A Global Environment Organization (GEO) and the World Trading ...

A Global Environment Organization (GEO)
and the World Trading System:
Prospects and Problems
C. Ford Runge
Distinguished McKnight University Professor of
Applied Economics and Law
Center for International Food and Agricultural Policy
Department of Applied Economics
University of Minnesota
January 15, 2001
A Paper prepared for the Center for Strategic and International Studies (CSIS), Georgetown University,
and the Twenty-first Century Commission on U.S. Foreign Economic Policy in a Globalized Economy.
My thanks to Greg Shaffer of the University of Wisconsin Law School, Scott Barrett of the Johns Hopkins
School of Advanced International Studies, and Steve Charnovitz of the law firm Wilmer, Cutler and
Pickering, Washington, DC for guidance and suggestions. Responsibility remains with the author.

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Internationalism suggests an attitude to the world based on mutual accord between nations. It
is or has been faced with two main problems: there are nationalisms that have been wholly, or largely,
incapable of accepting such cooperation; and also there are supposed internationalisms that are in
principle against nationality as such. The supranational world-state idea, urged by many rational liberals
for a century or so, is not plausible in any but a very long run, and certainly any excessive haste, or
attempt to impose it by fiat, would produce strong and violent resistence. It could only emerge over a
very long period of concord among its components.
Robert Conquest
Reflections on a Ravaged
Century (2000) p. 66

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Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Genesis of Proposals for a GEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. The Proposal: One View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. The Arguments in Favor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. The Arguments Against . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. Issues of Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6. Three Issues: LCDs, Subsidiarity and Conditionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7. Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Figure 1: Structure of a Global Environment Organization (GEO) (adapted from Runge, 1994) 42
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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A Global Environment Organization (GEO) and the World Trading System:
Prospects and Problems*
C. Ford Runge
Distinguished McKnight University Professor of Applied Economics and Law
Center for International Food and Agricultural Policy
Department of Applied Economics
University of Minnesota
Introduction
It might be supposed that a Global Environment Organization (GEO) is part of what Conquest
terms a “supranational world state,” for which the world is clearly not ready, and which he rightly
rejects as a “quick-fix idea.”1 However, despite serious difficulties, a GEO should be considered as a
possible step coordinating international environmental policy, whilst protecting and insulating the World
Trade Organization (WTO) from responsibilities for which it is both disinclined and unprepared. The
GATT/WTO system itself, now with over half a century of history, has been attacked in much the same
terms as a GEO. Both Right and Left have decried the loss of national sovereignty to international
bodies. Yet as Joseph Cobb of the Heritage Foundation noted, “The World Trade Organization will
expand the sovereignty of American citizens by reducing the power of interest groups to manipulate
*A Paper prepared for the Center for Strategic and International Studies (CSIS), Georgetown
University, Twenty-first Century Commission on U.S. Foreign Economic Policy in a Globalized
Economy. January 15, 2001.
1Robert Conquest. Reflections on a Ravaged Century. New York: W.W. Norton, 2000, p.
66.
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trade policy.”2 Similar remarks might apply to global environmental policy under a GEO. At the failed
trade ministerial in Seattle at the end of 1999, strident criticisms were levied at the WTO, IMF and
World Bank, described as faceless international bureaucracies with programs harmful to the
environment.3 Although hostile to multilateral institutions, these criticisms beg the obvious question: if
not these institutions, then what others?4 While many criticisms of the global economy and global
institutions may have merit, it is hard to think of a future in which trade and global institutions, or issues
of the natural environment, will play little or no part. Accordingly, the task is to redefine objectives in a
global economy, and to restructure institutions to meet these objectives.
This paper is developed in this spirit, with a GEO as part of a global institutional restructuring.
Such restructuring is necessary today at an international level, much as in the 1780s, the weaknesses of
the Articles of Confederation were increasingly apparent at the national level. Madison, Hamilton and
Jay (writing as “Publius”) recognized the need to persuade others that the nation would not persevere
without substantial institutional innovations. Max Beloff, writing in the introduction to The Federalist,
cautioned against American hubris, but recognized the broad relevance of the U.S. experience:
2Joseph Cobb. A Guide to the New GATT Agreement. Heritage Backgrounder Paper no.
985. May 5, 1994. Washington, DC. The Heritage Foundation (1994). Quoted in Daniel C. Esty.
Greening the GATT: Trade Environment and the Future. Washington, DC: Institute for
International Economics, 1994, p. 93.
