Within the last few years, a great deal of discussion and debate has occurred over the effect of international trade on environmental quality. Recently, violent protests have accompanied the meetings of some of the international organizations that support the free trade regime, such as the IMF, World Bank, and World Trade Organization. Many feel that with an increase in international trade, environmental quality will decrease, and that through a state’s membership in these organizations, any sovereign ability to impose restrictions for the protection of the environment will be decreased or lost. On some level, there is a just cause for concern, as it is apparent through the actions of these organizations and the businesses that support them that environmental concerns are often not one of the highest priorities in formulating decisions.

There is the possibility of change in the current system, a way to better incorporate the environment into policy decisions. However, this change must occur within the existing system; the destruction of international organizations that act to facilitate state interaction cannot be useful. Rather, there should be a change within existing policy guidelines and codes, for these organizations, particularly the World Trade Organization, to better take into account the need for environmental protection, and the use of trade policy actions by states to achieve such protection. In this way, trade and environment can be linked to form a coherent international policy towards achieving the idea of "sustainable development", an idea of economic growth while maintaining environmental quality.

Basic overview of the World Trade Organization

The World Trade Organization (WTO) is an international organization and the successor to the General Agreement on Tariffs and Trade (GATT). The WTO promotes the same regime of increased liberalization of international trade that was promoted by the GATT. It is therefore an important member of the global trade regime, and in order to fully understand the WTO’s philosophy and policies it is important to understand the policies and actions of its predecessor, the GATT. The GATT was created in the post-war period that followed the end of World War II. Many people believed that the closed international economy of the 1930’s increased the effects of the Depression, which itself influenced the beginnings of World War II (Hocking & McGuire, 1999). It was to prevent the same types of problems from arising again that led to the Bretton Woods Conference of 1944.

There were two goals set by the states that took part in the Bretton Woods Conference in 1944. The first goal was to achieve economic growth and full employment, and the second goal was the creation of a stable international economic system that would prevent the destructive economic nationalism of the Depression Era (Gilpin, 1987). It was with these goals in mind that the western democracies, led by an American-British cooperation created the Bretton Woods system. This system adopted such policies as fixed exchange rates, currency convertibility for transactions, and created the International Monetary Fund (IMF), an international organization that would provide assistance to states with balance of payments deficits. These rules governed a state’s exchange rates and foreign exchange restrictions, and through the Bretton Woods system, free trade between nations was encouraged with a minimal risk to national stability (Gilpin, 1987). The Bretton Woods system was successful in fostering economic growth, a significant increase in international trade, and the beginnings of an ever-increasing trend towards global economic integration.

Although there were problems inherent in the system, which caused the destruction of the Bretton Woods system with the removal of the gold standard and the end of fixed exchange rates by the American government in 1973, the Bretton Woods system did set the stage for increased liberalization of trade under international organizations as well as economic and trade agreements. This system would eventually lead to the creation of the WTO, an international organization with a firm legal footing in the international sphere and the role of bringing together many of the international trade and economic agreements under the auspices of one organization. (Qureshi, 1996).

Before the WTO came into being, however, there was the General Agreement on Tariffs and Trade (GATT). This was not an actual international organization, but rather was a group of multilateral agreements on the reduction of trade barriers and the increasing openness of international trade. The GATT came into existence in January 1948, as what was planned to be a temporary framework for the increased liberalization of trade while plans for an actual international organization dedicated to working for the trade regime were to be finished (Esty, 1994). However, disagreements on the scope and strength of such an organization as well as a lack of support from the US and other leading countries ended the chance to create an International Trade Organization in the post-war period.

Rather, the international system was left with the GATT, which was never meant to act alone and therefore lacked several key enforcement and rule-making systems. Although these shortcomings weakened the structural power of the GATT, it did embody and put forward some of the key free trade issues and rules that still influence the international trading system today.

Foremost of these is the idea of non-discrimination, or of treating all states equally in trade dealings through the use of the most-favored nation (MFN) obligation and national treatment (Kahler, 1995). Another principle measure of the GATT was the push for states to remove quotas and lower the amount of restrictive tariffs on trade goods. There were of course, loopholes that states could use to avoid some of the more unfavorable obligations, with trade liberalization being restrained by safeguard provisions to protect a state’s domestic interests (Gilpin, 1987). Also, because the GATT was not an international organization capable of enforcing all the rules of the trade regime or punishing violations of those rules, trade policy liberalization was very dependent upon the domestic trends of the economically powerful states.

