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Intro

It may come as a surprise that there is dissenting opinion when economists are asked whether or not Globalization has resulted in a degradation of the environment. Those claiming Globalization has indeed harmed the environment base their position around the well-known “race to the bottom” concern, “fearing that international trade and investment specifically (rather than industrialization generally) will put downward pressure on countries' environmental standards and thus damage the environment across the global system,” pointed out by Jeffrey A. Frankel, author of “The Environment and Globalization.” Frankel goes on to mention that there is another vein in the “race to the bottom” school of thought, that “it is not necessarily a matter of globalization leading to environmental standards that literally decline over time, but rather retarding the gradual raising of environmental standards that would otherwise occur” (Frankel, 13). On the flip-side of the argument, there is a belief that trade liberalization will foster growth allowing a country to raise environmental standards. A world of open trade provides the means necessary for an economy to advance. This advancement is believed to bolster a country's economy and allow it to focus more on raising its environmental standards. The phenomenon is well capture by the “Environmental Kuznets curve,” analogous to “the original Kuznets curve, which was a U-shaped relationship between average income and inequality” (Frankel, 9). As globalization continues, it is possible that the liberalization of trade could “trigger a convergence toward higher international standards” (Etsy-Ivanova, 3).

Regardless of one's position in regards to whether or not globalization hurts or helps the environment, what is undeniable is the presence of negative externalities. It is naïve to think that globalization could be the only reason for these externalities. For example, the population of American Buffalo were hunted to near extinction in the 19th century as a result of west-ward expansion and governmental policy advocating the killing of buffalo as a means to destroy a mainstay of the Native American's way of life. What needs to be kept in mind is that these externalities would exist even without open trade. If these externalities were simply due to globalization, by lowering the levels of trade and investment, we would see positive results with respect to the environment. Claiming that growth of an economy is the factor, Frankel points out “that openness only affects the environment in the way that investment, or education, or productivity growth, or any source of growth affects the environment, by moving the economy along the Environmental Kuznets Curve. Trying to restrict trade and investment would be a less attractive strategy in this case, because it would amount to deliberate self-impoverishment.”

Now that we've established that there are indeed negatives coupled with growth, the question arises: how do we reign in these byproducts? Who should be in charge of dictating what is or is not acceptable and pass judgment on a country's infractions? Currently, governance is extremely fragmented, with multiple agencies at the state and country level. This fragmentation has resulted in a diverse set of standards across countries, which exponentially increases the difficulty in conforming to standards across boarders. As it stands, the WTO is seen as the multilateral organization that should be addressing issues with the environment that arise from trade, however there are critics that “argue that the WTO lacks the capacity to address environmental issues effectively and that the WTO's efficacy and legitimacy are undermined whenever the organization is forced to make decisions that go beyond the scope of its trade mandate and expertise” (Etsy-Ivanova, 8). There is an idea that a multilateral organization whose with a much more broad scope (with respect to environmental issues) needs to be established in an effort to reverse the trend of the decline in the environment. The issue at hand was born of a collective affront to the environment, and only through collective action will it be mitigated.

State Level

Actions on the state level have proved to yield benefits as well as falling short. Corporate Average Fuel Economy (CAFE) standards were implemented by the Department of Transportation (DOT) in the United States in the early 1970s. Vehicles need to meet certain fuel efficiencies set in place by the DOT. The Environmental Protection Agency (EPA) would administer tests to measure fuel economy, levying penalties against those who did not comply. The regulation came as a result of the embargo placed on countries by OAPEC (Organization of Arab Petroleum Exporting Countries) in 1973. The embargo resulted in a shock to oil prices, rising from $3/barrel to about $12/barrel. The shock would not have been as powerful had it come a decade prior, but the embargo was during an era of thriving transportation in the U.S. “The interstate highway system made possible large scale freight movement by truck and facilitated by car travel” (NHTSA). The shock brought to light the disregard for how fuel efficient cars were at the time. Gas was so cheap that consumption was unfettered, but the shock emphasized the dependency on the supply of oil from foreign sources.

While on paper the policy was a good idea, it would be exploited using loopholes in the logic of the standards. Lee Iaccocca, former CEO of Chrysler who “figured that trucks could be converted to minivans to carry people the same way station wagons once carried people—without running afoul of CAFE”( Brown ), is credited with the rise of the Minivan and the Sport Utility Vehicle(SUV), to fill the vacuum created by the phasing out of the highly popular station wagon prior to the CAFE standards. “The U.S. government all but killed family station wagons in the 1970s with its politically inspired, non-science-based corporate average fuel economy (CAFE) rule” ( Brown ). The minivans and SUVs replicated the functionality of the station wagon, while being held to a less strict gas-efficiency standard because they were designated as “trucks.” This trend would eventually phase out as more efficient options were made available, but it points out how even reformations at the state level could be taken advantage with a disregard for the impact on the environment.

