IV. CONSIDERATION OF MULTILATERAL TRADE AND ENVIRONMENT AGREEMENTS IN DOMESTIC POLICY FORMULATION
The World Trade Organization agreement urges harmonization of technical regulations, using a set of international standards. However, that requirement may impose extra financial burdens on some least developed countries. Some people have argued against harmonization because different countries (and communities within a country) have different natural resource endowments, pollution absorption capacities and cultural preferences. For example, in some countries, communities in rural or coastal areas can tolerate higher emissions than urban populations. Also, some communities are better placed than others to deal with the income trade-offs associated with environmental regulation.
The biggest constraint facing Papua New Guinea in trying to comply with multilateral agreements is the lack of adequate financial resources. Harmonizing standards will impose transaction costs and raise production costs. Richer countries can afford greater trade-offs than poorer ones. Moreover, richer countries are more likely to have the technological expertise and equipment, while poorer ones are forced to use obsolete equipment and production methods. For example, studies on the impacts of the North American Free Trade Agreement indicate that the upward harmonization of health, safety and environmental regulations will be very costly to Mexican entrepreneurs, small businesses and consumers as a result of the increased costs (Mongelluzzo, 1994).
The US General Accounting Office has recommended greater use of technology transfer programmes and financial inducements for least developed countries. Examples of such schemes include the Global Environment Facility and the financing instrument for the United Nations Biodiversity and Global Climate Change Convention (United States General Accounting Office, 1992).