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REWARDING BENEFITS THROUGH PAYMENTS AND MARKETS
Box: 5.28: Trade and environment
The role of trade in sustainable development policies and ambitions is a complex one. The General Agreement
on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), are key components of this
relationship. These frameworks to regulate multilateral trade have been established through consensus among
their 153 member states and have progressively reduced global trade barriers, thereby contributing to the vast
increase in world trade witnessed over the past decades.
Trade and development
According to basic trade theory, increased international trade should lead countries to produce goods for which
they have a ‘comparative advantage’ in their production. This specialisation should, in turn, lead to a more optimal
allocation of inputs and production of goods, something desperately needed with the global population
predicted to increase to over 9 billion people by 2050. Trade can also act as a force for development, providing
opportunities for exports overseas, increasing production and incomes at home and accelerating the global
dispersion of technologies – including environmentally important ones.
Trade is often seen as also generating income and contributing to development by freeing up resources for investment
in environmental quality and protection of ecosystems and biodiversity (Sampson 2005). However,
as UNEP and IISD (2005) note, “The links between trade and environment are multiple, complex, and important.
Trade liberalisation is – of itself – neither necessarily good nor bad for the environment. Its effects on the environment
in fact depend on the extent to which environment and trade goals can be made complementary and
mutually supportive.”
…and environment
Governments have obligations not only under the WTO, but also various multilateral environmental agreements
(MEAs) such as the CBD and the UNFCCC. Debate often arises over a perceived risk of conflict between these
different international conventions, rules and disciplines. Although there have been no WTO legal disputes to
date regarding a conflict between specific MEA provisions and the WTO, governments may have to balance
WTO-related obligations not to discriminate in traded goods with MEA-related obligations to limit or ban the
import of goods produced under environmentally harmful conditions or that contribute to environmental degradation.
Both multilateral trade rules and environmental agreements include provisions focused on minimising the risk
of such conflict. The GATT includes an article (Article XX) that sets out general exceptions to its rules, including
for measures necessary to protect human, animal or plant life and health. Several MEAs specify that their implementation
should not adversely affect the rights and obligations derived from other existing international
agreements. For example, the CBD (Article 22(1)) contains a provision to this effect but makes an exception for
cases where the exercise of such rights and obligations would cause serious harm to biodiversity.
Another potential issue exists for goods and products that have been produced according to criteria that
safeguard ecosystems and mitigate environmental pressures. The external costs of their production (i.e.
costs that society has to bear) are lower than those of competing goods not produced under such conditions.
It has been argued that to ensure a level playing field, the external environmental costs incurred in
the production of goods should somehow be reflected e.g. goods produced under environmentally-friendly
criteria should be rewarded for the lower costs transferred to society as a whole. This could have implications
for international trade, depending on how governments decide to reflect these cost differences (e.g. through
standards or labelling schemes).
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 5: PAGE 54