CIESIN Reproduced, with permission, from: Shrybman, S. 1990. International trade: In search of an environmental conscience. EPA Journal 16 (4): 17-19.

International Trade: In Search of an Environmental Conscience

by Steven Shrybman

Trade agreements can substantially undermine national and international efforts to address ecological problems by ignoring the environmental implications of the economic forces they put into play or by deliberately subordinating environmental concerns to economic objectives. For much of the world, trade practices determine the scale and character of resource exploitation and use. This is particularly true for many developing countries where export of basic commodities and resources often represents more than 50 percent of Gross Domestic Product.

Unfortunately, these and other trade-environment linkages are poorly understood and rarely recognized. The outmoded notion persists that the economy and the environment somehow exist independently of each other.

The rules that govern most world trade are set out in the General Agreement on Tariffs and Trade (GATT), which is currently being renegotiated. Other important trade negotiations have either just concluded, like those between Canada and the United States, or are underway---between the United States and Mexico, and among the member nations of the European Community. The results of these negotiations will greatly influence global economic activity for the 1990s, the decade that will, from an ecological perspective, be the most critical in human history.

Nowhere is the failure to integrate the environment and the economy clearer than in the GATT negotiations in which, with only limited exceptions, evaluating the environmental implications of trade proposals is not even on the table. To make matters worse, the negotiations are veiled in secrecy, and virtually no opportunity exists for public comment or debate. Since environmental organizations, in particular, are excluded from the process, trade proposals are routinely put forward without any consideration whatsoever of their potential environmental effects. The most likely outcome of such a process is trade agreements which enshrine economic principles that are often at odds with environmental objectives.

There are some bright spots on the horizon. Governments are beginning to heed calls from the Brundtland Commission and others to integrate environmental and economic policy, development, and planning.

The G-7 economic summit in July 1989, for example, placed an unprecedented emphasis on environmental issues. The final communique from Paris addressed the "urgent need to safeguard the environment for future generations" and recognized that "environmental protection is integral to issues such as trade...." More recently, at a meeting on sustainable development in Bergen, Norway, ministers from the Economic Commission for Europe, representing Eastern and Western European and North American countries, agreed to "accelerate...the dialogue on the inter-linkages between environmental and trade ensure that trade does not bring about harmful environmental consequences."

However, while the need to integrate environmental and economic planning is gaining acceptance in theory, only tentative efforts are being made to actually put the principle into practice. While governments proclaim the principles of sustainable development, many important national and international "economic" institutions remain largely unaware of or indifferent to them.

Ignoring The Environment

Having considered the overall situation, let's examine some specific examples. In the language of multilateral trade, the agenda of current negotiations is to "liberalize" international trade by reducing import and export controls and by eliminating "non-tariff trade barriers." Let's consider each aspect of this trade agenda from an environmental point of view.

Export Controls and Sustainable Resource-Management Policies: For countries seeking to conserve non-renewable resources, the ability to control exports is often critical. Just as import controls, such as tariffs, can be used to protect local manufacturers, export limitations, such as quotas, can be used to protect indigenous resources. However, the GATT currently restricts the right of governments to control exports, and the objective of ongoing GATT talks is to further limit that right.

Not surprisingly, eliminating natural resource export controls is of considerable interest to developed countries that have co-opted the largest share of those resources and would like to ensure that such resources remain freely and cheaply available. North America, for example, which represents 6 percent of the world's population, consumes 25 percent of its energy resources. Developed nations as a whole, representing approximately 20 percent of the world's population, consume 80 percent of its natural resources.

To fully appreciate why controlling exports is critical to developing countries, it is important to note that international trade is carried out largely by private corporations, not national governments. For example, according to a survey by the United Nations Center on Transnational Corporations:

Eighty to 90 percent of the trade in tea, coffee, cocoa, cotton, forest products, tobacco, jute, copper, iron ore, and bauxite is controlled in the case of each commodity by the three to six largest transnationals.

Transnational corporations also control "80 percent of the world's land cultivated for export-oriented crops." In exercising this control in the developing world, they have encouraged the expansion of agricultural and resource production to serve export markets, rather than the needs of local people. The impacts can be appalling. For example, the Brundtland Commission has noted that during the 1980s, when drought and hunger were taking hold in the Sahel region of Africa, five countries in the region produced record amounts of cotton.

Less apparent, but probably even more destructive over the long term, are the ecological consequences of such policies. As the Worldwatch Institute points out, the wholesale export of vital resources from countries that are not self-sufficient in food or other essential resources has often lead local peoples to over-exploit remaining resources, such as rain forests, simply to eke out the barest existence.

Import Controls and Environmental Regulation: The most familiar type of import control is the tariff, and another objective of the GATT talks is to achieve "a substantial reduction or, as appropriate, elimination of tariffs by all participants." Eliminating import controls is likely to undermine environmental initiatives in several ways.

