Trade Policy Is Science Policy

Trade Policy Is Science Policy

SEBASTIAN PFOTENHAUER

Trade Policy Is Science Policy

Much of the discussion about a possible trade agreement between the United States and Europe hinges on technological, health, safety, and environmental standards.

By the time this article goes to press, the United States and Europe will be preparing for their second round of negotiations on a comprehensive free trade agreement, scheduled to commence on October 7 in Brussels. The ground for this widely noted Transatlantic Trade and Investment Partnership (TTIP) was prepared earlier this year by a joint announcement by U.S. and European leaders during the G8 summit in Northern Ireland in June, followed by a first round of negotiations in Washington in July. The political stakes are high. President Obama has declared TTIP a priority of his administration in the second term, and attention to the subject has been raised further by the parallel efforts of a U.S.-Japan free trade agreement. Recent allegations about U.S. espionage activities in Europe that captured media attention as a result of the Snowden leaks nearly prompted EU politicians to cease trade negotiations before they really began.

The idea of aligning the United States and the EU in a free trade zone is not new. Many attempts have been made in the past to better integrate the world’s two leading economic regions, which are jointly responsible for 40% of global economic output and $ 2 billion in daily trade of goods and services. However, given the abundance of dire economic news in recent years, this time analysts and commentators were quick to tout the renewed push by government leaders on both sides of the Atlantic. Following the initial announcement during Obama’s State of the Union Address on February 12, 2013, the New York Times wrote of a “transatlantic grand bargain [..] that would cover nearly half of the world’s economy [and] give a significant boost to the global economy and renew America’s most important alliance.” The Economist titled its story “A good idea [..] that business should rush to support.” The Times (London), commented that “transatlantic trade [is] set for historic breakthrough” and cautioned against the prospect that “Britain would be excluded if it decided to pull out of the Union.” The German weekly Die Zeit heralded “The dream of a Wirtschafts [economic]-NATO,” indicating that TTIP might not only address the weary problem of a sluggish economic recovery, but also provide a much-needed new vision for the North Atlantic Treaty Organization and transatlanticism at large after the end of the cold war.

Yet, upon closer inspection, the acclamations are premature and arguably misleading. Trade tariffs and taxes—the traditional targets of free trade agreements—are already virtually nonexistent between the United States and Europe for most goods and services, averaging only 4%. The main leverage of TTIP would lie in reducing non-tariff barriers, such as the costs imposed by national regulations and red tape. As captured succinctly by Vice President Joe Biden at the Munich Security Conference: “The reason we don’t have [TTIP] already is not because no one ever thought of it; it’s because there have always been difficult issues, such as regulations and standards, which continue to divide us.” In other words, TTIP is primarily a proposition about harmonization or mutual recognition of regulatory frameworks, most notably those that deal with the high-tech, high value- added goods and services that the EU and the United States care about most. It is, in short, about of technological, health, safety, and environmental standards.

TTIP thus falls squarely within the domain of science and technology policy, a domain where agreement on common goals and mechanisms for implementation has proven contentious between Europe and the United States. The decade-long stand-off on genetically modified (GM) organisms, irreconcilable positions on international agreements such as the Kyoto Protocol on climate change and the Basel Convention on hazardous waste management, or the adherence to different safety standards in the automobile industry are cases in point that highlight how entrenched the European and U.S. positions tend to be. Admittedly, all these issues relate to trade and national economic interests; yet, framing them as trade problems misses the point of why these differences exist in the first place. Rather than being matters of economic necessity, they are expressions of national preferences on issues such as health, safety, and the environment, and as such deeply enmeshed in the value system, experiences, and political culture of a society. Likewise, treating TTIP as an economic proposition is in part misleading because it suggests ostensible consensus about economic necessity on issues that can be deeply divisive for non-economic reasons.

How discordant free trade and national science and technology policy can be may be best illustrated by two cases from TTIP’s most prominent predecessor – the North American Free Trade Agreement NAFTA. In 1997, the US-based Ethyl Corp. sued Canada under NAFTA for banning Methylcyclopentadienyl manganese tricarbonyl (MMT) as a gasoline additive. Canada had moved to ban the use of MMT in gasoline in light of new evidence of MMT’s neurotoxicity and potential public health risks, which exacerbated MMT’s already bad image as a chemical that interferes with emission control in cars. Yet, the existence of contradictory scientific evidence prevented the Canadian government from issuing an outright ban of MMT under the Canadian Environmental Protection Act. To act swiftly and prevent potential harm, the government chose to ban MMT indirectly by prohibiting its transport and import, though not its production. Ethyl Corp., the only producer of MMT, subsequently sued Canada on the basis of NAFTA Chapter 11 for unfair treatment of foreign companies vis-à-vis domestic competitors and de-facto expropriation of investments. The case was settled outside the court: Canada withdrew its ban and compensated Ethyl Corp.

