Trade and Environment M2

MODULE 2

Introduction to Trade and Environment in the WTO

ESTIMATED TIME: 5 hours

OBJECTIVES OF MODULE 2

. Provide an overview of the linkages between environmental protection and the WTO

. Present the historical background of the WTO trade and environment discussions

. Explain the 1994 Marrakesh Ministerial Decision on Trade and Environment and the creation of the WTO Committee on Trade and Environment (CTE)

. Provide an overview of the Doha mandate on trade and environment . Explain the parameters of the trade and environment debate in the WTO

2 I. ENVIRONMENTAL PROTECTION AND THE WTO

IN BRIEF

Allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development and seeking to protect and preserve the environment are fundamental to the WTO. These goals, enshrined in the Preamble of the Marrakesh Agreement, go hand in hand with the WTO’s objective to reduce trade barriers and eliminate discriminatory treatment in international trade relations. For WTO Members, the aims of upholding and safeguarding an open and non-discriminatory multilateral trading system, on the one hand, and acting for the protection of the environment and the promotion of sustainable development, on the other, can and must be mutually supportive.

Through its goals, rules, institutions and mutually supportive environmental agenda, the WTO provides an important means of advancing international environmental goals.

IN DETAIL

I.A. WTO GOALS - CONTRIBUTION TO SUSTAINABLE DEVELOPMENT AND PROTECTION OF THE ENVIRONMENT

An important element of the WTO’s contribution to sustainable development and protection of the environment comes in the form of furthering trade opening in goods and services to promote economic development, and by providing stable and predictable economic conditions that enhance the possibility of technological development and innovation. It is its positive impact on economic growth and poverty alleviation that makes trade a powerful ally of sustainable development. The trade liberalization objective and the WTO’s key principle of non- discrimination promote the efficient allocation of resources, economic growth and increased income levels that in turn provide additional means for protecting the environment. The importance of trade’s contribution to efforts on sustainable development and the environment has been recognized in the main sustainable development fora, including the 1992 Rio Summit, the 2002 Johannesburg Summit, the 2005 UN World Summit in New York and, more recently, the 2012 Rio+20 Summit.

The multilateral trading system is an important tool to carry forward international efforts aimed at achieving sustainable development. The WTO’s founding Charter, the Marrakesh Agreement, recognizes sustainable development as a key objective which, for this reason, is at the heart of the currently on-going Doha negotiations.

1 THE PREAMBLE TO THE MARRAKESH AGREEMENT

The Parties to this Agreement,

"...Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development"

I.B. WTO RULES - MEMBERS CAN ADOPT TRADE-RELATED MEASURES AIMED AT PROTECTING THE ENVIRONMENT...

The commitment of WTO Members to sustainable development and the environment can also be seen in WTO rules. In general terms these rules, with their fundamental principles of non-discrimination and transparency, help set a predictable framework for countries to design and implement measures to address environmental concerns. Moreover, WTO rules, including specialized agreements such as the Agreement on Technical Barriers to Trade (TBT) which deals with product regulations, standards, testing and certification procedures and the Agreement on Sanitary and Phytosanitary Measures (SPS) which concerns food safety and animal and plant health measures, provide scope for environmental objectives to be followed and for necessary trade-related measures to be adopted. WTO rules set up the appropriate balance between the right of Members to take regulatory measures, including trade restrictions, to achieve legitimate policy objectives (e.g., protection of the environment) and the rights of other Members under basic trade disciplines. For example, GATT Article XX lays out a number of specific instances in which Members may deviate from GATT rules to protect the environment. At the same time, this provision seeks, among other things, to ensure that environmental measures are not applied arbitrarily nor used as disguised protectionism. (See Module 6)

Since the entry into force of the WTO in 1995, the WTO Dispute Settlement Body has had to deal with a number of disputes concerning environment-related trade measures. Such measures have sought to achieve a variety of policy objectives — from conservation of sea turtles and dolphins from incidental capture in commercial fishing to the protection of human health from risks posed by air pollution. WTO jurisprudence has affirmed that WTO rules do not take precedence over environmental concerns. For example, the WTO's dispute settlement allowed a member in 2001 to maintain its ban on the importation of a hazardous substance, asbestos, so it could protect its citizens and construction workers. In the US - Shrimp dispute, the Appellate Body emphasized the importance of Members' environmental collaboration relating to the protection of sea turtles. (See Module 6)

2 I.C. WTO INSTITUTIONS - ADVANCE DIALOGUE ON TRADE AND ENVIRONMENT LINKAGES...

The WTO also supports sustainable development and the environment through its specialized bodies. One unique body is the Committee on Trade and Environment (CTE). As a forum for dialogue on trade and the environment, the Committee is an incubator for ideas on how to improve mutual supportiveness of trade and environment. This has borne fruit. Some issues first raised in the CTE have become fully -fledged negotiations — for instance, on fisheries subsidies and on the relationship between the WTO and multilateral environmental agreements (MEAs). Other WTO bodies are also essential to explore further trade and environment topics. For example, the body administering the TBT Agreement (the TBT Committee) is where governments, inter alia, notify, discuss and review TBT measures of other Members ("specific trade concerns"), including various environment-related technical regulations. Similarly, in the TRIPS Council Members have been discussing the relationship between the disciplines of the TRIPS Agreement (intellectual property) and those of the Convention on Biological Diversity (CBD), which was a topic first discussed in the context of the CTE.

