WTO E-Learning WTO E-Learning – Copyright © October 2013

Trade and

Environment

Abstract

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 at the GATT time. Later, with the

creation of the WTO as a result of the Uruguay Round negotiations, 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 multilateral trading system. 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 forward-looking agenda, the WTO provides an

important means of advancing international environmental goals.

The Marrakesh Ministerial Decision also called for the creation of the Committee on Trade and Environment.

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. Two

important items of work of the CTE are the effects of environmental requirements on market access, and

labelling requirements for environmental purposes. Environmental requirements can impede trade and even

be used as an excuse for protectionism. The answer is not to weaken environmental standards, but to set

appropriate standards and enable exporters to meet them.

At the Doha Ministerial Conference in 2001, trade ministers launched, for the first time in the history of the

multilateral trading system, negotiations in the area of trade and environment. The mandate of negotiations,

contained in Paragraph 31 of the Doha Declaration covers the relationship between existing WTO rules and

specific trade obligations set out in multilateral environmental agreements (MEAs) (Paragraph 31(i));

procedures for regular information exchange between MEA Secretariats and the relevant WTO committees, and

the criteria for the granting of observer status (Paragraph 31(ii)); and the reduction or, as appropriate,

elimination of tariff and non-tariff barriers to environmental goods and services (Paragraph 31(iii)).

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 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. WTO Members can adopt trade-related measures

to protect the environment and human health and life as long as such measures comply with GATT rules, or fall

under the exceptions to these rules. Article XX on General Exceptions lays down a number of specific instances

in which WTO Members may be exempted from GATT rules.

List of Figures and Tables

MODULE 1: THE WORLD TRADE ORGANIZATION ............................................................ 11

Table 1: GATT Rounds of negotiations ........................................................................... 13

Figure 1: WTO organization chart ................................................................................. 19

MODULE 3: THE RELATIONSHIP BETWEEN MULTILATERAL ENVIRONMENTAL AGREEMENTS

AND THE WTO ........................................................................................ 51

Figure 1: Use of Trade Measures in MEAs ...................................................................... 56

Table 1: Examples of MEAs and their Trade Measures ..................................................... 58

Figure 2: WTO Principles ............................................................................................. 59

Figure 3: EC-Swordfish Example ................................................................................... 62

Figure 5: Main Approaches MEA negotiations in the CTESS .............................................. 66

Figure 6: MEAs Granted Observer Status in the CTE ........................................................ 71

MODULE 4: ENVIRONMENTAL GOODS NEGOTIATIONS ...................................................... 79

Figure 1: Win-win-win outcome .................................................................................... 82

Figure 2: DDA Negotiations: Institutional Structure ......................................................... 83

Figure 3: Lists of environmental goods submitted ........................................................... 85

Figure 4: Type of products in the submitted environmental lists (407 HS-6 Lines) .............. 86

Figure 5: Categories of products in the submitted environmental lists (407 HS-6 Lines) ...... 87

Figure 6: Identification of environmental goods, key challenges ....................................... 88

Table 1: Approaches proposed by Members to liberalize environmental goods .................... 91

MODULE 5: ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS, INCLUDING

LABELLING FOR ENVIRONMENTAL PURPOSES................................................ 103

Figure 1: Environment-related TBT Notifications (1991-2011) ......................................... 114

Figure 2: Environment-related SPS Notifications (1991-2011) ......................................... 115

Figure 3: Environment-related TBT STCs (1991-2011) ................................................... 116

Figure 4: Environment-related objective of TBT STCs (1991-2011) .................................. 117

Figure 5: Type of concern of environment-related TBT STCs (1991-2011) ........................ 118

Table 1: Environmental Aspects of Selected TBT STCs .................................................... 119

Figure 7: Examples of Eco-labelling Schemes ................................................................ 121

Figure 8: Environmental Labelling TBT Notifications (2000 – 2011) .................................. 131

Figure 9: Environmental labelling STCs raised in the TBT Committee (1995-2011) ............ 132

Figure 10: Concerns over environmental labelling STCs raised in the TBT Committee

(1995-2011) ............................................................................................. 132

MODULE 6: WTO RULES AND ENVIRONMENTAL POLICIES .............................................. 145

Figure 1: Analysis under article XX of GATT .................................................................. 158

Acronyms

APEC Asia-Pacific Economic Cooperation

CBD Convention on Biological Diversity

CAA Clean Air Act

CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora

CTD WTO Committee on Trade and Development

CTE WTO Committee on Trade and Environment

CTESS WTO Committee on Trade and Environment (Special Session)

CTG Council for Trade in Goods

DDA Doha Development Agenda

DPGS Domestically prohibited goods

DSB Dispute Settlement Body

DSU Dispute Settlement Understanding

EEE Electronic, electrical equipments

EFTA European Free Trade Association

EMIT GATT Group on Environmental Measures and International Trade

EU European Union

FAO Food and Agricultural Organization

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GHG Greenhouse gas

GMOS Genetically modified organisms

ISO International Organization for Standardization

IPRS Intellectual Property Rights

ITC International Trade Centre UNCTAD/WTO

ITLOS International Tribunal for the Law of the Sea

LCA Life cycle analysis

LDCS Least Developed Countries

LLDC Least developed of the Least Developed Countries

LMOS Living modified organisms

MEA Multilateral Environmental Agreement

MERCOSUR Common Market for the South

MFN Most-favoured-nation treatment

MRAS Mutual recognition agreements

MTS Multilateral trading system

NAMA Non-agricultural market access

NGO Non-governmental Organization

NTBS Non-tariff trade barriers

NTMS Non-tariff measures

ODS Ozone-depleting substances

OECD Organization for Economic Cooperation and Development

PIC Prior Informed Consent

PPMS Process and production methods

SCM Subsidies and Countervailing measures

SMES Small and medium size enterprises

SPS Sanitary and Phytosanitary measures

STOS Specific trade obligations

TBT Technical Barriers to Trade

TEDS Turtle excluder devices

TNC Trade Negotiations Committee

TPRB Trade Policy Review Body

TPRM Trade Policy Review Mechanism

TRIPS Trade-Related Aspects of Intellectual Property Rights

UNCED United Nations Conference on Environment and Development

UNCLOS United Nations Convention on the Law of the Sea

UNCPC United Nations Central Product Classification

UNCTAD United Nations Conference on Trade and Development

UNEP United Nations Environment Programme

UNFCCC United Nations Framework Convention on Climate Change

WCO World Customs Organization

WIPO World Intellectual Property Organization

WSSD World Summit on Sustainable Development

Table of Contents

MODULE 0: COURSE GUIDE .............................................................................................. 1

I. INTRODUCTION ............................................................................................................ 3

II. COURSE ORGANIZATION ............................................................................................... 4

II.A. Objectives ....................................................................................................... 4

II.B. Structure and duration of the Course .................................................................. 4

II.C. Who is who? .................................................................................................... 6

II.D. Evaluation and Certificate .................................................................................. 6

III. E-LEARNING WEBSITE .................................................................................................. 7

III.A. Training Materials ............................................................................................. 7

III.B. Interactive Tools .............................................................................................. 8

IV. USER AGREEMENT ........................................................................................................ 9

MODULE 1: THE WORLD TRADE ORGANIZATION ................................................................. 11

I. HISTORICAL BACKGROUND OF THE WTO ...................................................................... 13

II. OBJECTIVES OF THE WTO ........................................................................................... 15

III. FUNCTIONS OF THE WTO ............................................................................................ 17

IV. ORGANIZATIONAL STRUCTURE OF THE WTO ................................................................. 19

IV.A. The Ministerial Conference ............................................................................... 20

IV.B. The General Council ........................................................................................ 20

IV.C. The Councils .................................................................................................. 21

IV.D. The Subsidiary Bodies ..................................................................................... 21

IV.E. Decision-Making at the WTO ............................................................................ 23

IV.F. On-going Negotiations: the Doha Development Agenda ..................................... 24

V. SUMMARY .................................................................................................................. 26

MODULE 2: INTRODUCTION TO TRADE AND ENVIRONMENT IN THE WTO ................................... 29

VI. ENVIRONMENTAL PROTECTION AND THE WTO ............................................................... 31

VI.A. WTO goals - contribution to sustainable development and protection of the

environment .................................................................................................. 31

VI.B. WTO rules - Members can adopt trade-related measures aimed at protecting the

environment... ............................................................................................... 32

VI.C. WTO institutions - advance dialogue on trade and environment linkages... ............ 33

VI.D. WTO Forward-looking agenda - The Doha Development Agenda and the

environment... ............................................................................................... 33

VII. EMERGING ENVIRONMENT DEBATE IN THE GATT ........................................................... 34

VII.A. Developments between the Stockholm Conference in 1972 and the Rio Summit in

1992............................................................................................................. 34

VII.B. Rio Earth Summit and after ............................................................................. 36

VIII. THE 1994 MARRAKESH MINISTERIAL DECISION ON TRADE AND ENVIRONMENT AND THE

WTO COMMITTEE ON TRADE AND ENVIRONMENT ........................................................... 37

VIII.A. 1994 marrakesh MINISTERIAL decision on trade and environment ....................... 37

VIII.B. committee on trade and environment (CTE) ...................................................... 38

IX. THE DOHA MANDATE .................................................................................................. 40

IX.A. trade and environment negotiations - CTESS ..................................................... 40

IX.B. items of focus for the cte regular work .............................................................. 42

X. PARAMETERS OF THE TRADE AND ENVIRONMENT DISCUSSIONS IN THE WTO ................... 44

X.A. The WTO is not an Environmental Protection Agency .......................................... 44

X.B. WTO Rules Provide Significant Scope for Environmental Protection ....................... 44

X.C. Increased Market Access for Developing Countries could contribute to environmental

protection ..................................................................................................... 44

X.D. Trade and Environment Coordination Should be Enhanced ................................... 45

XI. SUMMARY .................................................................................................................. 46

MODULE 3: THE RELATIONSHIP BETWEEN MULTILATERAL ENVIRONMENTAL AGREEMENTS AND

THE WTO .............................................................................................. 51

I. INTRODUCTION TO MEAS ............................................................................................ 53

I.A. BACKGROUND ............................................................................................... 53

I.B. TRADE MEASURES IN MEAs ............................................................................. 56

II. RELATIONSHIP BETWEEN MEAs AND THE WTO: POTENTIAL CONFLICT? ........................... 59

II.A. MEA rules and GATT Articles I, III and XI .......................................................... 59

II.B. MEAs and the General Exceptions of GATT Article XX .......................................... 60

II.C. WHICH dispute settlement SYSTEM? ................................................................. 61

II.D. POTENTIAL CONFLICT? THE CASE OF EC - SWORDFISH ...................................... 62

III. NEGOTIATIONS ON THE RELATIONSHIP BETWEEN WTO AND MEA RULES.......................... 64

III.A. PARAGRAPH 31(I) MANDATE ........................................................................... 64

III.B. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ............................................. 65

IV. COLLABORATION BETWEEN THE WTO AND MEA SECRETARIATS ...................................... 68

IV.A. PARAGRAPH 31(II) MANDATE .......................................................................... 68

IV.B. INFORMATION EXCHANGE ............................................................................... 68

IV.C. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON INFORMATION EXCHANGE .. 69

IV.D. OBSERVER STATUS ........................................................................................ 71

IV.E. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON OBSERVER STATUS ........... 71

V. SUMMARY .................................................................................................................. 74

MODULE 4: ENVIRONMENTAL GOODS NEGOTIATIONS ........................................................... 79

I. BACKGROUND ............................................................................................................ 81

I.A. POTENTIAL TO DELIVER WIN-WIN-WIN OUTCOMES ........................................... 81

I.B. Economic Rationale for reducing tariff and Non Tariff barriers on Environmental

Goods ........................................................................................................... 82

I.C. The Institutional Structure of Negotiations ......................................................... 83

II. IDENTIFICATION OF ENVIRONMENTAL GOODS .............................................................. 85

II.A. ENVIRONMENTAL GOODS IDENTIFIED BY A NUMBER OF MEMBERS ...................... 85

II.B. Challenges in IDENTIFYING Environmental Goods .............................................. 87

III. TREATMENT FOR ENVIRONMENTAL GOODS ................................................................... 90

III.A. The DDA context ............................................................................................ 90

III.B. DIFFERENT APPROACHES ................................................................................ 90

IV. OTHER CONSIDERATIONS ........................................................................................... 94

IV.A. Non-Tariff Barriers .......................................................................................... 94

IV.B. Transfer of Technology .................................................................................... 94

IV.C. Environmental Services ................................................................................... 95

V. CURRENT SITUATION .................................................................................................. 98

VI. SUMMARY .................................................................................................................. 99

MODULE 5: ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS, INCLUDING LABELLING

FOR ENVIRONMENTAL PURPOSES............................................................... 103

I. ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS ............................................... 105

I.A. ENVIRONMENTAL REQUIREMENTS ................................................................... 105

I.B. RELEVANT WORK IN THE CTE COMMITTEE ....................................................... 108

I.C. work in other relevant wto committees ............................................................ 113

II. LABELLING REQUIREMENTS FOR ENVIRONMENTAL PURPOSES ........................................ 120

II.A. Introduction ................................................................................................. 120

II.B. Non-Product related PROCESS AND PRODUCTION METHODS .............................. 125

II.C. CTE'S WORK ON ENVIRONMENTAL LABELLING .................................................. 126

II.D. ENVIRONMENTAL labelling and the TBT Agreement ........................................... 131

II.E. market access Issues faced by developing countries .......................................... 135

III. SUMMARY ................................................................................................................. 140

MODULE 6: WTO RULES AND ENVIRONMENTAL POLICIES ................................................... 145

I. OVERVIEW OF GATT ARTICLE XX ................................................................................. 147

I.A. INTRODUCTION ............................................................................................ 147

I.B. KEY GATT DISCIPLINES ................................................................................. 149

I.C. GATT ARTICLE XX GENERAL EXCEPTIONS ........................................................ 153

I.D. OTHER RELEVANT WTO TEXTS ........................................................................ 160

II. ENVIRONMENT-RELATED DISPUTES IN GATT/WTO ......................................................... 165

II.A. EC – ASBESTOS ............................................................................................ 165

II.B. us – SHRIMP ................................................................................................. 166

II.C. US – GASOLINE ............................................................................................ 168

II.D. BRAZIL – retreaded TYRES ............................................................................. 170

II.E. US – TUNA II ................................................................................................ 173

III. SUMMARY ................................................................................................................. 176

SUPPORT DOCUMENTS ................................................................................................ 179

REFERENCE LIST ........................................................................................................ 181

ANNEX 1 ......................................................................................................... 183

ANNEX 2 ......................................................................................................... 187

1

Course Guide ESTIMATED TIME: ½ hour

CONTENT

Organization of your course

Main functions of the E-Learning platform

The User Agreement

MODULE

0

3

I. INTRODUCTION

Welcome to the course "Trade and Environment"!

This Course Guide is envisaged to give you an overview of the organization of your course, as well as of the

main functions of the E-Learning platform.

At the end of the Course Guide, you will find the User Agreement, which was initially sent with your username

and password. We advise you to print this Guide and have it readily available throughout the course.

4

II. COURSE ORGANIZATION

II.A. OBJECTIVES

After successfully completing the elements of the E-Learning course "Trade and Environment" you will have:

enhanced knowledge of WTO discussions on trade and environment;

enhanced knowledge of WTO trade and environment negotiations;

enhanced knowledge of WTO rules and environmental policies; and

benefited from the establishment of a network of useful contacts between course participants and

experts from the WTO Secretariat.

To facilitate the achievement the objectives of the course, you will have access to training materials,

background documents and the interactive tools of the E-Learning platform.

WTO E-Learning courses are part of the WTO Progressive Learning Strategy (PLS). The primary aim of the PLS

is to promote higher levels of learning, with a view to sustaining the human and institutional capacity of

beneficiary countries to participate more effectively in the WTO.

This course is a level 2 (intermediate level) course in the specialist path of the PLS.

TO KNOW MORE

The PLS is the progressive, multi modular sequencing of products aimed at improving the delivery of WTO

technical assistance and training.

To know more about the WTO PLS: http://www.wto.org/english/tratop_e/devel_e/teccop_e/pls_e.pdf

To know more about WTO technical assistance and training, please refer to:

http://www.wto.org/english/tratop_e/devel_e/teccop_e/tct_e.htm

II.B. STRUCTURE AND DURATION OF THE COURSE

WTO E-Learning courses give you the flexibility to combine your training activities and professional

responsibilities. Furthermore, you will be able to wholly benefit from interactive activities such as Chat Sessions

with WTO Experts. WTO E-Learning is available for government officials.

While the WTO E-Learning material is freely available on the WTO E-Learning website, you have to register and

submit the nomination form in order to access the course exams and obtain a WTO certificate. Once your

registration process is complete, a username and password will be sent to you by email. Your access codes will

be available for a two month period. In this period, you will have to complete AND submit all exams. During

these two months a Trainer will be available to assist you with any questions you may have.

5

The estimated study time per course is 50-60 hours. Therefore, the course requires around 2 hours of study

per working day.

Note

You will have access to the E-Learning website during the duration of the course and your account will

expire at 23:59 (Geneva time) of the last day. In order to finalise the course in a timely manner, you

should submit the Final Exam before this deadline.

Structure of the course

Training materials The course is divided into 6 Modules. Each module contains training materials on a

specific issue, including explanatory texts and examples, which take two forms:

Illustrations: A simplified explanation of WTO provisions or theoretical points

developed throughout the module.

Case studies extracted from WTO jurisprudence, which show how WTO rules have

been interpreted by the Dispute Settlement Body.

Exercises Self-assessment exercises are available in each module. They allow you to

measure your personal progress in the course.

Your academic profile allows you track your progress, using graphs and charts.

End-of-module

Exams

Please note that you may take the end-of-module exam only once and it will count

towards your final average.

Final Exam The final Exam is the exam at the end of the last module of your course. This

exam covers all the issues addressed during the course. Take your time to

complete and submit it, since you will only be able to do it once and it counts

double in the calculation of your final average.

6

II.C. WHO IS WHO?

During your course, you will have the opportunity to interact with colleagues from other WTO Members and

Observers, as well as with WTO experts in the subject matter of the course and the E-Learning Unit.

Who is who?

Participants Government officials who are taking part in the course and have the potential to

interact and build a network.

Trainer Your Trainer is a WTO expert, who is available to guide you and respond to your

queries on the academic content of the course. Feel free to contact your Trainer

using the Internal Email Service, whenever you need some clarification.

Help Desk The E-Learning Help Desk is ready to assist you on technical issues related to the

functioning of the website.

II.D. EVALUATION AND CERTIFICATE

At the end of each module, you will have to complete and submit an exam. These exams contain

multiple-choice questions addressing the substantive content, as well as case studies, of the pertinent Module.

Should you have questions on the evaluation of your exams, please remember to first carefully read

the reasoning for correct answer, which you will see together with your test results.

The results of each exam will be taken into account for the calculation of your final average. After completing

the last module, you will find the Final Exam, which counts double in the calculation of your final average.

Note

You may only take the end-of-module exams once and they count towards the calculation of your final

average.

Upon successful completion of the course, the WTO Institute for Training and Technical Cooperation will issue

and send you a certificate, signed by the Director General, if you:

reach a final average of at least 60% of correct answers;

have more than 50% in each exam except in one. (This means: If the course has 5 Modules, you have

to have 4 exams above 50%.);

have taken part in the interactive activities (chat and/or forum).

Participants with outstanding results (i.e. a final average above 90% and no exam below 50%) will receive a

Certificate with Distinction.

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III. E-LEARNING WEBSITE

The E-Learning website has been designed for you and to foster an efficient training experience and allow you

to interact with other participants and WTO experts. It contains the training materials for your course, as well

as background documentation and interactive tools.

You may take the Online Tutorial available on the website, to get familiar with the different functions and

interactive tools.

Note

In order to login, you should always enter the username and password that were sent to you.

III.A. TRAINING MATERIALS

E-Learning offers comprehensive courses. Each module consist of the following elements:

Training and theoretical materials on the WTO and its Agreements;

Illustrations and examples;

Case studies and exercises;

Text of the WTO Agreements and Official Documents;

Access to further information through hyperlinks or the module support documents;

End-of-module exam.

Furthermore, you will have access to the eLibrary, which contains background documents (WTO Agreements,

the Analytical Index of jurisprudence, Glossary of Trade Terms, Trade Policy Review Reports, List of

WTO members and Information on WTO Negotiations), as well as useful links to complement your study.

8

III.B. INTERACTIVE TOOLS

The E-Learning website offers interactive tools to foster the exchange among course participants, as well as

between participants and WTO experts. Please refer to the Online Tutorial for more detailed information on:

Interactive tools

Internal Email Service: Your own E-Learning email account! Use it to contact your Trainer, Help

Desk, other participants... and build-up your network.

News Forum: This is the place to discuss the latest WTO news of interest for you by

exchanging comments and views with other participants and trainers.

Chat Sessions: Chat Sessions with WTO Experts and Special Guests will be organized

during the course. An invitation with the date and time will be sent to you.

Important note

Do not wait to fully benefit from the interactive features of the E-Learning website! Take the first step in

contacting your Trainer and take the initiative in the process... talk about the most important trade issues

for your country and region with colleagues and share your knowledge and experiences.

9

IV. USER AGREEMENT

The use of the E-Learning platform, the training materials and interactive features is subject to the terms and

conditions contained in the User Agreement. You have automatically agreed to the User Agreement by using

the log-in details (username and password) that were sent to you. The User Agreement reads as follows:

1. The E-Learning platform is property of the World Trade Organization. It is managed by the E-Learning

Unit of the Institute for Training and Technical Cooperation and its objective is to deliver online courses

on the WTO and its Agreements, while taking full advantage of the internet and the latest multimedia

technologies.

2. The User is a trade official from a developing country or economy in transition, nominated by his/her

respective government. The User enjoys access to the E-Learning platform during the duration of the

course, under the following terms and conditions:

a. The WTO is the copyright holder of the content of the E-Learning platform. Training materials and

other tools available online shall not be disseminated without prior written authorization from the

WTO E-Learning Unit;

b. During the course, the User may print the training materials and documents available on the

E-Learning platform for his/her personal use only;

c. Citations and references to the course materials available on the E-Learning platform shall fully

acknowledge the source (i.e. WTO E-Learning course);

d. Only authorized Users (i.e. participants, nominated by their governments, who have received a

username and password) are entitled to use the E-Learning platform;

e. The User is responsible for maintaining the confidentiality of the username and password to access

the E-Learning platform. If you become aware of any unauthorized use of your account, you shall

notify the E-Learning Unit (elearning@wto.org) immediately;

f. The utilization of the E-Learning platform and its contents shall be exclusively in relation to the

course that is being followed by the User;

g. Communications through email and the Discussion Forum may be monitored by the WTO to ensure

civility and compliance with the User Agreement;

h. If the User breaches the terms and conditions of this User Agreement, his/her right to access the

E-Learning Platform will be revoked unilaterally by the WTO.

11

The World Trade Organization ESTIMATED TIME: 2 ½ hours

OBJECTIVES OF MODULE 1

Present a synopsis of the historical background of the WTO

Present the objectives and some new key WTO principles

Explain the function and organizational structure of the WTO

Present the negotiations launched in the Doha Development Agenda

MODULE

1

13

I. HISTORICAL BACKGROUND OF THE WTO

IN BRIEF

From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of

world trade. Although it appeared well established, for those 47 years it was a provisional agreement

serviced by only a de facto organization.

The GATT helped to establish a multilateral trading system that became progressively liberalized through

successive rounds of trade negotiations. The conclusion of Uruguay Round negotiations led to the creation of

new agreements, such as the General Agreement on Trade in Services (GATS) and the Agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), and the establishment of the

World Trade Organization (WTO) in 1995.

Rounds of trade negotiations

Year Place/name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960-1961 Geneva, Dillon Round Tariffs 26

1964-1967 Geneva, Kennedy Round Tariffs and anti-dumping measures 62

1973-1979 Geneva, Tokyo Round Tariffs, non-tariff measures, plurilateral

codes

102

1986-1994 Geneva, Uruguay Round Tariffs, non-tariff measures, rules,

services, intellectual property, dispute

settlement, textiles, agriculture, creation of

WTO, etc

123

Table 1: GATT Rounds of negotiations

14

IN DETAIL

The project to establish a multilateral trading system to negotiate lower customs duties and the reduction or

elimination of other trade barriers and to stimulate the expansion of world trade originated in the 1940s.

It was supposed to go ahead on two tracks:

the creation of the International Trade Organization (ITO); and

the launching of multilateral tariff negotiations that involved the drafting of binding legal provisions

relating to the tariffs under a "General Agreement on Tariffs and Trade" (GATT)

The GATT was drafted, but the ITO was never created. However, the Interim Commission for the International

Trade Organization (ICITO) was established and served as a de facto Secretariat to the GATT Contracting

Parties.

From 1947 to 1994, Contracting Parties organized eight rounds of negotiations. The major ones were:

The Kennedy Round (1964-1967):

substantial reduction of tariff barriers.

The Tokyo Round (1973-1979):

first negotiations on non-tariff barriers;

plurilateral codes; and

the enabling clause (the first major decision on differential treatment and non-reciprocity for

developing countries).

The Uruguay Round (1986-1994):

creation of the WTO;

transformation of Tokyo Round plurilateral codes into multilateral agreements;

strengthened dispute settlement system; and

incorporation of the new agreements on trade in services and trade-related aspects of intellectual

property rights which considerably broadened the scope of the multilateral trading system.

Participants in the Uruguay Round of Multilateral Trade Negotiations concluded the Round by adopting the

"Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" (the Final Act). The

Final Act included the "Marrakesh Agreement Establishing the World Trade Organization" (also referred to as

"the WTO Agreement").

The WTO Agreement established a new organizational body, the World Trade Organization ("the WTO"), to

administer the Uruguay Round agreements.

15

II. OBJECTIVES OF THE WTO

IN BRIEF

In the preamble to the Marrakesh Agreement establishing the WTO, the parties to the Agreement recognize

certain objectives they wish to attain through the multilateral trading system:

raise living standards;

ensure full employment;

ensure a large and steadily growing volume of real income and effective demand; and

expand 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.

The Agreement also recognizes the need for "positive efforts to ensure that developing countries, and

especially the least-developed among them, secure a share in the growth in international trade

commensurate with the needs of their economic development".

IN DETAIL

The Preamble to the WTO Agreement encapsulates its objectives. It declares:

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,

Recognizing further that there is need for positive efforts designed to ensure that developing countries, and

especially the least developed among them, secure a share in the growth in international trade

commensurate with the needs of their economic development. Being desirous of contributing to these

objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial

reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in

international trade relations...

16

The objectives of the WTO are not fundamentally different from the objectives contained in the preamble of the

GATT 1947. However, it is important to note the following two points:

Although the WTO's objectives do not mention trade liberalization as the means to establish free-trade

between Members, the drafters considered "substantial reduction of tariffs and other barriers to trade and the

elimination of discriminatory treatment in international trade relations" as important steps to achieving these

objectives.

A second means to achieve the noted objectives is the practice of Members of "entering into reciprocal and

mutually advantageous arrangements" as mentioned in the text of the GATT 1947.

Accordingly, the WTO adds three new dimensions to the objectives in the preamble of the GATT 1947. They

include:

the expansion of "the production of and trade in goods and services" to take into consideration the extension

of the coverage of the WTO subject matters. That is, while the GATT covered trade in goods, under the

WTO, coverage was expanded to another subject area – trade in services (see the GATS Agreement);

"the objective of sustainable development, seeking both to protect and preserve the environment and to

enhance the means for doing so …;"

the "development dimension" aiming at helping "…developing countries, and especially the least developed

among them, secure a share in the growth in international trade commensurate with the needs of their

economic development".

17

III. FUNCTIONS OF THE WTO

IN BRIEF

The WTO fulfils its objectives by:

administering trade agreements between its Members;

serving as a forum for trade negotiations;

settling trade disputes;

reviewing Members trade policies;

assisting developing countries in trade policy issues, through technical assistance and training

programmes; and

cooperating with other international organizations.

IN DETAIL

Article III of the WTO Agreement expounds the functions of the WTO. They include:

(1) "The WTO shall facilitate the implementation, administration and operation, and further the objectives

of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for

the implementation, administration and operation of the Plurilateral Trade Agreements."

(2) "The WTO shall provide the forum for negotiations among its Members concerning their multilateral

trade relations in matters dealt with under the agreements in the Annexes to this Agreement … The

WTO may also provide a forum for further negotiations among its Members concerning their

multilateral trade relations, and a framework for the implementation of the results for such

negotiations, as may be decided by the Ministerial Conference."

The preceding paragraphs refer to the role of the WTO of providing a permanent institutional forum for trade

negotiations among its Members. These negotiations may be on subjects already covered under WTO

agreements or in respect of "new issues" to be disciplined by WTO agreements.

(3) "The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of

Disputes (DSU) in Annex 2 to this Agreement."

18

The above paragraph refers to the role of the WTO as a forum for the settlement of disputes between its

Members in accordance with the disciplines and procedures elaborated in the Dispute Settlement

Understanding ("the DSU" in Annex 2 to the WTO Agreement). When Members are unable to reach a mutually

acceptable solution to a dispute arising under one of the agreements covered by the DSU, they may have

recourse to the Dispute Settlement Procedure.

(4) "The WTO shall administer the Trade Policy Review Mechanism (TPRM) provided for in Annex 3 to this

Agreement."

