Regional Trade and the Environment: European Lessons for North America

Abstract

INTRODUCTION Regional economic integration has become an increasingly important policy issue in international trade. Although its formal origins can be traced back to the establishment of the European Coal and Steel Community in 1952, it was not until the mid-1980s that regional integration activities increased significantly.(1) Three important though unrelated events are typically seen as responsible for sparking interest in regional economic integration: the floundering of the Uruguay Round talks of the General Agreement on Tariffs and Trade (GATT),(2) the laying of plans by the European Community (EC) to complete a Single European Market,(3) and the movement towards a Canada-United States Free Trade Agreement (FTA, and subsequently a North American Free Trade Agreement (NAFTA)).(4) Faced with the prospect of an international economic order dominated by two powerful trading blocs rather than one based on the continued pursuit of multilateral trade liberalization, non-EC and non-FTA nations have, in the last decade, sought to either establish regional trade blocs of their own or join the European or North American arrangements. The establishment of new regional trade blocs and the accession by states to existing regional integration arrangements (RIAs) will most certainly continue to be a significant issue in international trade in the coming years.(5) Another significant development in world trade policy has been the growing concern about the environmental implications of trade liberalization. The link between free trade and the environment was first made apparent by a 1991 GATT dispute settlement panel ruling (the Tuna-Dolphin case) which found unlawful a United States trade ban(6) aimed at preventing the incidental killing of marine mammals by commercial fishers.(7) This ruling mobilized environmentalists to become involved in trade policy to ensure that the progressive opening of markets did not infringe on the ability of states to establish and maintain their own national environmental protection laws. The increasing attention given to the environmental implications of trade liberalization arrangements (TLAs)(8) is evidenced by the efforts of environmental lobby groups in North America during the negotiation of the NAFTA, and the recent establishment of the World Trade Organization's(9) Committee on Trade and the Environment.(10) The increasing importance placed by the public on environmental protection, coupled with the progressive movement towards global and regional trade liberalization ensure that the trade-environment debate will remain a fixture in the development of trade policy. While a great deal has been written about both regional economic integration and the trade-environment debate, there has been surprisingly little discussion of the link between the two issues. The purpose of this article is twofold: first, it offers a comparative look at how the world's two most economically significant RIAs deal with circumstances in which environmental policy and trade liberalization interact (and sometimes conflict); and second, it attempts to draw some insight from this comparison as to whether (and why) the particular form of RIA (i.e., a free-trade area such as NAFTA or a common market such as the EC) influences how trade-environment interactions are reconciled. The remainder of this article is divided into four Parts. The first three Parts each deal with one of three key areas in which trade policy and environmental protection policy interact--environmental laws as non-tariff barriers to trade (NTBs), lax environmental standards as indirect subsidies, and the harmonization of environmental standards. The Introduction to each of the next three Parts will outline the potential environmental impacts associated with each of these areas, and how any negative environmental impacts might be nullified. Following this, the regimes of the EC and NAFTA with respect to each area will be detailed and compared. …