THE INTERPLAY BETWEEN INTERNATIONAL TRADE AND THE ENVIRONMENT

THE INTERPLAY BETWEEN INTERNATIONAL TRADE AND THE ENVIRONMENT

Introduction

The interplay between environment and international trade is a long political and legal debate, which has led to the creation of the World Trade Organization (WTO). While the agreements and policies on international trade seek to increase trade through the removal of barriers, environmental policies are seen as a strategy to restrict it. In most cases, the developing countries are against environmental agreements because they cannot adopt environmentally friendly methods of production and transportation. WTO has been on the front line to liberalize trade and therefore, against the environmental agreements. However, the environmental agreements and policies do not only restrict trade but also accelerate it in some situations. Also, trade liberalization does not only harm the environment, but in some instances it supports conservation. For several years, countries have therefore feared environmental restrictions with fear that they will reduce trade and thus prevent the interplay between the two. This paper analyzes the Tuna-Dolphin case to see how it has changed the restricted interplay between Trade and environment and how the interaction will and takes place.

Introduction to the Tuna-Dolphin Case

The case is a dispute between the US and Mexico brought before the WHO involving the method of fishing used by Mexican stakeholders. The US placed an embargo on the importation of Yellowfin tuna fish and their products from Mexico together with other countries with claims that the method of fishing was not environmental friendly.[1] The method of fishing in dispute is known as purse-seine fishing which leads to the death of many dolphins while catching the tuna fish.[2] The method is the most preferred way of fishing in most parts of the world where two vessels are used to encircle a school of fish with a net once located. A school of tuna is located through observation to identify where the dolphins are because they tend to swim above the small fish in the Eastern Tropical Pacific (ETP).[3] The anglers, therefore, drown the encircled dolphins intentionally to catch the tuna. The US bans the importation of tuna from Mexico so that they can use an alternative method that will minimize the unnecessary death of dolphins.

The first issue between the two countries dates back in 1990 (Dolphin Tuna I case) where the US through the Marine Mammal Protection Act of 1972 prohibited the importation of the tuna fish from Mexico to reduce dolphins death.[4] [5] The court prohibited the importation of such fish until one proves and produces a Yellowfin Tuna Certificate of origin to show that the method used was friendly to the other marine animals. The prohibition is emphasized in the Federal Trade Commission Act 15 U.S.C 45, which points out that the imported tuna and related products must have the label “dolphin-safe” to ascertain that the method being used is not harmful to dolphins.[6] Mexico after the ban by the US took the case to WTO with claims that the ban was not inconsistent with the General Agreement on Tariffs and Trade(GATT).[7] The issue, which comes out from the dispute, is that of the methods and processes used in production about trade restriction. Mexico claims in the first case that the product remained the same despite the process. In the first case, Mexico wins with the claims that such restrictions are not applicable outside the US.

In the second case (Tuna-Dolphin II), European Economic Community (EEC) and the Netherlands claim that the US does not have the right to ban the importation of the tuna products from the intermediary nations.[8] According to the WTO dispute committee, the method the US uses to conserve dolphins is not necessary, and that change of policies and practices from intermediary nations is the way to go.[9] The US again lost in the case. However, the latest case gives US victory. The WTO, which for several years has been claiming that the restrictions by the US on tuna importation are not in line with its rules now finds the labeling “dolphin-safe” to comply.[10] The released report also points out that Mexico should withdraw any countermeasures on US products because the Dolphin-safe requirements are in line with America-WTO duties.[11]

Impact of Tuna Case Decision on Trade and Environment

The case is a reconciliation of the environment and trade, which the WTO and other countries have separated for a long time minimizing their interplay. The WTO has for a long time come up with laws, which restricts measures on the environment with the fear that they will reduce trade, which it is supposed to liberalize. Although there is an idea of the continuation of restriction on the measures, the case has brought about some developments on the laws to enable the interplay between trade and environment. Both Trade and environment can now impact each other positively contrary to how it was before.

