The role of international agreements in environmental conservation and its implication to Vietnam

VIETNAM NATIONAL UNIVERSITY
FACULITY OF ECONOMIC

YASUKATA FUKAHORI



THE ROLE OF INTERNATIONAL AGREEMENTS IN
ENVIRONMENTAL CONSERVATION AND ITS IMPLICATION TO
VIETNAM

Major: Political Economy
Code: 62.31.01.01

DOCTORAL PHILOSOPHY OF ECONOMICS

Advisor: 1. Associated Professor, Doctor Phi Manh Hong
2. Doctor Phung Xuan Nha

HaNoi, 2008


VIETNAM NATIONAL UNIVERSITY, HANOI
COLLEGE OF ECONOMIC

YASUKATA FUKAHORI

THE ROLE OF INTERNATIONAL AGREEMENTS IN
ENVIRONMENTAL CONSERVATION AND ITS IMPLICATION TO

VIETNAM

Major: Political Economy
Code: 62.31.01.01

DOCTORAL PHILOSOPHY OF ECONOMICS

Advisor: 1. Associated Professor, Doctor Phi Manh Hong
2. Doctor Phung Xuan Nha

HaNoi, 2008


CONTENTS
Page
Introduction ………………………………………………………………………
1
Chapter I: Economic Theories Related to Environmental Conservation……….
14
1.1.
Theories of Common Pool Resources ……………………………………
14
1.2.
Theories of Collective Actions and International Agreements …………….
23
1.3.
Coase Theorem …………………………………………………………
25
1.4.
Game Theory ……………………………………………………….……

26
1.5.
Other Economic Theories …………………………………………….…
31
1.6.
Application of Economic Theories to Environmental Conservation……….
36
1.6.1.
Sustainability and Budget Line – Case Study for Forest Conservation…….
36
1.6.2.
Game theory scenarios and possible contribution arrangements of
international agreements ………………………………………….……….
46
1.7.
Summary of Results ………………………………………………….……
88
1.8.
Recommendations …………………………………………………….…
90
Chapter II: Environmental Conservation in Relation with Trade, ODA and
Sustainable Development ………………………………………… …………….
92
2.1
Trade Agreements and Environmental Issues ………………………… ….
92
2.1.1.
The New Politics of Trade ……………………………………… ………
92
2.1.2.

Trade under Commodity Agreements and Environmental Conservation…
96
2.1.3.
WTO Dispute Settlement Mechanism and Environmental Conservation
100
2.2.
Global Environmental Issues ……….……………………………………
101
2.2.1.
Issues and Problems related to Global Environmental Conservation……….
102
2.2.2.
World Summit for Environment ……………….………………………….
103
2.3
ODA and Environmental Issues …………………………………………
106
2.3.1.
Trade and ODA …………………………………….……………………
106
2.3.2.
ODA and Environmental Issues …………………….…………………….
107
2.3.3.
Problem of International Aid …………………………….………………
107
2.3.4.
Private Sector ……………………………………………………………
109
2.3.5.

Transparency …………………………………………………….……….
109
2.3.6.
The Problem of Sovereignty and Economic Forces ………………………
110
2.3.7.
Capacity Building, Education, and International Treaties ………….……
110
2.4.
Sustainable Management of Environmental Natural Resources ……….….
111
2.4.1.
Definitions of Sustainable Development ………………………………….
111
2.4.2.
Economic growth for local welfare and conservation  Sustainable
Development
112
2.4.3.
Problems Causing Sustainable Management …………………… ………
114
2.5.
Environmental Conservation and International Agreement ……………….
116
2.5.1.
International Negotiation on Environmental Conservation ………………
116
2.5.2.
Fund Raising under the Existing International Agreements ……………….
117

2.5.3.
ITTO and Forest Conservation …………………………………………….
118
2.5.4.
Limit in conservation by an international agreement organization …………
130
2.6
Experiences in Other Countries…………………………………………….
132
2.6.1
Japan ………………………………………………………………………
132
2.6.2
South Korea ……………………………………………………………….
133
2.6.3
China ………………………………………………………………………
133
Chapter III: Issues Related to Vietnam ………………………………………….
137
3.1.
The New Trade Debate and Its Implication to Vietnam …………………
137
3.1.1.
Vietnam’s New Membership of WTO ……………………………………
137
3.1.2.
New Politics of Trade and Vietnam ………………………………………
138
3.1.3.

