Abstract of a Research Paper on
"Trade and the Environment"
The GISPRI established
a research committee on trade and the environment two years ago, well
before any other research institutes in Japan began studying the issue.
Given the growing international discussions on this issue at WTO, OECD,
environmental NGOs and other organizations, GISPRI published a research
paper on the issue in this May. The abstract of the paper is given below.
1. Background of
the Issue on Trade and the Environment
After the end of the
Cold War, the world economy lost its ideological coordinate axis of
East and West which had served as criteria for settling disputes. Then
a period of megacompetition has been ushered in, in which developing
economies will remap the whole world with their abundant, cheap labor
and less strict environmental regulations than in developed countries.
The idea of sustainable
development was introduced in 1987 by the Brundtland Commission
set up by the United Nation, which called for creating a society in
which developmental goals can be reconciled with environmental goals;
this led to the Earth Summit held in Rio de Janeiro in 1992.
Thus, in the recent
international economy, the tendency of linking the economics of individual
countries with social problems has become remarkable. The issue of trade
and the environment is the most typical, stemming primarily from four
causes:
-
Rapid development
of world economy and expansion of trade under the leadership of
GATT and the U.S.A.
-
Global destruction
of the environment as a result of this trade expansion
-
Continuing increase
in the population and prevailing poverty in developing countriey
-
Participation
of non-government groups (NGOs, etc.) in environmental problems
This huge issue has
two major components: free trade vs. protective trade, and the South
vs. the North. In the World Trade Organization (WTO), which was organized
to take the place of GATT in January of this year, the problems of trade
and the environment and of trade and labor are viewed as the main issues.
Given this background,
the value of maintaining the free trade system in a structure of international
cooperation is discussed here, including NGOs and multinational enterprises
as well as nations with an eye toward sustainable development and with
common environmental problems.
2. Environmental
Policies Seen from the Trade Perspective
Trade policies were
established to assure an efficient distribution of resources, and they
have generally raised the living standard of the majority of the world's
people. However, it has recently been realized that trade practices
which have not covered costs for environmental protection often incur
externalities, in the form of global environmental pollution such as
acid rain and destruction of the ozone layer. This is especially true
in developing countries which are rich in natural resources and seek
high economic growth to dig themselves out of poverty. Some advanced
countries are attempting to solve this problem by restricting trade
with those which cannot afford the cost of environmental conservation
measures.
This has had only
partial effect, however. In the author's opinion, policies to include
some offsetting environmental costs with the price of objects of trade
and giving developing countries financial aid (the carrot)
will be far more effective than trade restriction (the stick)
which will only further isolate those with neither funds nor the technology
needed to preserve their natural environment.
3. Trade Policies
Seen from the Environmental Perspective
The purpose of environmental
policies is sustainable development, but ideas on the environment and
related conditions differ from country to country. If one country imposes
quotas, trade restrictions, or import barriers with no clear scientific
grounds but with the claim of protecting the environment,
this will immediately lead to a system of protective trade.
If, on the other hand,
a trade policy aiming at efficient distribution of resources includes
an amount for environmental protection which leads to economic efficiency
and the realization of economic welfare, the inevitable growth of that
country's economy will stimulate further steps to protect its environment.
This is a trade policy compatible with an environmental policy, and
is, of course, to assure sustainable development.
4. A Look at an Actual
Problem
a. Tuna and dolphin:
[Outline]
The case involves
the USA prohibiting imports of yellowfin tuna from Mexico on the grounds
that the practices of fishing of tuna kill dolphins when they are captured
in the purse seine nets used for catching tuna in Mexican seas. Mexico
filed a suit with GATT accusing America of a violation of free trade.
GATT decided that America's application of its own environmental standards
outside its boundary and prohibiting imports because of a different
production method were contrary to GATT.
[Problem]
(a) Application of
one country's environmental standards outside its own boundary -- In
this case, the grounds for America's prohibition of imports was its
own environmental standard called the Marine Mammal Protection Act (MMPA).
If such standards are unconditionally applied outside the boundaries
of the country establishing them, this is certain to immediately open
a Pandora's box of protectionism.
(b) Application of
environmental standards -- Production Process Methods (PPM) -- There
is a question whether, as in this case, a production method (particularly
one based on a moral judgment) which has no effect on the product (yellowfin
tuna) should be regarded as environmental standards. The author is against
such application for two reasons. It could be abused for political purposes,
and it is technically difficult to determine at the border whether the
PPM employed in a product meets the environmental standards of the importing
country.
b. Relationship between
GATT terms and trade restriction terms of the Multilateral Environmental
Agreement (MEA):
[Outline]
Although no case has
yet arisen, it is possible that among the 180 MEAs, under the trade
restriction terms provided in the 18 Agreements including Convention
on International Trade in Endangered Species of Wild Fauna and Flora,
the Basel Convention, and the Montreal Protocol, if a nation belonging
to both GATT and MEA restricts the import of an item from a GATT member
which is not an MEA member country, the former will be in violation
of GATT.
