International Trade and Environment: Convergent or Divergent Regulations? PhD.

OBREJA Ramona-Elena, Faculty of Economics and Business Administration, University Al.I Cuza Iasi

In the last decades, people concerning about the effects of human actions upon the environment is amplifying. The globalization process leads to intensified relations between nations, to increased commercial flows of goods and services. In the same time the probability of an impact, positive or negative; of one country activity on another country environment has grown. The international trade regulations have sometimes been in accordance with environment protection, at other times trade flows were detrimental to the environment. On the other side, environment regulations often bend trade flows. Under these circumstances, the article presents the relation between trade and environment regulations and the ways these policies are supported at institutional level. Keywords: trade regulations, sustainable development, environmental agreements

1. Introduction Negative effects of human actions upon the environment have lately transformed form national concerns to supranational concerns. Sometimes, the aspects related to the environment and its protection surpasses states national boundaries (ozone layer, climatic system or bio-diversity). Environmental regulation at the global level requires an extraordinary degree of cooperation among nations.1 Ecological worldwide interrelations appear as a concentrate effort in front of the global crisis caused the general concern of global warming. The international initiatives emphasized the importance of this problem and the necessity of immediately and integrated measures. Hence the environment protection and economic development must coexist as contemporary concerns2.

. Esty D. C., Ivanova M. H. , Making International Environmental Efforts Work: The Case for a Global Environmental Organization, Yale Center for Environmental Law and Policy, Rio de Janeiro, 2001, p. 6 2 Okita S., Cu faa spre secolul 21, AGER, Economistul RAI, Bucuresti, 1992, p.155

2. Evolution of trade-environment relationship debates During Stockholm United Nations Conference from 1972 different subjects related to the environment, the emergency necessity of a better level of live have been analyzed. The participants underlined the unbreakable linkage between the quality of life and environment quality for present and future generations of people. Therefore, the economic development continued to be an objective of the nations, but the strategies adopted shift toward an ecologic perspective; they should be in accordance with natural limits of the environment and exhausted resources, as Our Common Future the Brundtland Report of World Commission for Environment and Developments postulated. The paper pointed out that, sometimes the economic development might worse and not improve the quality of life. In consequence it considered that it was compulsory to be adopted a new development policy3 that would fulfill the people present needs without affecting future generation capacity to accomplish their necessities. The participants at Rio Summit from 1992 designed and integrated sustainable development plan for 21st century named Agenda 21. Ten years later, in 2002, Johannesburg Summit analyzed the progress toward sustainable development of the states. Johannesburg Declaration underlined the collective responsibility of the nations to strengthening the three pillars of sustainable development: economic development- social development- environment protection at local, national, regional and global level. Although at global level the initiatives were convergent, the approaches of initiatives of the states have been sometimes divergent. Even if the social dimensions of the actions concurred with economic or environment policies many times, the economic development and environment regulations did not coincide all the time. Thus, the economic trade relations between nations fell under GATT authority (General Agreement on Tariffs and Trade) since 1948, the international regulation related to environment protection have been spread across too many institutions with diffuse, overlapping, and even conflicting mandates. Globalization has increased the interaction between environmental measures and trade rules. The linkages between trade and environment are complex and multiple. As trade grows and spreads, domestic regulations can become more sensitive to risk associated with imported products. The majority of the discourses are polarized and the most of the times the arguments are sentimentalist. The ecologists consider the free trade is compatible with an asymmetric and disproportionate economic development and waste destructive effects upon the
3

It is talking about sustainable development policy. This concept includes the ensemble of the ways and methods of socio-economic development based on an equilibrium between these socio-economic systems and natural capital elements.