CDM and Vietnam ………………………………………………………
139
3.1.4
ODA and Environment/Trade Issues for Vietnam…………………………
141
3.2.
Application of Economic Theory - Implication of ITTO Mechanisms to
Vietnam - ………………………………………………………………….
142
3.2.1.
Scenario 1 …………………………………………………………………
144
3.2.2.
Scenario 2………………………………………………………………….
151
3.2.3.
Analysis of results …………………………………………………………
156
3.2.4.
Summary of Games ……………………………………………………….
157
3.3.
Experiences in Other Countries for the comparison with Vietnam…………
160
3.2.1.
Japan ………………………………………………………………………
160
3.2.2.
South Korea ………………………………………………………….……
160

3.2.3.
China ……………………………………………………………………
160
3.2.4.
Lessons from other countries ……………………………………………
161
Conclusion ……………………………………………………………………….
162
List of reference materials ………………………………………………………
168



1
Summary

Introduction

1. The Necessity of the Thesis Topic
There have been growing concerns in the global
community on the degradation of international
environmental assets. As the reports of Intergovernmental
Panel on Climate Change (IPCC) indicate, human activities
are considered culpable for the degradation. Trade is also
often criticized for the depleting precious environmental
natural resources such as tropical forests.
The purpose of the thesis is to examine how
International Agreements envisage to contributing to
conservation of the global environmental assets that are
diminishing rapidly at an increasing rate.

It is very timely and important in three main
reasons. First, Vietnam has just become a member of
WTO. WTO system and its rules have been often
criticized by environmentalists for the possible impact
on the relations between international trade and global
environmental assets. Therefore, Vietnam will have
to take into consideration this aspect of WTO as a
member. Second, Vietnam is expecting to face
environmental problems in the future. As a country
whose economy grows by around 7-8 per cent annually,

2
it is the natural, predicted and unavoidable course of
development. Third, the relations between trade and
environmental have newly emerged as an important
issue in the global community to which Vietnam is
rapidly being integrated.
It is of absolute importance that Vietnam is prepared
for the possible consequences of environmental degradation
and responsibilities under international agreements. This
thesis will introduce some of the possible alternative paths
that Vietnam will need to take during its economic
development process.

2. Research Background
There have been a number of studies related to the
relations between trade and environment especially in the
context of WTO Doha Round Negotiations. There are
also a number of studies related to other international
agreements such as FTAA and US-Jordan FTA. One of

the best studies probably the “WTO after Seattle” by
Jeffery Schott of which the review is stated below.
However, there has been no publication analyzing
the impact of trade agreements mathematically in terms of
environmental conservation. The proposed thesis is,
therefore, unique, original and very challenging in this
aspect.
The followings are some of the important previous

3
studies related to the issue of trade and environment.

(a) Governing the Commons (Elinor Ostrom, 1990)
Ostrom suggested in this Article that the desirable
result can be achieved if proper enforcement system is
established prior to the games. However, Ostrom did
not discuss about the introduction of arbitration under
International Agreements which this thesis tries to
incorporate into the games.

(b) The Logic of Collective Action (Olson, 1965)
Olson first introduced the concept of "collective
action problem" in this 1965 article. This article by Olson
constitutes one of the backbones of the theoretical approach
in environmental economics.

(c) WTO, after Seattle (Jefferey Schott, 2001)
WTO negotiations became paralyzed at its 3rd
Ministerial Meeting held in Seattle in 1999 due partly to
environmental issues. This book illustrates how the WTO

negotiations are affected by environmental conservation
movements.

3. Objectives
First of all, the focus will be set on the general
mechanisms of international agreements. This approach

4
would make it clear how international agreements try to
achieve sustainable management of the global
environmental assets. The mechanisms and arrangements
adopted by a number of international agreements must be
studied carefully in order to understand the effectiveness
and impact of their projects in relation with the global
environmental conservation.
Second, the results obtained by the above studies
will be further examined with the relevant economic
theories which are introduced in the Chapter 2 of the thesis.
By applying economic theories, the roles and mechanisms
of international agreements in conservation of global
environmental assets will become clearer.
Third, the Vietnamese context will be deeply
examined. Vietnam has become a member of WTO in
January 2007 and its implication to environment needs to
be assessed properly. Apart from trade implications,
Vietnam will have to take the path of balancing between
industrialization and environmental degradation. Japan
suffered quite heavily from pollutions during the fast
industrialization process during 60‟s and 70‟s. Such
experience of Japan needs to be properly introduced to

Vietnam whose economy is experiencing a very fast
economic growth.
The methodology of the study will mainly be the
researches based on the statistics and other public

5
documents related the relation between environmental
issues and international agreements, especially on trade.
Some of the evidences will be derived from interviews and
the diplomatic experiences of the author of the thesis.

4. Scope of Study
(1) International Aspects
First, it is necessary to study the relation between
WTO and environmental issues. Environmental
negotiation is included in the current Doha Development
Agenda (DDA) negotiations but to the minimum extent.
The proposed thesis will discuss how the environmental
negotiations under DDA will affect the future global trade.
Secondly, as a supporting factual background to the DDA
negotiations, the efforts that have been made by the
international community to conserve global environmental
assets need to be examined.

(2) Vietnamese Aspects
The most important element in the Vietnamese
context in the proposed thesis will be the Vietnam‟s
accession to WTO. First, the proposed thesis will discuss
the current situation of the multilateral and bilateral
negotiations on Vietnam‟s accession to WTO. Secondly,

the implication of Vietnamese accession to WTO and its
obligations related to environmental conservation will be