Claims that efforts to protect the environment are harmful to international trade may be unfounded, according to a report commissioned recently by the Global Environment & Trade Study GETS at Yale. The study of nine recent international disputes involving trade bans for environmental reasons found that economic losses were temporary and trade tended to return to prior levels following a brief period of adjustment.
"The World Trade Organization WTO as well as many governments and business groups have expressed concern that environmental laws may be used as a form of trade protectionism, but this study found little evidence of a serious trade problem," says Daniel Esty, associate professor of environmental law and policy in the School of Forestry and Environmental Studies, who helped establish the GETS program in 1994. Eight studies have been commissioned by GETS in an effort to provide better analytical underpinnings for the ongoing debate on trade and the environment.
The latest study, titled "Trade-Related Environmental Impacts: Sizing and Comparing Impacts," calculated the direct and indirect economic impact of environmental trade bans in nine cases occurring since 1989. These included a U.S. ban on Mexican tuna imports to protect dolphins killed in tuna nets, a Japanese ban on U.S. apple imports to prevent insect infestations, an environmental tax war between the U.S. and Canada over aluminum beer cans, a U.S. ban on endangered lobsters imported from Canada, U.S. restrictions on importing Venezuelan gasoline linked to pollution control, and U.S. sanctions on Taiwanese trade designed to protect endangered tigers and rhinoceroses.
The study, which also weighed economic losses against environmental benefits, was directed and written by Professor James Lee of the School of International Service at American University with the help of Antonio Santiago and Ali Ghobadi, also of American University, and Roland Mollerus of the United Nations Conference on Trade and Development in Geneva. Professor Lee directs the Trade Environment Database TED project, which has an inventory of nearly 400 trade and environment cases. See the full report on the TED web site at http://gurukul.ucc.american.edu/ted/gets.htm.
"As tariffs are cut in accordance with the General Agreement on Tariffs and Trade GATT, non-tariff barriers to trade may increasingly loom as sources of economic friction," says Professor Esty, who noted that several of the trade disputes examined by the researchers -- such as the U.S.-Mexico tuna and the U.S.-Venezuela gasoline dispute -- have been the subject of GATT or WTO adjudication.
The study found that:
Annual trade losses ranged from $6 million to $250 million in the cases reviewed. Measures to protect individual species blocked about $50 million in trade, while measures to protect general environments disrupted an average of $200 million in trade per year.
The environmental benefits, on the other hand, frequently were significant, including cleaner air in U.S. cities, and protection of forests and orchards from parasitic infestation. Five of the cases concerned the protection of endangered species and marine resources.
Compared to potential environmental benefits, the trade values in these nine cases tended to be small. For example, trade sanctions levied against Taiwan for continued tiger and rhino trade totaled about $25 million per year while the value of these animals to zoos far exceeds that amount.
"Although trade was shown to rebound in time, the environmental damages that many of the standards aimed to prevent are irreversible," the researchers conclude. "It is assumed that protecting the environment is often a barrier to trade. This may be true in the short term, but not necessarily in the long term."
In some cases, trade was declining even before environmental measures were imposed. For example, Venezuelan gasoline exports to the U.S. peaked in 1990 at $821.2 million but, by 1994, had fallen by three-quarters to $214.2 million. Therefore, Venezuelan estimates that the U.S. ban would cost them as much as $700 million annually was based on an earlier year when exports were at a maximum.
"Expected losses were frequently exaggerated by countries whose exports were banned," Professor Lee notes. "It is clear that the trade losses are far less than generally perceived or claimed."
Finally, the study found that the environmental measures that impeded or stopped trade did not mean the trade was lost, but more likely diverted elsewhere. Perishable goods such as tuna and shrimp may have gone to third markets or to the domestic economy. Non- perishable items, such as gas or wood, could be stockpiled and sold at times when prices were higher, Professor Lee says. To these suppliers, there may have been no net loss at all.