environment. At the opposite side, the partisans of free trade see it as an engine for economic development, and criticize the ecologists opinions, considering them hide protectionism or irrational fanaticism (Esty, 1994)4. 3. Regulations and Institutions for International Trade The initiatives for a single approach comes Stockholm United Nation Conference for Human Environment in 1972 that stipulates the GATT should include within their debates measures related to environment protection, due to the effects that national government trade regulations might affect negatively the environment of the other trade countries partners. Foreseeing this concerning for the environment, within GATT was set up since 1971a forum embodied in Group for Environment Measures within International Trade, where, GATTs members could express their opinions. The failure of this forum resides, after Ewing i Tarasofsky (1997) into the manner they acted: they tried to introduce environment policies measures into the existing trade regulation, rather to find a consensus among trade and environment policies as objective for a common policy. In consequence, the activity of this structure was passive for more then 20 years. Before 90, GATT activity analyzed how trade measures stipulated into Multilateral Environment Agreements could be integrated into GATT settlements. In the same time GATT concentrated on environment measures that might act as non-tariff barriers (eco-labeling, technical measures), but the action was not concluded into some concrete measures. The first important success for a co-existence between environment and trade at the institutional level was setting up in 1995 of Committee for Trade and Environment as compound structure of recent World Trade Organization. The objectives of this Committee were: to balance the relation between multilateral trade framework and measures for environment protection, inclusively those regulated under Multilateral Environment Agreements to manage the environment regulation that presents significant trade effects to set up taxes, standards, subsidies for trade that influence the environment

Michael J. Trebilcock, Robert Howse, The Regulation of International Trade, Routledge, London and New York, 1995

to manage the relation between Dispute Settlement mechanism within trade system and those risen form Multilateral Environment Agreements to administrate the aspects related to domestic prohibited goods export to administrate the aspects related Intellectual Property Rights to create internal structures to build up a right relationship with inter-governmental and non- governmental institutions. In spite of this legal framework for mutual purpose (trade and environment) the wide

mandate of the Committee to inspect the environment policy impact upon the trade raised critics and skepticism, encouraging the environment initiatives and obstructing the efforts to eliminate trade barriers. Furthermore, the activity of the Committee for Trade and Environment didnt have a strategic vision. The feed-back reports of Ministerial Conferences - Singapore (1996), Geneve (1998) and Seattle (1999) pointed out the confusion and the lack of unity in describing Committee responsibilities. Although the term of environment was not explicitly presented into GATT regulations, the agreement included measures for environment protection. The restrictions for any import or export goods are generally eliminated. However, the XX GATT articles stipulates some exceptions from free trade discipline motivated by the possibility of the countries to act in order to protect even human, plat or animal health (art XX, part b) or to conserve natural limited resources, when these measures are closely linked to national production or consume (art XX, part g). The lack of some clear and specific measures, a clear distinction between necessary environment regulations and protectionism, lead to various points of view, in prejudice of developing or low developed countries which could not sustain their positions in front of developed countries. 4. Regulations and Institutions for Environment On the other side, the regulations for environment are more confused. International environmental responsibilities are spread across too many institutions with diffuse, overlapping, and even conflicting mandates.5 We can not talk about a institutional consensus. Thus, the United Nations Environment Programme (UNEP), the institution whish should focused on environment competes for time, attention, and resources with other institutions with environmental responsibilities and interests (more than a dozen other United Nation
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UNEP 2001, International Environmental Governance: Report of the Executive Director, (UNEP/IGM/1/2). Full text available at http://www.unep.org/ieg