I.D. WTO FORWARD-LOOKING AGENDA - THE DOHA DEVELOPMENT AGENDA AND THE ENVIRONMENT...

The launch of the Doha Round of negotiations gave Members an opportunity to achieve an even more efficient allocation of resources on a global scale through further reduction of obstacles to trade. The Round is also an opportunity to pursue win-win-win results for trade, development and the environment. For example, the Doha Round was the first time when environmental issues have featured explicitly in the context of a multilateral trade negotiation. Members are working to liberalize trade in goods and services that can benefit the environment. They are also discussing ways to maintain a harmonious co-existence between WTO rules and the specific trade obligations in various agreements that have been negotiated multilaterally to protect the environment. Other parts of the Doha negotiations are relevant to the environment (e.g. aspects of the agriculture negotiations and the negotiations on fisheries subsidies disciplines), and the Doha Development Agenda has a section specifying the priority items in the CTE’s regular work.

Since environmental problems often transcend national borders, the response must involve concerted action at the international level. WTO Members have long recognized the need for coherence amongst international institutions in addressing global environmental challenges. The current Doha negotiations on the relationship between the WTO and multilateral environmental agreements (MEAs) provide a unique opportunity for enhancing mutual supportiveness between the trade and environment agendas at the international level.

EXERCISES:

1. How is sustainable development and environmental protection reflected in the Marrakesh Agreement?

2. How can trade provide a means to advance environmental goals?

3 II. EMERGING ENVIRONMENT DEBATE IN THE GATT

IN BRIEF

The link between trade and environmental protection — both the impact of environmental policies on trade, and the impact of trade on the environment — was recognized as early as 1970. There were important developments in the environmental forum and emerging environment debate took place in the GATT during 1972-1992.

IN DETAIL

Growing international concern about the impact of economic growth on social development and the environment led to a call for an international conference, the first in history of its kind and scope, on how to manage the human environment. The UN Conference on the Human Environment held in Stockholm in 1972 (the Stockholm Conference) was the response.

During the preparatory phase to the Stockholm Conference, the Secretariat of the General Agreement on Tariffs and Trade (GATT) prepared a study entitled "Industrial Pollution Control and International Trade". It focused on the implications of environmental protection policies on international trade, reflecting the concern of trade officials that such policies could become obstacles to trade, as well as constitute a new form of protectionism (i.e. "green protectionism").

In 1971, GATT Director-General presented the study to GATT members (then called the "Contracting Parties"), and urged them to examine what the implications of environmental policies might be for international trade. In the discussions that followed, a number of GATT members suggested that a mechanism be created in GATT for the implications to be examined more thoroughly. For this purpose, in November 1971 the GATT Council of Representatives established the Group on Environmental Measures and International Trade (the "EMIT Group"), which was open to all GATT members.

II.A. DEVELOPMENTS BETWEEN THE STOCKHOLM CONFERENCE IN 1972 AND THE RIO SUMMIT IN 1992

Between 1972 and 1992, environmental policies began to have an increasing impact on trade, and with increasing trade flows, the effects of trade on the environment had also become more widespread. This led to a number of developments in the trade and environment discussions:

 During the Tokyo Round of trade negotiations (1973–1979), participants addressed the question of the extent to which certain environmental measures could form obstacles to trade. The Tokyo Round Agreement on Technical Barriers to Trade (TBT), also known as the "Standards Code", was negotiated. Amongst other things, it called for non-discrimination in the preparation, adoption and application of technical regulations and standards, including those whose stated objective was to protect the environment, and for them to be transparent.

 In 1982, a number of developing countries expressed concern that products prohibited in developed countries on the grounds of environmental hazards, health or safety reasons, continued to be exported

4 to them. With limited information on these products, they were unable to make informed decisions regarding their import. At the 1982 GATT ministerial meeting, members decided to examine the measures needed to bring under control the export of products prohibited domestically (on the grounds of harm to human, animal, plant life or health, or the environment). This led to the creation, in 1989, of a Working Group on the Export of Domestically Prohibited Goods and Other Hazardous Substances.

