Do Trade Liberalization and International Trade Law Constrain Domestic Environmental Regulation

Environmentalists and free trade proponents sharply disagree on the role that trade plays in impacting environmental welfare. This article critically examines the contention that trade liberalization and World Trade Organization (WTO) trade law constrain domestic environmental regulations. An analysis of empirical studies and recent WTO jurisprudence demonstrates that neither extreme is quite right. Contrary to environmentalist contentions, trade liberalization can improve environmental regulations, and WTO jurisprudence is more welcoming of domestic environmental regulations than popularly perceived. But, counter to free trader claims, trade’s positive impact often works through stronger regulation — not through simple increases in wealth. In addition, though evolving WTO principles welcome fairly applied environmental regulations, specific decisions have applied these principles inconsistently and have been too quick to find unfair trade protectionism. Both sides can gain from a more nuanced understanding. Domestic regulators can achieve both improved environmental welfare and WTO-legality of environmental standards by ensuring their measures are fairly applied, and the WTO can advance its reputation and encourage more trade with more consistent application of safeguards against protectionism.