Who Should Make the Rules of Trade? The Complex Issue of Multilateral Environmental Agreements

Abstract

In recent years, governments have negotiated a number of Multilateral Environmental Agreements (MEAs) that include clauses regarding trade measures that conflict with their WTO obligations. As yet, there has been no formal dispute regarding which obligations should prevail, but the threat of conflict is perceived to be sufficiently grave for the parties to the Doha Ministerial to agree to examine the issue. Those who have strong preferences for environmental amenities have put considerable effort into fostering MEAs and are lobbying hard for them to prevail over the WTO in their areas of competence. The current lack of transparency caused by conflicting rules increases the degree of risk perceived in the international commercial environment. As MEAs allow trading partners to impose trade barriers on ratifying partners when the WTO rules would not, a perverse set of incentives is created that may lead to sub-optimal levels of environmental protection as well as sub-optimal amounts of investment in trade-related activities. The use of trade measures in MEAs is examined and suggestions are provided for removing the conflicting rules of trade.