TẠP CHÍ KHOA HỌC ĐHQGHN, KINH TỂ - LUẬT, T.XXII. số 3, 2006
ENVIRONMENTAL CONSERVATION AND TRADE
1. Trade A greem ents and E nvironm ental Issues
WTO negotiations became paralyzed a t its 3rd M inisterial M eeting held in Seattle in 1999. The negotiation to launch a new round was thw arted m ainly because NGOs around the world objected the globalization of trade.
These NGOs are m ostly environm ental groups such as G reen Peace and WWF who believed th a t trad e integration would harm th e global environment.
D uring 1990s, th ere has been a major change in tra d e debate in the world, particularly in th e U nited States, the largest tra d e r in th e world. Since the global tre n d of trad e debates have always been originated in the U nited States, review ing th e debate in the U nited S ta te s is crucially im portant for any countries in th e world, particularly the WTO m em bers.
2 . The N ew P olitics o f Trade
(a) T he R ise o f fT r a d e a n d ...” Is s u e s Since th e enactm ent of the Reciprocal T rade Agreements Act of 1934, US tra d e policy h as centered on opening up th e global economy through reciprocal reductions in national trade restrictions. T rade liberalization always took the sim ilar p attern , i.e., the governm ent negotiated trad e agreem ent with foreign countries and opened its
Y a su k a ta F u k a h o ri(,)
m arket, im ports poured into th e United States, some vulnerable industries suffered a loss of m arket share, protectionism followed, movement toward fu rth er relaxation of trade b arriers was troubled, and some new social m easures, such as TAA, were introduced. Thus, forces working for freer trad e rem ained constantly on guard against groups of domestic industries th reatened by imports.
This continued into the last decade and still continues. D uring each of the past two decades, trad e statistics were very sim ilar. M erchandise im ports rose 81% between 1982 and 1988, and rose 79% between 1991 and 1997. However, the landscape of trad e politics was not the same a t all in 1990s.
D uring th e 1990s, the political dynamics of th e trade debate changed in significant ways. Traditional protectionism became weak, except th a t from steel lobbies, b u t trade liberalization is th reaten ed from another direction-from politically im portant constituencies alarm ed over the impact of globalization, particularly, labor and environm ental groups. H um an rights activists also participated in the trade debate. For example, they influenced the passage of China-PNTR (Perm anent Normal T rading Right) in 2000.
(,) Deputy Director, Regional Policy Division, Ministry of Foreign Affairs of Japan.
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During 1990s, mostly because of the inception of new and very im portant m ultilateral trade organization, WTO, trade became related to m any issues.
Not only "Trade and Labor," "Trade and Environment," and "Trade and Hum an Rights," but also "Trade and Public Health," "Trade and Transparency,"
"Trade and Competition," "Trade and Intellectual Property," ’’Trade and Development,” "Trade and Technical Cooperation," became internationally focused, to name only a few.
These "Trade and ..." issues first rose to prominence in the struggle over the negotiation and approval of NAFTA.
NAFTA debate ended as a victory for the Clinton adm inistration which supported the trade liberalization through regional arrangem ent, but the struggle brought together for the first tim e a coalition of activist organizations. Owing to their strong demand, Clinton adm inistration conceded to enact the labor and environmental side agreem ents. iC'y (b) T ra d e a n d L a b o r
Organized labor is not a new player in the trade policy process. NAFTA, however, galvanized labor opposition against free trade. Labor groups developed a visceral sense of trade as a threat, particularly a t the grassroots level.
Their argum ents have been basically the same for decades. They m aintain th a t "trade costs jobs,” "trade suppresses wages," and "trade undercuts labor standards."
USITC assessed NAFTA's effects on employment in 1996 and concluded th a t the agreem ent's im pact on labor w as difficult to discern, and only modest where discernible. Trade critics concluded, however, th a t NAFTA an d globalization generally changed th e composition of employment in America, shifting it toward lower-paying services industries, thus damaging th e
us
laborstandard and causing a significant num ber of job losses.
