Privately Subsidized Recycling Schemes and Their Potential Harm to the Environment of Developing Countries Does International Trade Law Have a Solution?
By Arie Reich
INTRODUCTION
The asymmetry in the level of environmental protection between developed and developing countries and its implications for international trade regulation is an issue that has entered the limelight of public debate over the last decade. This, in turn, has caused an outburst in academic writing on this topic. There are calls--originating mostly from environmental groups located in the developed world--to use international trade measures to enforce higher standards on developing countries. In response, developing countries invoke the asymmetry in economic development in order to reject these calls and to justify the differences in environmental protection. “When you went through your industrial revolution,” so goes the argument, “there was a complete disregard of the damage caused to the environment. Now, when you have reached a high level of development, with much of your economy relying on the environment-friendly hi-tech and service sectors, and we are going through our industrial revolution, you want to impose on us standards that you yourselves never kept.” Most of the opposition against incorporating environmental norms into the World Trade Organization (WTO) comes from the developing countries, which fear that higher environmental standards will be used in order to bar their exports to developed countries. Indeed, environmental concerns are seldom invoked as a reason to bar exports going the other way--from the rich to the poorer countries.
The issue discussed in this article involves exports going that other way. It relates to products manufactured under perhaps the highest possible environmental standards, as part of programs created and designed in order to save the environment and promote sustainable development. Nevertheless, as a result of the asymmetry in economic development and environmental protection between developing countries and the developed countries where the products originate, these very programs and these very products may, in certain circumstances, actually harm the environment of developing countries. This may happen, for instance, when the export of such products to developing countries has a negative impact on the economic viability of waste collection and recycling efforts in those countries. Faced with foreign competition in the market for recycled products, newly established and still struggling recycling plants in developing countries, unsupported by private or governmental subsidies or other protective measures prevailing in rich and more environmentally-conscious countries, may be forced to close down. Alternatively, they may decide to abandon expensive collection of local waste, and instead accept free or subsidized waste imported from developed countries. In both cases, collection and recycling activities in the importing countries are reduced, and sometimes eliminated. As a result, developing countries neglect their own waste, abandoning it to landfills or, even worse, to nature.
The objective of this article is to document and draw attention to this problem and to examine the question of what remedies, if any, may be offered to affected countries under international trade law--in particular, under the General Agreement on Tariffs and Trade (GATT) / WTO rules. Would countries in situations such as those described above be permitted to take measures against imports harming their recycling activities? Of particular interest in this regard is how to characterize privately paid, but governmentally-induced, subsidies under the WTO Subsidies Agreement. Such subsidies, while fulfilling most economic definitions of subsidies, appear to have escaped the attention of the Agreement's drafters and may therefore be outside its scope. If so, importing member countries might be precluded from taking countervailing measures against products enjoying such subsidies. These, and other potential protective measures, will be discussed below in light of recent case law of the WTO, in particular the matter of United States--Measures Treating Export Restraints as Subsidies. This discussion will demonstrate the formalistic nature of the existing WTO jurisprudence and show how a more purposive, teleological approach to the interpretation of international trade rules could lead to a better solution to the problem at hand.
The asymmetry in the level of environmental protection between developed and developing countries and its implications for international trade regulation is an issue that has entered the limelight of public debate over the last decade. This, in turn, has caused an outburst in academic writing on this topic. There are calls--originating mostly from environmental groups located in the developed world--to use international trade measures to enforce higher standards on developing countries. In response, developing countries invoke the asymmetry in economic development in order to reject these calls and to justify the differences in environmental protection. “When you went through your industrial revolution,” so goes the argument, “there was a complete disregard of the damage caused to the environment. Now, when you have reached a high level of development, with much of your economy relying on the environment-friendly hi-tech and service sectors, and we are going through our industrial revolution, you want to impose on us standards that you yourselves never kept.” Most of the opposition against incorporating environmental norms into the World Trade Organization (WTO) comes from the developing countries, which fear that higher environmental standards will be used in order to bar their exports to developed countries. Indeed, environmental concerns are seldom invoked as a reason to bar exports going the other way--from the rich to the poorer countries.
The issue discussed in this article involves exports going that other way. It relates to products manufactured under perhaps the highest possible environmental standards, as part of programs created and designed in order to save the environment and promote sustainable development. Nevertheless, as a result of the asymmetry in economic development and environmental protection between developing countries and the developed countries where the products originate, these very programs and these very products may, in certain circumstances, actually harm the environment of developing countries. This may happen, for instance, when the export of such products to developing countries has a negative impact on the economic viability of waste collection and recycling efforts in those countries. Faced with foreign competition in the market for recycled products, newly established and still struggling recycling plants in developing countries, unsupported by private or governmental subsidies or other protective measures prevailing in rich and more environmentally-conscious countries, may be forced to close down. Alternatively, they may decide to abandon expensive collection of local waste, and instead accept free or subsidized waste imported from developed countries. In both cases, collection and recycling activities in the importing countries are reduced, and sometimes eliminated. As a result, developing countries neglect their own waste, abandoning it to landfills or, even worse, to nature.
The objective of this article is to document and draw attention to this problem and to examine the question of what remedies, if any, may be offered to affected countries under international trade law--in particular, under the General Agreement on Tariffs and Trade (GATT) / WTO rules. Would countries in situations such as those described above be permitted to take measures against imports harming their recycling activities? Of particular interest in this regard is how to characterize privately paid, but governmentally-induced, subsidies under the WTO Subsidies Agreement. Such subsidies, while fulfilling most economic definitions of subsidies, appear to have escaped the attention of the Agreement's drafters and may therefore be outside its scope. If so, importing member countries might be precluded from taking countervailing measures against products enjoying such subsidies. These, and other potential protective measures, will be discussed below in light of recent case law of the WTO, in particular the matter of United States--Measures Treating Export Restraints as Subsidies. This discussion will demonstrate the formalistic nature of the existing WTO jurisprudence and show how a more purposive, teleological approach to the interpretation of international trade rules could lead to a better solution to the problem at hand.