Race to the Top: The Biases of the WTO Regime. (Environment)

By Pope, Carl | Harvard International Review, Winter 2002 | Go to article overview
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Race to the Top: The Biases of the WTO Regime. (Environment)

Pope, Carl, Harvard International Review

In a recent speech before the Institute for International Economics, US Trade Representative Robert Zoellick did a fairly convincing job of knocking down a straw man in his discussion of environmental concerns over trade. "Given America respect for our sovereign authority to set environmental standards," he said, "we need to be cautious about infringing on others' sovereignty by trying to compel their standards through trade agreements." Unfortunately,

Zoellick appears to have listened to everyone except environmentalists in determining what concerns we actually have. Environmentalists do not seek to use international trade to set air pollution standards for New Delhi, water pollution rules in Johannesburg, or standards for genetically modified foods in Italy. We do not expect the World Trade Organization (WTO) to solve the world's environmental problems. Instead, we hope it will not worsen those problems or tilt the playing field against efforts in other arenas to achieve planetary sustainability.

Globally, we seek a rules-based system that allows, and ideally encourages, societies to internalize the environmental costs of economic activities. We want to avoid three kinds of subsidies: subsidizing local producers at the expense of local communities, subsidizing present generations at the expense of future generations, and subsidizing global commodity production at the expense of the global commons. What we have received, instead, is a rules-based trade system that discourages and, in some cases, effectively prohibits certain kinds of environmental protection strategies while setting the global economy against the internalization of environmental costs. Advocates of the current system argue that existing trade rules do not encourage a "race to the bottom" with regard to environmental standards because the WTO subsidy rules could, in theory, allow challenges to a nation that degraded its existing environmental standards to gain a trade advantage. But it is not this kind of extreme race to the bottom that most concerns environmentalists.

Greenless Subsidies

Since 1960, the global trend in virtually all countries has been toward stronger environmental standards. Indeed, only a global race to the top can achieve planetary sustainability. If WTO rules discourage nations from improving their environmental stewardship, then environmentalists have good reason for concern. But in a recent issue of the Harvard International Review ("National Sovereignty and the World Trading System," HIR, Winter 2001), economists Kyle Bagwell and Robert Staiger concede that "if a country were to significantly improve its existing standards in a way that raised the production costs of domestic firms, it might wish to unilaterally raise its tariffs... This degree of unilateral flexibility is not provided for under the WTO rules." By focusing on national efforts to maintain domestic markets for domestic producers, Bagwell and Staiger ignore the heart of the problem: the most critical environmental threats to planetary sustainability are overwhelmingly concentrated in commodity production. Environmental damage is largely caused by agriculture, logging, mining, energy production, and fisheries. These industries are, in most countries, export-driven. Unfortunately, current WTO rules explicitly prohibit subsidies to exports in the form of financial aid, but implicitly allow subsidies in the form of environmental degradation. For example, Canada cannot provide economic assistance to its timber industry in the form of replanting subsidies, but it can allow logging without replanting. Clearly, the odds of adopting an environmentally sound policy with such perverse incentives in place are dramatically lowered.

The WTO system is biased. It favors the least environmentally protective methods for countries seeking to increase the market share of their producers. There is no logical or systematic basis for this discrimination.

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