Anatomy of a controversy: The balance of political forces behind implementation of the WTO's gasoline decision

Law and Policy in International Business, Summer 2002 by Choinski, Alexander Stewart

I. INTRODUCTION

The overall effect of [the Uruguay Round] reforms [of the dispute settlement process] will be to make it more costly for a defendant country to escape the pressures of the GATT's enforcement process . . . [but] the political impact of higher resistance costs will depend on the overall balance of forces pro and con. There will be some cases in which the balance of forces will be fairly even. These are typically the cases in which domestic opposition to a restriction is fairly strong, and where other GATT governments are prepared to exert considerable diplomatic force in support of change. In such cases, the new dispute settlement rules could well make a difference. In others, the new rules will not be enough without some more basic political commitment to compliance.1

balance of forces in favor of WTO compliance was reinforced by the outcome of the WTO dispute and the domestic political interface provided to deal with such a dispute in the Uruguay Round Agreements Act (URAA).

This Note examines the political pressures surrounding the implementation of the WTO Gasoline decision, namely, reconciling the Environmental Protection Agency's (EPA) reformulated gasoline rulemaking to national treatment norms. Prior to the WTO Gasoline decision, or during the "pre-implementation" stage, the Clinton Administration and Venezuela faced critical impediments toward pursuing conformity with GATT norms. These political impediments, however, were soundly overcome after the WTO decision as several critical factors converged, including congressional codification of Uruguay Round agreements, the threat of retaliation stemming from potential non-compliance with the WTO decision, and domestic factors that helped reinforce an outcome favorable to rule revisions. In sum, the peculiar contrast in congressional reaction between "pre-implementation" and post-WTO-decision implementation underscores the way in which the WTO may provide an important form of "representation reinforcement" to pro-trade interests that might otherwise be marginalized by more powerful protectionist interests who have the ear of Congress.

The importance of congressional reaction to the President's attempts to conform executive rulemaking to norms articulated in international trade agreements is rather ironic because it involves no statutory enactment. However, congressional oversight powers, such as appropriations, are often used to express Congress' displeasure and to protect favored constituent interests. The domestic political history behind the WTO Gasoline dispute illustrates how the WTO can provide an effective counterweight to entrenched domestic protectionist interests, thereby reducing congressional obstacles to administrative implementation of WTO dispute settlements.

II. PRE-IMPLEMENTATION

A. EPA's Original RFG Rule

1. Background

On December 15, 1993, the EPA promulgated regulations that set standards for the production and sale of reformulated and conventional gasoline by domestic refiners and importers.2 The final rule, which implemented section 211 (k) (1) of the Clean Air Act (CAA), as amended in 1990, set new, unprecedented requirements for gasoline composition to improve overall automobile emissions. The statute required the EPA to issue standards for improving the air quality of major metropolitan areas that fared poorly as a result of emissions contamination, particularly ozone-creating pollutants.3 As a result, gasoline sold in these metropolitan areas had to be "reformulated" by reducing these pollutants in accordance with statutory and regulatory compositional specifications.4 To avoid the "dumping" of pollutants from reformulated gasoline into gasoline provided to areas outside non-attainment cities, the EPA was called upon to maintain conventional gasoline emissions to the 1990 levels.5 The CAA granted the EPA broad authority to devise standards that would provide the "greatest reduction in emissions" from reformulation.6

participate in the negotiations and was able to reach a modicum of consensus after long, highly-charged negotiations. Throughout the process, domestic refinery interests objected to the compliance burdens imposed by the reformulation standards. Criticism from consumer groups and industry associations not participating in the reg neg process continued long after promulgation, and the measure remained highly controversial even among participants.8

2. Rule Provisions

However, IBs would stay in place for conventional gasoline, since the intent of the statute was merely to prevent dumping of contaminants into conventional gasoline and not necessarily to promote improvements in conventional gasoline emissions beyond 1990 levels. Domestic refiners that did not have 1990 emissions data for gasoline had to infer 1990 emissions values by modeling post-1990 data under so-called "Method Two" or "Method Three."12 Importers of foreign gasoline were also required to establish 1990 IBs for their gasoline, but if actual 1990 data were not available, they would be required to comply with the statutory baseline without recourse to either Method Two or Method Three.13 The EPA precluded such recourse because both of these methods were designed to measure the quality of a particular refinery's overall production and not just the exported batches that may bear a "scant resemblance" in quality to a foreign refinery's total production.14 Consequently, as anticipated in the final rule's preamble, most importers found it necessary to comply with the statutory baseline.15