The Rationale
The Problem
   Some Examples
   A Way Forward    
WWF logo The Problem

The globalization of the world economy was initiated by the creation of the General Agreement on Tariffs and Trade (GATT). The GATT was a revolving contractual agreement between governments, erected in honour of economic efficiency and comparative advantage. In 1947 these two beacons offered light to a world recently ravaged by war, stalked by poverty and riven by suspicion between countries. Through free trade, regulated by this agreement between those same countries, it was hoped that all the people of the world would be able to establish decent livelihoods.

Simple rules were made to guide this trade rules that, in addition to preventing arbitrary discrimination between identical products from different GATT members, required also that there be no trade discrimination between identical products made using different PPMs. However, the worlds economy and indeed its ecology and human society was not that simple in 1947. It is certainly far more complex now. The understanding of this is growing, from grass roots to senior government levels, along with the realization that new economic policies and rules are needed to reflect this complexity and to direct the world towards sustainable development.

A part of this complexity was reflected in the GATT from the very beginning. Article XX of the founding agreement provides for exceptions to even the golden rules; exceptions to protect human, animal and plant life and health; to protect human morals; to conserve "exhaustible" natural resources; and perhaps most interestingly to define products produced by prison labour as "unlike" other, physically identical products. This is the point where the importance of how a product is made, of "process and production method" (PPM), was first recognized in the GATT. In this case it was a recognition that an unfair price advantage could be gained on world markets by exploiting captive labour. It was considered that the immorality of the practice, and the temptation to succumb to it due to the substantial reduction in production costs it allowed, constituted an advantage so unfair that it could undermine the entire trading system. Hence the exception to allow differential treatment of goods produced by prison labour.

Since that time it has become quite clear to the people and their governments that with increasing numbers of people on the planet, the question of how they make a living has become crucial to their ultimate survival. Unless the economic activities which generate wealth are conducted with careful regard for the environment and natural resources on which we all ultimately depend, the livelihoods generated will undercut life itself. Furthermore, unless the wealth generated is distributed equitably between people and generations, social, economic and environmental justice within and between nations are threatened.

These realities were recognized in the concept of sustainable development, formulated in the report of the World Commission on Environment and Development in 1987, and subsequently elaborated in Agenda 21, signed at the Earth Summit in 1992. In the negotiating processes which led up to those two meetings, both governments and civil society gradually came to understand the implications of sustainable development; in particular that one cannot separate human welfare from that of the planet, and that national and international policies must be coordinated and integrated to safeguard both. Securing human development (increasing human welfare) and protecting the environment were seen to be inseparable necessities, not alternatives.

The understanding that was developed during the UNCED process led in many cases to proposals for policy reforms which centred on changing PPMs on changing how economic enterprises are conducted so as to make them sustainable in social and environmental terms. Much of that understanding is now enshrined in Agenda 21. For example, Chapter 8 on "Integrating Environment and Development into Decision-Making" incorporates sections on choosing how one undertakes economic activities, and ensuring that the social and environmental costs of those activities are "internalized" that is, fully accounted for. Chapter 14 on "Sustainable Agriculture and Rural Development" sets out policies which support farmers employing those particular methods of agricultural production which husband natural resources and protect the environment while feeding people. In Chapter 30, on "Strengthening the Role of Business and Industry", actions are set out for the private sector which would lead them to adopt "cleaner production" methods, and to account fully for the social and environmental costs of their activities.

This has not happened in the context of the GATT, which became the World Trade Organization (WTO) in 1995, where the issue of PPMs has unfortunately tended to be polarized along North-South lines. In this context, environment and development have become separated, and are even seen as being in conflict. Yet in reality many of the PPMs that are bad for the environment are also bad for development. If the issue is not addressed, it will play into the hands of those who currently profit from environmentally damaging and poverty enhancing PPMs.



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