Trade and the Environment : A Critical Assessment and Some Suggestions for Reconciliation

This article critically assesses three links on how trade might harm the environment. First, trade liberalisation might exacerbate existing levels of resource depletion and en-vironmental pollution. Second, open borders might allow companies to migrate to ‘pol-lution havens', thus undermining high environmental standards in host countries. Third, the dispute settlement system of the World Trade Organization (WTO) might favour trade over environmental interests in case of conflict. It is shown that while trade liber-alisation can lead to an increase in environmental degradation, pollution havens are not a statistically significant phenomenon. As concerns measures aimed at domestic envi-ronmental protection, the dispute settlement in the WTO is not biased against environ-mental interests. The relationship is more complicated with respect to measures aimed at extra-jurisdictional environmental protection and with respect to trade restrictions for health reasons under the Agreement on Sanitary and Phytosanitary Measures. The paper concludes with some constructive suggestions on how trade and the environment can be reconciled in future trade negotiations