visser_logo_small.gif (1783 bytes)SociaI and Environmental Dimensions of Trade Liberalization: 
Some Early Reflections on the World Trade Organization

Williams, page 1 - 2 - 3 - 4
Section headings:

dot.gif (101 bytes) 1. Introduction dot.gif (101 bytes)  4. Critical areas of Concern
dot.gif (101 bytes) 2. A Brief Historical Overview of Globalization and Trade Liberalization dot.gif (101 bytes) 5. Conclusion
dot.gif (101 bytes) 3. From GATT to WTO dot.gif (101 bytes)  6. Bibliography


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4.2 WTO and the Environment

According to Greenpeace Netherlands, under WTO "there exists a grey area of uncertainty about the status of national environmental measures; whether they do, or do nor effectively obstruct trade, and whether they are, or not prohibited, and the current absence of legal precedent with regard to the new GATT." Unlike the social clause debate there has been some success in the effort w link trade and the environment. As a result the trade environmental linkage is a recognized aspect of WTO, and there are some limited institutional processes for environmental measures.

This depends on how the WTO rules are interpreted. Loosely interpreted they may favor some scope for preserving some environmental regulations. However, under strict interpretation, not only does the WTO easily and effectively facilitate challenges to national environmental standards as unfair trade barriers which would then be subjected to countervailing measures or otherwise "actionable", but there are wide ranges of international and national environmental policies and conventions that could be in conflict with strict interpretation of WTO. These potentially "actionable' non-tariff barriers may include:

  • implementation of the Basel Convention
  • mandatory information on environmental aspects of products
  • levies to regulate the use of certain materials such as pesticides
  • fiscal instruments such as the accelerated depreciation of environmental instruments and lower VAT percentages
  • legislation with regard to deposits (i.e. deposits on batteries)
  • direct environmental subsidies for business.
  • environmental technology subsidies requirement of quality statements
  • covenants, such as covenants on packaging used in the Netherlands
  • ecolabeling in which government is involved may constitute discriminatory trade effects
  • exhaust norms and product requirements for tradeable capital goods and vehicle
  • the Montreal Protocol for the protection of the Earth Ozone Layer (Source: Greenpeace-Netherlands and Greenpeace, Washington, D.C.)

It is not my intention here to argue that WTO is environmentally friendly but rather to show that in comparison to the debate on the inclusion of a social clause the environmental view at least has a foot in the door whereas as the agreement now stand any work on the social clause must start from the ground.

In generally WTO in a pure sense does not bode well for the environment. The environmental activists have had sonic limited successes: there is now an environment sub-committee on Trade and Environment. Furthermore, the Commission on Sustainable Development has observer status at WTO. The argument could be made that the [of the sub-committee on Trade and environment is not to consider the impact of trade on the environment but rather the reverse: to ensure that environmental regulations do not impede free trade. This is most certainly its objectives- However, there is still scope for activism to "expand and widen" the interpretation or some of WTO rules as it relates to the environment. In particular Article XX could be interpreted as some environmentalists have argued to "include broader scope for using trade measures as a means to achieve multilaterally agreed environmental goals."

Proponents such as the Dutch government would like to see Trade Related Environmental Measures (TREMS) which include environmental Code with regard to GATT/WTO- The code would include criteria for the use of trade instruments for environmental protection and nature preservation purposes including environmental concepts such as the 'Polluter Pays' and the 'Precautionary Principle'. Policy shift from direct regulations by the national government to less direct forms of regulation such as covenants and ecolabels. This trend corresponds to the liberalization of trade which GATT/WTO are intended to achieve (Greenpeace 1994, p.5).

Questions of environmental protection, workers rights, redress of sexual or racial discrimination are eventually labelled as barriers and obstruction to the free reign of capital to maximize short run profit. Hence the needs of civil society for basic health, environmental safeguards, the promotion of fairness and equity are invariably subordinated to the needs of the "free" market Freedom from unnatural obstruction is the magic of the market, economists and businesses all argue. However a careful analysis of the immanent cause of the so-called efficiency of the market will show its fundamental magic lies in the subordination of women's unpaid labor, the marginalization of workers rights and the destruction of the environment. This is the logic that underlies both structural adjustment programs and trade liberalization.

4.3 Fair Trade and Growth

The economist's preoccupation with free trade is based on the premise that trade liberalization results in economic efficiency arid hence, economic growth. This underlying belief is the cornerstone of the strategy subscribed to by Chief Executive Officers (CEOs) of transnational corporations such as Harry Cray of United Technologies Corporation who argues that economic efficiency can only be achieve by truly large corporations operating in "a world wide business environment that is unfettered by government interference" (Environmental News Network 1994)

It is important to realize that the real debate is less about the issue of economic growth and development, and more about the ability of multinational corporations to maximize profit without the strictures of accountability regarding workers rights, workers safety and environmental protection. Very rarely is the question of the nature of growth, its beneficiary, or its ultimate costs placed on the table for discussion.