This function underscores the role of the WTO in the transparency mechanism designed by Members during the

Uruguay Round. The Trade Policy Review Mechanism (TPRM) was one of the few elements of the

WTO Agreement that formed part of the "Early Harvest" realized before the Uruguay Round ended.

Early Harvest is an expression which describes the agreement by GATT contracting parties, at the "Mid-Term

Review" Ministerial Meeting of the Uruguay Round negotiations, in Montreal in 1988, that certain results of the

negotiations, on which a clear consensus already existed, would enter into force immediately, although on a

provisional basis. That is, their agreement that some fruits (of the negotiations) would be harvested early.

(5) "With a view to achieving greater coherence in global economic policy-making, the WTO shall

cooperate, as appropriate, with the International Monetary Fund and with the International Bank for

Reconstruction and Development and its affiliated agencies."

This final quote identifies one aspect that the Members need consider when they enter into negotiations to

design an international regulatory framework. They should cooperate with other multilateral agencies. The

quote also appears to be an implicit reference to the period when (in the context of the Havana Conference)

many participants considered that an ITO could be constituted under the UN umbrella, next to the IMF and the

World Bank. The ITO was envisioned as the third pillar of a system put in place to shape international

economic relations in the post-war reconstruction period - the Bretton Woods system.

EXERCISES:

1. What is the main objective of the WTO?

2. What are the main functions of the WTO?

19

IV. ORGANIZATIONAL STRUCTURE OF THE WTO

With a dense network of legal provisions and procedures to govern their trade transactions, WTO Members

established a working structure for the WTO to allow them to monitor the implementation and the development

of the WTO.

The WTO Agreement contains provisions that organize the work of the WTO. Members take their

consensus-based decisions through various bodies, which are open to all Members. The "legal structure" of the

WTO is shown in the diagram below:

Figure 1: WTO organization chart

20

IV.A. THE MINISTERIAL CONFERENCE

The Ministerial Conference is the highest authority in the WTO. Its sessions must take place at least once

every two years. The Ministerial Conference can take decisions on all matters under all multilateral trade

agreements.

IV.B. THE GENERAL COUNCIL

The General Council constitutes the second tier in the WTO Structure. It comprises representatives from all

Member countries, usually Ambassadors/Permanent Representatives based in Geneva. It meets regularly

(approximately once a month) to adopt decisions, mostly on behalf of the Ministerial Conference when the

Conference is not in session.

The General Council also meets as:

The Trade Policy Review Body (TPRB), with a different Chairperson, to carry out trade policy reviews as

mandated by the Decision on the Trade Policy Review Mechanism.

The Dispute Settlement Body (DSB), with a different Chairperson, to administer the rules in the Understanding

on Rules and Procedures Governing the Settlement of Disputes (DSU). The DSB has the authority to establish

panels, adopt Panel and Appellate Body Reports, oversee the implementation of rulings and recommendations,

and authorize the suspension of concessions and other obligations under the agreements for which disputes

can be settled by the DSU - the "covered agreements".

The DSB establishes Panels on an ad hoc basis, at the request of a Member (or Members) usually with the

following terms of reference:

...to "examine, in the light of the relevant provisions in the respective covered agreements, the matter

referred to the DSB by the complaining Member and to make such findings as will assist the DSB in making

the recommendations or in giving the rulings provided in that/those agreement(s)".

The DSB also appoints persons to serve on the Appellate Body. The Appellate Body is a standing body of seven

persons that hears appeals from reports issued by Panels and makes recommendations to the DSB,

accordingly. Where adopted by the DSB, the Appellate Body and the Panel Report (as upheld, amended or

reversed by the Appellate Body) becomes binding on the disputing Members.

21

IV.C. THE COUNCILS

The Councils can be described as subsidiary bodies to the General Council. There are three Councils:

The Council for Trade in Goods (the Goods Council) oversees all the issues related to the Agreements

on trade in goods.

The Council for Trade in Services (the GATS Council) oversees all issues related to the GATS

Agreement.

The Council for Trade-Related Aspects of Intellectual Property Rights (the TRIPS Council) oversees

issues related to the TRIPS Agreement.

These Councils are composed of all WTO Members and have subsidiary bodies (see below).

Several other bodies, which focus on specific issues, report to the General Council. They are usually called

Committees, Working Groups or Working Parties; they are:

Committee on Trade and Development (CTD);

Committee on Trade and Environment (CTE);

Committee on Regional Trade Agreements (CRTA);

Committee on Balance-of-Payment Restrictions (BOP Committee); and

Committee on Budget, Finance and Administration.

Working Parties on Accession;

Working Group on Trade, Debt and Finance; and

Working Group on Trade and Technology Transfer.

IV.D. THE SUBSIDIARY BODIES

Two Councils (for Goods and Services) have subsidiary bodies. The TRIPS Council, to date, has no subsidiary

body.

The Goods Council has 11 committees working on specific subjects (such as agriculture, market access,

subsidies, and anti-dumping measures). These committees are composed of all Members.

The Services Council's subsidiary bodies deal with financial services, domestic regulations, GATS rules and

specific commitments. It does not have a permanently fixed number of subsidiary bodies. For example, the

Negotiating Group on Basic Telecommunications was dissolved in February 1997 when its work ended.

22

EXERCISES:

3. Please arrange the following WTO bodies in hierarchical order:

- General Council;

- Council for Trade in Services;

- Ministerial Conference.

4. Please state the function of the following WTO bodies:

(a) General Council;

(b) Council for Trade in Services;

(c) Ministerial Conference.

23

IV.E. DECISION-MAKING AT THE WTO

CONSENSUS VERSUS...

The WTO is a Member-driven, consensus-based organization.

Consensus is defined as a situation in which no Member, present at a meeting where a decision is taken,

formally objects to the proposed decision. The definition is contained in Footnote 1 to Article IX of the

WTO Agreement:

"The Body concerned shall be deemed to have decided by consensus on a matter submitted for its

consideration, if no Member present at the meeting when the decision is taken, formally objects to the

proposed decision."

Consensus allows all Members to ensure their interests are properly considered.

...VOTING

Where consensus is not possible, the WTO agreement permits voting — a vote being won by a tally of the

majority of votes cast, and based on the principle "one Member, one vote".

Decisions are generally made by consensus, without voting. However, the WTO Agreement envisages voting

whenever a decision cannot be arrived at by consensus. Voting can be exercised in the following four specific

situations:

a three-quarters majority of WTO Members in the Ministerial Conference or the General Council can

adopt an interpretation of any of the multilateral trade agreements;

the Ministerial Conference, by a three-quarters majority, can waive an obligation imposed on a Member

by a multilateral agreement;

all Members or a two-thirds majority (depending on the provision of the agreement) can take a decision

to amend provisions of the multilateral agreements;

a two-thirds majority in the Ministerial Conference or the General Council in between conferences, can

take a decision to admit a new Member.

FORMALS AND INFORMALS

Important breakthroughs are often, but no always, made in formal meetings, or in the higher level Councils.

Since decisions are generally made by consensus, without voting, WTO informal consultations play a vital role

in bringing the diverse Membership to an agreement.

24

One tier below the formal meetings is informal meetings. Informal meetings, such as Heads of Delegations

(HOD), also include the full membership. More complex issues tend to be discussed in smaller groups. A

recent common practice is for the chairperson of a negotiating group to attempt to forge a compromise by

holding consultations with delegations in twos or threes, or in groups of 20-30 (of the most interested

delegations).

These smaller meetings have to be handled sensitively. The key is to ensure that everyone is kept informed

even if they are not in a particular consultation or meeting (the process must be "transparent"), and that they

have an opportunity to participate or to provide input (it must be "inclusive").

HAVE YOU EVER HEARD OF THE "GREEN ROOM"?

The "Green Room" is an expression originated from the informal name given to the GATT Director-General's

conference room, which was green. The term nowadays refers to small meetings, which are at times called by

the Director-General, and can take place anywhere, even during Ministerial Conferences.

Market access negotiations also involve small groups, but for a completely different reason. The outcome is a

multilateral package of individual countries' commitments, which are the result of numerous informal bilateral

bargaining sessions, and in the interest of individual countries, (examples are the tariff, and market access

negotiations on trade in services.)

Consequently, informal consultations play a vital role in facilitating consensus, but they do not appear in

organizational charts because they are informal. However, informal consultations are not separate from formal

meetings. They are necessary to facilitate formal decisions in the Councils and Committees. Nor are the

formal meetings unimportant. Formal meetings are the forums for exchanging views, putting countries'

positions on the record, and ultimately confirming decisions.

IV.F. ON-GOING NEGOTIATIONS: THE DOHA DEVELOPMENT

AGENDA

At the Ministerial Conference in Doha, Qatar in November 2001, Members decided to launch a new round of

negotiations, and pursuant to their decision, adopted the Doha Development Agenda and its accompanying

work programme.

The Doha Ministerial Declaration, which sets the negotiating mandate, required WTO Members to set up a

Trade Negotiations Committee (TNC). The TNC then established negotiating mechanisms and is supervising

the current negotiations under the authority of the General Council.

Negotiations are taking place:

In new negotiating groups, on:

Market access;

WTO rules (anti-dumping, subsidies, regional trade agreements); and

Trade Facilitation.

25

In existing bodies, on:

agriculture: in special sessions of the Agriculture Committee;

services: in special sessions of the Services Council;

geographical indications (a multilateral registration system): in special sessions of the Council

for Trade-Related Aspects of Intellectual Property Rights (TRIPS). Other TRIPS issues are

addressed in regular TRIPS Council meetings;

Dispute Settlement Understanding: in special sessions of the Dispute Settlement Body;

Environment: in special sessions of the Trade and Environment Committee; and

Negotiations on outstanding implementation issues: in relevant bodies according to

paragraph 12 of the Doha Ministerial Declaration.

Considerable emphasis is placed on special and differential treatment for developing countries (S&D). S&D is

an integral part of the WTO Agreements. All negotiations and other aspects of the Doha Agenda's work

programme are to fully incorporate this principle. According to the Doha Development Declaration

(paragraph 44) and the Decision on Implementation-Related Issues and Concerns, all S&D provisions are to be

reviewed to make them more precise, effective and operational. These reviews are carried out in special

sessions of the Trade and Development Committee.

26

V. SUMMARY

OBJECTIVES OF THE WTO

Improve the welfare of the peoples of the Member countries.

FUNCTIONS OF THE WTO

Facilitate the implementation, administration and operation, and furthering of the objectives of the

WTO Agreements (including the Plurilateral Agreements);

Serve as a forum for trade negotiations;

Administer the Dispute Settlement Understanding (DSU);

Administer the Trade Policy Review Mechanism (TPRM); and

Cooperate with the IMF and the IBRD (World Bank) to achieve coherence in global economic

policy/making.

STRUCTURE OF THE WTO

Ministerial Conference

|

General Council (also DSB and TPRB)

|

Councils for Goods, Services, Intellectual Property

|

Committees, Working Groups or Working Parties

|

Sub-Committees

27

PROPOSED ANSWERS:

1. The main objective of the WTO is to improve the welfare of the peoples of the Member countries

(standard of living, employment, income, etc.) by expanding the production of, and trade in, goods and

services. The expansion of the production and trade of goods and services is to be achieved through

negotiations leading to trade liberalization.

This objective should be attained in accordance with sustainable development and with due consideration

of the development needs of developing countries.

2. The main functions of the WTO are to:

1. administer trade agreements;

2. serve as a forum for trade negotiations;

3. settle trade disputes;

4. review Member's trade policies;

5. assist developing countries with trade policy issues, through technical assistance and training

programmes; and

6. cooperate with other international organizations.

3. (a) Ministerial Conference;

(b) General Council;

(c) Council for Trade in Services;

4. The Ministerial Conference is the highest authority of the WTO. It meets at least once every two years.

During the interim, the Conference is represented by the General Council. It meets regularly

(approximately once a month) to adopt decisions and to carry out its functions as the Trade Policy Review

Body and the Dispute Settlement Body.

The Council for Trade in Services (CTS ) is one the three Councils beneath the General Council. The CTS

oversees the functioning of the General Agreement on Trade in Services and reports to the General

Council. The CTS is open to all Members and meets several times a year in regular session and, for the

conduct of the ongoing services negotiations in Special Session.

All Members participate in the work of all WTO Bodies.

The WTO continues the GATT principle of taking decisions by "consensus".

29

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

MODULE

2

31

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.

32

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)

33

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?

34

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

35

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.

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

36

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

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.

37

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

38

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.

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.

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

39

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

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.

40

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).

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

41

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:

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").

42

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.

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 reviews7 have been standing

items on the agenda of the CTE, where Members and observers organizations exchange information in

these areas.

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.

43

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.

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?

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

44

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

45

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?

46

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.

47

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.

48

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

and equitable multilateral trading system on the one hand, and acting for the protection of the

49

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.

51

The relationship between

Multilateral Environmental

Agreements and the WTO ESTIMATED TIME: 6 hours

OBJECTIVES OF MODULE 3

Present an introduction to multilateral environmental agreements (MEAs)

Explore the relationship between MEAs and the WTO, including potential for conflict

Provide an overview of the Doha negotiating mandate on the relationship between

MEAs and the WTO

MODULE

3

MODULE

3

53

I. INTRODUCTION TO MEAS

IN BRIEF

Multilateral Environmental Agreements (MEAs) have emerged as an important means for countries to tackle

environmental problems, particularly those regional or global in scope. Several MEAs contain provisions for

measures to control trade, in order to prevent damage to the environment or as a tool to encourage

compliance with their objectives. There are therefore a number of interlinkages between WTO and MEAs

requirements.

IN DETAIL

I.A. BACKGROUND

It has been widely recognized by both environmental and trade policy-makers that multilateral solutions to

transboundary environmental problems, whether regional or global, are preferable to unilateral solutions.

Resort to unilateralism runs the risk of arbitrary discrimination and disguised protectionism which could

damage the multilateral trading system.

The 1992 Rio Conference has strongly endorsed the negotiation of MEAs to address global environmental

problems. Agenda 21 of the 1992 Rio Conference states that measures should be taken to "avoid unilateral

action to deal with environmental challenges outside the jurisdiction of the importing country. Environmental

measures addressing transborder or global environmental problems should, as far as possible, be based on

international consensus." Likewise, the 2012 Rio+20 Conference Declaration "encourage[s] parties to MEAs to

consider further measures, […] as appropriate, to promote policy coherence at all relevant levels, improve

efficiency, reduce unnecessary overlap and duplication, and enhance coordination and cooperation among

MEAs […]".1

WTO Members have been discussing the issue of the relationship between WTO and MEAs since 1995, as the

issue also forms part of the work programme of the Regular CTE."

RECALL

The 1994 Marrakech Ministerial Decision on Trade and Environment sets out the Work Programme of the

Committee on Trade and Environment (CTE). Items 1 and 5 cover the relationship between the rules of the

multilateral trading system and the trade measures contained in MEAs, and their dispute settlement

mechanisms.

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

54

Montreal Protocol

It is reported that there are around 250 MEAs currently in force. Out of these agreements, about 20 would

actually include trade-related provisions.

Discussions in WTO have tended to focus mainly on the following agreements:

the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their

Disposal;

the Convention on Biological Diversity (CBD) and the Cartagena Protocol on Biosafety;

the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);

the Montreal Protocol on Substances that

Deplete the Ozone Layer;

the Rotterdam Convention on the Prior

Informed Consent Procedure for Certain

Hazardous Chemicals and Pesticides in

International Trade;

the Stockholm Convention on Persistent

Organic Pollutants; and

the United Nations Framework Convention

on Climate Change (UNFCCC) and its Kyoto

Protocol.

Example of a successful MEA: The Montreal Protocol on Substances that Deplete the

Ozone Layer

The Montreal Protocol on Substances that Deplete the Ozone Layer (the Montreal Protocol) (adopted in 1987,

entered into force in 1989), a protocol to the Vienna Convention of the Protection of the Ozone Layer, is an

international treaty designed to protect the ozone layer by gradually phasing out the production of certain

chemical substances that deplete the ozone layer, so-called ozone depleting substances (e.g. CFCs).

The Montreal Protocol is often cited as an example of successful multilateral cooperation to tackle a global

environmental problem. One of the main reasons for the Protocol's success has been its ability to engage the

global community to respond. In 2009 the Montreal Protocol became the first United Nations treaty to

achieve universal ratification. The Protocol's wide membership has helped ensure that all countries are

actively engaged in reducing their negative impact of the ozone layer, with no countries free-riding on the

actions of others.

Another possible reason for the Protocol's success is the support it provides to developing countries. With

the assistance of the Multilateral Fund for the Implementation of the Montreal Protocol, developing countries

had, by mid-2010, permanently phased out over 270,000 tonnes of ozone depleting substances that had

been used to produce various products and have eliminated virtually all of their production of CFCs and

halons.

By 2012, the Parties had phased out the consumption of over 98 per cent of all the chemicals controlled by

the Protocol. Global observations have verified that atmospheric levels of key ozone depleting substances

55

are going down and it is believed that with the implementation of the Protocol’s provisions the ozone layer

should return to pre-1980 levels by the middle of this century.

More information can be found on the Ozone Secretariat's website.

EXERCISES:

1. Why are multilateral solutions to environmental problems preferred to unilateral solutions?

2. Please give examples of MEAs discussed in the WTO?

56

I.B. TRADE MEASURES IN MEAs

IN BRIEF

Trade measures in MEAs may be used for several purposes. For instance, such measures can be used to

control trade in order to prevent damage to the environment. Trade measures can also be used as tools to

encourage compliance with the objectives of the MEAs, for instance, in cases where the threat of such

measure may encourage a non-party to comply.2

Trade measures can take the form of an export and/or import ban; export and/or import permits and

licenses; packaging, labelling or transportation requirements; notification requirements; or reporting

requirements. Such measures may be taken vis-à-vis another State party to the MEA, or against a State

that is not a party to that MEA

Mainly used:Mainly used:

•• For monitoring and controlling trade For monitoring and controlling trade

•• To encourage compliance with MEA To encourage compliance with MEA

requirements requirements

•• As a means of enforcing MEA objectives As a means of enforcing MEA objectives

•• As an incentive for nonAs an incentive for non--parties to adhereparties to adhere

Trade Measures in MEAsTrade Measures in MEAs

A country

Party to the

MEA

A country nonA country non--

Party to the MEAParty to the MEA

Measure may be

taken against:

Figure 1: Use of Trade Measures in MEAs

2 See. e.g. Article X of the Convention on International Trade in Endangered Species of Wild Fauna and Flora

(CITES). Article X foresees regulations for trade with States not party to the Convention whereby comparable

documentation provided by competent authorities in non-parties that "substantially conforms" with the

requirements for permits and certificates under CITES "may be accepted in lieu thereof."

57

IN DETAIL

The following table contains some examples of MEAs and the trade measures they include.

MEA Objective Trade Measure

Basel

Convention

Reduce transboundary movements of

hazardous wastes; minimize the

generation, in terms of quantity and

hazardousness, of wastes; and promote

the environmentally sound management

of hazardous and other wastes.

Parties may only export a hazardous waste to

another party that has not banned its import

and that consents to the import in writing.

Parties may not import from or export to a

non-party. They are also obliged to prevent

the import or export of hazardous wastes if

they have reason to believe that the wastes

will not be treated in an environmentally

sound manner at their destination.

CITES Regulate international trade in wild fauna

and flora for conservation purposes.

Provides framework for sound

management of wildlife trade based on

the best biological information available;

analyses how different types of trade

regulations can affect specific populations.

CITES does not allow the issuance of

import/export permits involving the

commercial international trade in an agreed

list of threatened species. It also regulates

and monitors (by use of permits, quotas and

other restrictive measures) trade in other

species that might become endangered.

Montreal

Protocol

Develop a regime that limits the release of

ozone-depleting substances (ODS) into

the atmosphere.

The Protocol lists certain substances as ozone

depleting, and bans all trade in those

substances between parties and non-parties.

Similar bans may be implemented against

parties as part of the Protocol's

non-compliance procedure. The Protocol also

contemplates allowing import bans on

products made with, but not containing,

ozone-depleting substances—a ban based on

process and production methods.

Rotterdam

(PIC)

Convention

Promote shared responsibility and

cooperative effort among Parties in the

international trade of certain hazardous

chemicals in order to protect human

health and the environment from potential

harm and to contribute to their

environmentally sound use. This is done

by facilitating information exchange about

their characteristics, by providing for a

national decision-making process on their

import and export and by disseminating

these decisions to Parties.

Under the Convention, Parties can decide,

from the Convention's agreed list of chemicals

and pesticides, which ones they cannot

manage safely and, therefore, will not import.

When trade in the controlled substances does

take place, labelling and information

requirements must be followed. Decisions

taken by the parties must be trade neutral—if

a party decides not to consent to imports of a

specific chemical, it must also stop domestic

production of the chemical for domestic use,

as well as imports from any non-party.

58

CBD and

Protocol on

Biosafety

CBD: ensure conservation of biological

diversity, sustainable use of its

components and fair and equitable sharing

of the benefits arising out of the utilization

of genetic resources.

Biosafety Protocol: Ensure an adequate

level of protection in the field of safe

transfer, handling and use of Living

Modified Organisms (LMOs) that may have

adverse effects on the conservation and

sustainable use of biological diversity, also

taking into account risks to human health.

Parties may restrict the import of some living

genetically modified organisms as part of a

carefully specified risk management

procedure. LMOs that will be intentionally

released into the environment are subject to

an advance informed agreement procedure,

and those destined for use as food, feed or

processing must be accompanied by

documents identifying them.

Table 1: Examples of MEAs and their Trade Measures

TIP

Further information on MEAs containing trade measures and their relevant provisions can be found in a

document entitled "Matrix on Trade Measures Pursuant to Selected Multilateral Environmental Agreements"

(TN/TE/S/5/Rev.3).

EXERCISES:

3. Why do some MEAs use trade measures?

59

II. RELATIONSHIP BETWEEN MEAs AND THE WTO:

POTENTIAL CONFLICT?[3]

IN BRIEF

Measures taken pursuant to MEAs could give rise to questions of consistency with certain WTO rules, such

as the non-discrimination principle, or the prohibition of quantitative restrictions.

IN DETAIL

II.A. MEA RULES AND GATT ARTICLES I, III AND XI

Under GATT Article I, any advantage or privilege granted by a country to any product originating in

any other country shall be accorded to like products originating in the territories of all other WTO

Members.

Pursuant to GATT Article III, WTO Members must not discriminate between imported and domestic

like products.

Under GATT Article XI, no prohibitions or restrictions other than duties, taxes or other charges such

as quotas, import or export licenses shall be applied on the import or export of any product.

Article I:

The Most Favoured Nation

Article III:

The National Treatment

Article XI:

The Prohibition of

quantitative restrictions

WTO PrinciplesWTO Principles

Any advantage, Any advantage,

or privilege or privilege

granted by a granted by a

country to any country to any

product product

originating in originating in

any other any other

country shall be country shall be

accorded to accorded to like like

productsproducts

originating in the originating in the

territories of territories of allall

other Membersother Members

WTO Members WTO Members

must not must not

discriminate discriminate

between imported between imported

and domestic and domestic like like

productsproducts

No prohibitions or restrictions No prohibitions or restrictions other other

than duties, taxes or other chargesthan duties, taxes or other charges

such as quotas, import or export such as quotas, import or export

licenses shall be applied on the licenses shall be applied on the

import or export of any productimport or export of any product

Non-discrimination

Figure 2: WTO Principles

3 See also Module 6 on WTO Rules and Environmental Policies.

60

The situation could materialize where an MEA authorizes trade between its parties in a specific product, but

bans trade in that very same product with non-parties (hence, an inconsistency with the Most Favoured Nation

(MFN) clause, which requires countries to grant equivalent treatment to "like" imported products).

Example 1: The Montreal Protocol on substances that deplete the Ozone Layer

Article 4 of the Montreal Protocol on Substances that Deplete the Ozone Layer bans imports of controlled

ozone depleting substances from non-Parties to the Protocol, who may be Members of WTO. Under the

Protocol, similar restrictions are not imposed vis-à-vis other Parties. The application of such a measure

could give rise to questions relating to GATT Article I (MFN); Article III (National treatment); or GATT

Article XI (Prohibition of quantitative restrictions).

Example 2: CITES

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an often-

cited example of the use of trade measures to tackle environmental objectives. Agreed in 1973 and in

effect since 1975, CITES requires parties to implement a number of trade-related environmental measures

("CITES measures"). The objective is to save certain species of wildlife from extinction by regulating and

monitoring their global trade. CITES measures range from permits and quotas of enlisted species to

suspension of trade. Certain WTO rules may therefore be relevant to CITES measures, e.g., GATT Articles I

and III (Most-Favoured Nation and National Treatment) and GATT Article XI (Prohibition of Quantitative

Restrictions). It is interesting to note that, in fact, during all the time the GATT/WTO and CITES have co-

existed, now spanning more than 40 years, there has never been a single challenge under the WTO's

dispute settlement system against a measure taken by a GATT contracting party, or WTO Member,

implementing CITES obligations.4

II.B. MEAs AND THE GENERAL EXCEPTIONS OF GATT

ARTICLE XX

In the context of a dispute on the application of a trade measure under an MEA, the respondent could invoke a

defence under GATT Article XX.

According to Article XX, a Member can justify derogating from its obligations in respect of a measure that is

either necessary to protect human, animal or plant life or health, or that relates to the conservation of

exhaustible natural resources, provided certain conditions are met.

4 See, in this regard, Yeater, Marceil and Vasquez, Juan (2001), "Demystifying the Relationship between CITES

and the WTO", RECIEL 10(3), 271-276 at 276.

61

The relevant parts of Article XX of GATT read:

Subject to the requirement that such measures are not applied in a manner which would

constitute a means of arbitrary or unjustifiable discrimination between countries where the same

conditions prevail, or a disguised restriction on international trade, nothing in this Agreement

shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(...)

(b) necessary to protect human, animal or plant life or health;

(...)

(g) relating to the conservation of exhaustible natural resources if such measures are made

effective in conjunction with restrictions on domestic production or consumption;

(...)

Measures taken pursuant to an MEA would likely fall under at least one of the exceptions described in

Article XX (i.e. the protection of human, animal or plant life or health, or the conservation of exhaustible

natural resources).

However, in order to be able to justify a derogation from its GATT/WTO obligations, the Member having taken

the measure would still have to meet the test of the introductory paragraph, or "chapeau", of Article XX

(i.e. that the measure does not constitute unjustifiable or arbitrary discrimination, or a disguised restriction on

international trade). (see Module 6).

TIP

For a GATT-inconsistent environmental measure to be justified under Article XX, a Member must perform a

two-tier analysis, proving:

first, that its measure falls under at least one of the exceptions (e.g. paragraphs (b) or (g)), and

then,

that the measure satisfies the requirement of the introductory paragraph (the "chapeau" of

Article XX), i.e. that the measure is not applied in a manner which could constitute "a means of

arbitrary of unjustified discrimination between countries where the same conditions prevail", and is

not "a disguised restriction on international trade".

II.C. WHICH DISPUTE SETTLEMENT SYSTEM?

While disputes between two parties to an MEA, who are both WTO Members, are expected to be settled in the

MEA, disputes between an MEA party and a non-party (both of whom are WTO Members) would probably come

to the WTO since the non-party would not have access to the dispute settlement provisions of the MEA.

62

To date, no disputes regarding trade provisions contained in an MEA have come to the WTO. Some WTO

Members have argued in the CTE (in their proposals on negotiations about the MEA-WTO relationship) that the

existing principles of public international law suffice in governing the relationship between WTO rules and

MEAs. The 1969 Vienna Convention on the Law of Treaties as well as the principles of customary law could

themselves define how WTO rules interact with MEAs.

The legal principles of "lex specialis" (the more specialized agreement prevails over the more general) and of

"lex posterior" (the agreement signed later in date prevails over the earlier one) emanate from public

international law, and some have argued that these principles could help the WTO in defining its relationship

with MEAs. Others have argued that there is a need for greater legal clarity.

II.D. POTENTIAL CONFLICT? THE CASE OF EC - SWORDFISH

Although there has never been a formal dispute between the WTO and an MEA, the EC-Swordfish case has

illustrated the risk of conflicting decisions rendered by two bodies having competence over a different

subject-matter.

In this case, the European Union (EU), then still called the European Communities, asserted that its fishing

vessels operating in the South East Pacific were not allowed, under Chilean legislation, to unload their

swordfish in Chilean ports. The EU considered that, as a result, Chile made transit through its ports impossible

for swordfish. The EU claimed that the above-mentioned measures were inconsistent with GATT 1994, and in

particular Articles V and XI.

Chile however maintained that the EU had failed to cooperate with Chile to ensure the conservation of

swordfish, a highly migratory species, in violation of the UN Convention on the Law of the Sea. As a result,

conservation measures had become necessary to ensure sustainable fisheries for swordfish.