 The 1991 tuna/dolphin dispute between Mexico and the United States put the spotlight on the linkages between environmental protection policies and trade. The case concerned a US embargo on tuna imported from Mexico, caught using "purse seine" nets which caused the incidental killing of dolphins. Mexico initiated a dispute before the GATT on the grounds that the embargo was inconsistent with the rules of international trade. The panel ruled in favour of Mexico based on a number of different arguments. Although the report of the panel was not adopted, its ruling was heavily criticised by environmental groups who felt that trade rules were an obstacle to environmental protection.

 During the Uruguay Round (1986–1994), trade-related environmental issues were once again addressed. Modifications were made to the TBT Agreement, and environmental considerations were reflected in the General Agreement on Trade in Services (GATS), the Agreements on Agriculture, Sanitary and Phytosanitary Measures (SPS), Subsidies and Countervailing Measures, and Trade-Related Aspects of Intellectual Property Rights (TRIPS).

 During this same period (1972-1992), important developments were also taking place in environmental forums. The discussion on the relationship between economic growth, social development and environment that began at the 1972 Stockholm Conference continued throughout the 1970s and 80s. In 1987, the World Commission on Environment and Development produced a report entitled Our Common Future (also known as the Brundtland Report), in which the term "sustainable development" was coined. The report identified poverty as one of the most important causes of environmental degradation, and argued that greater economic growth, fuelled in part by increased international trade, could generate the necessary resources to combat what had become known as the "pollution of poverty".

Another important development took place in 1991. The "EMIT" group (which was established in 1971) had been dormant for twenty years when in 1991 the members of the European Free Trade Association (EFTA) 1 requested, for the first time, for the EMIT Group to be convened.

During its few years of activities, from 1991 until the creation of the WTO in 1994, the EMIT group served as a forum for the discussion of trade-related environmental issues. More specifically, the EMIT group was tasked with the examination of the effects of environmental measures (such as eco-labelling) on international trade; the relationship between the GATT and MEAs (such as the Basel Convention on the Transboundary Movement of Hazardous Wastes); and the transparency of national environmental regulations. In meetings of the EMIT group between 1991 and 1994, countries considered linkages between trade and environment, relating to, inter alia, trade provisions and restrictions, extraterritorial effects of environmental protection as well as cooperation with multilateral environmental agreements.

II.B. RIO EARTH SUMMIT AND AFTER

The activation of the EMIT group was followed by further developments in international environmental fora. The 1992 (two years before the creation of the WTO) Rio "Earth Summit" drew attention to the role of

1 At the time EFTA included Austria, Finland, Iceland, Liechtenstein, Norway, Sweden and Switzerland.

5 international trade in poverty alleviation and in combating environmental degradation. The "Rio Declaration" stated that an open, equitable and non-discriminatory multilateral trading system had a key contribution to make to national and international efforts to better protect and conserve environmental resources and promote sustainable development. Agenda 21, the programme of action adopted at the conference, also addressed the importance of promoting sustainable development through, amongst other means, international trade.

The preparatory work for the 1992 Rio "Earth Summit" had itself influenced developing countries’ approach discussing trade and environment issues in the EMIT group. The concept of "sustainable development" had established a link between environmental protection and development at large. These moves were about to yield more concrete results within the trading system. The environment and trade were to be linked more explicitly in the new constitution of the multilateral trading system (WTO) that was to be signed in 1994.

More recently, in June 2012, the UN Conference on Sustainable Development (the "Rio+20 Conference") was held in Rio de Janeiro, Brazil, to secure renewed political commitment for sustainable development, assess progress in the implementation of past sustainable development conferences, including Rio 1992, and address new and emerging challenges. The Rio+20 Conference's declaration recognizes the role of trade as an engine for sustainable development, as well as the WTO's contribution in this regard.2

EXERCISES:

3. What are the main environment-related developments in the GATT during 1972-1992?

4. What are the major environmental events that have impacted the trade and environment debate in the past 20 years?

2 UN (2012), "The Future We Want", United Nations Conference on Sustainable Development.

6 III. THE 1994 MARRAKESH MINISTERIAL DECISION ON TRADE AND ENVIRONMENT AND THE WTO COMMITTEE ON TRADE AND ENVIRONMENT

IN BRIEF

Towards the end of the 1986–94 Uruguay Round (and two decades after the EMIT group was set up in GATT), attention was once again drawn to trade-related environmental issues, and the role of the soon-to-be-created World Trade Organization (WTO). The preamble of the WTO Agreement refers to the importance of working towards sustainable development. The 1994 Marrakesh Ministerial Decision called for the creation of the Committee on Trade and Environment. With its broad based mandate, the CTE has contributed to identifying and improving the understanding on the relationship between trade measures and environmental measures in order to promote sustainable development.

