Reproduced, with permission, from:
U.S. Office of Technology Assessment. 1992. Trade and the environment: Conflicts and opportunities. Report no. OTA-BP-ITE-94. Washington, D.C.: Government Printing Office.
Until recently, both the United States and international institutions dealt with trade and environment policies separately, with little attention to their interactions. Environmental considerations have been largely absent in the trade regime regulated by the General Agreement on Tariffs and Trade (GATT). Similarly, national environmental policies sometimes have been devised with little concern for possible trade effects.
Several international forums are now examining trade/environment interactions, as are various U.S. Government agencies through the interagency working group coordinated by the U.S. Trade Representative (USTR) (see ch. 2). This chapter discusses the possible need for trade/environment guidelines to facilitate better coordination of trade and environmental policies at all levels. It also reviews possible changes to GATT, such as special recognition of multilateral environmental measures and modification of dispute resolution procedures. The chapter further examines the U.S. environment/trade policymaking process as it relates to domestic competitiveness issues and development of U.S. positions in international forums.
It might be easier to resolve trade and environmental disputes if broadly accepted guidelines were developed. Better coordination between trade/environment policy could ameliorate the potential for conflict. To have widespread credibility, a process for developing guidelines on trade/environment interactions ideally would need several features. Both developing and developed countries would need to participate. In some cases, the guidelines would have to consider the special needs of developing countries. The process would also need to involve both trade and environment agencies of participating governments and to safeguard both trade and environment objectives. Making the process open to public participation might give it more credibility with nongovernmental organizations (NGOs) and other interests.
In addition to GATT, other international institutions might contribute to the process. The most thorough discussion of trade/environment interactions to date has been at the Organisation of Economic Co-operation and Development (OECD). Because both trade and environment agencies are involved, OECD discussions may produce guidelines for addressing trade and environment questions in an integrated fashion. OECD members are working to revise the 1972 "Guiding Principles Concerning the International Economic Aspects of Environmental Policies" (see ch. 2). But OECD has no power to set policy for nonmembers. Moreover, developing countries are not OECD members and might not accept OECD's findings. Hence, further discussion and action in forums with broader membership will probably be required.
Various United Nations agencies might contribute. As discussed in box 5-A, the final preparatory meeting before the upcoming United Nations Conference on Environment and Development (UNCED) produced draft language on trade/environment matters, including some possible principles. Some of the UNCED discussion drew on provisional findings from a recent session of the United Nations Conference on Trade and Development (UNCTAD) which, among other things, considered several trade and environment issues within the context of sustainable development. [1]
New UN arrangements for coordinating environment/development issues may also emerge. Several alternatives were discussed in UNCED's preparatory meetings. One possibility would be to use the existing United Nations Economic and Social Council (ECOSOC) as a governing body to deal with environment/development connections. Another option would be to establish a new high-level multilateral coordinating mechanism. A third possibility could be to set up regionally or nationally focused mechanisms.
Whatever its specific form, such a coordinating institution might work with GATT (which is autonomous, but affiliated with the United Nations) and/or OECD to further develop some procedural and substantive guiding principles on trade and environment questions. To this end, participation by other international organizations (such as UNCTAD and the United Nations Environment Program) might be encouraged. Existing international environmental and scientific institutions could work with GATT to the same end. A few areas in which guidelines could be useful are identified below. (See also ch. 3.)
Some national environmental regulations might impede imports more than necessary (see, for example, the discussion of the Danish bottles case in ch. 4 and app. A). Application of existing GATT and OECD principles (such as national treatment and nondiscrimination, see chapter 2) have helped limit circumstances in which trade conflicts might arise. In addition, guidelines for balancing trade and environmental concerns would be helpful. (see ch. 4.)
Guidelines also might help identify appropriate and inappropriate circumstances for application of trade restrictions aimed at influencing environmental conduct by other countries. As discussed in chapter 3, many factors could be considered in evaluating whether such measures are appropriate-- for example, the importance of the environmental problem, the domestic efforts made by the country or countries in question to address that problem, the efforts made to reach an agreement that would make trade measures unnecessary, and the financial or other impacts of the trade measures.