EC EC –– Swordfish (2000)Swordfish (2000)

ChileChile

EU fails to cooperate with coastal state to ensure

the conservation of highly migratory species, in

violation of UN Convention on Law of the Sea

EU EU failsfails to cooperate to cooperate withwith coastalcoastal state to state to ensureensure

thethe conservation conservation ofof highlyhighly migratorymigratory speciesspecies, in , in

violation violation ofof UN Convention on Law UN Convention on Law ofof thethe SeaSea

Need conservation measures to ensure

sustainable fisheries for swordfish

NeedNeed conservation conservation measuresmeasures to to ensureensure

sustainablesustainable fisheriesfisheries for for swordfishswordfish

Chile prohibits unloading of swordfish in its ports in

violation of GATT Articles V (freedom of transit) and

XI (prohibition on quantitative restrictions)

Chile Chile prohibitsprohibits unloadingunloading ofof swordfishswordfish in in itsits ports in ports in

violation violation ofof GATT Articles V (GATT Articles V (freedomfreedom ofof transit) transit) andand

XI (prohibition on quantitative restrictions)XI (prohibition on quantitative restrictions)

EUEU

Requests access to Chilean ports to re-export

swordfish to the markets of NAFTA

RequestsRequests accessaccess to to ChileanChilean ports to reports to re--export export

swordfishswordfish to to thethe marketsmarkets ofof NAFTANAFTA

Figure 3: EC-Swordfish Example

63

On 12 December 2000, the Dispute Settlement Body of the WTO (DSB) established a panel further to the

request of the EU. In March 2001, the EU and Chile agreed to suspend the process for the constitution of the

WTO panel (this agreement was further reiterated in November 2003).

At the same time, proceedings in the Case Concerning the Conservation and Sustainable Exploitation of

Swordfish Stocks in the South-Eastern Pacific Ocean were instituted on 19 December 2000 at the ITLOS by

Chile and the EU. Chile requested, inter alia, the ITLOS to declare whether the EU had fulfilled its obligations

under UNCLOS Articles 64 (calling for cooperation in ensuring conservation of highly migratory species), 116-

119 (relating to conservation of the living resources of the high seas), 297 (concerning dispute settlement) and

300 (calling for good faith and no abuse of right). The EU requested, inter alia, the Tribunal to declare whether

Chile had violated Articles 64, 116-119 and 300 of UNCLOS, mentioned above, as well as Articles 87 (on

freedom of the high seas including freedom of fishing, subject to conservation obligations) and 89 (prohibiting

any State from subjecting any part of the high seas to its sovereignty).

On 9 March 2001, the parties informed the ITLOS that they had reached a provisional arrangement concerning

the dispute and requested that the proceedings before the ITLOS be suspended. On 25 November 2009, the

parties informed that they had reached a permanent settlement in the form of an Understanding and jointly

requested the ITLOS to discontinue the dispute. The ITLOS granted such request on 16 December 2009.

EXERCISES:

4. What are the WTO provisions that could be relevant to trade measures taken pursuant to MEAs?

5. In the context of a dispute arising over the application of a trade measure under an MEA, the respondent

could invoke a defence under which relevant parts of GATT Article XX?

64

III. NEGOTIATIONS ON THE RELATIONSHIP

BETWEEN WTO AND MEA RULES

IN BRIEF

At the Doha Ministerial Conference in 2001, agreement was reached to commence negotiations on certain

aspects of the WTO-MEA relationship. More specifically, Members have agreed to negotiate on the

"relationship between existing WTO rules and "specific trade obligations" (STOs) set out in MEAs".

IN DETAIL

III.A. PARAGRAPH 31(I) MANDATE

In 2001, Ministers agreed to the following mandate in paragraph 31(i) of the Doha Ministerial Declaration:

"31. With a view to enhancing the mutual supportiveness of trade and environment, we agree to

negotiations, without prejudging their outcome, on:

(i) the relationship between existing WTO rules and specific trade obligations set out in multilateral

environmental agreements (MEAs). The negotiations shall be limited in scope to the applicability of

such existing WTO rules as among parties to the MEA in question. The negotiations shall not

prejudice the WTO rights of any Member that is not a party to the MEA in question."

WTO Members have agreed to clarify the relationship between WTO rules and MEAs. The mandate explicitly

states that the negotiations should be limited to defining how WTO rules apply to WTO Members that are party

to an MEA. The reason for this limitation is that while WTO Members were willing to let the negotiations define

the relationship between WTO rules and MEAs they have joined, they were not ready to let them alter their

WTO rights and obligations vis-à-vis MEAs they were not part of.

Moreover, paragraph 32 of the Doha Ministerial Declaration carefully circumscribes the negotiations under

paragraph 31(i) and (ii): "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

SPS Agreement, nor alter the balance of these rights and obligations, and will take into account the needs of

developing and least-developed countries."

In the early stages of the negotiations, discussions focused on the scope of the negotiating mandate. For

instance, delegations have examined the different components of the mandate, such as the terms "existing

WTO rules," "specific trade obligations," "set out in MEAs," "MEAs," and "among parties to the MEA in

question".

On the different components of the mandate, the bulk of the discussion has revolved around the terms "MEAs,"

"specific trade obligations," and the notion of measures being "set out in MEAs". Some focus was placed on six

65

MEAs that could contain "specific trade obligations".[5]

However, Members have not agreed to limit the

discussion to any particular number of MEAs.

On "specific trade obligations," several Members believe that these must be measures that are explicitly

provided for and mandatory under MEAs. However, Members have not excluded other kinds of trade measures

contained in MEAs and whether they could also be considered "specific trade obligations".

In addition to these discussions on the terms of the mandate, Members have also embarked on an exercise of

sharing their national experiences in the negotiation and domestic implementation of trade measures under

MEAs. Over the years, in the CTESS, a number of Members have shared their national experiences on the

negotiation and implementation of "specific trade obligations" in MEAs.[6]

III.B. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME

More recently, a few Members have begun to look ahead at the possible outcome that the mandate could

deliver. There are five main proposals for an outcome currently on the table.

These are:

EU: The EU has been seeking to include in an outcome some basic governing principles on the

WTO-MEA relationship, such as mutual supportiveness; no subordination; deference; and transparency.

It has proposed that WTO committees and panels "defer" to the expertise of MEAs on

environment-related matters. This aspect was strongly criticized by a number of delegations who

consider that it would extend well beyond the scope of the mandate. The EU proposal was presented in

the form of a Ministerial Decision.

Switzerland: The proposal by Switzerland focuses mainly on conflict avoidance, closely resembling

the EU proposal in that they both address WTO disputes. The Swiss proposal puts forth three elements

to be included in the final outcome in the form of a Ministerial Decision: (i) the availability of a non-

adjudicatory procedure, e.g. requesting the CTE Chair to act as facilitator, to help Members find

solutions to their differences of opinions regarding the relationship between existing WTO rules and

"specific trade obligations" in MEAs; (ii) the encouragement to use the expertise of MEAs during

consultations pursuant to Article 4 of the DSU; and (iii) that Panels for disputes on this issue should

possess or have available the necessary expertise.

Australia and Argentina: A proposal by Australia and Argentina focuses on the importance of

national coordination to ensure a mutually supportive relationship of trade and environment.

It proposes that Members continue to share their experience relating to the negotiation and

5 These six MEAs are: the Basel Convention, the Convention of Biological Diversity and the Cartagena Protocol

on Biosafety, the Convention of International Trade in Endangered Species of Wild Fauna and Flora, the

Montreal Protocol on Substances that Deplete the Ozone Layer, the Rotterdam Convention and the Stockholm

Convention.

6 A number of submissions by Members, sharing their national experiences, are listed in Section IV.B of

document TN/TE/INF/4/Rev.15. For example, see the European Union's submission: "Putting MEA/WTO

Governance into Practice: the EC's Experience in the Negotiation and Implementation of MEAs" (TN/TE/W/53).

66

implementation of "specific trade obligations" in MEAs in the regular CTE. The Australian/Argentinean

proposal has garnered wide support in the negotiation. It was presented in the form of a report by the

CTESS.

Norway: Norway has made an attempt to strike a balance between the proposals of the EU and of

Australia and Argentina. The text proposed by Norway suggests, for instance, to acknowledge that

both MEAs and the WTO Agreement are instruments of international law of equal standing between

parties to the agreements; and all obligations under international law should be implemented

harmoniously and in good faith; and that all WTO bodies and Member States be mindful of this mutual

supportiveness when "negotiating, interpreting, implementing and applying WTO rules and MEAs".

African Group: The proposal by the African Group addresses the issue of technical assistance and

capacity-building in the area of trade and environment. More specifically, it suggests the establishment

of a Group of Experts on Trade and Environment from which WTO Members, and in particular

developing countries, could seek advice on the implementation of MEA measures to ensure that they

remain consistent with WTO rules.

Two main approaches in CTESSTwo main approaches in CTESS

Relationship has Relationship has

been working well; been working well;

nothing to “fix”; no nothing to “fix”; no

conflict to date; conflict to date;

existing rules provide existing rules provide

sufficient scope sufficient scope

(US, Australia, Argentina, (US, Australia, Argentina,

several developing countries)several developing countries)((EC, SwitzerlandEC, Switzerland))

Need to clarify Need to clarify

WTOWTO--MEA MEA

relationship; conflict relationship; conflict

can always arise; “all can always arise; “all

good relationships good relationships

can be improved..”can be improved..”

Figure 5: Main Approaches MEA negotiations in the CTESS

These proposals reflect Members' discussions, experience sharing and submissions since 2002. The Chairman

of the CTESS circulated a summary of these negotiations on 21 April 2011.7 Accompanying this Report, the

Chairman prepared, on his own responsibility, a Draft Ministerial Decision on Trade and Environment,

combining elements from the above proposals and using language derived from negotiations and consultations

with Members.

While the Report reflects that some progress was made on Paragraph 31(i) elements, several outstanding

elements remain to be addressed. Some of these include the European Union and Switzerland proposals to

include text on dispute settlement in the outcome decision,8 the African Group proposal to create a Group of

7 TN/TE/20, 21 April 2011.

8 See: TN/TE/20, Annex I.B

67

Experts on Trade and Environment,9 and other issues related to the definition of "specific trade obligations" in

MEAs, and national coordination. No further discussions have been held on this aspect of the negotiations.

EXERCISES:

6. How are Paragraph 31(i) negotiations limited in scope?

7. WTO panels already have the right to consult outside sources for advice. Why then are some Members

opposed to a relevant proposal under Paragraph 31(i)?

9 See: TN/TE/20, Annex I.A

68

IV. COLLABORATION BETWEEN THE WTO AND MEA

SECRETARIATS

IN BRIEF

In addition to the relationship between MEA measures and WTO rules, the negotiations have also covered

the issue of information exchange between the WTO and MEA secretariats and "observer" status.

IN DETAIL

IV.A. PARAGRAPH 31(II) MANDATE

In 2001, Ministers have agreed to the following mandate in paragraph 31(ii) of the Doha Ministerial

Declaration:

"31. With a view to enhancing the mutual supportiveness of trade and environment, we agree to

negotiations, without prejudging their outcome, on:

(ii) procedures for regular information exchange between MEA Secretariats and relevant WTO

committees, and the criteria for the granting of observer status."

IV.B. INFORMATION EXCHANGE

Close cooperation between MEA Secretariats and WTO Committees is essential to ensure that both the trade and

the environment regimes continue to evolve in a coherent and mutually supportive manner. The importance of

this goal was recognized in the Plan of Implementation of the 2002 World Summit on Sustainable Development

(WSSD) in Johannesburg, which calls for efforts to "strengthen cooperation among UNEP and other United Nations

bodies and specialized agencies, the Bretton Woods institutions and WTO, within their mandates." This goal was,

more recently, reaffirmed in the 2012 Rio+20 Conference Declaration, which stated:

"We underscore the need to strengthen United Nations system-wide coherence and coordination, while

ensuring appropriate accountability to Member States, by, inter alia, enhancing coherence in reporting and

reinforcing cooperative efforts under existing inter-agency mechanisms and strategies to advance the

integration of the three dimensions of sustainable development within the United Nations system, including

through exchange of information among its agencies, funds and programmes, and also with the international

69

financial institutions and other relevant organizations such as the World Trade Organization (WTO), within

their respective mandates."10

Various forms of cooperation and information exchange between WTO and MEA Secretariats are already in

place. These include information sessions held by the CTE with MEA Secretariats; the organization by the WTO

Secretariat of side events held in the margins of MEA Parties' meetings; exchange of documents; and

collaboration between the WTO, UNEP and MEAs in providing technical assistance to developing countries on

trade and the environment.

IV.C. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON

INFORMATION EXCHANGE

A number of concrete elements, which consolidate or formalize existing information exchange practices of the

CTE, WTO Secretariat, and MEA Secretariats, have been put forward by Members on this part of the Paragraph

31(ii) mandate. These core elements enjoy a high degree of consensus among Members. The CTESS

Chairman's April 2011 Draft Ministerial Decision on Trade and Environment11

(See: III.B above) formulated

these elements into possible outcome text, summarized below:

The CTE shall hold information exchange sessions with MEA secretariats on a regular basis, providing

opportunity for two way information exchanges between MEA and WTO secretariats and their

respective memberships on topics of common interest.

The WTO Secretariat shall cooperate and collaborate with MEA secretariats, including through increased

information exchange, and, as appropriate, document sharing and preparation.

The WTO Secretariat shall facilitate appropriate access by MEA secretariats to derestricted

WTO documents on a reciprocal basis and make information from MEA secretariats available to

WTO Members, including through the use of indexing and internet-based tools. Access to derestricted

WTO documents by MEA secretariats shall be facilitated in accordance with the General Council

Decision of 14 May 2002 on Procedures for the Circulation and Derestriction of WTO documents.[12]

The WTO Secretariat shall continue to cooperate and collaborate with MEA secretariats on enhanced

trade and environment-related technical assistance and capacity building activities for developing and

Least-developed countries, particularly those related to implementation of "specific trade obligations"

set out in MEAs.

TIP

More background material on "information exchange" can be found in the WTO Secretariat's note "Existing

forms of cooperation and information exchange between UNEP/MEAs and the WTO" (TN/TE/S/2/Rev.2). This

note contains information on, inter alia, MEA information sessions in the CTE, WTO side events in MEAs, and

10

UN (2012), "The Future We Want", United Nations Conference on Sustainable Development, paragraph 78.

11 TN/TE/20, 21 April 2011, pp. 9-11.

12 WT/L/452.

70

WTO technical assistance events in which MEAs participated or were represented.

EXERCISES:

8. Why is information exchange between the WTO and MEAs important?

9. What are the current forms of information exchange between the WTO and MEAs?

71

IV.D. OBSERVER STATUS

The issue of criteria for the granting of observer status to MEA Secretariats is also part of the negotiations.

Several MEA Secretariats and international organizations have already been granted observership to the CTE,

and a number of them are also invited to attend meetings of the CTESS, as "ad hoc" observers. The

negotiations could further enhance the participation of these organizations in the work of various

WTO committees.

Figure 6: MEAs Granted Observer Status in the CTE

IV.E. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON

OBSERVER STATUS

With respect to observer status, Members' proposals have outlined a number of key ideas. Some Members

believe that certain criteria should be applied by the CTE when assessing requests for observer status from

MEAs, while other Members believe that the process should be accelerated for those MEAs with longstanding

observership requests. In the April 2011 Draft Ministerial Decision on Trade and Environment13

(See: III.B

above), the CTESS Chairman formulated these elements into possible outcome text:

Members reaffirm that requests for observer status of international intergovernmental organizations

are subject to the criteria and procedures set out in Annex 3 of the Rules of Procedure for Sessions of

the Ministerial Conference and Meetings of the General Council.[14]

13

TN/TE/20, 21 April 2011, pp. 9-10.

14 WT/L/161.

MEAs granted Observer

Status in the CTE

As well as ...

UNCTAD

72

When examining requests for observer status from MEA Secretariats, the CTE shall further have

particular regard to the following:15

the relevance of the MEA's scope of work to the CTE as well as the relevance of the CTE's scope of work

to the MEA. (Examples of relevance would be whether the MEA contains provisions that have potential

implications for international trade or whether the CTE's work covers aspects and rules that have

potential implications for the environmental issues covered by the MEA.)

the MEA Secretariat's participation in the CTE and its prior contribution to WTO work, including

workshops, capacity building activities and preparation of documents; and/or the mutual benefit that

may accrue to the Committee and the MEA from the MEA Secretariat's participation in meetings of the

CTE.

The Draft Ministerial Decision includes additional text in square brackets (i.e. text which is not agreed and

remains under negotiation) which would grant observer status to the following MEA Secretariats, which have

pending observership requests, have met the criteria elaborated above and in Annex 3 of the Rules of

Procedure of the General Council, and which currently participate as observers in meetings of the CTE on an ad

hoc basis:

Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal

International Tropical Timber Organization

Montreal Protocol on Substances that Deplete the Ozone Layer

Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and

Pesticides in International Trade

While negotiations may result in the adoption of criteria for the granting of observer status to MEAs that would

complement existing criteria for observer status of international organizations contained in the Rules of

Procedure of the General Council, it is not clear whether formal observer status would be granted to MEAs

because of the long-standing political deadlock over observer status of international organizations in the

General Council since before the launching of the Doha Round.

It should be noted that while certain MEAs already have observer status in WTO bodies, other requests that

came after the deadlock are still pending. These include, for example, requests by the Basel Convention on the

Transboundary Movements of Hazardous Wastes, the Ozone Secretariat of the Montreal Protocol on Substances

that Deplete the Ozone Layer, and the International Tropical Timber Organization in the Regular CTE, requests

by the Convention on Biological Diversity in the TRIPS Council, the SPS and TBT Committees, and requests by

CITES in the SPS and TBT Committees.

It should be noted that despite the deadlock, several WTO Committees have developed a practice of granting

observer status to international organizations on an ad hoc, meeting-by-meeting basis. While no

15

Two additional criteria have been proposed by some Members, but not included in the Draft Ministerial

Decision: (i) the MEA's membership, e.g., whether it broadly reflects the membership of WTO; and (ii) the

reciprocity provided by the MEA to the WTO with respect to access to proceedings, documents, and other

aspects of observers status.

73

intergovernmental organizations have observer status in the CTESS, a number of them are invited on an

ad-hoc/meeting-by-meeting basis. This practice could therefore allow MEAs in many cases to continue to

participate in the work of WTO Committees.[16]

EXERCISES:

10. Why is MEA observership important in the CTE and the CTESS?

16 A full list of intergovernmental organizations granted observer status to the CTE can be found on the WTO

website.

74

V. SUMMARY

TRADE AND ENVIRONMENT NEGOTIATIONS IN THE WTO

The Doha Ministerial Conference in 2001 covered three elements: (i) relationship between existing

WTO rules and specific trade obligations set out in MEAs; (ii) procedures for regular information

exchange between MEA Secretariats and the relevant WTO committees, and the criteria for the

granting of observer status; and (iii) reduction or, as appropriate, elimination of tariff and non-tariff

barriers to environmental goods and services.

Following intense negotiations between 2003 and 2011, in April 2011 the Chairman of the CTESS

prepared on his own responsibility a Draft Ministerial Decision on Trade and Environment.17

This

document, inter alia, confirmed that Members agree to address Paragraphs 31(i) and 31(ii) in a

combined outcome.

PARAGRAPH 31(I): THE RELATIONSHIP BETWEEN WTO AND MEA RULES

MEAs have been negotiated to deal with environmental problems in a multilateral setting.

Trade measures contained in MEAs can include export and/or import bans, export and/or import

permits and licenses, packaging, labelling or transportation requirements, notification requirements or

reporting requirements.

Measures taken pursuant to MEAs could give rise to questions on their relationship with WTO rules,

such as the non-discrimination principle, or the prohibition of quantitative restrictions. In the context

of a dispute on the application of a trade measure under an MEA, the respondent could invoke a

defence under GATT Article XX.

Negotiations On The Relationship Between WTO And MEA Rules

A number of proposals for an outcome under Paragraph 31(i) have been put forth by Members covering core

areas, inter alia, national coordination and experience sharing on the negotiation and implementation of

"specific trade obligations" set out in MEAs, principles governing the relationship between WTO rules and

MEAs including in relation to dispute settlement, and aspects of technical assistance. Some outstanding

elements that remain to be addressed include, proposals to include text on dispute settlement in the outcome

decision, the African Group proposal to create a Group of Experts on Trade and Environment, and other issues

related to the definition of "specific trade obligations" in MEAs and national coordination. Paragraph 31(ii):

Collaboration Between WTO and MEA Secretariats:

On information exchange between the WTO and MEA secretariats and observer status, a number of

elements have been put forward by Members. With respect to the former, Members' proposals would

consolidate or formalize existing practices of the CTE, WTO Secretariat, and MEA Secretariats,

17

TN/TE/20, 21 April 2011.

75

including with respect to information exchange sessions, reciprocal access to documents, and

enhanced collaboration and cooperation between WTO and MEA Secretariats such as on delivery of

technical assistance and capacity building. With respect to the latter, some Members' proposals have

sought to elaborate certain criteria, in addition to the WTO General Council criteria and procedures

(Annex 3 of the Rules of Procedure for Sessions of the Ministerial Conference and Meetings of the

General Council), which may be used by the CTE to judge requests for observer status from MEAs.

These include the relevance of the MEA's scope of work to the CTE, and, the MEA Secretariat's

participation in the CTE and its prior contribution to WTO work. Moreover, some Members' proposals

aim to automatically grant observer status to those MEAs with longstanding observership requests,

which have actively participated in the CTE as ad hoc observers.

76

PROPOSED ANSWERS:

1. Multilateral negotiated solutions to environmental problems are preferred to unilateral solutions when the

environmental problem being addressed is regional or global in scope. Cooperation to address such

environmental problems helps to ensure that the most efficient solution is put in place and that efforts to

reduce environmental damage are not hindered by "free-riders". Furthermore, resort to unilateralism

runs the risk of arbitrary discrimination and disguised protectionism which could damage the multilateral

trading system.

2. Examples of MEAs discussed in the WTO are:

The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their

Disposal; the Convention on Biological Diversity (CBD) and the Cartagena Protocol on Biosafety;

the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); the

Montreal Protocol on Substances that Deplete the Ozone Layer; the Rotterdam Convention on the Prior

Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade; the

Stockholm Convention on Persistent Organic Pollutants; and the United Nations Framework Convention

on Climate Change (UNFCCC) and its Kyoto Protocol.

3. MEAs can use trade measures for a number of reasons:

for monitoring and controlling trade

to encourage compliance with MEA requirements

as a means of enforcing MEA objectives

as an incentive for non-Parties to adhere

4. The relevant WTO provisions that could relate to trade measures taken pursuant to an MEA include:

GATT Article I, any advantage, or privilege granted by a country to any product originating in any

other country shall be accorded to like products originating in the territories of all other

Members;

GATT Article III, WTO Members must not discriminate between imported and domestic like

products; and

GATT Article XI, no prohibitions or restrictions other than duties, taxes or other charges such as

quotas, import or export licenses shall be applied on the import or export of any product.

5. In the context of a dispute on the application of a trade measure under an MEA, the respondent could

invoke a defence under GATT Article XX, letter:

(b) necessary to protect human, animal or plant life or health;

(g) relating to the conservation of exhaustible natural resources if such measures are made

effective in conjunction with restrictions on domestic production or consumption.

6. The scope of Paragraph 31(i) negotiations are limited to: existing WTO rules; specific trade obligations

set out in MEAs; and applicability of such existing WTO rules as among parties to the MEA in question.

7. Several Members are of the opinion that dispute settlement falls outside the mandate of paragraph 31(i)

of the Doha Declaration. Furthermore, it has been argued that deference to MEA expertise could result in

WTO law being subordinated to rules contained in MEAs.

77

8. Information exchange between the WTO and various MEAs is essential to ensure that the trade and the

environment regimes continue to evolve in a coherent and mutually supportive manner.

9. Current forms of information exchange between the WTO and MEAs include information sessions held by

the CTE with MEA Secretariats; the organization by the WTO Secretariat of side events held in the

margins of MEA Parties' meetings; exchange of documents; and collaboration between the WTO, UNEP

and MEAs in providing technical assistance to developing countries on trade and the environment.

10. MEA observership in the CTE and the CTESS is important to establish means for information exchange

between the WTO and other multilateral institutions. Observer status for MEAs allows these organizations

to follow discussions on matters of direct interest to them.

79

Environmental Goods

Negotiations ESTIMATED TIME: 6 hours

OBJECTIVES OF MODULE 4

Introduce and explain the rationale for the environmental goods negotiations

contained in the Doha mandate on trade and environment

Give an overview of the current state of the negotiations on environmental goods

and services, including product identification, treatment and key challenges

Present some of the cross-cutting issues related to the negotiations, including

non-tariff barriers

MODULE

4

MODULE

4

81

I. BACKGROUND

IN BRIEF

One of the key elements of negotiations in the area of Trade and Environment concerns the liberalization of

trade in environmental goods and services. The mandate contained in Paragraph 31(iii) of the Doha

Ministerial Declaration reads as follows:

"With a view to enhancing the mutual supportiveness of trade and environment, we agree to negotiations,

without prejudging their outcome, on:

... the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental

goods and services."

IN DETAIL

I.A. POTENTIAL TO DELIVER WIN-WIN-WIN OUTCOMES

Reducing barriers to trade in environmental goods and services can improve global market access to more

efficient, diverse, and less expensive goods and services that can contribute to environmental objectives.

Increasing access to, and use of, environmental goods and services can yield a number of environmental

benefits, such as reducing air and water pollution, facilitating waste management and resource conservation,

and improving energy efficiency. By facilitating access to these environmental technologies, trade

liberalization can also assist developing countries achieve sustainable development objectives. Furthermore,

market opening in these sectors can be a powerful tool for economic development by facilitating the transfer of

valuable skills and technology embedded in such goods and services. As environmental goods and services are

produced and used by developed and developing countries alike, liberalizing trade is seen as a way to improve

market access and to further the trade, environmental and developmental goals of WTO Members. In short,

the Doha mandate provides an unprecedented opportunity for the multilateral trading system to contribute to

furthering mutual supportiveness of trade and the environment.

TIP

More information on the negotiations on environmental services is available in Module 7 (section II.H) of the

E-training course "Trade in Services in the WTO".

In initiating negotiations under Paragraph 31(iii) of the Doha Ministerial Declaration, trade ministers recognized

the potential environmental, developmental and trade benefits of enhanced trade opening in environmental

goods and services sectors. Since then, WTO Members have clarified that the outcome of the environmental

goods negotiations should deliver a mutually reinforcing "win-win-win outcome", i.e. one that is beneficial for

trade, environment and development, thereby contributing to broader sustainable development goals.

82

First, negotiations should result in a win for trade with the reduction or elimination of tariff and non-

tariff barriers (NTBs), as domestic purchasers, including business and governments at all levels, will be

able to acquire environmental technologies at lower costs.

Second, negotiations should result in a win for the environment by improving access to high quality

environmental technologies needed to protect the environment or to help mitigate and adapt to climate

change. This can lead to direct benefits for citizens in all countries in terms of a cleaner environment,

while satisfying basic human needs such as improved access to safe water, sanitation or clean energy.

In addition, the use of environmental goods can reduce negative externalities in the form of

detrimental environmental and human health effects and can assist in the realization of important

energy efficiency gains.

Finally, the negotiations should result in a win for development to the extent that liberalization can

assist developing countries in obtaining the tools needed to address key environmental priorities as

part of their on-going development and poverty reduction strategies, reaffirmed in the Rio+20 outcome

document.

Opportunity for “win-win-win” outcome

Increased availability / access to green

goods and services, environmentally-

friendly technology and know-how

Lower prices through tariff reductions

(Eliminate gap between green goods

and their standard counterpart)

Assist developing countries in obtaining

tools needed to address key

environmental priorities as part of their

ongoing development strategies

tradetrade

environmentenvironment

developmentdevelopment

Figure 1: Win-win-win outcome

I.B. ECONOMIC RATIONALE FOR REDUCING TARIFF AND

NON TARIFF BARRIERS ON ENVIRONMENTAL GOODS

There is a twofold rationale for reducing barriers to trade in environmentally-friendly goods and services. First,

reducing or eliminating import tariffs and non-tariff barriers should reduce their price and therefore facilitate

their widespread deployment at the lowest possible cost. Access to low-cost and more environmentally-

friendly technologies may be particularly important for industries which are faced with increasingly stringent

environmental requirements.

Tariff reductions, for instance, can ease the economic barriers to the use of environmentally friendly

technologies. This is particularly important in sectors where cost is the principle obstacle to the deployment of

83

such technologies, such as the renewable energy sector.[1]

In such cases, the reduction or removal of tariffs

could contribute significantly to improving access to these technologies.

Second, reducing tariffs and non-tariff barriers to trade in environmentally-friendly goods would provide

incentives to producers - and help build necessary domestic expertise - to expand the production and export of

these goods. It is argued that trade liberalization of such goods would allow developing countries, in

particular, to promote the industrial diversification of their economies and realize economies of scale.[2]

Increased trade allows larger markets for environmental goods, leading to profits from economies of scale and

gives producers the opportunity to learn and benefit from technological advances.[3]

Furthermore, increased competition from market opening can foster technological innovation in areas related

to the protection of the environment. Trade liberalization of environmental goods, in particular in developing

countries, could help increase local capabilities for innovation and adaptation of domestic technology rather

than fostering dependence on transfer of foreign technology.[4]

I.C. THE INSTITUTIONAL STRUCTURE OF NEGOTIATIONS

So far, most of the discussions relating to Paragraph 31(iii) have taken place in the Committee on Trade and

Environment in Special Session (CTESS). However, the mandate is also relevant to the work of other

negotiating groups, such as the Council for Trade in Services in Special Session as regards environmental

services; and the negotiating group on Non-Agricultural Market Access (NAMA) as regards industrial products.