IN DETAIL

III.A. 1994 MARRAKESH MINISTERIAL DECISION ON TRADE AND ENVIRONMENT

The Marrakesh Agreement establishing the WTO (also known as the "WTO Agreement"), was signed in April 1994 at the conclusion of the Uruguay Round negotiations. Its preamble refers to the importance of working towards sustainable development and to protect and preserve the environment. The fact that these issues have been recognized in the first paragraph of the preamble of the WTO's founding treaty reflects their important place within the multilateral trading system.

In Marrakesh, ministers also signed a "Decision on Trade and Environment" (see Annex 1) which, is composed of two main elements, as follows.

First, it states that:

"There should not be, nor need be, any policy contradiction between upholding and safeguarding an open, non-discriminatory and equitable multilateral trading system on the one hand, and acting for the protection of the environment, and the promotion of sustainable development on the other."

Second, the 1994 Marrakesh Ministerial Decision also called for the creation of the Committee on Trade and Environment (CTE). It mandates the committee to:

 identify the relationship between trade measures and environmental measures in order to promote sustainable development

 make appropriate recommendations on whether any modifications of the provisions of the multilateral trading system are required, compatible with the open, equitable and non-discriminatory nature of the system.

7 III.B. COMMITTEE ON TRADE AND ENVIRONMENT (CTE)

Created in 1995, the CTE has followed a comprehensive 10-point work programme (see below). It covers a range of relevant issues, from trade and the environment in general to trade barriers, taxes and individual sectors such as services and intellectual property, and relationship with environmental organizations.

The Original 10-point Work Programme of the CTE

Items 1 and 5 (now in negotiations) - Trade rules, environment agreements, and disputes

Relationship between the rules of the multilateral trading system and the trade measures contained in MEAs, and between their dispute settlement mechanisms.

Item 2 - Environmental protection and the trading system

Relationship between environmental policies relevant to trade and environmental measures with significant trade effects and the provisions of the multilateral trading system (MTS).

Item 3 (now an item of focus) - How taxes and other environmental requirements fit in

Relationship between the provisions of the MTS and: (a) charges and taxes for environmental purposes; and (b) requirements for environmental purposes relating to products, such as standards and technical regulations, and packaging, labelling and recycling requirements.

Item 4 - Transparency of environmental trade measures

Provisions of the MTS dealing with the transparency of trade measures used for environmental purposes.[3]

Item 6 (item of focus) - Environment and trade liberalization

How environmental measures affect market access, especially in relation to developing countries and least developed countries; and the environmental benefits of removing trade restrictions and distortions.

Item 7 - Domestically prohibited goods

Exports of domestically prohibited goods (DPGs), in particular hazardous waste.

Item 8 (item of focus) - Intellectual property

Relevant provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

Item 9 – Services

The work programme envisaged in the Decision on Trade in Services and the Environment.

Item 10 - The WTO and other organizations

Relationship and appropriate arrangements between WTO bodies and intergovernmental and non-governmental organizations (NGOs).

The CTE membership is composed of all WTO Members and a number of observers from inter-governmental organizations. It reports to the WTO's General Council. The CTE first convened in early 1995 to examine the

3 See environmental database (documents WT/CTE/EDB/---).

8 different items of its mandate. In preparation for the Singapore Ministerial Conference, in December 1996, the CTE summarized the discussions which it held since its establishment, as well as the conclusions reached in a report presented at the Conference.[4] Since then, it has met approximately three times a year. It has held a number of information sessions with MEA secretariats to deepen Members' understanding of the relationship between MEAs and WTO rules, and organized a number of public symposia for non-governmental organizations (NGOs).

With its broad based mandate, the CTE has contributed to identifying and understanding the relationship between trade measure and environmental measures in order to promote sustainable development.

Although the CTE has not recommended any changes to the WTO rules, its work has led to some trade and environment issues migrating to negotiations as key components of the Doha round (negotiations). One example is fisheries subsidies (under the Rules negotiations): this is an area where eliminating fisheries subsidies can help protect fish stock.

EXERCISES:

5. What are the 2 main elements of the Marrakesh Ministerial Decision on Trade and Environment?

6. What are the CTE items of work?

7. What are the main items of focus of the CTE so far?

4 See document WT/CTE/1.

9 IV. THE DOHA MANDATE

IN BRIEF

At the Fourth WTO Ministerial Conference in Doha, Qatar, in November 2001, WTO Members reaffirmed their

commitment to environmental protection and agreed to embark on a new round of trade negotiations, [5] including negotiations on certain aspects of the linkage between trade and environment. In addition to launching new negotiations, the Doha Ministerial Declaration requested the CTE, in pursuing work on all items in its terms of reference, to focus on three of those items.

