The Impact of International Trade Law on Environment

In one of the ministerial meetings of WTO which was held way back in 1999 one of the most
prominent event of that conference was that the protestors who were clad in turtle costumes
were staging anti –globalization campaigns. It was probably the first of the many more
protests to come in the subsequent years. The concerns which arise because of the pervasive
non-economic effects of globalization are also many1 especially in the case of environmental
impact because this is one area which sees a lot of interference by various countries and less
of restraint because in the end plant is something we all bequeath with equal rights and with
equal responsibility of transferring it to the future generation in a good condition.2 In the
words of Margaret Thatcher-‘No generation has a freehold on earth. All we have is life
tenancy with full repairing lease.

Trade no matter what affects environment in many direct and in direct ways and the relation
between them as of now stands on a rocky platform because of the reason that in recent times
environmental measures have been misused to gain trade advantage. At times or one can see
most of the times the developing countries are at the receiving end of measures espousing the
idea of environmental protection in the garb of protectionist measures nowadays called as the
‘green protectionism’.3 Another problem which arises between international trade and
environmental law is that they may lose their market to the developing countries with lower
environmental standards, who have lower costs of production and hence move with their
business to those countries with lower standards thereby gaining their jobs and revenue and
being profitable despite the developed countries high standards of environmental care which
fetches them low profits vis- a- vis them. These are two opposing opinions with regards to
environmental protection norms which the developed and developing countries have.

Viewpoints of Developed and Developing countries

1
The quotation marks are necessary around “non-economic,” because economists’ conceptual framework
fully incorporates such objectives as environmental quality, even though pollution is an externality that is
not measured by GDP. For further reading on how economists think about the environment, see Hanley,
Shogren, and White (1997) or Stavins (2000)
2
The literature on trade and the environment is surveyed in Dean (1992, 2001) and Copeland and
Taylor (2003b)
3 Green protectionism is described as the deliberated use of an environmental disguise for regulations that are in
fact aimed at protecting domestic industry. Aaron Cosbery, “The Trade, Investment and Environment
Interface”, in Shahrukh Rafi Khan (ed), Trade and Environment: Difficult Policy Choices at the Interface
(London: Zen Books), at p. 13.
The other contention which the developing and the developed countries have is with regards
to the approach to the issue of environmental degradation and trade activities. While the
developing countries want to establish international environmental standards by multilateral
environmental agreements (MEA), the developed countries are more in favor of the
enactment of unilateral measures for the protection of the environment.4

Another important aspect which needs to be considered is the effects of the global economic
integration.5There is one aspect which considers the trade and environment conflict to be an
imaginary construct. The WTO report from 1999 argued that trade liberalization can help to
generate resources which the developing countries require and in this way can help to reach
the goal of sustainable development which in turn will lead to the improved allocation and
more efficient utilization of the resources.6 But as a matter of fact the trade and environment
problem is real and not an imaginary construct. It can actually be analyzed through four
perspectives, the first being the way in which the international trade affects the domestic
environment of the trade, the second being its effect on Trans boundary ecological problems.
The third perspective talks about the link between trade and global ecological resources.
There are actually four causal effects which look into the aspect of environmental impact of
trade liberalization. The first is the scale effect. If the production or consumption of product
is very polluting the expansion in the global output is likely to lead to environmental
degradation. The composition effect talks about the change in the composition of the industry
which occurs because of trade liberalization as because of specialization it may gear towards
pro pollution intensive techniques or less pollution intensive techniques as the case may be.
The third effect is the technological effect which may actually resolve the conflict between
trade and environment as trade liberalization will lead to more environmental friendly
accessible technologies and at the same time better waste treatment methods. Well the last
affect that is the regulatory affect also offers a dichotomy. On one hand the exposure to
foreign regulatory mechanisms will lead to increase in demand for stricter environmental
control from the governments. Paradoxically the race to the bottom hypothesis as stated

