Globalization, Trade Liberalization & The Environment

Globalization, Trade Liberalization & The Environment

Trade Protectionism Historical role of nation states was to nurture and protect domestic industries, markets and economies. They did this using: Domestic subsidies nurture growth of domestic industries and give them a competitive advantage over competing, foreign industries. - Tax breaks or grants/low interest loans for business investments - Subsidized (below-cost) access to inputs, transportation, etc. Outright trade bans/restrictions: specific goods/services from select countries not allowed in domestic markets. - Cuban products banned from US Trade tariffs: Goods imported into a country must pay a tax (“duty”) to the government of that country. Tariffs can be raised or lowered as desired to increase or restrict imports. - Duty at the airport when you try to bring much home with you - Taxes on imported cars from selected countries Trade Quotas: Restrict imports to set volumes/prices as a means to favor trade with one country, but not another. • Caribbean bananas (to UK) and Philippine sugar (to US)

Trade Liberalization = Free Trade Free Trade: promotes trade liberalization = lowering of barriers to free flow of goods & services. Examples: • GATT: General Agreement on Tariffs and Trade: Includes 108 nations, >90% world's trade. Since 1994, principles of GATT enshrined under the World Trade Organization (WTO). Accomplishments: substantially reduced trade barriers since WWII (incrementally). Recent negotiations since WTO formation have accelerated process. • NAFTA: North American Free Trade Agreement: Canada, US, Mexico; may eventually include Chile and others • EC: European Common Market • ASEAN, other regional trade associations, etc.

Economic Rationale for Trade Liberalization • Comparative Advantage: All countries differ in terms of their natural and human resource endowments. Most gains made if we permit individual countries to sell those products and services that they are best at producing -- i.e., for which they offer a “comparative advantage” compared to other countries. • Specialization: Encouraging countries to specialize in the production and sale of certain types of goods and services for which they have a comparative advantage. E.g., US = high tech/heavy industry; Canada = Natural resources and services; and Mexico = agriculture/labor-intensive industry, etc. • Non-discriminatory/Rules-Based: Products and services of equal quality should not be discriminated against based on country of origin or other social-political criteria Free Trade Works: e.g., NAFTA led to substantial increases in trade between US-Canada-Mexico in the matter of a few years.

Potential Environmental Benefits of Trade Liberalization • Increases cooperation between states on environmental issues, both as a direct & side-effect of multi-lateral trade negotiations and institution-building. -- e.g., European Union, NAFTA-CEC • Potential mechanism for raising environmental standardsby using membership in trade regimes is an incentive to green domestic policies and practices… - Eastern European countries must raise environmental standards considerably to join the EU • Declining subsidies and global competition will tend tosqueeze out less efficient producers. - old polluting industries in former Soviet Union and China replaced by modern, more efficient and cleaner ones - agriculture will shift to production away from marginal, environmentally fragile sites to better quality sites

Potential Environmental Benefits of Trade Liberalization,cont’d. • Promotes transfer of “green” skills, knowledge and technology: Pollution technology, management know-how, etc. • International consumer pressure a force for environmental improvement. • Home Depot in US succumbs to pressure and agrees not to buy any wood from old-growth in BC • Forest Stewardship Council (FSC) • Promotes foreign investment and capital flows to LDC's that reduce poverty and provide $ resources for environmental improvement: - increased taxes support government environmental programs - higher standards of living = demand for clean environment - Higher standards of living = reduced family size

Environmental Problems with Trade Liberalization Increased economic growth increases consumption/depletion of resources, transport of goods, pollution impacts, etc. • China & India = 2.5 billion emerging consumers! • Transportation of goods and people a major cause of energy consumption and pollution Socio-economic, political and cultural disruptions: - Indigenous people impacted by resource development Domestic efforts to conserve natural resources may be undermined by inability to restrict exports of resources: - NAFTA guarantees US access to equal share of Canada’s oil & gas

Environmental Problems with Trade Liberalization, cont`d. • Domestic environmental policies and laws may come under attack as "non-tariff trade barriers"… could reduce ability of countries to use import controls as a means to change other country’s behavior. • Denmark's returnable beer/drink container law partly struck down as "protectionist" • US ban on Mexican tuna to reduce dolphin mortality overturned by GATT • Potential “race to the bottom” with environmental standards as a result of competition to attract foreign investment and support domestic industries • So far, little evidence that this is occurring on a broad scale • Existing and future multi-lateral, international environmental agreements may have their hands tied by trade rules. WTO is more favorable to MN agreements than unilateral actions. Nonetheless, serious challenges have yet to be mounted so it remains to be seen. • Basel Convention on Hazardous Wastes • CITES: regulate trade in rare & endangered species • Montreal Protocol regulates trade in ozone depleting substances

Status of Environment in Trade Treaties & Negotiations • Opening statement of the WTO: “....endeavour should be conducted with a view of raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development...” • Article XX, General Exemptions of the Agreement, includes:...“(a) measures necessary to protect human, animal and plant life or health; (b) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; (c) to address local or world-wide short supply.” • Committee on Trade & Environment (CTE): established in 1996, but progress, according to K. von Motlke (1999) not good: “... the limited technical nature of the Committee’s mandate (confined to examining the impacts of environmental regulation on trade, and not the reverse), and the near-total lack of progress in its four years of existence, suggest that environment remains part of the window-dressing rather than a significant concern within the trading system”.

Status in Trade Treaties, cont`d. • Subsidies Agreement: “Green Light Category” permits one-time subsidy of 20% of the cost to adapt existing facilities to new environmental requirements provided assistance is directly linked to the environmental issues. • In general, the WTO is much more open to multi-lateral environmental regulations, than to unilateral ones which are much more likely to be struck down as non-tariff, protectionist trade barriers (e.g., US dolphin-tuna struck down as such). • Agreement on Trade Related Intellectual Property Measures (TRIP) - extends intellectual property protection to plant varieties and micro-organisms: may come into conflict with Biodiversity Convention and subsequent efforts to establish BioSafety Protocol. • WTO Committee on Trade & Environment (CTE) established in 1995, but relatively weak and focused only on trade effects of environmental regulations (rather than the reverse) • 1999: WTO High-level Symposium on Trade & Environment suggests WTO is warming more to environmental concerns.

Harnessing Trade to Favour Environmental Protection • View in terms of wider processes of globalization • Green existing trade dialogue and processes: provide for international environmental dispute resolution mechanisms that more effectively reflect the science and provide formal means for wider public and NGO input • Support development of multi-lateral, non-descriminatory eco-labeling systems that reflect Process & Production Methods (PPM): i.e., goes beyond end-product qualities to include evaluation of the production processes (e.g., Forest Certification, Organic certification) • Ensure environmental treaties that include trade restrictions –CITES, Montreal Protocol, Basel, etc. -- are not superseded by trade treaties • Encourage the development of new multinational environmental agreements to meet the needs created by increasing trade and declining national influences

Greening Trade, cont`d. • Permit countries to continue act unilaterally to protect environment. E.g. Article XX of GATT permits countries to adopt measures to "protect human, animal or plant life, or health"--expand this. • Continue to pressure governments to shoot high with collective standard setting. • Use trade agreements and processes to encourage and promote trade and transfer of green ideas and technology between countries • Promote consumer awareness and activism on an international scale: international consumer pressure is critical now (e.g.. Nigeria and Shell; Greenpeace & GM foods, etc.). • Establish formal mechanism for protecting the interests of consumers and other people affected by the actions of multinational corporations

Globalization, Trade Liberalization & The Environment