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The Greening Of Trade Policy: “Sustainable Development” and Global Trade

Issue Analysis

Title

The Greening Of Trade Policy: “Sustainable Development” and Global Trade

 

  • Executive Summary
  • Introduction
  • The Environmental Critique of Trade
  • Free Trade and Environmental Quality
    • Free Markets Are Truly Green
    • Focus on Global Environment Fosters Ecological Central Planning
  • Trade-Related Environmental Standards
    • Green Protectionism
    • Policy Uniformity Breeds Cartelization
    • Eco-imperialism
  • International Environmental Laws and Principles
    • The Earth Summit: Defining Sustainable Development
    • Multilateral Agreements
    • Merging international trade and environment rules
  • Sustainable Development as “Free” Trade
    • Environmental Standards and the European Customs Union
    • NAFTA’s Green Accords
    • Global "Free" Trade: Greening the GATT
  • Implications of the Greening of Trade
  • About the Author
  • Endnotes

EXECUTIVE SUMMARY

World trade has been significantly liberalized during the last four decades;average tariffs have fallen from 40 percent in the 1950s to less than 5 percenttoday. The lowering of selected tariffs has not meant an end to protectionism,however. Increased competition brought on by growing trade has put pressure ongovernments to find new ways to protect domestic production in the absence oftariffs. A new rationale for protectionism is emerging which argues for therestriction of trade as a means of preserving and protecting the environment.The “greening” of protectionism and the merging of environmentalstandards into international trade agreements could fundamentally change theworld trading system.

Environmentalist objections to trade and proposals for the“greening” of trade require greater political management andregulation of the private sector; thus, they are fundamentally an assault onfree trade principles. Fearing lower environmental standards in the ThirdWorld, environmentalists call for new trade barriers to combat what they see as“eco-dumping.” To business interests fearful of competition,however, such trade barriers are just a disguised form of protectionism. Greentrade measures, championed as a means to harmonize environmental standards, arepumping new life into the old politics of protectionism, industrial policy, andover-regulation. The environmentalist critique of trade is rapidly becomingconventional wisdom.

Green protectionism is premised upon the idea of “market failure”and a theory of ecological central planning called “sustainabledevelopment.” However, environmental quality is only sustainable in thecontext of free market institutions and free trade. Markets have significantenvironmental benefits, including:

  • market forces promote increased efficiency in energy and materials use;
  • economic growth creates the wealth and technological resources necessaryto produce environmental improvement;
  • pollution problems decline in severity as per capita income rises.

A disturbing feature of green protectionism is eco-imperialism, in whichdeveloped countries impose unattainable and unaffordable environmentalstandards on the Third World, at the expense of economic development and thepoor. Moreover, green trade measures intrude on the sovereignty of Third Worldpeoples, depriving them of the use of natural resources such as fisheries,rainforests, and energy supplies.

The June 1992 Earth Summit produced a blueprint for environmental planning andinternational policy coordination, which calls for “sustainabledevelopment through trade liberalization.” An emerging body ofinternational law for global environmental protection is beginning to haveprofound impacts on trade and international economic affairs. Internationalenvironmental agreements and treaties may be harbingers of sweeping new globaltrade and environment policies. Many environmental agreements conflict withmultilateral trade rules, and pressure is mounting to incorporate internationalenvironmental policies into government-negotiated trade rules. Among the mostimportant environmental treaties which employ trade measures are:

  • The Montreal Protocol on Substances that Deplete the Ozone Layer;
  • The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal; and
  • The Convention on International Trade in Endangered Species of Wild Faunaand Flora.

Green protectionism gained a foothold with the environmental side agreement tothe North American Free Trade Agreement (NAFTA), a regional trade bloc. CarolBrowner, administrator of the U.S. Environmental Protection Agency, calls theNAFTA between the U.S., Canada, and Mexico, “the ‘greenest’trade agreement ever negotiated.”

The green trade agenda is now focused on the General Agreement on Tariffs andTrade (GATT), the system of world trade rules. GATT was designed in 1948 toexpand trade by reducing tariffs and other trade barriers. Historically,GATT’s free trade orientation has prevented it from incorporatingenvironmental standards or other social policy objectives unrelated to trade.GATT’s bureaucratic growth remains stunted due to the fact that itsprovisions are extremely difficult to amend. Lacking an internationalorganization, a binding charter, or enforcement provisions, the GATT isrelatively powerless and non-binding. The proposed World Trade Organization(WTO), negotiated by the Clinton administration, would be an internationalorganization with greater legal authority to enforce world trade rules throughbinding dispute settlement procedures. WTO provisions are more easily revisedand interpreted, and modifications to world trade rules could be negotiatedthrough a WTO Committee on Trade and the Environment.

If successful, the greening of trade would institute a new generation ofenvironmental regulatory controls, trade sanctions, and regulatoryharmonization. Bureaucratic centralization is incompatible with the objectiveof free trade. Further government intervention in the global market can onlyresult in the establishment of protected cartels and suppression of competitive enterprise.