Trade Negotiations Trade Negotiations

Committee (TNC)Committee (TNC)

Negotiating Negotiating

Group on Group on

Market Market

AccessAccess

Negotiating Negotiating

Group on Group on

RulesRules

Special Special

Session of Session of

the the

Committee on Committee on

AgricultureAgriculture

Special Special

Session of Session of

the Council the Council

for Trade in for Trade in

ServicesServices

Special Session Special Session

of the Dispute of the Dispute

Settlement BodySettlement Body

CTE CTE

Special Special

SessionSession

TRIPS Special TRIPS Special

SessionSession

GENERAL COUNCIL

DDA Negotiations: Institutional StructureDDA Negotiations: Institutional Structure

Figure 2: DDA Negotiations: Institutional Structure

1 Steenblik and Matsuoka (2008), Facilitating trade in selected climate change-mitigation technologies in the

electricity generation and heavy industry sectors, COM/TAD/ENV/JWPTE(2008)28.

2 Claro and Lucas (2007), Environmental goods: trade flows, policy considerations and negotiating strategies,

in ICTSD Trade in Environmental Goods and Services and Sustainable Development, Domestic Considerations

and Strategies for WTO negotiations, Policy Discussion Paper, pp. 32-60.

3 Stern (2006), The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge,

p. 308

4 Claro and Lucas (2007), see note 2.

84

Although the Doha Ministerial Declaration calls for negotiations on environmental goods, the mandate does not

provide any definition of environmental goods. Therefore, initially the focus of the negotiations has been on

identifying environmental goods. In addition, CTESS discussions have focused on the tariff treatment for

environmental goods and other considerations such as non-tariff barriers, transfer of technology and the link to

the environmental services negotiations.

EXERCISES:

1. Please explain how the Doha Paragraph 31(iii) negotiations could deliver a "win-win-win" outcome.

2. What is the economic rationale for liberalizing trade in environmental goods?

85

II. IDENTIFICATION OF ENVIRONMENTAL GOODS

IN BRIEF

The most significant challenge to date for the negotiations under Paragraph 31(iii) undertaken in the CTE in

Special Session has been the lack of an agreed definition of an "environmental good", and lack of agreement

on the criteria that should apply to the identification of such goods (which can be found across a whole range

of Harmonized System (HS) headings).

IN DETAIL

II.A. ENVIRONMENTAL GOODS IDENTIFIED BY A NUMBER OF

MEMBERS

Since the beginning of the negotiations, a number of delegations have put forward goods which they consider

to be environmental. The Members that have identified environmental goods are: Canada, the European

Union, Japan, Korea, New Zealand, Norway, Chinese Taipei, Switzerland and the United States of America

(which together form the "Group of Friends"), as well as Qatar, Saudi Arabia, Singapore, the Philippines and

Japan (on an independent basis).

169

17

59

20

259

72

"Group offriends"

Philippines Japan Qatar Saudi Arabia Singapore

Nu

mb

er o

f H

S-6

lin

es

Figure 3: Lists of environmental goods submitted

86

A broad range of products (amounting to 407 HS-6 tariff lines) have been put forward to date. More than half

of the submitted tariff lines correspond to industrial manufactured goods (i.e. machinery and electrical and

other manufactured articles).

Machinery / Electrical, 200, 49%

Miscellaneous, 56, 14%

Metals, 48, 12%

Chemicals & Allied Industries, 29, 7%

Plastics / Rubbers, 20, 5%

Mineral Products, 10, 2%

Textiles, 9, 2%

Wood & Wood Products, 6, 2%

Transportation, 29, 7%

Figure 4: Type of products in the submitted environmental lists (407 HS-6 Lines)

These products have been categorized by Members according to their environmental use. The main category

in which the goods fall is environmental technologies, such as: efficient consumption of energy technologies,

gas flaring emission reduction, and environmental monitoring, analysis and assessment equipment. Other

categories include carbon capture and storage, renewable energies, waste management and water treatment

and air pollution control.

87

3143

7180

259

311

Others Air PollutionControl

WasteManagement

and WaterTreatment

RenewableEnergies

Carbon Captureand Storage

EnvironmentalTechnologies

Nu

mb

er o

f H

S-6

lin

es

Figure 5: Categories of products in the submitted environmental lists (407 HS-6 Lines)

Note

A compilation list made up of all submissions on environmental goods submitted by Members can be found

in Annex III to the 2010 Report by the Chairman to the Trade Negotiating Committee (TN/TE/19).

II.B. CHALLENGES IN IDENTIFYING ENVIRONMENTAL

GOODS

Environmental goods in the CTESS have been identified on the basis of several Members' submissions

("defining by doing").

II.B.1. MULTIPLE USE

While some goods, such as wind turbines or solar panels, may seem to be intrinsically

environmental, there are many other industrial goods that may not come across as being

environmental per se, but which are nevertheless essential when carrying out environmental

activities or projects. In fact, this is the case for most of the goods that have been proposed

by Members under Paragraph 31(iii), many of which are industrial goods that have different

types of applications, some of which may be environmental, others not.

88

The "multiple use" of goods is a source of concern for several Members in the CTESS.

In particular, some countries have been worried about the scope of the liberalization

exercise under Paragraph 31(iii). This is particularly the case given that many of the

goods considered in the context of Paragraph 31(iii) negotiations will already be subject

to tariff cuts as a result of NAMA negotiations.

II.B.2. TARIFF CLASSIFICATION

With respect to the goods put forward so far, Members have proposed specific product descriptions, or

"ex outs", which could serve to identify with more specificity environmental goods in the national tariff

nomenclatures. That being said, there are many outstanding questions as to how environmental goods can be

identified under the Harmonized System and whether ex-outs can easily be implemented at the border,

especially in developing country Members.

II.B.3. INDUSTRIAL VS. AGRICULTURAL GOODS

Some delegations have indicated an interest in some goods classified under the

Harmonized System as agricultural products - namely ethanol and organic agriculture -

there is no formal proposal on the table at this stage suggesting to include such products

under Paragraph 31(iii).

II.B.4. RAPIDLY EVOLVING TECHNOLOGY

Another challenge in the identification of environmental goods has to do with

the fact that environmental technology is evolving rapidly. Goods that are

considered environmentally friendly today may no longer be considered as such

in five or ten years' time. In the context of the on-going DDA negotiations, this

gives rise to the question of whether the mandate in Paragraph 31(iii) calls for a

one-off liberalization exercise, or whether some kind of review mechanism

should be included in the outcome to ensure that the liberalization exercise continues to benefit the

environment.

Figure 6: Identification of environmental goods, key challenges

• • No agreed definition or criteria (work in OECD, No agreed definition or criteria (

APEC APEC – – “defining by doing”) “defining by doing”)

• • Coverage: industrial Coverage: industrial and and agricultural goods? agricultural goods?

• • Majority of goods proposed have “multiple uses” Majority of goods proposed have “multiple uses”

(not just environmental) (not just environmental end-use)

• • Technical issues relating to tariff classification Technical issues relating to tariff classification

(ability to distinguish at border; use of ex (ability to distinguish at border; use of ex - - outs) outs)

• • Constant evolution of the technology (Review Constant evolution of the technology (Review

mechanism needed? “one off” exercise?) mechanism needed? “one off” exercise?)

Identifying goods/product coverage: Identifying goods/product coverage:

Some challenges Some challenges

89

EXERCISES:

3. Try to identify examples of environmental goods that could fall under the various categories mentioned in

section II.A. (e.g. renewable energy, air pollution control, etc.).

4. Briefly summarize the challenges Members have faced in identifying environmental goods.

90

III. TREATMENT FOR ENVIRONMENTAL GOODS

IN BRIEF

In addition to identifying environmental goods under the Paragraph 31(iii) mandate, Members have to agree

on the extent of trade opening - in other words, the treatment that will apply to such goods.

IN DETAIL

III.A. THE DDA CONTEXT

III.A.1. NAMA

As mentioned in Section II.B.1, most of the goods proposed so far are industrial goods that will already be

subject to tariff cuts as a result of negotiations in the NAMA Group. The view has been expressed that the fact

that environmental goods were singled out in the DDA mandate would seem to suggest that goods considered

as "environmental" should be subject to additional tariff cuts, but the question remains open at this stage.

III.A.2. SPECIAL AND DIFFERENTIAL TREATMENT

WTO Members have agreed that "the negotiations and the other aspects of the Work Programme shall take

fully into account the principle of special and differential treatment for developing and Least-developed

countries ..." (Doha Ministerial Declaration, Para. 50). Any provisions for special and differential treatment

should form an "integral part" of the outcome of the negotiations, and be "precise, effective and operational"

(Doha Ministerial Declaration, Para. 44).

Furthermore, as regards to non-agricultural market access, the Doha Declaration states that any outcome

should "take fully into account the special needs and interests of developing and least-developed country

participants, including through less than full reciprocity in reduction commitments" (Doha Ministerial

Declaration, Para. 16). Several proposals have touched upon the issue of special and differential treatment

under Paragraph 31(iii), or the treatment to apply to environmental goods more generally.

III.B. DIFFERENT APPROACHES

Different approaches to goods identification have been proposed by Members for environmental goods

liberalization. These include:

negotiating a list of environmental goods that would be subject to liberalization;

proceeding on the basis of requests and offers;

liberalizing goods utilized in environmental projects;

91

a mix of the previous approaches proposed.

The following table briefly outlines the different approaches that have been proposed by Members for

environmental goods liberalization.

Approach Proposing Member(s) Details

List Approach Group of Friends, Philippines,

Saudi Arabia, Qatar and

Singapore

Members submit lists of environmental goods,

along with tariff lines, proposed for

liberalization.

Request and Offer

Approach

Brazil Interested Members would draw up their own

individual list of goods to be liberalized on an

MFN basis. Negotiations would proceed on a

bilateral basis.

Integrated Approach Argentina and India Members would multilaterally agree on

"categories of environmental activities". In

accordance with these categories, Members

would then identify specific goods used in the

context of national projects. Similarly, goods

required in the context of the Kyoto Protocol's

Clean Development Mechanism would qualify

for tariff concessions.

Combined Approach Chile and Mexico Members would self-selected products drawn

from the universe of goods tabled so far in the

CTESS (See Section II.A.). In addition,

interested Members could select goods

through a complementary list based on a

request and offer process.

Hybrid Approach Australia, Colombia,

Hong Kong (China), Norway

and Singapore

Members would undertake commitments on a

multilaterally agreed 'common core list' of

environmental goods. Developed Members

would also choose products for tariff

elimination from a 'complementary self-

selected list', while Developing Members would

be encouraged to do so. A request and offer

process would also complement the two lists.

Finally, other goods used in environmental

projects could be unilaterally liberalized when

used in environmental projects by the Member

concerned.

Table 1: Approaches proposed by Members to liberalize environmental goods

92

Modalities of Tariff Reductions and S&D

Lesser reductions, implementation delays and other forms of flexibilities have been discussed. Product

exemptions as well as the liberalization by developing country Members of a lesser number of tariff lines have

also been envisaged. For least-developed country Members and small and vulnerable economies, additional

flexibilities could also be envisaged.

In the context of the list approach proposed by the Group of Friends, Members would have to negotiate the

treatment that would apply to the various goods identified on a list. In this regard, one suggestion is that

tariffs could be eliminated as soon as possible for developed country Members and those developing country

Members declaring themselves in a position to do so; for other developing country Members, tariffs could be

eliminated by "X" years thereafter. The Group of Friends further suggested that special and differential

treatment for developing country Members could take the form of lower rates of liberalisation, different

timeframes for the elimination of tariffs, or additional flexibilities, including product exemptions.

Under Brazil's proposed request and offer approach both the identification of goods and their treatment

would take place in the context of a series of request-offer negotiations. In this respect, developing country

Members could decide on the proportion of goods to be liberalized, as well as on their own levels of reduction.

As a result of bilateral or plurilateral negotiations, the agreed goods would be liberalised on an MFN basis.

Under the integrated approach, proposed by India and Argentina, Members would first agree multilaterally

on categories of environmental activities; in accordance with these categories, they would then proceed to

identify environmental goods which would be subject to tariff reduction or elimination in the context of national

environmental projects. The elimination of tariffs and NTBs in relation to the goods selected would therefore

be limited in time. In other words, tariff concessions would be made only for the duration of the project in

which the goods are used.

In the context of the combined approach, elaborated by Mexico and Chile, developed Members would

eliminate tariffs on [α] self-selected products, while participating developing Members would reduce, on top of

the cuts resulting from the application of the Swiss Formula in the NAMA negotiations, tariffs by an additional

50 % on [β] self-select products, with [α] > [β] to fully integrate the principle of "less than full reciprocity". In

addition, the implementation period for tariff cuts would be 5 years for developed Members and 10 years for

participating developing Members. Other products from the overall universe not covered by Members' self-

selected lists could be committed under a request and offer process, where both products and treatment would

be determined through bilateral negotiations but consolidated and multilateralized via the MFN principle.

Under the hybrid approach, proposed by Australia, Colombia, Hong Kong (China), Norway and Singapore,

Members would undertake commitments on tariff elimination (Zero for Zero) or reduction (Zero for X and/or

X% reduction from bound tariffs) with respect to the multilaterally agreed 'common core list' of environmental

goods. Special and differential treatment is envisioned in the form of longer implementation periods and/or

differential tariff cuts for developing Members. Regarding the 'complementary self-selected list', developed

Members would commit to tariff elimination, while developing Members would be encouraged to select some

environmental goods from this list for tariff elimination (Zero for Zero) or reductions (Zero for X and/or X%

reduction from bound tariffs). The second 'complementary list', would be based on a bilateral request and

offer process, whose agreed outcomes, including special and differential treatment, would subsequently be

multilateralized via the MFN principle. Finally, goods used in environmental projects, that are otherwise not

included in the common core list, the complementary self-selected list or the subject of request/offer, could be

unilaterally liberalized when used in environmental projects by the Member concerned.

93

In order to illustrate how the hybrid approach could work, Australia, Colombia, Hong Kong (China), Norway

and Singapore identified, without prejudice to any of the co-sponsors’ positions in the DDA Paragraph 31(iii)

Negotiations, the following 25 goods as a starting point for the discussion in the CTESS on a common core-list:

Mats/screens of vegetable materials HS 460120 Heat pumps HS 841861

Towers and lattice masts for wind turbine HS 730820 Solar water heaters HS 841919

Solar stoves HS 732111 Solar collector and solar system controller, heat exchanger

HS 841950

Water saving showers HS 732490 Industrial catalysers HS 847989

Super-heated water boilers and parts of steam generating boilers

HS 840290 Wind turbines HS 850231

Auxiliary plant for steam, water and central boiler

HS 840410 Static converters HS 850440

Producer gas or water gas generators, with purifiers

HS 840510 Photovoltaic system controller HS 853710

Turbines, steam and other vapour, over 40 MW, not elsewhere specified or included

HS 840681 Photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light emitting diodes

HS 854140

Hydraulic turbines HS 841011/ HS 841012

Solar concentrator systems HS 900190

Engine catalysers/Silencers HS840999 Solar concentrator systems HS 900290

Hydraulic turbines and water wheels; parts including regulators

HS 841090 Spectrometers HS 902730

Gas turbines of a power not exceeding 5,000 kW

HS 841181 Thermostats HS 903210

Gas turbines of a power exceeding 5,000 kW HS 841182

Table 2: Illustrative common-core list - Goods identified for discussion without prejudice

EXERCISES:

5. Describe the main frameworks that have been proposed by Members for liberalizing trade in

environmental goods.

6. How could the concept of S&D treatment feature into the list approach?

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IV. OTHER CONSIDERATIONS

IN BRIEF

In Paragraph 31(iii), Ministers also called on WTO Members to reduce or eliminate non-tariff barriers (NTBs)

to trade in environmental goods. The importance of this part of the mandate has been underscored by

several WTO Members.

Also, a number of WTO Members have noted that transfer of environmental technologies is linked to the

mandate, although Paragraph 31(iii) does not explicitly refer to "technology transfer."

Finally, the provision of environmental services is closely linked to trade in related goods. Some Members

have indicated that the development of their list of environmental goods had been informed by the types of

products used in environmental services.

IN DETAIL

IV.A. NON-TARIFF BARRIERS

While the elimination of tariffs is an important means of making environmental goods more affordable and

widely available, non-tariff barriers (NTBs) can be equally, or even more significant, impediments to trade in

such goods. It has been proposed that specifically identified NTBs on environmental goods should be

addressed and reduced to the maximum extent possible so as to facilitate trade in environmental goods.

So far, discussions in the CTESS on the NTB component of the mandate have been

relatively limited but some examples of NTBs have been mentioned by Members.

These include, for instance: restrictive technical regulations and conformity

assessment procedures on specific products; complications related to customs

procedures; immigration procedures; local content requirements; and intellectual

property rights protection.

Some proposals have also alluded to problems relating to the lack of international standards, including with

respect to energy efficient goods (Japan) and organically produced food (Brazil). It was further suggested that

Members consider establishing a structured work programme to address NTBs faced by developing country

Members in the export of environmental goods.

IV.B. TRANSFER OF TECHNOLOGY

As noted above, reducing tariff and non-tariff barriers to environmental goods and services is one way of

reducing the cost and increasing the availability of environmental technologies. However, a number of WTO

Members have noted that additional efforts are likely to be required to ensure that effective transfer of the

technology takes place in practice.

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Note

The mandate contained in Paragraph 37 of the Doha Declaration, referring to the relationship between

trade and technology transfer, led to the establishment of a Working Group on Trade and Transfer of

Technology.

Although Paragraph 31(iii) does not explicitly refer to "technology transfer", it is understood that liberalizing

tariff and non-tariff barriers to trade in environmental goods and services can contribute to making these

goods and services more affordable and available, which in turn may facilitate access to relevant technologies.

A number of developing countries have noted that environmental goods negotiations provide an opportunity

within the WTO mandate to increase flows of technology to developing countries, and that an explicit focus on

opportunities for doing so will be particularly important in order to achieve "wins" for the environmental and

developmental dimensions of the Paragraph 31(iii) mandate. Some recent submissions from developing

countries have proposed some ideas for advancing this element, including: developing work programmes on

technology transfer; cooperative research and development of environmental technologies; technical

assistance and capacity building; and elements related to intellectual property rights and finance to promote

transfer of environmental technology.

Considering that the environmental goods sector is only just emerging in most developing countries, it has

been underlined that an important outcome of the negotiations should be to strengthen this sector in

developing Members. Some Members have provided examples of aid and technical assistance activities that

have contributed to technology transfer with respect to certain environmental goods.

IV.C. ENVIRONMENTAL SERVICES

It has been stated that the provision of environmental services is closely linked to trade in related goods.

Indeed, there are many environmental activities that entail the use of goods in conjunction with the delivery of

services. Some Members have indicated that the development of their list of environmental goods had been

informed by the types of products used in environmental services: many goods are environmental goods

because they are used in environmental services.

The current classification of environmental services is based on the Services Sectoral Classification List

developed during the Uruguay Round, which is in turn largely based on the United Nations Provisional Central

Product Classification (CPC).

The environmental services sector includes:

sewage services;

refuse disposal services;

sanitation and similar services; and

other environmental services.

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Although the "other" category does not refer to any CPC item, it presumably includes the remaining elements

of the CPC environmental services category, e.g. cleaning of exhaust gases, noise abatement services, nature

and landscape protection services, and other environmental protection services not included elsewhere. This

list has been used by many Members in their schedules of specific commitments.

TIP

More information on the United Nations Provisional Central Product Classification (CPC) can be found on the

United Nations Statistics Division's website.

Environmental services are covered by the negotiations in the Council for Trade in Services in Special Session.

The main negotiating method in the area of services is the request and offer approach, which is similar to the

request offer approach traditionally, used in the goods negotiations. As a result of these negotiations, some

Members may take additional specific commitments in the area of environmental services.

It has been reported that as of April 2012, some 51 Members had already undertaken specific commitments in

at least one sub-sector of the environmental services sectors. Most of them, however, have undertaken

specific commitments in several, and for some Members, in all sub-sectors. The number of commitments

across sub-sectors is roughly equal.

As compared to other services sectors, such as tourism, financial services or telecommunications, liberalization

bound under the GATS in environmental services appears rather limited. However, one should remember that

Members' policies may be more liberal in practice than is reflected in their schedules of specific commitments.

The four modes of supply are relevant in the environmental services sector, although their importance varies

depending on the services concerned. Environmental services is a sector where most trade takes place

through commercial presence (mode 3) with the accompanying presence of natural persons (mode 4). Cross-

border trade (mode 1) and consumption abroad (mode 2) offer an avenue for some supporting services, but

appear to be technically limited for a number of relevant activities. These patterns are reflected in specific

commitments undertaken by Members.

Note

Mode 1 – cross-border supply

Ex: Remote monitoring and control of air

pollution levels

Mode 2 – consumption abroad Ex: Solid waste are treated abroad

Mode 3 – establishment of commercial

presence

Ex: Subsidiary provides solid waste treatment

services

Mode 4 – presence of natural persons Ex: Foreign technician provides natural disaster

assessment services

In 2010, the WTO Secretariat produced a Background Note on Environmental Services, with the view to

stimulating discussions in the Council for Trade in Services on the sector of environmental services

(S/C/W/320). The note outlines general patterns and trends of environmental services markets, main

features of the environmental services market, environmental services classifications, and the application

of GATS to trade in environmental services.

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EXERCISES:

7. Give examples of possible NTBs to trade in environmental goods.

8. Explain why transfer of technology is an important element for developing countries of an outcome under

the environmental goods negotiations?

9. How will an outcome under paragraph 31(iii) contribute to the overarching objective of the trade and

environment negotiations?

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V. CURRENT SITUATION

In April 2011, the serving Chairman of the CTESS circulated a report on the state of

play of the negotiations, including under Paragraph 31(iii) (see: TN/TE/20).

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VI. SUMMARY

ENVIRONMENTAL GOODS AND SERVICES NEGOTIATIONS IN THE WTO

At the Doha Ministerial Conference in 2001, trade ministers launched, for the first time in the history

of the multilateral trading system, negotiations in the area of trade and environment.

These negotiations address the reduction or, as appropriate, elimination of tariff and non-tariff

barriers to environmental goods and services.

Negotiations should result in a 'win-win-win' outcome, for environment, development, and trade.

Liberalization of trade in environmental goods can facilitate access to, and encourage the use of,

environmental technologies, which can in turn stimulate innovation and technology transfer to

developing countries. Moreover, developing country Members may have a rapidly growing

commercial interest in some of the environmental goods that are being discussed.

IDENTIFICATION OF ENVIRONMENTAL GOODS

There is no internationally agreed definition of an "environmental good" for trade liberalization

purposes. Nor is there any agreement on the criteria that should apply to their identification. To

date, in the negotiations, some Members have put forward a broad range of products which they

consider to be "environmental." These products have been categorized according to their

environmental benefit or rationale, including: air pollution control, renewable energy, waste

management, environmental technologies, and others.

Members have faced a number of specific challenges in the identification of environmental goods:

Environmental friendliness is a relative concept. Goods that are considered environmentally

friendly in one country might not be in another country.

Numerous environmental goods also have alternative "non-environmental" uses. Additionally,

HS-6 categories are broad and can include both environmental and non-environmental products

under the same tariff heading. Some Members have suggested using ex-outs in order to

narrow the scope of liberalization.

Members have to consider whether their negotiating mandate is limited to industrial goods or

also covers agricultural goods.

Environmental technology is rapidly evolving. Goods that are considered environmental today

may not be so in 10 years' time.

Different frameworks have been proposed by Members for environmental goods liberalization. These

include:

negotiating a list of environmental goods that would be subject to liberalization;

proceeding on the basis of requests and offers;

liberalizing goods utilized in environmental projects;

a mix of the previous frameworks proposed

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OTHER CONSIDERATIONS IN THE ENVIRONMENTAL GOODS NEGOTIATIONS

The negotiating mandate under Paragraph 31(iii) also calls for the elimination or reduction of non-

tariff barriers to trade in environmental goods. While NTBs can be even more important impediments

to trade than tariffs, to date, discussions in the CTESS on NTBs have been relatively limited.

While the removal of tariff and non-tariff barriers to trade in environmental goods is one way of

reducing the cost and increasing the accessibility of such goods, a number of WTO Members have

noted that additional efforts are likely to be required to ensure that effective technology transfer takes

place in practice. While technology transfer is not a part of the mandate under paragraph 31(iii),

discussions have taken place on the issue in the CTESS.

Negotiations on liberalizing trade in environmental services are taking place in the Council for Trade in

Services. Trade in environmental services is often directly tied to trade in environmental goods,

therefore, a successful outcome in both sets of negotiations will prove to be mutually supportive.

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PROPOSED ANSWERS:

1. A successful outcome under Paragraph 31(iii) should result in a triple win for WTO Members: a win for the

environment, a win for trade and a win for development. The environmental benefits would come from

better access to safe water, sanitation or clean energy; trade benefits, since producers of such goods and

technologies can find new markets; and development wins because poorer countries can better afford the

tools needed to address key environmental priorities as part of their on-going development strategies.

2. There is a twofold rationale. First, reducing or eliminating tariffs and non-tariff barriers for environmental

goods would reduce their price and therefore facilitate their deployment. Access to low-cost and more

environmentally-friendly technologies may be particularly important for industries which must comply

with environmental regulations. Second, trade liberalization of environmentally-friendly goods would

provide incentives to producers to expand the production and export of these goods. Increased trade

allows larger markets, leading to profits from economies of scale, and provides producers the opportunity

to benefit from technological advances. This would allow, in particular, developing countries to promote

diversification of their economies.

3. Examples of environmental goods include:

Renewable energy: solar panels, wind turbines, solar water heaters

Waste water management and potable water treatment: waterless urinals, composting toilets

Management of solid and hazardous waste and recycling systems: waste containers, biomass boilers

Air pollution control: air or vacuum pumps, fuel efficient vehicles

Clean up or remediation of soil and water: oil skimmers

Heat and energy management: glass fibres for thermal insulation of buildings, electricity meters

Natural resources protection: fishing nets that include turtle excluder devices (TEDs)

Noise and vibration abatement: industrial mufflers

Environmental monitoring, analysis and assessment equipment: thermostats, gas or smoke analysis

apparatus

Cleaner or more resource efficient technologies and products: solar stoves

Environmentally preferable products, based on end use or disposal characteristics: fabrics made with

biodegradable or sustainable sources (e.g. jute vs. synthetic)

4. The challenges Members have faced identifying environmental goods stem from the fact that there is no

internationally agreed definition of an "environmental good". Nor is there any agreement on the criteria

that should apply to their identification. Specific challenges include:

The concept of "environmental friendliness" is relative. Goods that may be considered

environmentally friendly in one country might not correspond to the same priority in another

country. Similarly, goods could be considered environmentally preferable when compared to

other products, but could still be harmful to the environment. This challenge applies to most

industrial goods identified by Members in the negotiations.

Many environmental goods also have other "non-environmental" uses. Challenges exist in

ensuring that the goods benefiting from trade liberalization under Paragraph 31(iii) are in fact

being used for environmental purposes.

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Members have to define the scope of negotiations, whether to liberalize trade in industrial

environmental goods only, or to also include agricultural environmental goods.

Environmental technology is rapidly evolving. Goods that are considered environmental today

may not be environmental in 10 years time. In the context of the on-going DDA negotiations,

this gives rise to the question as to whether the mandate in Paragraph 31(iii) calls for a one-off

liberalization exercise, or whether some kind of review mechanism should be included in the

outcome to ensure that the liberalization exercise indeed benefits the environment.

5. Under the list approach, Members submit lists of environmental goods of interest to them. Members

would then negotiate the treatment that would apply to the various goods identified on a list. Under the

request and offer approach, interested Members would draw up their own individual list of goods to be

liberalized on an MFN basis. Negotiations would proceed on a bilateral basis. Under the integrated

approach, Members would first agree multilaterally on categories of environmental activities;

in accordance with these categories, they would then proceed to identify environmental goods which

would be subject to tariff reduction or elimination in the context of national environmental projects. The

elimination of tariffs and NTBs in relation to the goods selected would therefore be limited in time. In

other words, tariff concessions would be made only for the duration of the project in which the goods are

used. Under the combined approach, Members would self-select products drawn from the universe of

goods tabled so far in the CTESS and interested Members could also select goods through a

complementary list based on a request and offer process. Under the hybrid approach, Members would

undertake commitments on environmental goods based on a multilaterally agreed 'common core list'.

Developed Members and interested developing Members would also choose products for tariff elimination

from a 'complementary self-selected list'. Other products could be selected through a request and offer

process, while other goods used in environmental projects could be unilaterally liberalized when used in

environmental projects.

6. Under the list approach, it has been suggested that tariffs could be eliminated as soon as possible for

developed country Members and those developing country Members declaring themselves in a position to

do so; for other developing country Members, tariffs could be eliminated by "X" years thereafter. The

Group of Friends further suggested that special and differential treatment for developing country Members

could take the form of lower rates of liberalisation, different timeframes for the elimination of tariffs, or

additional flexibilities, including product exemptions.

7. NTBs could include complications related to customs procedures, immigration procedures, local content

requirements and intellectual property rights protection.

8. Technology transfer is important in order to achieve a "win" for the developmental dimension of the

Paragraph 31(iii) mandate. Given that the environmental goods sector is just emerging in most

developing countries, it has been underlined that an important outcome of the negotiations should be to

strengthen this sector in developing Members.