In particular, there might be a presumption in favor of multilateral action. To some, multilateralism confers more political legitimacy than unilateral measures. Unilateral measures often do not take foreign interests into account. As a result, laws and regulations can disadvantage foreign firms. This happened with a U.S. tax to pay for Superfund cleanup, in which the United States taxed imported petroleum at a higher rate than domestically produced petroleum (see app. A), and in the ban on certain tuna imports taken pursuant to the U.S. Marine Mammal Protection Act. In the latter case, U.S. tuna fishermen were given a fixed limit of dolphin kills each year but their foreign counterparts did not know their limits for a particular year until the year ended. [2]
In the absence of effective international environmental agreements, some countries may view unilateral trade measures as playing a useful environmental role at times. In some cases, these measures or threat of their use may have induced countries to change their behavior more quickly than they otherwise might. [3] This may have happened with several threatened unilateral U.S. trade measures directed at conserving fish and wildlife. U.S. threats to employ Pelly Amendment sanctions [4] led to a commitment by Japan to phase out imports of hawksbill turtle shells. [5] Similarly, U.S. negotiations (backed up by possible use of import restrictions) have been effective in obtaining commitments from 14 targeted countries to change their shrimp catching practices to protect sea turtles. [6]
The justification for unilateral measures to regulate conduct abroad seems stronger when the environmental impacts extend beyond the targeted country. When the effect of the behavior abroad appears localized, trade measures may be harder to justify. However, it is by no means unprecedented for one country to seek change in another country's policies, even when those policies have only internal effects. For example, the United States has in some cases made aid and trade relations contingent on a foreign country's human rights record; GATT itself permits members to ban imports of goods made with prison labor. [7]
Guidelines for national regulations with trade effects might also take into account the need to foster the development of environmental technology. Environmental regulations are sometimes an important driver of environmental technology. For example, national regulations pursuant to the Montreal Protocol, signed in 1987, prompted technology development enabling phaseouts of some categories of ozone-depleting chemicals at a faster pace than most thought possible. When an environmental regulation appears likely to accelerate technology development, that factor might weigh in its favor. Governments can further encourage the development of environmental technology by other means such as research and development (R&D) support and tax incentives. Trade rules might be adjusted to encourage such government action, as recognized in OECD's 1972 Guiding Principles and in the Uruguay Round proposal to exempt certain R&D subsidies from countervailing duties (see ch. 4).
While helpful, guidelines on trade/environment issues will not necessarily resolve conflicts that could arise within GATT. Mechanisms might still be needed for GATT members to finally adopt, agree to, or tap into such accommodations.
International environmental agreements might have a special claim in GATT; indeed, GATT's Secretariat has urged multilateral action with respect to the environment as a way of reducing the potential for conflict. GATT contracting parties could approve resulting trade measures in several ways, including:
GATT also could be amended to automatically approve trade measures under agreements meeting certain criteria. This approach could be modeled on GATT Article XX(h), which permits an exception to GATT's rules for measures:
. . . undertaken in pursuance of obligations under any intergovernmental commodity agreement which conforms to criteria submitted to the [GATT members] and not disapproved by them or which is itself so submitted and not so disapproved.
While Article XX(h) has never been invoked, and the criteria to be used have never been established, one could in principle amend GATT to provide a similar mechanism for environmental agreements. However, an amendment to GATT's text is quite difficult to achieve. Also, thought would have to be given to the criteria for evaluating the trade provisions of particular agreements. These criteria might, for example, include the number of signatories, the openness of the negotiating process, and the relative roles of trade and nontrade measures.
Finally, some members of GATT could decide to develop a separate code or treaty for environment/trade matters. Such agreements only bind those who accept it. However, its signatories could agree to apply guidelines or other trade/environment rules among themselves.