4
There is also a possibility that regulations that are in fact aimed at environment protection, because of the
ambiguity in implementation, could be the subject of lobbying to interpret the regulation for their own benefit.
Aaron Cosbery, “The Trade, Investment and Environment Interface”, in Shahrukh Rafi Khan (ed),
Trade and Environment: Difficult Policy Choices at the Interface (London: Zen Books), at p. 13.
5
See Friends Of the Earth (FoE) Fools Gold_the general agreement on tariffs and trade and the threat of
unstainable development (FOE 1992). WWF’s Trade and investment programme website at www.panda.org
/about_wwf/what_we_do/policy/trade_and _investment and H Daly From Adjustment to Sustainable
Development: The Obstacle Of Free Trade (1992) 15 Loyola LA International and comparative LJ 33.
6
WTO, Trade and Environment in the GATT/WTO Background Note By the WTO Secretariat For the high
level symposium on Trade And Environment (WTO 15 March 1999).
previously in the essay will lead to a situation by which the countries lower their
environmental standard so as to get a competitive advantage.7 A case study was conducted by
NAFTA (North American Free Trade Agreement) described how an increase of imports of
maize from USA into Mexico had adverse environmental impacts in both the markets. In the
USA new export opportunities have actually provided support to unsustainable mass
production agricultural practices. In Mexico this has led to a loss of bio diversity both
because of the out migration of the indigenous farmers with traditional knowledge because of
the displacement of local corn varieties with other crops or with commercial hybrid seeds.8

International Trade Law and Environment

The role which international trade law plays is essential because it creates the institutional
setup which is required for multi-party conversation. Another unique feature of the law lies in
its capacity to resolve disputes between competing world views without making a clear
ideological commitment. One of the major mechanisms through which law performs this
neutral function is by the use of fluid concepts which can acquire different meanings
depending upon the context timing, and external pressures. In the field of International Trade
Law WTO and its Predecessor GATT are member driven organizations which make
decisions on trade and environmental issues.9The basic contention by the environmentalists
has been that while the GATT//WTO agreement provides sufficient scope for environmental
protection of the environment the GATT/WTO adjudication bodies have repeatedly struck
down the environment friendly measures and have taken a pro- trade stand.10 This view was
further strengthened by the ruling in Tuna –Dolphin case but this understanding has taken a
deviance with the subsequent ruling in the Shrimp turtle case which is considered to be the

7
See Daly above 5, 36-7 some of the economic literature treats the regulatory and technological effects as one
effect. While this joint treatment makes some sense, because both effects to some extent depend on income, it
may obscure the fact that pro environmental technological change does not depend just on income-driven
regulatory change but also on non-regulatory processes.
8
These finding should not be interpreted as giving support to the “pollution haven hypothesis). They reflect
mostly changes in the local economy. The reason that there is not much flight is probably due to the fact that
those industries with the largest pollution abatement costs and hence the largest motivation to relocate, also
happen to be the least geographically mobile: J Edirington et al Footloose and Pollution free (National Bureau
Of Economic Research 2003) 13-14 See further Copeland and Taylor.
9
Jadish Bhagwati, “After Seattle: Free Trade and the WTO”, in Roger B. Porter, Pierre Sauvé, Arvind
Subramanian, and Americo Beviglia Zampetti, eds., Efficiency, Equity, and Legitimacy: The Multilateral
Trading System at the Millennium(CBG/Brookings Institution 2001), pp. 60-61.
10
At the November 1971 meeting of the GATT Council of Representatives, it was agreed that a Group on
Environmental Measures and International Trade (EMIT Group) be established. This group would only convene
at the request of Contracting Parties, with participation being open to all. Up until 1991, no request had been put
forward for its activation. Between 1971 and 1991, environmental policies began to have an increasing impact
on trade, and with increasing trade flows, the effect of trade on the environment had also become more evident.
WTO, Trade and Environment at the WTO, Trade and Environment Division,( WTO Secretariat, Geneva)
turning point of trade and environment interface11Article XX of the WTO is the most
important provision concerning environment and has been the subject intensive study by the
Appellate Body.

WTO Law and the trade and environment conflict

The WTO/GATT system has two non-discrimination principles, the most favored nation
established in article 1 of GATT and the national establishment principle in Article III.
Article I requires that the members should grant the products of other countries no less
favorable treatment than accorded to the members of any other countries. Article III states
that once the goods have entered the market they must be treated no less favorably than
accorded to the status of any other country. Article XI addresses the elimination of
quantitative introduced by countries on the importation or exportation of products. The
General Exception provisions of the GATT, Article XX comprises of various conditional
exceptions to GATT obligations including Article I, III and XI. Article XX (b) and (g) for
dealing with both provide a way of dealing with both inward oriented and extraterritorial
12
oriented trade conflicts. The inward oriented measures13 question the powers and freedom
of the WTO members to determine the environmental regime that will that will persist within
their borders and the objective of extra-territorial conflicts is to regulate trade measures
which lie outside the trade boundaries but has global significance such as the protection of
the Brazilian Tropical Forests.

