Environmental Engineering Reference
In-Depth Information
comparative advantage by undermining their own environmental rules, thereby making
production cheaper. If other countries cannot discriminate against them for doing so,
then this sort of environmental 'race to the bottom' can give a country a comparative
advantage in international trade over countries with stronger environmental protections.
It should be noted that these two problems are in a way the opposite of each other. The
fi
exibility to create their own environ-
mental regulations, while the second is that they may have too much.
There are two general models through which trade institutions have dealt with these
problems. The
rst problem is that states may not have enough
fl
rst model deals with the environment as an exception to the rules, whereas
the second creates explicit rules delimiting members' freedom of action in changing their
environmental rules. The classic example of the
fi
rst model is the WTO, while the classic
example of the second model is the North American Free Trade Area (NAFTA). These
two models are not mutually exclusive - the WTO is discussing the creation of more
explicit environmental rules, and NAFTA does allow for environmental exceptions. But
it remains the case that the two models represent clearly di
fi
ff
erent approaches to dealing
with environmental issues in trade institutions.
In the exceptions model, exempli
ed by the WTO, states are allowed to create barriers
to trade when these are necessary for the purposes of environmental management, as long
as they do not interfere with trade more than necessary to achieve the environmental goal
(GATT, 1986, Article XX; Barkin, 2005). Disagreements among member states as to
whether a particular national environmental regulation is unnecessarily trade-distorting
are resolved through arbitration, and if this does not succeed, through a trade court (in
the case of the WTO, the Dispute Settlement Mechanism, or DSM). Because the WTO
rules do not specify in any detail what constitutes legitimate grounds for environmental
exceptions, the details have tended to develop judicially, through DSM
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ndings. In prac-
tice, the DSM has generally accepted any stated need for environmental management as
legitimate, but has forcefully supported the requirement that the rules created to meet the
need not be unnecessarily trade-distorting (DeSombre and Barkin, 2002).
The WTO does deal with the relationship between trade and the environment politi-
cally, as well as judicially. It has a Committee on Trade and the Environment (CTE), which
is charged with examining the relationship, and with recommending appropriate changes
in trade rules to deal with the need for environmental stewardship. The CTE is a political
body, in that it is made up of representatives of member states acting as voices for their
states, rather than for the CTE or WTO as institutions. Because the CTE, like the WTO,
works on a consensus basis, the CTE is rarely able to generate any speci
fi
c recommenda-
tions that can be acted upon. A good example of this deadlock is the relationship between
the WTO and multilateral environmental agreements (MEAs), the institutions discussed
in the next section of this chapter. Developed countries generally prefer a rule that explic-
itly states that trade-distorting MEA rules constitute exceptions to WTO rules (see WTO,
2004 for an overview both of the CTE and of the WTO/MEA relationship). Developing
countries generally prefer that this not be a rule. Since consensus is unlikely, the interpre-
tation of the status of MEAs in WTO rules is likely to be made by the judicial mecha-
nism, the DSM, rather than the political mechanism, the CTE.
The second model for dealing with environmental issues in trade institutions,
exempli
fi
ed by NAFTA, is by creating explicit rules. NAFTA in fact incorporates the
environmental exceptions of the WTO (NAFTA, 1993, Article 2101), although it also
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