(c) T ra d e a n d th e E n v ir o n m e n t
Unlike organized labor,
environm entalists are new player in the trade policy debate. The com m itm ent of environm ental groups to trad e issues, though growing, is not as firm as th a t of labor. Some groups support trad e liberalization asserting th a t it would lead to the efficient protection of environment. O thers simply denounced trade because trad e would expand global consumption and damage n atu ral resources as well as e a rth ’s life supporting system. The NAFTA debate of early 1990s exposed deep political and ideological divisions w ithin the environm ental movement over trade policy.
The opponent’s argum ents are not limited to the economic aspect of the issue. They are also concerned about non-economical aspect, such as aesthetic value of environm ental goods and ethical implications.
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Environmental Conservation and Trade
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The environm entalists gained further political credibility through their successful cam paign against MAI negotiated from 1995 to 1997.
They stren g th en ed their opposition to free trad e as a re su lt of several WTO rulings a g ain st environm ental protection measures, including those for the tuna- dolphin, sh rim p -tu rtle, and MMT cases.
(d) A fter NAFTA
Clinton ad m in istratio n successfully let the Congress pass NAFTA by providing labor and environm ental side agreem ents. However, moderate environm entalists who supported NAFTA were disillusioned by the weak provisions and hardened their position.
Business groups also were disappointed by the en actm en t of side agreem ents.
This prevented Clinton adm inistration from gaining fast-track authorization and free trad e debate turned into stalemate. American trade policymaking system faced a new and serious challenge of "trade and ..." issues.
It should be noted th a t the strong opposition to NAFTA was based on the image as the villain harm ing
us
workers, not based on the actual impact to the US economy.
Labor and environm ental activists continued to play a significant role in im portant tra d e debates. In 1997, MAI was abandoned. In 1999, the efforts to launch the WTO new round negotiation in Seattle w as th w arted by the strong demand for the inclusion of labor and
environm ental negotiations as well as strong opposition from developing countries to them.
In 2000, they succeeded, for the first time in the
us
history, to include labor and environm ental provisions in the main body of an international agreem ent -Free Trade Agreement with Jordan.The provision even included clauses related to possible sanctions.
In 2002, Bush adm inistration finally gained TPA, which includes labor and environm ental provisions. U nder the constrains of these provisions, ƯSTR has been engaged in various trade negotiations such as Doha Development Agenda, FTAA, FTAs with Chile, Singapore, C entral American Countries, Morocco, Southern African Customs Union, A ustralia and EAI for ASEAN.
(e) P ossible F u tu re s
Labor was dropped from Doha Development Agenda, and environment was only partially included. FTAA did not completely rule out these two issues but it is expected th a t they will face a strong opposition from developing countries. However, one thing certain is th a t these issues will continue to be increasingly focused and seriously discussed in the future trade negotiations. Republicans have learned th a t they will not be able to avoid these issues.
A possible future is, therefore, a compromise th a t addresses labor and
Tạp c h í Khoa h ọ c Đ H Q G H N , K inh t ế - Luật, T.XXII, S ố 3, 2006
environm ental concerns and broadens th e support coalition.
E lem ents of a trad e compromise are:
1) A national commitment to enhanced Labor and Environm ental Standards
2) Steps to reinforce the social benefits a t home
W orker opportunity program s H ealth and safety regulation Review of biotechnology products 3) Steps to m ake the WTO friendlier toward social and environmental concerns
3. WTO D ispute Settlem ent Mechanism and Environmental C onservation
WTO is th e only international organization equipped w ith a dispute settlem en t mechanism. The establishm ent of th e D ispute Settlem ent Board (DSB) is probably the most im p o rtan t aspect of the entire WTO system . For other international organizations, including th e U nited N ations, reaching agreem ent or consensus by negotiations is the only possible way for mem bers to settle disputes. U nder WTO DSB system, m em ber countries have to abide by the decisions of the DSB, by giving up their own position as sovereign countries.
