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Trium Global Executive MBA Module 1

Business in the Global Political Economy Course


Business and World Trade

Essay Title
Is the WTO acting irresponsibly by not permitting the use of non-traditional trade measures to assist in the protection of the environment and public health, enforcement of labor standards and other social objectives?

LSE ID
201230494

Total Word Count ( excluding charts , tables and references)


1994

Introduction During a rather extended discussion about the Shrimp Turtle issue in our Business and World Trade class at LSE last month, one of my fellow students commented, Its amazing that there is so much of discussion and noise about saving the turtles and no one is even thinking of saving the poor shrimps. The whole class burst into a roar of laughter and that is where the discussion ended. Although his comment was made in a lighter note but apparently he was rather confused on why this issue was being discussed in the WTO class? The World Trade Organization (WTO) was formed in 1995 as an evolution of The General Agreement on Tariffs and Trade (GATT) (Hoekman, 2002). The main objective was to provide a permanent, legal, binding and rule based trading framework to facilitate the world trade with a much strengthened dispute settlement mechanism. Also, the scope of trade was extended to cover the services and Intellectual Property Rights. WTO has a very stringent dispute settlement system (Sampson, Introduction and Overview, 2009) and that is what makes it unique as compared to some other international organizations. More than 400 disputes have been brought to WTO since its inception. However, some of these cases are pertaining to what we call as Non- traditional trade measures like environment protection, public health, enforcement of fair labor standards, wildlife etc. The shrimp turtle case mentioned above is one such case which was brought to the WTO and the ruling in this and some other such cases appeared that WTO has acted irresponsibly but that has not been the case. Actually WTO has acted responsibly and within its framework, principles and objectives around which it was formed to address such issues. Due to the very vast and varied nature of the topic, its difficult to express all the thoughts within the given limitation of the size of the essay, hence this essay will discuss the thesis by

evaluating the objectives of the WTO, the boundaries of its framework and rules, and how those are applied or not applied in addressing the non-traditional trade measures. The essay will also include, embedded within the sections, elements of discussion on why the argument which suggests that WTO has acted irresponsibly to handle non-traditional trade measures is invalid. The essay will then conclude by reaffirming WTOs changing role and the go forward path with an understanding that cropping up of issues of this kind will only increase in future.
WTO and not WTSDO

First and the foremost, WTO is a trade organization and its primary objective is to promote world trade. As discussed above, one of the key improvements over GATT and also the reason of WTOs success is its very strengthened and effective dispute settlement system. Out of some 400 odd dispute cases reported to the WTO since its inception and with WTO through its enforceable rules has been able to settle most of the 400 odd dispute cases reported announcing a verdict which is binding. The success resulted in many Nontraditional issues like the Shrimp turtle, Tuna and asbestos packaging landing in WTOs lap. The WTOs agreements and rules does support the cause of environment protection leading to sustainable development , which means that the development in trade must ensure that we are not depriving the future generations of the resources which we use today. The WTOs agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. The environment protection has not been an agenda of many governments even in the late 80s and was definitely not a main consideration in the Uruguay round. WTO was never ready to accept the disputes of this nature which started flowing in its direction mainly due to the increased understanding of the member nations of its dispute settlement system. The United Nations (UN) through its various committees, conferences, programmes and agencies supposedly addresses some of these specific causes E.g. United Nations Environment

Programme (UNEP) for environment protection, International Labor Organization (ILO) for international labor standards etc. In fact there is a United Nations Commission on Sustainable development (CSD) to address this very issue of sustainable development. Almost all of the WTO member states are a member of the UN too. But the problem is that none of the international organizations have a dispute settlement system like the WTO and that is the primary reason of WTO getting bombarded with such issues. Hence, we are witnessing a trend of World Trade Organization (WTO) metamorphosing into World Trade and Sustainable Development Organization (WTSDO) (Sampson, 2005). Trade and Environment WTO has a dispute settlement system which even limits national sovereignty, and with twothirds members of the WTO now being developing countries, the main growth strategy for these nations is based on their effectiveness to export to richer nations. So any hindrance to this strategy has encouraged them to use the WTO and its effective dispute settlement system and they have been fairly successful in getting their way. This is why the critics of the globalization argue the role of WTO being autocratic and unidirectional towards promoting trade only and that other objectives like environment and sustainable development take a back seat. WTO, on the contrary, has always reaffirmed its intentions and its evolving understanding of the relationship between trade and sustainable development right from its inception. The Preamble of WTO agreements states this understanding and its evolving. However, WTO also has a role to determine if its member states are not using environment protection as a disguise to introduce protectionism. Lets examine the shrimp turtle case. (ENVIRONMENT: DISPUTES 8, India etc versus US: shrimp-turtle). Many have missed the importance of the Appellate Bodys ruling on this case. The following text is from the WTO website, It also said measures to protect sea