In another NAFTA case, the U.S. company S.D. Myers sued the Canadian government for its 1997 ban of the shipping of polychlorinated biphenyl (PCB) wastes from Canada to be processed in the United States. Canadian regulators were not convinced that the US would transport and dispose of PCB, a highly toxic and persistent carcinogen, in accordance with international standards as defined by the 1989 Basel Convention, to which the US was not a signatory. Canada lost the case in 2000, but filed for review in 2001 with the Federal Court of Canada on the grounds that the decision exceeded the NAFTA tribunal’s jurisdiction and was in conflict with both Canada’s obligations to the Basel Treaty and its sovereign public policy in public risk matters. The court dismissed Canada’s appeal.

These two cases attracted significant attention not because of their (relatively modest) economic impact. Rather, they blatantly revealed that what is at stake in free trade agreements is not only trade barriers, but also the sovereignty of a country to interpret scientific data and handle technological risk in the ways it chooses, as well as the supremacy of democratically legitimized politics over international investments. The history of world trade suggests that the overturning of national science and technology policy by foreign company interests is neither uncommon nor unpredictable; indeed, there has been a pattern of sweeping interventions in a decisively antiregulatory manner. “With only two exceptions,” Lori Wallach and Patrick Woodall find in their book Whose Trade Organization?, “every health, food safety, or environmental law challenged at the WTO has been declared a barrier to trade.”

If TTIP is to aim for a more fruitful interaction between trade and science policy, it is paramount to better understand the sources of their frequent incompatibility. Here, at least three points are worth making from a science policy perspective. First, science and technology do not straddle nations and cultures as easily as the circulation of commercial goods might suggest. Science and technology are deeply embedded in—and constitutive of—the ways in which we choose to live as societies. For example, the arrival of agricultural products of genetic engineering in the 90s played out very differently across countries. In the United States, GM crops were seen as an extension of existing biotechnologies, not fundamentally different or more risky, and were hence understood to be well-covered under existent regulatory frameworks. Britain, traditionally in line with liberal U.S. regulation on GM organisms, was hit by the bovine spongiform encephalopathy (BSE) crisis, prior to which government authorities and experts had wrongly assured the public that “mad cow disease” could not be transferred to humans. The crisis thoroughly undermined public trust in the government’s capacity to manage risk in agricultural bio- hazards and lead to an unusually deliberative and scrupulous approach in Britain. Germany, against the backdrop of decades of strong environmental movements, took a forward-looking but extremely cautious strategy, using detailed regulation and publicly monitored experimental procedures to introduce GM crops into the environment to safeguard against any risk. Despite seemingly identical technologies, then, countries develop unique ways how to cope with compounds of scientific, technological, ethical, and social uncertainties. Instead of speaking of neatly packaged “technologies,” policy scholars thus often prefer to speak of hybrid sociotechnical systems that cannot be easily disentangled for economic or regulatory purposes. This complicates the common assumptions of ready tradability.

Second, much of science and technology regulation deals with impacts that are not easily captured by markets, and hence are not easily tradable through commercial interactions. For example, environmental externalities (e.g. air pollution from car emissions, or forest and river degradation through chemicals), health externalities (e.g. the spreading of health hazards such as BSE beef, different food processing standards such as the chlorine-washing of chicken, or different safety standards embodied by different national drug approval processes), security externalities (e.g. the proliferation of “dual-use” technologies), or privacy issues (e.g. the storage of user data from social media platforms or patient data for health services) all beget broader societal effects that are “external” to market interactions. As economics Nobel laureate Joseph Stiglitz puts it, “trade agreements typically put commercial interests ahead of other values – the right to a healthy life and protection of the environment, to name just two.” Moreover, market mechanisms may fail us because of imperfect information (e.g. lax food labeling standards), incomplete markets (e.g. absence of clear property rights for shared natural resources such as clean air or water), monopolies (e.g. IP rights granted on software, pharmaceuticals, or genes), or high transaction costs (e.g. agreeing on common technical standards for electric vehicles), all of which are considered essential to the functioning of markets. The US and the EU differ markedly on how and how much they rely on markets with regard to all of the above examples, and all of them are bound to reappear in TTIP disputes in one way or another.