This is indeed a rem arkable achievem ent by th e founders of WTO.
Is WTO th en capable of m aking decisions against member countries th a t are depleting environm ental resources?
It does. However, WTO is not able t(.
intervene all kinds of environm ental issues. WTO can m ake decisions if a n d when th e cases brought up to the DSB are in accordance w ith the WTO rules related to trade and environment. Still, the fact th a t WTO is the only in ternational organization in th e present world th a t can m ake decisions to protect environm ent over the sovereignty of member countries is precious for the in ternational n a tu ra l environment.
WTO actually has proven to be a useful organization in term s of environm ental conservation. There are some cases th a t WTO succeeded in m aking decisions in favor of environm ental conservation.
Tuna-Dolphin cases between the U nited S tates and Mexico are well know to the general public b u t the ruling by the WTO DSB was against the environm ental protection measures introduced by the U nited States. The WTO Shrim p T urtle dispute is arguably the m ost im portant environm ent-related case under which the environm ental protection m easures were supported against trade. The dispute focused on Section 609 of the E ndangered Species Act of th e U nited S tates enacted in 1989 th a t requires th e u s governm ent to certify th a t all shrim p im ported to the country are caught w ith TEDs (turtle excluder devices) th a t protect sea turtles from incidental drowning in shrimp traw ling nets. India, P akistan, Malaysia, and T hailand filed a case against the Section 609 in 1997. On April 6, 1998, a
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Environmental Conservation and Trade 5 1
dispute settlem en t panel ruled against th e shrim p embargo, and the Appellate Body later supported the panel decision in October 1998.
The U nited S tates made certain changes to the way it im plem ents the law in accordance w ith the WTO ruling.
However, in October 2000, Malaysia again challenged th e im plem entation by th e U nited S tates. In J u n e 2001, a WTO panel ruled th a t U.S. im plem entation was consistent w ith its WTO obligations, and the A ppellate Body la te r upheld th a t position. Thus, WTO is considered a capable in tern atio n al organization from the view point of environm ental protection.
In the Figure 1., trad e is assum ed to be a t th e level of T which corresponds to the point A of th e production line where Sustainable boundary line crosses
(1) In the Figure 1., T represents the volume of traded goods, s represents the level of environmental amenity at which the level of environmental quality is marginally sustained. A represents the point which balances the volume of trade and environmental amenity.
4. M echanism o f Trade Intervention System and Environm ental C onservation
This section illu strates how th e trad e in te r v e n tio n s y s te m su c h a s d is p u te settlem ent mechanism of WTO works to prevent n a tu ra l environm ent from being over-exploited.
Figure l . (1) illu strates a production curve which relates trade volume and environm ental am enity. In this figure, n a tu ra l environm ent is sustainably managed in the area to the rig h t of the Subtainable Line. As the volume of trad e increases into the area to th e left of the Sustainable Line, n a tu ra l environm ent is increasingly dam aged and no longer sustainable.
the production line. Therefore, the environm ental am enity is being ju s t m arginally m anaged under th is level of trade. If the level of tra d e volume decreases from T to T , th en the environm ental am enity increases to the point S' w here environm ental am enity is safely m anaged w ithout a th r e a t froT^
F ig u r e 1.
Trade
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damage caused by overexploitation of n atu ral resources triggered by trade.
However, if th e volume of trade increases to the point T”, environm ental am enity now decreases to th e point S”.
Here, environm ent is no longer sustainably m anaged and it dooms to be completely depleted if th e volume of trade rem ains a t the level w here it crosses the production line in the area to the left of the sustainable line.
