Trade and Environment
Natalia Popova

Tel: (831) 655] 807
Email: Natalia. Pot)ova@mns

  
  Editorials &r Opinion


Sunday, March 3,1999  
Trade and Environment
By Natalia Popova

WHY are Seattle and the state of Washington so special? Seattle was declared "Best Big Place to Live in the US"(Money, 1998), "Best City for Work and Family"(Fortune, 1996), "Best City for Business"(Fortune), etc Recently, the state of Washington decided to invest $225 million in saving the salmon in the local creeks and streams. The farmers agreed to rent fertile streamside acreage to preserve the fish habitat. How can the state of Washington afford to make such investments? The explanation is not difficult to find While Washington state accounts for 2% of the nation's population, it ranks fourth in total exports and first in exports per capita. International trade is the fastest growing sector of the local economy, about 4% annually. One in every four jobs in Washington State depends on international trade.

The above example proves that trade and environment are not mutually exclusive. On
the contrary, they are interrelated and mutually dependent. It is very difficult to imagine
that the population of Washington would be interested in the salmon's fate if the people
were starving. Most probably, they would eat all of the salmon available. Although this is
an extreme example, it illustrates a basic truth - people living at a subsistence level are
not willing to make sacrifices in favor of the environment. This truth applies not only tohuman beings, but also to entire countries. Poor countries are more concerned about how
to make their industries work, how to attract foreign investment, how to create more jobs, and usually their last concern is how to save the environment.

Trade is of crucial importance to the environment, because it brings the necessary funds for environmental conservation. On the other hand, trade cannot exist without environmental protection as well. What if International Paper in Tacoma decides to cut all of the trees, without planning to plant new ones? Well, International Paper will not be around for very long, because if there is no forest there is no paper. In practice, traders and environmentalists pursue the same long-term goals: rising living standards, using resources in a most efficient way, creating opportunities for future growth. However, they approach those goals from different aspects. Trade officials want to achieve the most efficient allocation of resources through specialization in the production of goods and services. They negotiate to remove barriers to trade in order to increase the flow of exchanged commodities, thus reducing the environmental risk. Environmental officials try to keep economic growth by preserving and improving environmental resources.

In order to achieve the best allocation of resources over the long run, trade and
environmental policies have to establish a symbiotic relationship. This relationship can be
discussed at three different levels. The first level is the national level Every country has
the right to establish its own domestic environmental regulations. However, a country
cannot have one environmental rule for domestic companies and another for foreign.
Otherwise, this country will prevent the most efficiently produced goods to reach their
consumers, and will cause unnecessarily depletion of scare resources.

The second level is the regional level. This is when a group of countries get together and write down regulations, governing their trade and environmental relations. An example is the North American Free Trade Agreement (NAFTA). Under NAFTA, the US, Canada and Mexico created their own rules, regarding trade and environment. Unfortunately, the rules have not worked very well due to lack of financing. President Clinton promised $8 billion over 10 years to be spent on environmental projects. Up to now, the NAFTA Commission for Environmental Cleanup has reviewed 47 cleanup proposals, seven of them have been approved and no funding has been received.

The third level is the global level. The Montreal Protocol is an example of it. The Protocol was an attempt to solve environmental concerns globally. It was signed by a large number of countries, except India, China and Korea. The Protocol includes provisions on Chlorofluoro Carbon (CFCs) releases in the atmosphere that damage the global ozone layer, which protects the Earth from ultra-violet radiation. If only several countries decide to follow the Protocol provisions and ban imports of CFCs, other countries can continue to release them in the atmosphere. Thus, the destruction of the ozone layer will not be stopped. That is why the drafters of the Montreal Protocol decided to include provisions banning imports of CFCs from countries that had not signed the convention. They realized that where the environment was concerned, nobody could be excluded. However, this decision crates problems in terms of how fair it is to apply the Protocol to non-signing parties. So far, due to international pressure India, China and Korea have not protested against it. This fact should tell something about what global cooperation can achieve.

The Montreal Protocol showed that environmental problems were global and they had to be solved globally. This is where the trade-environment relationship enters its most intensive phase. With this connection, the UN Conference on Environment and Development in 1992 (the "Earth Summit") recognized that an open and non-discriminatory international trading system was crucial for environmental conservation and long-term growth. Actually, article XX of the General Agreement on Tariffs and Trade (the World Trade Organization's predecessor) contains exceptions clauses that allow WTO members to place their environmental concerns ahead of their obligations not to create barriers to trade. In a sense, trade has already shown respect for the environment.

In 1994, following the Uruguay Round negotiations, the WTO decided to begin a comprehensive work program on trade and environment. This decision resulted in the creation of the WTO Committee on Trade and Environment. The Committee's first report
to the WTO Ministerial Conference in Singapore in 1996 stated that trade and development were areas of policymaking that should be considered together in order to
foster sustainable development. It was argued that international trading system had the
capacity to integrate environmental concerns, without altering its non-discriminatory
character.

The WTO has scheduled a High Level Meeting on trade and environment on March 15-16 in Geneva as part of its preparations for the upcoming Ministerial meeting in Seattle. The US, Canada, Japan and the European Union have agreed to foster a campaign in the WTO for a new approach to how the international trading system can manage trade and environment together. They think that the upcoming negotiationsshould be a "very open process". At the Geneva meeting, there will be high level officials on trade and environment, as well as representatives of civil society from both developed and developing countries, including environmental, developmental and business non-governmental organizations. The purpose is to allow for a first hand exchange of information and opinions. This new approach fosters even higher expectations for the Seattle Ministerial. Hopefully, the ice between traders and environmentalists will finally break.

It can be concluded that trade and environment are entering a new stage of mutually
rewarding cooperation, where both traders and environmentalist will sit at the table and
discuss the issues. There are very good chances that, in the future, people will hear fewer
emotional arguments, such as "Trade will kill the Planet". And if somebody still wants to
believe that trade and environment are incompatible, he or she should take a trip to
Seattle...