Over the years, the GATT evolved through several rounds of negotiations, and gradually began to codify some of the international trade regime practices into policy. Such an occurrence was the development of the Trade Dispute Settlement Mechanism (DSM), which was finally codified during the Tokyo Round of negotiations in 1979 (Kahler, 1995). It was also through the eight rounds of negotiations that most of the reductions in tariffs were negotiated. As the GATT evolved over time, broader arrangements at trade liberalization were discussed, antidumping law and subsidy codes were revised, programs to assist developing nations through trade measures were adopted, and close attention to non-tariff barriers to trade made the system of global trade too complicated and expansive to be managed by what was only a set of agreements between nations, not even a true organization. The complexity of the system brought the GATT to the point of creating a formally recognized international organization that could facilitate and support the international trade regime and GATT.

The solution was to go back to the idea of an International Trade Organization, one with the authority to develop and enforce trade measures. The WTO was created as a legal international organization with its own international legal personality, and today it is the foundation of the multilateral trading system (Krueger, 1998). It came into existence on 1 January 1995, and was created by the Marrakech agreement establishing the World Trade Organization. This agreement was part of the Uruguay Round of multilateral trade negotiations, the last round of talks held under the auspices of the GATT (Hocking & McGuire, 1999). The creation of an international organization dedicated to the promotion of a liberal system of international trade was of great significance.

In the international system, there are many various "regimes" and rules of order. A formal international organization supported and recognized by other international actors such as states and other international organizations lends strength and legitimacy to a particular regime. As such, the WTO is the "embodiment of the trade regime" (Hocking & McGuire, 1999). To see how having an organization assists in the structure and promotion of a regime it is useful to compare the international trade regime to another possible, but far weaker regime, that of environmental protection. With no intergovernmental environmental organization to formulate or enforce environmental law, that regime is producing far slower and weaker results than those achieved in the lowering of trade barriers by the WTO.

The WTO exists to promote and develop an integrated multilateral trading system that includes the results of GATT and previous trade liberalization agreements. Membership in the WTO is open to "any state or separate customs territory that has autonomy in the conduct of its external commercial relations with respect to matters covered under the WTO and multilateral trade agreements" or the terms agreed upon between the WTO and state (Qureshi, 1996). However, to become full members, many states must work and change their economic or trade policy to meet the goals set by the WTO. The accession of a new member state must be approved by a two-thirds majority of WTO members (Hocking & McGuire, 1999). Before accession is granted a list of criteria must be met.

A state wishing to enter the WTO must show the goals of its economic policy, the necessary institutions and governance that will provide an acceptable base for international trade and economic relations, and an acceptable level of economic knowledge that includes statistics and publications of the state’s economic status. When a state applies to become a member of the WTO, a panel of member states called the Working Party oversees the application. Accession to the WTO depends upon the applicant state’s acceptance of the level of trade concessions and commitments established for it by the Working Party of the WTO in return for the benefits the state will receive from its membership (Qureshi, 1996).

As an international organization concerned with supporting the global trade regime, the WTO has two primary purposes. These are to ensure the reduction of tariffs and other barriers to trade, and the elimination of discriminatory treatment in international trade relations (Qureshi, 1996). The WTO provides the basic institutional framework for trade conduct between its member states and also provides a forum for further trade negotiations and settlements of disputes. Therefore, the WTO can be seen as an international organization that both enforces current trade conduct rules, while also providing a flexible system for adaptation of this trade regime.

The WTO itself has a fairly broad description of its goals and objectives. In the Marrakech Agreement establishing the World Trade Organization, the parties to the agreement recognize,
" That relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development" (Marrakech Agreement, 1995).

Described in this statement is not only the promotion of an increasingly liberalized trade system, but of the promotion of that system in a way that takes into account the needs of the global environmental system. Although the WTO may not be an environmental organization, in principle at least, it recognizes the need to develop in a way that does not cause undue harm to the environment.

At a national level, the objectives of the WTO coincide with those of the other organizations formed under the Bretton Woods regime such as the IMF and World Bank. The WTO does not act to remove all barriers to commercial trade, but rather to provide a place for states to work at lowering barriers to a level acceptable to the states that make up the global trade regime. By working with such other organizations as the IMF and the World Bank, the WTO works towards achieving greater coherence in global economic policymaking (Krueger, 1998). All three of these international organizations must be able to adapt and evolve to fit the ever-changing global system and international society of trade and economics. Therefore it is important for the WTO to also work with non-governmental organizations, which are playing an ever-greater role in the international system.

As an international organization, the WTO is made up of sovereign states, each with its own national trade policy and rules. These states must work together within the structures of the WTO to maintain an international trading system that increases openness and benefits economic growth. The WTO facilitates this forum for negotiation and enforcement through the use of several bodies within the WTO.

