Unpacking the "Trade and Environment" Conflict

Assuming for the moment that worldwide environmental policies internalizing all pollution costs--backed by a Global Environmental Organization and a multi-billion dollar Green Fund to assist developing countries--are not readily forthcoming, how then should the conflict between environmental goals and trade liberalization principles be settled? For their part, environmentalists have developed long lists of amendments to the General Agreement on Tariffs and Trade (GATT) that they would like to see adopted.(1) In response, free traders have honed their arguments responding to these suggestions and have added some counterclaims from the trade perspective.(2) Indeed, taxonomies of trade and environment problems abound.(3) The standard menu of concerns usually includes: GATT Article XX reform, import prohibitions, export restraints, product standards, restrictions on production processes and methods, taxes and subsidies, unilateral and extraterritorial actions, and the use of trade penalties to enforce international environmental agreements. Unfortunately, analysis of these issues often leads to a convoluted debate over abstruse GATT concepts, dispute panel precedents, and terms of art. Rather than sorting out the trade and environment problems along lines of analysis that reflect this traditional thinking and follow the GATT's legal structure, this article analyzes the underlying concerns of environmentalists and free traders--environmental injury and unjustified trade disruptions, respectively--and proposes a new set of concepts and rules for making environmental protection and trade liberalization mutually reinforcing. I. BASIC GOALS The environmental community wants to stop ecological harm and reduce pollution-based public health risks. Environmentalists believe that trade restrictions are a necessary ingredient to force countries with inadequate environmental standards or practices to raise their requirements and to improve their performance. In particular, they want trade penalties to be available to enforce international environmental agreements. Many environmentalists also object to the cost advantage in the global marketplace that businesses operating in jurisdictions with low environmental standards can obtain. They view competitiveness achieved by degrading the environment as unfair trade and fear that it exerts downward pressure on environmental standards elsewhere as competitors demand that their governments reduce pollution control costs to "level the playing field."(4) A growing number of environmentalists argue that producers everywhere should meet high environmental requirements, and they want the rules of international trade to reinforce the drive for environmental care just as the trade system has been employed to mandate other baseline aspects of fair competition such as intellectual property protection. Thus, they want trade measures to be available as a tool for prodding countries perceived to have low environmental practices or standards. At the same time, many environmentalists fear that standards harmonized in a trade context will be set at the lowest common denominator. They therefore demand that trade rules not inhibit countries from setting their own environmental standards above international norms, and they want trade restrictions used to protect "high" standards to be shielded from GATT scrutiny and countermand.(5) Thus, many environmentalists believe that international trade rules and dispute settlement procedures should give great deference (some eco-advocates would say total deference)(6) to highly protective environmental policies. In sum, environmentalists want responsiveness to environmental needs to be a fundamental element of trade rules. Free traders worry about the flip-side of these concerns. They want to protect international commerce and the economic benefits it provides from illegitimate or ill-considered environmental policy intrusions. …