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One of the greatest challenges facing mankind at the inception of the 21 st century is how to accommodate a growing population and material aspiration in the developing countries without compromising the nature, resources and environment.
Since the WTO agreements are going to be implemented from 1st January 2005, concerns over different aspects are emerging serious specially from the developing countries. But gravity of the environment-related issues under WTO regime is still not felt deeply by many of the developing countries including Pakistan.
Many of the economists and analysts seriously believe that developed countries may be going to use environment barriers as a tool against the less developed countries in a free trade era of the WTO thus it is needed to be clarified that whether environment is not to become a tool for reintroducing barriers to trade which have been suppressed otherwise.
Before going into detail of the issue one should have an insight into the relevant clauses of the WTO agreements which can effect the free trade era in the coming years.
General Agreement on Tariffs and Trade (Article XX): This waives members of the obligation to apply fundamental commitments, particularly non-discrimination, in certain cases. They include protection of national security, protection of orals, and preservation of national cultural heritage.
Accord on Technical Barriers to Trade (Article 2.1 & Article 2.2): Technical standards with restrictive trade effects are permitted for four "legitimate purposes", (including standards developed for the protection of the environment, for national security requirements, for the prevention of deceptive practices, for the protection of human health, safety, animal and plant health and life).
Sanitary and Phytosanitary Measures (Article no I, II, and XX): The SPS Agreement recognizes the legitimate right of governments to maintain the level of health protection they deem appropriate ensuring at the same time that this right is not abused and does not result in unnecessary barriers to international trade.
Accord on Agriculture: The negotiations on the continuation of the reform programme take account of non-trade concerns, which includes the environment. The Annex 2 lists the different types of subsidies which are not subject to reduction commitments, covers different types of measures relevant to the environment.
General Accord on Trade in Services: a. Article XIV of the GATS b. environmental services. The Services Sectoral Classification List annexed to the GATS was developed during the Uruguay Round and was largely based on the UN Central Product Classification (CPC) system. The environmental services sector contained in the List includes four categories:
(a) Sewage services (CPC 9401); (b) refuse disposal services (CPC 9402); (c) sanitation and similar services (CPC 9403) (d) other, eco-labelling in the TBT committee.
Certain volunteer standards for the labelling and quality standards such as ISO 9000 and the ISO 14000 have been made which are although not necessary to be adopted yet are of great importance.
Environmental threats: Some recent trends and indicators show that environmental hazards are increasing over time. We can elaborate some of the recent threats as under:
Increased global use of energy i.e. about 70 per cent increase has been recorded since 1970. There are more incidents of acid rains in the world. Use of chemicals in the agriculture sector is becoming intensive day by day to such an extent that it is now threatening the environment.
Deforestation, global warming are the indicators which are compelling the governments and societies to rethink its emphasis over the uncontrolled growth activities to save the nature and resources for the coming generations.
Data of some recent studies carried out by different agencies like FAO showed that emission of hazardous gases in to the air is increasing in developing countries while deforested area is also causing a panic in these countries.
Availability of safe drinking water is becoming hard. All these trends especially in the developing countries where industrial sector is expanding show a positive relationship between pollution and growth.
Environmental degradation: Roots of environmental degradation can be traced down by analyzing the following failures:
Market failures: These are the situations when market forces of demand and supply fail to deliver an optimal outcome to the society as a whole resulting in a polluted environment to live in.
Policy failures: Policy failures refer the government policies which are adding to the factors responsible for environmental degradation. Undefined property rights over natural resources can also be traced down as the cause of rapid environmental degradation.
This phenomenon can also be termed as "Tragedy of the commons". There is no restriction on the use of natural resources which results in overexploitation of natural resources.
'Political economy argument: Competitive pressure from the world markets some times makes it impossible to forge the necessary political support to upgrade environmental standards.
A simple situation of a farmer can better illustrate the situation that how perusing private optimum can lead to more intensive use of pesticides and fertilizers per unit of land thus leading to more social cost.
Linkage between trade and environment: In order to estimate the net effect of economic growth resulting from free, liberalized trade three types of "concepts" are usually very important and these are used to establish the linkage between trade and environment.
a) Composition effect. The net effect on the local environment will be positive if expanding export sectors are less polluting on average than contracting import-competing sectors, and negative if the opposite relation holds.
b) Scale effect. Enhanced economic activity will give birth to increase pollution. Composition effect estimates the net effect on environment due to expansion in industrial sector.
c) Technique effect. It estimates the associated income growth that drives the demand for a cleaner environment in the world. The willingness to pay for goods produced according to stricter environmental standards increases with income thus compensating for the environmental degradation associated with trade.