Moreover, the Doha Ministerial Declaration strongly reaffirmed Members' commitment to the objective of sustainable development as stated in the Preamble to the WTO Agreement (see Paragraph 6 of the Doha Ministerial Declaration). Ministers also called on the CTE and Trade and Development Committee to act as forums for identifying and debating the environmental and developmental aspects of the negotiations, in order to help achieve the objective of sustainable development.

Furthermore, Paragraph 28 of the Doha Ministerial Declaration instructs Members "to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing countries". These negotiations are taking place in the Negotiating Group on Rules.

The Doha mandate has placed trade and environment work at the WTO on two tracks:

 The CTE Special Session (CTESS) has been established to deal with the negotiations (mandate contained in Paragraph 31 of the Doha Ministerial Declaration).

 The CTE Regular deals with the non-negotiating issues of the Doha Ministerial Declaration together with its original agenda contained in the 1994 Marrakesh Decision on Trade and Environment (mandate contained in paragraphs 32, 33 and 51 of the Doha Ministerial Declaration).

IN DETAIL

IV.A. TRADE AND ENVIRONMENT NEGOTIATIONS - CTESS

The negotiations on trade and the environment are part of the Doha Development Agenda, with an overarching objective to enhance the mutual supportiveness of trade and environmental policies. In the Doha Round, WTO Members are negotiating certain aspects of the link between trade and the environment, particularly the relationship between the WTO and MEAs, and market access for environmental goods and services. These negotiations take place in "Special Sessions" of the Committee on Trade and Environment (CTESS).

Paragraph 31 of the Doha Ministerial Declaration launched negotiations, "with a view to enhancing the mutual supportiveness of trade and environment" and "without prejudging their outcome", on the following issues:

5 Relevant of the Doha Ministerial Declaration can be found in Annex 2.

10 PARAGRAPH 31(I) - RELATIONSHIP BETWEEN WTO RULES AND MEAS SPECIFIC TRADE OBLIGATIONS

 Paragraph 31(i) mandated Members to negotiate on the relationship between WTO rules and specific trade obligations set out in MEAs. Negotiations are limited in scope to the applicability of such existing WTO rules as among parties to the MEA in question. Moreover, the negotiations are not to prejudice the WTO rights of any Member that is not a party to the MEA in question. (See Module 3)

PARAGRAPH 31(II) - INFORMATION EXCHANGE

 Negotiations were mandated in Paragraph 31(ii) on procedures for information exchange between MEAs and the relevant WTO committees, and on the criteria for the granting of observer status in WTO bodies. (See Module 3)

PARAGRAPH 31(III) – ENVIRONMENTAL GOODS AND SERVICES

 Negotiations were mandated in Paragraph 31(iii) on the reduction or, as appropriate, the elimination of tariff and non-tariff barriers to environmental goods and services. (See Module 4)

The end of Paragraph 32 is also relevant to these negotiations as it cautions against altering through these negotiations the balance of rights and obligations of WTO Members under existing agreements. It also adds that:

The outcome… of the negotiations carried out under Paragraph 31(i) and (ii) shall be compatible with the open and non-discriminatory nature of the multilateral trading system, shall not add to or diminish the rights and obligations of Members under existing WTO agreements, in particular the Agreement on the Application of the Sanitary and Phytosanitary Measures, nor alter the balance of these rights and obligations, and will take into account the needs of developing and least-developed countries.

Negotiations under Paragraph 31 are taking place in the Committee on Trade and Environment in Special Session (CTESS). The Committee reports to the Trade Negotiations Committee (TNC).

The Trade and Environment chapter of the Doha Round also includes negotiations aimed at clarifying and improving WTO disciplines on fisheries subsidies. These negotiations are taking place in the Negotiating Group on Rules (the "Rules Group").

IV.B. ITEMS OF FOCUS FOR THE CTE REGULAR WORK

In addition to launching negotiations in the areas listed above, the Doha Ministerial Declaration provides the CTE with a special mandate. Paragraph 32 of the Doha Declaration instructs the CTE, in pursuing work on all agenda items within its current terms of reference, to give particular attention to three items.

