World Trade and the Environment

Part of the debate – in the House of Commons at 11:28 am on 11 December 1996.

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Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Environment) 11:28, 11 December 1996

In recent years, the interaction between trade and environment protection has generated much debate but little consensus. Yet, in theory at least, the international community is committed to both trade liberalisation and environmentally sustainable development. In principle, the pursuit of both objectives might be entirely compatible. Trade allows countries to specialise in the production of goods and services in which they are most efficient, and to maximise the return from the given use of resources, which is a movement in the direction of environmental sustainability. Furthermore, trade liberalisation can encourage the spread of environmentally friendly technology.

However, trade can also—and arguably often does—harm the environment. The benefits of lower costs through lower environmental standards go to the producer. The disbenefits of the environmental pollution that results fall on the entire community, and increasingly that means the global community. In other words, competitive trade can encourage producers to ignore the wider environmental costs of what they do, to maximise their own price competitiveness at the cost of everyone else.

A country that has accepted more stringent environmental controls may well find that it is undermined by competition from other countries with laxer standards and hence lower production costs. In practice, most of the evidence submitted to the Select Committee suggests that that has not happened. Higher environmental standards have been offset by the gains from greater efficiency. However, there is no doubt that Governments and industries have often resisted higher environmental standards for fear of losing competitiveness, or for fear of businesses relocating abroad to places demanding lower standards.

International market prices do not reflect the environmental costs of cutting down forests, polluting waterways, eroding soils and overfishing. We have international rules against selling products at less than they cost to produce, but environmental dumping may be rewarded in the global market economy.

To some people, such concerns still seem remote, but the environmental threats are real and, for many communities, so are the economic threats. My constituency is no exception. In the St. Austell area, for example, we have the largest site of opencast mining in Europe—not for coal, but for china clay. Thousands of clay jobs have been lost, partly through new technology and partly through increasing competition in recent years. In the clay area, there is understandably constant pressure for higher environmental standards to protect residents from dust, to protect traditional village communities from tipping coming too close and to protect what remains of the traditional landscape, flora and fauna.

Much has already been achieved in the area, to the credit of the county council and the clay companies, chiefly English China Clays, but the industry continues to warn that tougher standards could threaten its future and its competitiveness. The remaining 4,000 jobs in the industry in my community are under review again and more may be lost as new china clay deposits come on stream in Brazil. There, companies do not have to operate around existing villages—those can be swept away, if they exist at all—nor do they have to restore and revegetate the landscape after tipping waste on to it.

The fear in St. Austell is that the choice may be between protecting our environment but losing our jobs as the local industry becomes uncompetitive, and maintaining competitiveness, with the loss of our environment. I hope that it will not come to that, but in one of the poorest communities in Britain, the fear is real.

The conflict between the desire to protect the environment and the urge to increase trade will not go away. On the contrary, the combination of the growth in trade and the accumulating evidence of global environmental degradation seems likely to lead to more, and more serious, conflicts.

The World Trade Organisation committee on trade and the environment is an important first step to relieving those pressures, by incorporating environmental considerations into international trade policy, but the fear is that it is unbalanced in favour of trade. This week's WTO summit is the first opportunity to resolve those tensions. The purpose of our report was to influence the British and European position.

In response to our report, the Government said that they would accept many of the Committee's conclusions and recommendations, although they rejected some. There are times when I am not sure that the Select Committee went far enough. I urge the Government to reconsider their position on those issues.

My most serious concern relates to trade measures based on process and production methods. Recent general agreement on tariffs and trade panel decisions have differentiated between the environmental impact of products and the environmental impact of how they are produced—process and production methods. Countries are permitted to take trade measures—import bans, for example—against products that are harmful to the importing country's environment, so long as the same product is treated equally, whether it is produced by domestic or overseas producers. GATT panels, however, have ruled that such action is not permitted on the basis of process and production methods.

The logic of that decision is that process and production methods are highly country-specific. The same process may cause different environmental damage in different countries, depending on such factors as population density. Yet where the effects of pollution are international, such a differentiation is hard to justify. Carbon dioxide released in Asia, for example, causes just as much global warming as carbon dioxide emitted in Europe.

It is probably true that most of the serious pollution problems that we are facing arise from production processes, not the resulting products. An example is the use of energy in industry and agriculture. To combat such problems, important and effective multilateral agreements have been introduced on topics such as chlorofluorocarbons. When applied to world trade, however, such agreements are under constant threat of being undermined by current WTO rules.