turtles would be legitimate under GATT Article 20 (i.e. XX) which deals with various exceptions to the WTOs trade rules, provided certain criteria such as non-discrimination were met. But the US still lost the shrimp turtle case, not only because it violated the like product principle of WTO but also because it discriminated between WTO members. It provided some countries like the Caribbean technical and financial assistance and longer transition periods for their fishermen to start using the turtle-excluder devices but didnt offer the same to the four complainant Asian countries (India, Malaysia, Pakistan and Thailand).

Examining a more recent case, where China had put trade measures, which included export quotas , tariffs and minimum export prices on the export of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous and zinc. The steel and chemical firms are main consumers of these items. The US, European Union and Mexico had filed a case opposing the measures and the WTO ruling established that China's restrictions on exports of the nine industrial raw materials violate international trade rule. China had cited environmental concerns arising from the production of these materials as a reason to restrict their exports. WTO rules allow countries to restrict trade to protect the environment. But the panel ruled that only export restrictions, with no measures to limit domestic industries from using the materials, don't effectively protect the environment (Dalton, 2011).

Many will argue that the above resolutions do not help the cause of endangered species or environment protection and that these reflect WTOs lack of responsibility, but upon careful examination, it will establish WTOs efforts on striking a balance between trade and environment and to check any barriers which the states may impose to protectionism under the

disguise of environment protection or sustainable development while discriminating with their domestic polices or other favorable countries.

Size does matter The consolidated budget of WTO for the year 2012 is approximately USD 209M, funded by contributions from its members. (THE WTO: SECRETARIAT AND BUDGET, WTO

Secretariat budget for 2012, 2012). There are about 625 employees who work for the secretariat. Just to provide a context, the WTO budget is less than the travel budget of International Monetary fund (IMF) (Sampson, 2000). Although the cited fact about the size was written to point out WTOs limited possibilities of partcipiation in joint activities with some of the other international organizations but that this also suggests that WTO was not designed to be an environment protection or human rights protection body. On the contrary, considering the above facts on its resources, WTO as been doing a tremendous job in conducting its business and this further substantiates the argument made in the previous sections. WTO 2.0 - The way forward The expectation and criticism of WTOs role in some of these non-traditional issues as argued above is un-reasonable and this is like making International Labor Organization (ILO) responsible for vaccination and health of children which in essence is World Health Organization (WHO)s responsibility just because ILO, supposedly, deals with the issue of child labor. The criticism which flew towards WTO and became specifically visible due to the mass protests in Seattle during a ministerial meeting nicknamed teargas ministerial (Rodrik, 2001) by environmentalists and activists dressed as turtles again questioning the shrimp turtle case verdict. WTO has remained amongst such protests and disputes ever since. But the role and the face of WTO have been changing ever since and in fact there are gradual changes already being

made in the rules to accommodate the subtle greening of the WTO (Weinstein & Charnovitz, 2001). This is being noticed more prominently under the current Director General, Pascal Lamy. Lamy has been vocal about the reforms and WTOs support to sustainable development. Excerpt from his speech at UNEP Global Ministerial Environment Forum in Nairobi on 5 February 2007 (Lamy, 2007) establishes this fact :
Sustainable development should be the cornerstone of our approach to globalization and to the global governance architecture that we create. If I have come to this forum, it is to deliver a message: the WTO stands ready to do its part.