11 PARAGRAPH 32 – MARKET ACCESS, TRIPS AND LABELLING

 (i) The effect of environmental measures on market access, especially in relation to developing countries, in particular the least-developed among them, and those situations in which the elimination or reduction of trade restrictions and distortions would benefit trade, the environment and development ("win-win-win situations") (see Module 5)

 (ii) The relevant provisions of the intellectual property (TRIPS) Agreement

 (iii) Labelling requirements for environmental purposes (See Module 5)

Following paragraph 32, f the CTE was mandated to report to the Fifth Ministerial Conference in Cancún on the progress made in discussing the above-mentioned items, and to make recommendations, where appropriate, with respect to future action, including the desirability of negotiations. At its meeting of 7 July 2003, the CTE adopted its report to the Fifth Ministerial Conference in Cancún. This report covered the work undertaken by the regular session of the CTE between the Fourth (Doha) and the Fifth (Cancún) Ministerial Conference of the WTO. It contains a factual summary of those issues that have been discussed and that are covered by the reporting requirement in paragraphs 32 and 33 of the Doha Ministerial Declaration. However, no recommendations were formulated in this report.[6]

PARAGRAPH 33 – TECHNICAL ASSISTANCE, CAPACITY BUILDING AND ENVIRONMENTAL REVIEWS

Paragraph 33 states: "We recognize the importance of technical assistance and capacity building in the field of trade and environment to developing countries, in particular the least-developed among them. We also encourage that expertise and experience be shared with Members wishing to perform environmental reviews at the national level. A report shall be prepared on these activities for the Fifth Session."

Following this mandate, technical assistance, capacity building and environmental reviews 7 have been standing items on the agenda of the CTE, where Members and observers organizations exchange information in these areas.

PARAGRAPH 51 - SUSTAINABLE DEVELOPMENT

Paragraph 51 explicitly calls on the CTE, together with the Committee on Trade and Development, to act as a forum within which the environmental and developmental aspects of the negotiations can be debated, in order to help achieve the objective of sustainable development.

As a result, sustainable development has been a standing item on the agenda of the CTE. The committee decided to look at the subject by sector. In 2006, the Secretariat compiled developments related to the environment in the various negotiating groups: agriculture, non-agricultural market access, rules, services and trade and environment.[8] The purpose was to help Members identify and debate the issues as prescribed in Paragraph 51.

6 See document WT/CTE/8.

7 See e.g. documents WT/CTE/W/245, 4 June 2007, and WT/CTE/W/245/Add.1, 28 October 2008.

8 See document WT/CTE/W/243, 27 November 2006.

12 EXERCISES:

8. What is the overarching objective of the Doha trade and environment negotiations?

9. What are the three Doha trade and environment negotiation items?

10. The Doha Ministerial Declaration instructed the CTE to organize its work in what manner?

13 V. PARAMETERS OF THE TRADE AND ENVIRONMENT DISCUSSIONS IN THE WTO

Certain parameters have guided trade and environment discussions in the WTO since its creation, including the following:

V.A. THE WTO IS NOT AN ENVIRONMENTAL PROTECTION AGENCY

As indicated above, in the Preamble to the WTO Agreement, Members affirm the importance of working towards sustainable development. In addition, the 1994 Marrakesh Ministerial Decision on Trade and Environment states that the aim of the work of the CTE is to make "international trade and environmental policies mutually supportive". WTO Members recognize, however, that the WTO is not an environmental protection agency. Its competence in the field of trade and environment is limited to trade policies and to the trade-related aspects of environmental policies which have a significant effect on trade.

In addressing the link between trade and environment, WTO Members do not operate on the assumption that the WTO itself has the answer to environmental problems. However, they believe that trade and environmental policies can complement each other. Environmental protection preserves the natural resource base on which economic growth is premised, and trade liberalization leads to the economic growth needed for adequate environmental protection. To address this, the WTO's role is to continue to liberalize trade in a non-discriminatory manner, as well as to ensure that environmental policies do not act as obstacles to trade, and that trade rules do not stand in the way of adequate domestic environmental protection.

V.B. WTO RULES PROVIDE SIGNIFICANT SCOPE FOR ENVIRONMENTAL PROTECTION

It is generally believed that WTO rules provide significant scope for Members to adopt national environmental protection policies. For example, under the GATT and the TBT Agreement WTO Members are free to adopt national environmental protection policies provided, for instance, that such measures are not unnecessarily restrictive and that they are not applied in a manner which would constitute an arbitrary or unjustifiable discrimination or a disguised restriction on international trade. Non-discrimination is one of the main principles on which the multilateral trading system is founded. It secures predictable access to markets, protects the economically weak from the more powerful, and guarantees consumer choice. (See Module 6).

V.C. INCREASED MARKET ACCESS FOR DEVELOPING COUNTRIES COULD CONTRIBUTE TO ENVIRONMENTAL PROTECTION

The special situation of developing countries and the need to assist them in their process of economic growth is widely recognized and accepted in the WTO. From the point of view of developing countries, the opening up of

14 world markets to their exports is an essential tool to facilitate their development. WTO Members recognize that trade liberalization for developing country exports, along with financial and technology transfers, is necessary in helping developing countries generate the resources they need to protect the environment and work towards sustainable development. As many developing and least-developed countries are heavily dependent on the export of natural resources for foreign exchange earnings, trade liberalization is expected to improve allocation and more efficient use of their resources, as well as enhance export opportunities for their manufactured goods.

