However, this change must start somewhere, and as there is no "Global Environmental Organization" to facilitate this action, change must occur within the WTO and the multilateral agreements made by states. Within the last year, many arguments over the faults of the WTO and similar economic organizations such as the IMF and World Bank have prompted protests in cities around the world. Some of these protestors are calling for the complete dissolution of these international organizations. However, eliminating a forum for states to discuss and negotiate trade interaction will cause more problems than it solves. Rather, what needs to be realized is a series of changes to the WTO code, in order to modernize the international trade system and take into account new knowledge about trade and environment interaction. The WTO was set up as an international organization capable of evolving with new views and trends concerning international trade, and now is the time to make use of the flexibility of the organization in order to adopt new trade policy. There are a series of issues that need to be addressed by the WTO in order to create a system of international trade that achieves the WTO’s stated goal of obtaining sustainable development. Some areas of change fall under policy and procedure, others within the rule-structure of the WTO, which was inherited from the GATT.
Two similar areas of contention between many outside groups and the WTO is the concept of transparency of WTO actions and the interaction the WTO has with other groups in the international system, such as nongovernmental organizations (NGO’s). The WTO is unique amongst most large international governmental organizations such as the United Nations and the World Bank in that the WTO does not engage "operational civic groups" like NGO’s in the delivery of services (Hocking & McGuire, 1999). The WTO inherited this problem from the GATT, which when it was created in 1948 had no provisions for dialogue with international civil society. The creation of the WTO caused the issue of external transparency and public outreach to again be discussed, and in article V.2 of the Marrakech Agreement it was stated that, "the General Council shall make appropriate arrangements for effective cooperation with other international governmental organizations and nongovernmental organizations that have responsibilities or concerns related to those of the WTO" (Marrakech Agreement, 1994).
Since the agreement, this article has been open to some level of interpretation, as decisions about exactly what organizations conduct business related to WTO activities. It is true that some positive action towards increasing the transparency of WTO activities and negotiations have taken place. Some of these changes include such measures as:
* An adjustment in the language of the WTO to recognize international civil society.
* Various outreach programs created to initiate interaction with outside organizations.
* An increase in public dissemination of information such as reports of dispute panels, trade-policy review reports, and CTE summaries.
* The alteration of WTO policy that meets slightly civil society demands.
These improvements present a chance at improvement of interaction between the WTO and international civil society, provided the measures are used fully and fairly. It should be noted that nowhere is there a direct consensus for the WTO to begin involving NGO’s directly in the work of the WTO, and some delegations are actively resisting further involvement of NGO’s and civil society in WTO affairs (WTO, Moore, 2000). As more protests and arguments arise due to the WTO’s relative lack of transparency it is becoming clear that the WTO must continue to look forward in its involvement with civil society, rather than return to the somewhat closed policies of the GATT.
This is necessary in order to show NGO’s with interests in areas other that only international trade that the WTO is moving towards accepting a greater role in international society. For many years, many groups interested in trades effect on the environment were frustrated by the closed policies of the WTO. This is because environmentalists emphasize a policy-making process of open discussion, participation, and accountability; a process that greatly contrasts with the policy undertaken by the trade regime, which environmental groups see as secretive and negotiated by isolated trade bureaucrats in closed WTO meetings (Uimonen & Whalley, 1997). This sense of isolation from the decision-making process is further compounded by the biased outreach programs of the WTO. Article V.2 states that the WTO will cooperate with like organizations, which often means organizations involved in international trade, banking, business associations, or finance. For example, at the Singapore Ministerial Conference in 1996, business interest made up sixty-five percent of civic organizations able to attend, while other groups representing established labor, development, or the environment had a much lower access rate, and other civic groups such as grassroots organizations had no access to the WTO at all (Hocking & McGuire, 1999).
There also exists an inequality in representation of organizations located in developing states compared to those in developed states. Development NGO’s and those representing the underclass have had a hard time competing with the urban-based, highly organized and funded organizations from international civil society (Hocking & McGuire, 1999). Therefore, although the WTO has, on paper and in statements, agreed to increase transparency and involve organizations from international civil society, as of yet this process is not occurring in a democratic fashion, and many of the groups that felt isolated from the decision-making processes under the GATT continue to feel so today, leading to the angry protests and calls for change seen within the last few years.
The WTO needs to realize a greater change in its actions if anything resembling increased transparency is to be accomplished. Such changes need to be carefully planned and implemented, so as to increase transparency without causing undue difficulty and constraint of action in WTO policy. Because the WTO is a more modestly staffed organization than other organizations such as the IMF and World Bank (only 500 employees compared to 2600 employed by the IMF or 5500 by the World Bank) the WTO lacks the resources to fully integrate civil society into WTO actions and panels (Hocking & McGuire, 1999). This is one of the main reasons it is doubtful if organizations or groups will ever be able to directly appeal to or present arguments to the WTO, especially if one considers the large amount of organizations involved with international society.