Conflict between the MEA’s and The WTO

At times the multilateral environmental agreements use trade mechanisms to achieve their
objectives14.Basel convention15 for example discourages the transfer of hazardous waste from
one nation to another nation. Likewise the Convention on International Trade in Endangered
16
Species (CITIES) sanctions the use of trade measures to achieve its objectives. There are

11
United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R (1998) and
United States - Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5,
WT/DS58/AB/RW (2001)
12
WTO Understanding on Rules and Procedures Governing the settlement of Disputes, 1994 In the World Trade
Organization.
13
Inward-oriented measures involve both production standards(e.g. emission controls) and standards relating to
consumption(e.g. recycling or regulation controlling the sale and distribution of products)
14
L Schaltek (Ed), Trade and Environment, the WTO and the MEA: Facets of a complex relationship (Henrich
Ball foundation 2001), available at www.boell.org/docs WTO-MEA.pdf.
15
Convention on the Control of Trans boundary movements Of Hazardous wastes and their disposal (Basel
convention, 1988 28 ILM 657.
16
Convention On International Trade In Endangered Species Of Wild Fauna and Flora 1973,99 UNTS 243.
other MEAs which use a variety of trade and economic measures to encourage the parties to
become a part of the agreement such as Montreal Protocol17 and the Kyoto Protocol 18dealing
with ozone depleting chemicals and fossil fuels respectively. The relation between trade
restrictions between nations inn MEA and the WTO is still unresolved and the Tuna Dolphin
and the Shrimp case has actually further added to the confusion.

Decisions of the appellate Body of the WTO in landmark cases

Tuna Dolphin case

The case was triggered by a US programme which sought to reduce the number of dolphins
that were killed by the fishing of the yellowfin tuna with the use of purse –seine nets. The US
government had imposed a ban on those countries importing wish whose techniques were
incidental to the killing of dolphins so as to ensure that he countries actually use less harmful
for fishing. Two GATT panels came to the conclusion that the restriction was inconsistent
with Article XI (1) prohibition against quantitative restrictions. Secondly Article XX (b) is
not extend to protecting human animal or plant life outside the jurisdiction of the country
taking the measure19. The panel observed that if the broad interpretation of Article XX(b)
suggested by the US were accepted, each contracting party could unilaterally determine the
life or health protection policies from which other contracting parties could not deviate
without jeopardizing their rights under the GATT.20 The panel even ruled that the US
measure could not be considered necessary under Article XX (b) as the USA had failed to
demonstrate that it had actually exhausted all the options, reasonably that were able to it to
carry out its objective of dolphin protection, through measures which were in consonance
with the provisions of GATT. The decision was considered to be anti-environmental from the
perspective of Mexico but still its fishing industry was largely affected and the basic reason
for this was that the US “dolphin safe” private labeling regime complied with GATT rules.21

The Shrimp/Turtle case

17
Protocol on Substances that Deplete the Ozone Layer 1987, 26 ILM 1550.
18
Protocol to the Framework Convention on Climate change 1997 (1998) 37 ILM 22.
19
The panel also found that the intermediary embargo was not justified under Article XX (d).
20
Ibid.
21
Shaffer 2001, n. 7, p. 29. On 24 October 2008, Mexico requested consultation with US regarding the legality
of “Dolphin-Safe” labels for tuna products in the US. Mexico claims the "Dolphin Safe" label is a trade barrier
and construed in a way that effectively and unfairly keeps Mexican producers out of the US market. If a panel is
established, it would examine the requirements for a label that is entirely voluntary, even if it is granted by a
government agency. See ICTSD, “Tuna-Dolphin Update”, News and Analysis, vol. 13, no. 1, March 2009
The ruling in the Shrimp/ Turtle case was contrary to the judgment of the Tuna dolphin case
and hence had deviated from the established principle and had given a new interpretation to
the Articles of WTO. The USA had barred the import of shrimp from all countries that did
not use the Turtle Excluder Devices, (TED) which permits turtle to escape from the Shrimp
nets. The USA law22 also provided that this would not apply to any country that is certified to
have a regulatory programme and an incidental take rate comparable to that of the USA or if
the fishing environment of that particular country does not pose a threat to sea turtles. The
Appellate body considered the ban to be necessary because of the following reasons. They
found that the turtle came under the ambit of exhaustible natural resources for the purposes of
the Article XX (g). The Appellate body main concern was that whether the USA as it was
applied in practice met the requirements of the Article XX chapeau. The Appellate body thus
read the Chapeau as giving it broad powers to strike a balance or draw a line of equilibrium
between the environmental interests protected by the specific exceptions in Article XX and
the trade interests furthered by what it called the “substantive” provisions of GATT. While
this balancing test resembles those proposed by some environmental critics, it suffers from
the unpredictability inherent in all balancing tests.23