bodies - the Commission for Sustainable Development (CSD), the World Meteorological Organization (WMO), the International Oceanographic Commission (IOC), the UN Educational, Scientific and Cultural Organization (UNESCO) and others organizations as Organization for Economic Cooperation and Development (OECD) and the World Bank. Adding to this fragmentation are the independent secretariats to numerous treaties including the Montreal Protocol (ozone layer protection), the Basel Convention (hazardous waste trade), the Convention on International Trade in Endangered Species (CITES), the Climate Change Convention, and many others. The vision is not singular, and the actions are not coherent. In fact, there are now over 500 multilateral environmental treaties, and 60 per cent of them have come into existence since the Stockholm Conference in 1972. For a better understanding of the relations between environment and trade, United Nations Environment Programme analyzes the various forms this relationship can take (UNDP, 2002)6: Environment taxes: in order to stimulate indirect the consumers to purchase alternative goods that protect the environment, the prices of usual goods might include costs related to environment damages caused by production process (energy consume) or product content (content of carbon of some specific fuel). If the environment tax is linked to production process and restrict the import, this measure might be interpreted as a constrain measure for the export country, thus prejudicing its trade. Environment subsidies and procurement policies: in order to stimulate the activities that protect the environment, the governments often support direct and indirect such activities, allocating financial founds or purchasing environment- friendly products. When these measures favor domestic produces or products, they might come into conflict with one of GATT principles- non discrimination principle and generate trade disputes. Environmental technical standards: governments can protect national consumers and environment by using technical environments standards for products or production process, such as requirements for energy consumption for one god or the pollution level. These standards can be mandatory and must be met before the product is imported or sold. Trade bans: sometimes governments adopt extreme measures, forbidding the import or selling when the goods do not met some sanitary or fito-sanitary standards. These
6

Kamal Malhotra, Making Global Trade Work for People,Rochefeller Brothjers, Earth scan Publication Ltc, London, 2003, p. 322

measures protect human, plant or animal healths, prevent some diseases, or restrict waste imports from other states. Sometimes, the subject of the restrictions can be products that do not represent themselves a risk, but their transformation within production process might harm the environment. Environmental labeling: using some distinctive elements on the label for an informative purpose distinguish some friendly- environment products from similar products. These labels may be mandatory or voluntary and sometimes have been criticized as adversaries of free trade discipline. 5. Co-existence between Environment and Trade: divergent or convergent regulations? In order to establish national policies, the nations should guide their regulation after some general rules. For this purpose, trade and environment policies should come into a consensus: a balance between trade and environment objectives was more than redundancy. The Rio de Janeiro United Nation Conference for Environment and Development from 1992 addopted The Declaration for Environment and Development which sets the principle of this equilibrium: Trade policy measures should not represent an arbitrary or discrimination instrument on international trade; unilateral actions outside the jurisdiction of the importer state should be avoided, and the environment measures related to global or transnational problems must be sustained, as it is possible by an international consensus. In this respect, states should cooperate in order to promote an open international economic system, favorable for economic growth and sustainable development for all the nations, without any discrimination (principle 12) States should cooperate in order to discourage or to prevent the reallocation or transfer in other countries of the activities or substances that harm the environment or human health (principle 14) States shall enact efficient environment legislation. Environment standards, the objective management and the priorities must be connected with the development context where they are applied. The requirements for one country might be inappropriate for another country, the economic and social cost is different from a country to another, especially with reference to developing countries (principle 11)

With the view to protect the environment, some preventing measures may be used on a large scale by the states according to their capacities. Where there are threats of some irreversible damages for the environment, the lack of scientific certainty shall not be used as a reason for postponing measures in order to prevent that danger (principle 15). Sustainable development policy asks for an integrated perspective of trade,

environment and social regulations. In this respect, in order to achieve its objectives, some requirements must be complained for global welfare: Each country must be free to manage its domestic environmental issues in according to human resources development priorities. Trade regulations designed to protect national consumers or to prevent the damages are welcomed. In spite, trade measures designed to coerce the harmonization of environment standards by another country are arbitrary and protectionist. Trade measures related to global environmental objectives that surpass the national boundaries must be designed within multilateral negotiation, otherwise, being unilateral, run the risk of inefficiency and do not comply with their role- to correct free market failures. Trade measures must comply with standards agreed at international level, such as Multilateral Environemnt Agreeements. Using some trade mesures with a restrictive purpose for environemnt protections are alowed only when the justification of these actions resides in environment problems of global interest (as Kyoto protocol7). 6. A single or different institutions for managing trade-environment relation? As it can be seen above, the relation between trade and environment did not found equilibrium neither from regulations consensus, nor from the institutional perspective. In order to integrate and to conciliate the debated from the two tendencies, the efforts targeted GATT reorganization by ecologizing this structure or to set up different Regional Multilateral Environmental Agreements. There are two different approaches for institutionalizing trade-environment relationship: or reconciliation between these two
7