If the WTO were to begin hearing from one set of groups, such as those concerned with the environment, many others would also want representation, overflowing the WTO’s decision-making body. However, a system of more participation, just short of "full rights to appear and appeal" could include such measures as the right to submit documents to panels and comment on panel reports, prior to their adoption (Uimonen & Whalley, last 2, 997). This would be of particular use when a particular decision deals with environmental issues that are not always understood or addressed by panels made up primarily of trade financiers. To have the ability to allow environmental organizations to review and comment on policy would allow international trade policy to have a more coherent and connected relationship with international society, reducing the isolation of the WTO. Perhaps the Committee on Trade and the Environment (CTE – my emphasis) could come fully into its named role as such by facilitating the discussions held between the trade panels and environmental organizations by working as a mediator. The CTE could increase dialogue and transparency of WTO actions, and provide the WTO with information gathered from organizations with the necessary resources to provide research that the WTO cannot accomplish with its own resources. Such a system of compromise would no doubt prove useful in bringing together trade and environment policy to form a coherent system, preventing the overuse and inefficiency of too many uncoordinated Agreements. Whatever choice is made, some action towards increased transparency is needed for the WTO to maintain legitimacy and support in international society.
Another area in which the WTO needs to adopt changes to its policy is in the WTO’s relationship to separate agreements made by states, such as multilateral environmental agreements, or MEA’s. Currently, the WTO does not have a clearly delineated policy towards these agreements, as there was none outlined clearly within the GATT, although the GATT does encourage multilateral action as a way for states to reach cooperative solutions to problems (Esty, 1994). However, at the same time that the WTO recommends states work at achieving multilateral agreements for policy decisions, the potential for conflict exists as some of these agreements incorporate trade measures into their policy, which conflicts with GATT rules (Brack, 1998). What then should be the decision of the WTO with regard to these MEA’s?
Some states fear the adoption of a policy of giving preeminence to one agreement over another, as this would potentially create a hierarchical structure of organizations or lead to protectionist measures. Developing countries in particular fear the creation of MEA’s by the developed sates, with these new agreements being superior to the WTO code, will help erect new trade barriers against developing countries under the justification of needing them for environmental protection or other measures (Hocking & McGuire, 1999). Although this would seem like a legitimate concern as many trade barriers do act against developing countries, posing a great detriment to economic development, it is crucial to observe that the trade barriers agreed to in a MEA are arrived at by the consensus of many states, not only those in the developed world. If a developing country felt threatened by the measures the agreement contained, it should not sign onto the MEA. Theoretically, if these agreements are being accepted by most states in the international trade system, support must exist for the trade measures enclosed within, which is one argument as to why no measure has yet been challenged by a state in the WTO.
Decision on what to do when trade policy affects non-signatories to a particular MEA, but a member state of the WTO is more difficult. The WTO does not support a "one size fits all" approach to trade and environment conflicts, but rather a way to establish synergies between trade and environmental policies (WTO-CTE, Oct, 2000). Currently, the WTO has primacy of decision over trade and environment disputes. Whether the decision is made to accept the imposition of MEA provisions over the rules of the WTO, or vice versa, a clearly understood policy towards MEA’s must be negotiated and accepted. Once accomplished, further negotiation of MEA’s can occur with the understanding of how the agreement will interact within existing policy, and if necessary, changes to policy with regard to non-signatories can occur.
Yet one other area in which policy change within the WTO needs to occur is within the rules pertaining to process and production methods (PPM’s). This may well be one of the most controversial areas of possible change to WTO rules and procedure, and it is noted that far less support exists for changes to PPM rules than for other areas of the WTO. Yet, as the increasing linkages between production process and environmental effects, particularly those with a transboundary effect become apparent. The need to review this area of WTO rules will become critical.
Process and production methods (PPM’s) came into WTO use through their existence in the GATT, and were originally created within the GATT to prevent the imposition of discriminatory trade restrictions based on national origin (Hocking & McGuire, 1999). This was seen as necessary to prevent states from creating non-tariff trade restrictions while hiding behind the justification of using such restrictions to protect human or environmental health or safety. However, since the creation of the PPM rules, the GATT and WTO dispute panels have interpreted the rules to include prevention of discrimination based on the process methods of a product, rather than the product itself, when they are the main cause of restrictive trade measures. Therefore, if a product itself and its use or consumption are found to be safe or to meet the domestic standards of a state, that state cannot impose restrictions on that product based on the method or process in which it was produced, despite the fact that those product production methods may cause negative impacts on human or environmental health.