Impact of Trade Agreements on the Environment

Before the case, most people have been assuming that trade can only lead to environmental pollution and degradation.[12] However, the case proves and changes the interplay to make trade contribute to environmental conservation. From the final decision on the case, WTO allows the US to restrict importation of tuna until Mexico and other countries change their methods of production to ensure that dolphins are safe web.[13] WTO is the governing body where any trade agreement between countries is settled. [14] Similar to courts where a previous case can inform other cases or leads to the legislation of some laws, the case on tuna will apply in other international trades. Traded products, therefore, will require meeting environment conservation standards in the production process and not on the final product or the method of transport. Engagement in trade, therefore, means that a country or company is engaging in environmental conservation process because they will require averting the old production methods and coming up with new ones that are friendly to the environment.

Before the case, countries have been observing on the final product and method of transportation to ascertain that they do not lead to environmental pollution.[15] The method of production has not been a concern. Trade, as a result, has not been able to affect much on environmental conservation but doing more harm because most countries would use any method to increase production even though it pollutes the environment. There has been no law governing the process of production to ensure that it observes the environment conservation guidelines.[16] The decision of the case creates a precedent law, which will control the method of production meaning that it has widened the scope of the interplay between trade and the environment. There is no more fear that environmental control measures will inhibit trade because countries will take the new direction to adjust and therefore have quality trade.[17]

The case has opened the idea of harmonized trade standards to conserve the environment. Countries, therefore, will use trade to improve and conserve the environment. Both parties in the case, US and Mexico together with the other intermediary countries emerge to be winners.  Mexico argued that the embargo placed by the US was discriminatory on its products where the US maintained that it was only trying to conserve dolphin.[18] WTO had the same view that the US was discriminatory and therefore it was not necessary to impose a burn on Mexico and other intermediary countries. Mexico’s stand is what WHO and other many countries use to prevent the environment from influencing trade and therefore making the interplay to remain heavier on one side.

The cause of disagreement between the two parties was article XX b of the GATT, which points out that a measure taken by any party to protect lives must be necessary and that there should be similar measures imposed in the domestic country.[19] There have been arguments on the word necessary for a long time many parties coming up with different interpretations. In this case, WHO and Mexico argue that it means that there is no other alternative and a country cannot avoid using such measures. However, the US interpreted the term to suggest that the action is needed.[20] The other misunderstanding and Mexico argument was that the US had not imposed similar measure in its country and therefore, the restrictions were not legitimate. In a similar incidence on U.S.—Gambling, United States prohibited gambling in Antigua and Barbuda, but it did not do the same in domestic.[21] WHO restricted the prohibition because of violation of the chapter.  The two issues are hindrances to impose environmental policies that will, in turn, affect international trade.

Through a continuers argument on the issue, the parties and WTO agrees on the issue that to avoid the connotation of discrimination on Mexico tuna products, the US to emphasize on a dolphin-safe label.[22] WTO and the US, therefore, do not ban Mexico and the other countries from exporting, only that they must prove that their products are observing environmental conservation strategies. Trade of tuna fish has led to the death of many dolphins without control. Lack of a proper guide has been leading to harm to the environment, and the environment has not reduced trade. The direction of impact, in that case, has been on one side. However, WTO has opened a new association where trade is taking care of the environment unlike before where trade has been harming the environment.[23]

Impact of Trade Harmonization on the Environment

The tuna case saga has brought a new trend where parties can bring together their trade agreements and align them with environmental issues and policies. Trade harmonization is now an environmental goal and not a strategy used by other countries to harass others or reject their products. Countries have had their internal ways through which they approach environmental conservation similar to that of the US where it bans Mexico tuna products importation.[24] The standards which individual countries set are in line with their practices and not similar to those of other countries. Most of them are configured with the basis of the extent of harm on their environment and the benefits and ability to conserve the environment including technology.[25] For example, the case of Mexico and the US, perhaps the US has the technology to fish without killing the dolphins and Mexico does not have. Such a case is what the WTO was protecting without providing a solution, which has come where the parties can agree on the right way to carry out trade while helping each other in their environmental objectives.[26]

