GATT restricts:

Export/import restrictions on products
Lowering of environmental standards
Import/export restrictions on unsustainable practices
Economic instruments

The GATT was established in 1947 to foster free trade&emdash;that is, the removal of trade barriers such as tariffs and export bans. It was thought that, if trade was unimpeded by such barriers, global economic growth could be fostered and each country would prosper as a result. Since 1947 there have been several rounds of negotiations to update the GATT rules. The latest round&emdash;the Uruguay round (1986-94)&emdash;involved 108 countries in extensive and prolonged secret negotiations. The final agreement resulted in the establishment of the World Trade Organisation in 1995.

Countries that break the GATT rules can be called to account before a disputes panel which can punish them. Although the GATT holds free trade to be the ideal, it does allow many exceptions to the rules, particularly where countries seek to protect local industries from competition from firms in other countries. As a result, many subsidies, tariffs and 'voluntary export restraints' remain in place. As was seen in chapter 16, third-world nations have often been disadvantaged by such protectionism, and could gain from the opening up of markets in affluent countries that might result from the GATT talks. However, third-world activists argue that low-income nations are disadvantaged by the GATT.

Activists from low-income countries have argued that free trade might be fair and mutually beneficial between equal partners&emdash;but not where there are large differences in power. The analogy of a race between a poorly fed African child and a world champion sprinter has been used. Applying the same rules to each of them, so that they both start at the same time and run the same distance, would hardly be considered a 'fair' race. Similarly, free trade between high-income nations and those that have been exploited by them in the past, so that they are way behind economically, is not fair. It is likely to result in multinational corporations taking control of industries in low-income countries, and local companies being unable to develop and compete. ('Titanic battle for the world's future' 1990)

Similarly, they argue that the GATT negotiations themselves are less than fair, with affluent countries unwilling to discuss issues unless they have made prior agreements. At the end of a series of discussions in 1990, the Brazilian ambassador made the following statement on behalf of the low-income nations:

"Developing countries wish to reaffirm their readiness to negotiate constructively … [but] will reject any attempt to impose upon them a prenegotiated package agreed only by a few." ('Titanic battle for the world's future' 1990, p. 24)

Another concern that people in low-income countries share with some people in high-income countries is the degree to which the GATT rules will interfere with a country's right to set its own internal laws and regulations. This has grave implications for environmental protection measures that countries may individually or jointly wish to take. This concern can manifest itself in the following ways:

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Export/import restrictions on products

Under the GATT, attempts to ban environmentally damaging products are seen as being contrary to the rules of free trade. Examples of such bans would include bans on products which contain heavy metals such as batteries and bans on throw-away packaging. Bans on aluminium cans or the imposition of deposit systems would affect foreign producers, and are therefore considered to be trade-distorting and unnecessary since packaging can otherwise be dealt with through a waste disposal system.

Countries such as Indonesia and the Philippines prohibit or limit log exports to control the rate of logging and thereby protect their local forests and industry. Such bans have been opposed by Japan and the European Community (EC) as being contrary to the GATT rules.

Countries may also wish to ban imports of hazardous materials and wastes. However, the GATT only allows this if local production or disposal of the same material is also banned. Belgium has recently been taken before the European Court of Justice because it banned some hazardous waste imports. This could mean that if Australia builds a facility for dealing with organochlorine wastes or radioactive wastes, it will not be able to limit imports of these types of wastes from other countries for disposal.

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Lowering of environmental standards

The GATT encourages international standards (harmonisation) and discourages countries from maintaining their own higher standards unless these are to protect human health or safety, the health of animals and plants, or the environment. Even in these areas, the onus is on the country wanting to implement higher standards to prove scientifically that the higher standards are necessary and that the same goals could not be achieved in a way that does not affect trade.

An example of this is provided by the standards for pesticide residues in foods. If the standards adopted internationally are those set by the Food and Agriculture Organisation (FAO), countries with more stringent standards (up to fifty times tighter in some countries) would have no choice but to accept imported goods with higher levels of pesticide residues.

It is possible for the GATT to try to impose higher environmental standards throughout the world rather than lower ones. But, as was noted in chapter 10 with respect to international legislation, this is unlikely to happen because of the lowest common denominator effect. This means that where governments democratically decide to implement high standards, these have to be justified scientifically. Political and social factors shape the standards individual countries decide upon, and often a decision has to be made despite a large amount of scientific uncertainty (see chapter 12). That uncertainty is likely to make it very difficult for a nation to prove its standards are necessary before a panel of hostile scientists chosen by GATT.

Greenpeace International says that 'by not allowing countries to adopt stricter standards, harmonisation will slow environmental protection as countries can advance only in lockstep, using narrow scientific and cost&endash;benefit criteria.' (1992b, p. 5)

While countries are discouraged from enforcing higher environmental standards than those accepted internationally, countries that do not impose any standards or regulations are not penalised under the GATT. This is the case even though such a situation is like a subsidy to polluters, since it allows them to keep their costs down by using the environment as a free disposal resource. It is for this reason that the Social and Economic Council in the Netherlands argues that 'it is not countries with high environmental standards that distort the trading system, but the countries with too low standards' (Van Bennedom & Van Brakel 1992, p. 4). This principle is recognised in the OECD's polluter-pays principle (see chapter 10); but the polluter-pays principle is not recognised by GATT.

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Import/export restrictions on unsustainable practices

Even though there is provision under the GATT for countries to argue the case for environmental standards that are applied to products, there is no provision for standards to be applied to production processes and methods used in producing a product. The GATT precludes a country from acting to prevent environmental damage in another country or in the global commons. This is because placing a trade barrier on a product because of the way it is produced in another country is seen as breaching that other country's national sovereignty. One example of this is the Dutch proposal to ban imports of tropical hardwood logged in an unsustainable way by the year 1995. This would not be allowed by the GATT.

