Responsibility of World Trade Organization Members - Case Study Example

International Trade and Environment Name Instructor Course International Trade and Environment Introduction Some of the fundamental goals of the World Trade Organization (WTO) are environmental preservation and protection as well as sustainable development. These goals are stipulated in the agreement that established WTO known as the Marrakesh Agreement (Frankel and Rose, 2005). Aside from environmental protection, the other objectives of WTO are to minimize the trade barriers among various countries while at the same time eliminating any form of discriminatory treatment in the global economic relations. The concept or topic of international trade and environment has been one which has continuously been discussed because of some of the detrimental effects that the global economy has caused on the environment (Frankel and Rose, 2005). Following this, the WTO contributes to environmental preservation and protection through some of its objectives which ensure trade openness (Baron, 2003). The paper will discuss the importance of the topic, international trade and environment, the theoretical underpinnings of the subject, the importance of the topic in the contemporary global economic relations, and the ways in which the WTO members can address some issues related to the topic. Why the Topic is of Interest It is evident that there are several links between the environmental issues and trade policy, more the environmental issue that concerns climate change as well as those that are aimed at promoting greening in the global economy. Although these links exist and are evident, they are under-explored, yet their importance and impacts are significant which is why I found the topic important to explore (Copeland and Taylor, 2001). For example, the mechanisms that concern the mitigation relating to the Kyoto Protocol have primarily been confined to those nations which have made the unilateral commitments towards the efforts to reduce the emission of carbon. However, these commitments have not been reflected in the countries which stand in the financial markets (Copeland and Taylor, 2001). Following this, the positive results that the agreement seeks to achieve becomes a problem because of that lack of the unifying factors and agreements that are supposed to be aimed at protecting the environment while progressing economically at the same time. On the other hand, the regime of international trade has evidently evolved into becoming among the most influential and powerful multilateral regimes in the globe mainly regarding its ability to discipline its members while at the same time attracting them (Trebilcock and Howse, 2005). Additionally, the international environmental law and the Multilateral Environment Agreements (MEAs) often offer a fragmented kind of governance which lacks the organizational structure, financial backing, as well as the coherence of the WTO. This lack of clear legal jurisprudences, practicality, and cohesion, among other issues related to the established trade and environment agreements have impacted on the capacities of different nations to manage to balance the global economy and environmental protection (Trebilcock and Howse, 2005). This, in turn, results in some detrimental effects on sustainability. Theoretical Underpinnings Linkage of the International Trade and the Environment The relationship between the environment and trade has been a topic or subject which has had various empirical analyses and discussions. According to studies, the intensity of pollution more so in the developing countries was growing very fast during the time when the environmental regulations in the developed countries were being toughened (Jian-guo and Zhang, 2005). These environmental regulations suggested that the various environmental standards have the possibility of creating some pollution havens. Following this, the fundamental theoretical hypothesis which underlies the policy relationship between environment and trade is definite in that there need not be a conflict between good environmental policy and good economic policy (Van Beers and Van den Bergh, 2001). Additionally, a good economic policy needs not to prevent or hinder the implementation and adoption of a sound environmental policy or the other way around. Ideally, both good economic and environmental policy needs to be present in the global economic relations as well as when addressing environmental issues in the same context (Van Beers and Van den Bergh, 2001). According to the trade theory, in a small country, where the market imperfections are absent, for example, in cases of externalities, then the utilization of trade barriers will tend to create some market distortions which will reduce the overall welfare in general (Nfa, Taylor and Thomas, 2005). In contrast, most of the environmental concerns nearly involve externalities invariably which the market forces alone cannot capture them. Following this, a good environmental policy is that which results in internalizing these externalities whether through the market-based instruments or the measures of command-and-control (Nfa, Taylor and Thomas, 2005). Thus, a particular liberal trade policy needs not prevent the implementation and adoption of an adequate environmental policy or the other way around. Actually, both of these needs to be present where the resources and goods become priced properly which would lead to the market working efficiently and consequently resulting in an optimum welfare. In the same light, this does not mean that there would be no trade-offs between the environment and trade policies (Koo and Kennedy, 2005). When the environmental regulations become too restrictive, it could penalize the real comparative advantage. In contrast, laxity in the environmental policy would lead to unjustified and unintended subsidies. It is widely argued that when there is an enhanced competition for the foreign and trade direct investments, there would be the possibility of lowering the environmental regulations and standards (Hoel, 2001). Also, when some governments strive to maintain high environmental standards, their efforts may be hindered by the existence of some less strict environmental regulations in other countries. The lack of standardization in stipulating these