In this figure, A is assum ed to be the current point of tra d e and the environm ental dam age caused by the activities related to trade. Environm ent is ju st m arginally m anaged a t th is point A. However, in th e real world, it is unlikely th a t the volume of trad e stays at the same level. Volume of trad e is usually on an increasing trend.
(2) In the Figure 2.,
s
also represents the level of environmental amenity but it reduces as the amount on the horizontal axis increases. Thus, it is defined as the damage applied to the environmental amenity (=environmental damage).
Figure 2(2). shows the Figure 1. from a different angle. In th is figure, the horizontal axis represents the degree of environm ental damage, not the degree of environm ental amenity.
N atu ral environm ent is being increasingly dam aged as the trade increase in th e area to the right of the Sustainable Line. This is how actual trad e increases if no restriction is applied to free trad e principles.
Particularly in developing countries like Vietnam, th e volume of trad e is increasing a t a high and accelerating rate as economic liberalization advances.
In other words, it is assum ed impossible to keep the level of trade a t th e point A, where trad e is conducted a t th e most effectively and profitably without dam aging th e environment.
Environm ent is doomed to be unsustainably damaged if trad e is not restricted under an internationally agreed system.
Fl8Ure 2 - Trade
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Environmental Conservation and Trade 5 3
Figure 3.(3) illu stra te s how the trade intervention system such as the trade dispute m echanism of WTO saves n atu ral environment by shifting the trade curve to th e left of th e Sustainable Line.
For this figure to happen, an in tern atio n al organization responsible for environm ental conservation through trad e mechanism s needs to first determ ine the point A beyond which the n a tu ra l environm ental can not be
In th is Figure 3., trad e is originally conducted a t the point T where environm ent is ju st marginally sustained. Owing to the intervention of an international organization,(3) the volume of trad e is decreased to T which is somewhere w ithin the range sm aller th a n T. As th e figure shows, environm ent is now safely sustained at the point S’ u n d er the control of in tern atio n al trad e organization. It should be noted th a t a sufficient level of
(3) In the Figure 3., I indicates the shift o f the trade curve from the right of
s
to the left o fs.
sustainably managed. Then the organization needs to enact rules to apply economic sanctions against countries which export goods over the level A. The am ount of sanction m ust be large enough for those trading countries to find it beneficial to decrease trade below the level A. Then the trade decreases to the left of the Sustainable Line and the n a tu ra l environm ent is sustainably managed.
penalty will be applied if trade volume exceeds the point T.
Figure 4.(4) explains th a t trade intervention m echanism does not necessarily decrease profits of trading countries. Since price of trad ed goods is the function of the dem and and supply, the price will increase if th e supply is lim ited due to th e control of the international organization.
(4) In the Figure 4., p represents the level of profit gained from trade. Trade line is shifted from 0-A’ line to 0-A"
line due to the intervention of international trade organization.
F ig u r e 3.
Trade
T ạp ch í K hoa học D H Q G H N , K inh t ế- Liiật, TJO ai, S ố 3, 2006
F igure 4.
Profit
Figure 4. illu strates th e profit function of above figures. The quantity of traded goods will increase from T to T if there is no restriction in term s of environm ental protection. An international trad e organization then establishes rules to reduce the quantity of traded goods below the level of T which corresponds to th e Sustainable point in the above figures. When trad e is conducted a t the point T , th e exporting country is m aking profit a t th e level of P’
which is higher th a n p. Now the quantity of traded goods is reduced to T, the level of profit is also supposed to be reduced back to p.
However, it should be noted th a t demand on the trad ed goods was once balanced with the level of supply a t the point A\ Although the supply has been forcefully reduced to T , th e expanded demand of consum ers does not autom atically reduced. Hence, due to the existence of ex tra-d em an d ,. th e price of
the traded goods will become high enough to suppress the expanded demand. Accordingly, the profit gained by the trade will increase even though the quantity of traded goods is decreased. The degree of the effect on price depends on the elasticity of price against demand. If the elasticity is equal between the reduction of trad e volume and the increase in price, i.e., AP’/AT = AP/AT’, the level of profits for the trading countries can be guaranteed a t the level corresponding to A” where goods are traded freely.