Countries now do not have the right to choose their standards of conserving the environment through the harmonization of trade. There is a tendency that when countries are allowed to choose their strategies, they will settle on low-level standards based on their values. The WHO protects such rights where countries can choose standards without external interference, and that is why Mexico can present a case against America, which interferes with its environmental standards. However, the latest outcome of the tuna saga makes WHO to change its laws to allow harmonized trade, which takes care of the environment. When WTO allows trade parties to choose their environment levels, there are some challenges, which arise especially in high standard countries.[27]

States with the best technology assume that their standards are the best and they consider those of developing countries to be low. However, the standards of the developed countries can also be low because they base them on balance between environmental objectives and trade of the individual countries.[28] That is the same situation, which the US and Mexico were experiencing. According to the US, their standards are better and the same case for Mexico. The case proceedings reveal that the standards employed by Mexico were meager. Although countries with high standards of conserving the environment seek to attract other countries outside trade completion to adopt their standards, the settled level is still low.[29] Developing countries and the WHO does not take time to assess whether the standards adopted by the developed countries are the best because they do not want to create a barrier to trade. An example of how such interplay takes place is seen from the tuna case where the US seeks to influence Mexico to adopt its method of environmental conservation thinking that they are the best. US strategy is not yet the best because it does not address the death of other aquatic animals.

Believing in an individual’s environmental standards and protection from interference reveals that countries carry out trade in expenses of their environment. A harmonized trade allows a balanced high-level environment resulting from a consideration of all parties.[30] The decision from the case allows WTO to handle trade agreements and therefore will not settle on individual countries standards but look at the maximum level best standards. Trade will therefore now control and produce the best ways to conserve the environment.

The change in the interplay between trade and environment extends to cover jurisdictions, which the parties do not own. Before the case, WTO and most countries could not allow trade agreements to include environment, which countries share.[31] Also, the countries importing products were concerned with how the products affect their environment only. However, after the case, trade agreements do not only conserve the environment in countries, which are engaging exchange, but also in areas, which countries share like the ocean. The interplay comes because of the interpretation of the GATT Article XX (g) and (b) where WHO points out the environment, which countries are protecting, does not have to be within their Jurisdiction.[32]  The interpretation expands the scope of international trade agreements to extend environmental conservation beyond boundaries. Any trade that countries engage in will require that the method and process used to make and transport the products are not harmful to not only the environment in the country importing but also the country that is exporting. The impact also extends to intermediary countries to prevent a case where a country can export through other countries to avoid the barriers on the environment.

Impact of Environmental Policies on Trade

The tuna case saga also expands the scope at which the environmental policies affect international trade both positively and negatively. Mexico in the case fears that the measures, which the US is taking on dolphin conservation, are going to reduce their ability to export tuna fish and therefore trade.[33] The same fear extends to the other intermediary countries, which makes them develop an interest in the case. One of the issues, which WHO try to protect through its policy agreements, is a situation where countries emphasize more on environment conservation to create barriers on trade.[34] There has not been any strategy established by nations to develop environmental policies, which will either be fair or increase international trade until the last decision of the case. Environmental policies and trade agreements are seen as two opposing forces where an increase in one leads to a decrease in the other.[35] However as seen from the previous paragraphs, the case has brought some positive perspective on the relationship between the two. Apart from a harmonized trade affecting the environment positively, the environment will also now increase international trade unlike before.

Environment policies as most countries and agencies like the WHO claim decrease trade. When countries want to increase their production, they increase pollution to the environment.[36] There has been no law to control the environment pollution level with an increase in production level, and therefore companies take advantage and increase output at the expense of the environment. The case is so because industries use power and they release unwanted products like polluted water and gases to the environment. An increase in production means an increase in waste products. Countries have not had an opportunity where they can work out other ways to increase production with a decrease in environmental pollution.[37] Imposition of environmental policies like the case of US, therefore, makes other countries to stop production, which decreases their trade. The impact of the environment ontrade, thus, has seen to be negative, and that is why WHO and most countries advocate resistance from policies to conserve the environment.

