THE GLOBAL TRADE REGIME’S IMPACT ON ENVIRONMENTAL PROBLEMS

CHELSEA KEIRSNOWSKI

Abstract: the world trade organization (wto) aims to create free and open trade, which creates opportunities for business growth and increased competition. it is widely held that increased competition correlates with increased enterprise efficiency and better outcomes for consumers.0 however, operating in a capitalist system, the current trade framework can be damaging for the environment as it creates emissions and overexploits resources in its pursuit of profit and growth.

I Introduction

In its entirety, this essay will argue that whilst the rules and operation of the global trade regime, in some ways, help progress environmental problems, overall, the regime hinders progress, and therefore the WTO should shift its focus away from preventing trade protectionism and towards promoting environmental protection. This essay will commence by critiquing the environmental aspects of the trade regime through the lens of Green International Relations (IR) Theory. Next, this essay will discuss how the current international trade rules of the WTO are not conducive to enacting environmental protection because the restrictions on trade protectionism limit the action states can take to ban environmentally harmful imports. Subsequently, this essay will discuss how the WTO’s support of Multilateral Environmental Agreements (MEAs) for environmental protection is insufficient due to the role of the trade regime in exacerbating environmental problems and the legal and practical uncertainties of the implementation of MEAs. Finally, this essay will use two strands of Green IR Theory, Environmentalism and Green Political Theory, to propose strategies to address the shortfalls of the global trade regime.

Ii Green Ir Theory

Green IR Theory seeks to integrate environmental concerns into the study of IR and therefore is useful in informing political understanding of environmental issues within the trade regime. The framework challenges the capitalist commitment to production and consumption. A prominent consideration of Green IR Theory is how to address environmental issues which transcend borders in the contemporary, state-centric, international model and consequently, how decision making should be facilitated at a national, international, or regional level.0 There are various strands of thought within Green IR Theory. For instance, a distinction can be made between Environmentalists and the more radical, Green Political Theorists. These strands of thought differ on ideas about how the environment should be valued.0 Environmentalists hold a more anthropocentric viewpoint which proposes that whilst the current global trade regime has caused environmental issues, these issues can be solved within the current framework. It supports the continuation of current strategies, such as MEAs, to tackle issues rather than seeing

0 Federal Trade Commission, ‘Competition Counts: How Consumers Win When Businesses Compete’, Federal Trade Commission (Report, 2023) 2, https://www.ftc.gov/sites/default/files/attachments/competition-counts/zgen01.pdf

0 Hugh Dyer, ‘Introducing Green Theory in International Relations’ (7 January 2018) E-International Relations Introducing Green Theory in International Relations (e-ir.info) environmental concerns as requiring transformational action. Contrastingly, Green Political Theorists hold an eco-centric viewpoint which perceives human needs and desires from a wider ecological standpoint. It holds that nature has intrinsic value separate to the value that nature brings to humans. An idea within Green Political Theory is ‘green theory of value’; a moral vision which holds that environmental sustainability should be considered when evaluating the value of a product or service. For instance, it proposes that economic growth should not be pursued at the expense of environmental degradation.0

0 Ari Tayyar ‘Green Theory in International Relations’ in Tayyar Ari and Elif Toprak (eds), Theories of International Relations II (Anadolu University, 2019) 162, 167.

The current rate of global production and consumption is not sustainable, therefore practical policy implications of Green Political Theory are often incompatible with traditional assumptions and contemporary practices. Green Political Theory proposes that the prevalence of competitive relationships between states, as they strive to increase profits, is not conducive to effective environmental cooperation. In contrast to Environmentalists, Green Political Theory proposes that the global trade regime is the source of environmental problems and therefore a solution must involve a theoretical and practical transformation of the current trade framework. To exemplify the differences in beliefs, Environmentalists address the relations and environmental agreements between humans in different states, whereas Green Political Theorists address the relations between humans and the non-human environment.0 As recommended by Environmentalists, currently, environmental efforts are pursued using pathways in our current trade system such as the WTO dispute mechanism, however the outcomes have not been significant.

