ENVIRONMENTAL ISSUES IN THE NEW WORLD TRADING SYSTEM

ENVIRONMENTAL ISSUES IN THE NEW WORLD TRADING SYSTEM

Also by John Whalley DEVELOPING COUNTRIES AND TIlE GLOBAL 1RADING SYS1EM, Volumes 1 and 2 (editor) TIlE URUGUAY ROUND AND BEYOND: The Final Report from the Ford Foundation Project on Developing Countries and the Global Trading System (editor)

Environmental Issues in the New World Trading System Peter Uimonen International Monetary Fund Washington. DC and John Whalley Professor of Economics University of Western Ontario Professor of Economics University o/warwick

First published in Great Britain 1997 by MACMILLAN PRESS LID Houndmills. Basingstoke. Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN 978-1-349-25414-9 ISBN 978-1-349-25412-5 (ebook) DOI 10.1007/978-1-349-25412-5 First published in the United States of America 1997 by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division. 175 Fifth Avenue, New York, N.Y. 10010 ISBN 978-0-312-16325-9 Library of Congress Cataloging-in-Publication Data Uimonen, Peter. Environmental issues in the new world trading system: development and prospects / Peter Uimonen and John Whalley. p. cm. Includes bibliographical references and index. ISBN 978-0-312-16325-9 (cloth) I. International trade-environmental aspects. 2. Environmental policy-economic aspects. J. Whalley, John. 11. Title. HF1379.U36 1996 363.73'I-dc20 96-20516 CIP Peter Uimonen and John Whalley 1997 Softcover reprint of the hardcover I st edition 1997 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright. Designs and Patents Act 1988. or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency. 90 Tottenham Court Road, London W I P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. 10 9 8 7 6 5 4 3 2 06 05 04 03 02 01 00 99 98

Contents List of Tables List of Figures Acknowledgements Introduction 1 Economic Analysis of Trade and Environmental Policy Linkages vi vii viii 1 11 2 Elements of the Political Economic Conflict between Trade and Environmental Policies 25 3 Evidence of the Linkages between Trade and the Environment 39 4 North-South Dimensions of the Trade and Environment Debate 55 5 The System of World Trade Rules and the Environment 71 6 The Potential Environmental Agenda after the Uruguay Round 107 7 Environmental Issues in NAFTA and Other Western Hemisphere Trade Arrangements 133 8 Longer-Term Considerations and Concluding Remarks 145 Appendices A Trade and Environment: Some Analytical Issues 153 B Selected International Environmental Agreements 167 Notes 175 References 185 Index 195 v

List of Tables 2.1 A partial catalogue of issues in the recent conftict between trade and the environment 26 2.2 Selected US environmental laws with trade provisions 27 3.1 Economy-environment model structure used by Beaus6jour, Lenjosek and Smart 45 3.2 Data on pollution abatement operating costs by type of expenditure, 1988 49 3.3 Production and demand structures in the Wballey/Wigle global general equilibrium model used to evaluate carbon tax options SO 3.4 Regions in the Wballey/Wigle global equilibrium model used to evaluate international incidence effects of carbon taxes 51 4.1 Trade-related components of the UNCED agreements 60 5.1 Selected GATT rules 80 5.2 GATT panel disputes relevant to environmental issues 82 5.3 Provisions of the Uruguay Round standards agreements 91 5.4 Environmentally related provisions of the Uruguay Round subsidies 98 5.5 Selected provisions of the Uruguay Round agriculture agreement 102 6.1 Selected GATT Articles and potential environmentally motivated changes 110 7.1 Concerns raised over the environmental dimensions of US trade with Mexico 134 7.2 Environmentally related NAFr A provisions 139 vi

List of Figures 1.1 Pollution abatement taxes 13 1.2 Import taxes against cross-border pollution 17 1.3 Export taxes for environmental reasons 20 3.1 Perroni and Wigle's model treatment of economy-environment linkages 47 5.1 PPM-based trade measures: first tuna-dolphin panel 76 5.2 PPM-based trade measures: second tuna-dolphin panel 78 vii

Acknowledgements We have benefited tremendously from the comments and suggestions of numerous colleagues on several drafts of this study. Among those who were generous with their time and expertise in reviewing more than one draft were Steve Chamovitz, Patrick Low, Arvind Subramanian, and Colleen Hamilton. Kimberly Elliott helped improve the quality of the study in innumerable ways. Others who have been of great help at various times along the way include Thomas O. Bayard, C. Fred Bergsten, Mark Ritchie, Robert Repetto, Hennan Daly and Daniel Esty. Other helpful comments on previous drafts came from Allan Carlin, Richard Cooper, Geza Feketekuty, Leon Fuerth, Sanford Gaines, Julius Katz, Konrad von Moltke, Eliza Patterson, Robert Reinstein, Lawrence Summers, and John Williamson. Fred Bergsten, Tom Bayard and the staff of the Institute for International Economics were particularly important in providing the initial impetus for this study, as well as a congenial and supportive environment during the early stages of the project. Needless to say, any errors of omission or commission are the responsibility of the authors alone. While Peter Uimonen is a research assistant at the International Monetary Fund, the views he expresses in this book are strictly his own and do not necessarily represent those of the International Monetary Fund. viii