Trade and Environmental Governance
Speech to an Open Forum on International Environmental Governance
Organised by the European Union Delegation in Australia
Opera House, Sydney, 24 November 2006
There is widespread concern that today’s international institutions are inadequate to deal with the serious environmental dangers faced by the world. The foremost worry is the apparent inability of the world to tackle the problem of climate change with the urgency and seriousness it demands.
Undoubtedly, much of the anxiety has arisen because of the unilateralist approach adopted by the United States over the last several years. Conservative supporters of the Bush Administration have expressed a particular contempt for the United Nations and its various institutions, reflecting both a frustration at the unwillingness of the UN to be stampeded into decisions and a shift away from traditional diplomacy to the wilful assertion of power, perhaps best illustrated by the appointment of America’s most hostile critic of the UN, John Bolton, as US Ambassador to the world body.
Australia has served as the United States’ most loyal ally in this new assertion of US hegemony. But it should be kept in mind that among our own conservatives, there is a home-grown hostility towards the UN which emerged in the late 1990s in the Australian campaign against the UN’s human rights system.2 The criticisms by the Howard Government of the UN human rights system and the calls for it to be reformed were driven by anger and embarrassment at international condemnation of Australia’s treatment of asylum seekers and inability to solve the problems of Indigenous disadvantage. In the vernacular, it was a ‘dummy spit’.
The Howard Government, like its US counterpart, has been willing to invoke, for political advantage, a primitive view in the electorate that ‘foreigners’ can’t tell us what to do.
We are passing through a dark period for multilateralism. We do, however, need to keep these developments in historical perspective. There has always been a strong strand of anti-European isolationism in the United States, dating back well before the First World War. This view alternates between withdrawal from the rest of the world and its problems, and a determination to go and sort out those problems through the exercise of force.
After all, the view that American independence required political and military isolation from Europe kept the United States out of the First World War until April 1917, at which point it intervened only when German U-boats attacked American merchant ships and the ‘Zimmerman telegram’, in which the German Foreign Secretary urged Mexico to wage war against the US, was intercepted.
More significantly, the United States did nothing for two years as fascism swept across Europe from 1939. American exceptionalism – the view that the US occupies a special place in the world because of its commitment to democratic forms and individual rights – took second place to American isolationism. It took a direct attack on the United Sates in December 1941 at Pearl Harbour before America was compelled to intervene.
We can understand the US refusal to enter the Second World War and its refusal to join global efforts to tackle climate change as the effect of supremacy of isolationist tendencies. But there has always been a struggle within the United States between those who adopt what might be called the stern father model – distant from the world and inclined to administer discipline when forced to intervene to control squabbling children – and a more enlightened approach. The latter, the ‘maternal model’, appreciates the greater effectiveness of engagement, understanding, soft diplomacy and collaboration.3
Under the sway of the ‘maternal’ view, the US has often played a constructive and lasting role in international relations, not least at Kyoto in 1997 during the Clinton Administration. Those who adopt this view recognise that being the dominant economic, political and military power does not mean that it can sweep all before it. They understand intuitively that other people do not react well to being bullied. This is a lesson the conservatives keep forgetting, and the events in Iraq today serve as a tragic reminder of that fact.
This perspective helps us better understand international climate change politics and the prospects for international environmental governance. Under the prevailing influence of anti-European conservative sentiment, the US and Australia have adopted a recalcitrant attitude to the Kyoto Protocol, refusing to ratify the treaty they both helped to negotiate in different times.
Sadly, given the magnitude of global warming crisis, the rest of the world will have to wait until the pendulum of US history swings back to the maternal model and the US can engage collaboratively and deploy its enormous resources to work with the rest of the world.
There are signs that the tide has already turned with a greater recognition that, even more than terrorism and Middle Eastern instability, climate change cannot be solved by unilateral action, even by the world’s remaining superpower.
In the end it could be the disaster of Iraq that brings the US back to its senses on climate change. Just as Europeans listen politely when some Americans claim that it was they who won both world wars, when the US does finally come to the party and takes action to cut its huge greenhouse gas emissions the rest of the world will nod benignly as Americans claim that they solved the problem of climate change.
It is common to hear climate change used as an instance of the failure of global environmental governance. Yet we should not lose sight of the fact that the negotiation of the Kyoto Protocol was an astonishing diplomatic breakthrough. After years of agonising negotiation, some 170 nations, with vastly differing economic and political interests, reached an agreement that will require them to transform their economies in the interests of the global environment.
