Equivalence: not quite close enough for the international harmonization of environmental standards.

• Author: Donahue, Alexander M.

1. INTRODUCTION

   As noted by economist Herman Daly, the world used to be "relatively empty of human beings and their belongings ... and relatively full of other species and their habitats."(1) But many people, particularly urban residents, might say that quite the opposite is now true.(2) At a minimum, the impacts of current human activity are significant enough that the environment must be actively managed to a degree unimaginable just a century ago.(3) Over the last forty years, many nations have responded by developing complex environmental protection regimes in national law.(4)

   Nevertheless, a competing effort that often overshadows environmental protection is the generation of a higher standard of living through economic growth.(5) According to traditional economic theory, the key to growth is expanded international trade.(6) Until the latter half of this century trade was neither very expansive nor very international. During the decades preceding the Second World War, national policies of protectionism and high tariff structures constrained global trade and, in the minds of many, contributed to the political tensions that gave rise to that devastating war.(7) These obstacles to trade are now mostly gone, vanquished by trade liberalization tools such as the General Agreement on Tariffs and Trade (GATT),(8) the European Union (EU),(9) and the North American Free Trade Agreement (NAFTA).(10) Since 1960 annual world trade has increased from $60 billion to $6.5 trillion in constant dollars, and world economic production has quadrupled.(11)

   Having won the major battles against tariff barriers, business leaders and trade officials are now focusing their trade liberalization efforts on nontariff barriers (NTBs)--environmental, health, and safety standards and technical regulations that act as artificial barriers to trade.(12) The problem, they argue, is not that these standards and regulations exist; after all, each nation has the sovereign right to regulate commerce with its citizens, protect their health, and safeguard their environment.(13) Rather, the problem lies in the differences in coverage and stringency between the standards of different nations.(14) When one country's standard is higher than that of another, it acts as an NTB by making the importation of products from the other country impossible or, at best, possible only after costly modifications.(15) Standards disparities obstruct imports and exports, create inefficiencies, and increase costs for international business, which in turn impedes international trade and slows the global train of prosperity.(16) Worse yet, countries can purposely employ environmental standards as NTBs for protectionist reasons.(17) For trade liberalizers, the solution to the costs and barriers resulting from standards disparities is to eliminate the disparities by making the standards the same or as similar as possible.(18) This process is called harmonization.(19)

   There are two possible methods or models of harmonization: full harmonization and equivalence.(20) These two methods are not interchangeable because they produce significantly different results, particularly in the case of substantive standards for the protection of health, safety, or the environment. Under full harmonization, two or more parties adjust their differing standards until they are the same. If this harmonization is in an upward direction, it strengthens the level of protection. Under equivalence, in contrast, the parties do not adjust their standards--they only agree to treat their differing standards as if they were the same. This produces the opposite result, because it allows the weaker standard to serve as a bypass route around the stronger one, thereby invalidating the stronger and reducing the level of protection.(21)

   This Comment asserts that equivalence may be acceptable for the harmonization of regulatory procedures in some instances; however, it is unsuitable for the harmonization of substantive standards between nations, and of health, safety, and environmental standards in particular. Nevertheless, the trade officials of the European Union and the United States appear to be focusing on only one method--equivalence--in their joint pursuit of deregulation and trade liberalization.(22) The central reason for this focus appears to be the mandates of the Agreement on Technical Barriers to Trade (TBT Agreement)(23) and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)(24) of the World Trade Organization (WTO),(25) which both encourage and require member nations to employ equivalence in harmonizing standards.(26) Additional factors include the desires of organized business, the increasing strain on regulatory resources posed by growing international trade, and the inherent difficulty of pursuing full harmonization.(27)

   Part II of this Comment investigates the theory and dynamics of harmonization and distinguishes the two models or methods of harmonization. Part III discusses the factors that propel the United States toward the harmonization of regulatory standards and procedures, including the United States's responsibilities under the TBT and SPS Agreements of the WTO. Part IV describes the harmonization activities of the United States to date, focusing on its choice and use of equivalence, and points out a number of likely future targets for harmonization by the United States. The Comment concludes by arguing for the use of full and upward harmonization rather than equivalence, especially as applied to environmental standards.

2. HARMONIZATION THEORY

   1. Background and Definitions

      Harmonization is the process of bringing two or more standards, technical regulations, or conformity assessment procedures (CAPs)(28) into accord with each other. In general usage, the term "standard" refers to a "definite rule, principle, or measure established by authority."(29) Accordingly, standards may be mandatory, as when set by governmental authorities, or they may be voluntary, as when offered by nongovernmental authorities such as industry groups or scientific experts that grant certifications to products or practices.(30) The term "technical regulation" refers to a governmentally imposed rule that sets a standard or specifies a procedure such as a CAP.(31) Harmonization of standards, technical regulations, and CAPs can take place within the following two contexts: 1) bilaterally or multilaterally between different nations, and 2) between nations and international standard-setting organizations.(32)

      Historically, the primary purposes of harmonization have been economic integration and the reduction of trade barriers and regulatory burdens.(33) In theory, harmonization of standards and procedures increases market accessibility, reduces costs, brings productivity improvements through specialization on the basis of comparative advantage, and boosts overall growth.(34) Harmonization can also lead to improved environmental protection if the harmonization is upward--that is, if nations with less protective standards raise them to the levels of the more protective nations' standards.(35) For example, the previously lax southern European countries rapidly developed the environmental protection regimes that were required for their integration into the European Union.(36)

      In fact, the most successful practitioners of harmonization are the member states of the European Union, a regional trade organization that has its trade facilitation roots in the European Coal and Steel Community and the European Economic Community.(37) Perhaps taking cues from the successful history of European patent law harmonization,(38) the EU has applied harmonization in various regulatory areas, including environmental regulation, as its central legislative tool in creating a common internal market.(39) Harmonization has also assured international importance by its inclusion in the TBT and SPS Agreements.(40)

   2. The Full Harmonization Model

      There are two slightly, but crucially different, models of harmonization: the full harmonization model and the equivalence model. The first, commonly mislabeled simply as "harmonization," is more accurately described as "full harmonization" or "equalization." Under full harmonization, two or more countries agree to adopt the same (equal or identical) standard.(41) Countries may equalize their standards in one of the following three ways: 1) upward harmonization, in which the country with the lower standard strengthens it to match the higher one; 2) downward harmonization, in which the country with the higher standard weakens it to match the lower one; or 3) what may be called compromise harmonization, in which the two countries negotiate a new standard at an intermediate level.

      Each of the three types of full harmonization has drawbacks that make the task difficult. Countries arrive at levels of environmental protection through formal or informal cost-benefit analyses. Upward harmonization, then, requires the country that previously had the lower standard to bear higher economic costs than it had deemed optimal.(42) Conversely, downward harmonization deprives the country that previously had the higher standard of some environmental protection that it had decided was necessary. Compromise harmonization, of course, involves both of the above. Advocates of environmental protection generally consider the first of the three methods--upward harmonization--to be the ideal method and consider its economic costs to be acceptable.(43) In contrast, downward harmonization best serves the interests of trade because lower standards generally translate into lower costs for business. The resulting conflict is a focal point in the trade/environment debate.(44)

      In the 1970s and early 1980s, the European Union applied full harmonization in many fields to achieve its internal harmonization of standards, but encountered exactly the drawbacks noted above.(45) By the 1980s...