3For a critique of the Seattle debacle in the context of food security, see C. Ford Runge and
Benjamin Senauer. “A Removable Feast.” Foreign Affairs (May-June 2000): 39-51. For an
environmental critic’s view of Seattle see Henry Holmes “The World Trade Take-Over.” Earth Island
Journal 14: 4 (Winter 1999-2000): 38.
4See John Mickelthwait and Adrian Wooldridge. A Future Perfect: The Challenge and
Hidden Promise of Globalization. London: Heinemann, 2000.
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If Americans assume too readily that their own Constitution and the greatest of the
commentaries upon it, together provide the answer to all the unsolved political problems of the
world, there is their own history as well as that of other countries to make them
cautious. But the substitution of relativism and will for natural law and reason, does not so far
seem to have produced results which would justify the neglect of that school of thought which is
best represented in the Federalist.5
A central element in this school of thought was that free and unfettered commerce should be
encouraged between states, coordinated by bodies which derived their authority from the consent of
the same states. The concept of a GEO defended here has exactly such features, although the states
are nations.
This paper traces the evolution of the debate over a GEO, and analyzes its problems and
opportunities in the world trading system. It first considers the genesis of proposals for a GEO, and
provides a short historical account. Second, it offers one view of what a GEO might entail. The next
two sections offer a brief summary of some of the main arguments for and against such a body. The
fifth section discusses issues of implementation, and the relationship between a GEO and existing
institutions with environmental or trade responsibilities, such as UNEP and the WTO. It also considers
whether a GEO should be built up incrementally, or whether a “grand stroke” would be more effective
in establishing it. The sixth section takes up three related issues: the role of developing countries, issues
of subsidiarity and the effective use of sanctions or conditionality. The seventh and final section offers a
summary and conclusion.
5Max Beloff (ed.). The Federalist: Or, the New Constitution, by Alexander Hamilton, James
Madison, and John Jay. Oxford: Basil Blackwell, 1948, p. 1xvi.
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1. Genesis of Proposals for a GEO
In the early 1990s, transnational environmental policy challenges first led to calls for a Global
Environmental Organization (GEO). By 2000, support extended from French Prime Minister Jospin
and President Jacques Chirac to former WTO Director General Renato Ruggiero, the Economist
magazine, and others.6 Even so, many remain unconvinced of the need for yet another international
organization.7
The argument for a GEO arose primarily from trade policy participants who felt that the
GATT/WTO system was ill-equipped to respond when trade questions intersected with environmental
issues. While sympathetic to stronger national environmental safeguards, they recognized that
governments required coordinated multilateral responses to transnational environmental issues, not only
when trade conflicts were apparent, but also where trade was largely unaffected. Even if the
GATT/WTO system could be “greened,” they felt that international environmental challenges required
their own multilateral responses. Just as the GATT/WTO system had evolved out of growing
commercial interdependence following World War II, and had helped to foster a set of rules by which
the trade game should be played, so growing ecological interconnections now created the need for a
set of global environmental rules.8 The parallelism of trading rules and environmental rules arose from
6Daniel C. Esty. “The Value of Creating a Global Environmental Organization.” Environment
Matters. Annual Review. Washington, DC. The World Bank. 2000.
7See, for examples Calestous, Juma. “The Perils of Centralizing Global Environmental
Governance.” Environmental Matters. Annual Review. Washington, DC. The World Bank. 2000.
8See G. Maggi. “The Role of Multilateral Institutions in International Trade Cooperation.”
American Economic Review (March, 1999): 190-214. K. Bagwell and R.W. Staiger. “An Economic
Theory of GATT.” American Economic Review (March, 1999): 215-248. For a longer history of
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the fact that interdependent states could not cope with commercial or environmental challenges through
unilateral or ad hoc solutions. A more stable and predictable system must be rule-based,
although the coexistence of a set of multilateral trade and environmental rules would give rise to
questions of priority and consistency.9
The first calls for a GEO emerged from criticisms of the impacts of trade liberalization on the
natural environment in the debate over the North American Free Trade Agreement (NAFTA) during
1992 and 1993. The early phases of this debate found traders and environmentalists in hostile camps
(where many remain). Environmentalists, influenced by a number of critiques of expanded economic
growth on the natural environment, tended to equate trade, and thus growth, with pressures on natural
ecosystems.10 Traders, in contrast, focused on the potential role of environmental safeguards as non-
tariff barriers to trade, the inevitable differences across nations in environmental regimes, and the
necessity of income growth if environmental protection was to be afforded.11 In addition, a growing
trade-environment interactions, see Charles S. Pearson. Economics and the Global Environment.