Implication of the Shrimp Turtle Decision and the Environment

The developing countries, since the beginning had opposed the inclusion of environment
agenda because they feared that their autonomy and their economic growth would be limited
if environmental obligations are imposed.24 The analysis of the rulings of The WTO reveals
that there has been an attempt by the developed countries to actually bring the environmental
criteria through within the WTO through the Appellate body. The analysis also helps us to
know that the source of all trade and environmental conflicts finds its origin in the attempt of
the USA to unilaterally impose trade restrictions so as to assert its domestic environmental
policies on other countries. The Turtle case was a watershed as far as the relationship
between the trade and the environment is concerned.25 By the reversal of the Tuna dolphin
decision the WTO has effectively revised the international rules governing one of the
persistent sources of trade conflict in favors of the economically advanced countries.

22
Section 609 of Public law 101-102, enacted in 1989.
23
Shrimp-Turtle I Appellate Body Report, supra note 139, ¶ 156 (emphasis in original).
24
David Kay and Eugene Skolnikoff, “International Institutions and the Environmental Crisis: A Look Ahead”,
International Organization, vol. 26, p. 474
25
Martin Khor, South Concerned over New Issues at WTO, www.iatp.org/iatp, in Shaffer 2001, n. 6, p. 24
(footnote). For a discussion on the different positions of the WTO membership on the subject: Sabrina Shaw and
Risa Schwartz, “Trade and Environment in the WTO – State of Play”, Journal of World Tradevol.
36, 2002, p. 129.
Unincorporated Process and Production Methods (PPMs)26 or ‘non-product related PPMs’,
i.e., PPMs which leave no trace in the final product 27was considered outside the scope of the
WTO. Another implication of this ruling was also that the non- trading concerns could find
its way as the new trade barriers. The developed countries are at an advantage because after
the Shrimp case the unilateral measures have actually gained some legality and they could be
used to reduce the market access of the competitors and secondly even if international
agreement is imposed it would mean an international burden on the competitors because
almost all the environmental friendly technologies are developed by the west and also comes
at a high price. Further, if the developed countries were serious about their global
environment, they would not have opposed the two “environmental” items of primary
interest to only developing counties, concerning “the export of domestically prohibited
goods”28and “the relevant provisions of the Agreement on Trade Related Aspects of
Intellectual Property Rights” (TRIPs) in relation to sustainable development objectives.29
This ruling has actually opened up gated for unilateral measures instead of multilateral
environmental agreement which his actually is unacceptable. The overall effect has been that
the traditional trade barriers such as tariffs and quotas have declined30 but the US and EU
regulations would actually increase substantially. Jagdish Bhagwati has reacted strongly to
this and has stated that I have some sympathy for [the] view that the dispute settlement panels
and the appellate court must defer somewhat more to the political process instead of making
law in controversial matters. I was astounded that the appellate court, in effect, reversed
longstanding jurisprudence on process and production methods in the Shrimp/Turtle case. I
have little doubt that the jurists were reflecting the political pressures brought by the rich-