9. Recall that the overarching objective of the Doha negotiations on trade and the environment is to

enhance the mutual supportiveness of trade and environmental policies. A successful outcome under

Paragraph 31(iii) should result in a triple win for WTO Members (i.e. environmental, trade and

developmental benefits) enhancing the mutual supportiveness of trade and environment.

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Environmental Requirements

and Market Access, including

Labelling for Environmental

Purposes ESTIMATED TIME: 8 hours

OBJECTIVES OF MODULE 5

Part one of Module 5 deals with environmental requirements and market access. It

gives an overview of environment requirements and provides a general summary

of relevant work in the Committee on Trade and Environment (CTE) and the

Committee on Technical Barriers to Trade (TBT).

Part two of Module 5 focuses on labelling for environmental purposes. It gives an

overview of environmental labelling; provides a general summary of relevant

work in the CTE; describes relevant disciplines in the TBT Agreement; and explains

market access issues faced by developing countries.

MODULE

5

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I. ENVIRONMENTAL REQUIREMENTS AND MARKET

ACCESS

IN BRIEF

Environmental requirements and market access: preventing ‘green protectionism’

Environmental requirements are requirements adopted to achieve environmental objectives. There is a risk

that these requirements impede trade and even be used as an excuse for protectionism. The answer is not to

weaken environmental standards, but to set appropriate standards and enable exporters to meet them.

IN DETAIL

I.A. ENVIRONMENTAL REQUIREMENTS

I.A.1. WHAT ARE ENVIRONMENTAL REQUIREMENTS?

Policies adopted to achieve environmental objectives take the form of environmental requirements. They may

include bans and restrictions; product-content and product- process- requirements; product performance

requirements; packaging, waste management and recycling requirements; charges and taxes; labelling

requirements; testing, inspection and certification; amongst others.

Examples of environmental requirements...

Requirements on products or processes: Requirements specifying certain product characteristics,

performance or production methods in the pursuit of environmental objectives are often elaborated in

(mandatory) technical regulations, or in (voluntary) standards. These requirements can be product-content

requirements (e.g., a ban on use of characterizing flavours in tobacco products or on the use of fur/skin of

endangered animal species in the production of garments) or maximum residue limits (e.g., bans and

restrictions on the use of certain hazardous pesticides). They can also be minimum product performance

standards (e.g., energy efficiency requirements on electronic and electrical appliances, or maximum emissions

standards on vehicles).

Labelling requirements: Environmental-labels inform consumers and raise their awareness about the

environmental characteristics of a product. Frequently, they aim at changing both consumers' and producers'

behaviour in favour of environmentally-friendly production, products, technologies and consumption. They may

be set out as (voluntary) standards and also as (mandatory) technical regulations, and may lead to the award

of eco-labels.

Packaging and disposal requirements: These requirements aim at reducing the quantity of packaging

waste, facilitating its recovery, reuse, recycling or disposal, obliging producers and consumers to take more

direct responsibility for tackling the environmental problems they create. They are applied to alter the

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characteristics of packaging, for instance, its recyclability, recycled content and bans on certain types of

packaging material or substances, as well as how packaging is disposed of, for instance, handling

requirements, take-back obligations and deposit-refund schemes.

I.A.2. RECENT TRENDS[1]

Proliferation and growing complexity

Consumers, producers, regulators and other stakeholders are becoming increasingly aware of environmental

and health issues, and are looking for versatile tools to address these effectively. As a result, environmental

requirements have proliferated, in particular in developed countries, as well as in some developing countries.

They are becoming more complex, aimed at fulfilling not only environmental objectives but often also other

public policy objectives, connecting to health, food safety, environmental and occupational safety concerns.

These requirements may be stringent, have broad impacts and be subject to frequent changes. They often

differ from market to market. Since they are multidimensional, involving various groups of stakeholders, they

are more difficult to harmonize across markets.

In recent years, there has been an increasing number of eco-labelling schemes relying on life cycle

assessment (LCA) in order to assess and quantify the environmental impacts of a given product throughout its

lifecycle, from production, processing, transportation, sale, use until disposal. For instance, concerns about

climate change have witnessed the emergence of new carbon footprint labelling schemes, whose objective is to

quantify the total amount of greenhouse gases emitted during the different stages in the life cycle of goods.

The growing number of carbon footprint schemes at the private but also national level over the last five years

has raised some concerns in the trade community about the potential impact of the proliferation of these

carbon footprint schemes in terms of market access.

Rise in private sector voluntary initiatives

In addition to those set out in (mandatory) technical regulations and (voluntary) standards, environmental

requirements are increasingly prevalent in so-called 'private standards', set by companies or non-governmental

organizations (NGOs). The importance of private standards is on the rise, for instance, in food and beverage,

fisheries and forestry sectors. Private standards may include more stringent specifications than those

contained in government technical regulations or standards, and are evolving fast. Although private standards

are by definition voluntary, in many cases, they may have to be met to effectively gain market access, and

become commercial imperatives for certain markets. In such cases, a clear separation between mandatory

and voluntary requirements is not clearly discerned at the level of the producer and exporter.

Increase in global supply-chain driven requirements

With a globalized production system, producers and exporters are obliged to meet specifications required by

multinational companies, including those set out in private standards. For example, there is an increase in

environmental requirements imposed by big retailers along the global supply chain. Producers, including small

and medium-sized enterprises (SMEs) have to abide by requirements set by global supply chains or risk being

1 Based on OECD Trade Policy Studies 2005 and the UNCTAD Trade and Environment Review 2006

(WT/CTE/W/244).

107

phased out as input providers. For instance, in the food sector, one of the global purchasing standards is the

Good Agricultural Practice (GlobalGAP) launched by the Euro Retailer Produce Working Group, which includes

the leading supermarkets in Europe.[2]

GlobalGAP includes environment-related standards for "green coffee",

which covers issues such as waste and pollution management, recycling and re-use as well as environment and

conservation.

EXERCISES:

1. What are environmental requirements, give three examples?

2. What are the recent trends in environmental requirements?

2 GLOBALGAP is a global partnership of voluntary members, bringing together like-minded parties with the

shared vision of harmonising Good Agricultural Practice (G.A.P.) world-wide. The partnership is open to any

organization agreeing to the Terms of Reference committed to responding to consumer concerns on food

safety, animal welfare, environmental protection and worker welfare.

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I.B. RELEVANT WORK IN THE CTE COMMITTEE

IN BRIEF

The effect of environmental measures on market access, especially for developing countries and in particular

to least developed countries (LDCs), is one of the items of work of the Committee. In 2001, the Doha

Ministerial Declaration instructed the CTE to give particular attention to this subject.

IN DETAIL

I.B.1. CTE WORK PROGRAMME

The effect of environmental measures on market access is one of the items (Item 6) on the Committee’s work

programme established in the 1994 Marrakesh Ministerial Decision on Trade and Environment. In 2001, the

Doha Ministerial Declaration instructed the Committee to give particular attention to this subject.

Marrakesh Ministerial Decision on Trade and Environment - Item 6 - (First Part)

The effect of environmental measures on market access, especially in relation to developing countries, in

particular to the least developed among them

Doha Declaration - Paragraph 32(i) (First Part)

We instruct the Committee on Trade and Environment, in pursuing work on all items on its agenda within its

current terms of reference, to give particular attention to: (…) (i) the effect of environmental measures on

market access, especially in relation to developing countries, in particular the least developed among them (…).

I.B.2. GENERAL DISCUSSION SINCE 1995

Environmental requirements and market access is a main area of work of the CTE. It is particularly important

as it holds the key to the complementarities that exist between sound trade and environmental policy-making.

Moreover, improved market access for developing countries' products is key to the goal of achieving

sustainable development. Since the establishment of the CTE, discussions under this work item have covered

a large number of issues that aim generally at overcoming market access challenges while pursuing legitimate

environmental policy objectives.

In the early years, discussions started in the context of a number of general principles contained in the 1992

Rio Declaration on Environment and Development (e.g. the principle of common but differentiated

responsibility; the understanding that poverty is a basic cause for environmental degradation; the polluter

pays principle; and the importance of multilateral cooperation).

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Further discussions highlighted a list of issues that could be useful to overcome market access challenges due

to environmental requirements: transparency; notification; early warning; impact assessment; consultation

and taking into account comments on draft measures; technical assistance and capacity building to assist

compliance; and coordination within exporting countries.

I.B.3. KEY ASPECTS OF THE DISCUSSIONS

WTO Member governments consider that the protection of the environment and health are legitimate policy

objectives. But they also acknowledge that measures designed to meet these objectives could hinder exports.

And they agree that sustainable development depends on improved market access for developing countries’

products. Key aspects of the CTE discussions on environmental requirements and market access are: (i)

positive potential of environmental requirements for sustainable trade; (ii) key concerns and developing

countries' specific conditions; and (iii) ways to enable compliance with environmental requirements.

Positive potential of environmental requirements for sustainable trade

The positive potential of environmental requirements for sustainable trade has been highlighted on a number

of occasions in the CTE: they are seen as capable of creating market opportunities and offering developing

countries the possibility to use their comparative advantage in exporting their products to markets where

environmental protection is an important consideration. To recall, the World Summit on Sustainable

Development (WSSD) in 2002 reiterated the need to support WTO compatible voluntary market-based

initiatives for the creation and expansion of domestic and international markets for environmentally friendly

goods. In the discussion, some Members have mentioned concrete examples where environment-related trade

measures, sometimes even in the form of bans, resulted in a positive environmental outcome. For instance,

Malaysia's export controls on unprocessed logs were levied to meet sustainable developmental objectives and had

helped to reduce the rate of deforestation. Another example is the German ban imposed on carcinogenic

Azo dyes for public health reasons, which resulted in a dangerous substance being removed more quickly.

Key concerns and developing countries' specific conditions

The fact that environmental requirements could adversely affect exports has been acknowledged on several

occasions. Principle 11 of the 1992 Rio Declaration on Environment and Development says that standards,

objectives and priorities do need to reflect the particular environmental and developmental context to which

they apply. [3]

In other words, environmental standards applied in some countries could be inappropriate in

others. They could cause unwarranted economic and social cost to others, particularly developing countries, by

hindering exports. SMEs are especially vulnerable.

Developing countries face particular difficulties in adjusting to the increasing number of environmental

requirements in their export markets and some environmental measures require prohibitive compliance costs.

A study presented by India4 in October 2000 highlighted various reasons for the vulnerability of developing

3 Principle 11 says "States shall enact effective environmental legislation. Environmental standards,

management objectives and priorities should reflect the environmental and development context to which they

apply. Standards applied by some countries may be inappropriate and of unwarranted economic and social

cost to other countries, in particular developing countries."

4 WT/CTE/W/177 (October 2000).

110

countries when environmental measures were introduced in developed countries, including inadequate access

to information and technology as well as lack of necessary skills and capital. Colombia also presented a study

on the negative market access implications of private environmental requirements.5 One particular concern

raised by developing country Members was the difficulties encountered by their SMEs to comply with certain

environmental measures. Developing country Members also expressed concerns that environmental

requirements adopted by developed countries did not take into account the country-specific natural and socio-

economic conditions of developing countries.

Enabling compliance to environmental requirements

Members consider that a balance is needed between safeguarding market access and protecting the

environment. WTO Agreements help ensure that environmental measures do not unnecessarily restrict trade.

Examples of such Agreements include the SPS Agreement — which deals with food safety and animal and plant

health — and, in particular, the TBT Agreement — which deals with technical regulations, product standards

and labelling.

Furthermore, WTO Member governments agree that there is a need to examine how environmental measures

could be designed so that they are consistent with WTO rules and inclusive, while taking into account the

capabilities of developing countries and meeting the legitimate objectives of the importing country. The

objective is not to weaken environmental standards, but to enable exporters to meet them.

Most environmental requirements are in the form of (mandatory) technical regulations or (voluntary)

standards, and some of them are based on international standards. The importance of improving the effective

participation of developing countries in international standard setting activities has been highlighted on a

number of occasions, in particular as a way of mitigating negative trade effects. Moreover, flexibility in the

application of environmental measures was seen as key, including through longer time-frames. Also, several

Members emphasized the principles of equivalence and mutual recognition. In order to enable exporters to

meet environmental requirements, technical assistance, capacity building and technology transfer, as well as

investment in domestic infrastructure were emphasized. It has also been proposed to use the Enhanced

Integrated Framework (EIF)6 to mainstream capacity building and technical assistance to enable developing

countries to respond to environment-related challenges that impacted on trade. In this regard, Aid for Trade is

also a conduit mentioned in general but not taken up in the CTE context.

I.B.4. RECENT DISCUSSIONS

Recently, CTE discussions focused on some specific areas, such as private voluntary standards and organic

agricultural products.

5 WT/CTE/W/76 (9 March 1998).

6 Set up in 1997 in the WTO, and subsequently reviewed in 2005, the EIF is a "multi-donor programme, which

supports LDCs to be more active players in the global trading system by helping them tackle supply-side

constraints to trade."

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Private voluntary standards

The issue of private (voluntary) standards as such was taken up for the first time in the CTE in 2009.[7]

To

recall, private standards usually refer to standards set by companies or NGOs, for example, as often applied in

retail supply chains. Members, including developed and developing countries, raised concerns on: the de facto

mandatory nature of these requirements; the difficulties in keeping up with rapid proliferation of private

schemes; their effect on market access, in particular for SMEs in developing countries; the lack of

transparency of some of the schemes; and the difficulties faced by producers to participate in standards

development. The need for more transparency and harmonization in this area has generally been emphasized.

Argentina and a number of delegations also raised concerns on the non-product related processes and production

methods (npr-PPMs) content of some private standards. Some emphasized that these requirements should not

become a condition for market access, and should conform to the rules of the Code of Good Practice for the

Preparation, Adoption and Application of Standards under the TBT Agreement. Other concerns related to the lack

of scientific basis in standards development; insufficient data; the large variety of methodologies used; and the

need for disciplines governing the development and implementation of standards that go beyond transparency

disciplines. The European Communities and the United States have expressed caution in this debate, highlighting

the need to reflect on the right format and approach for discussions on standards prepared by private entities.

In July 2009, the WTO Secretariat organized a Workshop on Environment-related Private Standards, Certification

and Labelling Requirements. A variety of environment-related private standards, certification and labelling

schemes in the fisheries, coffee, horticulture and forestry sectors were presented. Information was provided in

areas such as standard-setting process; suitability of standards to producers; conformity assessment procedures;

distribution of costs and benefits; and relationship between government regulations and private standards. It

was explained that private standards responded greatly to the concerns of NGOs and consumer organizations, but

were also influenced by big retailers in developed countries that wanted to differentiate products. The general

issues that were discussed related to proliferation and harmonization, transparency and standard development

processes, environmental impact and effectiveness, and capacity building. Opportunities and challenges faced, in

particular by producers and exporters in developing countries, were also addressed. On transparency and

standard development processes, a recurring theme throughout the event was the recognition of the existence of

key principles and best practice guidelines available to standard setters, for example, the TBT Agreement, ISO

Guides, the FAO Code and the various ISEAL Codes.[8]

Organic agricultural products

In 2007-2008, a number of developing countries (Uganda, Kenya, India, China and Egypt) shared their national

and regional experiences in exporting organic agricultural products. Growing consumer demand for these

products could provide new market opportunities for farmers, in particular small holders, in developing countries.

The development of this sector could have positive effects not only on income generation, but also on the

conservation of natural resources and social development. While highlighting the possible contribution of organic

production to creating a win-win-win situation for trade, the environment and development, Members also raised

concerns on the difficulties faced by producers due to the proliferation of both different government regulations

and private voluntary standards, the lack of international standards, as well as the high cost of multiple

inspection, certification and accreditation requirements. The importance of providing the possibility for small

7

WT/CTE/M/47 (July 2009) and WT/CTE/M/48 (November 2009).

8 See report of the workshop in JOB(09)/136.

112

holder group certification, as well as the need for a multilateral solution on harmonization, equivalency and

mutual recognition was emphasized.[9]

EXERCISES:

3. Why are private voluntary standards in the environmental realm a growing area of concern for some WTO

Members?

4. How has the work of the CTE in the area of environmental requirements and market access helped

promote coherence between trade and environment policy making?

9 WT/CTE/M/46.

113

I.C. WORK IN OTHER RELEVANT WTO COMMITTEES

IN BRIEF

The TBT and SPS Committees provide a unique framework for work on environmental requirements through

notifications and debates at committee meetings.[10]

IN DETAIL

I.C.1. NOTIFICATIONS

WTO Members regularly notify their environmental measures to the WTO, as per the transparency provisions

contained in the TBT and SPS Agreements, amongst others. In fulfilment of the recommendation in the 1996

Report of the Committee on Trade and Environment (CTE) to the Singapore Ministerial Conference, the

Secretariat compiles and updates annually all environment-related measures that were notified to the WTO.

This environmental database (WT/CTE/EDB) also includes environment-related measures, provisions or

programmes noted in Trade Policy Reviews.

TBT notifications

The TBT Agreement covers technical regulations, standards and conformity assessment procedures applying

to agricultural and industrial goods.

Technical regulations: measures which lay down product characteristics or their related processes

and production methods, with which compliance is mandatory.

Standards: measures approved by a Recognised Body that provide, for common and repeated use,

rules, guidelines or characteristics for products or related processes and production methods, with

which compliance is voluntary.

Conformity assessment procedures: procedures used, directly or indirectly, to determine the

fulfilment of relevant requirements contained in technical regulations or standards.

One of the objectives of the TBT Agreement is to ensure that these technical regulations, standards and

conformity assessment procedures do not constitute unnecessary barriers to international trade while

recognizing the right of Members to take regulatory measures to achieve their legitimate objectives such as

the protection of animal or plant life or health, or protection of the environment.

10

In 2006, the Secretariat prepared a note considering the work in these two committees on

environment-related information which Members have notified and specific trade concerns (STCs) which they

have raised (document JOB(06)263).

114

Over the past years, the number of such notifications has steadily increased, in particular those under the TBT

Agreement. Recently, on average, around 13 per cent of all proposed regulations notified under the TBT

Agreement indicate environmental protection as the objective, covering a wide range of sectors and measures.

10% 9% 9% 7% 6% 5%11%

15% 12%16%

12%20%

13%17% 16% 18% 16% 19% 18% 19% 22%

35 3642

3525 25

8998

8397

67

114100

107121

155 168

238

274 270 268

Share of environment-related TBT notifications

Number of environment-related TBT notifications

Figure 1: Environment-related TBT Notifications (1991-2011)

The notified TBT environment-related measures addressed, among others, chemicals, ozone depleting

substances, volatile organic compound, waste, toxic and hazardous substances, fertilisers and pesticides, gas,

biofuels, other liquid fuels and petroleum products, electronic and electrical appliances, vehicles, vessels,

engines and motors, buildings, batteries, tyres, drugs, wood, food and agricultural products.

These measures included general environmental requirements, ban and prohibition, performance and efficiency

standards, technical or quality specifications, safety specifications, eco-design requirements, classification,

harmonization, labelling and packages requirements, handling, transportation, storage and distribution

requirements, testing, certification and other conformity assessment procedures.

The environment-related notified measures aimed at environmental protection in areas such as increased

energy/fuel efficiency, energy/resources conservation, GHG emission reduction (including meeting national

emission or renewable energy targets), pollution reduction, waste, radioactive waste, chemicals and toxic

substances management, recycling and recovery, protection of animal and plant health, biodiversity, promotion

of sustainable production and consumption, compliance with multilateral environmental agreements (e.g.

Kyoto Protocol and Montreal Protocol), and contribution to mitigation of climate change. Among the above,

measures related to energy conservation and efficiency were the most frequently notified.

115

SPS notifications

The SPS Agreement covers measures that are taken by countries to ensure the safety of foods, beverages

and foodstuffs from additives, toxins or contaminants, or for the protection of countries from the spread of

pests or diseases. It recognizes the right of Members to adopt SPS measures but stipulates that they should

follow international standards and must be based on a risk assessment, should be applied only to the extent

necessary to protect human, animal or plant life or health, and should not arbitrarily or unjustifiably

discriminate between countries where similar conditions prevail.

Article 5.7 of the SPS Agreement allows Members to take SPS measures in cases where the scientific

evidence is insufficient, provided that these measures are only provisional, and that a more objective

assessment of risk is being conducted. In general, the TBT and SPS Agreements are designed to complement

one another, although the application of these Agreements is mutually exclusive. Article 1.5 of the TBT

Agreement excludes SPS measures from the scope of the TBT Agreement. Likewise, Article 1.4 of the SPS

Agreement provides that nothing (in the SPS Agreement) shall affect rights of Members under the TBT

Agreement with respect to measures not within the scope of the SPS Agreement. So, in short: a

TBT measure cannot be an SPS measure and vice-versa. Notwithstanding such distinctions, governments

may, and indeed do, draft and implement regulations that are broad in scope, where some requirements

within the regulation are covered by the TBT Agreement and others by the SPS Agreement.

The share of environment-related SPS notifications with respect to all proposed regulations notified under the

SPS agreement has been, on average, around 8 per cent.

3% 7% 3% 6% 4% 8% 7% 9% 8%

16%12% 9% 11%

8% 8%

286 296

402 402

621 610

687

612

1298

901 849889

737

10511007

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Share of environment-related SPS notifications Total number of SPS notifications

Figure 2: Environment-related SPS Notifications (1991-2011)

116

Frequently, the SPS environment-related notifications addressed, among others, sanitary and phytosanitary

requirements for the importation of nursery stocks of forest and plant species; fruits and seeds; wild birds

and eggs; live fish, live animals and animal products; animal feed and veterinary products; fertilizers and

pesticides; toxic chemicals and bio-chemical products. Some other measures related to wood packaging

material; quarantine requirements; import risk analysis (IRA); environmental and toxicological evaluation

procedures. They aimed solely or partly at protecting animal health, plants from animal/plant pests or

diseases, and the territory from other damage from pests (e.g. protection against the outbreak of Avian

Influenza).

I.C.2. SPECIFIC TRADE CONCERNS

WTO Members regularly use the TBT and SPS committee meetings to raise specific concerns on potential

adverse trade effects, or any perceived non-compliance with the obligations of the Agreements, of other

Members' measures. These specific trade concerns (STCs) relate to existing measures or draft measures

notified to the Committees. In the case of the TBT Committee, in the period 1995-2011, 330 STCs have been

raised,[11]

of which approximately 25 per cent were environment-related.[12]

0 0 0 3 3 3 3

64 5

3

108 9 9 10

124

6

1113

5

1315

20

1514

12

24

27

32

46

29

44

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Environment-related STCs Total STCs

Figure 3: Environment-related TBT STCs (1991-2011)

11

326 STCs have been raised in the SPS Committee, around 8 per cent of which were environment-related.

12 This number may not necessarily represent the full range of TBT trade concerns that exist among Members.

Many trade concerns are dealt with bilaterally, and not raised at the Committee level.

117

Most frequently, these environment-related STCs involve the following product groups: chemicals, electrical

and electronic equipment, fertilizers and other industrial goods. These include environmental concerns related

to the control of hazardous substances, emissions reduction and resource and waste management. They cover

measures such as bans and restrictions, production rules, labelling (e.g. energy efficiency labelling schemes),

eco-design, fuel economy and emission standards, pollution control requirements, collection, treatment,

recycling and recovery, certification and registration, risk assessment and sustainable management

schemes.[13]

12 2 2

4 45

9

1315

18

30

Nu

mb

er o

f S

TC

s

Figure 4: Environment-related objective of TBT STCs (1991-2011)

Among the environment-related STCs, the most frequently invoked concern is to avoid unnecessary barriers to

trade. Others, for example, relate to the need for more information or clarification, including with respect to

the rationale of the measure or the use of international standards.

13

For more information, TBT STCs can be found in document G/TBT/GEN/74/*.

118

3

10

14

18 18

24

33 34

57N

um

ber o

f S

TC

s

Figure 5: Type of concern of environment-related TBT STCs (1991-2011)

Environmental

Concerns

Products affected Type of measures

Control of

hazardous

substances

Chemical products Registration, risk assessment and

management, labelling obligations and

restrictions

Electrical and electronic equipment Bans on the use of certain substances,

collection, treatment, recycling and

recovery

Fertilizers Limits on the use of certain substances in

fertilizers (e.g. arsenic, cadmium, lead,

chromium and mercury etc.)

Emissions

reduction

Energy-using products such as electrical

and electronic equipment (e.g. air

conditioners, refrigerators and lamps) and

other household or office appliances

Eco-design requirements (e.g. standby

and off-mode electric power

consumption) and energy efficiency

labelling scheme

Taxis, road vehicles, passenger cars with

compression ignition engines and aircrafts

Emission standards, particle filters for

diesel engines, registration, certification

and fuel economy standards

119

Environmental

Concerns

Products affected Type of measures

Resource

management

Wood Certification for sustainable management

forests, tracing systems for sustainably

produced wood and labelling

Seal products Ban on the marketing, transit, import and

export of seal products

Organic agricultural and aquaculture

products

Production and labelling rules

Waste

management

Various industrial goods Promotion of waste reduction, reuse and

recycling, post consumption collection,

take-back obligations and substitution of

substances

Table 1: Environmental Aspects of Selected TBT STCs

EXERCISES:

5. Explain how the TBT and SPS Committees provide a framework for work on environmental requirements

and market access.

120

II. LABELLING REQUIREMENTS FOR ENVIRONMENTAL

PURPOSES

II.A. INTRODUCTION

IN BRIEF

Often, environmental labels are used to differentiate environmentally friendly products and capture market

opportunities. They also serve to raise consumer environmental awareness; provide timely information on

certain environmental aspects of products and their processes and production methods; and direct

manufacturers to account for the environmental impacts of their products and production. They can

contribute to the development of a more environmentally conscious market. They can also have impacts on

the market, in particular with their recent proliferation and increasing complexity.

IN DETAIL

II.A.1. TYPES OF ENVIRONMENTAL LABELLING SCHEMES

There are different types of environmental labelling schemes, depending on their design and implementation,

for example:

Voluntary or mandatory: Most environmental labelling schemes are voluntary (e.g. environmental

labels on detergents and paper products). However, sometimes, they can be mandatory requirements

imposed by governments (e.g. energy efficiency label for home appliances).

Single or multiple sector/issue: Some labels focus on a specific product sector with multiple

criteria, looking into products' entire life cycle from their production, processing, transportation, sale,

use until their disposal (e.g. wood products, coffee and fisheries), while others focus on certain

environmental issues and may cover several product categories (e.g. organic production, recycle

material and energy efficiency).

Information or rating: Some labels provide direct information or quantitative data on products'

environmental performance, while others provide rating or select leadership based on criteria and

comparison (e.g. electronic and electrical appliances).

Self-declared or third party: Often labelling schemes require third party verification, but some labels

are in the form of self-declaration.

Government or non-governmental: Labelling schemes can be government-run or

privately-administered. There are also voluntary government-sponsored schemes. On the other hand,

a programme can be government-run, and subject to independent third-party certification. Many

governments were among the first to recognise the benefits of environmental labelling, and started

programmes that now successfully label a multitude of environmentally preferable products.

121

ISO Classification

Labelling schemes can be classified based on the following International Organization for

Standardization (ISO) classification:

Type I labels are defined as voluntary, multiple-criteria-based programmes, administered by

third parties. Under these programmes, a license is awarded which authorises the use of an

environmental label intended to indicate the environmental preferability of a product, based

on life cycle considerations. These programmes provide a license to manufacturers to use a

certification mark, owned by an independent body, on their products.

Type II labels are self-declared environmental claims. Under the ISO’s definition, these are

environmental claims that are made, without independent third-party certification, by

manufacturers, importers, distributors, retailers, or anyone else likely to benefit from such a

claim.

Type III labels can be generally described as declarations of quantified environmental data

relating to a product.

Eco-labels

Eco-labels are specific environmental labelling schemes that are based on life-cycle analysis14

or

“cradle-to-grave” approach (raw material, production, consumption and disposal). 15

The purpose is to

help consumers identify products that are environmentally preferable to other products in the same

category. Examples of eco-labelling labelling schemes include: the German "Blue Angel" (covers

different product groups e.g., heating systems, copying machines and paper products); the Japanese

"Eco Mark" (covering around 69 product categories, including stationary products - ballpoint and marker

pens, mechanical pencils, correction products and notebooks); and the Danish "Nordic Swan" label

(e.g. on toilet paper, paper towels and detergents).

Recently, eco-labelling schemes have been developed in many developing countries, such as the

Brazilian eco-label "Qualidade Ambiental"; China's "Environmental Labelling Scheme", the

Chinese Taipei's eco-label "Green Mark"; the Indian "Ecomark"; the "Green Choice Philippines"; and

the "Korea Eco-Label".

Figure 7: Examples of Eco-labelling Schemes

14

"Life-cycle analysis" looks at environmental impacts of a product throughout all stages, beginning from

extraction of raw materials used to produce the product, to production, transportation and distribution, sale,

use, repair and maintenance, disposal, recycling and end of life.

15 Introduction to Ecolabelling, Global Ecolabelling Network, 2004.

122

Note: Differences between environmental labelling and eco-labelling

The term eco-labelling is often misused to refer to all labels relating to the environment. In reality,

environmental labelling refers to a large and composite set of labels, declarations and claims of

environmental performance, while eco-labelling is a sub-group of environmental labelling schemes relying

on specific criteria based on life cycle considerations and awarded by an independent third party.

