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CEI Expert Testifies on Trade and International Environment

Regulatory Comments and Testimony

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CEI Expert Testifies on Trade and International Environment

Chairman Ros-Lehtinen, thank you for the invitation to testify here today on the important topic of the connections between international trade and environmental protection.  My name is Myron Ebell.  I am director of international environmental policy at the Competitive Enterprise Institute (CEI), a non-profit and non-partisan public policy institute dedicated to advancing the institutions of liberty.

 

CEI has developed a good deal of expertise over the past decade on international environmental and trade-related issues, particularly under my predecessor, James M. Sheehan, and our chairman, Fred L. Smith, Jr.  As part of my testimony today, I am submitting several relevant articles by CEI staff and by Distinguished Fellow Jack Kemp.

 

CEI has participated as an accredited NGO in a number of international negotiations, including the Rio Earth Summit, the Kyoto Protocol, CITES, the Cartagena Protocol, and the World Trade Organization.  Last year, CEI joined a new international NGO, International Consumers for Civil Society (ICCS), which, under the chairmanship of Frances B. Smith, president of Consumer Alert, has brought together a number of free market NGOs from around the world.

 

At the WTO Ministerial in Seattle, CEI helped ICCS hold a major conference on “Ensuring Open Trade and Global Prosperity.”  Speeches and papers by leading experts considered the various connections between trade and the environment, and in particular the “linkage” issue; that is, the attempt by environmental pressure groups to become official parties to WTO deliberations and to make the WTO into an environmental enforcement agency.  Unfortunately, the reasoned discourse of our ICCS conference on 29th November was drowned out by the protestors and rioters in the streets of Seattle the next day.  And so I am grateful for the opportunity you have given me here today to share some of the observations and conclusions from the ICCS’s conference.

 

The connection between trade and the environment is as strong as it is obvious.  Increasing international trade generally leads to increasing environmental vitality.  The reason is that trade is one of the principal means of increasing wealth.  As people become wealthier, they become more concerned about environmental quality and they acquire the resources to spend on protecting the environment.  The environmental effects of a lack of wealth can be seen most clearly in subsistence economies.  People living at the subsistence level don’t worry much about pollution or biodiversity; they are too busy working to earn their next meal.  And even if they did worry, they are too poor to do anything about it.  A stark example was provided when the Indonesian economy collapsed in 1997.  Newspapers reported that hungry people were taking to the jungles to hunt wild animals to eat.  They were not concerned that many of these animals were rare or endangered species.

 

The simple connection between prosperity and a healthy environment has been obscured by the rantings of the international environmental establishment against the alleged evils of modern industrial civilization and corporate globalization.  For them, trade is the enemy precisely because it increases wealth.  A cornerstone of modern environmentalism is the claim that affluence and technology are the problem—that they actually increase environmental degradation and deplete the world’s natural resources. 

 

This claim is demonstrably false.  (A thorough refutation of the neo-Malthusian worldview upon which it is based can be found in two essays in Earth Report 2000, a CEI book published this year by McGraw Hill: “The Progress Explosion,” by Ronald Bailey; and “Richer is More Resilient,” by Indur Goklany.)  To take just one example, pollution levels are much higher in Delhi and Beijing than in New York or London, even though consumption levels are much lower in the former cities.  Delhi has very few cars and very low electricity production, yet the air quality is so terrible that it kills 10,000 or more people a year. 

 

Moreover, if trade itself were the problem, then the countries with the lowest tariffs and the most trade should have the worst environmental quality and those countries with the highest tariffs and the least trade should have the best environmental quality.  But, of course, the reverse is true.  The United States, the European Union, and Japan are the world’s leading trading nations and the world’s leaders in environmental protection.  Conversely, India has pursued closed economic policies for decades and has seen its share of total world trade drop from approximately .75% to .35% without experiencing any noticeable environmental improvements.