environmental standards in different countries relating to trade will ultimately result in the lowering the international environmental standards in most of the countries. This is what led to the development of the ‘race-to-the-bottom’ theory (Hoel, 2001). According to this theory, the level of environmental degradation is affected by the level of income of the people in that particular country and effectiveness of these environmental regulations will be seen through the analysis of the income itself (Hoel, 2001). According to Kuznets curve model, when the real income increases, so do the demand for a high environmental quality (Taskin and Zaim, 2001). This, therefore, translates into a positive progress regarding maintaining a high environmental quality through externalities, and the effective regulation which is significantly confined within the particular national borders and thus are amenable to the national regulation (Taskin and Zaim, 2001). However, there is a substantial amount of evidence which argues that even in the case that there is a low-income level, there still exists a rather complex and subtle link between environmental protection and economic development. It is apparent that numerous developing countries are also increasingly becoming aware of the environment and have also begun fighting some environmental vices like pollution and climate change even at their lower income levels even more than some of the developed countries (Shahin, 2002). Importance of the Topic to the Contemporary Global Economic Relations Numerous developing countries often grow their crops for the purpose of export and domestic sale. When there is increased trade, the countries, and areas that will be devoted to exporting these crops increases. This increased trade is usually a primary characteristic of the structural adjustment policies which are needed by the international agencies like the World Bank and the International Monetary Fund (Rauch, 2001). However, there are some environmental impacts which are related to enhancing this trade, and for example, in this case of improving exporting crops. Some of the environmental effects of increasing the export rates include increased soil erosion because of over cultivation and the utilization of the marginal land which have high possibilities of enhancing aridity as in the case of Mali (Rauch, 2001). Therefore, when the trade barriers are removed with the aim of promoting global economic relations, some of these developing countries may opt to do all that they can to generate the maximum economic benefits from the enhancement of the economic relations. This is regardless of whether or not these activities jeopardize environmental quality or not (Rauch, 2001). Trade expansion and the global international relations among various countries may have both indirect and direct positive impacts on the environment. Following the comparative advantage theory, international trade results in nations to become efficient in their utilization of resources and the process avoid waste as well as conserve resources (Dao-xian, 2007). The global trade liberalization could lead to the removal of pricing policies as well as distortionary subsidies which consequently enhances the effectiveness and efficiency when it comes to resource allocation. To put this into context, for example, the widespread subsidies which have been imposed on the pesticides and the chemical fertilizers tend to promote farming methods that are environmentally harmful (Dao-xian, 2007). On the other hand, when these grants which are given to the domestic producers are usually not allowed in the international trade agreements. Following the elimination of these subsidies, there would be the promotion of both environmental sustainability and economic efficiency (Gunasekaran, Patel and Tirtiroglu, 2001). Therefore, it is evident that the relationship between environmental quality and trade is complex which makes it very valuable to explore. The extensive exploration of international trade and the environment is important in the global economic relations in that the economic growth which is based on free trade will reduce some of the detrimental environmental effects and enhance a balance between economic growth and environmental protection (Gunasekaran, Patel and Tirtiroglu, 2001). International trade has the possibility of affecting both the domestic and international policies, while at the same time weakening the nations’ autonomy to define their particular social and environmental policies (Winham, 2003). Countries are continuously striving to minimize the social and environmental standards so that they can gain their competitive advantage. Since environmental concerns need to be a global initiative and there has been the removal of trade barriers to enhance global economic relations, it is proving to be difficult for a country that wants to improve their economic abilities to uphold high standards of environmental protection (Winham, 2003). This is because these countries have realized that when they lower the environmental standards, then they increase their comparative advantage and in the end jeopardizes the efforts of protecting the environment even in the midst of promoting the global economic relations (Winham, 2003). North American Free Trade Agreement (NAFTA) entails some cases where various corporations which have challenged some of the environmental regulations as being trade barriers (Trebilcock and Howse, 2005). For example, the pesticide industry in the United States sought to challenge some of the Canadian pesticide regulations while at the same time the asbestos industry in Canada sought to eliminate the American restrictions on selling asbestos which is associated with products that can cause cancer (Trebilcock and Howse, 2005). These are some of the inconsistencies and gaps that the WTO needs to address when it comes to balancing a strike between international trade and the environment because, in the first place, none of them can thrive without the other. Therefore, the international trade and environment topic are relevant is essential to the global economic relations majorly focusing on the achievement of one of the WTO’s goals relating to sustainable development (Trebilcock and Howse, 2005). This sustainable development cannot be achieved if there is no balance