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Trade Policy and Global Environmental Change
In this guide you can find the following useful information:
Nature of the Trade and Environment Issue
Efforts on the international level to strengthen the
international trading regime often spill over into areas of
international environmental concerns and vice versa. The norms
and rules used to oversee international trade can affect the goals
and norms associated with pursuing international environmental
issues. The trade and environmental links topic has gained
increasing attention due to the continued diversification and
integration of the global economy since the creation of the
General Agreement on Tariffs and Trade (GATT) in 1947, and
due to increasing awareness of environmental issues. Overall this
has been described as the "greening of world trade."
Key issues arising from the nexus of international trade and environment include
It should also be noted that, with the exception of a few concrete
examples, the issues outlined above, which manifest the linkages between
trade and the environment, are constantly evolving as new challenges arise
and the scope of international environmental agreements expands.
- Trade and Environmental Rule Synergy. This refers to the
interaction between international trade regulation or
liberalization and domestic environmental regulation; or vice
versa. For example, if a law is passed in one country imposing
strict environmental standards on the production of a certain
good, these standards may unfairly discriminate against foreign
producers which is against trading rules.
- Harmonization. This issue concerns whether trade agreements
of Environmental Standards, and whether harmonization
positively or negatively affects the environmental impact of
economic activity, a topic addressed by Stevens (1993) in "Harmonization,
Trade and the Environment."
- Trade and the Internalization of Environmental Costs.
Environmental costs can be shifted to other countries using trade
measures. Conversely trade agreements can provide an effective forum for
internalizing environmental costs not currently accounted for in
production and processing of traded goods. Trade and
Environment and UNCED Follow-Up Activities in UNCTAD, a report from
the United Nations Conference on Trade and Development (1994), examines
methods of internalizing environmental costs.
- Transparency. This notion is simply the publicizing of
governmental laws and regulations, whether trade or environmental.
Transparency has two general applications. The first application is in
terms of the laws and regulations themselves through notification
requirements. For a discussion of this issue in context see WTO Committee on Trade and
Environment Bulletin No.3. Second, the question of transparency also
arises in the area of dispute resolution mechanisms in multilateral trade
agreements if applied to environmental matters, and vice versa. von Moltke
(1993) discusses this issue in "Dispute Resolution and Transparency."
- Intellectual Property. The application of intellectual property
rights and patent regimes, especially as related to biodiversity, can
influence trade and environmental outcomes. Groombridge (1992) surveys
this issue in "Intellectual
Property Rights for Biotechnology," an excerpt from Global
Biodiversity: Status of the Earth's Living Resources.
- Development. Trade and environmental issues raise questions
about potentially disparate effects on economic growth in industrialized
countries and developing countries. A U.S. Office of Technology Assessment
(1992) report section from Trade
and the Environment: Conflicts and Opportunities examines these
International Treaties Affecting the Trade and Environment Linkages
GATT to WTO: The Conclusion of the Uruguay Round
Since GATT's inception in 1947, a number of multilateral trade
negotiating rounds have been initiated and concluded. In
general these negotiating rounds result in further liberalization
of world trade and expansion of the scope of the GATT to new
areas such as non-tariff barriers.
The successful conclusion of the Uruguay Round in
1994 addressed a number of important issues which had been
notably absent from earlier GATT trade rounds. These issues
include, inter alia, agriculture, intellectual
property, and trade in services. The Uruguay Round agreements also led to the creation of the World Trade Organizations (WTO).
It is not clear whether the new, more comprehensive trade
agreement creating a new international organization with an
enhanced status in terms of international law, has complicated
the linkages between international environmental law and
international trade law. In the past the GATT has been criticized
for promoting freer trade at the expense of international
environmental efforts. However, pursuant to the Marrakesh
ministerial declaration, the WTO,
established in January 1995, is working with other key
environmental organizations such as the UNEP to clarify these
difficulties. Details are outlined in About Trade and Environment in the WTO.
Action by the WTO, since its inception at Marrakesh, has included
the creation of a standing committee to address the problems
raised by the congruence of international environmental issues
and international trade issues. The WTO Committee on Trade and
the Environment (CTE) has met regularly since its creation,
convening first in March 1995.
The CTE has addressed a number of concerns listed at the outset
of this guide. The conclusion of 1995 brought with it the
development of a work plan for the Committee to address the
salient trade and environment issues. For a listing of the CTE work plan see CTE Bulletin
Key GATT/WTO Provisions
The primary GATT/WTO provision which is cited most often in
reference to trade and environmental norm conflicts is Article
XX. This article outlines the allowable exceptions for trade
restricting national policies.
Additional relevant GATT/WTO provisions depend on the particular trade
and environmental conflict at issue. Other GATT/WTO norms which
are often mentioned in reference to potential trade and
environmental law conflicts are prohibitions against so-called
technical barriers to trade (TBTs) and prohibitions against
quantitative restrictions on trade.
