International Trade And Environment:Lessons From The Federal Experience

This Article has two objectives. First, the Article will develop a conceptual framework for analyzing the interrelationship between trade restraints and environmental protection policy. Second, it will draw from the experiences of two federal-type political systems--the United States and the European Community--potential lessons for the international institutional treatment of trade and environment issues. The Article does not deal with many other aspects of trade and environment issues, such as the use of pollution-control subsidies, or the impact of trade liberalization on environmental quality, or whether treaty negotiations should be subject to environmental assessment procedures. Nor does it offer a detailed review of relevant legal texts and decisions. Its aim is to provide an analytical structure for thinking through the issues of law and policy presented by trade-related environmental regulation.I. THE FREE TRADE REGIMEThe cornerstone of the case for free trade is the mutual economic benefit resulting from trade among nations with differences in comparative advantage in producing goods and services. This concept has been characterized by Paul Samuelson as "the sole proposition in the Social Sciences which is both true and non-trivial."(1) In the classic Ricardian conception, comparative advantage was based on relative differences in factor endowments--such as the character of agricultural land, climate, timber, and mineral resources--among nations.(2) But an enlarged conception of comparative advantage has come to include differences in human capital and industrial and technological infrastructure. No reason exists in principle why comparative advantage should not also encompass differences in national economic, social, and regulatory policies and legal and administrative systems. Economists also regard national differences in the ability of ecosystems and populations to assimilate pollution as an element of comparative advantage.(3)There are additional reasons, beyond comparative advantage, why free trade should enhance the welfare of all nations engaging in trade.(4) A wider market enhances the opportunity to realize economies of scale. It also promotes specialization, with attendant gains in productivity. A greater array of suppliers stiffens the efficiency-promoting discipline of competition. The wider network of international contacts accelerates the diffusion of knowledge and technological innovation.(5)Experience confirms the economic benefits of a free trade regime (FTR). Empirical studies show a strong correlation between the degree of trade liberalization and economic growth rates among different nations and a similar correlation between changes in trade policy and growth in individual nations.(6)The economic benefits from a common market and the perceived detriments from trade rivalry among the states under the Articles of Confederation were an important impetus for the ratification and adoption of the United States Constitution.(7) The expected gains from the creation of a common market and common currency were not purely economic; it was thought that economic integration would advance political integration and mutual security. Similar considerations propelled the creation and subsequent strengthening of the European Community. Economic rivalry was thought to stimulate political conflict and to have contributed to the outbreak of three large-scale wars in Europe within seventy-five years. Europeans believed that economic integration would ameliorate the causes of political and military conflict.Economic integration was seen as a global imperative after World War II. Many western leaders thought that restrictive trade policies by major nations in response to the Great Depression were a major cause of the continued economic stagnation of the 1930s. The development of a coordinated international monetary policy at Bretton Woods and the promotion of trade liberalization through the General Agreement on Tariffs and Trade(GATT)(8) were cornerstones of global prosperity. …