The nature and causes of economic growth and its relationship to trade liberalization are not quite as settled as it might appear to be. Two main questions need to be addressed: (1) Is trade liberalization the paramount factor contributing to economic growth?; and (2) Does economic growth results in the greatest good for the greatest number of people? I do not intend here to engage in a lengthy discussion but rather to make some general comments on these two questions as it relates to social clause and environmental safeguards.

Discussion of the determination of economic growth is fraught with misconceptions and inconsistencies. Generally analysis of the growth process focusses on narrow quantitative measures such as growth rate of gross domestic product and total income. Often ignored is the relationship between income inequality and growth. Recent developments in economics have shown that growth may exert a strong negative effect on income distribution in a country. In particular, new findings offered by a number of economists, utilizing the mathematical growth model of University of California (Berkeley) economist Paul Romer, link income disparity to overall economic growth. Romer's work also suggests that income disparities "hurt skills" which negatively affect gross domestic product growth by its affect on productivity and efficiency.

Romer's finding is important because it helps to debunk one of the most prevalent myths in conventional economic mythology. The myth that increased growth benefits everyone in a society. But the fact is that rising growth does not automatically result in improvement in the living standards of worker; nor does it automatically lead to improvement of the environment; nor does it correct for gender or racial discrimination. Working with US, data Romer argues that economic growth may in fact coincide with rising income in income inequality. The study reported in Business Week (1994) shows that in the 1980s despite the fact that "the country (the U.S.) got rich those on the bottom didn't." Overall workers as a group lost ground.

The works of Romer and others are still in the early stages and therefore not yet not sufficient enough to totally negate the conventional model. However, when combine with the of works on structural adjustment programs in the South they do point to a great deal in over reliance on economic growth to bring widespread prosperity for the many. Therefore also greatly reduce our expectations of free trade. In order for workers and the poor to benefit significantly from economic growth there must be meaningful labor policy and wage safeguard must be in place.

Trade liberalization was the centerpiece of structural adjustment programs. While in some cases it led to improve balance of payments position it did not improve the overall living standards of the workers. This is in part because these programs completely neglected the social dimensions of the growth and development process- Though one cannot argue that structural adjustment programs are solely responsible for the dramatic situation of workers, especially women in developing countries. Once can certainly argue that outlandish claims heralding the institutionalization of trade liberalization were enacted without much thought to the structural problems of these economies as it relates to social development. These polices carefully avoid or ignored the existing conditions of poverty, unequal distribution of income. Moreover, as pointed out by feminist economists such as Elson (1991), Moser (1993) and Sparr (1995), these polices assume that "women's unpaid domestic work is infinitely flexible and free" (Sparr 1995) and therefore will cushion the effects of economic re-adjustments.

Likewise, claims of the benefits of trade liberalization also proceeded without thought of the nature and level of social development and the potential impact of free trade on poverty and the environment. Thus there is no safeguards for ensuring that any benefits of free trade also accrue to workers. Even as the WTO/Uruguay Round discussion attempts to enforce the corporate agenda (including the dismantling of the UN Centre on Transnational Corporations and the establishment of implicit codes of conduct for countries relationship with TNCs) no mechanisms were created to "level the playing field" for the world's workers. Nor were there any mechanisms established to promote social development for the developing countries.

Despite the rhetoric of poverty elimination and calls to strengthen the social fabric of the world community, the World Summit on Social Development, held in Copenhagen in March 1995, did not establish any new initiative for debt reduction or debt forgiveness for heavily indebted economies. [Twenty percent of Official Development Assistance will be matched by twenty percent of recipient country and earmarked for public expenditures for human development objectives.] With few exceptions, country after country rejected title 20/20 proposal that would give a real meaning to a commitment for social development. Despite widespread recognition by the IMF and the World Bank of the need for new resources and an implicit acknowledgement that structural adjustment did not deliver as much as it promised, no new resources was created for developing countries economies ravage by debt payment and structural adjustment.

5. Conclusion

While the full implication of the World Trade Organization for the world economy cannot as yet be determined, we can be certain that despite economists' upbeat predictions of rapid increase in jobs and rapid rise in international trade flows, there will be some negative fall-out for labor in the North and South. In light of the intense hardship that the majority of people face in poor and rich countries alike in terms of rising structural unemployment and declining social services, there is great need for increased vigilance around the activities of multinational corporations. There is also need for a strong counterbalance against the World Trade Organization and any attempt to back-track on environmental agreements and minimal international labor standards already existing in the various ILO conventions.

