Classical Assumptions about the Impact of Trade Liberalization

Major controversies about the (in-)coherence between trade liberalization on the one hand and environmental protection on the other date back to the early 1970s, particularly instigated by the 1972 United Nations Conference on the Human Environment (UNCHE) in Stockholm. In the pre-negotiations for this conference, both representatives of developed and developing countries for the first time discussed the trade-environment nexus in a larger setting. Another forum for such early debates was the Organization for Economic Cooperation and Development (OECD) which adopted "guiding principles concerning the international economic aspects of environmental policies" in May 1972. Also, the General Agreement on Tariffs and Trade (GATT) tried to join the party, and establishing in 1971 the Group on Environmental Measures and International Trade (EMIT). In these various settings, the compatibility question was raised out of the emerging awareness that new transboundary environmental challenges had to be tackled within an international setting.

Parallel to this debate among practitioners, academics from various disciplines, such as international economics, international law, and political science sparked off similar discussions, most noteworthy in the aftermath of the 1972 "Limits to Growth" Report of the Club of Rome [2]. Political theorists came up with a multitude of mostly normative models discussing how the objectives of sustainability and growth could be reconciled, or whether such reconciliation was even possible. Even when ignoring the more utopian blueprints of these earlier debates, and instead concentrating on more realistic models, it is still possible to paradigmatically distinguish the protagonists of a win-win hypothesis from an eco-fundamentalist position.*

At the occasion of the WTO's establishment, these two groups voiced major assumptions and predictions about the environmental impact of the new organization. The only expectation which both sides, skeptics and optimists, had in common was that the WTO would bring about a further intensification and liberalization of global trade. Bernauer [3] summarizes the perspective of the trade-skeptical group [4-7] along the following well-known lines of argument:

1. Intensified international trade will promote economic growth across the globe, thus accelerating the current rate of environmental exploitation.

2. Further trade liberalization will exploit and freeze the low environmental standards of certain countries, in particular least developed countries (LDCs). With re-imports of end-products facilitated, developed countries will be given further incentive to outsource ecologically detrimental industries into LDCs, along with the relocation of hazardous goods, e.g., wastes or pollutants. In short, the WTO will promote the transfer of risks to the global South, leading to a faster depletion of its rich environmental assets.

3. Correspondingly, stronger trade liberalization will threaten previously high environmental standards in other countries, in particular industrialized countries. Through the adjustment and abolition of commercial barriers, it will spark off a race to the bottom, severely obstructing domestic environmental policies and safety standards as well as local, environmentally sound ways of life.

On the other side of the spectrum of opinions, proponents of a harmony hypothesis [8,9] and advocates of "Free Market Environmentalism" [10,11] stress the considerable synergy between environmental and commercial objectives. Naturally, major representatives of the world trade regime adopted their position and repeatedly stressed the win-win situation (e.g., Pascal Lamy, as quoted above, or former GATT Director-General Arthur Dunkel).f Their key tenets include [12]:

1. Intensified international trade will promote economic growth and welfare across the globe, thus raising the international awareness of post-material, long-term goals such as environmental protection.

* This is not to disregard positions which occupy middle ground between both extremes, e.g., the proponents of green trade such as Daly (Beyond Growth: The Economics of Sustainable Development, 1996); Gray (Beyond New Rights: Markets, Government and the Common Environment 1993); or Norton (Toward Unity Among Environmentalists 1991). Clearly the below lists of arguments shall provide a paradigmatic introduction to the issue and are far from being exhaustive.

t Arthur Dunkel: "International trade and the protection of the environment are at heart natural allies" (quoted from Eglin 1998: 253).

2. Further trade liberalization will enhance the dissemination of environmentally sound products and technologies. By the same token, it will challenge protectionist policies which favor environmentally harmful production methods.

3. International trade appears un-ecological because it has so far not been applied appropriately and thoroughly. The WTO has the potential to set things right on a global scale: conflicts between environmental protection and economic globalization can now be solved in a comprehensive manner, for example, by integrated accounting which internalizes ecological costs [13-15].

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Negotiating Essentials

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