The WTO regulations have important implications for environmental regulation, particularly export and import restrictions on products and practices, environmental standards, and incentives to encourage environmentally sound practices.
In February 1992, GATT released a ‘Document on Trade and Environment’ which stated that free trade promoted economic growth and therefore the production of resources for environmental policy. It said that, where there was conflict between free trade and environmental measures taken by individual countries, free trade should be given priority.
It is little wonder then that WTO rulings consistently favour free trade over environmental considerations. In 2001, CorpWatch noted that since 1995, when WTO was established, ‘the WTO has ruled that every environmental policy it has reviewed is an illegal trade barrier that must be eliminated or changed.’ The same has been true of health and safety laws with only one exception.
A more recent study by Public Citizen found that almost 90 percent of the 137 WTO challenges to national laws between 1995 and 2008 were successful, forcing nations to alter their laws to fit with WTO rules.
Friends of the Earth Netherlands points out that ‘policies aimed at sustainable development are much more relevant to the future of the world than the promotion of free trade’, and that therefore priority should be given to sustainable development over trade. The same point was made by the Dutch Minister of Housing, Physical Planning and the Environment, Hans Alders: ‘Environmental policies should impose limits to trade policies rather than the other way round’.
In contrast a European Roundtable (ERT) report stated that, whilst businesspeople were ready to consider other objectives such as social welfare and environmental improvement, ‘[w]hat industry cannot accept is that the pursuit of other objectives is used as an excuse for damaging the wealth-creating machine itself, whether by raising its costs or blocking its development’.
Export/import restrictions on products
Under WTO rules, imported products may not be banned so attempts to ban the import of environmentally damaging products would only be allowed if the environmental damage they would cause is internationally recognized and there is no other, less trade restrictive, way of preventing that damage. Bans on aluminium cans or the imposition of deposit systems, for example, would affect foreign producers, and are therefore considered to be trade-distorting and unnecessary since packaging can otherwise be dealt with through a waste disposal system. Countries may also wish to ban imports of hazardous materials and wastes. However, the WTO only allows this if local production or disposal of the same material is also banned.
Countries such as Indonesia and the Philippines prohibit or limit log exports to control the rate of logging and thereby protect their local forests and industry. Such bans have been opposed by Japan and Europe as being contrary to GATT and WTO rules. Environmentalists accuse the WTO of wanting ‘to open up the natural resources of developing countries for exploitation by giant logging, mining and seafood companies based in the industrialised world.’ For example, Mauricio Fierro, a leader of the Cascada-Chile opposition movement argues that WTO rules ‘will allow the biggest and most destructive logging companies to gain free access to vast tracts of pristine forest.’
Lowering of environmental standards
The WTO encourages international standards (harmonization) and discourages countries from maintaining their own higher standards unless they are designed to protect human health or safety, the health of animals and plants, or the environment. Even in these areas, the onus is on the country wanting to implement higher standards to prove that the higher standards are necessary and that the same goals could not be achieved in a way that does not affect trade.
Therefore, where governments democratically decide to implement high standards, these have to be justified scientifically. Political and social factors shape the standards individual countries decide upon, and often a decision has to be made despite a large amount of scientific uncertainty. That uncertainty is likely to make it very difficult for a nation to prove its standards are necessary before a panel of hostile scientists chosen by WTO.
An example of this is provided by the standards for pesticide residues in foods. If Food and Agriculture Organisation (FAO) standards are used as the appropriate international standards, countries with more stringent standards (up to fifty times tighter in some countries) have no choice but to accept imported goods with higher levels of pesticide residues. In 1998 the WTO ruled that Japan’s pesticide residue testing requirements for food imported into Japan were against WTO rules because their standards were too high.
In another example the US and Canada won a WTO challenge against an EU ban on imported beef that had been fed with hormones. European governments believe such hormones are carcinogens. In contradiction to the precautionary principle, which the WTO has labelled ‘non-scientific’, the WTO panel required Europe to prove that hormones caused cancer or other harm to humans eating the beef.
Despite a lengthy report by independent scientists showing that some hormones added to U.S. meat are ‘complete carcinogens’ – capable of causing cancer by themselves – the WTO’s 3-lawyer tribunal ruled that the EU did not have a ‘valid’ scientific case for refusing to allow the import of U.S. beef. The losing countries are now required to pay the U.S. $150 million each year as compensation for lost profits.
More recently, the US is using the WTO to force the EU to approve the import of genetically engineered food. The US Secretary of Agriculture, Ann Veneman admits that ‘With this case, we are fighting for the interests of American agriculture’. The Department of Agriculture points out that WTO rules require ‘sufficient scientific evidence’ to support regulations to protect health and the environment and that approvals must be granted without ‘undue delay’.
Import/export restrictions on unsustainable practices
Even though there is provision under the WTO for countries to argue the case for environmental standards that are applied to products, there is no provision for standards to be applied to production processes and methods used in producing a product. The WTO precludes a country from acting to prevent environmental damage in another country or in the global commons. This is because placing a trade barrier on a product because of the way it is produced in another country is seen as breaching that other country’s national sovereignty. One example of this was a Dutch proposal to ban imports of tropical hardwood logged in an unsustainable way. This would not have been allowed under WTO rules.
In September 1991, when GATT was in force, Mexico complained against the US ban on tuna caught with encirclement nets. The USA banned this tuna because millions of dolphins had being killed by these nets. The Mexicans argued that the USA was unfairly discriminating against their tuna. The GATT panel ruled in Mexico’s favour, arguing that ‘regulations governing the taking of dolphins incidental to the taking of tuna could not possibly affect tuna as a product’. Therefore, whether or not Mexico had regulations against this practice was not relevant to the trade in tuna.
In 1997, after the WTO had been established and sanctions could be imposed, the US lifted its embargo on tuna caught in these nets. It has been argued that the primary motivation for this tuna ban on the part of the USA was to protect its own tuna industry. Nevertheless the environmental issue was a genuine one and a ban that was primarily motivated by environmental concerns would be unlikely to meet with a better reception in the WTO.
In a similar, more recent case, the WTO ruled in 1998 against US legislation that required fishers to catch shrimp using turtle excluder devises to protect endangered sea turtles and banned imports of shrimp product from countries where such devises were not used. In another case, the USEPA voluntarily reduced its standards on the use of reformulated petrol to head off a possible challenge from Venezuela.
Economic instruments to encourage environmentally friendly behaviour
In the USA–Canada free-trade pact, which was used as a model for GATT, the government of British Columbia was prevented from planting trees because it was seen as a subsidy to the Canadian timber industry. Similarly, subsidies to stimulate cleaner production methods have been viewed as protectionist under this pact.
Also, nations which attempt to internalize environmental costs into prices would be unable to apply tariffs to prevent similar products that have lower prices because they do not include environmental costs, from coming into the country. A GATT panel, for instance, disapproved of US taxes on oil and chemical feedstocks that were levied to pay for hazardous waste clean-ups.