Study: Kyoto Protocol, Free Trade Compatible

Free trade and environmental responsibility need not be competing objectives, according to a recent study by Harvard Kennedy School professor Jeffrey A. Frankel.

Frankel’s paper responds to concerns that environmentally motivated import restrictions would necessarily conflict with World Trade Organization statues protecting free trade, which he characterized as already “pretty environmentally friendly.”

Border measures, as such restrictions are commonly labelled, attach a penalty to imports that violate the environmental standards of the importing country, and are typically imposed on products such as fuels or crude materials.

Frankel said that properly constructed restrictions pose no threat to fair trade, provided they hold domestic activities to the same standards and are applied in a non-discriminatory fashion.

He points to two international precedents that demonstrate the permissibility of such restrictions: a WTO ruling concerning American shrimp imports, and the Montreal Protocol, which established trade controls affecting ozone levels.

In the case brought to the WTO, the U.S. imposed penalties on imports from Asian fishermen who, it was believed, allowed their nets to ensnare shrimp and endangered sea-turtles indiscriminately. Though it overturned the penalties on more technical aspects, the WTO maintained that trade controls could be established based on the methods of production as well as the nature of the product itself.

The Montreal Protocol, meanwhile, provided an important example of successful trade controls: firms were discouraged from relocating to evade standards through the imposition of non-discriminatory controls placed on industries that release CFCs, ozone-depleting compounds.

But according to Frankel, border measures are frequently constructed in a manner that unfairly favors domestic activities, leading to their eventual rejection under accusations of protectionism.

In other cases, overly specific language leads to unrealistic standards, as in the shrimp import dispute where the law required the use of a particular rescue device for the trapped turtles.

Only border measures established by multilateral agreement and targeted toward fossil fuels and energy-intensive methods of production should be allowable, according to Frankel. These measures would either impose tariffs or require an exchange of carbon permits, and create a uniform method to evaluate the actual environmental impacts of production.

The United States, he said, is close to enacting such “green” tariffs—the Lieberman-Warner bill is a recently failed example—though it may face backlash tariffs from entities like the European Union for not meeting a high environmental standard domestically.