The governing body of the WTO is the Ministerial Conference. The Ministerial Conference contains representatives from all of the members of the WTO, usually a state’s minister of trade, and holds meetings every two years (Qureshi, 1996). When the Ministerial Conference is not in session, its role is carried out by the General Council of the WTO. The General Council is also made up of ambassadors from each of the member states and meets in Geneva along with other WTO subsidiary bodies such as the various committees responsible for working on one of the WTO’s multilateral agreements, such as the Trade Rights in Intellectual Properties (TRIPs) (Hocking & McGuire, 1999).

One significant difference between the WTO and the IMF or World Bank is that within the governing bodies of the WTO there is no weighted voting. Importance or additional influence is not given to states with larger economies, larger populations, or larger contributions to international trade or the WTO budget (Qureshi, 1996). This gives the WTO a more democratic sense than other international organizations that use weighted voting, such as the UN.

Because of this method of voting, and because unlike a body such as the United Nations Security Council, there is no state with the power to veto an item brought before the WTO’s General Council or Ministerial Conference, most decisions in the WTO are reached through consensus. If a consensus among member states cannot be reached, decisions are made by voting, with each state receiving one vote and a majority in favor deciding (Qureshi, 1996). This method holds for all types of decisions except for amendments or changes to the international trading system.

Amendments or waivers of obligations imposed on member states must be passed by a three-fourths majority vote. Any member may submit a proposal for an amendment, however, amendments to most-favored nation, tariff concessions or decision making processes must be reached by consensus and amendments to the WTO are binding only in relation to those member states that have accepted them (Qureshi, 1996). However, because of the great numbers and range of proposals brought before the WTO, it is very rare for any item to be examined fully by all members and observing states, and therefore, smaller examining committees are often created. The method of voting and accepting amendments brought before the WTO leads to protecting a nation’s sovereignty as it is very unlikely that a particular amendment with new rights or obligations would be forced onto a state (Krueger, 1998).

Although much has been made by some groups and individuals about the threat to a nation’s sovereignty by international organizations such as the WTO, it is important to realize that these organizations are in fact made up of said sovereign states, and are therefore unlikely to do anything that would excessively restrict their national sovereignty. Organizations like the WTO continue to evolve to meet the needs and wishes of their members, while adhering to the broader goals, such as trade liberalization for which they were created.

Because the WTO lacks the power to directly coerce a state into compliance with the international trade code, it must rely upon other measures to gain compliance from states. Implementation of the trade regime code is therefore accomplished through methods that "pre-empt" non-compliance or "correct" non-compliance (Qureshi, 1996). This is done by direct supervision, surveillance, or dispute settlement. When examined closely, these methods rely on initiation or acceptance of the member states of the WTO in order to be effective, demonstrating the lack of enforcement mechanisms controlled by the WTO itself.

The WTO can act as a monitor of a state’s trade policy and actions through the methods of surveillance, which itself can range from information gathering through increased transparency of a state’s actions to review of a state’s trade policy by the Trade Review Policy Mechanism (TPRM) and the dispute settlement system (WTO, 2001). Through surveillance, the WTO can collect information, publish reports, consult governments, or use inspection teams, and by processing the information it retrieves and passing it into international society, the trade policy of a state can be altered by self-censorship (Qureshi, 1996). However, the surveillance of a state’s territorial jurisdiction may not be practiced by an international organization such as the WTO unless the state has consented to it. This policy removes a potential direct threat to a state’s sovereignty by giving the state the ability to choose trade code implementation practices.

Surveillance is also one of the few areas in which the WTO itself may directly initiate action. The Secretariat of the WTO may make analytical comments on a state’s policy in regularly published trade policy reviews, and according to WTO agreements, states are required to notify the Secretariat of "new or modified trade measures", which is one of the main ways implementation of trade policy code is monitored (Hocking & McGuire, 1999).

Although through the acceptance by a state of supervision by an international organization that state has relinquished part of its sovereignty in a particular sphere, there are direct limits as to how much authority is ceded. In the case of the WTO, it is unlikely that there is a general authority for supervision or that intrusion by the WTO upon a state’s sovereignty is necessary to enforce the trade regime code (Qureshi, 1996). Therefore, although through the WTO’s use of surveillance and supervision some progress can be made in gaining a state’s compliance in implementing the trade regime code through indirect pressure or self-reflection, these actions are often undertaken by the member states themselves, as there is no direct coercive power held by the WTO to enforce compliance. It can be argued that the WTO is used as a self-monitoring system or forum for the exchange of information, which states use in order to achieve transparency in reviewing the trade policy actions of other states.

