ABSTRACT
Trade and environment linkages are becoming a major focus for trade negotiation, particularly in the GATT.
There are some areas of broad agreement. Sustainable development is, in general, more likely to be achieved in an open multilateral trading system which enables developing countries to diversify their exports and allows discipline to be imposed on agricultural and other subsidies. Global environmental agreements may have to be buttressed by trade provisions, and these will need safeguards to ensure that measures are not used in a discriminatory and protectionist manner. The major application of this principle will come with action taken to counter global warming; carbon taxes are market instruments which are compatible with an open trading system. Countries should be free to set product standards which reflect their own environmental preferences, provided this does not involve discrimination against overseas suppliers.
The big area of controversy is ‘environmental dumping’: the demand from some environmentalists and industrialists that they should be protected from competition from ‘low cost’ suppliers who observe lower process standards. The paper argues strongly against admitting trade restrictions on these grounds, both for practical reasons and in principle. In any event, the current of trade and investment flows generated by differences in environmental standards seems small.