Iii Wto Rules Limitiing Environmental Protection

Whilst the WTO rules have the potential to be used for environmental protection, the WTO was created for the primary purpose of facilitating trade liberalization and therefore its effectiveness for environmental protection is often limited. General Agreement on Tariffs and Trade (GATT) Article XX outlines each country’s prerogative to enact environmental policies which restrict trade if the policies are for the purpose of protecting human, animal, or plant life or health, or for the conservation of exhaustible natural resources.0 The enactment of this Article promoted the frequency of disputes over environmental issues related to trade. Despite not being adopted as a legally binding decision, the ‘Tuna-Dolphin’ case between the US and Mexico, heard by the WTO panel, was a pivotal case centered on Article XX and the relationship between trade and environmental protection. The US rejected Mexican imports of tuna on the grounds that Mexico’s fishing standards did not satisfy US dolphin protection standards. Consequently, Mexico initiated a complaint in 1991 through the GATT dispute settlement procedure. The WTO panel’s judgement stated that the US could not reject Mexico’s tuna imports on the basis of how Mexico’s tuna was produced, as GATT rules only allow restrictions based on the quality or content of imported products, as per the process and production methods (PPM) rule. Additionally, allowing the US’ restrictions would have resulted in the undesired outcome of permitting the US to enforce its domestic dolphin protection standards extra-territorially, violating state sovereignty.0 The

0 Dyer (n 2).

0 Tayyar (n 3) 168.

0 General Agreement on Tariffs and Trade 1947 Article XX.

0 Jonathan M Harris, Trade and the Environment (Global Development and Environment Institute, Tufts University, 2004) 1.

PPM rule has the potential to impede environmental protection in many industry areas. For instance, there have been disputes over the European Union’s (EU) ability to restrict imports of genetically modified organisms (GMO’s), particularly from the US: a major producer and exporter of GMO crops. Arguments against GMOs are largely based on environmental concerns, such as the possibility of genetically modified crops spreading unintendedly, disrupting ecosystems, and creating herbicide resistant species.0

However, the EU is limited by the PPM rule in the trade restrictions it can implement based on environmental concerns. The PPM rule governs that the process used to produce a product is not a valid reason for trade restrictions. This means that restrictions cannot be enforced on the basis that the food has been genetically modified. It must be proven that the product itself is harmful. Another example of the PPM rule inhibiting environmental action is that imports of illegal logging cannot be banned due to their unsustainable sourcing, as the timbre itself is not harmful.0

To help ensure that WTO rules are not exploited to permit trade protectionist measures under the guise of environmental protection, there are many requirements that the trade restrictions must satisfy additionally to the PPM rule. For example, a significant WTO case, adopted in 1998, concerned a joint complaint by India, Malaysia, Pakistan, and Thailand against the US’ ban on shrimp imports (WTO 2023).0 Under US law, shrimp trawlers must use Turtle Excluder Devices, a technology which protects turtles from being harmed by fishing activity. Since the exporting countries did not use this technology and were deemed by the US to pose a threat to sea turtles, their shrimp imports were banned. The WTO concluded the US’ restrictions were inconsistent with GATT because Article XX can only be implemented to protect animal life or health if certain criteria, such as non-discrimination, are met. The US’ restrictions on imports were found to be discriminatory because it granted countries, such as those in the Caribbean, assistance and more flexible time periods to begin using the Turtle Excluder Devices, whereas the US did not allow the complainants the same conditions.0 As seen with the PPM rule and principle of non-discrimination, the WTO has strict requirements to promote free trade, however this limits the ability of states to take unilateral action against environmental harm caused by products imported into their country.

Iv Limitations Of Meas

The WTO holds that MEAs, rather than unilateral action through trade policies, are the most effective way to pursue environmental protection, however, the current state of the climate indicates both methods have limitations. The WTO generally holds that trade should not be implicated in environmental issues. The specificity rule, an economic principle, proposes that policies should target problems at their source. According to this idea, trade policies should not be implemented to target environmental issues; rather, it is more effective to seek environmental protection through MEAs which deal specifically with environmental issues.0 Further, environmental issues often extend beyond national borders and warrant an international or regional response rather than unilateral action. Therefore, the international trade regime helps advancement of environmental action through MEAs such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora 1973 (CITES), signed by 184 nation states, which targets issues such as illegal logging and the illegal trade of ivory, birds of paradise and pangolin scales.0

0 Ibid 7.

0 Ibid.

0 Appellate Body Report, United States - Import Prohibition Of Certain Shrimp And Shrimp Products, WTO Doc WT/DS58/AB/R (12 October 1998) [2].

0 Ibid [184].

0 Harris (n 7).

However, currently, there is an absence of legal certainty on whether MEAs or WTO rules take precedence in circumstances of conflict. The 2002 Rio +10 Conference decided that neither would take precedence and instead, both would provide mutual supportiveness to ensure the integrity of each instrument.0 However, clarification may be required due to the potential for situations to arise where non- hierarchical solutions are not evident. For instance, the WTO rules prohibit export subsidies, whereas the Kyoto Protocol promotes subsidies for developing nations to support their adoption of energy efficient technology.0 This uncertainty leaves room for the influence of MEAs to be overpowered by rules upholding trade liberalization. Additionally, whilst the current trade regime promotes the implementation of MEAs to address environmental problems, it is likely that many of these environmental issues would not be so prolific if not for the liberalization of trade by the global trade regime. For instance, in our current system, most of our purchases are not benefiting the environment. Materials and products, such as palm oil, are sourced unsustainably, goods are then mass produced and subsequently transported in heavily polluting cargo ships.