Many have said that Kyoto is only a small first step and, given the scale of the task ahead of us, that is true. But diplomatically it was a very big first step. After all, a global system was agreed in which the industrialised nations committed to cutting their emissions substantially in the first commitment period. Without Kyoto EU and Japanese emissions would have grown around 10-20 per cent over 1990-2010, yet they agreed to cut them by 8 per cent, and are on track to do so. They are big cuts.
Despite various loopholes, the system of global emission caps supplemented by an international system of emissions trading including the opportunities provided by the Clean Development Mechanism and Joint Implementation, is a beautiful structure. Moreover, when we consider the political and economic complexities it had to negotiate the system is already working with remarkable effectiveness.
It is worth commenting here on the hypocrisy of the Australian Government on this point. Having achieved the most lenient deal of all nations at Kyoto, and then repudiating it the Protocol, our Government is now gloating over the fact that some European countries are struggling to meet their much more onerous targets.
US and Australian recalcitrance can in part be explained by the fact that any agreement to cut greenhouse gases would impinge on economic interests. Under conservative administrations, they have been strong advocates of economic globalisation but have resisted efforts to pursue global responses to cross-border environmental impacts. As the Stern Review observes, global warming is the worst instance of market failure we have seen.
The Stern Review has pointedly referred to the problem of free-riding. If global warming is the biggest externality we have ever faced, then the refusal by the US and Australia to ratify the Kyoto Protocol represents the worst instance of free-riding we have ever seen. They will benefit from efforts by the rest of the world to cut their emissions without doing their fair share. In the same way that tax dodgers are reviled, no one likes free-riders.
In my view, it is no longer feasible to treat climate change as a mere externality, but as something that bears directly and powerfully not just on our future well-being but our future survival. Yet, as long as we think of climate change as an externality we give a privileged place to the economic including global economic institutions. In practice this has meant that trade considerations trump environmental ones.
We have reached the point where this is no longer tenable, and the institutions of global economic management and those of planetary environmental management should be joined. It will soon become intolerable for US and Australian firms to gain a trade advantage because they do not face restrictions on their greenhouse gas emissions similar to those from nations that are meeting their international obligations.
In these circumstances it is quite proper for us to turn our attention to the global trading rules that allow such a situation to continue. I believe we need to harmonise the global climate change system with the trading regime through changes in the GATT rules. The international trade rules already permit nations to ban imports of products that fail to meet certain standards. For example, the Agreement on the Application of Sanitary and Phytosanitary Measures permits countries to ban imports of plants and animals that might carry pests or diseases, i.e. quarantine measures.
More generally, Article XX of the GATT allows exceptions to trade rules for certain measures with environmental objectives. Under the GATT rules it is legal for countries to ban imports of some products that contravene safety rules, such as cars that are not fitted with catalytic converters. However, with these few exceptions, the GATT rules prevent countries from discriminating against imports of ‘like products’ so that goods produced using environmentally damaging process (such as indiscriminate logging) cannot be banned.
This was established in the famous Tuna-Dolphin case. In brief, the US attempted to restrict imports of yellow fin tuna caught by Mexican fishing boats because too many dolphins were being killed in the process. Mexico challenged the US under the GATT rules. Although a GATT panel gave a ruling in 1991, Mexico reached a deal with the US and the case was dropped without it being formally adopted by the GATT. The European Union subsequently brought a separate case, which ensured that the GATT reached a formal decision in 1994.
The US argued unsuccessfully that their prohibition on Mexican tuna 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 change in GATT rules that permitted discrimination against goods produced using unacceptable methods of production, including methods that contribute unduly to global warming, would help overcome the problem of free-riding on the Kyoto Protocol. Such a change would be no more ‘protectionist’ than opposition to trade in goods produced by prison labour.
I note that the Prime Minister of France last week called for discussion of a proposal for European nations to apply taxes on energy-intensive imports from countries that fail to comply with greenhouse gas restrictions. Such a tax would be morally justified as well as being economically sensible. After all, two decades of economic reform have been aimed at creating a level playing field for producers around the world, and that should require measures against the sort of environmental dumping that US and Australian companies will soon be engaged in.
1 Executive Director, The Australia Institute [email protected]
2 See Spencer Zifcak, The New Anti-Internationalism: Australia and the United Nations Human Rights Treaty System, Discussion Paper No. 54, The Australia Institute, April 2003
3 The father-mother analogy is used by George Lakoff to explain the rise of conservatism in the United States, see Thinking Points (Farrar, Straus and Giroux, New York, 2006).