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Good afternoon. I am Dan Esty, Director of the Yale Center for Environmental
Law and Policy. In a former life at the Environmental Protection Agency in
Washington, I was a Special Assistant to Administrator William Reilly (1989-90),
Deputy Chief of Staff (1990-91), and then Deputy Assistant Administrator for
Policy (1991-1993), and I served as one of the negotiators of the environmental
provisions of the North American Free Trade Agreement (NAFTA). I would like to
thank the Chairman and members of the Subcommittee for allowing me the
opportunity to offer my views on the important waste trade issues that are
before the Congress.
The legislation before this Subcommittee raises critical questions about the
relation of environmental protection to trade obligations. In brief, I see the
challenge centering on the question of how best to structure a set of
environmental safeguards without running afoul of these obligations? The three
bills before you - H.R. 382, H.R. 411, and H.R. 1730 - represent different
approaches to regulating the inter-state and international movement of municipal
solid waste. The bills' authors share a common goal, which is to protect the
environment. So the question I want to address is: which approach is most likely
to achieve this outcome?
Before answering this question, I would like to speak briefly about the
framework of trade agreements and obligations that shape the context for this
analysis. Regardless of one's views of NAFTA, the General Agreement on Tariffs
and Trade (GATT), or the US-Canada Waste Trade Agreement, these agreements
represent binding obligations on the United States. To ignore these obligations
invites legal and political challenges to any structure of environmental
controls that a state might choose to adopt. Dispute resolution processes within
the international trading system often take years to be resolved, which could
create chaos and postpone the implementation of an appropriate structure of
environmental controls on waste shipments. As I will explain below, the best way
to ensure that the states have the ability to regulate waste shipments and to
limit the environmental harm that unrestricted waste disposal might inflict, is
carefully constructed regulation that minimizes the risk of NAFTA or GATT
challenges.
I should also add at this preliminary juncture a word about our own Supreme
Court's scrutiny of restrictions on interstate waste shipments. In past cases
such as Philadelphia v. New Jersey (437 U.S. 617 (1978)) and Ft. Gratiot v.
Michigan (504 U.S. 353 (1992)), the Supreme Court has struck down attempts by
states to regulate interstate movement of solid municipal waste. These cases
can, however, be differentiated from the legislation at hand. Both H.R. 382 and
H.R. 1730 explicitly confer upon the states immunity from the strictures of the
Commerce Clause.
The ability of Congress to authorize state regulation, even to the extent of
burdening interstate commerce appears to be quite clearly settled as a matter of
law. The Supreme Court has repeatedly indicated that Congress can immunize state
regulation, including environmental standards, even where the regulatory
approach affects interstate trade that might otherwise be protected by the
dormant Commerce Clause. In Northeast Bancorp, Inc. v. Board of Governors of the
Federal Reserve System (472 U.S. 159 (1985)), the Supreme Court upheld the
Federal Reserve Board's approval of applications by out-of-state companies for
acquisition of bank holding companies in Massachusetts and Connecticut partly on
the basis that Congress had immunized the relevant state statutes: "When
Congress so chooses, state actions which it plainly authorizes are invulnerable
to constitutional attack under the Commerce Clause." As recently as this
past June, the Supreme Court emphasized in Hillside Dairy, Inc. v. Lyons (123 S.
Ct. 2142 (2003)) that, though in the case at hand there was no immunity from the
Commerce Clause, "Congress certainly has the power to authorize state
regulations that burden or discriminate against interstate commerce." But
the Court "will not assume that it has done so unless such an intent is
clearly expressed." Thus, the bills under discussion today would likely
withstand Commerce Clause review.
The real issue with this legislation does not concern interstate trade and the
dormant Commerce Clause, but rather international trade and the obligations
imposed on United States (and by extension to each of the 50 states) under
various agreements to which the United States is a party. In this regard, import
bans are likely to run afoul of US trade obligation. Both Article XI of the GATT
and Article 309:1 of NAFTA prohibit a member country from imposing quantitative
restrictions on goods imported from other member countries. And both agreements
forbid discriminatory behavior
Yet both NAFTA and the GATT provide exemptions for legitimate environmental
policies that are carefully constructed, even those that might have a disruptive
effect on trade. Properly designed legislation could therefore afford effective
environmental protection and meet our international trade obligations -thereby
minimizing the possibility of a dispute with the chaos and delay that would be
entailed.
