Trade and the environment

Specialization

Income Growth

Technology

Transport

Environmental policy

Trade liberalisation

The environment

Pollution-havens

Weak evidence, except for some industries

Environmental Kuznets curve?

Pollution differs amongst equally rich countries

Environmental problems must be internalized

Uncertain trade → growth link. Institutions

Transfer of technology

Spill-over from preferences, policies and standards in rich countries

More transportation – energy, alien species

Less transportation – distance, lower subsidies, less tariff escalation

“Race to the bottom”/”chilling effect”

Competitiveness, harmonisation

Political effect of free tradeSource: Bach (2004): International Trade, Development Aid. and the Multilateral Environmental Agreements, Paper prepared for the Danish Ministry of Foreign Affairs, March 2004

Core problems in current WTO legislation

Non-discrimination - ”like products” Production and Processing Methods (PPMs) Least-Trade distortive Environmental exception - GATT article XX

Core disputes Tuna-Dolphin Shrimp-Turtle Beef hormone Asbestos

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

“... (b) necessary to protect human, animal or plant life or health;

“... (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; ...”

Core issues in the WTO negotiations

Environmental standards and labels – green protectionism Subsidies – double-win Environmental goods and services – triple-win Multilateral environmental agreements and the WTO – conflict or cooperation

Average tariff levels for environmental goods (in ad valorem percentage terms)

Applied MFN Bound End UR

Canada, EU, Japan, US 2.1 2.7

Korea, Mexico, Turkey 8.2 22.4

Czech and Slovak Republic, Hungary, Poland 7.4 7.0

Argentina, Brazil, Chile, Venezuela 11.2 29.2

China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, Taiwan, Thailand, Vietnam

9.7 35.9

Estonia, Latvia, Lithuania, Romania, Russian Federation, Slovenia, Ukraine

5.1 36.0

Source: OECD (2002), Average tariff levels for environmental goods http://www.oecd.org/dataoecd/50/12/2484545.pdf

Conclusion: Trade and the environment

No clear link between openness and the state of the environment - depends on the state of environmental policies, regulations and institutions

Trade may amplify the state of the environment.

In some cases trade measures are needed, But trade policies are second- or third-best options and may divert attention from appropriate environmental policies

Avoiding trade measures may inspire international measures

Trade liberalisation and environmental policies must go hand in hand

A more nuanced debate on environmental labels

Clear win-win situations for subsidies and environmental goods and services

The dramatic clash between MEAs and the WTO has not appeared but some problems remain

Source: Bach (2004): International Trade, Development Aid. and the Multilateral Environmental Agreements, Paper prepared for the Ministry of Foreign Affairs in Denmark, March 2004