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Text File | 1994-05-02 | 10KB | 207 lines

<text> <title> Trade and the Environment </title> <article> <hdr> CRS Review, February-March 1992 Trade and the Environment </hdr> <body> By Susan R. Fletcher, specialist in international environmental policy, and Mary E. Tiemann, specialist in environmental policy. Both are with the CRS Environmental and Natural Resources Policy Division. Environmental issues are becoming a highly visible factor in trade-related debates. As trade negotiators and environmental interests search for ways to reconcile apparent conflicts, it is likely these issues will remain prominent on the trade agenda. Early in 1990, during negotiations of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), major environmental concerns were added to the already difficult array of contentious issues. The environmental community recognized that while trade rules and policies have significant impacts on the environment and natural resources of nations, neither international negotiations nor U.S. positions on trade addressed the environmental implications of those policies. To seasoned trade negotiators, this was an unfamiliar and unwelcome concern. However, as environmental advocates and analysts continued to raise the issue, trade and environment interconnections have gained increasing visibility and attention. Environment has not been taken up as an issue within the Uruguay Round of the GATT negotiations, but there is broad consensus that finding a way for GATT to accommodate environmental concerns--both the impacts of trade on environmental quality and, conversely, the effects of environmental regulations and agreements on trade--will be a major focus of attention. An important unresolved question is whether these concerns are best dealt with within trade negotiations themselves or in a separate forum. Although the trade-environment nexus has yet to be fully analyzed, a number of basic issues have been identified: -- Environmental regulations, especially those that impose requirements on imported goods, may be considered restraints on trade. -- Lower standards or lack of environmental regulations by exporting countries may be considered to be a hidden subsidy. -- Differences in environmental regulations may have impacts on competitiveness. -- If, in the interests of liberalizing trade, countries are prohibited from controlling exports, they may lose a major tool for conserving resources that are overharvested for trade markets (a concern with tropical timber). -- Trade sanctions are increasingly invoked as enforcement mechanisms in environmental agreements (e.g., the Montreal Protocol, Convention on International Trade in Endangered Species); the individual and cumulative impacts of the use of such sanctions need to be studied and understood. -- If a country acts unilaterally to impose trade sanctions (e.g., an import ban) in order to enforce its own laws against certain practices affecting the global commons, this could be interpreted under current trade rules as a restriction on fair and free trade. Environment and the GATT Within the GATT structure, which is directed at trade practices and rules per se, working parties are established to study the issues on which members may wish to make decisions. In 1971, the GATT parties established, but never convened, a Group on Environmental Measures and International Trade. Motivated by concerns that had been reportedly raised throughout the year, this group convened for the first time in late 1991 and began to formulate its agenda. The major reference point in the GATT for environmental concerns to date has been Article XX which exempts from the GATT rules those measures "necessary to protect human, animal, or plant life or health...[and/or] relating to the conservation of exhaustible natural resources...." This article prohibits use of such measures as "a disguised restriction on international trade" and has been interpreted to refer only to protection of the environment within the borders of the country taking the action. A major environmental issue emerged within GATT in mid-1991. In accord with provisions of the Marine Mammal Protection Act (MMPA), the United States banned tuna imports from Mexico as a protest against fishing methods that killed dolphins excessively. Mexico requested a GATT ruling against the United States for actions contrary to GATT rules. The GATT dispute panel reported that GATT prohibits its members from imposing import restrictions based on extraterritorial concerns, or from taking action to dictate how other nations produce their export goods. The implications of this report would be significant if adopted by GATT (at present, the report is a recommendation to the full GATT Council, which must act if the recommendation is to take effect). A GATT ruling against the U.S. MMPA tuna sanctions would exemplify concerns expressed by environmental groups that GATT procedures and decisions could undermine national laws aimed at protecting extraterritorial resources and the global environment. Others argue that the ruling would protect international commerce from undue influence by the subjective standards and policies of a single country. Responding to extensive reaction, especially in the environment community, Mexico deferred pursuing a final GATT ruling on this complaint and entered into bilateral negotiations with the United States on this issue. NAFTA and the Environment When the United States and Mexico, and later Canada, announced their intent to negotiate a North American Free Trade Agreement (NAFTA), several of the issues discussed above promptly emerged. (Although Canadian and U.S. environmental policies are often similar, laws and standards in each country have been challenged under the U.S.-Canada FTA. This article focuses on U.S.-Mexico trade-environment issues that have been the subject of considerable debate.) In the U.S.-Mexico context, environmental issues concern effects of such an agreement on environmental standards, including whether stricter standards in one country could be challenged as nontariff trade barriers. Other issues entail (1) whether a NAFTA would induce a large number of U.S. industries to relocate to Mexico in order to cut production costs and (2) whether increased border-area industrial development would exacerbate regional environmental degradation. The issue of standards as trade barriers escalated during the U.S.-Mexico GATT dispute over the U.S. dolphin protection law, and Mexico's successful preliminary challenge to the U.S. law served to exacerbate existing conflicts. Regarding concerns over worsening border-area pollution, some U.S. border communities and environmental groups point to real differences between the environmental protection systems of the United States and Mexico, and express concern that a NAFTA could create environmental problems potentially much worse than those already resulting form border-area industrial development. NAFTA proponents charge that environmental issues have been raised primarily by protectionists to impede an agreement. But many Members of Congress are concerned about the possible environmental consequences of a NAFTA and promise to reject any agreement that fails to address this issue. The Administration argues that although some environmental precautions must be taken, trade negotiation is not the preferred forum. For its part, Mexico has recently begun to strengthen and enforce environmental laws, but enforcement is seriously hindered, largely by lack of financial resources. President Bush has promised that in negotiating a NAFTA, he would not weaken U.S. environmental and health and safety regulations and standards, and would maintain the right to prohibit the import of goods that do not meet scientifically sound regulations