It is generally assumed that the less developed countries (LDC) have comparative advantage in pollution intensive industries because of less pollution abatement costs and weak regulatory measures.
It further results in deterioration of their resources. But same time income level of the people will raise the living standards and they will be willing to pay more for the pollution abatement costs.
The famous environmental Kuzents curve (EKC) also states the same conclusion that environmental degradation increases with the increase in per capita income to certain extent and then decreases.
Now the question is that if economic growth is associated with free trade and trade liberalization and in turn it is associated with environmental degradation then whether the WTO is capable of dealing with the LDCs concerns regarding the developed countries'perceived hidden barriers to the free trade in the name of protection of environment.
And can the WTO is really in a position to handle these issues effectively? Some people are of the view that the WTO might not be able to handle these issues as there are few loopholes in the net. Still no agreement has been reached which can classify the environmental goods. Confusions are overwhelming.
There are more than 20 multilateral environmental agreements (MEA) that can be used to achieve the objectives by developed countries and which are conflicted to the WTO basics.
A recent decision by the Appellate Body of the WTO dispute settlement system indicates that the WTO members may be able to impose restrictions on imports based upon the way those imports are produced under certain circumstances.
Those circumstances are: (a) that doing so is necessary for environmental protection or the conservation of natural resources;
(b) That the importing country has attempted to negotiate a bilateral or multilateral agreement involving the country in export to achieve the environmental/conservation measure without the imposition of sanctions, but that this has failed;
(c) That the sanctions imposed conform with the basic precepts of the WTO, namely fairness and non-discrimination.
And to add more to the situation, there are many NGOs which are criticizing the organization's dispute settlement procedure and the role of Panel Proceedings as adopted in WTO. The decisions in most of the cases were strongly criticized by the Green Peace and certain other NGOs.
Policy options: To make our survival into the 21 st century in the era of free trade under certain limitations and protections in the name of environment protection and safeguard measures, it is necessary that we should continuously have a check over the environment policy.
The basic aim of our policy should be optimizing welfare (i.e., development which attains economic, social and environmental objectives). The contribution of Industrial sector has been very high in the emission of different pollutants.
The condition in water pollution is worse even. And the waste of industry is also polluting the agriculture and with the decision of different developed countries especially in the EU to check the process of production for the safety procedures, it might become very dangerous for our agro based exports.
More polluting industries have higher rate of growth thus establishing the links between growth and pollution. But this trend can lead to some specific problems for the trade linkages between developing and developed countries in the presence of many environment specific agreements under the WTO.
Laws: a) The Environmental Protection Ordinance (PEPO) No. XXXVII of 1983;
b) Pakistan Environmental Protection Act, 1997;
c) National Environmental Quality Standards;
d) Pollution Charge Programme;
e) Pakistan Environmental Assessment Procedures
The basic aim of all these laws is to check pollution but this strategy might not be fruitful as to check pollution may result in a check for the rapid industrial growth.
The efficient policy should be a double edge sword which not only control the pollution with in the acceptable limits and also should not create obstacles in the way of industrial expansion.
Policies: It is widely believed that taxing the pollution is better option than the abatement cost solution, fixing standards for the maximum omission of pollutants or the bargaining between polluter and the sufferer for compensation.
Two policy issues for taxing the pollution are. A). Taxing the toxic emissions or the toxic inputs directly. B). Taxing the production of highly polluting production processes.
It is evident from different studies conducted in different countries that the 2nd option is more costly option resulting in higher pollution and low productivity so over policy makers who are designing the policy should consider the 1 st option and a complete study should be carried out to asses the damages of different industries to environment so that proportional taxes can be levied to safeguard our resources for this and coming generations.
Recommendations:
i. Strengthening of the regulatory system and institutional capacities;
ii. Self-monitoring and reporting and pollution charges;
iii. Training for small and medium enterprises;
iv. Establishing industrial estates;
v. Strengthening local governments;
vi. Encouraging industry to adopt quality certification, especially ISO-14000.;
vii. Effective use of electronic and print media.;
viii. Training through educational institutes.
