Reflections on Climate Change and Trade

Abstract

Let me start with a general comment that is relevant as background to the theme of this book, and then move on to some of the specifics of the inter face between trade, the World Trade Organization, and the environment that many of the chapters above have addressed. At the outset, we need to remem ber that those who work on trade (mostly academics) and those who work on the environment (mostly activists) have traditionally been at loggerheads from time to time. Why? One important philosophical difference that underlies much of this tension, which I think we tend to forget, is that trade economists are typically considering and condemning governmental interventions (specifically, protec tionism, such as the imposition of tariffs and nontariff barriers) mainly as creating distortions and harming the general welfare. Conversely, environ mentalists are typically dealing with what are best described as missing markets (for example, people dump carcinogens into lakes, rivers, and oceans and emit them into the atmosphere, and they do not have to pay for the pollu tion). Therefore, they see government intervention (for example, the use of pollution-pay taxes or the use of tradable permits) as correcting a distortion. It is useful to recall this fundamental difference in the experiences and lifestyles of the people on the two sides of the trade-and-environment aisle, because it underlies and explains, to some extent, the occasional frictions between them. Of course, trade and the environment are integrally related, and that is why many disputes were coming up at the General Agreement on Tariffs and Trade (GATT)?the most important being, of course, the celebrated dolphin-tuna case between the United States and Mexico. I will return to the important issues raised by the dolphin-tuna jurisprudence and its later reversal in the shrimp turtle dispute, also involving the United States. But let us start with the problems raised by global warming. In his comment on chapters 5 and 6, Daniel Drezner points out that, in the past, America has opted for adjustment costs with a view to long-run gain. I do not quite know what he means by short-run adjustment costs, but 171