Making the trade system fairer

Although a GATT panel gave a ruling in 1991, Mexico reached a deal with the US and dropped the case without it being formally adopted by the GATT. The European Union then brought a separate case, which ensured that the GATT reached a formal decision in 1994.

In both cases the US argued unsuccessfully that their prohibition was consistent with GATT exceptions for environmental purposes, but the GATT ruled that Mexican and US tuna are ‘like products’, regardless of the level of harm caused to dolphins, and that US import restrictions were illegal.

A simple change in GATT rules to permit discrimination against goods produced using unacceptable methods of production, including unsustainable and polluting processes, would bring about a major improvement in environmental standards around the world.

Imposing a floor for environmental and labour standards would make international trade a tool for improving wellbeing. By contrast, the existing system puts pressure on governments to reduce their standards in order for domestic firms to remain ‘competitive’. This gives rise to a phenomenon known as ‘eco-dumping’.

While environmental costs are as real as any other costs, they are often not reflected in the market prices of products. (The same can be said for the ‘costs’ of violations of human rights and exploitative labour practices.) If these ‘external costs’ are not reflected in prices, then the country in question is effectively subsidising production by not imposing adequate environmental standards. By permitting environmental damage a country can gain an unfair advantage in the international marketplace.

The acceptance by some countries of environmental damage can therefore be considered as a form of subsidy, resulting in eco-dumping. At present, trade rules prevent countries from taking any measures to prevent this type of dumping. While no one is arguing that all countries should have the same environmental and workplace standards, those countries that have decided to adopt higher standards should not be undermined by exports from those with unacceptably low standards.

This is especially true if transnational corporations go in search of locations with low standards in order to avoid higher standards elsewhere. There is a danger of a ‘race to the bottom’ in environmental and labour standards as a result of which governments come under pressure to defer the introduction of tighter standards or even water down existing ones.

Once upon a time, ‘all the fish in the sea’ was meant to imply an infinitely large number. Now, it is simply seen as an annoying constraint on the capacity of the world’s fishing fleet. As time and circumstances change, so too must domestic and international laws.

Advocates of the free market often celebrate the enclosure and privatisation of the English commons as a turning point for wealth creation and prosperity. Such a change in laws was no more ‘interventionist’ than what is now required if global capitalism is to deliver benefits to all.

Trade can become a powerful tool for raising the production and living standards of all counties. But this will not happen while those of us in developed countries continue to turn a blind eye to the fact that many of our ‘cheap imports’ come at the cost of other people’s health, lives and environments.