GATT Trade Rules and the Environment

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I. INTRODUCTION

This paper focuses on the relationship between trade rules contained in the General Agreement on Tariffs and Trade (GATT) and the proposed North American Free Trade Agreement (NAFTA), and the ability of the signatories to these agreements to protect their own and the global environment. The public debate on this question involving the major conservation organizations, on the one hand, and the GATT secretariat and the U.S. trade representative, on the other, often gives the impression that free trade and the environment are conflicting objectives. The position of this paper is that a viable set of trade rules can establish the essential conditions for competitive international commerce without seriously impairing the ability of nations to protect the environment.(1)

One can concentrate on the GATT trade rules since most rules alleged to conflict with trade restrictions on behalf of the environment also apply to NAFTA. First, consider exactly how the GATT rules constrain members from applying trade restrictions, or from taking other actions that affect international trade in the interest of the environment. A recent GATT secretariat report (GATT 1992) asserts that GATT rules do not prevent a country from protecting its own environment against damage from imported products, so long as the measures taken do not discriminate between domestic and imported products. However, the report states that restricting imports alleged to be harmful to the domestic environment must be based on "scientific evidence" of such harm, in order to prevent countries from banning harmless imports for reasons of protection. Some environmental organizations have rejected this condition as interference with domestic policy. More importantly, however, the report asserts that the GATT rules prevent members from making access to their own markets dependent on the domestic environmental policies or practices of the exporting country. This constraint would apply to protecting the global commons (for example, ozone depletion) and to avoiding "unfair" competition from goods produced in other countries under low or nonexistent environmental standards.

Environmentalists believe that the GATT trade rules should permit restrictions on trade in endangered species and in products, such as chlorofluorocarbons (CFCs), that adversely affect the global environment. According to the secretariat report, in the absence of a change in the GATT rules, or a waiver of the specific GATT obligation (requiring a two-thirds majority vote), future dispute panels might interpret GATT rules so as to deny trade restrictions for these purposes. The report does point out that members can apply restrictions on domestic sales of endangered species without regard to the source of the product. Domestic regulations could deal with some of the conflicts between actions taken in the interest of the environment and GATT rules. For example, simply prohibiting domestic sales or ownership could effectively restrict imports of ivory, rhinoceros horns, or pandas. However, using this means to restrict imports of tropical forest lumber or wood products from countries that are wantonly destroying their forests presumably would require banning domestic trade in all tropical wood.

II. TRADE RULES AND THE PROTECTION OF THE GLOBAL COMMONS

Over the past decade, the GATT's dispute settlement process has adjudicated only five conflicts over trade restrictions in the interest of environmental protection alleged to be in violation of GATT rules. Three of these cases had to do with fish products. The best known concerned the U.S. ban on imports of yellowfin tuna from Mexico on the grounds that Mexican fishermen violated the U.S. Marine Mammal Protection Act, which limits dolphin kills. The Mexican government argued that the U.S. embargo on yellowfin tuna violated GATT rules. The United States countered that article III of the GATT permitting national treatment allowed the embargo, since the U. …