Two elements of Article XX of the GATT provide a foundation for appropriate
state regulation of waste shipments. Article XX(b) allows for environmental
measures "necessary to protect human, animal or plant life or health,"
as long as they are "not applied in a manner which would constitute a means
of arbitrary or unjustifiable discrimination between countries where the same
conditions prevail, or a disguised restriction on international trade." A
French ban on imports of asbestos under this exception was recently upheld by
the Appellate Body of the WTO.
Article XX(g) provides an even clearer foundation for carefully crafted
restrictions on waste shipments. It states that the GATT shall not prevent
contracting parties from taking actions "relating to the conservation of
exhaustible natural resources if such measures are made effective in conjunction
with restrictions on domestic production or consumption." GATT panels have
interpreted this language to mean that a questioned environmental policy should
be "primarily aimed" at addressing a conservation goal and invoked in
conjunction with comparable domestic restraints.
The NAFTA contains similar language. The basic prohibition on quantitative trade
restrictions and the national treatment obligation are subject to exemptions for
legitimate environmental policies. US-Canada trade relations are further framed
by the 1986 Agreement Between the Government of Canada and the Government of the
United States of America Concerning the Transboundary Movement of Hazardous
Waste, which was amended in 1992 to include municipal solid waste. The terms of
this Agreement are especially important to address because, by the terms of the
NAFTA, it prevails over the NAFTA should there be an inconsistency between them.
H.R. 411 expressly recognizes the US obligations under the US-Canada Waste Trade
Agreement and seeks to strengthen the environmental safeguards built into this
agreement. H.R. 411 would use the existing US-Canada framework to ramp up the
oversight of the flow of waste from Canada to the United States, requiring, for
example, the EPA to implement and enforce the established notification and
consent procedures. Of the three bills presently under consideration by the
Subcommittee, H.R. 411 represents the one that is least likely to be challenged
as a violation of US trade obligations. In this regard, it represents the best
bet for promoting quick environmental action to address the waste trade problem.
H.R. 382 seems to be at the greatest risk of engendering a challenge based on
international trade obligations. Because it authorizes virtually any regime of
waste regulation that a state might choose to adopt, including a ban on waste
imports, it would likely be seen as a threat to the free trade principles of the
GATT and the NAFTA and a potential direct violation of the US-Canada Waste
Agreement. H.R. 382 has a simple elegance. But in a complex world, simple
solutions rarely work. I believe that H.R. 382 would almost certainly draw
multiple legal challenges.
Since H.R. 382 simply authorizes state restrictions on waste trade and does not
mandate them, it might not trigger a GATT or NAFTA challenge immediately. Under
the emerging jurisprudence of the World Trade Organization, laws that permit
outcomes that might be inconsistent with a country's trade obligations will
generally not be considered ripe for challenge. But a law that creates
"explicit risks" of a breach of WTO obligations might be considered a
sufficient basis to launch a GATT challenge and for Canada to request that a
dispute settlement panel be seated. The sweeping nature of what might be done
under the authorization of H.R. 382 makes this a risky approach to regulating
waste shipments.
Because H.R. 1730 is more narrowly tailored, it is much less likely to
precipitate a challenge based on US trade obligations. Unlike H.R. 382, H.R.
1730 is not open-ended. It specifies a particular set of regulations that states
may adopt rather than giving states "carte blanche" authorization to
restrict foreign waste trade. In addition, H.R. 1730 tracks more carefully the
language and disciplines of GATT Article XX(g). It makes a state's authority to
regulate waste shipments contingent on the state's own efforts to promote
recycling and places any effort to limit foreign municipal solid waste imports
within the broader context of U.S. attempts to reduce the nation's own municipal
solid waste.
Environmental protection represents an important public policy goal. But
regulation must be done on a pragmatic basis that promises to deliver real,
on-the-ground progress. Efforts to control waste shipments must therefore be
undertaken with an eye on other policy goals and constraints. Developing a
system of waste trade restrictions that ignores international trade obligations
makes no sense and invites trouble. Systematically designed legislation that
carefully defines what states can do and seeks to promote consistency with the
GATT, NAFTA, and other international trade obligations of the United States
offers the best path forward.
Thank you.
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