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Enlisting the support of liberal trade for environmental protection and sustainable development.

The decision to enlist the support of liberal trade for environmental protection and sustainable development has already been taken, at the, regional level for example in the North American Free Trade Agreement (NAFTA), and on a global scale in the United Nations Conference on Environment and Development (UNCED). The myth that trade and the environment are on a collision course has been thoroughly debunked, and the direction of policy change deems in no doubt. Clever governments are not looking for a trade-off between the two, but for the means of capitalizing on the broad popular and political support that both enjoy. They now need to settle on how best to design and implement mutually supportive policies.

Proper environmental protection depends on government intervention. Free market forces alone will not do the job as long as so many key environmental resources remain unpriced or underpriced in relation to the value that society attaches to them.

That does not amount to a rejection of market forces, and still less to the conclusion that modern, growing market economies are incapable of taking care of their environments. On the contrary. The extent of environmental decay in Eastern Europe, after forty years of neglect, has destroyed whatever faith there may have been in total reliance on state intervention. Closer to home, the environmental damage that Organization on Economic Co-operation and Development (OECD) countries inflict on themselves through agricultural protectionism, at an annual cost of more than $300 billion, makes the point as clearly as anything: bad economic policies lead invariably to miserable environmental consequences.

With proper pricing policies in place, vigorous competition and undistorted markets have a key role to play. They encourage innovation, technological progress and productivity gains that will be crucial if the challenge of sustainable development is to be met, and they deliver the greatest possible increase in the quality of the environment at least cost by allocating resources, especially environmental resources, as efficiently as possible. The more efficiently governments set about environmental improvement, the more demand there win be for it.

Government intervention is not anathema to the General Agreement on Tariffs and Trade (GATT). The GATT is not about free trade at any cost, nor is it a policy-maker's straight-jacket. A wide range of trade-related measures, whether of the market-based or the command and control variety, can be applied to protect environmental resources without- running a risk that they win face a commercial challenge from another GATT Contracting Party.

The proof is there, in the extensive environmental legislation that most developed countries have already on their books. If the GATT were even half the obstacle to environmental policy-making that it is sometimes claimed to be, we would be swamped in Geneva by environment-generated trade disputes. Yet we are not. Where then, do the real problems lie?

That is the question on which GATT Contracting Parties began work in 1991, and on which they agreed at the end of last year to broaden their approach to encompass the results and recommendations of the UNCED on trade and environment. Two main areas are under examination.

One is the use of trade measures to enhance and enforce legislation aimed at protecting domestic environmental resources. This covers a wide area of,policy-making. Neither the GATT as it stands at present, nor the improvements to the trade rules that will follow from completion of the Uruguay Round negotiations, prevent governments from applying such measures. What the rules do demand is that they should not create unnecessary barriers to trade in the process, The cardinal trade rule is nondiscrimination, and it is hard to accept that environmental policies need to be discriminatory in order to be effective. Beyond that, there may well be need for clarification of the GATT rules in some areas and for creative thinking in others to provide policy-makers with the full range of tools they need to meet their objectives constructively.

The second is the use of trade measures to protect international environmental resources. This can become a highly contentious issue, in part because of differences in perception about the ownership of the resources at stake and about who bears the burden of the responsibility for preventing environmental degradation. UNCED called for cooperative financial and technological transfers and open markets as the basis for progress in this area. That approach receives the full endorsement of GATT Contracting Parties. In contrast, the use of trade sanctions for breaches of environmental norms and of trade restrictions by one country to try to influence the environmental policies and practices of another is very divisive, and contradicts effort4s to find cooperative, multilateral solutions. Trade restriction is a blunt instrument which m#y appear to offer seductively easy answers in the short term, at least to those that can wield it most readily. Over the longer term it destroys international relations, and with the environment it is the longer term that matters.

While GATT's current work program on trade and environment is most definitely moving ahead, there can be no doubt that the most immediate contribution governments can make in GATT to international Policy coordination between trade and the environment is to conclude the Uruguay Round negotiations. Yet at the time of writing this Afterword, the immediate fate of the Round hangs very much in the balance.

Unhappiness that the Uruguay Round has not addressed trade and environment issues directly is no secret. Yet opposing its results on environmental grounds risks throwing the baby out with the bathwater. Without any results at all, the likelihood is that we shall enter A period of unstable and protectionist trade policies that will exacerbate existing environmental problems; polluting agricultural practices in industrialized countries, for example, and over-exploitation of natural resources in developing countries. Furthermore, failure to conclude would damage seriously prospects for multilateral policy cooperation in general, not only on trade but on environmental issues as well. Developing countries attach considerable importance to the repeated UNCED references to the need to conclude the Round in order to accelerate sustainable development.

There are no quick fixes to "green" the Round or the trading system more generally. Inserting a paragraph here or altering a sentence there in the Draft Final Act would short change the trade and environment agenda; something more serious is needed. Proposals for a "Green" Round seem impractical. Even once the existing negotiation is completed, the next one is unlikely to begin within ten years given the schedules foreseen for implementing the results of the Uruguay Round. Addressing the trade and environment interface cannot wait that long. It may appear attractive to try to extend file Uruguay Round for long enough to allow the trade and environment dossier to be formally incorporated and thoroughly negotiated. To do that, however, would surely require a renegotiation of the existing mandate, which could prove time-consuming and contentious. It would be viewed as an act of considerable bad faith by the large number of GATT member governments for whom improved trade opportunities are a vital component of their prospects for economic recovery from the current recession; while those countries may be perfectly willing to address the trade and environment agenda substantively, they are unlikely to appreciate their trade interests being held to ransom in the process.

It is a fallacy to believe that with a successful Uruguay Round under their belts, governments will turn their backs on the trade and environment agenda. On the contrary, they are likely to attack it all the more vigorously and constructively. A serious work program on trade arid environment is already underway in GATT. It deserves to be encouraged at the highest political level. Sooner or later, a more liberal trading system will be playing its part in accelerating sustainable development; everyone has an interest in it being sooner than later.
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Title Annotation:Trade and the Environment
Author:Eglin, Richard
Publication:Environmental Law
Date:Apr 1, 1993
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