attention must be paid to development needs. Development, at the same time, will not be sustainable if attention is not paid to the environment. To satisfy the objectives of sustainability and development, and to preserve options for future generations (itself a central goal of sustainable development), economic and environmental considerations must be integrated. (2) Throughout the 1980s, the concept of sustainable development was refined still further and there evolved a greater understanding that environmental problems derive from particular models of development and patterns of economic activity, and not from discrete actions taken by individuals, corporations, governments, or multilateral development agencies. The focus on trade issues in the 1990s can be seen as a natural step in the evolution of critical thinking within the environmental community.(3) Trade is an increasingly important factor in national economies and plays a central role in determining the patterns of economic behavior between nations. The expanded definition of trade, which now includes issues such as investment and intellectual property, has helped shape the nature of development within and between nations. World trade, which totals over $3.5 trillion annually, has played a significant role in determining how, and in what manner, the natural resources of our planet are utilized. This is not to say that trade patterns are the sole determinant of resource use, since most of the economic activity taking place on this planet is domestic and not international. Nevertheless, as more nations engage in steadily liberalized world trade, the role of trade in determining resource use will expand. If understood in the context of sustainable development, environmental concerns and trade activities are not necessarily at odds, and should be dealt with in an integrated fashion. It is clear that trade policy which does not consider environmental impacts can undermine the natural resource base on which continued, or future, development depends. At the same time, it is obvious that environmental policy, framed without regard to development needs, can be equally short-sighted. Within the context of sustainable development, trade and environmental policy become means by which to achieve a higher goal. The implications of this approach are captured in an excerpt from the OECD's recent "Joint Report on Trade and Environment" which concludes that: It is, therefore, important that trade policies are sensitive to environmental concerns and that free trade is not an end in itself...") One of the most important keys to understanding the environmental perspective on trade issues is to recognize its basis in the concept of sustainable development. It is, therefore, necessary to correct two misconceptions this perspective seems to have generated. First, the environmental perspective on trade should not be construed as anti-trade, since trade can be an important instrument by which to achieve development that is economically and environmentally sustainable. Second, this approach is not an attempt to extort from trade practices the means to cure all of the world's environmental ills. What is critical is the intersection of trade and environmental concerns. WHY FREE TRADE IS NOT A PANACEA (AND NEITHER IS PROTECTIONISM) The dynamic relationship between economic activity and the health of the environment, and the implications of this relationship for sustainable development, are now widely accepted, as is the recognition that change is needed in the patterns of global economic activity in order to better address environmental concerns. One of the most active prescriptions for addressing these concerns, however, is a strong dose of free trade. In response to environmental criticism of the NAFTA negotiations, for example, the Bush Administration argued that the agreement, which would further liberalize trade between the U.S., Mexico, and Canada, was deserving of support because it would increase the financial resources available for environmental protection, particularly in Mexico.(5) Unfortunately, while free trade agreements can lead to greater economic growth and a greater pool of funds targeted for environmental protection, there is no guarantee that this will necessarily occur. Further, while acknowledging that environmental protection cannot occur in the absence of some level of economic growth, promoting free trade as a panacea for resolving environmental ills ignores some of the very real costs that it entails. As Patrick Low and Raed Safadi of the World Bank have noted, "This proposition is contentious, as many environmentalists would argue that wear and tear is positively correlated with income, especially in relation to the global commons.”(6) An awareness of the wear and tear associated with liberalized trade begins with an understanding of the higher energy costs associated with an increased transportation of tradeable goods. Environmental impacts are felt in both the production and the use of energy associated with the transportation of goods (e.g. oil development in ecologically sensitive areas, and increased air emissions from trucks). Second, the transportation of these goods can, and often does, increase the possibility of environmental accidents, the most obvious example of which is the recent Exxon Valdez oil spill in Alaska. Export-led growth resulting from free trade agreements can also promote a rapid and unsustainable extraction of natural resources. The unsustainable harvesting of tropical timber to gain foreign exchange is but one example of this process.(8) Another potential impact of free trade is the chilling effect that it can have on the ability of federal, state, and local governments to establish the highest environmental standards they deem appropriate. Provisions of the U.S.-Canada free trade agreement have already been used to attack U.S. domestic environmental regulations on asbestos.(9) Finally, it is possible that free trade agreements can undermine international efforts to protect the global commons. Korea, which is a party to GATT, but is not a signatory to the Montreal Protocols on the production and use of chloroflourocarbons, is expected to challenge this international environmental agreement as illegal under GATT articles.(10) The limitations of free trade as an instrument for sustainable development are also evident on theoretical grounds. Economists like to argue, for example, that one of the principle benefits of free trade is that it leads to a more efficient allocation of the earth's resources. Unfortunately, in terms of natural resources, this theory only holds true if externalized environmental costs are internalized. Though some mechanisms are available for doing so (for instance, taxes and tradeable pollution permits) they are not utilized in any current trade agreements, neither are they being actively considered in any current trade negotiations. A related critique of free trade suggests that comparative advantage is not defined solely in terms of efficiency, but also in terms of lower cost factors of production. Countries with lower environmental standards, or more lax enforcement of environmental standards, can avoid the environmental costs associated with unsustainable natural resource use. In so doing, they can gain an advantage over goods that are produced in countries with higher standards, or more strict enforcement of environmental measures. Countries may not actively pursue policies of this nature to gain trade advantage, but investment may nevertheless flow to countries where such advantages exist, assisted in no small measure by the investment liberalization provisions of free trade agreements.(11) Having outlined some of the limitations in applying free trade as the antidote for environmental distress, it is imperative to immediately point out that this does not make the case for using protectionism as a means for achieving sustainable development. Indeed, there is an emerging body of literature that suggests that protectionism, or at the very least closed economies, can have an even greater negative impact on the environment. Protectionism rewards an inefficient use of resources, and its most direct impact is felt in developing countries, i.e. those least able to afford continued obstacles to their own development. While protectionism might be justified for some industries, at certain stages in a nation's development, the application of protectionism is rarely the most effective policy. Free trade can increase competitiveness and, in so doing, can make a significant contribution to industry employing new, and less polluting, production methods.