II.A.2. IMPACTS OF ENVIRONMENTAL LABELLING REQUIREMENTS[16]

The effects of environmental labels on producers, consumer behaviour, markets and the environment are

closely linked: producer and consumer behaviour will, to a certain extent, affect markets, and may in turn lead

to effects on the environment.

Impacts on producers

More and more companies are making improvements to their environmental performance as they strive to

meet consumers’ increased demand for environmentally preferable products. This also has an influence on

suppliers since manufacturers are increasingly demanding proof of their products’ environmental soundness in

order to prevent future liability or negative publicity. Environmental labels may serve as a communication tool,

allowing for "environmental benchmarking".17

The criteria of an environmental label may help orient

companies’ R&D activities and internal requirements.

Impacts on consumers

Some studies reveal that consumers are willing to pay more for eco-labelled products. The effects depend on

consumers’ levels of education and environmental involvement, the media and the type of additional

information available. In general, environmental labels seem to raise consumers’ awareness of environmental

issues and change their purchasing behaviour while leading manufacturers to increasingly produce

environmentally preferable goods.

Impacts on environmental protection

Environmental labels can contribute to the development of a more environmentally conscious market (and

market behaviour) and help set standards for product development and manufacturing, directives and support

programmes, and contribute to a systematic approach in decision-making (e.g. "life-cycle analysis"). They can

also have a multiplier effect (raising public awareness for environmentally preferable products beyond the

labelled product group), and make the public aware of the environmental impacts of consumption, and can

therefore be employed to influence national policies.

16

Effects of Eco-labelling Schemes: Compilation of Recent Studies, OECD, 2005.

17 "Environmental benchmarking" involves an actor (company, government, organization, etc.) measuring its

environmental performance for the purpose of self-assessment of progress at a future date, or assessment

against other actors.

123

The environmental effectiveness of environmental labelling requirements in terms of measuring improvements

to the environment is difficult to evaluate — owing mainly to difficulties in isolating environmental benefits

achieved through eco-labelling from environmental benefits attained by other environmental measures.

Impacts on the market

The impact of environmental-labelling requirements on the market is directly linked to the general level of

environmental awareness and, consequently, the consumer demand for green products. Environmental

labelling schemes may have greater impact when they become a requirement imposed by retailers or when

they are used as instruments for “green” public procurement and institutional purchasing. However, empirical

evidence assessing trade effects of environmental-labelling is limited, and may depend inter alia on the design

of the measure, market structure in the trading countries and products covered.

II.A.3. RECENT TRENDS IN ENVIRONMENTAL LABELS

Proliferation

The use of labelling requirements by governments, industry and non-governmental organizations for

environmental purposes is increasing. The reason can be found in growing global concern for environmental

protection on the part of governments, businesses and the public. Environmental labelling schemes are

increasingly becoming an integral part of a government “environmental toolbox”. Moreover, as businesses

recognise that environmental concerns may be translated into a market advantage, various environmental

declarations/claims/labels (e.g. natural, organic, recyclable, eco-friendly, low energy and recycled content)

have emerged on products and services. These labels are common in the marketplace and become “price of

entry” for competition. However, the proliferation of labelling schemes could confuse consumers (i.e. prevent

them from being able to recognize or trust any particular label) and could make it difficult for exporters to

meet many different criteria and requirements.

Competing schemes

There are in essence two markets in which labelling schemes compete - the market for the label and the

market for the product itself. The market for the label includes not only competition between programmes that

make the same claim, but also competition between and among programmes making different claims for the

same product. For instance, a farm-raised fish that could qualify for one of several competing labels indicating

that it was produced under environmentally friendly conditions, could also qualify for an organic label, a fair

trade label, a country-of-origin label, or a label indicating freshness or making health claims.

Increase in complexity

The growing complexity and diversity of environmental labelling schemes raise difficulties for developing

countries, and particularly SMEs in export markets. Increasingly, environmental labelling requirements tend to

be based on "life-cycle analysis", i.e. the consideration of the environmental effects of a product from its

production to its final disposal.18

In practice, life-cycle analysis is not easy to conduct. Frequently, criteria are

related not only to environmental issues but other sustainability aspects of the process of production or of the

product itself.

18

See also footnote 14, above.

124

EXERCISES:

6. What are eco-labels?

7. What are the potential impacts of environmental labelling requirements on environmental protection?

125

II.B. NON-PRODUCT RELATED PROCESS AND PRODUCTION

METHODS

The CTE has discussed extensively the question of whether eco-labelling based on life-cycle analysis or non-

product related process and production methods (nprPPMs) were covered by the TBT Agreement. Labelling

requirements for environmental purposes can cover product-related PPMs and non-product-related PPMs.

Product-related PPMs - the use of a different production method (e.g. no chlorine) may be visible in

the final product (paper not bleached), so it is a PPM that is related to the characteristics of the final

product.

Non-product related PPMs - the use of a different production method (e.g. filters to reduce pollution)

may not be visible in the final product, so it is a PPM that is not related to the characteristics of the

final product.

Since eco-labels were often based on a mixture of criteria relating to product and performance characteristics,

product-related and non product-related PPMs, some Members were of the view that it would not be practical

to separate the coverage under WTO provisions of eco-labelled products according to the nature of the criteria

used, and that all criteria involved in granting an eco-label should be covered by WTO disciplines. According to

some Members, the TBT Agreement provided sufficient flexibility to permit nprPPM-based eco-labelling to be

used, subject to appropriate trade disciplines. However, several other Members argued that the

TBT Agreement did not cover requirements based on nprPPMs. In their view, accepting nprPPMs and life-cycle

analysis under the TBT Agreement would permit one country to impose its environmental priorities on another

since these schemes reflected exclusively the environmental preferences of the importing country. There was

an objection to any attempt through CTE work on eco-labelling to extend the scope of the TBT Agreement to

permit the use of requirements based on nprPPMs.[19]

EXERCISES:

8. Give an example of a product related PPM and an nprPPMs.

19

WT/CTE/1 (November 1996).

126

II.C. CTE'S WORK ON ENVIRONMENTAL LABELLING

IN BRIEF

Labelling requirements for environmental purposes is one of the subjects assigned to the CTE. It is part of

item (3b) of the 1994 Marrakesh Ministerial Decision on Trade and Environment on the Committee’s work

programme in which the Committee is assigned to consider the relationship between the provisions of the

WTO’s Agreements and the requirements governments make for products in order to protect the

environment. In 2001, the Doha Ministerial Conference made labelling requirements for environmental

purposes an issue of special focus for the CTE.

IN DETAIL

Marrakesh Ministerial Decision on Trade and Environment - Item 3(b)

The relationship between the provisions of the multilateral trading system and requirements for

environmental purposes relating to products, such as standards and technical regulations, and

packaging, labelling and recycling requirements

Doha Declaration - Paragraph 32(iii)

We instruct the Committee on Trade and Environment, in pursuing work on all items on its agenda

within its current terms of reference, to give particular attention to: labelling requirements for

environmental purposes.

II.C.1. CTE DISCUSSIONS

Environmental labelling schemes are complex, causing concerns about developing countries’ and small

businesses’ ability to export. How do you use labelling to inform consumers about environmental protection

without jeopardizing these weaker players? Opinions are divided.

Effective policy tools

Members have debated the possible trade effects of eco-labelling schemes on a number of occasions. Some

Members believed these schemes are effective policy tools to encourage the use of environmentally sound

products and services; and, that it would be difficult to imagine a less trade restrictive alternative, as

eco-labelling schemes are often voluntary.

Negative market access effects

However, other Members reported that negative market access effects were real and that the environmental

efficiency and effectiveness of eco-labelling schemes had yet to be fully determined. A number of developing

countries also reported difficulties in complying with requirements based on nprPPMs. These problems were

particularly acute for SMEs, because e.g. of difficulties in obtaining and adapting to the required technology.

127

They argued that this is particularly the case when label criteria are determined through consultations only with

interested parties at the national level. For example, a common complaint by the users of eco-labels has been

that eco-labelling criteria tend to focus on local concerns and do not address the views of foreign suppliers, nor

the specific environmental situation in the countries of these suppliers. For instance, an eco-label developed in

a country with a serious air pollution problem may put the emphasis on air pollution control measures, whereas

the main environmental problem in the foreign country could have to do with water and not air. Concerns

have been also raised about the lack of transparency, potential for discrimination, proliferation, growing

complexity and diversity of environmental labelling schemes. It has also been noted that environmental

labelling schemes could be misused for the protection of domestic markets.

Developing countries concerns

Several developing country Members reported that developing countries were severely affected by

environmental requirements such as eco-labelling schemes. Some of the problems faced by developing

countries resulted from the multiplicity and growing complexity of eco-labelling schemes in developed

countries, their differing criteria, the increased costs in complying with eco-labels and the need for greater

transparency. One of the main concerns was that eco-labelling criteria did not take into account the conditions

of individual developing countries. These schemes often necessitated the acceptance of inappropriate criteria,

mainly as a result of a lack of participation of all interested countries in their formulation. This is especially the

case, they claimed, with labelling schemes based on life-cycle analysis and the use of nprPPM criteria. They

considered that these requirements could create difficulties for developing countries, and particularly SMEs in

export markets.[20]

They expressed concern that their SMEs lacked the technical expertise to adhere to such

schemes. They argued that compliance costs and lack of capacity of developing country industries, particularly

SMEs, should be taken into account in designing eco-labelling criteria.

Technical assistance and capacity building

Developing country Members urged developed country Members to provide them with the necessary technical

assistance and capacity building to improve their environmental performance and their market access. It was

necessary to ensure the effective participation of developing countries, sufficient technology transfer, and

credit lines for developing country producers. The "principle of common but differentiated responsibility" was

recalled in this context and the idea that developing countries should be given longer periods to phase-in

environmental standards was mentioned. Another idea was to establish partnerships in order to adapt to these

eco-labels, especially in terms of compliance costs.

Adequate WTO disciplines

Most Members were also of the view that existing WTO disciplines were adequate to deal with the issue of

environmental labelling, including specific trade concerns (STCs) that could arise. In their view, no compelling

argument had been made for the need for a common understanding or guidance to be negotiated. Nor was it

clear that further work on this issue needed to include the clarification of existing rules. The TBT and SPS

20

For further information, see document WT/CTE/W/150, 29 June 2000, "Information Relevant to the

Consideration of the Market Access Effects of Eco-Labelling Schemes", Note by the Secretariat.

128

Agreements, it has been claimed, had created the appropriate balance of rights and obligations for both

mandatory and voluntary labelling programmes.[21]

21

WT/CTE/8 (July 2003).

129

National experience sharing

Several Members have shared their national experience in developing and implementing eco-labelling schemes.

For instance, Brazil presented its voluntary eco-labelling programmes in the leather and forestry sectors, which

aimed to encourage Brazilian consumer awareness, and ensure the competitiveness of Brazilian forestry and

leather and footwear products in the international market. Japan explained the development process of its

"Eco-mark" programme, which allowed for public review and participation by industry, consumers, and

academia. India reported mixed experience with the introduction of an eco-label called "Indian Eco Mark".

Iceland presented a report of the Working Group to the Nordic Council of Ministers on an eco-labelling scheme,

which provided fishing communities with market incentives to support responsible and sustainable fisheries

management. Some other Members explained the difficulties they had in meeting the requirements of eco-

labels in general. For instance, Colombia presented evidence of reduced market access due to eco-labelling

schemes in the bananas, flowers and textiles sector. This exchange of national experience has illustrated the

variety of approaches that have been adopted on eco-labelling by WTO Members and highlighted the perceived

environmental benefits and cost effectiveness of the different approaches. Members generally encouraged

further experience sharing on eco-labelling in order to enhance an understanding of the various approaches

used.

II.C.2. RECENT WORK IN THE CTE

Recent CTE work on environmental labelling touch upon the following areas: energy efficiency labelling

schemes and carbon labelling schemes.

Energy efficiency labelling schemes

Recent CTE work on labelling requirements for environmental purposes has focused on national experience

sharing on energy efficiency labelling schemes. For instance, in 2007, the United States gave a presentation

on the US “Energy Star” energy efficiency programme, a voluntary performance based labelling scheme

covering more than 50 product categories. This self-certification scheme was created with the objectives of

reducing greenhouse gas emissions and to enable consumers to better identify and choose products with

enhanced energy efficiency. There is a demand for these products in the market, since energy efficient

appliances, equipment, windows and doors, for example, reduce consumers' energy bills. Information was

provided on how the relevant requirements are developed including guiding principles and involving

stakeholder consultations; how the label is used inside and outside the US; how the integrity of the label can

be protected; and how coordination efforts have been made with other WTO Members on harmonization of

specifications and testing procedures. In 2008, Australia informed the CTE of its national experience on

minimum energy performance standards and mandatory labelling requirements that had led to an increase in

sales of energy efficient appliances in Australia. In September 2010, Chile shared its national experience with

public and private sector collaboration in developing labelling schemes for energy efficiency, among others.22

Carbon labelling schemes

22

WT/CTE/17.

130

Concern over climate change has stimulated interest in estimating the total amount of greenhouse gases

(GHG) emitted in the provision of goods and services. Carbon labelling schemes and their related standards

intend to reflect the total amount of GHGs emitted throughout the complete “life cycle” of goods and services

— i.e. including raw material extraction, manufacturing, processing, transportation, sale, use and disposal.

These schemes variously permit comparison of carbon footprint values between different products, between

the same product from different producers, and between the same product from the same producer in different

locations. In 2009-2010, a number of delegations mainly from the Southern Hemisphere (e.g. Argentina,

Australia, Kenya, New Zealand, Colombia and Uruguay) raised concerns over the recent proliferation of

unilateral voluntary carbon footprint labelling schemes. Some countries believed that these schemes often did

not reflect the entire life cycle of a product by only focusing on transportation, and generally lacked

consistency. Concerns were also raised on challenges related to data collection and high costs, the

effectiveness of these schemes, as well as their possible trade impacts.

It was proposed that the CTE should study various initiatives being developed at the international and national

levels (both by governments and private bodies) and assess their trade impacts, effectiveness and

environmental benefits. In this respect, an Information Exchange session was organized in February 2010.[23]

Following this session, some Members, including Chile, the Republic of Korea and New Zealand, shared their

national experiences on the development of new carbon footprint and labelling schemes.24

EXERCISES:

9. What are the concerns expressed by some WTO Members with regard to carbon labelling schemes? How

do these concerns differ from concerns that have been raised with eco-labelling schemes?

23

WT/CTE/M/49/Add.1.

24 WT/CTE/18.

131

II.D. ENVIRONMENTAL LABELLING AND THE TBT AGREEMENT

IN BRIEF

Most Members believe that existing disciplines on technical barriers to trade are adequate to deal with

environmental labelling, and that the TBT Agreement has created the appropriate balance of rights and

obligations for both mandatory and voluntary labelling programmes. For voluntary environmental labelling

schemes, the TBT Agreement contains a “Code of Good Practice for the Preparation, Adoption and

Application of Standards”. Agencies and organizations that develop labelling requirements are encouraged to

accept this Code.

IN DETAIL

II.D.1. TBT COMMITTEE'S WORK ON ENVIRONMENTAL LABELLING

REQUIREMENTS

Notifications

A number of environmental labelling measures have been notified to the TBT Committee by WTO Members in

compliance with their transparency obligations. These labelling requirements relate to environmental issues

such as GMOs, energy efficiency, emissions reduction, toxic and hazardous substances, waste management,

natural resources conservation and organic products.

15%

34%

13%21%

13%19% 19% 18% 16%

26% 23%31%

15

23

15

21

14

23

30 30

39

71

61

83

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Percentage of environment-related notifications related to labelling

Number of environmental labelling TBT notifications

Figure 8: Environmental Labelling TBT Notifications (2000 – 2011)

132

Specific trade concerns

Moreover, environmental labelling-related STCs are frequently raised in the TBT Committee. The concerns,

ranging from seeking further information to challenging the legitimacy of the measures, are often resolved

through discussions at Committee meetings.

2 2

1

5

1

2

1

4

3

2 2

63

1

5

6

3

4

11

6 6

1

7

4

12 12 12

10

14

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Number of STCs related to environmental labelling

Number of STCs related to labelling

Figure 9: Environmental labelling STCs raised in the TBT Committee (1995-2011)

3

10

14

18 18

24

3334

Nu

mb

er o

f S

TC

s

Figure 10: Concerns over environmental labelling STCs raised in the TBT Committee (1995-2011)

133

II.D.2. TBT DISCIPLINES

The TBT Agreement seeks to ensure that product specifications, whether mandatory or voluntary (known as

"technical regulations" and "standards"), as well as procedures to assess compliance with those specifications

(known as "conformity assessment procedures"), do not create unnecessary obstacles to trade. In its

Preamble, the TBT Agreement recognizes the right of countries to adopt such measures at the level which they

consider appropriate, and recognizes in Article 2.2 the protection of human, animal or plant life or health, and

the protection of the environment as being legitimate objectives for countries to pursue. The Agreement calls

for non-discrimination and the avoidance of unnecessary trade barriers in the preparation, adoption and

application of standards, technical regulations and conformity assessment procedures. It also encourages

Members to harmonize these specifications with international standards. Transparency through notifications

and the establishment of national enquiry points is a central feature of the Agreement.

Most Members are of the view that existing WTO disciplines are adequate to deal with the issue of

environmental labelling. For these Members, the TBT Agreement has created the appropriate balance of rights

and obligations for both mandatory and voluntary labelling programmes.

II.D.3. TRANSPARENCY AND DEVELOPING COUNTRIES' PARTICIPATION

The importance of transparency in the development and implementation of eco-labels has been reiterated on a

number of occasions. Information on regulations has to be properly disseminated for foreign producers not to

be at a disadvantage and not to suffer unnecessary losses. The benefits that have been highlighted include:

reduction of the risk that environmental criteria in eco-labelling schemes only reflect national

considerations and timely reflection of different environmental approaches;

ensuring that foreign producers or countries with significant trade interests in a labelled product have

both timely and effective input throughout the entire eco-labelling process;

avoidance of negative impact on market access, including unnecessary discrimination;

increase of the legitimacy of such schemes; and

promotion of the understanding of eco-labelling schemes.

Members generally agree that participation of all relevant stakeholders in developing and implementing

eco-labelling scheme is crucial to reduce the risk of a negative impact on market access. The participation of

developing countries in particular needs to be improved so as to ensure that their interests are taken into

account. The existence of multiple schemes and constantly changing criteria and the lack of capacity have

made developing countries' participation more difficult. Developing countries tend to be standard-takers rather

than standard-setters and it has been pointed out that international standards are frequently skewed towards

developed country interests. Information from international standards setting organizations has been shared

in the TBT Committee, from instance from ISO on its efforts to improve developing countries' participation in

standards development.

134

II.D.4. TBT CODE OF GOOD PRACTICE FOR THE PREPARATION,

ADOPTION AND APPLICATION OF STANDARDS

With respect to voluntary environmental labelling schemes, the TBT Agreement's Code of Good Practice for the

Preparation, Adoption and Application of Standards (Annex 3 of the TBT Agreement) is important, and acceptance

of this Code by the bodies developing labelling requirements is encouraged. The Code contains similar disciplines

as the main TBT Agreement itself: non-discrimination, avoiding unnecessary barriers to trade, harmonization, and

transparency. According to Article 4 of the TBT Agreement, Members are required to ensure that their central

government standardizing bodies adhere to the Code, and are to take reasonable measures for ensuring that

other standardizing bodies in their territories adhere to the Code. Members generally agreed on the desirability of

standardizing bodies preparing eco-labelling schemes to adhere to the TBT Code of Good Practice, as this would

help address trade concerns, while maintaining an environmentally-credible eco-labelling programme.

Moreover, it has been recalled that the TBT Committee's Decision on the "Principles for the Development of

International Standards" provided useful guidance.25

This decision contains principles for the development of

international standards, including environmental labelling standards. These are: transparency, inclusiveness or

openness (that all stakeholders be involved in the development of the standard), impartiality and consensus,

effectiveness and relevance, coherence, and, wherever possible, responsiveness to the needs and interests of

developing countries.

II.D.5. HARMONIZATION, MUTUAL RECOGNITION AND EQUIVALENCE

Given the growing number of eco-labelling schemes, the importance of harmonization or equivalence among

standards as well as mutual recognition of conformity assessment results was discussed on several occasions.

The importance of regional harmonization of environmental requirements was also mentioned. Harmonization

could help avoid trade and market distortions or consumers' confusion. Several Members repeatedly insisted on

the importance of equivalence and mutual recognition in order to take into account different approaches and

circumstances of Members and facilitate trade. It was indicated that a more flexible use of equivalence and

mutual recognition was important to developing country exporters, particularly SMEs. For developing countries,

the recognition of the equivalence of their own labelling/certification systems was an area of particular concern; it

was important to concentrate on assisting developing countries to design schemes that supported environmental

objectives within their own domestic context. Some countries also noted that equivalence could be complex to

implement in particular in environmental areas where life-cycle analysis was applied to different eco-systems.

II.D.6. DISCUSSIONS IN DIFERENT COMMITTEES

Since 1995, discussion on eco-labelling has been taking place in parallel both in the CTE and the

TBT Committee. Some Members preferred discussing eco-labelling in the CTE, believing that the subject was

mentioned explicitly in the CTE's work programme and that the issues it raised went beyond the mandate of

the TBT Committee. With the DDA mandating the CTE to give particular attention to labelling requirements for

25

G/TBT/1/Rev.10.

135

environmental purposes, some Members were of the view that the discussion in the CTE could then be used as

an input to the debate in the TBT Committee. On the other hand, some Members favoured discussions on the

impact of eco-labelling to take place in the TBT Committee. They argued that the TBT Committee was better

suited for the task of deliberating WTO rules vis-à-vis labelling since it was already discussing labelling in

general, including in the context of specific trade concerns (STCs) on environmental labelling. They were of

the view that it would be unwise for the CTE either to pre-empt or to duplicate such work and more preferable

to consider the results of the work carried out in the TBT Committee before taking a decision on the course of

action for the CTE.

II.E. MARKET ACCESS ISSUES FACED BY DEVELOPING

COUNTRIES

IN BRIEF

Developing-country producers, in particular the SMEs, may find it challenging to meet environmental

requirements in export markets. They may find it difficult to make the needed investments. In addition,

there can be lack of infrastructure, capital and skills, and insufficient access to information and technology.

Developing-country responses to environmental requirements vary, ranging from a firefighting approach to a

holistic approach to harness the sustainable development benefits. A number of activities, including

improving information flows, technical assistance and capacity building, have been carried out both at the

national and international level to ease the challenges faced by developing countries.

IN DETAIL

II.E.1. BACKGROUND[26]

The extent to which a country is affected by environmental requirements in export markets depends on the

degree of diversification of its exports (i.e. whether or not its total exports are concentrated in products that

are subject to environmental requirements in major export markets). Often, developing countries' exports are

concentrated in a small number of products and sectors (e.g. textiles and clothing, leather and leather

products, footwear, timber, wooden furniture and paper, food and fishery products) in which environmental

requirements apply. Limited diversification also makes these countries more affected by changes in

requirements. Moreover, often large shares of their exports are low value-added products deriving from

natural resource intensive industries that compete on the basis of price in international markets.

In developing countries, SMEs often account for a significant proportion of exporters but export only a small

share of their total output. Compared to large firms, making adjustments to environmental requirements is

26

Document WT/CTE/W/26.

136

generally more difficult for SMEs. Investments required to comply with some environmental standards and

regulations, such as installations for recycling industrial waste or waste water treatment, may not be

economical on a small scale. These problems are exacerbated in the case of SMEs that are often family-run,

located in urban areas with deficient infrastructure, working with obsolete technologies, with a weak market

and financial position and little scope for improvement.

The relatively weak domestic environmental legislation and demand for environmentally-friendly products in

developing countries, does not necessarily provide developing country producers with sufficient incentives to

make the investments needed for changes in production methods, and makes it more challenging for them to

comply with stringent environmental requirements in developed country markets.

New market opportunities

There is growing demand in developed countries for environmentally preferable products. For instance, the

demand for organic agricultural products has been growing faster than overall food products over the past two

decades. This presents promising export opportunities for producers and exporters of organic products in

developing countries. In addition to income generation, organic agriculture also has the potential to offer a

range of local and national sustainable development opportunities.

II.E.2. MAIN CHALLENGES

Lack of information

Disseminating information on environmental requirements to domestic industry in a timely manner requires

effective communication networks, and it could be a challenge, in particular for LDCs and for SMEs in

developing countries. Information disseminated on draft regulations through the WTO, including through the

internet, facilitates developing countries' access to relevant information. This early awareness may avoid

situations in which exporting country governments or industries may have insufficient time to respond to the

requirements before their exports are affected.

Lack of capacity and resources

Some developing country producers may not have the needed knowledge to comply with environmental

requirements. This is particularly the case when changes in processes and production methods are required,

and the know-how is lacking due to insufficient prior research. In some cases, exporters, in particular SMEs,

may not be able to understand fully the details of the requirements due to technical complexity. Often, they

lack the capital to invest in the new processes and production methods (e.g. pollution control installation,

specific machinery or chemical agents). Difficulties may also arise due to the lack of substitution products that

are sometimes linked to technologies held exclusively by a company or are simply too expensive and not

readily available to developing-country producers, in particular SMEs.

Proliferation of heterogeneous requirements

One of the main challenges for developing country exporters is the need to both keep up with changing

requirements and deal with divergent measures in different markets. The associated costs include the

expenditure on information and conformity assessment, as well as the loss of economies of scale. Concerns

can be heard regarding requirements that assume "one size fits all" and therefore do not take into account the

137

special circumstances of certain developing countries. Possible solutions can be to develop relevant

international standards or to negotiate equivalence agreements.

Costs of conformity assessment

In many developing countries, local certification bodies are not recognized or accredited by the importing

countries' authorities. In some cases, there may be a lack of supporting infrastructure such as laboratories,

metrology, data and technologies. For example, importers may fix a very low limit on residues that has to be

measured by sophisticated laboratory equipment operated by highly qualified technicians. This leaves

exporters with no choice but to pay the high cost of using laboratories and certifying bodies recognized by, and

usually based in, importing countries. The situation can be particularly difficult for SMEs who need to provide

“proof of compliance” with diverse requirements in different markets. Although mutual recognition agreements

(MRAs) could provide a solution to multiple certifications, their use has generally been limited, since the

conclusion of MRAs tend to be complex and time-consuming.

II.E.3. DEVELOPING-COUNTRY RESPONSES[27]

Developing-country responses to environmental requirements vary. It depends, for instance, on the

characteristics of the industry, producers and countries involved. More advanced developing countries tend to

attract subcontractors, subsidiaries and branches of large companies from developed countries, and therefore

tend to be better informed of, or prepared for new requirements. Many of the large producers may be partly

or wholly owned by companies based in developed countries, and therefore be able to obtain the needed

knowledge and capital to adapt to new processes and production methods. On the other hand, producers in

LDCs and locally owned SMEs may be less able to adapt to new environmental requirements in export markets.

A holistic approach

Some developing countries address environmental requirements in a holistic way, attempting to promote

reconciliation at a high level of environmental protection and stronger growth in exports. The impetus appears to be

coming from a desire to promote policy coherence and regulatory reform to make government regulations more

efficient and trade-friendly. For instance, proactive policies of this kind can be observed in China, the Philippines and

Thailand on their adjustment strategies to new electronic electrical equipment (EEE) environmental requirements in

the global markets and their need to address problems related to the growing domestically generated EEE waste.28

Actions include information-sharing; better understanding on environmental requirements in key export markets;

participation in standard-setting consultations where there are significant implications for exporters; coordinating

efforts to assess implications of new requirements; raising general public's awareness on environmental and health

issues; improving infrastructure for waste management; developing an appropriate legislative framework and

enforcing environmental regulations; collaboration between government and private sector stakeholders; training

and strengthened research; and enhancing SMEs' capabilities to adopt environmental management systems.29

27

Document WT/CTE/W/244.

28 Environmental Requirements and Market Access, OECD Trade Policy Studies, OECD, 2005.

29 Trade and Environment Review 2006, UNCTAD, 2006. Relevant discussions have taken place in the context

of the "UNCTAD Consultative Task Force on Environmental Requirements and Market Access for Developing

Countries" (CTF).

138

Improving information flows

On improving information flows to key actors at the national level, some countries operate an early warning system

aimed at helping exporters to anticipate new requirements including environmental ones(e.g. the system of the

Brazil's national standards institute INMETRO).30

Information provided can cover areas such as requirements set

out in environmental measures; market opportunities offered by the measures; and the most effective ways for

producers to adjust to the measures. Some other vehicles for disseminating information can be holding workshops

and seminars, sending information missions or undertaking longer-term outreaching projects to exporters. Such

"outreach" activities with direct interaction with producers and exporters provides an effective means of transferring

information and knowledge.31

I.B.4. ACTIVITIES TO EASE DEVELOPING COUNTRIES' CHALLENGES[32]

A number of activities could usefully ease developing countries' market-access challenges as a result of

environmental requirements.

Procedures for the preparation, implementation and review of environmental requirements

Environmental requirements, if well designed and implemented, can minimize their trade impacts, create new

export opportunities for developing countries, while improving environmental performance. In this respect, the

importance of inclusiveness and transparency to facilitate participation of developing country in stakeholder

consultations and ex-ante assessments has been highlighted. The usefulness of periodic reviews to avoid

regulations and standards becoming obsolete has also been underlined.