Key Environmental Treaties with Trade Implications
International environmental treaties promote environmental goals. The
requirements of the treaties may lead to actions by national governments
or international organizations to implement the treaty prescriptions.
These actions, or other aspects of the treaties can lead to the
circumstances described in the trade and environment issues section of
this document. All of the treaties listed below potentially influence
trade whether through restrictions on trade, or through requirements as to
notification, or through the fact that countries may implement laws to
further the goals of the treaties which have implications for trade.
These treaties include, but are not limited to:
As part of its preparation for the first WTO Ministerial meeting held in Singapore, 9-13 December 1996, the CTE prepared a report (downloadable WordPerfect 5.1 file) summarizing its work on trade
and environment linkages. The report listed eleven key issues addressed
by the CTE which are quoted from the document:
While extensive discussions were held on these various items, specific WTO
policies were not developed. However, a number of important observations
were described in relation to items 1 and 5.
- Item I: "The relationship between the provisions of the multilateral
trading system and trade measures for environmental purposes, including
those pursuant to multilateral environmental agreements."
- Item II: "The relationship between environmental policies relevant to
trade and environmental measures with significant trade effects and the
provisions of the multilateral trading system."
- Item IIIA: "The relationship between the provisions of the
multilateral trading system and charges and taxes for environmental
- Item IIIB: "The relationship between the provision of the
multilateral trading system and requirements for environmental purposes
relating to products, including standards and technical regulations,
packaging, labelling and recycling."
- Item IV: "The provisions of the multilateral trading system with
respect to the transparency of trade measures used for environmental
purposes and environmental measures and requirements which have
significant trade effects."
- Item V: "The relationship between the dispute settlement mechanisms
in the multilateral trading system and those found in multilateral
- Item VI: "The effect of environmental measures on market access,
especially in relation to developing coun tries, in particular to the
least developed among them, and environmental benefits of removing trade
restrictions and distortions."
- Item VII: "The export of domestically prohibited goods."
- Item VIII: "The relevant provisions of the Agreement on Trade-related
Aspects of Intellectual Property Rights."
- Item IX: "The work programme envisaged in the Decision on Trade in
Services and the Environment."
- Item X: "Input to the relevant bodies in respect of appropriate
arrangements for relations with intergovernmental and non-governmental
organizations referred to in Article V of the WTO."
adopted at the ministerial meeting contained a paragraph concerning the
general topic of trade and environment. The main trade and environment
issues cited in this context were the interactions between trade
liberalization, development, and environmental issues. Emphasis in the
delcaration was placed on policy coordination at the national level.
- No disputes have been addressed by either the GATT or WTO concerning
trade measures used pursuant to an international environmental agreement.
- Existing WTO provisions are often adequate to encompass the
appropriate use of trade related environmental measures, most notably GATT
Article XX applies in this case.
- Both trade and environment expertise should be relied on when
incorporating a trade provision in an international environmental
- If all concerned have agreed to a trade related measure as part of an
international environmental agreement, then disputes over the measure are
unlikely to arise.
- In future international environmental agreements, consideration should
be given to how trade measures affect non-parties to the agreement.
- Policy coordination between trade and environment officials at the
national level is essential for parties to both trade and environment
agreements to uphold their obligations.
Linkages from Trade and the Environment to Key Indicators
Indicators of linkages between trade and the environment are
multifaceted. Which indicators are most relevant depend on the
question addressed. However, two issues, both related to dispute
settlement, are indicators of these linkages: trade disputes
with environmental content and comparison of trade dispute
settlement and environmental dispute settlement.
Trade Disputes with Environmental Content
Perhaps the clearest indicators of the linkages to be found
between the areas of the environment and trade are in the
disputes brought before the GATT and the WTO. Two disputes stand
out as highlighting the difficulties surrounding the integration
of international environmental concerns and the international
trading regime. These two disputes are the 1992 US/Mexico Tuna
dispute and the more recent 1995 US/Venezuela & Brazil Gasoline
Resolved through bilateral negotiation, the 1992 US/Mexico Tuna dispute
resolution came after the dispute was brought before a GATT dispute
settlement panel. The Tuna dispute involved the application of a US
embargo on Mexican tuna imports. The embargo was imposed due to Mexican
tuna harvesting methods (purse seine driftnet) which violated the US Marine
Mammal Protection Act. For more information see US/Mexico Tuna Dispute in the TED database Case 1 and Case 2.
Even though on technical grounds the US lost the 1992 case a
second, related case was brought by France and the EC under
similar grounds. For a brief description see US/Mexico Tuna Dispute in the TED database Case 1 and Case 2.
The 1995-6 US/Venezuela and Brazil Gasoline case is important for
a number of reasons. First, it is the first case brought before
the new WTO utilizing the refined dispute settlement process. In
addition, the decision by the dispute settlement panel was
appealed by the US to the WTO Appellate body. This dispute
involved the imposition of US sanctions against Venezuela.
