Of all the many proposals Joseph Stiglitz offers for fixing the global economy in "Making Globalization Work," the one that is getting the most attention is his suggestion on how to force the U.S. to get serious on global warming. Stiglitz recommends that other nations start bringing trade actions against the U.S. at the World Trade Organization, on the grounds that the U.S. is illegally subsidizing its energy industry by not paying for the damage it is doing to the global environment.
Sound a little far-fetched? In his book, Stiglitz states that there is precedent for such a tactic in a decision reached by the WTO in a trade dispute involving shrimp and endangered sea turtles.
In the 1990s the U.S. imposed a total ban on the importation of wild shrimp caught with nets that did not incorporate turtle exclusion devices that allow turtles to escape. But in 1998, India, Pakistan, Malaysia and Thailand filed a complaint with the WTO arguing that the U.S. action violated WTO treaty law.
The details of the dispute are complex: for a full and fascinating treatment, this article by Thai lawyer Varamon Ramankura in The Georgetown International Environmental Law Review is highly recommended.
But here is where it gets a bit sticky. Stiglitz says in his book, and, according to one account is on record as confirming as recently as last week in an an appearance at a Center for Global Development event in Washington, that "the WTO sustained the U.S. position."
But did it, really? The WTO actually ruled against the United States after determining that the U.S. was applying its ban in a discriminatory manner: From the WTO page on the case:
"The U.S. lost the case, not because it sought to protect the environment but because it discriminated between WTO members. It provided countries in the western hemisphere -- mainly in the Caribbean -- technical and financial assistance and longer transition periods for their fishermen to start using turtle-excluder devices... It did not give the same advantages, however, to the four Asian countries (India, Malaysia, Pakistan and Thailand) that filed the complaint with the WTO."
Did Stiglitz goof? Practically speaking, no, because the WTO appellate panel explicitly made allowances for the possibility that in the future, environmental factors could be used as a justification for trade bans or tariffs. In other words, the U.S., or any other nation has the right the right to incorporate environmental factors in national trade policy. Thus, in principle, the WTO decision, as Ramankura wrote, is "revolutionary," and could conceivably be the basis for ambitious efforts at global environmental protection, such as Stiglitz's global warming scheme.
"Even though no case has successfully defended the application of trade policies for environmental protection, the implication of the Shrimp-Turtle ruling suggests that a carefully designed trade policy intended to protect the environment might be allowed under the WTO."
Again, the WTO is bending over backwards to ensure that this is exactly how its decision is interpreted. On its Web site, it takes the somewhat extraordinary step of "underscoring" what the decision does not say: "We have not decided that the sovereign nations that are Members of the WTO cannot adopt effective measures to protect endangered species, such as sea turtles. Clearly, they can and should."
But the true test -- a ruling in favor of an environmentally flavored trade ban -- has yet to come. So maybe we shouldn't hold our breath for punitive global warming tariffs aimed at the U.S.