5. Conclusion
As explained in the Section 2. above, trade h as now been closely related to environm ental conservation. Doha round negotiations of WTO may bring new sets of regulations to control trade flows in order to protect n a tu ra l environment.
Developing m em ber countries of WTO may not have to abide.
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By such regulations if cu rren t rules to d ifferentiate developing countries from the principles of free trad e under WTO.
However, developing countries will not be allowed to be totally indifferent to the issues related to trad e and environment.
For example, as the Section 3 illustrated, M alaysia actually lost a case against the U nited S tates on a turtle- shrimp problem. If new rules are adopted under WTO agreem ents, all countries may face trad e retaliations if they do not pay due attention to the environm ental aspects of trade.
However, as th e Section 4. above explains, restrictions on trade may not necessarily decrease profit of exporting countries because the reduction of supply will push up the dem and on the
product and th u s offsets the trade balance. From another angle, this can be interpreted th a t international organizations can a ttrib u te the right values to th e environm ental goods in the trad e m arket, for the benefit of producing and exporting countries.
F u rth e r efforts and experim ents in the global trad e m arket will have to be made in order to enact efficient rules th a t could be supported by the global community for th e protection of environm ental n a tu ra l recourses by way of introducing new m easures related to trade. In th is respect, fu rth er studies on the relation betw een trade and environm ent also need to be pursued continuously.
R E F E R E N C E
1. Environment Agency of Japan, 2002, Quality of Environment in Japan in 2002 2. FAO, 2002b, FAO Year Book 2002, Rome, FAO
3. Field, B. c., 1994, Environmental Economics, London, McGraw-Hill Book Company 4. Goodland, R., 1997, 'Biophysical and Objective Environmental Sustainability',
Sustainability and Global Environmental Policy: New Perspectives, Cheltenham, Edward Elgar
5. Lipsey & Courant, 2003, Macroeconomics, London, Harper-Collings
6. Ostrom, E., 1990, 'Governing the Commons' The Evolution o f Institutions for Collective Action, Cambridge, Cambridge University Press
7. Schott, J. 2001, WTO, after Seattle, Washington D.C., Institute of International Economy
8. Vogler, J., 1995, The Global Commons, England, John Wiley & Sons Ltd.
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TẠP CHl KHOA HỌC ĐHQGHN, KINH TẾ - LUẬT, T.XXII, số 3. 2006
BẢO VÊ MỒI TRƯỜNG VÀ THƯƠNG MẠI Y asu k ata F u k a h o ri
Ministry of Foreign Affairs o f Japan
Trên th ế giới gần đây có một sự thay đổi đáng kể trong những tra n h luận về thương mại. Đó là thương mại ngày càng có mối quan hệ chặt chẽ vối việc bảo vệ môi trường.
Bài báo này trước h ế t muôn nghiên cứu về những vấn đề đã xảy ra trong quan hệ thương mại những th ập kỷ cuối cùng của th ế kỷ 20, tác động của nó đến những tran h luận về thương mại và môi quan hệ vói việc bảo vệ môi trường. Đặc biệt, tác động của điều khoản về môi trường của NAFTA và phương thức hoà giải tra n h chấp của Tổ chức Thương Mại th ế giới (WTO) sẽ được phân tích chi tiết. Bài báo cũng sẽ minh hoạ bằng đồ thị mối quan hệ giữa khối lượng thương mại và chất lượng môi trường nhằm mục đích chỉ ra một sự cân bằng khả dĩ mà tại đó hàng hoá có thể được trao đổi cùng với sự nhát triển bền vững của môi trường tự nhiên.
T ạp ch í K hoa học Đ H Q G H N , K inh t ế - Luật, T.XXII, S ố 3, 2006
