An ecosystem services penalty system for evaluating international trade proposals

The World Trade Organization is not explicitly in the business of environmental protection, but through recent initiatives it has sought to better understand the complex relationship between trade and the environment and its role in promoting sustainable trade growth. In line with these initiatives, this paper discusses ways it might explicitly consider ecosystem services impacts when ruling on trade disputes so as to internalise ecosystem services externalities. We propose a change to existing methods of settling trade disputes to include a comparison between the traditional gains from trade and the multilateral change in ecosystem services associated with trade by incorporating a penalty system into the dispute resolution process. If this comparison assesses damages to ecosystem services to exceed the gains from trade then the penalty system suggests trade should not be allowed to take place. This penalty system in turn can create an incentive for exporting countries to reduce their impacts on ecosystem services to facilitate trade.