Information and communication

At the multilateral level, the WTO's TBT and SPS Agreements provide disciplines on transparency to improve

information flow. WTO Members are obliged to notify draft regulations and conformity assessment procedures,

including environmental requirements, and to provide opportunities for comments and consultations.

Capacity building and technical assistance

There is a substantial role of targeted capacity-building initiatives from bilateral and multilateral donors to

assist developing countries to overcome challenges regarding environmental requirements. Capacity building

may cover a broad range of activities aimed at improving a country's human, scientific, technological,

organizational and institutional capacities and resources. Although these initiatives may not be able to address

short-term problems of market access, in the long run they can increase the ability of exporters and their

governments to anticipate and react positively to new environmental requirements. Capacity building

30

More information on TBT national enquiry points is available in the TBT Information management System.

31 The International Trade Centre (ITC) is involved in several environment-related projects in order to assist

developing country exporters in exploring environmental market opportunities.

32 Document WT/CTE/W/244.

139

initiatives are also carried out by Multilateral Environmental Agreements (MEAs). For example, the Montreal

Protocol's mechanism provides financial and technical assistance, including technology transfer, to reduce the

cost for developing countries of measures to control emissions of ozone-depleting substances. There are also

private organization initiatives. For instance, the Marine Stewardship Council assists developing countries in

sustainable managed fishery. For example, on organic agriculture, at the multilateral level, the International

Task Force on Harmonization and Equivalence in Organic Agriculture was created by the International

Federation of Organic Agricultural Movements, the Food and Agriculture Organization (FAO) and the UNEP-

UNCTAD Capacity Building Task Force on Trade, Environment and Development provide capacity building

activities.

EXERCISES:

10. What are the main challenges faced by developing countries producers in complying with environmental

requirements in export markets?

11. What can developing countries do to address new environmental requirements in the global markets in a

proactive way?

12. What can be done in the preparation, implementation and review of environmental requirements to ease

the challenges faced by developing countries?

13. What is the view of most WTO Members regarding the TBT disciplines dealing with environmental

labelling?

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III. SUMMARY

ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS

Introduction

Environmental requirements are requirements adopted to achieve environmental objectives. Recently,

consumers, producers, regulators and stakeholders are becoming increasingly aware of environmental and

health problems, and are looking for versatile tools to address them effectively. As a result, in particular in

developed countries, environmental requirements are becoming increasingly complex, aimed at fulfilling not

only environmental objectives but often also other public policy objectives.

Developing country exporters, in particular SMEs, may face challenges to implement environmental

requirements, for instance due to the proliferation of heterogeneous requirements, resources restraints, the

lack of information and capacity, as well as costly conformity assessment procedures. Approaches such as

early warning, improved information flow, targeted capacity-building initiatives are undertaken by

government and non-governmental agencies at the national and international levels to respond to these

challenges.

There is a general view that environmental requirements, if well designed and implemented, can create new

export opportunities for developing countries while improving the environmental performance of affected

industries. Needs have been highlighted, including inclusiveness and transparency, facilitating participation

of developing country representatives in stakeholder consultations and ex-ante assessments; the usefulness

of periodic reviews to avoid regulations and standards becoming obsolete or out of date; and delays in

implementation to address difficulties faced by developing countries.

CTE discussions

The effects of environmental measures on market access is an important subject in the work of the CTE

(DMD Paragraph 32 (i)). The discussion in the CTE has highlighted a list of issues that could be useful to

overcome market access challenges: transparency, notification (early warning), consultation, impact

assessment, taking into account comments while a measure is being prepared, technical assistance and

capacity building to assist the implementation of environmental requirements, and coordination within

exporting countries.

Various views have been expressed among WTO Members, including the following:

WTO Member governments consider that the protection of the environment and health are legitimate

policy objectives. But they also acknowledge that measures designed to meet these objectives could

hinder exports. The answer is not to weaken environmental standards, but to enable exporters to

meet them.

WTO Agreements (e.g. TBT and SPS Agreements) have enough scope to ensure that environmental

measures do not unduly restrict exports. A balance is needed between safeguarding market access

and protecting the environment. There is a need to examine how environmental measures could be

designed so that they are: consistent with WTO rules; inclusive; take into account capabilities of

developing countries; and meet the legitimate objectives of the importing country.

Environmental standards, objectives and priorities need to reflect the particular environmental and

developmental context to which they apply — so says Principle 11 of the 1992 Rio Declaration on

141

Environment and Development.

It is recognized that it is essential to involve developing countries in the design and development of

environmental measures as a way of mitigating negative trade effects. Once developed, flexibility in

the application of environmental measures is seen as key.

The Plan of Implementation adopted at the World Summit on Sustainable Development (WSSD) in

Johannesburg in 2001 has reiterated the need to support voluntary, WTO-compatible market-based

initiatives for the creation and expansion of domestic and international markets for goods which are

environmentally friendly.

The CTE could look at incentives and means to assist developing countries to identify products, and

develop export markets or environmentally friendly products in areas where these countries enjoy a

comparative advantage.

Recently, the CTE discussion has been focusing on a number of specific environmental requirements,

including organic product requirements, biofuel certification, private voluntary standards and carbon

footprint measures.

TBT and SPS Committees' work

Furthermore, the TBT and SPS Committees provide a unique framework for work on environment-related

regulations and standards through notifications and debates at committee meetings on specific trade

concerns.

LABELLING REQUIREMENTS FOR ENVIRONMENTAL PURPOSES

Introduction

Increasingly, labels are used to inform consumers that a labelled product is more environmentally friendly

relative to other products in the same category. The objectives are to differentiate environmentally friendly

products and capture market opportunities; raise consumer environmental awareness; provide accurate and

timely information to consumers; and direct manufacturers to account for the environmental impact of their

products.

There are different types of labelling schemes (e.g. voluntary or mandatory, single or multiple issue, self-

declaration or third party verification, government-run or privately-administered schemes). Eco-labels are

specific environmental labelling schemes that are generally based on a life-cycle analysis approach. The

effects of eco-labels on producers, consumer behaviour, markets and the environment are closely linked:

producer and consumer behaviour will, to a certain extent, affect markets, and may in turn lead to effects on

the environment. Recently, there has been an increase in environmental labelling requirements and in their

complexity.

CTE discussions

Labelling for environmental purposes is one of the subjects assigned to the CTE (DMD Paragraph 32(iii)).

Environmental labelling schemes are complex, causing concerns about developing countries’ and small

businesses’ ability to comply and export. WTO Members generally agree that voluntary, participatory,

market-based and transparent environmental labelling schemes are potentially efficient economic

instruments to inform consumers about environmentally friendly products. Moreover, they tend to be less

trade restrictive than other instruments. However, environmental labelling schemes could be misused for the

142

protection of domestic markets. Hence, these schemes need to be non-discriminatory and not result in

unnecessary barriers or disguised restrictions on international trade.

A common concern by the users of eco-labels has been that eco-labelling criteria tend to focus on local

concerns in markets where they are developed and applied, and do not address the views of foreign

suppliers, nor the specific environmental situation in the countries of these suppliers. Concerns have been

also raised about the lack of transparency, potential for discrimination, proliferation, growing complexity and

diversity of environmental labelling schemes. This is especially the case with labelling based on life-cycle

analysis and the use of nprPPM criteria. These requirements could create difficulties for developing

countries, and particularly SMEs in export markets.

There are divergent views among Members on the appropriate forum to discuss the issue of environmental

labelling. Some Members are of the view that, considering the mandate contained in Paragraph 32(iii) of the

Doha Ministerial Declaration, which instructs the CTE to give particular attention to labelling requirements for

environmental purposes, the CTE needs to intensify its work on environmental labelling. Other Members,

however, argue that the TBT Committee is better suited for the task of examining WTO rules vis-à-vis

labelling since it is already discussing labelling in general, including under “specific trade concerns”.

TBT disciplines

Most Members believe that existing TBT disciplines are adequate to deal with environmental labelling, and

that the TBT Agreement has created the appropriate balance of rights and obligations for both mandatory

and voluntary labelling programmes. For voluntary environmental labelling schemes, the TBT Agreement

contains a “Code of Good Practice for the Preparation, Adoption and Application of Standards”. The TBT

Agreement provides a number of principles that countries must adhere to in the development of labelling

requirements, such as non-discrimination, avoidance of unnecessary trade obstacles, harmonization, and

transparency, amongst others.

143

PROPOSED ANSWERS:

1. Environmental requirements are requirements adopted to achieve environmental objectives. They can be

requirements aimed at ensuring a certain standard on product characteristic and performance to pursue

environmental objectives (e.g. energy efficiency requirements on electronic and electrical appliances);

environmental-labels to inform consumers and raise their awareness about the environmental

characteristics of a product; and packaging requirements that aim at reducing the quantity of packaging

waste, facilitating its recovery, reuse, recycling or disposal, and obliging producers to take more direct

responsibility for tackling the environmental problems they poses.

2. Recent trends in environmental requirements include:

proliferation and growing complexity;

rise in private sector voluntary initiatives; and

increase in global supply chain-driven requirements.

3. Some WTO Members are concerned that private voluntary standards are becoming de facto mandatory for

market access, and that at the same time these standards are not developed subject to the disciplines

contained in TBT Agreement Code of Good Practice for the Preparation, Adoption and Application of

Standards. More specially, concerns with regard to private voluntary standards include: the de facto

mandatory nature of these requirements; the difficulties in keeping up with rapid proliferation of private

schemes; their effect on market access, in particular for SMEs in developing countries; the lack of

transparency of some of the schemes; lack of harmonization across schemes; the difficulties faced by

producers to participate in standards development; lack of scientific basis in standards development;

insufficient data; and, the large variety of methodologies used. Other WTO Members have expressed

caution in this debate, highlighting the need to reflect on the right format and approach for discussions on

standards prepared by private entities.

4. In the past four years, under its agenda item environmental requirements and market access, the CTE

has held focussed discussions on organic agricultural products, biofuels and private voluntary standards.

5. The TBT and SPS Committees provide a unique framework for work on environmental requirements

through notifications to provide transparency, and opportunities for comments and consultations.

Moreover, WTO Members regularly use the TBT and SPS committee meetings to raise specific concerns on

potential adverse trade effects or any perceived non-compliance with the obligations of the Agreements of

other Members' measures, including environmental measures.

6. Eco-labels are specific environmental labelling schemes that based on life-cycle analysis or “craddle-to-

grave” approach (raw material, production, consumption and disposal). In general, eco-label criteria are

set so that only a small percentage of products in a product category (typically, 5 to 30%) can meet these

criteria. The purpose is to selectively identify a sub-set of products that are environmentally preferable to

other products in the same category.

7. Environmental labels can contribute to the development of a more environmentally conscious market. For

example, they can have a multiplier effect to raise public awareness for environmentally preferable

products beyond the labelled product group, and make the public aware of the environmental impacts of

consumption.

8. Product-related PPM implies that the production method leaves a trace in the final product (e.g. cotton

grown using pesticides, with pesticide residue in the cotton itself), while non-product-related PPM or

144

"unincorporated PPMs" are PPMs which leave no trace in the final product (e.g. cotton grown using

pesticides, with there being no trace of the pesticides in the cotton).

9. Some WTO Members are concerned that carbon labelling schemes sometimes did not reflect the entire life

cycle of a product by only focusing on transportation, and generally lacked consistency. Concerns were

also raised on challenges related to data collection and high costs, the effectiveness of these schemes, as

well as their possible trade impacts. With regard to eco-labelling schemes, developing country Members

have stressed they were severely affected by the multiplicity and growing complexity of eco-labelling

schemes in developed countries. Moreover, the fact that the criteria subject to eco-labelling often did not

take into account the conditions of individual developing countries was highlighted. For instance, an eco-

label developed in a country with a serious air pollution problem may put the emphasis on air pollution

control measures, whereas the main environmental problem in the foreign country could have to do with

water pollution and not air pollution.

10. The main challenges faces by developing country producers in complying environmental requirements in

export markets are:

lack of information;

lack of capacity and resources;

difficulties to keep up with proliferating heterogeneous requirements; and

high costs of related testing and certification requirements.

11. Developing countries can address new environmental requirements in the global market in a proactive

way by adopting a holistic approach aiming at achieving environmental protection and stronger export

growth at the same time. Actions can include information-sharing; raising general public's awareness

on environmental and health issues; coordination and collaboration between government and private

sector stakeholders; improving infrastructure; developing an appropriate legislative framework and

enforcing environmental regulations; training and strengthened research; and enhancing SMEs'

capabilities to adopt environmental management systems.

12. Environmental requirements, if well designed and implemented, can minimize their unnecessary trade

barriers and create new export opportunities for developing countries, while improving the environmental

performance of affected industries. Needs have been highlighted for inclusiveness and transparency to

facilitate participation of developing country representatives in stakeholder consultations and ex-ante

assessments. The usefulness of periodic reviews to avoid regulations and standards becoming obsolete,

and delays in the implementation of requirements by developing countries have also been underlined.

13. Most WTO Members believe that existing disciplines on technical barriers to trade are adequate to deal

with environmental labelling, and that the TBT Agreement has created the appropriate balance of rights

and obligations for both mandatory and voluntary labelling programmes. For voluntary environmental

labelling schemes, the TBT Agreement contains a “Code of Good Practice for the Preparation, Adoption

and Application of Standards”. Agencies and organizations that develop labelling requirements are

encouraged to accept this code.

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WTO Rules and Environmental

Policies ESTIMATED TIME: 7 hours

OBJECTIVES OF MODULE 6

Provide an overview of Article XX of the GATT 1994 addressing, in particular, its

role in allowing WTO Members to adopt trade-related measures to protect the

environment

Identify some key WTO disciplines and explain their relation with the exceptions

contained in Article XX of the GATT 1994

Identify other provisions contained in various WTO Agreements that are relevant

for the protection of the environment

Provide an overview of the existing environment-related panel and Appellate Body

decisions, and determine whether, in light of this jurisprudence, Members can

adopt measures to address environmental concerns without infringing upon their

GATT and WTO commitments

MODULE

6

MODULE

6

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I. OVERVIEW OF GATT ARTICLE XX

I.A. INTRODUCTION

IN BRIEF

WTO Members can adopt trade-related measures to protect the environment and human health and life, as

long as such measures comply with GATT rules or fall under the exceptions to these rules.

Article XX on General Exceptions lays down a number of specific instances in which WTO Members may be

exempted from GATT rules.

IN DETAIL

Measures aimed at protecting the environment come in various shapes and forms. Under WTO rules, as

confirmed by WTO jurisprudence, Members can adopt trade-related measures aimed at protecting the

environment, subject to certain specified conditions. It is not uncommon for some of these measures to be

raised and discussed at the WTO Committee level (e.g. at the TBT Committee). However, certain measures

taken to achieve environmental protection goals may, by their very nature, restrict trade and thereby impact

on the WTO rights of other Members. They may violate basic trade rules, such as the non-discrimination

obligation and the prohibition of quantitative restrictions. The Appellate Body in Brazil – Retreaded Tyres

recognized that such a tension may exist between, on the one hand, international trade and, on the other

hand, public health and environmental concerns. This is why exceptions to such rules are particularly important

in the trade and environment context.

These exceptions exist to ensure a balance between the right of Members to take regulatory measures,

including trade restrictions, to achieve legitimate policy objectives (e.g. the protection of human, animal or

plant life and health, and natural resources) and the rights of other WTO Members under basic trade rules

(such as non-discrimination). 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 such measures. Four disputes are of particular

relevance: the US – Gasoline case (clean air), the US – Shrimp case (turtles), the EC – Asbestos case (human

life and health), the Brazil – Retreaded Tyres case (human, animal and plant life and health) and US – Tuna II

(dolphins).

So far, most of these disputes have been brought in relation to the application of GATT rules.62

Several other

WTO agreements may be relevant to the protection of the environment as well. In particular, the TBT

Agreement and the SPS Agreement seek to ensure that environmental product requirements do not create

unnecessary obstacles to international trade. At the same time, these agreements explicitly recognize

Members' rights to protect animal or plant health, and the environment, at the level they choose. In light of

62

However, more recently, the US - Tuna II dispute also involved claims under the TBT Agreement.

148

the jurisprudence to date, it is fair to say that WTO rules provide ample space for environmental concerns to be

accommodated. Even if a measure is found to be inconsistent with basic disciplines, it may be justifiable under

one of the exceptions contained in Article XX, for example, if it pursues an environmental or human health

objective, and its application does not reveal protectionist intent.

I.A.1. WTO MEMBERS HAVE THE RIGHT TO ADOPT TRADE-RELATED

MEASURES TO PROTECT THE ENVIRONMENT...

WTO Members can adopt trade-related measures to protect the environment and human health and life as long

as such measures comply with GATT rules or fall under their exceptions. This right has been reaffirmed by

panels and the Appellate Body time and again.

In the first case decided by the new WTO dispute settlement body, US – Gasoline, the Appellate Body asserted

WTO Members' autonomy to determine their own environmental policies. The Appellate Body cautioned,

however, that a balance needed to be maintained between market access obligations, on the one hand, and

the right of Members to invoke the environmental justifications foreseen in the GATT, on the other, so that one

objective is not eroded or compromised by the pursuit of another.

More recently, in US – Clove Cigarettes and US – Tuna II, the Appellate Body has also clarified that, as

expressed by the sixth recital of the preamble of the TBT Agreement, a balance must exist between, on one

hand, the desire to avoid creating unnecessary obstacles to international trade and, on the other hand, the

recognition of Members' right to regulate.

I.A.2. … AND EVEN TO BE EXEMPTED FROM BASIC GATT PROVISIONS,

AS LONG AS THE MEASURES ARE JUSTIFIED UNDER ARTICLE XX

GATT Article XX on General Exceptions lays down a number of specific instances in which WTO Members may

be exempted from GATT rules. Two exceptions are of particular relevance to environmental and human health

protection: Articles XX(b) and (g) allow WTO Members to justify GATT-inconsistent measures if these are either

necessary to protect human, animal or plant life or health, or if the measures relate to the conservation of

exhaustible natural resources, respectively.

In addition, the introductory paragraph of Article XX (or its “chapeau”, as it is commonly referred to) has been

designed to prevent the misuse of trade-related measures. Pursuant to the chapeau, an environmental

measure may not be “applied in a manner which would constitute a means of arbitrary or unjustifiable

discrimination between countries where the same conditions prevail, or a disguised restriction on international

trade.” These additional safeguards seek mainly to ensure that, by allowing a measure to be inconsistent with

GATT rules through the use of exceptions, protectionism is not introduced through the back door.

EXERCISES

1. Please briefly explain whether it is possible under the GATT 1994 to adopt measures aimed at protecting

the environment, even if those measures have trade-restrictive effects that contravene GATT disciplines.

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I.B. KEY GATT DISCIPLINES

IN BRIEF

Certain measures taken to achieve environmental protection goals may, by their very nature, restrict trade and

thereby impact on the WTO rights of other Members. They may violate basic trade rules, such as the

non-discrimination obligation and the prohibition of quantitative restrictions. This is why exceptions to such

rules, as contained in Article XX, are particularly important in the trade and environment context. Article XX

being an exception clause, comes into play only once a measure is found to be inconsistent with GATT rules.

I.B.1. THE PRINCIPLE OF NON-DISCRIMINATION

In the GATT, the principle of non-discrimination stipulates that a Member shall not discriminate:

between “like” products from different trading partners (giving them equally “most favoured-nation” or

MFN status; GATT Article I); and

between its own and "like" foreign products (giving them “national treatment”; GATT Article III).

This principle is also enshrined in provisions contained in other WTO Agreements, such as in Article 2.1 of the

TBT Agreement, Article 2.3 of the SPS Agreement, Articles 3 and 4 of the TRIPS Agreement and Article II of

GATS.

“LIKE” PRODUCTS

If trade-related environmental or health measures are to be consistent with WTO rules, they cannot result in

discrimination between “like” products. Therefore, the principle of non-discrimination raises two key questions:

Are products at issue “like” products? If so, is the foreign product treated less favourably than the domestic

product or than another foreign product?

To take an example from public health protection, in the EC – Asbestos case, which dealt with measures

(prohibiting the import, sale and use of asbestos) to address the dangers posed to human health from an

exposure to asbestos and products containing asbestos, Canada – the complainant – had to prove that

products (containing asbestos) imported from Canada to France were "like" French domestic substitutes (PVA,

cellulose and glass fibres) and that the French regulation accorded imported products “less favourable

treatment” than "like" domestic products.

In fact, in this case, the panel found that domestic and imported products were “like”. However, the Appellate

Body modified this finding and explained that several criteria should have been taken into account by the panel

in the determination of "likeness" in this specific case, including not only the "competitive relationship"

between products, but also the “risk” to health posed by the two products, due to their different physical

characteristics.

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In WTO case law, four main, non-exhaustive, criteria have been used in determining whether products are

“like”:

(i) the physical characteristics of the products;

(ii) the extent to which the products are capable of serving the same or similar end-uses;

(iii) the extent to which consumers perceive and treat the products as alternative means of performing

particular functions, in order to satisfy a particular want or demand (consumers' tastes and

habits); and

(iv) the international tariff classification of the products at issue.

It is important to bear in mind that, as recently explained by the Appellate Body,63

ultimately, the examination

of the above "likeness" criteria is done in order to determine the nature and extent of the

"competitive relationship" of the products at issue.

If two products are found to be “like”, the question remains whether imported products are treated in a less

favourable manner than domestic products. In the US – Gasoline case, for instance, the panel ruled that a US

measure aimed at regulating the composition and emission effects of gasoline in order to reduce air pollution in

the United States violated Article III:4 of the GATT: imported gasoline was effectively prevented from

benefiting from sales conditions as favourable as domestic gasoline; therefore, the panel found that imported

gasoline was treated less favourably than domestic gasoline.

A RELATED QUESTION: THE ISSUE OF PROCESSES AND PRODUCTION METHODS (PPMS)

An important question in relation to environmental measures is whether, under WTO law, products may be

treated differently because of the way in which they have been produced. In other words, whether in

determining if two products are "like", it is relevant to consider the processes and production methods

(PPMs) used to produce them.64

The WTO jurisprudence indicates that the fact that different PPMs were used

in the manufacture of two products do not, per se, render them “unlike”. In the WTO dispute US - Tuna II,

although dealing with a TBT not a GATT claim, the US labelling scheme established the conditions for the use of

the dolphin-safe label in tuna products based on the different PPMs (i.e. the fishing technique) used to harvest

this fish. Nevertheless, despite the fact that different PPMs were used to harvest the fish, for the purpose of

assessing whether the measure had discriminated against tuna products imported from Mexico, the panel

considered all tuna products "like".65

As previously mentioned, a determination of "likeness" must be based on

the competitive relationship between and among products, rather than on the regulatory objectives of the

measure. This analysis should be also always carried out on a case-by-case basis, as pointed out by the

Appellate Body in EC – Asbestos.66

63

In Philippines - Distilled Spirits and US - Clove Cigarettes, with respect to "likeness" under GATT and the

TBT Agreement.

64 See Module 5 for background information on PPMs.

65 For a complete summary of the US - Tuna II dispute, see section [II.E], below.

66For a complete summary of the EC - Asbestos dispute, see section [II.A], below.

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Another important question is whether WTO rules cover measures based on non-product related PPMs

(nprPPMs), i.e. those that do not leave a trace in the final product. In other words, when nprPPMs are used,

the characteristics of the final products being compared are not affected even though they were produced

using different PPMs. The US - Shrimp dispute provides an interesting example of a measure that provided for

different treatment to products on the basis of nprPPMs but which was nevertheless provisionally justifiable

under Article XX(g) of the GATT. The dispute concerned the manner in which fishermen harvested shrimp.

Certain production methods, involving the use of fishing nets and shrimp trawl vessels, resulted in a high rate

of incidental killing of sea turtles, as turtles can be trapped and drowned by the nets used to harvest shrimp.

The United States aimed to reduce the killing of turtles by imposing an import ban on shrimp harvested by

methods which may lead to the incidental killing of sea turtles. In order to avoid the ban, exporters were

required to demonstrate the use of TEDs (turtle excluder devices which limit the incidental catch of endangered

sea turtles), or similar equipment, when harvesting shrimp. However, the various fishing techniques to catch

shrimp did not have any traceable effect on the characteristics of the harvested shrimp, the final product (i.e.

they were nprPPMs). The Appellate Body viewed the United States' measure as directly connected to the policy

of conservation of sea turtles and the measure was thus considered to be provisionally justified under

Article XX(g).67

More recently in US – Tuna II, although the Appellate Body ultimately considered that the US dolphin-safe label

was discriminatory and therefore inconsistent with Article 2.1 of the TBT Agreement, it did not base its

conclusion on the fact that the measure distinguished among tuna products on the basis of the different PPMs

used to harvest the tuna. Moreover, protecting dolphins by discouraging the use of certain fishing techniques

(PPMs) that are harmful to dolphins (through the use of a dolphin-safe label) was considered by the panel to be

a legitimate regulatory objective.

I.B.2. THE PROHIBITION OF QUANTITATIVE RESTRICTIONS

Certain environmental measures (such as bans) may also violate another key discipline of the GATT, which is

contained in Article XI and provides, among other things, that restrictions on the importation or sale of

products from other WTO Members are prohibited. In the US – Shrimp case, already mentioned above, the US

embargo was found to be inconsistent with Article XI: the United States had prohibited the import of shrimp

originating from non-certified countries, i.e. countries that did not use a technology known as TEDs. More

recently, in the Brazil – Retreaded Tyres dispute, Brazil's import ban on retreaded tyres was also found to be

inconsistent with Article XI.

This does not mean, however, that WTO Members are barred from restricting imports (or exports) on the basis

of environmental concerns. For instance, in the above-mentioned Retreaded Tyres dispute, Brazil successfully

proved that the ban on these products, although a violation of Article XI, was nevertheless necessary to protect

human, animal or plant life or health, against the risks arising from the accumulation of waste tyres under

GATT Article XX(b). GATT Article XX, explained in more detail immediately below, contains the main exceptions

to the GATT obligations.

67

For a complete summary of the US - Shrimp dispute, see section [II.B], below.

152

EXERCISES

2. Please briefly explain what the principle of non-discrimination requires in relation to domestic and

imported products.

3. In WTO case law, four criteria have been used in determining whether products are “like”. What are these

criteria?

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I.C. GATT ARTICLE XX GENERAL EXCEPTIONS

IN BRIEF

GATT Article XX on General Exceptions lays down a number of specific instances in which WTO Members may

be exempted from GATT rules. Two exceptions are of particular relevance to the protection of the

environment: those contained in paragraphs (b) and (g) of Article XX. Pursuant to these two paragraphs,

WTO Members may adopt policy measures that are inconsistent with GATT disciplines, but necessary to

protect human, animal or plant life or health (paragraph (b)), or relating to the conservation of exhaustible

natural resources (paragraph (g)).

GATT Article XX on General Exceptions consists of two cumulative requirements. For a GATT-inconsistent

environmental measure to be justified under Article XX, a Member must perform a two-tier analysis proving:

First, that its measure falls under at least one of the exceptions (e.g. paragraphs (b) or (g), two of the ten

exceptions under Article XX) and,

Second, that the measure satisfies the requirements of the introductory paragraph (the “chapeau” of

Article XX), i.e. that it is not applied in a manner which would constitute “a means of arbitrary or unjustifiable

discrimination between countries where the same conditions prevail”, and is not “a disguised restriction on

international trade”.

I.C.1. ENVIRONMENTAL POLICIES COVERED BY ARTICLE XX

WTO Members' autonomy to determine their own environmental objectives has been reaffirmed on a number

of occasions (e.g. in US – Gasoline, Brazil – Retreaded Tyres). The Appellate Body also noted, in the

US - Shrimp case, that conditioning market access on whether exporting Members comply with a policy

unilaterally prescribed by the importing Member was a common aspect of measures falling within the scope of

one or other of the exceptions of Article XX.

In past cases, a number of public health and environmental policies have been found to fall within the realm of

these two exceptions:

policies aimed at reducing the consumption of cigarettes, protecting dolphins, reducing risks to human

health posed by asbestos, reducing risks to human, animal and plant life and health arising from the

accumulation of waste tyres (under Article XX(b)); and

policies aimed at the conservation of tuna, salmon, herring, dolphins, turtles, clean air (under

Article XX(g)).

Interestingly, the phrase “exhaustible natural resources” under Article XX(g) has been interpreted broadly

to include not only “mineral” or “non-living” resources but also living species which may be susceptible to

depletion, such as sea turtles. To support this interpretation, the Appellate Body noted, in the US – Shrimp

case, that modern international conventions and declarations made frequent references to natural resources as

embracing both living and non-living resources. Moreover, in order to demonstrate the exhaustible character of

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sea turtles, the Appellate Body noted that sea turtles were included in Appendix 1 on species threatened with

extinction of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES").

Also in the US – Shrimp case, the Appellate Body accepted as a policy covered by Article XX(g), one that

applied not only to turtles within the United States waters but also to those living beyond its national

boundaries. The Appellate Body found that there was a sufficient nexus between the migratory and endangered

marine populations at issue and the United States, for purposes of Article XX(g).

Moreover, the panel in China – Raw Materials found that "a proper reading of Article XX(g) in the context of the

GATT 1994 should take into account the challenge of using and managing resources in a sustainable manner

that ensures the protection and conservation of the environment while promoting economic development".

