How Freeing Up Trade Could Help the Environment

by Gretchen Kell

Some critics of trade liberalization worry that freer trade will undermine national health, safety and environmental protection, but a new book by Berkeley Professor David Vogel says those fears often are unjustified.

In "Trading Up: Consumer and Environmental Regulation in a Global Economy" (Harvard University Press, 1995), Vogel argues that trade liberalization more often strengthens, not weakens, regulatory product standards.

A professor at the Haas School of Business, Vogel also is a political scientist, the first to write an extensive study of trade and regulation on a global scale.

To help make his argument, he uses "the California effect"--the critical role of California, a wealthy state on the cutting edge of environmental regulation, in promoting a regulatory "race to the top" among its trading partners.

Both globally and within North America, said Vogel, the California effect has occurred primarily through the influence of the United States.

"When rich political jurisdictions with large domestic markets such as California, the United States and Germany enact stricter product standards," he said, "their trading partners are forced to meet those standards in order to maintain their export markets. This, in turn, often encourages consumer or environmental organizations in the exporting country to demand similar standards for products sold in their domestic markets--a demand that internationally oriented producers are now more willing to support since their exports to greener markets already meet them."

Vogel cites as an example California's tough auto emission standards that have become a model both for the federal government and for foreign nations like Japan and Germany.

Within the European Union, "the willingness of Germany's automobile manufacturers to support stricter EU standards was in part due to their experience in producing vehicles for the American market," said Vogel. "Ger-many's stronger standards have subsequently been adopted by other European nations."

The book provides numerous examples of non-tariff trade barriers --domestic regulations that discriminate against imported goods without using a tariff--designed to protect both the consumer and the environment.

It also examines in detail a number of well known trade agreements, including the General Agreement on Tariffs and Trade, the GATT Standards Code, the Free Trade Agreement between the U.S. and Canada, and the North American Free Trade Agreement among the U.S., Canada and Mexico.

In January, the World Trade Organization issued its first dispute panel decision in a case involving a Venezuelan challenge to American standards for reformulated gasoline. The decision held that a provision of the U.S. Clean Air Act was GATT-inconsistent, demonstrating a central theme of "Trading Up"--namely, the increasing importance of environmentally related trade disputes.

Although the U.S. has a long and unique history of using trade as a lever for non-trade related policies, Vogel said it's a relatively new development that Americans are using trade policy to change foreign environmental policies.

But while Vogel shows how liberal trade policies and stricter regulations can be compatible goals, he also explores in depth other trade and regulatory conflicts that have surfaced in recent years that do not support the optimistic hypothesis of the California effect.

One illustration is a decision by the U.S. to pass restrictions on tuna imports from countries that kill dolphins caught in tuna nets. While Americans argued that banning sales of "dolphin-unfriendly" tuna is necessary to protect the lives of intelligent marine mammals, Mexico complained to the GATT on the grounds that it was unfair of the U.S. to dictate to Mexico how its fishermen should protect dolphins.

The GATT issued a ruling against the U.S., but the U.S. has not complied with it, and Mexico has not forced the issue because of its concerns about NAFTA.

Issues such as this one "create a tremendous amount of resentment on the part of other countries, who see them as eco-imperialism," said Vogel. "In the dolphin/tuna case, every single country in the world supported Mexico. Not so much because of the issue itself, but because of their resentment against the United States' continual use of trade policy to affect their domestic policies."

But while free trade and domestic regulations often conflict, Vogel is optimistic that the camps will be reconciled.

"The central thrust of my book is that if you look over the history of the last 30 to 40 years," he said, "you get both--a steady liberalization of the global economy and a steady strengthening of regulatory standards."

"Trading Up" is Vogel's third book on the politics of consumer and environmental regulation. The other two are "National Styles of Regulation: Environmental Policy in Great Britain and the United States" (Cornell University Press, 1986) and "Fluctuating Fortunes: The Political Power of Business in America" (Basics Books, 1989).


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