 

Mere facts, however, have never been of much concern to the environmental movement.  When reality threatens to get in the way, they simply create their own “reality” and move ahead with their agenda.  That is happening today in the arena of international trade and environmental negotiations on a gigantic, almost mind-boggling scale.  Hundreds of green NGOs pursue their goals in a bewildering variety of ways and in every possible international forum.  While thousands of protestors and rioters filled the streets of Seattle, hundreds of accredited NGO delegates from environmental pressure groups filled the halls of the convention center where the WTO Ministerial was taking place.  And the number of green NGO delegates in Seattle was not an unusual occurrence.  They show up by the hundreds and even thousands at every significant international environmental negotiation.  They are able to do this because the combined budgets of all the green NGOs total in the hundreds of millions of dollars.  These funds come primarily from American charitable foundations, U. S. government agencies such as EPA, and many European governments and the European Union.  To a large degree, green NGOs and not the world’s sovereign nations now set the agenda for multilateral environmental agreements (MEAs) and have become the loudest voice in WTO negotiations.  (A detailed overview of the size and scope of green NGOs can be found in a book written by my predecessor at CEI, James M. Sheehan, and published by Capital Research Center in 1998, Global Greens: Inside the International Environmental Establishment.)

 

Since the United Nations Environment Summit in Stockholm in 1972, over 250 environmental treaties and conventions have been negotiated.  Many more are in the works.  While many of these agreements are minor, a number of the major MEAs have serious negative consequences for world trade.  For example, the Basel Convention on Transboundary Movements of Hazardous Waste and Their Disposal regulates international trade in a wide variety of materials, many of them not hazardous.  By raising the costs of recycling a number of industrial materials, the Basel Convention has had negative environmental as well as economic effects, particularly on poorer countries.  It is worth noting that the United States is not a signatory to the Basel Convention.   

 

In a paper published in 1995 by CEI, Ray Evans called the Basel Convention “Internationalism’s Greatest Folly.”  That, of course, was before the Kyoto Protocol to the Framework Convention on Climate Change, negotiated in 1997.  If Kyoto ever goes into effect, it threatens in one stroke to destroy all the progress made since 1948 by the GATT and the WTO to lower tariffs and trade barriers.  This is because those countries required by Kyoto to lower their greenhouse gas emissions will inevitably want to raise tariffs and trade barriers on products produced with much cheaper energy in countries not covered by Kyoto.  Vice President Al Gore supported just such a policy in his 1992 environmental manifesto, Earth in the Balance, when he suggested that “weak and ineffectual enforcement of pollution control measures should also be included in the definition of unfair trading practices.”

 

Several other MEAs could be mentioned, but I would instead like to consider briefly a doctrine underlying most of these environmental treaties, namely “sustainable development.”  The concept was first publicized in a document published by the International Union for the Conservation of Nature in 1980, World Conservation Strategy: Living Resource Conservation for Sustainable Development.  In 1982, the Brundtland Commission Report for the United Nations, Our Common Future, recommended that the doctrine of sustainable development be the basis for future United Nations economic and environmental actions.  It’s hard to know exactly what is meant by sustainable development, and perhaps that’s just the point.  It can be and has been used by environmentalists as an all-purpose club to oppose nearly any particular economic activity and to support almost any environmental restriction.  The idea seems to be that unfettered human economic activity will or already has exceeded the carrying capacity of the earth.  Limits must therefore be imposed by the people who know best.  A successor to the Brundtland Commission, the Commission for Global Governance, has in fact proposed that a United Nations Economic Security Council be created to enforce sustainable development on unenlightened nations and peoples.  The council would be funded by a variety of environmental taxes.  Its proposed enforcement powers are still somewhat vague.      

 

MEAs are one way to restrict and reduce world trade, but they are indirect and, until now at least, constitute only minor impediments.  Environmental pressure groups have therefore launched a direct attack on the world’s principal vehicle for lowering trade barriers and thereby increasing trade, the World Trade Organization.  A huge amount of rubbish has been written about what’s wrong environmentally with the WTO (the most detailed treatment being Whose Trade Organization?: Corporate Globalization and the Erosion of Democracy, published by Public Citizen in 1999), but let me summarize it by quoting from a top ten list of what’s wrong with the WTO, which I found last November on the internet. This list was produced by the Direct Action Network as part of their campaign to “SHUT DOWN THE WTO”:

 

Number 1: “The WTO only serves the interests of multinational corporations.”  

Number 4: “The WTO is destroying the environment.

“The WTO is being used by corporations to dismantle hard-won environmental protections, who (sic) call them barriers to trade.  In 1993 the very first WTO panel ruled that a regulation of the US Clean Air Act, which required both domestic and foreign producers alike to produce cleaner gasoline, was illegal.  Recently, the WTO declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device that allows endangered sea turtles to escape.  The WTO is currently negotiating an agreement that would eliminate tariffs on wood products, which would increase the demand for timber and escalate deforestation.”