V.D. TRADE AND ENVIRONMENT COORDINATION SHOULD BE ENHANCED

It is generally considered that improved coordination at the national level between trade and environmental officials can contribute to eliminating policy conflicts between trade and environment at the international level. Lack of coordination has, in the past, contributed to the negotiation of potentially conflicting agreements in trade and environmental fora. In addition, it is widely recognized that multilateral cooperation through the negotiation of MEAs constitutes the best approach for resolving transboundary (regional and global) environmental concerns.

MEAs provide a safeguard against unilateral attempts to address environmental problems. Unilateral solutions are often discriminatory, and frequently involve the extraterritorial application of environmental standards. The 1992 Rio "Earth Summit" clearly endorsed consensual and cooperative multilateral environmental solutions to global environmental problems. Such solutions reduce the risks of arbitrary discrimination and disguised protectionism, and reflect the international community's common concern and responsibility for global resources.

EXERCISES:

11. What are the main parameters of the trade and environment discussions in the WTO?

15 VI. SUMMARY

ENVIRONMENTAL PROTECTION AND THE WTO

Allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development and seeking to protect and preserve the environment are fundamental to the WTO. These goals, enshrined in the Preamble of the Marrakesh Agreement, go hand in hand with the WTO’s objective to reduce trade barriers and eliminate discriminatory treatment in international trade relations.

Through its goals, rules, institutions and forward-looking agenda, the WTO provides an important means of advancing international environmental goals.

HISTORY OF THE TRADE AND ENVIRONMENT DEBATE

The link between trade and environmental protection — both the impact of environmental policies on trade, and the impact of trade on the environment — was recognized as early as 1970. This led to the establishment of the GATT EMIT Group in 1971 and a number of development during 1971-1994 in the trade and environment discussions. For example, trade-related environmental issues were taken up both at the Tokyo Round and the Uruguay Round Negotiations. The 1991 tuna/dolphin dispute between Mexico and the United States put the spotlight on the linkages between environmental protection policies and trade.

During the same period, important developments were also taking place in environmental fora, for example, the 1987 Brundtland Report, which identified poverty as one of the most important causes of environmental degradation, and the 1992 Rio "Earth Summit", which drew attention to the role of international trade in poverty alleviation and in combating environmental degradation.

THE MARRAKESH AGREEMENT AND DECISION ON TRADE AND ENVIRONMENT

As a result of the above development, trade and the environment were linked more explicitly in the new constitution of the multilateral trading system signed in 1994. The preamble of the Marrakesh Agreement refers to the importance of working towards sustainable development. Also, the Marrakesh Decision on Trade and Environment states that: "There should not be, nor need be, any policy contradiction between upholding and safeguarding an open, non-discriminatory and equitable multilateral trading system on the one hand, and acting for the protection of the environment, and the promotion of sustainable development on the other." The Marrakesh Decision also called for the creation of the Committee on Trade and Environment (CTE) to promote sustainable development. The CTE, created in 1995, has followed a comprehensive work programme covering a range of trade and environment issues, from trade rules and MEAs, labelling, environmental measures and market access to services and intellectual property.

THE DOHA MANDATE

At Doha in November 2001, WTO Members reaffirmed their commitment to environmental protection and agreed to embark on a new round of trade negotiations. The Doha Development Agenda (DDA) includes trade and environment elements, with an overarching objective to enhance the mutual supportiveness of trade and environmental policies.

16 The DDA has placed trade and environment work at the WTO on two tracks:

 Under Paragraph 31, the CTE Special Session (CTESS) has been established to deal with the negotiations on the following: relationship between WTO rules and MEAs specific trade obligations; information exchange; and environmental goods and services.

 Under Paragraphs 32, 33 and 51, the CTE Regular deals with the non-negotiating issues of the DDA together with its original agenda contained in the 1994 Marrakesh Decision on Trade and Environment.

PARAMETERS OF THE TRADE AND ENVIRONMENT DISCUSSION IN THE WTO

Environmental issues were taken up in the GATT/WTO as a result of numerous developments at the international level in trade and environmental fora. Whilst developed countries were subjected to increased pressure from environmental interest groups to reconcile what they perceived as "incompatibilities" between trade and environmental policies, developing countries feared that environmental concerns would be addressed at the expense of international trade. In particular, they feared that a new "green" conditionality would be attached to market access opportunities. Within this context, certain parameters have guided trade and environment discussions in the WTO, including the following: the WTO is not an environmental protection agency; GATT/WTO Rules provide significant scope for environmental protection; increased market access for developing countries is necessary in helping them generate the resources needed to protect the environment; and trade and environment coordination should be enhanced.

