General

International trade and environment were two independent fields until at least around the 1980s.

1、 The Beginning of Attention to Trade and Environmental Issues

On the one hand, the mainstream of international trade has developed in the direction of free trade established by the General Agreement on Tariffs and Trade, which came into effect temporarily after World War II. Through several rounds of negotiations, the tariff levels of goods, especially industrial products, have been successfully reduced, leading to a significant increase in the flow of international trade;

On the other hand, international environmental law did not receive widespread attention from countries for a long time, and its development was slow. It was not until the Stockholm Conference on the Human Environment in 1972 that international environmental law began to develop comprehensively. By the Rio Conference on Human Environment and Development in 1992, the development of international environmental law had already achieved many remarkable results.

In the early stages of the development of international environmental law, trade and environmental issues did not receive widespread attention from the international community, although some countries and international organizations have made important resolutions related to trade and environment. This issue has received widespread attention from the international community since the 1990s, thanks not only to the development of environmental movements worldwide, but also to the prominent potential tension between the development of the economy and the carrying capacity of the ecological environment, regardless of environmental costs.

2、 Economic Interpretation of Trade and Environmental Issues

According to economists' explanation, the friction between trade and environment is mainly caused by the externality of production. The so-called externality refers to the additional costs and benefits that are not reflected by market transactions.

Externality include positive externality - additional benefits and negative externality - additional costs. For example, when an electric locomotive train passes a farmer's wheat field, the roar of the train drives away the birds that peck, and the farmer does not have to pay a fee to the railway company; In the latter case, for example, when a steam engine train passes the farmer's wheat field, the sparks from the locomotive fly to the wheat ears in the wheat field, reducing the wheat production, but the railway company does not pay compensation to the farmer.

Environmental pollution is a typical manifestation of the negative externality of production, which is caused by market failure. Market failure is that the market cannot correctly evaluate and allocate environmental resources, which leads to the fact that the production costs of products cannot fully reflect their market costs, that is, the prices of goods and services do not fully include their positive or negative impacts on the environment;

For example, Freon, which is used as spray cans and air-conditioner refrigerants, can destroy the ozone layer. However, manufacturers of canned sprays and air-conditioners do not need to pay fees for the destruction of the ozone layer by Freon. The sales prices of these two products also do not contain such fees.

Secondly, the market values the ecosystem improperly. Some uses of a resource can be sold, such as tropical rainforest as wood, but others cannot be sold, such as its impact on climate and its role in protecting biodiversity.

Thirdly, the open management model of resources allows them to be utilized by anyone, but the environmental utility of resources is not recognized by all users, resulting in excessive exploitation and destruction of resources.

Market failure needs government intervention to correct intervention methods can be as follows:

1 Property rights arrangement: Some economists led by Ronald Koukos, a Nobel laureate from the University of Chicago School of Law, argue that as long as the property rights are designed properly, the market can solve the externality problem without direct government intervention. For example, if anyone can fish in a small lake without paying any fees, then every fisherman will not consider the fact that the more fish he catches from the lake, the less fish others can catch, and ultimately the fish in the lake may be depleted. If the government rearranges the property rights and grants the fishing rights of the lake to someone, the externality will be eliminated.

Command and control the government to control environmental pollution through administrative orders or regulations, such as prohibiting power companies that burn high sulfur coal from directly discharging sulfur dioxide into the atmosphere and requiring them to install washing equipment to remove sulfur from exhaust gas.

Levying environmental taxes and providing environmental subsidies is an economic means to achieve environmental goals. Levying taxes and fees is a "big stick" policy, while providing subsidies is a "carrot" policy.

4. Sold licenses: The government can sell or grant a transferable license to emit a certain amount of pollutants. The government can control the total amount of pollutant emissions by issuing such permits, and enterprises can develop anti pollution measures inspired by this mechanism. If a company has high production technology and low pollution level, it may not be able to use the government's permit for its emissions. It can sell the excess permits to other companies; On the contrary, it may have to purchase emission permits from other companies at a high price.

There are two main aspects of the relationship between trade and environment. On the one hand, due to market failure, free trade has contributed to the excessive development and unreasonable use of natural resources, and has also exacerbated environmental pollution; On the other hand, improving the environment requires funds and technology. Trade can drive economic development, increase income, and solve the financial problems needed to overcome poverty and improve the environment.