Number 9: “The WTO undermines national sovereignty.

“…For the past nine years, the European Union has banned beef raised with artificial growth hormones.  The WTO recently ruled that this public health law is a barrier to trade and should be abolished.  The EU has to rollback its ban or pay stiff penalties.  Under the WTO, governments can no longer act in the public interest.”

 

The first claim, that the WTO only benefits multinational corporations, is repeated everywhere and endlessly, but it is only a slogan and is not worth our time.  The ninth claim, that the WTO undermines national sovereignty, is curious since one of the principal aims of the international environmental establishment has been to undermine national sovereignty and since many environmental treaties succeed in that aim.  To take only the biggest threat to sovereignty, the Kyoto Protocol would create a global energy regime to override national decisions about energy use.  In fact, the WTO protects national sovereignty.  The several dispute decisions cited by environmentalists and Naderites alike as infringements on sovereignty are precisely the opposite.  The beef hormone decision prevented the European Union from using phony science to indirectly protect their own beef producers from foreign competition.  Unfortunately, many of the environmentalists’ grievances are being promoted by one government or another or one industry or another because their practical effect is disguised protectionism.

 

Sovereignty enters as well into the fourth claim, that the WTO is destroying the environment.  It is claimed that the WTO overturned a Clean Air Act regulation designed to require cleaner gasoline.  It did nothing of the sort.  It only required that Venezuelan refiners be treated in the same way as American refiners.  In the shrimp-turtle decision, it is claimed that the WTO gutted American environmental protections for sea turtles.  It did not.  The WTO simply ruled that American environmental laws cannot be exported to other countries under the guise of international trade.

 

That is really the main point of all the WTO decisions that the environmentalists don’t like.  Their goal is to create an international regime that will allow the United States to force other countries to abide by U. S. environmental regulations as a condition of trading with the U. S.  The EPA will thus regulate the world.  And if, say, Sweden has even more restrictive environmental regulations than the U. S., then Sweden can use the WTO to force their regulations on the U. S.  If this process ever begins, there will be no end to it.

 

This is what green NGOs want when they demand environmental linkage.  They want a seat at the table in all WTO deliberations in order to turn the WTO into an international environmental enforcement agency.  The linkage issue was one of the principal points of disagreement at the WTO Ministerial in Seattle and one of the principal reasons that the talks collapsed.  Nearly all the developing nations oppose linkage because they see it as just another variant of imperialism.  The opposition to eco-imperialism even extends to some environmental groups in developing countries.  For instance, the Centre for Science and Environment in India published a paper this spring that argues that international environmental negotiations are skewed in favor of the environmental concerns of developed countries and ignore the environmental concerns of developing countries.  The paper argues that India should oppose the environmental agenda being imposed by the United States and the European Union.  

 

The attempt to link environmental issues to the WTO and bring green NGOs into the negotiating process is the gravest threat to international trade before us.  The Clinton-Gore administration has stated that we can have it both ways—that we can increase world trade and accept environmental linkage.  But there is no “third way” on this issue.  Luckily for all of us, wiser governments prevailed in Seattle and opposed linkage categorically.

 

The threat posed by linkage to international trade has been most ably stated in a petition, “Third World Intellectuals and NGOs Statement Against Linkage,” which was circulated last fall by Professor Jagdish Bhagwati of Columbia University and which has been signed by many of the world’s leading trade economists.  The petition makes a powerful case that trying to link environmental and trade policies in international bodies will undermine both environmental protection and world trade.  In the words of the petition, “You cannot kill two birds with one stone.”  As Professor Bhagwati said in a talk to a conference on international trade organized by Senator Bob Kerrey in Omaha in 1998,  “Free trade is a moral cause.  Why?  Because, as Democrats here and Social Democrats and Liberals abroad fully appreciate now, our social agendas cannot be advanced without economic prosperity.”

 

We may disagree with Professor Bhagwati about what our social agenda should be, but his point is applicable nonetheless.  WTO negotiations to lower trade tariffs and barriers are almost impossible now.  Mixing controversial environmental issues into these trade liberalization negotiations can only lead to the collapse of the WTO process, a process which has brought untold benefits to people throughout the world and which could still bring more benefits in the future.     

 

Madam Chairman, this concludes my testimony.  I would be happy to answer any questions that you or other members of the committee may have.