econciling open trade with environmental protection is a central dilemma for the world in the 21st century. Trade issues go to the heart of whether increased wealth is good or bad for the environment. Will global markets provide the means to take ecological concerns into account, or merely encourage the excessive consumption, pollution and waste that stoke the engines of environmental destruction?

Trade has been one of the driving forces of civilization since antiquity, when maritime trade through the Indian and Pacific Oceans sustained Chinese imperial dynasties. The search for spices, gold and other luxuries first brought Europe into regular contact with both Asia and Africa, while trade sustained the early colonies of the Americas.

Trade, by expanding export markets and boosting timber demand for ships, has always had the potential to trigger environmental destruction. Plantations of crops bound for Europe displaced most of the coastal rainforests of West Africa in the 19th century¹. More recently, Japanese demand for timber fuelled the plundering of the rainforests of Southeast Asia. But trade has allowed other countries to conserve natural resources through substituting local products with imports.

World trade at the start of the 21st century is running at unprecedented levels and for the first time is being regulated by a single body. The World Trade Organization (WTO) was set up in 1996 and has more than 130 member nations. But its rules, which aim to maximize global trading, present a dilemma for environmental protection. On the one hand they encourage economic efficiency which, by ensuring the careful use of materials, should also promote environmental efficiency. On the other, they may undermine livelihoods and invalidate national and international laws framed to address specific environmental threats.

Most economic activities create ecological "externalities", such as pollution or loss of finite natural resources, that are not reflected in the price of the product. Some governments attempt to fill this gap by taxes on pollution, regulations on the environmental behavior of manufacturers, or subsidies for environmentally preferable methods. But such interventions can be seen as “protectionist” if they skew trade against foreign competitors.

A parallel debate concerns the role of wealth in environmental protection. Some argue that poverty is the real enemy of the environment, and that increasing trade opens up markets for the products of the poor, diminishing poverty and providing the means, incentives and technical know-how to use resources efficiently and invest in cleaner production, thereby encouraging sustainable economic growth².

Others believe that a growth in international trade is already undermining poor economies by increasing penetration by foreign companies. They say that this process has hastened the pauperization of Africa, whose share of world exports fell from 4.2 percent in 1985 to 2.3 percent in 1996, of which South Africa made up almost a quarter³.

Proponents of lowering barriers to trade argue that bans on subsidies for farming and the energy industries will benefit the environment. One test case concerns Western agriculture, where subsidies designed to maintain rural populations have encouraged more intensive farming, including heavy use of pesticides and fertilizers. The hidden environmental and human health costs of modern farming methods in Britain have been put at US$350 per hectare each year, approaching the value of European Union subsidies⁴. If future trade rules outlawed the subsidies, economists and environmentalists agree that these environmental costs would also fall as farming became less intensive.

Another test case is Chinese energy. State subsidies are a major cause of the overuse of fossil fuels, causing smogs and acid deposition and adding to climate change. During the late 1990s, while negotiating to join the WTO, China cut subsidies on coal by more than 50 percent. This resulted in real cuts in the use of coal at a time when its economy was growing by an average of 8 percent a year⁵.

One important impact of international trade, particularly on fast-growing countries, is to increase the impetus for their economies to be based on specialization for export markets. In developing countries still heavily dependent on agriculture, this typically means a commodity crop such as coffee, cocoa or bananas. This can both encourage deforestation and the drainage of wetlands, and push once biodiverse farming areas into species-poor monocultures of varieties frequently alien to local ecosystems – with high inputs of toxic chemicals such as pesticides.

The WTO's charter, however, does require it to promote environmentally responsible trade and allows it to exempt conservation laws from its rules banning protectionism. The Organization formally recognizes some international environmental legislation as a legitimate constraint on trade, including the Montreal Protocol on Substances that Destroy the Ozone Layer. But a series of rulings in its first years appeared to back trade against the environment.

In 1998, for example, it ruled against the United States, which had banned imports of shrimps worth US$2.5 billion a year from four Asian countries – Thailand, Pakistan, Malaysia and the Philippines – because fishermen in these countries used nets that captured up to 20 000 endangered Olive Ridley turtles. Such nets were illegal under United States law. The WTO invoked the rule that it is generally illegal to discriminate, either through labelling or outright bans, between identical products on the basis of how they are produced.

The shadow of the WTO has also hung over negotiations for future environmental laws. These include proposed controls on persistent organic pollutants (POPs) such as pesticides, and on genetically modified (GM) products. Talks on a Biosafety Protocol under the Convention on Biological Diversity broke down in early 1999 because of fears that it could become a protectionist device, but agreement was nevertheless reached early in 2000, setting rules for controlling trade in GM products. The Protocol explicitly allows countries to respond to fears about health or environmental dangers from GM by preventing trade, but also leaves them open to WTO sanctions.