Third, progress in science and technology frequently challenges the very terms and categories we use in our canons of law, including trade agreements. GM crops, stem cell research and the rise of gene patents are challenging our traditional notions of “natural” and “life,” pointing to blatant gaps in existing regulatory frameworks. Consumer genetic testing with its statistical propensity statements puts into questions our understanding of “sick” and “healthy,” and with them whole health care industries, public welfare system, and the role of medical profession. The storage of personal data on servers around the world and the ubiquity of the internet are challenging our notions of “privacy” and “freedom of speech.” These examples illustrate that laws do not refer to fixed entities, but that science, technology, and the law are in permanent mutual interaction and flux. Countries have developed complex mechanisms at the intersection of science and the law to carefully re-evaluate the legal implications as science progresses, making sense of old terminology and customs in light of recent breakthroughs. However, these mechanisms differ markedly between countries. They hinge on different bodies of law, different national precedence cases, and different legal traditions at large. Moreover, they strike different balances between scientific expertise, civic rights, and democratic participation for the acquisition and use of scientific information. The language of trade, in contrast, tends to take legal categories as given and de facto identical across nations, while treating de jure differences as mere historical relics and barriers. They are blind to the fact that to harmonize regulation across high-tech nations is to also question what is meant by such terms as “life,” “health,” “private” and “safe” in these societies, and with it the very ways in which citizens relate to science and technology. As a result of this ignorance, the deeper causes of regulatory differences and the limited success of previous free-trade attempts remain unexplained. The protracted struggle to turn the EU alone into a uniform regulatory space in science and technology matters stands witness to the inadequacy of any broad-brush approach.

What is to be learned from these three “complications?” Science, technology, and the economics of trade are intertwined in many important ways. Yet, science and technology policy follows—and should follow—different rules and rationales than trade, and it is important to maintain this normative distinction. Differences in science and technology policy are not simply barriers to trade, but the result of decades-long and often painstaking deliberation of societies about how much risk they are willing to take, to whom they turn for scientific advice, and what priority they assign to various societal goals. Heralding TTIP as a purely economic proposition, then, is thus a deeply reductionist move that should provoke an outcry among scientific and science policy communities. To claim that different safety regulations in the United States and the EU are simply different expressions of “comparable levels of safety”, as suggested by the European Commission in a recent public outreach document on TTIP, is an almost cynical depiction of the complexity, heterogeneity, origin, and purpose of health, safety, and environmental regulation around the globe, tantamount to begging the question of why regulations exist in the first place.

Instead of black-boxing and side-stepping complicated science and technology issues under the pretext of trade, then, politicians on both sides of the Atlantic should work toward a much-needed global science and technology policy agenda for the 21st century and use this as a stepping- stone for future free trade agreements. Just as with foreign policy, science and technology policy would undoubtedly benefit from a strong transatlantic axis. But just like foreign policy, too, a science and technology policy that only cares about trade will not do.

Further reading:

N. A. Ashford and Charles C. Caldart. Environmental Law, Policy, and Economics: Reclaiming the Environmental Agenda: 1st (first) Edition (MIT Press, 2009).

T. Bernauer, K. Oye, and D. G. Victor. Regulatory Diversity: Can the World Trading System Cope? Swiss Political Science Review 6(3), pp. 96-108 (2000).

B. T. Hodges, Where the Grass Is Always Greener: Foreign Investor Actions against Environmental Regulations under NAFTA’s Chapter 11, S.D. Myers, Inc. v. Canada, Geo. Int’l Envtl. L. Rev. 14, 367 (2001).

S. Jasanoff, Ed., Reframing Rights: Bioconstitutionalism in the Genetic Age (MIT Press, 2011).

S. Jasanoff, Designs on Nature: Science and Democracy in Europe and the United States (Princeton University Press, 2007).

J. Stiglitz. The Free-Trade Charade, published online at Project Syndicate (2013) (accessed Aug 25, 2013)

A. C. Swan, Ethyl Corporation v. Canada, Award on Jurisdiction (under NAFTA/UNCITRAL), The American Journal of International Law 94, pp. 159-166 (2000).

L. Wallach, P. Woodall, R. Nader, Whose Trade Organization: A Comprehensive Guide to the World Trade Organization, Second Edition (The New Press, 2nd Revised edition, 2004).


Sebastian Pfotenhauer (pfotenh@mit.edu) is a research scientist and lecturer with the Technology & Policy Program and the MIT-Portugal Program at the Massachusetts Institute of Technology, as well as a fellow at the Program on Science, Technology and Society at the Harvard Kennedy School.