The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), an international environmental treaty produced at the United Nations Conference on Environment and Development (UNCED), held in Rio de Janeiro, Brazil, 1992. The treaty is intended to achieve "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." The Kyoto Protocol establishes legally binding commitments for the reduction of six greenhouse gases (carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, and perfluorocarbons) produced by industrialized nations, as well as general commitments for all member countries.

tendencies, or objective arbitration of a third neutral part. Under these circumstances, a solution might be a narrow difference at international level between trade institution (GATT/WTO for free trade regulations) and environment institution. Due to the variety and high number of international institutions focused on environment policies, it is necessary to harmonize their objective, to create a single strategy for environment policy, to create a single international institution- Global Environment Organization (GEO). Environment issues are generally global issues. Why a Global Organization when there are already agreements for environment protection? If a problem is identified, a convention, then a protocol, and then a structure are created to solve this problem. But these structures concentrate their attention on a single pattern, and, in case of environment issues, usually the problem is linked to another problems. Missing a single variable within this chain enormous opportunities are being lost to address these issues in ways that recognize their interconnectedness. There are considerable synergies to be obtained by addressing these problems as linked. Therefore, providing an intersection point for countries thinking about "common problems" that is, problems that all countries or many countries face. There is a great deal to be gained by sharing information about how to respond to common problems, getting data and the best science to understand them, providing the best risk analysis to figure out what the impacts are on public health or ecological resources, developing a common understanding of possible policy responses, and comparing notes on what works and what does not work. Another alternative to address environment issues is to fix the existing structures in institutions such as the United Nations Environment Programme (UNEP) or the United Nations Commission for Sustainable Development (CSD). These institutions are, however, beyond repair. But their revision is not enough because their actual condition, lack of infrastructure, would delay the general objective: the CSD, in particular, has an almost impossible mandate of trying to follow up on Agenda 21 with little political backing and very little budget. UNEP has the additional handicap of having to try and run the world from Nairobi, and it is difficult to attract and retain firstrate people to spend their careers and lives in Nairobi. The responsibilities of this single institution should be: - to coordinate and disseminate the research results in order to prevent and to adjust global ecological crisis - to set up an international framework where the states can develop negotiation to improve legal international collaboration

- institutional services at global level - the possibility to coordinate the activity of the other institutions that are acting at regional, sub-regional and national level A new structure for environment similar to GATT for trade is a revolutionary idea. But the actual global context stresses the necessity of such organization. It is a great challenge for humanity to admit the existence of the ecological interdependence as well as the growing economic interdependence of nations. Creating Global Environment Organization means to set up the fourth Bretton Woods Pillar8. 7. Conlusions The reality shows concentrate efforts to conciliate the relationship between trade and environment. Until the setting up of an institution with concrete attributes for global environment framework, the initiatives overshoot improving the existing structures. In this respect, the 4th Ministerial Conference from Doha is a significant progress. Including for the first time the relation trade-environment within negotiations is the result of the pressure exerted both developing countries and developed countries. The 6th paragraph of Doha Declaration stress that [...] respecting WTO rules, no country can adopt measures that protect arbitrary plats, animal and human health, which create discriminatory condition between states, or which represent restrictions for international trade, but otherwise are consonant with GATT principles. We are opening toward cooperation with United Nations Environment Programme as well as with other similar inter-governmental institutions. The sustainable development objective, in other words he reconciliation between trade and environment, admits free trade discipline that should include fundamental issues for environment protection. As it could be seen, the debate between trade and environment is still an open question, the developing countries being afraid of the domination of developed countries. The solution, in this moment, might be the transparency of negotiations, in order to take into consideration both the partisans of environment protection and the partisans of economic development, to achieve successfully the objectives of sustainable development policy.

See Dan Esty, A Global Environment Organization: The Fourth Bretton Woods Pillar?, at

http://www.g8.utoronto.ca/g7/scholar/kirton199503/esty/document.html

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