Cambridge, UK: Cambridge University Press, 2000, pp. 258-306.
9John Jackson. World Trade and the Law of GATT. New York: Bobbs-Merrill Co., 1969.
John Jackson. “World Trade Rules and Environmental Policies: Congruence or Conflict?” Washington
and Lee Law Review 49: 4 (Fall, 1992): 1227-78.
10Herman E. Daly. “The Perils of Free Trade.” Scientific American 269: 5 (November, 1993):
50-57.
11J. Bhagwati and T.N. Srinivasan. “Trade and Environment: Does Environmental Diversity
Detract from the Case for Free Trade?,” in J. Bhagwati and Robert E. Hudec (eds.), Fair Trade and
Harmonization: Prerequisites for Free Trade? Vol 1. Economic Analysis. Cambridge: MIT Press,
1997.
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number of multilateral environmental agreements (MEA’s) stimulated discussion of the need for
enforcement mechanisms, some of which involved explicit trade sanctions. This raised questions of
how, and whether, such MEAs should be granted exceptions to the principles of the GATT articles.12
The politics of NAFTA brought these interests into sharp conflict, especially over the
environmental degradation evident in factories along Mexico’s pre-NAFTA free trade zone with the
U.S. NAFTA also brought into relief the North/South divide over environmental policy, with richer
Northern countries such as the U.S. and Canada calling for higher levels of transborder environmental
protection. LDCs such as Mexico perceived other motives in these calls, including old-fashioned
protectionism disguised as “environmental conditionality.” Many LDCs remain convinced that Northern
environmental restrictions will serve as nontariff barriers to market access, or will condition such access
on developing countries adherence to costly environmental measures.
In the volatile political atmosphere of the 1992 Presidential election, many Democrats were
critical of NAFTA, while most Republican supporters attempted to protect the agreement from
environmental criticisms or labor opposition. Given this political dilemma, a small number of scholars
and a few environmental organizations saw an opportunity for linkage between trade and environment,
proposing that an “environmental protocol” be attached to the NAFTA treaty to safeguard and support
12See discussion in C.Ford Runge(with Francois Orlalo-Magne and Philip Van de Kamp).
Freer Trade, Protected Environment: Balancing Trade Liberalization and Environmental
Interests. New York: Council on Foreign Relations Press, 1994 and Gary Sampson. Trade,
Environment and the WTO: The Post-Seattle Agenda Overseas Development Council. Policy Essay
No. 27. Washington, DC, 2000, ch. 6.
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environmental initiatives, especially in the U.S./Mexico border region.13 Such a protocol could reassure
NAFTA’s environmental critics while preserving the gains from trade in the agreement itself. This
proposal rapidly evolved into an environmental “side-agreement” (one of three ultimate side-agreements
to NAFTA). Candidate Clinton, seeking a way to square pro-NAFTA and pro-environment positions,
gave his support. While the government of Mexico regarded the side-agreement with considerable
anxiety, their larger interest in expanded trade with a U.S. economy 25 times the size of Mexico’s
caused them, after intense negotiations, to agree to its basic provisions. Despite fears of “protectionism
in green disguise” and threats to its sovereignty, the promise of substantially expanded access by
Mexico to the markets of the U.S. and Canada ultimately proved too great a prize to reject the side-
agreement.
The provisions of the side agreement evolved from the environmental guarantees given by
President George Bush in May 1991 in order to gain renewed fast-track negotiating authority for
NAFTA and the GATT Round. On September 16, 1992, the environment ministers of Canada,
Mexico and the U.S. initiated a new round of negotiations directed at creating a trilateral North
American environmental council. From April of 1993 until August 13, 1993, negotiations continued,
leading to a signed side-agreement to the NAFTA text, the North American Agreement on
13C. Ford Runge and Peter Emerson circulated a memo proposing an environmental protocol in
1991. Emerson was the Environmental Defense Fund’s point man on NAFTA, and headed EDF’s
Austin office. A similar proposal was circulated by Justin Ward, of the Natural Resources Defense
Council (NRDC) in Washington, D.C. Other groups, such as the Center for International
Environmental Law (CIEL), the National Wildlife Federation, and Sierra Club were actively involved in
debating whether a side-agreement could justify support for NAFTA.
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