A test of this occurred in September 1991 when Mexico complained against the US ban on tuna from the eastern tropical Pacific. The USA banned this tuna because too many dolphins were being killed in the process of obtaining it. The Mexicans argued that the USA was unfairly discriminating against them. The GATT panel ruled in Mexico's favour, arguing that 'regulations governing the taking of dolphins incidental to the taking of tuna could not possibly affect tuna as a product' (quoted in Van Bennecom & Van Brakel 1992, p. 10). Therefore, whether or not Mexico had regulations against this practice was not relevant to the trade in tuna. The primary motivation for this tuna ban on the part of the USA may well have been to protect its own tuna industry, but a ban that was primarily motivated by environmental concerns would be unlikely to meet with a better reception under the GATT.

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Economic instruments to encourage environmentally friendly behaviour

In the USA&endash;Canada free-trade pact, which is seen as a model of what the GATT is trying to achieve, the government of British Columbia was prevented from planting trees because it was seen as a subsidy to the Canadian timber industry. Similarly, subsidies to stimulate cleaner production methods have been viewed as protectionist under this pact.

Also, nations which attempt to internalise environmental costs into prices would be unable to apply tariffs to prevent similar products with lower prices that did not include environmental costs from coming into the country. Recently, a GATT panel disapproved of US taxes on oil and chemical feedstocks that were levied to pay for hazardous waste clean-ups.

It is for these reasons that environmental groups such as Greenpeace, World Wide Fund for Nature and Friends of the Earth are opposed to the GATT. Greenpeace International argues that free trade is detrimental to the environment, particularly when it takes place on a global scale. Not only does global trade increase transport and energy costs, and threaten cultural and biological diversity; but, Greenpeace argues, environmental and social costs associated with producing goods are often not seen or borne by those who consume those goods in other countries.

These impacts are worse in low-income countries where debt and low commodity prices have accelerated the process:

Clear examples of this process can be seen, for example, in the replacement of indigenous food production systems in Latin America by monoculture export crops like tobacco, sugar, or cotton, which require heavy chemical use, impoverish the soil, and displace small farmers. (Greenpeace International 1992b, p. 2)

A discussion of the implications of the GATT took place at the 1992 global forum held in conjunction with the Earth Summit at Rio de Janeiro in June 1992. An extract of that discussion is provided below.

At the end of 1990, several European countries argued at a GATT meeting that the environmental implications of trade should be taken into account. They put forward a resolution that a study be done of the relationships between environmental policies and trading rules, and that a working group be set up to provide a forum for discussion of these issues. Several months later, the GATT resurrected its group on environmental measures and international trade which had originally been set up in 1971. The group will look at international environmental agreements, and packaging and labelling legislation with respect to the GATT provisions and trade effects. However, it is unlikely to impact on the Uruguay round of negotiations.

In February 1992, the GATT released a 'Document on Trade and Environment' which stated that free trade promoted economic growth and therefore the production of resources for environmental policy. It said that, where there was conflict between free trade and environmental measures taken by individual countries, free trade should be given priority (Van Bennedom & Van Brakel 1992, p. 11).

Friends of the Earth Netherlands argues that 'policies aimed at sustainable development are much more relevant to the future of the world than the promotion of free trade' (p. 14), and that therefore priority should be given to sustainable development over trade. The same point was made by the Dutch Minister of Housing, Physical Planning and the Environment, Hans Alders: 'Environmental policies should impose limits to trade policies rather than the other way round' (quoted in Van Bennedom & Van Brakel 1992, p. 15).

The failure of such issues to be discussed at the main forum of the Earth Summit or to be included in Agenda 21 reflects the unwillingness of powerful affluent nations to question an international economic system that has huge economic benefits to those countries. Recognition of the inequalities perpetuated by the economic system and the environmental consequences of these inequalities would require action on the part of affluent nations to redress the balance. The principle of equity which is put forward as part of the sustainable development package also requires it. The next chapter will consider steps that are being taken in this direction.

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Panel debate at the global forum in June 1992

Annie Petsonk, representative of the US Trade Representative's office (USTR), indicated that panellists who urged that countries use trade restrictions to carry out trade policy were proposing outdated arguments. 'The free trade train is leaving the station,' she said 'If we want our views to be heard, we must jump on board,' she said.

Picking up the analogy, Charlie Allen Clarke, from the World Wildlife Fund (WWF), said the train has no windows, and the passengers have no control of the train or the driver, or even the destination of the train. Clark was referring to a lack of transparency in the GATT process. The GATT works in secrecy with the only inputs coming from diplomats or other governmental representatives. Others interested in shaping the nature of the debates at GATT, or bringing evidence before the panel, are excluded from the process, he said.

Clarke and others noted one prominent group of entities which are not blocked out of the process. Multinationals or trans national corporations (TNCs) have excellent input into the GATT, he said. During a recent negotiation session in Geneva, US GATT representatives met each afternoon with representatives from TNCs to discuss positions at the session and to receive industry information, he said.

The standards of the GATT are upside down, said Carlos Minc, congressman from the state of Rio de Janeiro. GATT rules should start with standards for ethical conduct among nations. Free trade should be allowed only when products are not harmful to other nations, he said. He cited exports of pesticides and dangerous chemicals which are banned in the US but permitted to be exported to developing countries. 'You cannot put trade above life and sovereignty,' he said, 'it is above all a democratic and ethical issue, not just a trade issue.'

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