There is also need to rally in support of activists in the South who are organizing against IMF style structural adjustment polices. In light of the increasing globalization and trade liberalization pressures structural adjustment programs will further weaken the bargaining position of workers in highly indebted economies. We must redirect the operations of the global economy so that it sustains life not destroys it. We need to rebuild and reshape our society to ensure economic justice.

  • Economic justice is characterized by equitable distribution of income and wealth, economic security and economic freedom.
  • Economic security includes, but is not limited to, access to decent affordable housing, nutritious, safe food, clean air and clean water and access to meaningful education.
  • Economic freedom includes the options of sustainable livelihood (either in the labor market or other meaningful alternatives), and the right to be a member of a union or other workers organizations.

6. Bibliography

Barker, Isa (1994) The strategic silence. Gender and Economic Policy. zed Books
Bello, Walden (1994) Dark Victory Pluto Press.
Dawkins, Kristin (1994) "Selected Documents Regarding the Inclusion of Workers' Rights and A Social Clause in the GATT/WTO." Institute for Agriculture and Trade Policy
Edregn, G. (1979) "Fair Labor standards and Trade Liberalization" in International Labor Review 5.
Elson, Diane (ed.) (1991) Male Bias in the Development Process Manchester University Press.
Environmental News Network (1994) GATT the Environment and the Third World Environmental News Network, California, USA.
Gaston, Noel and Daniel Trefler (1994)- "The Role of International Trade and Trade Policy in the Labor Markets of Canada and the United States." The World Economy 17,1, January, pp. 45-62.
GATT (1994) "The Marrakesh Agreement Establishing the World Trade Organization" GATT, Geneva
GATT (1994) 1986-1992 vol. 1. The GATT - The Uruguay Round. Negotiating History Greenpeace International (1994) Greening of World Trade London Greenpeace International
Greenpeace-Netherlands (1995) Dutch Environmental Policy Imprisoned in the GATT Regulations. Greenpeace Netherlands
Greenpeace (1994) GATT Trading Away the Environment Greenpeace, Washington, D.C.
Gontier, Hegel (1994) "Social Clauses in Trade: Protecting the Rich or Helping the Poor?" The Courier No. 145. May\June.
Hoekman, B.M. and Petros C. Mayroidis (1994) "Competition, Competition Policy and the GATT." The World Economy 17,2, March. pp 112-150.
International Labor Organization (1994) "The Social Dimensions of the Liberalization of World Trade." ILO Governing Body Working Party on The Social Dimensions of the Liberalization of World Trade, ILO, Geneva
Khor, Martin (1994) "Why the GATT or WTO Should Not Deal With Labour Standards and Workers' Rights" (unpublished paper)
Krugman, Paul (1994) "Europen Jobless, America Penniless?" Foreign Policy 95:19-34.
Maggs, John (1994) "Clinton's Plan for Rights Code Dreaks Down." The Journal of Commerce
McGee, Robert, W. (1995) "The Moral Case for Free Trade." Journal of World Trade 29,1, Feb. pp 69-76.
Mehta, Chirag (1994) "The SEED Satyagraha. Indian Farmers and Global Capital Face off." Dollars and Sense Sept/Oct.
Moser, Carolins (1993) Gender Planning and Development Theory, Practice and Training Routledge, New York.
Patterson, Eliza (1992) "GATT and the Environment" Journal of World Trade
Pescatore, Pierre, W.J. Davy and A.F. Lowenfeld (1994) Handbook of GATT Dispute Settlement. Transnational Juries Publication, Inc July
Potier, Michel (1994) "Agreement on the Environment." OECD Observer 189, Aug/Sept
Raghavan, Chakravarthi (1994) "US Push for Labor Standards" Third World Economics 16-30 June.
Rom, Michael, (1995) "Some Early Reflections on the Uruguay Round Agreement as Seen from the Viewpoint of a Developing Country." Journal of World Trade
Sparr, Pamela (1995) Mortgaging Women's Lives: Feminist Critiques of Structural Adiustment zed Books.
Stevens, Barrie (1994) "The Social Fabric Under Pressure" OECD Observer no. 189 Aug/Sept
Stevens, Candice (1993) "Do Environmental Policies Affect Competitiveness." OECD Observer 183, Aug/Sept.
Sutherland, Peter P. (1994) "The World Trade Organization and the Future of the Multilateral Trading System" Address to the St. Gallen Symposium, St Gallen, May 30.
UNCTAD (1994) A Preliminary Analysis of the Results of the Uruguay Round and their Effects on the Trading Prospects of Developing Countries Secretariat Report 6
UNRISD (1995) Adjustment, Globalization and Social Development United Nations Research Institute for Social Development. Geneva
Van Liemt, Gijsbert (1994) "The Multilateral Social Clause in 1994." ICDA (International Coalition for Development Action) Draft Discussion Paper, August.
Zuckoff, Mitchell (1994) "Free Trade, Human Rights Clash over GATT" Boston Sunday Globe p. 78

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