between international trade and environmental protection. Regarding the environment and international trade, there are various safety and health issues which have not been resolved both in the international and domestic levels. Health and safety is a significant component of the environment as well as of the international trade (Frankel and Rose, 2005). For example, regarding the sale of toxic pesticides may be prohibited on a domestic level but this prohibition may not be applicable in other countries. In the same light, the goods which are restricted in the domestic markets, following that they may be dangerous to the health, plant life, animal life, human life, or the environment may still be exported to other countries legally (Frankel and Rose, 2005). These inconsistencies and lack of standardization and coherence between the various aspects of the environment and the global economic relations among different countries makes the realization of sustainable development very difficult. In return, the topic of international trade and the environment becomes as essential one with the aim of establishing this coherence and standardization of environmental regulations and economic standards across various countries in the world (Frankel and Rose, 2005). Responsibility of WTO Members The WTO members could seek to be mutually supportive to both the environmental and trade policies which will significantly contribute to the achievement of one of their goals which are sustainable development (Rauch, 2001). The paper has discussed extensively the problem that exists when it comes to international trade and environmental protection which is the lack of a balance between them which jeopardizes the ability of WTO to realize sustainable development (Rauch, 2001). Precisely, the Committee on Trade and Environment (CTE) which is under WTO could strive to negotiate in the ways in which the particular countries and the members of the WTO at large may enhance their support to both the environmental and international trade policies (Rauch, 2001). This can be done with a significant emphasis on the trade and environmental issues in the developing countries. Another issue that has been highlighted in the paper is the complexity of the connection between creating an economic equity while at the same time overseeing there is environmental protection (Winham, 2003). Following this, the WTO members could seek to not only concentrate on developing policies to create a balance between the two but also focus on the analysis of the impacts of those particular measures. Specifically, WTO needs to evaluate whether the measures of environmental protection could influence trade restriction and the effects that they have on restricting trade in a way that will benefit the domestic industries of a country (Winham, 2003). In doing this, the WTO members will be in a position to evaluate whether or not there can be striking a balance between trade and environmental protection and if it can move to the next step of implementing the ways in which this balance can be achieved (Winham, 2003). Conclusion For decades, there have been increasing concerns regarding international trade and environmental protection. WTO which is a body that is established under the Marrakech Agreement has continuously been concerned with the evaluation of the interactions that exist between environment and trade. Regarding the issue of international trade and the environment, there have been concerns with the ability to strike a balance between the two because it is widely argued that enhancing environmental standards usually inhibit trade which is what causes the problem in developing this balance. Various theories have been used to explain the topic of international trade and environment including trade theory, the comparative advantage theory, and the Kuznets curve model. The importance of the subject to the global economic relations has also been discussed. In addressing the issues related to international trade and the environment the members of WTO could seek to be mutually supportive of both the environmental and trade policies in various countries and undertake an analysis of the effects of these policies to strike a balance between trade and environmental protection. References Baron, D.P 2003, Business and its environment, Upper Saddle River, NJ: Prentice Hall. Copeland, B.R and Taylor, M.S 2001, International trade and the environment: a framework for analysis (No. w8540). National bureau of economic research. Dao-xian, Y.J 2007, The Empirical Analysis of the Export Trade and Environmental Pollution of China. Journal of International Trade, vol. 5, p.013. Frankel, J.A and Rose, A.K 2005, Is trade good or bad for the environment? Sorting out the causality. Review of economics and statistics, vol. 87, no. 1, pp.85-91. Gunasekaran, A., Patel, C and Tirtiroglu, E 2001, Performance measures and metrics in a supply chain environment. International journal of operations & production Management, vol. 21, no. 1/2, pp.71-87. Hoel, M 2001, International trade and the environment: How to handle carbon leakage. Frontiers of Environmental Economics, 2001, pp.176-191. Jian-guo, L.M.H.C. and ZHANG, L.Z 2005, The Transfen of Pollution Intensive Prodoct across Boundaries In Chinese International Trade [J]. International Trade Journal, vol. 10, pp.019-023. Koo, W.W and Kennedy, P.L 2005, International trade and agriculture, Blackwell Pub. London. Nfa, A.T., Taylor, A and Thomas, C 2005, Global trade and global social issues, Routledge, New York. Rauch, J.E 2001, Business and social networks in international trade. Journal of economic literature, pp.1177-1203. Shahin, M 2002, Trade and Environment: how real is the debate. Trade, Environment and the Millennium. Taskin, F and Zaim, O 2001, The role of international trade on environmental efficiency: a DEA approach. Economic Modelling, vol. 18, no. 1, pp.1-17. Trebilcock, M.J and Howse, R 2005, The regulation of international trade, Psychology Press, New York. Van Beers, C and van den Bergh, J.C 2001, Perseverance of perverse subsidies and their impact on trade and environment. Ecological Economics, vol. 36, no. 3, pp.475-486. Winham, G.R 2003, International regime conflict in trade and environment: the Biosafety Protocol and the WTO. World Trade Review, vol. 2, no. 02, pp.131-155. Read More