The elimination of inefficient public policy can yield gains from both an environmental and economic perspective. “Many countries have historically subsidized the use of coal. The United States subsidizes mining and cattle grazing on federal land, and sometimes logging and oil drilling as well, not to mention water use” (Frankel, 11). Regardless of the origin of the subsidies, their riddance would provide financial gains for the economy as well as qualitative gains for the environment.

Role of the WTO

Currently, the WTO is at the forefront of multilateral agencies addressing issues concerning trade and the environment. It may seem peculiar for an organization promoting trade, development, and growth to be seen as the champion for environmental reform, but the WTO and its predecessor, GATT, did include bylaws and policies with a nod towards sustainability. Indeed, Article XX of GATT, covering “General Exceptions” stated that “...nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:” amongst other things, “(b) necessary to protect human, animal or plant life or health;” ( WTO Website ). This essentially enabled governments to intervene on trade as long as it did not result in favoritism. This sentiment was echoed upon the creation of the WTO, a result of the Marrakesh Declaration on April 15th, 1994. Specifically in regards to the Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) agreements. The former stated that country reserved the right to establish a domestic standard – not much unlike the excerpt taken from article XX of the GATT. Similarly, to eliminate the implementation of barriers to trade arbitrarily, these SPS-based standards or regulations “must be based on science.” While this is a continuation of the precedent established with the GATT, its effect is lessened by the fact there is still a lack in a global standard. Adhering to international standards eliminates the likelihood of there being a discrepancy between countries, but the WTO does not mandate a shared standard. Issues can, and do, arise when this discrepancy is present, such as whether or not “different standards and different methods of inspecting products” are acceptable between and a country exporting a good, and another country importing the same good. International precedence can alleviate some of the grief and inefficiency caused.

The Technical Barriers to Trade Agreement can be seen as auxiliary to the SPS Agreement. In conjunction, they can seen as a system of checks and balances, where SPS gives power to countries to establish standards, TBT helps to reign in those standards and make sure that they aren't simply a disguised form of protectionism. When a country develops some kind of analysis to determine whether a product meets its standard, it must be fair. The TBT Agreement “discourages any methods that would give domestically produced goods an unfair advantage.”

Panel Cases In Support of Environmentalism

In Frankel's paper, “The Environment and Globalization”, he brings up a key advancement from the establishment of the WTO, specifically “that the new institution featured a dispute settlement mechanism, whose findings were to be binding on the member countries. Previously, a party that did not like the ruling of a GATT panel could reject it” (Frankel, 26). Critics of the WTO's role in enforcing standards cite rulings in panel cases as a basis for why the WTO is ineffective, Frankel mentions that “most within the environmentalist and NGO community have at some point acquired the belief that these rulings told [the defendants] that their attempts to protect the environment must be repealed” (Frankel, 27). The only problem with this view is that it stands unsupported when examining high profile cases brought to the WTO concerning the environment and harmful practices.

One of the aforementioned cases was a complaint brought against the U.S. by India, Thailand, Pakistan, and Malaysia. The U.S. had required the use of a particular device to catch shrimp that kept from capturing and killing endangered species of sea turtles in the process. The ban on the importation of products from these four countries was eventually overturned by the WTO. Admittedly, this could be seen as a failure on the part of the WTO to uphold practices that promoted sustainability. This was not the case, but rather “the U.S. had unilaterally and inflexibly banned shrimp and shrimp products from countries that did not have in place...a specific turtle-protection regime of its own liking...” (Frankel, 29). The U.S. had not given the Asian countries as much time to adopt this new standard and transition to the new device as compared to competitors in the Caribbean. The WTO did not strike the ban down because it sought to protect the environment, but rather because at its core, the ban was discriminatory.

Does the WTO Fall Short?

Some question the sincerity of the WTO when it comes to environmental policy reform. There is a “fear that the WTO's preoccupation with securing market access for exporters will prevent it from authorizing trade sanctions to enforce international commitments to labor and environmental standards that might be negotiated outside the WTO” (Bagwell-Staiger, 1). Despite significant advancements in the integration of global markets and the opening of trade, advancements of similar magnitude cannot be shown when looking at the degradation of the environment. Zakri Abdul Hamid, Science Adviser to the Prime Minister of Malaysia, states we must come to grips with “the grim reality that the current governance arrangements for environment have failed to meet expectations; indeed, have not reversed or even contained the decline of the environment over the last decade” ( Zakri ). Indeed, the very same measure seen as a saving grace as GATT transitioned to the WTO, namely the ability for countries to dispute trade bans as opposed to instant rejection, had come under fire for perceived failures of the WTO to enforce environmental standards.

