria for determining which countries are eligible. As a result, there is no basis to determine whether those criteria or standards are discriminatory.

 

The GSP case provides guidance for establishing criteria for the permissibility of trade incentives for the promotion of human rights. States are allowed to include non-economic criteria like sustainable development, or even human rights and social standards as conditions for trade incentives. The program must however be formulated generally and not be applied in a discriminatory manner.

 

In contrast to trade restrictions, trade incentives do have positive aspects. Firstly, trade incentives do not infringe on another state’s sovereignty and cannot be considered as an interference with internal affairs. Secondly, trade incentives can better target the population’s needs than trade sanctions. It remains doubtful whether trade incentives are less influenced by foreign policy considerations than trade sanctions. Another issue is whether human rights conditionality alone is a suitable instrument to improve the human rights situation of the target country. Technical assistance and programs to promote the awareness for human rights are also needed to effectively change the human rights situation in the target country.

 

 

An additional approach to improving the human rights situation in Member States is to incorporate human rights aspects in the technical assistance programs. Such programs are an important feature of the WTO work, namely for developing countries, which get support in implementing the trade rules required to comply with the WTO regime, and creating the necessary national institutions to administer those rules. These technical assistance programs could integrate human rights considerations into the process of drafting trade policies and regulation. Trade Policy Reviews could provide the necessary assessments for specific countries. In order to avoid the duplication of efforts, and to acquire the necessary know-how, cooperation and coordination with already existing technical assistance programs of other UN organizations, such as the International Labor

Organization (ILO), or the UN Human Rights Bodies, is essential.

 

Some of the principles enshrined in the WTO agreements are very similar to human rights concepts, and can serve as a starting point. The principle of transparency, requiring that all trade rules be published and accessible for everyone, and that all countries provide fair and impartial court procedures, reflect some of the basic civil and political rights contained in the CCPR. Furthermore, the principle of non-discrimination, a core principle of the WTO, is also one of thekey principles of human rights protection.130 The goals of sustainable development and raising thestandard of living can also be interpreted to encompass all other human rights.

 

The proposed activities of the WTO to mainstream human rights in its work will need the strong support of human rights organizations. Standard setting and monitoring of implementation is the main task of UN human rights bodies and the International Labor Organization (ILO). Nevertheless, the elaboration of standards to implement the right to health or the right to food, for instance, will be difficult, as these human rights issues are heavily disputed among Member States of the relevant organizations, as well as parties to the relevant agreements. Clearly this is a difficult issue for human rights experts to solve, and therefore, cannot be expected to be resolved by the WTO. The same is true for the monitoring of the implementation.

 

The UN human rights bodies have not only started to examine the relationship between trade and human rights, but also started to elaborate approaches to mainstream human rights in the WTO. A first step is Paul Hunt’s in-depth study on the right to health, which analyzes what the WTO and human rights bodies could do to avoid the negative impact of trade rules on the right to health. Another attempt is the UNDP study ‘Making Global Trade Work for People’ which examines the trade and development linkage and serves as a basis for projects to improve national trade policies.

 

If the WTO is to integrate human rights aspects into its work, it will need suitable techniques and standards to conduct this undertaking. For example, if the WTO is expected to perform a human rights impact assessment, it not only needs a methodology for the impact assessment, but also substantive criteria. Assistance will also be needed, if the Trade Policy Review Body is expected to include a human rights impact assessment in its work. Similar guidance is also necessary for technical assistance programs provided for by the WTO. If this assistance includes human rights aspects, the human rights bodies will have to submit substantive proposals. Last, but not least, the

Dispute Settlement institutions’ lack of expertise on human rights issues could be addressed by integrating human rights experts to examine the case from a human rights perspective.

 

 

Trade and human rights linkages are manifold, and there are numerous policy proposals to avoid the negative impacts of trade liberalization on the human rights situation in the WTO Member States. Even so, not all approaches to address the existing conflicts of interest and improve the trade and human rights relationship are feasible. One of the main points of criticism of anti-globalists is that WTO rules prohibit the enforcement of human rights or social standards through trade sanctions. Apart from the legal constraints of the WTO agreements, it is however doubtful whether trade related human rights measures are a viable instrument to promote human rights in the target country. From an economic point of view, trade sanctions harm, rather than improve the human rights situation in the target country. Hence, an amendment to the WTO agreements to enable Member States to pursue human rights interests through trade measures, is not only highly unlikely— due to the existing conflict of interest between industrialized and developing countries— but also does not actually contribute to the improvement of the human rights situation and the ‘standard of living’ in WTO Member States.

A more effective way to address negative impacts of trading rules on the human rights situation is to incorporate human rights considerations into the work of the WTO. The UN human rights bodies have identified a number of measures that can improve the ‘human rights records’ of the WTO and promote ‘higher standard of living’ and ‘sustainable development’ in its Member States. One possibility to incorporate human rights considerations in the work of the WTO is through a human rights impact assessment of trade rules at the negotiation stage, or during the examination of TPRM reports. Technical assistance can also play an important role.

 

There are however limits to the WTO facilities that can only be overcome through cooperation with other International Organizations. The WTO needs know-how from the relevant UN institutions, like the UN human rights bodies or the ILO, not only in determining the applicable human rights standard, but also for monitoring human rights obligations and mainstreaming human rights into its work. In addition, it is important that those institutions specialized in labor, human rights or social issues supplement the WTO efforts to address human rights concerns through technical assistance and training programs for the improvement of the human rights situation in the countries concerned.

 

Although the WTO cannot mutate into a human rights organization, in order to maintain credibility, it must take steps to acknowledge the human rights effects of its work. It is the responsibility of the Member States of the WTO to ensure that human rights considerations are incorporated in the work of the WTO Councils and Working Groups. Disregarding all political disputes, namely between industrialized and developing countries, the reluctance towards human rights is difficult to grasp. The creation of an acceptable human rights framework is often perceived as a cumbersome and expensive duty, yet it actually improves the economic situation and attractiveness of a state. If the population is provided with basic labor standards, education or health care facilities, the political climate in a country will stabilize and the productivity of the work force will improve. If a state respects the rule of law, and provides for fair and non-discriminatory administrative and court procedures without corruption, this will lead to a more attractive business environment. Hence, the respect and promotion of human rights and economic development are not contradictory, but mutually reinforcing.