1st November 2002
The Costs and Benefits of Compliance with International Environmental Standards, Pakistan Case Study
The trade-environment nexus continues to generate heated debate. From the benign setting of Rio, to open confrontation at Seattle, to the “behind closed doors” diplomacy at Doha, at times it appears impossible that the various stakeholders will trade in their differences for consensus. Perhaps environmental regulations define this split best. Its advocates in the North feel that such regulations will promote sustainable development and growth eventually. Inverting this argument, Southern countries claim environmental regulations are trade-restricting devices, engineered by coalitions to protect domestic industries and block exports from the South.
Following upon the premise of the Pakistan TKN I study (Khan et al., 1999), this paper, too, avoids the histrionics such debates can give rise to and focuses on the practical implications. It begins with the stance that the reality is somewhere in between, and that environmental regulations can cut both ways: they can be trade restricting but they also offer new market niches and can lead to cleaner production practices in the exporting countries. The institutional challenge is to address the concerns and maximize the benefits. Also, in the final analysis, developing countries are left with little choice other than to comply with the increasingly stringent environmental regulations in order to maintain their export shares.
The North, too, has a responsibility to facilitate this process by displaying sensitivity for environmental and social realities in the South. With regard to process standards (effluents, emissions) tolerances vary, given the initial pollution and emission baselines. This is as true intra-North, as across the North-South divide. In fact, the WTO Agreement on Technical Barriers to Trade (TBT) and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), to which Pakistan is signatory, offer concrete ways to bridge such differences. Both agreements are designed to minimize trade restrictive impacts and maximize environmental and social benefits associated with the imposition of international environmental and social standards—whether of a voluntary or legal nature. By the same token, the agreements are prone to developing a pro-North bias as the South is unable to respond to their technical and institutional imperatives. This needs to be rectified through technical assistance for capacity building for—among other things—improving access to information on standards, setting good national standards and regulations and ensuring compliance audits (conformity assessment).