However, the WTO does have one other method of reviewing trade policy and the actions of states, although the power of implementing this method does not lie within the control of the WTO itself. This method is through the use of the Dispute Settlement Mechanism (DSM) of the World Trade Organization, a body created to hear complaints issued by member states, form panels made up of member states, and if needed, recommend actions to be taken in order to correct the trade dispute (WTO, 2001). Although the majority of international trade occurs without problems or disagreements, occasionally a state’s trade policy will be seen to clash with the international trade code as defined by GATT and the WTO. It is recommended and preferred that states attempt to reconcile their trade related differences through negotiation and mutual agreement, however, if agreement cannot be reached, a member state has the right under the rules of the WTO to request enforcement of the trade code by the DSB (Qureshi, 1996).

It is important here to note that the complaint and instigation of the Trade Policy Review Mechanism is done by a member state, not the WTO itself. Without the actions of the member state, the WTO cannot take action against domestic or international trade policy that conflicts with the rules set down by the GATT and WTO agreements. The WTO itself does not even have a clear mandate to observe and publicize a list of those states that act as trade delinquents (Qureshi, 1996). It is therefore up to the states themselves to observe faults in trade policy and bring them to the WTO’s attention.

However, once action is taken in bringing trade policy violations to the attention of the trade dispute settlement body, the enforcement and the correction of deviant trade behavior is accomplished much swifter through the DSB than through previous dispute settlement mechanisms (Kahler, 1995). Access to the DSB is only available to WTO member states; therefore actions cannot be taken by non-signatories to the WTO. The DSB is a centralized and strengthened trade review mechanism, with the power to "establish review panels, adopt panel and appellate reports, authorize the use of sanctions by member states, and monitor the implementation of rulings and policy recommendations" (Qureshi, 1996).

Decisions by the DSB can usually be reached by consensus, and of course, this is the preferred outcome of any trade dispute. The resolution of trade conflict can be facilitated by the use of consultation, mediation, arbitration, or adjucation by a panel of members, with emphasis on ensuring a "consensual resolution" between members, while adhering to the rule of law (Qureshi, 1996). However, if consensus cannot be reached, the DSB usually secures the withdrawal of those trade measures found to be in violation of the WTO code. If measures cannot be immediately withdrawn, temporary compensation can be provided to the aggrieved member state until a solution is reached with a final resort being the "suspension of concessions or obligations on a discriminatory basis", or the imposition of sanctions authorized by the DSB on the offending member (Hocking & McGuire, 1999). It is the DSB that has handed down rulings on some of the more notable international trade disputes such as the Tuna-Dolphin dispute, however, as a functioning dispute settlement system, the DSB is not without its shortcomings.

As was already mentioned, actions by the DSB can only be initiated by the request of a member state. The DSB itself has no authority to monitor and implement the trade review mechanism. The DSB is also limited in that it is not open to adopt interpretations of additional multilateral or WTO agreements (Qureshi, 1996). This poses a distinct problem in the area of multilateral environmental agreements that contain trade measures, an example of which is the Montreal Protocol. Because there is no codified set of rules as to how the WTO should interpret multilateral agreements, the possibility of trade conflict and disputes exists. A clearly described set of rules governing the relationship between the WTO and other independently negotiated multilateral agreements should be codified in order to remove any possible disputes or confusion with regard to their interaction in the international trade system.

Although there are some weaknesses in the Dispute Settlement System, the system itself has been very actively used since it was developed. Within the first three years of its creation, the WTO presided over one hundred trade disputes, a number which is far larger than that of disputes resolved by the GATT (Hocking & McGuire, 1999). Due to the more egalitarian nature of the WTO with regard to individual state influence, the DSB has been used by states with both large and small economies or proportions of international trade. Countries such as Thailand can initiate action against the United States without knowing that the electoral clout of the US is going to nullify any actions taken against it. Because of the way the system is structured, the DSB is seen as "fair" by developing countries that often are suspicious of international organizations or agreements that are created by developed states (Hocking & McGuire, 1999).

As a part of the international trading system, the DSB will continue to adapt, as the WTO does, in order to respond to the actions or inactions with regard to trade issues of its member states. Currently, actions to alter the DSB to allow the limited input of non-governmental organizations to dispute panels are changing the transparency of the organization (WTO, Nov. 2000). As more states join the WTO, the system will continue to grow in size, and with the negotiation of further agreements that influence trade between states, it will grow in scope as well. This ability to evolve gives flexibility to the international trade system, allowing for a dynamic organization and the adaptation of new rules or agreements as they may arise.

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Copyright 2001 by Stacy Schumacher