Prior to the establishment of the WTO, Mexico brought a case to the GATT where the United States had enacted a prohibitive measure disallowing the importation of tuna from countries that did not practice fishing techniques that protected dolphins. “Mexico believed that the U.S. legislation violated its GATT rights by prescribing extra-territorially how it should catch its exported tuna” (Halle, Najam, Melendez-Ortiz, 4). A rebuttal from the U.S. claimed that Mexico was doing the bare minimum, if anything at all, when it came to utilizing safe fishing practices. The GATT disallowed the ban imposed by the U.S., under the premise that “the U.S. could not suspend Mexico's trading rights by prescribing unilaterally the process and production methods (PPMs) by which that country harvested tuna” (Halle, Najam, Melendez-Ortiz, 4). The ruling was seen as a disheartening loss for environmentalists as well as exacerbating the lack of faith in the WTO – although it did lead to the rise and implementation of the dolphin-safe labeling still used to this day. There was a nod to this case with the North American Free Trade Act, which included a measure “intended to help ensure the effective implementation of existing environmental laws among signatories” (Halle, Najam, Melendez-Ortiz, 4-5).

Trying to Find a Balance

The WTO/GATT panel cases have shown steps both progressive and regressive. While it is unrealistic to expect a complete disregard for national welfare to effectively turn back the clock on globalization, it is just as unrealistic to expect a complete disregard for the environment to maximize profit. The integration of global markets has been facilitated by the WTO and its predecessor, the GATT, but without a clear defender present for the Earth's resources, we're facing a tragedy of the commons on a global level. It is important to realize that there have been considerable advancements over the past few years, and the right steps are being made, they're just being suppressed. Globalization lead to a growth of world economies by opening and increasing the level of interaction between countries, but environmental progress has stalled because countries are still clinging to their sovereignty. “It again follows that if the issues are to be addressed, then multilateral institutions are the vehicle, and expressions of national sovereignty are the obstacle, not the other way around” (Frankel, 33). A lack of a global standard has caused an increasing flow of complaints brought to the WTO, bogging down an already slow judicial process. While the WTO has done an adequate job so far, the issue may be that environmental concerns are being handled by a multilateral institution arguably concerned more so with protecting exporters. “The reality is that there is a serious need for a WEO (World Environment Organization) and that proposals for it look nothing like a WTO” (Zakri). A multilateral agency like the WEO would alleviate pressure on the WTO, while satisfying the need for an organization that unites the world in a global effort to promote and foster environmentalism the same way the WTO liberalizes trade.

Bibliography

Bagwell, Kyle, and Robert W. Staiger. "The WTO as a Mechanism for Securing Market Access Property Rights: Implications for Global Labor and Environmental Issues."Journal of Economic Perspectives  15.3 (2001): 69-88. Web. 20 Feb. 2015.

Brown, Warren. "Real Wheels." Washington Post. The Washington Post, 13 Apr. 2007. Web. 20 Feb. 2015. <http://www.washingtonpost.com/wp-dyn/content/discussion/2007/04/06/DI2007040601383.html>.

Brown, Warren. "The Station Wagon Stealthily Returns." Washington Post. The Washington Post, 29 Aug. 2004. Web. 20 Feb. 2015. <http://www.washingtonpost.com/wp-dyn/content/article/2004/08/29/AR2005032405083.html>.

Esty, Daniel C., and Maria H. Ivanova. Globalization and Environmental Protection: A Global Governance Perspective. New Haven, CT: Yale School of Forestry & Environmental Studies, 2004. 23-25 Feb. 2003. Web. 20 Feb. 2015. <http://www.yale.edu/gegdialogue/docs/dialogue/oct03/papers/Esty-Ivanova.pdf>.

Frankel, Jeffrey A. The Environment and Globalization. National Bureau of Economic Research, 2003.

Hamid, Zakri A. "PERSPECTIVES ON RIO+20 A World Environment Organization to Serve Developing Nations." United Nations Environment Programme. United Nations Environment Programme, n.d. Web. 20 Feb. 2015. <http://www.unep.org/environmentalgovernance/PerspectivesonRIO20/ZakriAbdulHamid1/tabid/78591/Default.aspx>.

"LEGAL TEXTS: GATT 1947." WTO. GATT, n.d. Web. 20 Feb. 2015. <https://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm#articleXX>.

Najam, Adil, Mark Halle, and Ricardo Meléndez-Ortiz. Trade and Environment: A Resource Book. S.l.: International Centre for Trade and Sustainable Development, 2007. PDF.

NHTSA. "BACKGROUND." Background. NHTSA, n.d. Web. 20 Feb. 2015. <http://icsw.nhtsa.gov/cars/rules/rulings/cafe/alternativefuels/background.htm>.