People come to the trade-environment debates from many different backgrounds. The various assumptions and worldviews they start with, and their different technical languages, can be important obstacles to meaningful dialogue and solutions.

People understand the issues through three common perspectives—that of trade, environment and development. Of course, these are not mutually exclusive—many people understand all three. What follows are crude stereotypes of each perspective, but ones that help illustrate the challenge of finding policies that simultaneously support the objectives of trade, environment and development.

The trade perspective

• Trade creates the wealth that could be used to increase human well-being.
• But most national governments answer too directly to national industries, and will try to preserve domestic markets for these industries, keeping foreign competitors at bay.
• In doing so, governments make their citizens worse off: domestic firms become inefficient, domestic consumers pay higher prices, and more efficient foreign firms are shut out.
• The best protection is a strong system of rules against such behaviour, such as WTO rules, by which all countries abide.
• Even after signing such agreements, countries will look for loopholes. Banning or restricting goods on environmental grounds may be one such loophole.
• Trade can actually be good for the environment, since it creates wealth that can be used for environmental improvement, and the efficiency gains from trade can mean fewer resources used and less waste produced.

The environmental perspective

• The status quo seriously threatens the earth's ecosystems.
• But most national governments answer too directly to national industries, and will try to protect them against "costly" environmental demands.
• In doing so, governments make their citizens worse off: domestic firms make profits, but the public subsidizes them by paying the costs of environmental degradation.
• One way to avoid these problems is a strong system of rules spelling out clearly how the environment shall be protected, at the national and international levels.
• Even after such rules are in place, governments and industry will look to scuttle them. Trade rules forbidding certain types of environmental regulations may be one way to do so.
• Trade means more goods produced and thus in many cases more environmental damage. The wealth created by trade will not necessarily result in environmental improvements.

The development perspective

• Over one-fifth of the world's population live in absolute poverty, most of them in developing countries, and the gap between the rich and poor countries continues to widen. Developing countries' top priority should be reducing that poverty and narrowing that gap.
• Openness to trade and investment may be a key way to do so, by increasing exports, though the links between openness and economic growth are not automatic.
• But rich countries protect their industries with subsidies, special trade rules and tariff systems that hurt developing country exporters.
• The best solution is a strong set of multilateral rules against such behaviour, but current WTO rules are too deeply influenced by the powerful trading nations, and liberalization has selectively benefited sectors of interest to developed countries.
• Over time, as such behaviour is outlawed by trade rules, rich countries will look for new ways to keep foreign competition out of their markets. Banning or restricting goods on environmental grounds may be one of those ways.
• Demands that poor countries comply with rich country environmental standards are unfair, particularly if they are not accompanied by technical or financial assistance. Priorities differ; for example, in many poor countries clean water is paramount. And rich countries often caused most of the environmental damage in the first place.

Chapter 1: Suggested readings