Experience has shown that in the early stages of economic development, countries generally experience a deterioration of environmental pollution. As per capita income increases, the level of environmental pollution gradually decreases, and environmental quality improves with income. Economist Simon Kuznet also drew this observation into the famous Environmental Kuznet Curve.

3、 Research on Trade and Environment Issues under GATT and WTO

The scope of issues related to trade and environment issues is very broad, and the perspectives and focuses of research vary among different institutions. Now, let's mainly introduce the research situation of this topic within GATT and WTO.

1、 Environmental Measures and International Trade Group

As early as preparing for the Human Environment Conference to be held in Stockholm in 1972, the Secretary General of the Conference requested the GATT Secretariat to prepare a statement.

According to this requirement, the GATT Secretariat has prepared a study entitled "Industrial Pollution Control and International Trade", which mainly analyzes the impact of measures to control industrial pollution on international trade. The study recognizes the need for governments to protect and improve the environment while avoiding new barriers to trade. It analyzes several issues that governments should address when formulating guiding principles for effective pollution control without compromising international trade.

In October 1971, Mr. Oliver Lang, Director General of GATT, suggested that contracting parties pay attention to the impact of anti pollution measures on international trade, especially what controlling industrial pollution means for international trade. In the subsequent discussion, representatives of some countries stated that GATT has a responsibility to address the impact of controlling industrial pollution on international trade.

Many representatives agree on this issue. For this purpose, a permanent establishment was established. In November 1971, the Council of GATT contracting parties decided to establish the Environmental Measures and International Trade Group, which was authorized to study trade policy issues related to pollution control and measures to protect the human environment as required.

Especially regarding measures related to the application of General Agreement rules, taking into account the special circumstances of developing countries, report to the Council on the activities of the group and other international organizations' research on environmental issues. Compared to the group's main focus on studying environmental measures related to the application of the General Agreement, unfortunately, in the nearly 20 years since its establishment, there have been no issues requiring the group to hold a meeting to discuss.

In December 1990, the GATT Ministerial Conference held in Brussels, the European Free Trade Association countries proposed that the ministers make an official statement on trade and environment. These countries believe that in order to have a clear understanding of the relationship between trade policies and environmental policies, all contracting parties should. Study the relationship between environmental policies and the multilateral trading system.

Considering the significance of the preparatory work for the United Nations Conference on Human Environment and Development to be held in 1992 and the possibility of submitting a GATT statement, a meeting of the GATT Group on Environmental Measures and International Trade was convened in 1991 to provide a forum for contracting parties to discuss these issues. However, the GATT Ministerial Meeting did not make a statement on EU country recommendations.

EU countries continued to suggest that GATT contracting parties study the relationship between trade and the environment. In February 1991, EU countries also suggested that Mr. Arthur Dunkel, the Director General of GATT, convene a meeting of the GATT Environmental Measures and International Trade Group at an appropriate earliest date. In April 1991, the contracting parties unanimously agreed. Conduct so-called "structural discussions" on trade and environment at the next council meeting.

The discussion culminated in a meeting of the Council held on May 29-30, 1991, which raised a large number of issues, including ensuring mutual support between trade rules and environmental protection, the relationship between trade restrictions and GATT rules in international environmental treaties, the application of GATT rules and the principles of trade-related environmental issues, the difference between legitimate environmental trade measures and trade protection measures, and the special problems of developing countries, Poverty is the root cause of environmental degradation in developing countries, and trade is a prerequisite for driving economic growth and achieving sustainable development.

However, the contracting parties did not reach a consensus on whether to discuss the relationship between trade and environment in the 1971 Environmental Measures and the Authorization of the International Trade Group. It was only after a discussion in July of the same year that the contracting parties finally agreed.

The 1971 group had the authority to discuss three issues: the relationship between trade provisions in existing multilateral environmental treaties, such as the Montreal Protocol on Ozone Depleting Substances to the Convention on International Trade in Endangered Species of Wild Fauna and Flora, and the Basel Convention on the Control of Transboundary Movements and Disposal of Hazardous Wastes, and GATT principles and regulations, which may affect the domestic environment of trade. The transparency issue of environmental regulations aims to protect the trade impact of new packaging and labeling requirements for the environment.

Since then, the Environmental Measures and International Trade Group has been studying the above three issues within the scope of its mandate, and members of the group have reached consensus on many issues. They believe that the group's research should be limited to potential significant impacts on the trade of GATT contracting countries. The GATT is not suitable for environmental measures related to trade, and is tasked with inspecting domestic environmental policies, establishing environmental standards, or developing global environmental policies.