There have been calls to exclude certain products from trade agreements because they cause damages to public health or the environment. Lately, campaigns for product exclusions have included chemicals (generally or specific chemicals like glyphosate), sugary drinks and candy (or sugar generally), and alcoholic beverages. Previously the same case has been made for tobacco products. In this paper, it is argued that product exclusions are neither legally feasible nor desirable. Measures to exclude products would run foul of the rules and market-access commitments that countries have agreed in the WTO, and that serve as a basis also for other trade deals, like bilateral Free Trade Agreements. Importantly, excluding products from current market-access commitments in the WTO would per se do nothing with regard to public health because the main effect is that local production of the excluded goods would substitute goods that are now imported. The conclusion is that trade policy is not a tool for regulatory ambitions. Nor does it stand in the way for regulations that aim to improve public health. Trade policy concerns trade, and the instruments and agreements that exist for the pursuit of better and less-discriminatory trade conditions simply cannot be used for sundry regulatory proposals, however relevant they may be.
The purpose of trade policy is to improve the conditions for economic exchange in the world by reducing barriers to trade and taking away discrimination of goods and services. For any long-term observer of trade policy, that statement is so obvious that it neither needs clarification nor explanation. Trade policy is about – trade. However, in the more recent debate around trade, there have been calls to upend decades of international trade policy and rules by simply taking away various types of goods and services from international trade agreements – either by excluding products from current schedules of commitments in the World Trade Organization (WTO) and Free Trade Agreements (FTAs), or not including them in future FTAs. It has been argued that, principally, products that cause damages to health or the environment should not get the embrace of trade rules that protect against arbitrary and discriminatory practices, and that they should not be covered by agreements that have cut or are cutting tariffs. In the extreme version, the view is that past concessions in trade agreements – the conditions that governments voluntary have signed up to – should be nullified. Ultimately, it means stopping trade in these particular goods.
This is a ‘Swiss cheese’ approach to trade agreements: certain products would be exempted from trade disciplines and liberalization. It would be a radical approach and overturn trade policy and rules that are based on the general principle in trade agreements to progress increased openness across different sectors – without picking out specific products for the embrace of or the exclusion from liberalisation. Liberalization has of course not been advanced at the same pace in all sectors; the gradual reduction of tariffs over the years has varied between goods, and even if the direction has been similar across sectors, the pace of tariff reductions have been different. But there has been a growing consensus on the need to converge trade openness between various types of goods. An important reason behind that consensus is that an increasing number of the products that are traded are input rather finished goods, and that finished goods that are traded include many different inputs. Simply, a restriction on one type of good would affect trade in a host of other goods and services. The more companies have designed their supply chains in a globalized and fragmented way, all the more sense it has made to look at broad multi-sectoral liberalization. Today, a finished product is based on a huge accumulation of cross-border trade in inputs, and in order to generate significant gains from liberalization, there will have to be liberalization in many, if not all, parts of the supply chain to also lower the effective tariff or barrier.
Another key reason behind the growing consensus of multi-sectoral liberalization concerns political economy – or, in plain speak, the conditions that are required for multiple governments to actually come to an agreement on trade. If bilateral or multilateral trade policy would only deal with a selected number of goods and services, there would be a number of countries that couldn’t enter trade agreement because the products they care most for wouldn’t be included in the agreement. At a broad headline level, it would be impossible for countries that are exporting food and food staples to enter a trade agreement that doesn’t cover the liberalization of those products, let alone an agreement that worsens trade openness for food and food staples. And in a similar fashion, trade agreements that would exclude industrial goods from new exporting opportunities would be a red blanket for many countries with strong trade capacities in that particular area.
The viewpoint now, however, is that – regardless of the consequences for trade policy – certain products should be excluded from new trade agreements and/or lose their rights in current trade agreements because they are detrimental to health or the environment. Admittedly, that view is not entirely new because there has been calls over a long period of time to exclude tobacco products from trade agreements. But the scope of the argument has radically widened and there are now campaigns for excluding from trade agreements products such as chemicals – in general or specific chemicals like glyphosate – alcohol, sugary drinks, candy and food products that contain higher levels of salt. The basis for the exclusion may vary a bit, but the conclusion is the same: these goods should ideally lose their current status in current agreements in the World Trade Organization (WTO) and, pointedly, they should not be considered in the scope of new trade agreements.
This Policy Brief will consider the arguments behind excluding products from existing and new trade agreements. The paper, however, takes a critical view of these arguments and arrives at the opposite conclusion: for new trade agreements to be economically meaningful – and, in the first place, achievable – liberalizing measures need to be broad and multi-sectoral, and the rules that underpin trade agreements should apply across the board. FTAs should follow the principle of liberalizing “substantially all trade” and naturally work from the basis of the schedule of commitments in the WTO.
There is a case to be made for having rules and liberalizing measures that attend to the different regulations that exist in countries for products that could cause harm to health and the environment – regulations that are specifically about public health and the environment, but that do not distort the competitive relation between domestically-produced goods and foreign goods. However, that is a different issue and is already a central plank of rules and measures in all modern trade agreements, including the core agreements in the World Trade Organization. Joint work by the WTO and the World Health Organization have also helped to clarify the scope for domestic regulation in the area of public health.
It is the core argument of this paper that in matters related to products that are detrimental to health or the environment, trade agreements basically allow for countries to impose stronger regulations as long as they don’t discriminate and have the consequence of giving domestic producers an advantage over foreign producers. Trade policy is not and never has been a regulatory policy that directly addresses specific concerns for public health or the environment. Nor could it be. An effective policy on protecting the environment, addressing obesity or reducing smoking – to take just three examples – includes many different measures such as tax and product and sales regulations. Taking away products from trade agreements, however, does not change the content of these taxes and regulations: it only means that domestic producers will substitute foreign producers.
The next chapter will consider international trade rules and how matters of regulation are dealt with internationally. Chapter 3 steps into the world of trade substitution and shows how limiting trade in certain products would only reshuffle production and favor protected firms at home against foreign companies. Chapter 4 concludes the paper. Generally, and to make the paper less wieldy, most elements of the analysis are anchored in a European economic and policy context.
 GATT Article XXIV states: “A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories”.
 WHO and WTO (2002) WTO Agreements and Public Health: A Joint Study by the WHO and the WTO Secretariat. Geneva: World Trade Organization