17 PROPOSED ANSWERS:

1. Enshrined in the Preamble of the Marrakesh Agreement, the goals of allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development and seeking to protect and preserve the environment go hand in hand with the WTO’s objective to reduce trade barriers and eliminate discriminatory treatment in international trade relations.

2. Trade provides a means to advance environmental goals in the following ways: trade's potential impact of economic growth and poverty alleviation is a powerful ally of sustainable development; furthering trade opening in goods and services promotes economic development and provides stable and predictable conditions that enhance the possibility of innovation that can contribute to environmental protection; the WTO’s key principle of non-discrimination promotes the efficient allocation of resources, economic growth and increased income levels that in turn provide additional possibilities for protecting the environment.

3. The main environment-related developments in the GATT during 1972-1992 are:

 the Tokyo Round negotiations (1973–1979), when participants took up the question of the degree to which environmental measures could form obstacles to trade, and the TBT Agreement was negotiated;

 the creation in 1989 of a Working Group on the Export of Domestically Prohibited Goods and Other Hazardous Substances due to the concerns expressed by a number of developing countries that products prohibited in developed countries on the grounds of environmental hazards, health or safety reasons, continued to be exported to them;

 in 1991, the tuna/dolphin dispute between Mexico and the United States that put the spotlight on the linkages between environmental protection policies and trade, and although the report of the panel was not adopted, its ruling was heavily criticised by environmental groups who felt that trade rules were an obstacle to environmental protection; and

 the Uruguay Round negotiations, when trade-related environmental issues were once again taken up, and modifications were made to the TBT Agreement, certain environmental issues were addressed in the General Agreement on Trade in Services, the Agreements on Agriculture, Sanitary and Phytosanitary Measures (SPS), Subsidies and Countervailing Measures, and Trade-Related Aspects of Intellectual Property Rights (TRIPS).

4. The major environmental events that have impacted the trade and environment debate are:

 the UN Conference on the Human Environment held in Stockholm in 1972, responding to the growing international concern about the impact of economic growth on social development and the environment;

 the 1987 Brundtland Report, identifying poverty as one of the most important causes of environmental degradation, and in which the term "sustainable development" was coined; and

 the 1992 Rio "Earth Summit", drawing attention to the role of international trade in poverty alleviation and in combating environmental degradation. Agenda 21, the programme of action adopted at the conference, also addressed the importance of promoting sustainable development through, amongst other means, international trade.

5. The 2 main points of the Marrakesh Decision on Trade and Environment are: (i) "There should not be, nor need be, any policy contradiction between upholding and safeguarding an open, non-discriminatory

18 and equitable multilateral trading system on the one hand, and acting for the protection of the environment, and the promotion of sustainable development on the other"; (ii) the creation of the Committee on Trade and Environment.

6. The 10 original work items of the CTE are: Items 1 and 5 - trade Rules, MEAs and disputes; Item 2 - environmental protection and the trading system; Item 3 - relationship between the provisions of the multilateral trading system and: charges and taxes for environmental purposes; and requirements for environmental purposes relating to products, such as standards and technical regulations, and packaging, labelling and recycling requirements; Item 4 - transparency of environmental trade measures; Item 6 – environmental measures and market access; Item 7 - domestically prohibited goods; Item 8 - intellectual property; Item 9 - services; Item 10 - the WTO and other organizations.

7. With its broad based mandate, the CTE has contributed to identifying and understanding the relationship between trade measure and environmental measures in order to promote sustainable development. Although the CTE has not recommended any changes to the rules of the multilateral trading system, its work has led to some trade and environment issues migrating to negotiations as key components of the Doha round (negotiations). One example is fisheries subsidies (under the Rules negotiations): this is an area where eliminating fisheries subsidies can help protect fish stock.

8. The overarching objective of the Doha negotiations on trade and the environment is to enhance the mutual supportiveness of trade and environmental policies.

9. The three negotiation items are: paragraph 31(i) - Relationship between WTO Rules and MEAs Specific Trade Obligations; paragraph 31(ii) - procedures for information exchange between MEAs and the relevant WTO committees, and on the criteria for the granting of observer status in WTO bodies; and paragraph 31(iii) –on the reduction or, as appropriate, the elimination of tariff and non-tariff barriers to environmental goods and services.

10. The Doha Ministerial Declaration instructs the CTE, in pursuing work on all agenda items within its current terms of reference, to give particular attention to three items: environmental measures and market Access; TRIPS; and Labelling requirements for environmental purposes.

11. The main parameters are: GATT/WTO rules provide significant scope for environmental protection; increased market access for developing country exports is necessary in helping developing countries generate the resources needed to protect the environment; and improving trade and environment officials' coordination at the national level can contribute to eliminating policy conflicts between trade and environment at the international level. Finally, it should be kept in mind that the WTO is not an environmental protection agency.