[Solutions]
GATT proposes two
solutions: to insert the word environment in Article 20
and to apply the Waiber method in Article 25 to each individual case.
It is pointed out, however, that environment could be
far broadly interpreted in the former method, and the latter method
may result in inconsistency due to case-by-case solutions.
In addition, a case
that has violated the Superfund Act concerning the effect of environmental
standards on industrial competition, and the Drink Container Case in
Denmark that raised the problem of life cycle assessment (LCA) are well
known.
5. New Problem
Today, in countries
in the South, rapid economic growth cannot keep up with environmental
protection. Countries with bargaining power, like China, are also emerging.
China is an example of a country which is consuming a large amount of
coal in its pursuit of economic growth, to the extent that neighboring
countries are beginning to fear this might cause acid rain. China is
not yet a member of GATT/WTO, however, and there is no international
agreement on acid rain; trade restrictions by a neighboring country
would thus have no effect on China. This makes the establishment of
international cooperation systems based on technical and financial aid
and local solutions highly desirable.
6. The Present International
Discussion
a. GATT:
At the Uruguay round, the phrase a certain degree of consideration
of the environment was added to the preamble of the WTO and
SPS.TBT Standards. Also worthy of note is that "Trade and Environment
Committee" was established based on the decision made at the meeting
of Cabinet ministers held in Marrakesh in April 1994. The results of
this committee's investigations are to be reported at the first meeting
of WTO Cabinet ministers in January 1997.
b. OECD:
As far back as 1972 OECD came out with the "Polluter Pays Principle"
(PPP), and it has since been widely supported as governing the polluter's
liability in matters of the environment. Joint Committee of Specialists
in Trade and the Environment was established in 1992 in which trade
specialists (including those in NGOs and industrial circles) and environmental
specialists cooperated in investigations. The Committee submitted its
final report to the Cabinet Committee in May this year.
c. NAFTA:
The North American Free Trade Agreement concluded by the USA, Canada
and Mexico in December 1992 is often referred to as the greenest
agreement. The environmental sovereignty of the three member
nations is stated in the supplement to the Agreement. It also spells
out the priority of environmental considerations, and states that if
MEA and NAFTA do not agree, MEA takes precedence. Among the provisions
is one stating that an NGO or even an individual can file a suit with
the panel on a problem of trade or the environment. The most remarkable
point, however, is the apparent "WIN-WIN Strategy": Mexico,
which is said to have less strictly followed environmental regulations,
has promised to observe the Agreement and has therefore been admitted
to the American market. Here, the North and South relationship is taken
into account as well as the environment.
7. Response from
Industrial Circles
Internationally, BCSD
(presently WBCSD: World Business Council for Sustainable Development)
has proposed that efficient actions on protection of the environment
be promoted by a combination of direct restrictions, private voluntary
restrictions and economic methods. This move has encouraged business
circles to become involved, voluntarily with the International Standardization
Organization (ISO) and LCA. This is expected to develop into environmental
assessment action and a green GNP.
8. For International
Solution of Trade and Environmental Problem
The diagram below
shows details of the following points:
-
Take into consideration
the developing countries where environmental deterioration is severe.
The solutions should be targeted toward sustainable development.
-
Establish an international
cooperative system to draw up effective plans and see that they
are practiced. Since WTO is an organization concerned with trade,
there must be cooperation with other organizations in the UN on
environmental problems.
-
As in NAFTA and
OECD, business circles and NGOs should be recognized as supplementary
groups to any intergovernmental panel. Multinational enterprises
that are well informed on the environmental conditions of both advanced
and developing countries are expected to play especially important
roles as bases for the transfer of environmental technology through
Foreign Direct Investment (FDI) and environmental education provided
in employer-employee situations.
-
Free trade is
recognized as a key means of economic development. The problem is
how to incorporate a consideration for the environment within it.
Trade restrictions for conservation of the environment are not out
of the question, but they should be kept to a minimum and economic
means should be adopted to the greatest extent possible.
9. Assignments to
Japanese Policies
Because of its achievement
of rapid economic growth based on a strong export industry after World
War II, and simultaneous solutions to pollution problems using its own
technology, Japan should do the following:
-
Take steps to
establish an intergovernmental panel where the North and the South
can discuss their problems.
-
Take the lead
in encouraging multinational enterprises to transfer environmental
technology to developing countries and NGOs to take charge of environmental
education worldwide.
-
At the APEC to
be held in Osaka this year, propose establishment of a mediation
committee of trade and the environment (similar to the Mediation
Committee of Investment), Japan should take advantage of the APEC
opportunity where China and other economically rapidly growing countries
will be present.
Written by Akira Yamada,
ISPR.
Note: The
responsibility for the wording of this article lies with the author.
It represents neither the viewpoint of the MITI nor of the GISPRI.
|
