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Environment benefits from removing trade restrictions and distortions: background for WTO negotiations

Research report

Written by Sheila Page

Research report

The interaction between environmental policies and trade policies emerged as an issue at the end of the Uruguay Round of trade negotiations in 1994. It has been feared by developing countries as a potential excuse for protection, but the work of the Committee on Trade and the Environment at the WTO has tried to shift the debate to also looking at ways in which improving access of developing countries to developed markets can lead to more environmentally friendly production in addition to the conventional gains to income and development from trade and the potential effect of reducing poverty on increasing care for the environment. The CTE has provided a forum for discussing some of the issues and started to identify products, but there is now a need to clarify the analysis and look at products in more detail.

Trade liberalisation, particularly removal of subsidies, could be an important stimulus in some products, and may be a condition for progress in others. It would need to be accompanied by measures to correct transitional and other unintended effects, to help developing countries to meet administrative, legal, and technical requirements, and by initiatives specifically targeted at environmental problems. There is a need for the international agencies to improve data on subsidies and on environmental costs to apply the analysis. Environmental arguments could be a stimulus to make advances on trade liberalisation which have been unable to secure sufficient support for economic motives alone. But the linking of economic and environmental goals implied by the discussions for which this paper is background raises important issues about how the international system can manage not only conflicting interests, but potentially conflicting ways of defining interests: economic, the long term sustainability relevant to environmental questions, the new emphasis on property rights, as well as the traditional other interests of governments, including protection of industries. The economic framework in this paper can only offer partial answers.

Sheila Page