To begin with, there is growing evidence that the developed world is transferring its polluting industries and wasteful "resource- management" practices to the developing world. While quantification is difficult, a study undertaken for the Brundtland Commission estimates that in 1980 developing nations would have incurred over $14 billion in pollution-control costs had they been required to meet the prevailing U.S. environmental standards. For an industry able to export goods to the United States free from tariff restrictions, the absence of pollution-control costs can be an attractive incentive to relocate or establish new operations. This not only discourages environmental regulation in the developing world, it pressures developed countries to weaken standards, or avoid new ones, in order to keep industry at home.

The same dynamics have encouraged a flourishing trade in hazardous waste. As documented by the Worldwatch Institute, disposal costs in some developing countries are as low as $40 for wastes that would cost as much as $250 to $300 to dispose of in the United States. Specific instances have been documented of hazardous enterprises associated with the asbestos, smelting, and chemical industries being transferred to developing countries. Often desperate for economic growth, these countries have simply been willing to accept risks of environmental, public, and occupational health consequences. While efforts are under way to negotiate treaties to control the trade in hazardous waste, the thrust of current policies to weaken controls runs counter to them.

Subordinating Environmental Objectives

Environmental Regulation as Non-tariff Barrier: Another way in which trade agreements can defeat environmental regulations is to attack them as non-tariff barriers. A recent decision by the Court of Justice of the European Community illustrates how environmental programs can be forced to take a back seat to a country's trade obligations. The case before the European Court concerned Danish laws that required all beer and soft drinks to be sold in refillable containers. As noted by the Court, Danish regulations were "highly effective" and made no distinction between beverages bottled in Denmark and those imported to the country. Nevertheless, other member states of the European Community objected, as did retail trade associations. Both complained about the costs of collecting used bottles and argued for the right to sell disposable containers. In considering these complaints, the Court took into account the European Community treaty which imposes a duty on all member states to preserve, protect, and improve the quality of the environment. (No similar obligation exists under GATT.) It found the Danish regulations to be just such measures and accepted them as genuine and successful. However, the Court went on to find that Denmark had failed to prove that its reuse laws were "not disproportionate to achieve a legitimate aim." While Denmark could require a deposit on all beverage containers, the Court reasoned that it could not require them to be reusable. Even though it acknowledged that no actual restraint of trade had occurred, the Court concluded that:

There has to be a balancing of interests between the free movement of goods and environmental protection, even if in achieving the balance the high standard of the protection sought has to be reduced.

This case illustrates that when environmental laws are characterized as non-tariff barriers to trade, legitimate environmental programs can be relegated to second-class status and subordinated to trade objectives. Opponents of environmental regulation now have an important new tool to challenge environmental initiatives.

The Lowest Common Denominator: The U.S. government has proposed to harmonize certain standards under GATT so that food safety standards governing pesticide residues and food additives would have to conform to international norms. Clearly, the development of international agreements around environmental standards is desirable. However, there are reasons to suspect that the intent of the proposals is to lower environmental standards to a common denominator.

First, harmonization proposals are being promoted by those who are often outspoken critics of efforts to strengthen food safety standards in the United States and Europe. For example, the U.S. Department of Agriculture is a principle advocate for harmonization. The department describes harmonization as an answer to regulatory initiatives that it considers unjustified, including Europe's ban on bovine-growth hormone and California's rigorous pesticide initiatives.

Second, harmonization proposals would give the responsibility for setting food-safety and environmental standards to international scientific panels. Ethical and social considerations could be ignored, and the role of elected and democratic bodies, like the U.S. Congress, would be weakened.

Finally, and perhaps most telling, the proposed harmonized standards would operate as a ceiling but not as a floor for environmental regulation. To illustrate: Any country that established food-safety standards tougher than international norms, and applied those standards to imports as well as domestic products, would risk suffering retaliatory trade sanctions; on the other hand, a country that failed to live up to international standards might lose access to certain markets but would not be subject to GATT sanctions.

New Imperatives

Recent developments in Eastern Europe and the plight of many countries in the Third World underscore the need to reconsider current trade policies and agreements and to hammer out new, equitable policies that promote sustainable patterns of development. GATT initiatives must be developed quickly to make environmental protection and sustainable resource management explicit and central themes of any new or renegotiated trade agreement.

It is not too late to inject these imperatives into current trade negotiations. While the details will need considerable work, several general principles can be identified:

If trade policies continue to be advanced without regard for their environmental consequences, the result will be agreements that inhibit or defeat much-needed progress on the environment. The task before us is to define the relationships between trade and the environment, and having done so, to develop trade agreements that will sustain our ecosystem, rather than destroy it.

(Shrybman is Counsel for the Canadian Environmental Law Association.)