Undoubtedly, with the changing needs of the world trade and ever growing need for multilateralism based on its past success, WTO 2.0 is inevitable. The key is that this doesnt necessarily need to come by changing the rules of WTO, which will need consensus of 153 countries, but should be achieved by creating awareness about WTOs role and its boundaries on one side and by empowering other international organizations to work within their specific areas and setting their own rules on the other. In the process they should manage the issues of the member states which get drifted towards WTO currently. WTO will continue evolving into WTO 2.0 with trade, environment and other elements of sustainable development embedded in its DNA but the core mandate still remaining as WTO being a pivotal body to promote trade and continue to check if sustainable development agenda or environment protection rules set up by other specific international organizations are not being used as a disguised protectionism. Conclusion As the world recovers from the economic downturn, the volume of world trade has resumed its northward journey. WTOs contribution in refueling this cannot be undermined. But there is a need to make sure that the success doesnt become its own enemy. As argued in various sections, WTO has evolved into an organization with a broader agenda over the past 17 years which not

only limits itself to managing the nuances of traditional trade but has also adapted to manage some of the nontraditional trade situations. The journey is still on and it is able to find its own way. As Pascal Lamy summed up in his speech at Yale University in October 2007 (Pascal Lamy's speech at the Yale University on 24 October 2007, 2007) calling it as The Greening of the WTO has started and as a tribute to Yale Universitys professor Daniel Esty and his book Greening the GATT: Trade, Environment, and the Future (Esty, 1994), noting how trade and environment discussion has travelled since those days.

References
Dalton, M. (2011, July 6). Beijing Sparks Ire of WTO Over Curbs. Retrieved October 24, 2012, from The Wall Street Journal: http://online.wsj.com/article_email/SB10001424052702304803104576427740779532 356-lMyQjAxMTAyMDIwMDEyNDAyWj.html?mod=wsj_valettop_email ENVIRONMENT: DISPUTES 8, India etc versus US: shrimp-turtle. (n.d.). Retrieved October 23, 2012, from World Trade Organization: http://www.wto.org/english/tratop_e/envir_e/edis08_e.htm Esty, D. C. (1994). Greening the GATT: Trade, Environment, and the Future. Institute for International Economics. Hoekman, B. M. (2002). The WTO: Functions and Basic Principles. In Development, Trade, and the WTO: A Handbook (World Bank Trade and Development Series) (pp. 42-49). Washington DC: World Bank Publications. Lamy, P. (2007, October 24). Pascal Lamy's speech at the Yale University on 24 October 2007. Retrieved October 30, 2012, from World Trade Organization website: http://www.wto.org/english/news_e/sppl_e/sppl79_e.htm Lamy, P. (2007, February 5). Pascal Lamy's address to to the UNEP Global Ministerial Environment Forum in Nairobi on 5 February 2007. Retrieved October 30, 2012, from World Trade Organization website: http://www.wto.org/english/news_e/sppl_e/sppl54_e.htm Rodrik, D. (2001). The Globalization Paradox: Why Global Markets, States, and Democracy Can't Coexist. Oxford: Oxford University Press. Sampson, G. P. (n.d.). Sampson, G. P. (2000). Greater Coherence in Global Economic Policymaking: A WTO Perspective. In A. O. Krueger, The WTO as an International Organization (pp. 257258). Chicago: University Of Chicago Press. Sampson, G. P. (2005). The WTO and sustainable development. Tokyo, Japan: United Nations University Press. Sampson, G. P. (2009). Introduction and Overview. In G. P. Sampson, WTO and Global Governance: Future Directions (pp. 3-4). United Nations University Press. THE WTO: SECRETARIAT AND BUDGET. (2012). THE WTO: SECRETARIAT AND BUDGET, WTO Secretariat budget for 2012. Retrieved October 24, 2012, from World Trade Organization: http://www.wto.org/english/thewto_e/secre_e/budget_e.htm Weinstein, M. M., & Charnovitz, S. (2001, November / December). The Greening of the WTO. Retrieved October 30, 2012, from Foreign Affairs: http://www.foreignaffairs.com/articles/57426/michael-m-weinstein-and-stevecharnovitz/the-greening-of-the-wto

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