By reducing trade barriers and increasing the flow of goods, the regime is promoting ease of access to goods which were manufactured or produced through harmful methods.0 This has led to overconsumption of fast-fashion and mass landfills of disposed products which were not designed to last. Furthermore, exacerbating the situation, since the trade regime is based on the goal of facilitating the flow of trade, less than 2% of container cargo is inspected by customs officers, as inspections are timely and costly.0 This figure is likely even lower in free-trade zones, as in certain jurisdictions, customs officers do not have the authority to inspect or seize illicit goods in these zones.0 Consequently, this bars MEAs such as CITES from being effectively implemented as criminals use international shipping lines to transport products constituting environmental crimes without being detected. The negative outcomes of efficient supply chains exemplify the proposition held by Green Political Theorists that the international trade regime is the cause of environmental problems and highlights the downfalls of the trade regime’s prioritization of trade facilitation.

V Recommendations Of Green Ir Theory

Evidently, there is room for improvement in the current trade regime’s protection of the

0 Convention on International Trade in Endangered Species of Wild Fauna and Flora 1973.

0 Jose Romero and Karine Siegwart, ‘A Survey of Kyoto Tools for Greenhouse Gas Reductions: Speculations on Post-Kyoto Protocols’, in Thomas Cottier, Olga Nartova and Sadeq Bigdeli (eds), International Trade Regulations and the Mitigation of Climate Change: World Trade Forum ( Cambridge University Press) 13, 15.

0 Harris (n 7) 14.

0 Ibid 5.

0 United Nations Office on Drugs and Crime, ‘UNODC-WCO Global Container Control Programme’, United Nations Office on Drugs and Crime (Webpage, 2023) https://www.unodc.org/ropan/en/BorderControl/container-control/ccp.html

0 World Customs Organization, ‘Practical Guidance on Free Zones’, World Customs Organization (Report, 2009) 49, https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/facilitation/activities-and-programmes/free-zone/wco-fzguidence_en.pdf?la=en environment. Green IR Theory is a useful tool for navigating contemporary challenges and devising various solutions to the harm caused by international trade. The solution of a compulsory carbon pricing scheme aligns with the ideas of both Environmentalists and Green Political Theorists. This is compatible with the Environmentalist Theory proposal that environmental issues can be addressed within the current international framework, and it is compatible with Green Political Theory’s concept of ‘green theory of value’, considering the environmental cost when evaluating the value of a product or service. It is a current market failure that the externalities, being the social and environmental costs, of emissions caused by products are not accounted for in their price. To counteract this, the carbon market provides a system where companies are required to neutralize their emissions by purchasing carbon credits or engaging in environmental restoration efforts. This enables environmental concerns to be woven into the current trade model: businesses have the overarching goal of maximizing profitability thus, a price is placed upon emissions.0 However, despite having the potential of being highly effective at motivating emitters to adopt more environmental practices, the carbon market has not yet become widely prolific due to concerns that the system will harm the competitiveness of the involved industries or impede development.

The International Monetary Fund (IMF) proposes that implementing an International Carbon Floor (ICF) is an advisable step to achieving the Paris Agreement goals of limiting global warming to 2 degrees Celsius. The IMF recommends that the world’s largest emitters should be required to pay $25-$75 USD per ton of carbon, depending on their level of economic development. If countries use carbon pricing policies that vary from the IMF’s recommendations, it is advised that these alternate policies at least achieve the same reductions in emissions as the ICF system. Using an ICF price also does not limit countries to take more substantial action if they wish. The IMF tested the effectiveness of various carbon pricing policies and found the ICF system, if implemented by all countries simultaneously, to be the only feasible carbon pricing option to achieve the Paris Agreement goals 0 Rather than simultaneously implementing a consistent carbon pricing strategy, a fragmented system of varying approaches is currently being enacted. Without coordination, this system risks creating competitive losses in regions with ambitious environmental policies and administrative burdens to account for the variations and transaction costs. This may cause a ‘race to the bottom’ in carbon pricing policies in countries wishing to avoid suffering a competitive disadvantage as well as specialization in pollution-intensive industries in areas with these relaxed standards.0 These ‘pollution havens’ would likely occur in developing countries, thus creating a system where developed countries are effectively exporting their pollution.0

