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International Trade and the Environment: The WTO and the New Beginning

Robert Page

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Introduction: The Challenge

In 1995, we are seeing the launch of the World Trade Organization (WTO) and with it the international discussions to implement the conclusions of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). This presents a series of opportunities for creating a truly effective world trade regime as never before. In the vigorous public debate on environment and trade, the focus has tended to be on issues not on institutions. While issues provide easy and dramatic copy for the media, it is often institutions which explain an incapacity to deal effectively with issues. Institutions often involve complex structures and procedures, difficult in their own right, but compounded by historic traditions and assumptions understood by few outside the circles of the officials involved. While there are such internal forces of inertia, there are strong external pressures for change. With the launching of the new WTO we have the opportunity for a new beginning.

Over the years, the GATT has successfully projected an image of competence and mystery with its closeddoor deliberations and its professional vocabulary and acronyms which compete with the lawyers and scientists. Multilateral trade negotiations are elaborate rituals in semantic gymnastics whereby vested interests have often been disguised in the vocabulary of the principles of liberalized trade. And the trade sphere was constructed, and has evolved, as a separate and exclusive world of its own, subject to few outside forces, except international economics and politics. While some may resent these circumstances, no one can ignore their significance in understanding the nature of the current impasse in dealing with the new issues facing this conservative club.

Now, as environmental concerns penetrate trade issues, the institutional structures were poorly equipped to respond. This impasse was a natural product of the carefully evolved GATT process. It was designed to deal with one type of issue and it was facing a fundamentally different type of issue. But with the launching of the new WTO in 1995 and the negotiated evolution of its structures, this is the essential time for those in the environmental community to make their case for structural changes as trade moves into the transitional stage between GATT and the WTO, before the latter completes the fine tuning of its structures and procedures.

In approaching this topic, it is important to understand and appreciate the entrenched influence of the historic and intellectual traditions of the trade community. Given that these traditions have served members of the trading community well, it is natural that they are reluctant to abandon their assumptions. The founders of GATT were reacting against the economic nationalism and protectionism which had been so prevalent since the 1880s in Germany, the United States, and even in Canada with the "National Policy" of Sir John A. Macdonald and his successors. Given the events of the 1930s and the World War II, their emphasis was on lowering tariffs and liberating market forces to create a new economic "internationalism." They believed that protectionism promoted rivalries which in the long term caused trade wars. While some of the idealism might appear naïve in retrospect, it was real at the time, and it remains entrenched in the collective wisdom of the trading community, and contributes to its reluctance to change. Unfortunately, the full potential of the theory has always been restrained by the vested economic interests of the contracting parties. Theory has always been subject to political reality. Expanding trade has been the strategic goal of just about every nation.

The rules and the practices of the GATT reflect the uneasy compromises which are an inherent and inevitable part of its operations. Trade has always comprised a key component in power politics, whether in the Pax Britannica of the 19th century or the North American Free Trade Agreement (NAFTA) of today. In neither GATT nor NAFTA is there ever equality of the members without equality in economic power. With the end of the Cold War, there was an enormous decline in the military tension between East and West, but an increase in the economic tensions between western trading partners. Given regional and NorthSouth tensions, it is no wonder that the trade community appears awkward and hesitant. While there has been considerable progress on reducing tariff barriers in successive rounds of negotiation, the nature of trade relations has steadily become more complex with a variety of nontariff barriers. The boundaries of trade now appear to be blurred with a variety of social, labour, and environmental concerns, threatening the traditional discipline and orthodoxy in the field. The problem for many traditionalists is not that environmentalists want some new role for the GATT, but that they want to change the nature of the game as it has evolved since 1948.

The historic assumptions of trade economics go back to Adam Smith in 1776, and are perceived to have stood the test of time. Trade is based upon economics, while environmental protection is based upon scientific assumptions. Some argue that they do not lend themselves to integrated analysis, especially when some key environmental issues are not easily quantified in dollar terms or, as in the case of global climate change, are based on future projections. They believe that the fields are inherently different and that they should be handled to the greatest degree possible in separate forums and institutions. Others argue that they must be integrated because trade policies are an essential component for sustainable development. These are important considerations in approaching the forthcoming G7 Summit in Halifax in June.

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