Positive Impact of Environmental Policies on Trade

The case has brought a new dimension where countries can agree on how to conserve the environment and still maintain trade. The agreements will create an assurance that the policies set are not meant to create discrimination against other countries products like the case of Mexico and therefore adapt other production methods to maintain trade.[38] In the tuna case, there was a misinterpretation and representation of the GATT article XI where no country is supposed to completely restrict or prohibit the importation of products other than placing duties or taxes.[39] GATT adopts the article to prevent any country from imposing environmental policies, which may completely prevent another country from exporting. The law completely prevents a case where environment policies can reduce trade and does not provide an alternative where the environment policies can increase trade.[40] WHO, therefore, through the GATT article XI minimizes the interplay between trade and the environment. This article is what the US is against although it does not point it directly and it is the same law, which Mexico is using to defend its argument, and since it is a law, Mexico wins in the first two phases of the case.

With the latest declaration by WHO that US is right in requesting imports of tuna fish to have dolphin-safe label means that article XI does no longer have the power to claim that countries cannot prohibit the importation of products and that they can only impose duties to regulate trade.[41] The move means that WHO has accepted to allow environmental policies to control trade.  On the positive side, the new interplay will increase trade because there will there be no assumption that a certain country is imposing the policies to discriminate against the exported products.[42] When countries do not make such an assumption, they will not impose prohibitions or tariffs on the opposing states. Let us consider the case of Mexico and the US to see how the lack of freedom to use environmental policies affected trade and the changes which result from the case. There is the assumption that the US is discriminating against Mexico products because of the prohibition on the imports. The reason for the premise is the strength Mexico gets from GATT article XI. From the article and WHO support, Mexico is allowed to impose countermeasures on US imports reducing trade between them.[43]

After the declaration that the action taken by the US is not discrimination of Mexico products, countries will need to trade in an environmentally friendly way and not end the exchange. The new impact of environmental policies to affect trade positively starts immediately after the decision by WHO where it orders Mexico to drop the countermeasure on US product.[44] As a result, the US resumes trade with Mexico a move that would be impossible without change on the GATT article XI. The article is yet to change, but the outcome creates a precedent case law that renders the article powerless.

Environmental policies and laws will now increase the quantity and quality of trade by stimulating innovations. Those countries, which will face the prohibition of their products because of environmental pollution, will be forced to come up with other improved methods of production or transportation, which will result in increased trade.[45] Mexico in the case having the knowledge that the US is not discriminating its products will know that its potential market maintains and therefore will .have to look for other proper methods of fishing. It might buy the best fishing ideas from the US thereby increasing trade even further. With the notion that countries are not discriminate against each other, there will be more dialogs on how each country would want the other to make production for exports including process and use of raw materials.[46] The new direction will open up the sharing of innovations to not only to ensure environmental conservation but also to increase productivity.[47] The case, therefore, gives trade and environment a new positive interplay.

All these advantages which trade will get from environmental policies are results of harmonization and acceptance that trade and environment associated with each other. The acceptance eliminates fears that policies that aim at conserving the environment are barriers to trade.[48] Countries will take this as an opportunity to interact with each other and settle on how to implement environmental policies in ways that will not affect trade.   Considering the case of Mexico and the US, if there were the integration of environmental policies on trade agreements, the US would have invited Mexico for a discussion on how the two will trade without harming the dolphins. The US knew that such policies would reduce Mexico importations and therefore would not have invited the courtly on to discuss. On the other hand Mexico new that the US is creating a barrier to its export and therefore would not have accepted negotiations. With the case outcome, the two countries and others will now be able to negotiate to look for slow solutions to environmental conservation without affecting trade positively.[49]