For the effective implementation of a carbon pricing scheme to address greenhouse gas emissions within our trade system, the WTO should operate as a forum to formulate clear, consistent rules such as those outlined by the IMF’s ICF. WTO rules and mechanisms should then be used to monitor and enforce compliance. Stringent environmental policies can align harmoniously with a free trade framework by creating demand for environmentally friendly products in countries that also uphold high environmental standards as they capitalize on first-mover advantage.0 Therefore, the WTO should use its influence to implement the carbon pricing system recommended by the IMF, so that countries are required by an international agreement to neutralize their trade emissions, as this will have the ripple effect of creating demand for low emissions technologies.

0 Harris (n 7) 8.

0 Ibid 5.

Vi Recommendations Of Green Political Theory

On the other hand, Green Political Theory proposes more radical solutions, for instance, to re- organize our societies and global trade systems according to bioregionalism. Bioregionalism rejects traditional political borders and instead groups communities by bioregions which are large enough to encapsulate ecosystems necessary for human, plant, and animal life to sustain itself. This solution is based on the idea that the contemporary world order is inadequate at protecting the environment, as we have a growth-dependent economy that relies on overconsumption. It suggests that our modern system relies too heavily on international supply chains to maintain our basic living standards.0 Supply chains can be disrupted, as seen with the Covid-19 pandemic, and reliance on a few countries to produce fossil fuels can cause price shocks, as caused by the war in Ukraine.0 Rather than valuing the accumulation of wealth and accessing immediate gratification to our consumerist desires, bioregionalism values the self-sustainability of communities.0 Proponents of Green Political Theory suggest that protecting the longevity of human life on Earth not only requires technical changes but also a shift in values.0 Bioregional societies are envisioned to be reliant on what they can produce, only trading when necessary. This self-sufficiency aims to foster a connection between the citizens and their resources which may incentivize more mindful and sustainable use of those resources.0 However, bioregionalism and self- sufficiency are not the solution to all problems. International trade can be pivotal in climate disaster recovery, for instance, in improving food security and access to emergency goods and services, and for helping economic recovery.0 An additional drawback of self-sufficiency is that in comparison, strong trade relationships are beneficial for the formation of effective working relationships between countries to address transnational environmental issues. Currently bioregionalism is a purely theoretical, post- capitalist, economic model. However, the WTO and entire trade system does not have to be modified to benefit from the ideas proposed by bioregionalism. By incorporating localization, sustainability and increased self-sufficiency, the values of Green Political Theory can be adopted in a less radical way than a full-scale implementation of bioregionalism.

Vii Conclusion

0 OECD, ‘Trade and the Environment’, OECD (Webpage, 2023) Trade and the environment - OECD

0 Tristan Bove, ‘Bioregionalism: A Model for a Self-Sufficient and Democratic Economy’,Earth.org (Webpage, 2021) Bioregionalism: A Model for a Self-Sufficient and DemocraticEconomy | Earth.Org.

0 Maciej Kolaczkowski, ‘How does the war in Ukraine affect oil prices?’, World Economic Forum (Article, 2022) https://www.weforum.org/agenda/2022/03/how-does-the-war-in-ukraine-affect-oil-prices/

0 Bove (n 24).

0 Dyer (n 2).

0 Bove (n 24).

0 World Trade Organization, ‘World Trade Report 2022’, World Trade Organization (Report, 2022) 34, https://www.wto.org/english/res_e/booksp_e/wtr22_e/wtr22_e.pdf

There is potential for the trade regime to advance environmental action in some instances. For instance, the WTO has stated in political forums that the WTO rules would support, rather than override MEAs. Additionally, there are enforcement efforts against environmental crimes, such as those covered by CITES, and GATT rules can be utilized to protect animal and plant life.

However overall, the WTO has fallen short in adequately addressing environmental concerns. GATT rules have blocked environmental actions and MEAs are not sufficiently enforced, in part due to the prioritization of efficient supply chains. Unfortunately, the facilitation of efficient trade correlates with the efficient destruction of the planet. It is recommended that instead of being primarily instrumental in promoting open trade and economic growth, the WTO re- evaluates its priorities to advance environmental action more substantially. The WTO’s proposition to not complicate trade issues with environmental issues is no longer possible or acceptable. Unsustainable consumerism, illegal trade of plants and animals, and the pollution caused by transportation are among the many issues where trade and the environment are intertwined. The solutions proposed by Environmentalists and Green Political Theorists of a compulsory carbon trading scheme and more sustainable use of resources must be implemented to adequately advance environmental effort.