26
A process or production method is the way in which a product is made. For example, traditional paper-making
requires trees to be grown and harvested, the wood to be processed, and the pulp often to be bleached, and so on.
Other paper may be made from post-consumer waste, or without chlorine - processes arguably involving less
environmental impact. See UNEP/IISD, Trade and Environmental: A Handbook, Second Edition
27
For example, cotton grown using pesticides, with there being no trace of the
Pesticides in the cotton.
28
See Shaffer 2001, n. 7, p. 38
29
WTO CTE, Report of the Meeting Held on 11-13 September 1996, WT/CTE/M/12 of 21 Oct. 1996. India has
also proposed that countries prohibit the granting of patents to inventions made with foreign genetic material
obtained in contravention of the principles of “sovereign rights” over genetic resources and “fair and equitable”
sharing of benefits set forth in Article 15 of the UN Convention on Biological Diversity.
30
The Uruguay Round has reduced the amount of average ad valorem tariffs to under five percent, down from
an average of 40 percent ad valorem at the end of World War II.
country environmental NGOs and essentially made law that affected the developing countries
adversely.31

Conclusion

The daunting challenges which are facing the world today in the area of international trade
law environmental concerns can only be solved by internationally recognized rules and
regulations. The issue of environmental protection can only be addressed multilaterally by the
group of nations. Be it the protection of animals or the forests or any other substance of the
environment unilateral actions taken by the country and the extraterritorial application of
these actions is not at all the solution. There are genuine environmental concerns beckoning
us and each and every country should actually come forward with full support of carrying out
their responsibilities and the chunk of developing countries should not be always at the
receiving end of these sanctions and actions. No doubt that it is well established fact that
trade is an important means of securing those resources which are essential for environmental
protection. Trade liberalization and market access opportunities in favor of products of export
interest to developing countries are fundamental to help them achieve sustainable
development. The WTO Rules have the provisions according to which the developed
counties have to provide technical assistance and capacity building to the developing
countries so as to ensure that the developing countries can fulfill their obligations. But the
promises of the financial and technology transfers to developing countries, made at the
Uruguay Round and in the WTO Agreements to help them meet their economic development
and environmental protection needs, have not been fulfilled.32An important question that
needs to be considered is that how should the trade universe react to this call foe ecological
responsibility. One of the ways is to develop ecological sensitivies. Since the ecological
damages are irreversible they should be assessed at an earlier stage. Secondly the trade
institutions should also take into account the current asymmetry which exists between the
trade and the environmental spheres. Finally the trade environment should support the
development of the linkage modules that would help in exploiting the synergies between the
domain of trade and environment. With regards to the institutional changes there should be
the creation of deeper ties between the WTO and the United Nations Environment

31
Jagdish Bhagwati, “After Seattle: Free Trade and the WTO”, in Roger B. Porter, Pierre Sauvé, Arvind
Subramanian, and Americo Beviglia Zampetti, eds., Efficiency, Equity, and Legitimacy: The Multilateral
Trading System at the Millennium(CBG/Brookings Institution 2001), pp. 60-61.
32
WTO, “Trade and Environment at the WTO”, WTO Secretariat Working Paper,
Geneva 2004, p. 8.
Programme (UNEP)33 and the MEA Secretariats. Environmental organizations should also
play an active role in the governance of the WTO. The provision should transcend the role of
the observer which is currently discussed in WTO. This will require efforts both on the part
of the developing and the developed countries as well the internationally established
institutions such as the WTO. Unfortunately the Shrimp case has so failed to make any
positive impact. Even the environmental part of the Doha negotiations framework introduced
in the 2001 Doha Declaration34 is very modest and the targets it sets out are very limited and
there are still various aspects of the declaration on which there are disagreements. The only
important item on which there has been a growing consensus is the reduction of tariff and
non-tariff barriers to environmental goods and processes35. However the range of products
which are actually going to be benefited by this measure are very limited.36 There are various
middle grounds which can be taken and have been taken but again they face deeper
challenges so the ides of green jurisprudence and bringing of environmental disputes relating
to trade can actually be fruitful when first of all there is a consensus on an international level
n these solutions and secondly such solution will not be biased to any particular country ad
thirdly they will in all respects solve the conflicts between trade and environment
negotiations and not just promote the idea of trade in the garb of protectionist measures.

33
For a detailed description of the status of the negotiations to the Sixth ministerial conference in Hong Kong
(Dec 2005),see the Committee in Trade and Environment special Session’s report on the Trade negotiations
Committee
34
Negotiated in the Fourth WTO Ministerial Conference held at Doha Qatar in Dec 2001.
35
Doha Declaration Article 31 (i)
36
The main beneficiaries of the proposed cut would be the developed countries the main exporters of green
technology and services. A broader definition of green goods which would also have been embraced products
made through green production methods and would have helped the developed countries to reap some of the
benefits of these cuts.