There are several reasons given for the justification of maintaining restrictions on trade policy under PPM rules. One argument that is often used is that of state sovereignty. Many of those opposed to allowing production process as a reason for restrictive trade action claim that "if GATT rules conceded measures against products based on production judgments, it would result in distinct interference in the sovereign right of nation-states to make decisions" (Anderson, et.al. 1995). Claims of the use of these measures to achieve a sort of environmental imperialism are also made to refute the use of PPM’s in restrictive trade policy, as states in the developing world often resent being told how to use resources or produce goods by the developed states, who are seen as having abused their own environment and workforces to achieve their level of development.
The issue of what right a state has to abuse or exploit its resources brings up the issues of comparative advantage and "like goods". The GATT and WTO rules against trade restrictions based on PPM’s because the environmental regulations that justified them were imposed due to the production process, not the product itself (see the Tuna-Dolphin dispute). Therefore, the GATT and WTO have taken two goods, although produced in different ways, yet found to be the same at use or consumption, to be "like goods"; therefore, the GATT and WTO rules that clearly prohibit the discriminatory trade measures on "like goods" apply (Hocking & McGuire, 1999). The fact that one state is able to produce a good without having to take account of potentially cost-increasing environmental health or safety measures can be seen to simply be part of that state’s comparative advantage.
Comparative advantage is the properties or resources a state has which allow it to produce certain goods at a lower cost than other states without those properties (Esty, 1994). Some states, such as those well-developed states with a great deal of capital available for investment have a comparative advantage in the production of capital-intensive goods, while those states with abundant resources or labor have a comparative advantage in either resource or labor-intensive goods. Yet as we are realizing the growing interconnection between ecosystems, the question must be asked whether the rapid destruction of a state’s natural resources can be considered its comparative advantage (Anderson, et.al. 1995). For the implications of those actions can affect more than just the state that is degrading its own resources.
Issues about global biodiversity and the effect one ecosystem has upon others argue against the idea that a state may degrade its own resources under the rules of national sovereignty. Therefore, production processes that cause undue environmental degradation and have a negative impact on the Earth as a whole can be seen to inflict costs on other countries, potentially legitimizing the use of trade restrictions to recoup those losses. However, as issues of biodiversity and environmental quality are more difficult to quantify and give an economic value to, perhaps another example would be more useful.
If a case was found where the process of producing a good created pollutants that affected another state through transboundary pollution, one would reasonably think that the state being affected by pollution would have the right to complain and place restrictions on goods from the polluting state. An example of such transboundary pollution could be something like the emission of SO2 in one state causing acid rain in another. Currently, as the GATT rules stand, the effects of production would not be considered during a dispute settlement panel, as Article III refers to "a product as a product, from its introduction into the market to its final consumption" (Hocking & McGuire, 1999). This is despite the fact that the WTO itself recognizes that many environmental problems are the result of "polluting production processes" and the fact that producers do not always pay the costs of these polluting actions (WTO report, 1999).
Negotiation between states can occur with the goal of solving specific environmental problems, such as the US and Canada negotiating over the damage done to Canadian forests and lakes due to acid rain caused by businesses in the US (Acid Rain Plan, 1998). However, negotiations on such environmental issues are difficult to begin and come to an agreement upon, and therefore, many cases of transboundary pollution caused by production process methods are not addressed. It is vital for the WTO to realize the part played by these environmental externalities and allow for the limited use of trade restrictions based on environmental degradation due to production methods. Such actions would work towards internalizing the social costs of production, rather than imposing those costs upon individuals or a state that receive no benefit from production.
The WTO could allow the carefully monitored and scientifically justifiable use of trade restrictions where it is proven that the process of producing a good causes environmental or social costs upon another state. Information on such actions could be researched and provided by members of international civil society, and presented to dispute panels through increased transparency of the WTO. And in larger cases where actions occur between many states and actors, decisions on environmental trade policy action could be delineated by the acceptance of multilateral environmental agreements, facilitated by the Committee of Trade and the Environment of the WTO. Such actions could bring the two regimes of trade liberalization and environmental protection into closer interaction, and work towards solving problems tat arise between the two in a more efficient manner.
Concluding Thoughts
The ability to change exists, what is needed now is the will and the acceptance of ideas not incorporated into the GATT when it was created so many years ago. When the GATT was created, little was known about the effect certain types of production would have upon the environment, and the way in which various ecosystems would interact. When the WTO was created, this knowledge was accepted in the statements on achieving "sustainable development". However, little direct action towards integrating trade and the environment has occurred since the creation of the WTO, and as there is still no international organization to promote international environmental standards, it is the environment that too often is negatively impacted due to economic or trade action.
As new science and understanding demonstrates the effect of environmental costs and the interconnection of ecosystems, the members of the WTO must realize the role that trade has upon the environment, and how it is through the use of specific and justifiable trade actions that true economic and environmental efficiency can be reached. Action to change the WTO code to incorporate these changes will no doubt happen slowly, but it is vital to the health of our shared environment that the acceptance of international trade measures to achieve environmental goals occurs.
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Copyright 2001 by Stacy Schumacher