The World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT), have been remarkably successful for 50 years at doing what governments mandated them to do: liberalize world trade and conduct it according to multilateral rules based on nondiscrimination. However, both the process of trade liberalization and the nondiscriminatory manner in which trade is conducted are now under attack, at times violently.

While environmental nongovernmental organizations (NGOs) have regularly voiced their dissatisfaction with those areas that trade officials see as the greatest contribution of the GATT and the WTO to global welfare, including trade liberalization and nondiscrimination, stakes have increased considerably in recent years. For governments advocating a new round of multilateral trade negotiations, agreeing on an agenda for trade and environment has emerged as principal areas of controversy.

At the most fundamental level, many environmentalists argue that the WTO should employ broader criteria to evaluate the multilateral trading system. In particular, the goal of sustainable development—a major concern to many environmentalists, UN agreements, and organizations—is said to be inextricably linked with the international economic system and should provide the common moral and legal underpinnings for the global economy. But while achieving sustainable development is indeed a principal objective of the WTO, and has been identified as such in the preamble to the agreement establishing the WTO, it does not appear in the legally binding rights and obligations that comprise the agreement’s substance. As desirable as the goal of promoting sustainable development may be, the important question is what mechanisms would enable its integration into the legally binding instruments of the WTO. Various proposals describing how this could be done have been put forward, some of which would also profoundly alter the manner in which the WTO functions. The challenge is to identify policy options for future negotiations that would provide an acceptable agenda for all WTO members, satisfy the demands of environmental groups, and preserve the well-functioning characteristics of the rules-based trading system.

Green Growth

Many environmental groups are concerned that the growth generated by trade liberalization is harmful to the environment, particularly in developing countries. This concern has manifested itself in their opposition to trade liberalization as implemented by WTO negotiations. The important question is an empirical one—does growth through trade liberalization harm the environment? While the positive link between trade liberalization and growth is accepted by many, the numerous quantitative studies that have explored the link between growth and environmental degradation have been far from convincing. This is not surprising. The source of environmental damage from liberalization is not trade per se; rather, it is inappropriate production and consumption patterns and the failure to implement environment-management programs to deal with the negative implications of growth. Liberalization should only be implemented after conducting environmental impact-assessment studies to evaluate the implications of growth.

It is eminently sensible that policies make provisions for their environmental implications. But given that national trade-offs and a desire to preserve national sovereignty are involved, it can be argued that this decision is best left to the national decision-making processes, in which domestic conditions and priorities can be respected. Nevertheless, there is certainly a role for NGOs and other organizations in providing technical assistance to governments (particularly in developing countries) when formulating their environment-management policies. In fact, many NGOs have been particularly active in this respect. However, the idea of trade liberalization conditional upon WTO approval, as sought by some, would only mean a further extension of the WTO’s reach into non-conventional trade areas, something for which it is already soundly criticized by environmentalists and others.

Although economic growth can damage the environment, it can also generate additional resources that improve the environment. If trade liberalization, growth, and increased resources go hand in hand, then the WTO clearly has a role in promoting the free trade of developing countries’ exports. However, the allocation of additional resources at the national level remains a national choice. In this case, NGOs and international organizations can certainly provide expertise and other forms of technical assistance with respect to environmental management. Nonetheless, the WTO’s first priority is to accelerate trade liberalization, with a focus on the exports of developing countries.

Another consideration is that the removal of trade restrictions and distortions can itself lead to an environmentally friendly outcome. Removing market restrictions and distortions can mean an improved functioning of markets and enhanced competition mean that fewer scarce natural resources are required to produce the same level of output. The idea of linking trade liberalization to the reduction of resource depletion has already been discussed intensively in the WTO Committee on Trade and Environment. Hopefully, such discussions will encourage developing countries to be suspicious of the protectionism advocated by environmental interest groups who see little advantage in linking the conditions of trade liberalization to the environment.

In fact, trade liberalization could create “win-win-win” scenarios for the environment in developed countries. A number of these countries could first “win” by removing trade restrictions that damage their own environment. Developing countries would gain a second “win” when their exports increase as a result of lower restrictions. The third “win” comes from the additional resources created by trade, which can be used to improve the environment. This is in fact one of the few areas in the WTO where developing countries find themselves on the same side of the fence as most environmentalists.

The good news is that “win-win-win” situations do exist in practice. In the case of fisheries, developing countries account for over one-half of world trade in fish and fish products and thus have considerable export potential in these products. The World Wide Fund for Nature and other NGOs have argued that fishery subsidies not only undermine the sustainable use of fish stocks, but also violate WTO rules. Even those who defend intervention in agriculture do not deny the link between output-related policies and significant negative environmental effects. These include perverse subsidies that lead to the excessive use of chemical fertilizers, damage to the artesian water basin, industrial production in environmentally sensitive marginal areas, homogenization of culture, and loss of biodiversity.