(12) EMERGING ISSUES RELATED TO TRADE, ENVIRONMENTAL POLICY, Much of the debate on trade and environment has centered on demonstrating the relative merits of free trade or protectionism, or open or closed economies, in dealing with environmental problems. If these problems are discussed in the context of sustainable development, a more optimal use of collective brainpower would be spent in identifying the emerging issues of trade and environment, and raising the questions that need to be resolved in order for world trade to promote sustainable development. This section of the paper is dedicated to that effort. Standards One of the most obvious issues involving trade and the environment is how to deal with the differences in environmental standards that exist between nations. On the one hand, there is a concern that exporters in countries with lower environmental standards will have a competitive advantage over exporters in countries with higher standards. Some have proposed creating an environmental code which would treat the lower standards as "subsidies" subject to the imposition of countervailing duties to correct their perceived impact on trade.(13) On the other hand, many recognize that a scarcity of technical and financial resources may make it difficult, particularly for the developing countries, to both establish and enforce the same level of environmental standards that exist in the more industrialized countries. If exports from these countries face trade sanctions based on their lower standards, then they will be at a competitive disadvantage vis-a-vis countries with higher environmental standards. In dealing with the issue of differential environmental standards, it will be necessary to discuss technical and financial resources necessary for environmental standards to be raised worldwide. A discussion of standards should also address three other issues of critical interest to the international trade and environmental communities. The first would be an analysis of proposals to “harmonize" international standards. The environmental community is concerned with the process to be followed in setting these standards, and the use of the standards themselves. We would prefer to see international standards serve as a floor, rather than a ceiling. We would like to have a role in defining the situations where it is even appropriate to set international standards. Finally, we are extremely concerned that state and local governments maintain the right to set the highest environmental standards they deem appropriate for their needs. A second important issue relates to the use of "sound science" as the basis for evaluating the validity of national or subnational standards. The current argument in trade circles seems to be that standards higher than a harmonized international norm would be allowable if such standards are based on sound science. While this might offer some relief to those concerned about protecting the rights of national and subnational governments, it ignores the relevance of risk assessment to the question of what is or is not a legitimate standard. Science can help determine the probability of impact of a given occurrence, but standards also incorporate a society's determination of tolerable risk. Finally, the August, 1991 ruling on the tuna-dolphin dispute seems to suggest that the GATT will only recognize standards that apply to goods and services in trade, and not the process by which these goods or services are produced. This is a head-in-the-sand attitude that runs counter to the political reality that, worldwide, countries are moving to adopt process standards, with related trade measures, that affect both natural resources as well as manufactured goods. Environmentalists are increasingly concerned about the life cycle of a product, beginning with the extraction of natural resources in the production process, but also including a consideration of the environmental ramifications of transport, marketing, packaging, consumption, and disposal. Rather than arguing that process standards and trade do not mix, a better use of time would be spent in the development of principles by which to avoid the use of process standards as protectionist devices.(14) Transparency and Public Participation Transparency is a word with two entirely different applications depending on whether one is primarily concerned with environmental protection or the promotion of free trade. To the international trade community, the term transparency generally applies to the promulgation of environmental policies, laws, and regulations. The complaint is often heard that these measures are difficult to understand, and that their development and implementation are not transparent. Greater transparency for the international trade community is usually a battle cry for greater openness in the development and implementation of environmental policies, laws, and regulations which can affect trade. To the environmental community, greater transparency is a battle cry for increased openness and accountability in the formation, negotiation, and implementation of trade policies and accords. A closely related need is to increase public participation in these activities. In comparison to the deliberations and operations of other multilateral economic institutions, such as the World Bank and the International Monetary Fund, multilateral trade policy, particularly as it relates to the GATT, is shrouded in an even greater veil of secrecy. Increased transparency and public participation means increased access to trade documents, and increased openness of the decision-making process within institutions like the GATT. As the negotiations surrounding the U.N. Conference on Environment and Development have demonstrated, this new openness can be accomplished without undermining the negotiating positions of individual governments.(15) Dispute Resolution The issue of how to resolve trade and environmental disputes is closely related to the issue of standards, and has been affected in the extreme by the aforementioned GATT ruling in the tuna-dolphin dispute. Any discussion of how to formulate more effective dispute resolution mechanisms must incorporate the concerns expressed above with regard to transparency and standards, as well as issues that may overlap with a discussion of international environmental treaties and the GATT, and issues of protection of the global commons. Other concerns related to dispute resolution have to do with the perceived lack of expertise of trade panels in dealing with environmental issues. Some suggestions are to include at least one environmental expert on any panel that is dealing with these disputes, and to allow amicus briefs to be filed by interested parties. Principles should be developed which can help identify disputes that are not appropriate for resolution by trade panels. Another question relevant to the establishment of more effective dispute resolution mechanisms is where the burden of proof should lie in resolving trade and environmental disputes, and the role of "sound science." Current policy seems to place the burden on the governmental entity establishing the policy or standard in question. Further, the extent to which environmental measures are based on sound science seems to be the litmus test by which departures from a common standard will be judged. Most in the environmental community feel that the burden should be placed on those challenging environmental measures to prove that these measures are not legitimate. Moreover, as discussed earlier, the environmental community is extremely suspicious of what the test of sound science will mean in practice, especially when the role of risk assessment in setting standards is ignored.(16) |