GATT's dispute resolution process was not set up to weigh the merits of competing environmental and trade claims. Yet such a weighing is likely to be needed in the future. Such weighing would first require understanding the limits of an often ambiguous body of scientific evidence. Members of a dispute resolution panel could not be expected to articulate a consensus in cases where the scientific community is divided. Scientific evidence is only one aspect to be weighed. Environmental disputes usually have societal dimensions that require judgments about how to balance environmental, economic, and other concerns, while GATT panels are intended to focus on a single dimension, trade law. [9] A GATT panel could more effectively make these judgments if it worked closely with international organizations with expertise in science, environment, and economic development. Requiring some panel members to possess scientific, environmental, and economic development expertise, as well as trade expertise, could help enable panels to be more effective in weighing interests.
GATT's process for resolving disputes is normally closed. Only governments have the right to make presentations to the panels. Public access to GATT panel proceedings is not allowed, and panel reports normally are not made public until adopted by the GATT Council.
A closed process might make it more likely that parties will settle their dispute without a formal ruling. However, the environment-related disputes brought to GATT are of interest to more than just the governments that are parties to the dispute; a more open process would better inform the panel and help countries weigh competing concerns. Public awareness can be especially important for environmental concerns, because it allows those concerns to be heard by governments.
GATT's dispute resolution process might be better able to address environmental issues if nongovernmental organizations (NGOs) were provided opportunities to present evidence and argument, and if there was prompt public disclosure of both submissions to a dispute resolution panel and the panel's report. NGOs (which could include business groups as well as environmental organizations) often have important information and perspectives; governments might not always present that information, either out of ignorance or for political reasons. Without this input, panels might be poorly informed about some dimensions of the dispute.
Closer coordination of trade and environmental policies would be useful. The United States also needs to develop positions as contributions to international forums such as OECD. This is one purpose of the interagency task force on trade and environment.
Policy coordination requires some agreement about goals. Given the different perspectives on trade and environment issues, developing agreement on goals may be difficult. Indeed, given the many agencies involved in the interagency discussions, differences in opinions about trade and environment matters, and how they should be addressed, no doubt will continue to exist.
Guidance from Congress might make the USTR-led interagency work group more effective and better able to resolve differences among agencies. Congressional oversight on the interagency process could be needed to ensure that U.S. negotiators have adequate policy guidance. It might help for Congress to encourage continuing coordination on trade and environment policy, so that coordination would persist despite changes of political party and policymakers.
At some point negotiations (and preparations for negotiations) must be conducted in confidence. However, while U.S. negotiators are still in the early stages of formulating positions, public involvement can contribute to effective policymaking by assuring that all views are considered. International discussions pertinent to trade and environment are progressing in GATT, OECD, and the United Nations. U.S. statements (or lack of statements) can even at this early stage affect the debate. In theory, this might lock in U.S. positions before the public has much input into the process. [10]
Although some steps have been taken to broaden access to environment/trade policy discussions, public involvement in the interagency process has been limited. As mentioned in chapter 2, the U.S. delegation to some of the OECD trade/environment discussions has included one representative from an environmental organization and one representative from industry. These representatives have attended some interagency meetings. However, the group meetings are generally not accessible to the public; drafts of background and position papers have been slow to issue forth; and the Administration does not routinely keep the public abreast of developments in international forums or make available copies of public documents issued by those forums.
One issue of longstanding interest to Congress is the effect of environmental regulations on trade and competitiveness. Congress has expressed concern that strict U.S. regulations could harm U.S. firms. Even if regulations are agreed to internationally, the ability to monitor compliance is often doubtful, [11] so that U.S. firms could still be at a disadvantage. Attempts to understand these effects have been hampered by problems with methodology and data (see app. E). Congress might consider calling for assessment of trade and competitiveness impacts when it enacts major new environmental laws, as it did under the 1990 Clean Air Act Amendments (see app. E). If Congress were to establish one agency as the overall leader on competitiveness issues, an option examined in a previous OTA report, [12] that agency might be able to conduct such assessments more easily than any existing agency.