Negative Impact of Environmental Policies on Trade

After the case, environmental policies will as well start reducing trade in some countries and situations. The outcomes affect developing countries more. Looking the at issue in light of the situation Mexico found itself in, it was easy to change the method of fishing compared to stopping trade for some time. The whole duration of the case, so Mexico loses many trade opportunities in the US as it had to wait until WHO rules it its favor. Other countries exported on its behalf leading to low profit. Perhaps Mexico decided to follow the case because it did not have an alternative method or it was expensive to acquire other methods. Also, there are chances that the methods the US is advocating are not as productive as the ones in use. Those are the challenges which developing countries face and will make the environmental policies affect their trade negatively.[50]

Environmental conservation is not cheap and calls for sophisticated processes that will minimize waste products.[51] There is a lot of technology and modification which manufacturing companies need to make. Most developing countries do not have the technical knowledge and resources to make the adjustments. Imposition of environmental policies will make such countries to stop production because they do not have safe alternatives thereby reducing their trade.[52] Mexico stops its exportation because it did not have ways of shifting to more advanced fishing methods making it lose trade. WHO does no longer protect trade through restriction of environmental policies. The case allows countries to take measures which conserves the environment and which directly affects trade negatively.[53] The interplay between trade and environment, therefore, experiences a shift from the neutral impact of environmental policies to a negative effect on international trade.

Another way through which the negative impact of environmental policies on trade has come into play after the case is trough adaptation of less productive methods of production.[54] Most production methods and processes, which are environmentally friendly, are not productive. Electric engines, for example, are not as productive as those using fuel from coal. Allowing the environment to control trade, therefore, means that countries will have to adopt such methods, which are less productive, but safe for the environment leading to low production. Looking at the Mexico case, it is not that there were no other methods of fishing only that the purse seine was efficient and more productive. The country resisted because it knew that its productivity would reduce. Also, to reduce environmental pollution means that industries will reduce their productivity. As Production increase, the number of waste products also increases. Some countries might place a maximum quantity of poisonous gases industries produce per given duration of time. The industries will, therefore, have to /lower production to achieve those levels of waste products.[55] Low production means that the country will reduce exports and consequently, imports to attain a balance of trade.

Conclusion

The dolphin case saga between Mexico and the US expands and strengthens the interplay between trade and environment. The case involved a dispute on the purse-seine fishing method, which Mexico was using to get Yellowfin fish. The US burned importation of Yellowfin fish from Mexico because the fishing method used was resulting in the death of many fish. The dispute challenges the WHO laws together with countries relationship on trade and the environment. Before the case, WHO and most states did not allow environmental policies to challenge business. Most of the nations, which imposed environmental policies, reduced trade in other countries. Also, trade affected the environment negatively. The case has allowed the WHO to rule against its article XX where now countries can harmonize their business with environmental issues, and they can formulate policies to conserve the environment. With a harmonized trade and environment issues, countries will become creative to adopt environmental friendly industrial methods and therefore increase trade. Also, Trade will allow states to develop policies which will conserve the environment. However, developing countries will experience reduced business because they cannot introduce efficient production methods. The case, therefore, has strengthened the negative effect of environmental policies on trade and added a positive correlation between the two.

 

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[13]Office of the United States Trade Representative, U.S. Dolphin Safe-Labeling Requirements Found Compliant with WTO Rules2017 (Oct. 26, 2017), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/october/us-dolphin-safe-labeling-0

[14] Alexander, Lorand Bartels. “The Chapeau of the General Exceptions in the WTO GATT and GATS Agreements: A Reconstruction,” 1. AJIL 95, 95-105 (2015).

 

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[19] United States b – Restrictions on Import of Tuna (No 1), Mexico v United States, GATT Panel Report, DS21/R, BISD/39S/155, (1991) 30 ILM 1594, ITL 041 (GATT 1991).

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[35] Heinz, Schandl, et al. “Decoupling global environmental pressure and economic growth: scenarios for energy use, materials use and carbon emissions,” 132. JCP 42, 42-56 (2016).

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[38] Muhammad, Shahbaz, et al. “Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia” 25. RSER 109. 109-121 (2013).

[39] Alexander, Lorand Bartels. “The Chapeau of the General Exceptions in the WTO GATT and GATS Agreements: A Reconstruction,” 1. AJIL 95, 95-105 (2015).

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