Trade and the Environment Outline

1. Tension between Trade and the Environment (focus on % NOT #)

A. Rio Principle 11

States shall enact effective environmental legislation. Environmental standards, management objectives and priorities should reflect the environmental and development context to which they apply. Standards applied by some countries may be inappropriate and of unwarranted economic and social cost to other countries, in particular developing countries.

B. Rio Principle 12

States should cooperate to promote a supportive and open international economic system that would lead to economic growth and sustainable development in all countries, to better address the problems of environmental degradation. Trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.
Unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided. Environmental measures addressing transboundary or global environmental problems should, as far as possible, be based on an international consensus

C. Rio Principle 15: Precautionary Principle

In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation

D. Stockholm Principle 21

States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction.

1. Effects of Trade (and policy behind rules)

Scale and Composition Effects: trade can lead to unsustainable consumption, unfair burden on LDCs
· Trade reply: wipe out bad subsidies
· Daly:
o Mechanism
§ Increase efficiency
§ Or
§ Decrease standards
· BhagwatIssue:
o Conflict strong between environment and economy
o $ growth à increase tax base à increase environmental protection
o Prioritization effect: ex. Mexico has greater social incentive to prevent disease than decrease lead levels in oil
o No evidence of race to the bottom

Regulatory effect: trade regulations used to override environmental regulations
· Trade reply: self determination for environmental standards

Comparative Advantage:
· Reason to specialize à capture economies of scale à increase comparative advantage
· Trade rules try to prevent skewing comparative advantage
· Look at
o Economies of scale
§ Economies of scale: goods can be produced at a lower cost per good, as the quantity produced increases.
· Large-scale factory operations can permit the most efficient specialization of machinery and labor.
· Average fixed costs will decline as costs such as advertising can be spread across more and more units.
o Access to raw materials
o Access to markets
o Skilled labor
o Political/$ reliability
§ The Law of comparative advantage refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party. It is the ability to produce a product most efficiently given all the other products that could be produced.

Absolute v. Comparative Advantage: Lawyer faster typist (than secretary)
· Absolute advantage in both (lawyer)
· Secretary has comparative advantage in typing because can do it faster
· absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources.[

Polluter Pays Principle
· Tax pollution to firm (not popular, prefer direct regulation)
· False comparative advantage

Sustainable Development (conflict: environmental protectionism v. economic protectionism)
· Elimination of import/export restrictions and better IP rights
o 4 aspects of sustainable development
1. Development- in order to reduce poverty
2. Limits- on growth and population (very controversial)
3. Change-
4. Protection of Biodiversity (future oriented)
· Notion of Inter-generational equity
o Definitions:
· Sustainable Development: development that meets needs of present without compromising ability of future generations to meet their own needs.
· Ecological Footprint: amount of land needed to provide resources to meet a population’s consumption needs.
· Capital:
· Natural: flora, flauna, atmosphere
· Manufactured: factories, products, roads
· Human: People’s knowledge, institutions, education, information
Why are we running out of resources?
Issue 1: Supply and Demand is distorted and doesn’t account for env costs
Issue 2: when resource is not under anyone’s control pollution of the
oceans
rivers
migratory species
minerals
oil (not regulated because no one owns them)
Issue 3:Tragedy of the Commons

Ends up promoting overuse of resources
When something is free, there is no limit on using it

RULE: Externalities must be internalized for supply and demand to save us from pollution
èPPP
èCost internalization
èImpacts consumer behavior

2. WTO Dispute Settlement and Domestic Legal Effect of Trade Agreements

2. DSB main roles:

DSB = exclusive jurisdiction

1. Supervises the functioning of the procedures and the organizational elements that constitute the WTO’s dispute settlement processes
2. Final decision maker for every dispute

3. DSB authority

· can deny enforcement of panel decision only by consensus
· All panel and appellate body reports are reviewed and discussed by the DSB
· DSB appoints members of appellate body to 6 year terms è direct WTO jurisprudence

4. DSB Process: Should take 9-12 months

1. Consultations that may lead to settlement
2. Establish a panel
a. Written request DSU art. 6
b. Panel established at next DSU meeting (within 1 month)
c. Panel made of 3 (up to 5) members agreed to by the parties
i. If cannot agree then the Director General of the WTO names the panelists DSU Art. 8
d. Panel may address only those issues addressed in consultation period
e. Multiple complaints can be put into one proceeding DSU Art. 9
f. 3rd parties may be heard at proceedings
3. Panel process : Submit report within 6 months
a. Parties first written submission
b. Oral arguments
c