Venezuelan gasoline imports violated the restrictions on certain
pollutants known as olefins by the Clean Air Act. The US lost the
initial dispute and appealed the decision to the WTO dispute
settlement Appellate body. The Appellate body upheld the initial
decision. For a summary of the dispute see US/Venezuela
Gasoline Dispute in the TED database.
An on-line database of cases involving trade and environment issues can be
found at the Trade and Environment Database (TED) project
sponsored by the US Environmental Protections Agency and implemented by
Dr. James R. Lee of The School of International Service at American
Comparison of Trade Dispute Settlement and Environmental Dispute Settlement
For a detailed discussion comparing trade dispute settlement and
environmental dispute settlement see Stacking
the Deck: Compliance and Dispute Settlement in International
Environmental Agreements. This paper argues that dispute
settlement procedures are the keys to linkages between trade
policy goals and environmental policy goals. Given the difficulty
of enforcement in international law and in international
organizations, dispute settlement procedures are arguably very
important. Additionally, this paper makes the observation that
dispute settlement in international environmental agreements is
not as developed as is the case with dispute settlement in
Key Indicators on Environment and Trade
In addition to the trade and environment disputes listed above
which have far reaching implications for the trade and
environment, indicators of the linkages between trade and the
environment can be thought of in other ways. For example, when
the conception of linkages between trade and the environment is
expanded to include notions of development and sustainable
development it is useful to think of indicators for these kinds
For information on indicators on trade and trade by commodities see the following resources.
For development related issues see:
- For a description of data on aggregate trade and other
economic indicators see the CIESIN page on the World Bank World Tables
National Response Indicators on Trade and the Environment
Given the often indirect nature of conflicts between trade and
environmental goals, it is not surprising that national responses
to these difficulties are at times difficult to identify.
However, those countries with the most at stake either in terms
of trade or environmental concerns are likely to address these problems to
the greatest extent.
National responses to trade and environmental linkages can take
place in a number of ways, recommendations for action, specific
legislation or directives leading to specific actions, or
reactions to other trade and environment related events such as
The Office of the United States Trade Representative (USTR), is responsible for
overseeing the implementation of US trade policy. The US Trade
Representative is an U.S. Government, Executive Branch position
with ambassadorial rank. The USTR is working to implement the
various provisions called for by the establishment of the WTO.
For a report on these efforts see the USTR WTO
implementation page. This report also contains an appendix
submitted to the USTR on issues pertaining to trade and the
Remote Sensing Data and Linkages Between Trade and the Environment
At present, there is an uneasy relationship between the
promulgation of environmental goals and trade goals in the
international arena. The ability to gather and use remotely
sensed data may substantially influence this relationship.
On the one hand, remote sensing is used to promote productivity and trade.
For example, the Southeast Asian Fisheries Development Center uses data gathered from remote
sensing to aid operators of fishing vessels in their quest to harvest
fish. Commercial uses of remote sensing data are also available to promote tuna fishing.
On the other hand, remote sensing also can be used as an important
resource management tool. Remote sensing has been used to monitor
yellowfin tuna stocks in the Pacific.
Information gleaned from remote sensing can also influence the course of
international agreements. As the history of the Montreal Protocol
illustrates, remotely sensed data and the analytical conclusions drawn
from that data have the potential to influence the course of an
international environmental agreement. As the understanding grew of the
damage inflicted on stratospheric ozone by ozone depleting substances
(ODS) and the potential hazards raised for human life on earth, the
timetable for eliminating ODS from day-to-day commerce was shortened.
This is a rare but illustrative example in the field of international
Applying the Montreal Protocol history to trade and the
environment suggests that remotely sensed data may have the
potential to shift the balance away from trade goals and towards
environmental goals. Using the US/Mexico tuna dispute as an
example, it is possible to say that remotely sensed data of tuna
stocks or fishing fleets, had it been available, might have
influenced the GATT trade dispute panel adjudicating the
To date, trade disputes which arise from environmental goals have
ruled in favor of trade norms to the detriment of environmental
goals. Remotely sensed data carries with it the potential to
influence this balance.
Other Relevant Trade and the Environment Links
Agriculture, trade, and the environment : discovering and measuring
the critical linkages / edited by Maury E. Bredahl, et al. Boulder,
Colo.: Westview Press, 1996.
Reconciling trade, environment and development policies : the role
of development co-operation. Paris: Organisation for Economic
Co-operation and Development. Washington, D.C.: OECD Publications and
Information Center, c1996.
Esty, Daniel C. Greening the GATT (BOOK REVIEW) trade, environment,
and the future. Institute for Int. Economics, 1994.
Low, Patrick, ed. International Trade and the Environment. World
Bank Discussion Papers, 159. Washington, DC: The World Bank,
Siebert, Horst. Trade policy and environmental protection. World
Economy 183-94 '96 Global Trade Policy Issue.
Ulph, Alistair. Environmental policy and international trade when
governments and producers act strategically. Journal of Environmental
Economics and Management 30:265-81 May '96.