I.C.2. DEGREE OF CONNECTION BETWEEN THE MEANS AND THE

ENVIRONMENTAL POLICY OBJECTIVE

In order for a trade-related environmental measure to be eligible for an exception under Article XX,

paragraphs (b) and (g), a Member has to establish a connection between its stated environmental policy goal

and the measure at issue. The measure needs to be either:

necessary for the protection of human, animal or plant life or health (paragraph (b)); or

relating to the conservation of exhaustible natural resources (paragraph (g)).

To determine whether a measure is “necessary” to protect human, animal or plant life or health under

Article XX(b), a process of weighing and balancing a series of factors has been used by the Appellate Body.

This process is commonly known as the "necessity" analysis.

First, a panel must weigh and balance certain factors that include: (i) the importance of the common interests

or values protected by the measure; (ii) the contribution made by the environmental measure to the policy

objective, and (iii) the impact of the measure on international trade.

If the above analysis yields a preliminary conclusion that the measure is "necessary", this result must be

confirmed by comparing the measure with its possible alternatives, which may be less trade restrictive while

providing an equivalent contribution to the achievement of the objective pursued.

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GATT ARTICLE XX(B) - NECESSARY FOR THE PROTECTION OF HUMAN, ANIMAL OR

PLANT LIFE OR HEALTH

The Appellate Body in Korea - Various Measures on Beef found that when assessing a measure claimed to be

"necessary", account may be taken of the relative importance of the common interests or values that the

measure is intended to protect. The Appellate Body added, "[t]he more vital or important those common

interests or values are, the easier it would be to accept as 'necessary' a measure designed as an enforcement

instrument". Regarding the contribution aspect of the necessity analysis required by Article XX(b), in Korea -

Various Measures on Beef, the Appellate Body observed that the greater the contribution of the measure to the

realization of the end pursued, the more easily that measure might be considered to be "necessary". This was

further clarified in Brazil - Retreaded Tyres, where the Appellate Body stated that "[s]uch a contribution exists

when there is a genuine relationship of ends and means between the objective pursued and the measure at

issue".

Moreover, the analysis of the contribution of a measure does not necessarily require the quantification of such

contribution. As clarified by the Appellate Body in Brazil – Retreaded Tyres, "[t]he selection of a methodology

to assess a measure's contribution is a function of the nature of the risk, the objective pursued, and the level

of protection sought"; and it ultimately depends "on the nature, quantity, and quality of evidence existing at

the time the analysis is made". In relation to the assessment of the impact of the measure, the Appellate Body

in Korea - Various Measures on Beef has clarified that "[a] measure with a relatively slight impact upon

imported products might more easily be considered as 'necessary' than a measure with intense or broader

restrictive effects" (emphasis added). In Brazil - Retreaded Tyres, the Appellate Body also observed that

"when a measure produces restrictive effects on international trade as severe as those resulting from an import

ban, it […] would be difficult for a panel to find that measure necessary unless it is satisfied that the measure

is apt to make a material contribution to the achievement of its objective".

As mentioned before, if the "weighing and balancing" of the various factors taken into consideration in a

necessity analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed

by comparing the measure with possible less-trade restrictive alternatives. A "reasonably available" alternative

measure is one that preserves for the responding Member its right to achieve its desired level of protection

with respect to the health or environmental objective pursued. Thus, an alternative measure may be found not

to be "reasonably available", where it is merely theoretical in nature, for instance, where the responding

Member is not capable of taking it, or where the measure imposes an undue burden on that Member, such as

prohibitive costs or substantial technical difficulties. In the Brazil – Retreaded Tyres case, for instance, the

Appellate Body found that the proposed alternatives, which were mostly remedial in nature (i.e. waste

management and disposal), were not real alternatives to the import ban, which could prevent the accumulation

of tyres. Furthermore, the Appellate Body also recognized that certain complex environmental problems may

be tackled only with a comprehensive policy comprising a multiplicity of interacting measures. Finally, the

Appellate Body pointed out that the results obtained from certain actions – for instance, measures adopted in

order to address global warming and climate change – can only be evaluated with the benefit of time.

GATT ARTICLE XX(G) - RELATING TO THE CONSERVATION OF EXHAUSTIBLE NATURAL

RESOURCES

For a measure to be “relating” to the conservation of natural resources, a substantial relationship between the

measure and the conservation of exhaustible natural resources needs to be established. In the words of the

Appellate Body, a Member has to establish that the means (i.e. the chosen measure) are “reasonably related”

to the ends (i.e. the stated policy goal of conservation of exhaustible natural resources). Moreover, in order to

156

be justified under Article XX(g), a measure affecting imports must be applied “in conjunction with restrictions

on domestic production or consumption” (the even-handedness requirement).

In the US – Gasoline case, the United States had adopted a measure regulating the composition and emission

effects of gasoline in order to reduce air pollution in the United States. The Appellate Body found that the

chosen measure was “primarily aimed at” the policy goal of conservation of clean air in the United States and

thus fell within the scope of paragraph (g) of Article XX. As far as the second requirement of paragraph (g) is

concerned, the Appellate Body ruled that the measure met the “even-handedness” requirement, as it affected

both imported and domestic products.

In the US – Shrimp case, the Appellate Body considered that the general structure and design of the measure

in question were “fairly narrowly focused” and that it was not a blanket prohibition of the importation of shrimp

imposed without regard to the consequences to sea turtles; thus, the Appellate Body concluded that the

regulation in question was a measure “relating to” the conservation of an exhaustible natural resource within

the meaning of Article XX(g). The Appellate Body also found that the measure in question had been made

effective in conjunction with the restrictions on domestic harvesting of shrimp, as required by Article XX(g).

RECALL

WTO Members' autonomy to determine their own environmental objectives.

In order for a trade-related environmental measure to be eligible for an exception under Article XX,

paragraphs (b) and (g), a Member has to establish that the measure is necessary for the protection of

human, animal or plant life or health (paragraph (b)), or that it relates to the conservation of

exhaustible natural resources (paragraph (g)).

I.C.3. ARTICLE XX CHAPEAU: THE MANNER IN WHICH

ENVIRONMENTAL MEASURES ARE APPLIED

The introductory clause of Article XX (the "chapeau") emphasizes the manner in which the measure in question

is applied. Specifically, the application of the measure must not constitute a “means of arbitrary or unjustifiable

discrimination” or a “disguised restriction on international trade”.

The chapeau requires the measure not to constitute an abuse or misuse of the provisional justification made

available under one of the paragraphs of Article XX, that is to say, to be applied in good faith. In

Brazil - Retreaded Tyres, the Appellate Body recalled that the chapeau serves to ensure that Members' right to

avail themselves of exceptions is exercised in good faith in order to protect legitimate interests, not as a means

to circumvent one Member's obligations towards other WTO Members. In other words, Article XX embodies the

recognition by WTO Members of the need to maintain a balance between the right of a Member to invoke an

exception and the rights of the other Members under the GATT.

WTO jurisprudence has highlighted some of the circumstances which may help to demonstrate that the

measure is applied in accordance with the chapeau. These include whether:

The lack of serious efforts into international cooperative arrangements constitutes unjustifiable

discrimination;

The flexibility of the measure allows it to take into account different situations in different countries as

well as;

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The rationale put forward to explain the existence of discrimination bears a connection to the stated

objective of the measure at issue;

The design of the measure reveals a disguised restriction to international trade.

These circumstances are explained in more detail below.

In the US – Gasoline decision, the Appellate Body considered that the United States had not sufficiently

explored the possibility of entering into cooperative arrangements with affected countries in order to

mitigate the administrative problems raised by the United States in their justification of the discriminatory

treatment. Moreover, in the US – Shrimp case, the fact that the United States had “treated WTO Members

differently” by adopting a cooperative approach regarding the protection of sea turtles with some Members but

not with others, also showed that the measure was applied in a manner that discriminated among WTO

Members in an unjustifiable manner. At the compliance stage (i.e. under Article 21.5 of the DSU), in US –

Shrimp (Article 21.5), the Appellate Body found that, in view of the serious, good faith efforts, made by the

United States to negotiate an international agreement on the protection of sea turtles with others, including

with the complainant, the measure was no longer applied in a manner that constitutes a means of unjustifiable

or arbitrary discrimination.

Further, in the US – Shrimp case, the Appellate Body was of the view that rigidity and inflexibility in the

application of the measure (e.g. by overlooking the conditions in other countries) constituted unjustifiable

discrimination. It was deemed not acceptable that a Member would require another Member to adopt

essentially the same regulatory programme without taking into consideration that conditions in other Members

could be different and that the policy solutions might be ill-adapted to their particular conditions. In order to

implement the panel and Appellate Body recommendations, the United States revised its measure and

conditioned market access on the adoption of a programme "comparable in effectiveness" to that of the United

States. In this regard, the Appellate Body, in US – Shrimp (Article 21.5), stated that there was an important

difference between, on the one hand, conditioning market access on the adoption of "essentially the same

programme and, on the other, conditioning market access on the adoption of a programme comparable in

effectiveness. The Appellate Body considered that the latter was acceptable as it would give "sufficient latitude"

to the exporting Member to adopt a programme that could achieve the level of effectiveness required and

which would be "suitable to the specific conditions prevailing in its territory.

Additionally, finding support in its previous reports in US – Gasoline, US – Shrimp, and US – Shrimp (Article

21.5 – Malaysia), the Appellate Body concluded in Brazil – Retreaded Tyres that analysing whether

discrimination is arbitrary or unjustifiable under the chapeau of Article XX, usually involves an analysis that

relates primarily to the cause or the rationale put forward to explain the existence of that discrimination.

Accordingly, it considered difficult to understand how discrimination may be viewed as complying with the

chapeau of Article XX when the alleged rationale for discriminating does not relate to the pursuit of or would go

against the objective that was provisionally found to justify a measure under a paragraph of Article XX. Thus,

the Appellate Body considered, in that particular case, that the fact that imports of used tyres from Europe and

retreaded tyres from MERCOSUR countries were allowed while imports of retreaded tyres from Europe were

prohibited, constituted unjustified discrimination. Moreover, it found that the fact that those exceptions were

imposed by the rulings of domestic and international tribunals was not an acceptable rationale for the

discrimination, because such fact bore no relation to the legitimate objective pursued by the import ban on

retreaded tyres, and even went against such objective.

Finally, the Appellate Body in US – Gasoline noted that the terms "arbitrary discrimination", "unjustifiable

discrimination" and "disguised restriction on international trade" should be read side-by-side, because they

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impart meaning to one another. In the Appellate Body's view, "disguised restriction" includes disguised

discrimination in international trade. However, concealed or unannounced restriction or discrimination in

international trade does not exhaust the meaning of "disguised restriction" under the chapeau of Article XX. In

sum, an environmental measure must not constitute a “disguised restriction on international trade”, i.e. must

not result in protectionism. In past cases, it was found that the protective application of a measure could most

often be discerned from its “design, architecture and revealing structure”. For instance, in US – Shrimp

(Article 21.5), the fact that the revised measure allowed exporting countries to apply programmes not based

on the mandatory use of TEDs, and offered technical assistance to develop the use of TEDs in third countries,

showed that the measure was not applied so as to constitute a disguised restriction on international trade.

More recently, the panel in Brazil – Retreaded Tyres found that the existence of a "disguised restriction on

international trade" might be derived from a variety of situations where a restriction on international trade,

arising in the application of a measure provisionally justified under a specific paragraph of Article XX, would

lead to that exception being abused or illegitimately used.

Figure 1: Analysis under article XX of GATT

ANALYSIS UNDER ARTICLE XX OF GATT

FALLS WITHIN PARAGRAPH (B)? FALLS WITHIN PARAGRAPH (G)?

NECESSITY TEST

ANALYSIS UNDER THE CHAPEAU

IS THE MEASURE "RELATING" TO?

ARBITRARY OR UNJUSTIFIABLE

DISCRIMINATION?

DISGUISED RESTRICTION TO

INTERNATIONAL TRADE?

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RECALL

In sum, the analysis under GATT Article XX in relation to environmental measures is two-tiered:

- Under the first step, it is necessary to determine whether the measure in question falls within

paragraph (b) as a measure aimed at protecting human and animal or plant life and health, or

paragraph (g) as a measure intended to preserve exhaustible natural resources. This includes assessing the

degree of connection between the measure and its stated objective, to determine whether the measure is

"necessary" within the meaning of paragraph (b) or "relating to" according to paragraph (g). This first step

also involves an evaluation of whether there are less trade restrictive alternatives that are reasonably

available and that equally achieve the stated objective of the measure.

- Under the second step, it must be assessed whether the measure is not applied in a manner that

constitutes "arbitrary or unjustifiable discrimination" between countries where the same conditions prevail,

or a "disguised restriction on international trade".

EXERCISES

4. How does the two-tiered analysis to determine whether a measure is justifiable under GATT Article XX

apply in a hypothetical case of an import ban on pesticides which pollute groundwater aquifers?

5. Please indicate whether each one of the following trade-related measures could be more appropriately

covered by either paragraph (b) or paragraph (g), or both paragraphs, of Article XX (for example, a

measure prohibiting the importation of carcinogenic products could be more adequately covered by

paragraph (b) of Article XX; a measure imposing an import ban on portable heat radiators that generate

considerable air pollution would be more appropriately covered by paragraph (g) of Article XX):

(i) A measure that restricts the marketing of toys made with lead-containing paint;

(ii) A measure that prohibits the importation of tuna that is caught using a fishing technique that

is harmful to dolphins;

(iii) A measure that establishes quantitative restrictions on the importation of pesticides that

pollute groundwater reservoirs;

(iv) A measure that requires that imported products bearing a label informing the carbon

emissions generated during their fabrication.

(v) A measure that bans the imports of batteries on the grounds that disposing of these products

when they become waste is particularly complicated.

6. Please describe the process of "weighing and balancing" to determine whether a measure is "necessary"

to protect human, animal or plant life or health under Article XX(b) of the GATT 1994.

7. What is the meaning of the term "relating" in GATT Article XX(g)?

8. How was a measure considered as constituting a means of arbitrary or unjustifiable discrimination in the

US – Shrimp case?

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I.D. OTHER RELEVANT WTO TEXTS

IN BRIEF

The interface between trade and environment is also addressed in a number of different WTO Agreements

and Decisions. These include the General Agreement on Trade in Services (GATS), the Agreement on

Technical Barriers to Trade (TBT), the Agreement on the Application of Sanitary and Phytosanitary Measures

(SPS), the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), the Agreement on Subsidies

and Countervailing Measures, the Agreement on Agriculture, the April 1994 Marrakesh Ministerial Decision on

Trade and Environment, and the December 1993 Marrakesh Ministerial Decision on Trade in Services and the

Environment.

I.D.1. THE GENERAL AGREEMENT ON TRADE IN SERVICES

The General Agreement on Trade in Services (GATS) contains a “general exceptions” clause, Article XIV, similar

to GATT Article XX. The GATS Article starts with an introduction (“chapeau”) that is almost identical to that of

GATT Article XX.

Addressing environmental concerns, paragraph (b) allows WTO Members to adopt policy measures that would

normally be inconsistent with GATS if this is “necessary to protect human, animal or plant life or health”

(identical to GATT Article XX(b)). As under GATT, this must not result in arbitrary or unjustifiable discrimination

and must not constitute a disguised restriction on trade in services.

I.D.2. THE AGREEMENT ON TECHNICAL BARRIERS TO TRADE (TBT)

The TBT Agreement and its relevance for measures intended to protect the environment, such as those

providing for environmental labels, are discussed in further detail in Module 5 of this course. It suffices here to

recall that the TBT Agreement seeks to ensure that product specifications, whether mandatory or voluntary

(known respectively as "technical regulations" and "standards"), as well as procedures to assess compliance

with those specifications (known as "conformity assessment procedures"), are not discriminatory and do not

create unnecessary obstacles to trade.

The sixth recital of the preamble to the TBT Agreement recognizes that no country should be prevented from

taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant

life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers

appropriate, subject to the requirement that they are not applied in a manner which would constitute a means

of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised

restriction on international trade.

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In line with the sixth recital, these same legitimate objectives, including the protection of the environment,

have been enshrined in Article 2.2 of the TBT Agreement,68

which states:

"Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or

with the effect of creating unnecessary obstacles to international trade. For this purpose, technical

regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking

account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national

security requirements; the prevention of deceptive practices; protection of human health or safety,

animal or plant life or health, or the environment. In assessing such risks, relevant elements of

consideration are, inter alia: available scientific and technical information, related processing technology

or intended end-uses of products."

Among the TBT Agreement’s important principles applicable to TBT measures taken for the protection of the

environment are:

non-discrimination in the preparation, adoption and application of technical regulations, standards, and

conformity assessment procedures;

avoiding unnecessary obstacles to trade;

harmonizing specifications and procedures with relevant international standards as far as possible;

the transparency of TBT measures, through governments notifying them to the WTO Secretariat and

establishing national enquiry points.

I.D.3. THE AGREEMENT ON THE APPLICATION OF SANITARY AND

PHYTOSANITARY MEASURES (SPS)

The SPS Agreement deals with food safety, and human, animal and plant health and safety regulations. It

recognizes Members’ rights to adopt SPS measures but stipulates that they must be based on a risk

assessment, should not create unnecessary obstacles to trade (should be applied only to the extent necessary

to protect human, animal or plant life or health), and should not arbitrarily or unjustifiably discriminate

between Members where similar conditions prevail. The Agreement encourages Members to adapt their

SPS measures to the areas (regions, countries or parts of countries) that supply their imports.

The SPS Agreement complements the TBT Agreement. It allows Members to adopt SPS measures for

environmental purposes, but subject to such requirements as risk assessment, non-discrimination and

transparency.

Previous sections of this course (see subsection I.C.1 of Module 5) describe the operation of the

SPS Committee and the notifications submitted by the Members, and specific trade concerns that are raised in

relation to measures establishing environmental requirements that are covered by the SPS Agreement.

68

References to the protection of the environment also appear in other provisions of the TBT Agreement, such

as Articles 2.10, 5.4, 5.7 and Annex 3(L).

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I.D.4. THE AGREEMENT ON TRADE-RELATED ASPECTS OF

INTELLECTUAL PROPERTY RIGHTS (TRIPS)69

The Doha Ministerial Declaration (paragraph 32(ii)) instructs the CTE, in pursuing work on all agenda items

within its current terms of reference, to give particular attention to three items, including the relevant

provisions of the TRIPS Agreement.

Environmental-related provisions: optional exceptions to patentability

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) contains one explicit

reference to the protection of the environment, which is contained in the provisions of the Agreement dealing

with the possibility Members have to exclude certain inventions from patentability. TRIPS Article 27.2 states

that "Members may exclude from patentability inventions, the prevention within their territory of the

commercial exploitation of which is necessary to protect ordre public (public order) or morality, including to

protect (…) human, animal or plant life or health or to avoid serious prejudice to the environment (…)." The

use of this exception is subject to the condition that the "commercial exploitation" of the invention must be

prevented and this prevention must be necessary to, for instance, avoid "serious prejudice to the

environment". Thus, this provision does not allow Members to exclude from patentability inventions simply

because their exploitation is prohibited by law. In other words, inventions cannot be excluded from

patentability merely because, for example, they have not yet received marketing approval from health

regulatory authorities under the law. Some countries have availed themselves of such exceptions. For example,

in some jurisdictions, either on moral or public order grounds, patents are not available in respect of process

for the cloning of human beings or for modifying the germ line identity of humans or animals.

There is also another environment-related optional exclusion from patentability allowed under the

TRIPS Agreement. Under Article 27.3(b), Members are not required to provide patent protection for inventions

of 1) plants and animals and 2) essentially biological processes for their production. They are, however,

required to provide patent protection for 1) micro-organisms and 2) non-biological and microbiological

processes for the production of plants and animals. Where Members do not provide patent protection for new

plant varieties, they are required to protect plant varieties through an effective sui generis system (i.e. a

system created especially for this purpose). Members also have the option of using a combination of both

systems of protection, namely patents and a sui generis system. There is no further explicit guidance in the

TRIPS Agreement as to what is to be considered an effective sui generis system.70

Article 27.3(b) also provides

for this provision to be reviewed four years after the entry into force of the WTO Agreement. The TRIPS Council

accordingly began a review of Article 27.3(b) in 1999.71

69

For a detailed description on the historical and legal background of the TRIPS Agreement see "A Handbook

on the WTO TRIPS Agreement", by Antony Taubman, Hannu Wager and Jayashree Watal (Cambridge, 2012).

70 The main existing sui generis system for the protection of plant varieties at the international level is that

contained in the convention establishing, in 1961, the International Union for the Protection of New Plant

Varieties (the UPOV Convention). Many WTO Members have chosen to meet their TRIPS obligations in this

area by joining UPOV upon adopting systems based on it. However, it is generally understood that there are

other ways in which the TRIPS option of "effective sui generis system" can be met and there is no presumption

that Members should join UPOV.

71 The Secretariat has prepared a summary of the points made and issues discussed under the review of

Article 27.3(b), which is available in IP/C/W/369/Rev.1.

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The relationship between, on the one hand, the TRIPS Agreement and, on the other hand, the Convention on

Biological Diversity (CBD) and the protection of traditional knowledge and folklore

There have been discussions on the relationship between, on the one hand, the TRIPS Agreement and, on the

other hand, the Convention on Biological Diversity (CBD) and the protection of traditional knowledge and

folklore. The work on these matters was formalised in the 2001 Doha Declaration which mandated the TRIPS

Council to work on them. Work in the WTO on these issues, especially on the relationship between the TRIPS

Agreement and the Convention on Biological Diversity, has also been undertaken pursuant to the provisions of

the Doha Ministerial Declaration on the so-called "outstanding implementation issues" identified by developing

countries.72

I.D.5. THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING

MEASURES (SCM)

The SCM Agreement, which applies to non-agricultural products, is designed to regulate the use of subsidies.

Under the Agreement, certain subsidies referred to as “non-actionable” (i.e., protected from countervailing-

duty or dispute-settlement actions by other WTO Members) are generally allowed. Amongst the non-actionable

subsidies that had been provided for under Article 8 were subsidies used to promote the adaptation of existing

facilities to new environmental requirements (Article 8.2(c)). However, this provision expired in its entirety at

the end of 1999. It was intended to allow Members to capture “positive environmental externalities” when they

arose.

I.D.6. THE AGREEMENT ON AGRICULTURE

Adopted during the 1986–94 Uruguay Round, the WTO Agriculture Agreement seeks to reform trade in

agricultural products, and provides a basis for market-oriented policies. In its preamble, the Agreement

reiterates Members’ commitment to reform agriculture in a manner that protects the environment.

Under the Agreement, domestic support measures with minimal impact on trade (known as “green box”

policies) are allowed and are excluded from reduction commitments – they are listed in Annex 2 of the

Agreement. Among them are expenditures under environmental programmes, provided that they meet certain

conditions. Again, the exemption enables governments to capture “positive environmental externalities”.

I.D.7. RELEVANT DECISIONS

Two ministerial decisions addressing environmental issues were adopted at the end of the Uruguay Round. A

ministerial Decision on Trade and Environment, taken in April 1994, created the Committee on Trade and

Environment (CTE) with the aim of making international trade and environmental policies support each other.

72

The Secretariat has prepared two summary notes of the points made and issues discussed: 1) on

relationship between the TRIPS Agreement and the CBD, available in IP/C/W/368/Rev.1; and 2) on the

protection of traditional knowledge and folklore, available in IP/C/W/370/Rev.1.

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The decision contains the work programme of the CTE. This Decision is discussed in more details in other

Modules of this course, in particular Module 2.

Ministers also adopted a Decision on Trade in Services and the Environment. It instructs the CTE to examine

and report on the relationship between trade in services and the environment, including the issue of

sustainable development, in order to determine if any modifications of GATS Article XIV are required. The CTE

has taken up this issue as part of its work programme. Module 4 of this course discusses the environmental

services negotiations in more detail.

EXERCISES

9. Please establish the argument that a technical regulation, which requires certain electronic products to

perform at certain energy efficiency levels, would be acceptable under one or more WTO agreements,

even if this measure may have adverse impacts on trade.

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II. ENVIRONMENT-RELATED DISPUTES IN GATT/WTO

IN BRIEF

Since the entry into force of the WTO in 1995, various panel and Appellate Body reports have examined

environmental or health-related measures. Five disputes are particularly relevant in this respect: the US –

Gasoline case (clean air), the US – Shrimp case (turtles), the EC – Asbestos case (human life and health), the

Brazil – Retreaded Tyres case (human, animal and plant life and health), and the US – Tuna II case (dolphins).

II.A. EC – ASBESTOS

IN BRIEF

This case was brought by Canada against the European Communities (European Communities – Measures

Affecting Asbestos and Asbestos-containing Products, WTO dispute DS135). The decisions rejected Canada's

challenge to France's import ban on asbestos and asbestos-containing products, reinforcing the view that the

WTO Agreements support Members' ability to protect human health and safety at the level of protection they

deem appropriate. The Appellate Body and panel reports were adopted in 2001.

II.A.1. INTRODUCTION

In 1998, Canada, among the world's largest exporters of asbestos, challenged the French ban on importation

of asbestos and products containing asbestos fibres. The French Government imposed the ban in 1997 in

response to concerns about the serious consequences for human health caused by exposure to asbestos fibres.

Asbestos is the name of a group of highly fibrous minerals with separable, long and thin fibres.

Chrysotile asbestos is generally considered to be a highly toxic material, exposure to which poses significant

threats to human health (such as asbestosis, lung cancer and mesothelioma). However, due to certain qualities

(such as resistance to very high temperature), Chrysotile asbestos has been widely used in various industrial

sectors.

Canada claimed that the ban violated France's WTO obligations. Although Canada did not dispute the health

risks associated with exposure to Chrysotile asbestos, it argued that a distinction should be made between

Chrysotile fibres and Chrysotile asbestos secured within a cement matrix. Canada challenged the French

Decree insofar as it prohibited, among other things, the use of cement-based products containing

Chrysotile asbestos fibers. Canada argued that the Decree altered the conditions of competition between, on

the one hand, substitute fibres of French origin and, on the other hand, Chrysotile fibres from Canada.

Accordingly, Canada submitted that the Decree breached France's national treatment obligations under

Article III of the GATT, because it imposed less favourable treatment on imported products containing asbestos

as compared to "like" domestic products containing substitutes for asbestos. But the European Communities

(on behalf of France) argued that France wanted to halt the spread of asbestos-related health risks, particularly

for those exposed occasionally and very often unwittingly to asbestos when working with products containing

asbestos, and that a ban on products containing asbestos was the only way to achieve its chosen level of

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protection. The EC requested the panel to confirm that the French Decree was compatible with GATT

Article III:4, or alternatively, was justified to protect human health within the meaning of Article XX(b).

II.A.2. PANEL

The panel found that France's measures violated Article III:4 of the GATT on the basis that France was in effect

discriminating between supposedly "like products". The panel was persuaded that cement-based products that

contained asbestos fibres, and cement-based products that didn't, were "like products" and thus comparable

under Article III:4. In coming to this conclusion, the panel relied inter alia on the end-uses of the respective

products, noting that they were the same, but excluded from its consideration the health risks associated with

asbestos fibres. However, the panel then agreed with the EC that the measure was justified under Article XX(b)

because it was necessary to protect human life and health.

II.A.3. APPELLATE BODY

In response, Canada appealed the panel's decision. The Appellate Body essentially upheld panel’s ruling in

favour of the EC, but modified the reasoning in a number of important ways. First, the Appellate Body

considered that the very serious health risks inherent in products containing asbestos should have been taken

into consideration by the panel when it assessed "like products" under Article III:4. The key is assessing the

competitive relationship between allegedly "like products". The Appellate Body considered that the carcinogenic

nature of asbestos fibres meant that a product containing asbestos fibres has quite different physical properties

to a product that does not. Moreover, the Appellate Body was persuaded that the health risks associated with

products containing asbestos fibres would influence consumers' behaviour in relation to those products. Thus,

the products compared were not "like" and the EC had consequently not breached Article III:4.

The Appellate Body then examined the arguments made with respect to Article XX, and reaffirmed the panel's

finding that most scientific opinions agreed that asbestos represents a serious risk to human health. The

Appellate Body considered that the objective pursued by France, namely the preservation of human life or

health, is "both vital and important in the highest degree" and consequently it was easier for the EC to prove

the necessity of the asbestos ban. The Appellate Body also confirmed that WTO Members have the right to

determine the level of protection of health that they consider appropriate in a given situation, and upheld the

panel's finding that there was no reasonable alternative available to France (e.g. the controlled use of asbestos

products as suggested by Canada) to achieve its objective.

II.B. US – SHRIMP

IN BRIEF

This case was brought by India, Malaysia, Pakistan and Thailand against the US (WTO dispute DS58). The

measure at issue was an import ban imposed by the United States on shrimp and shrimp products. According

to the United States, this measure was related to the conservation of sea turtles that the United States

considered as exhaustible natural resources. The panel and Appellate Body reports were adopted in 1998 and

the compliance reports in 2001 (the compliance case was only brought by Malaysia).

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II.B.1. INTRODUCTION

In early 1997, India, Malaysia, Pakistan and Thailand brought a joint complaint against a ban imposed by the

US on the importation of certain shrimp and shrimp products. The protection of sea turtles was at the heart of

the ban.

A US regulation of 1973 listed, as endangered or threatened, five species of sea turtles that occur in US

waters, and prohibited their “take” within the US, its territorial sea and the high seas. “Take” means the

harassment, hunting, capture, killing, or attempting to do any of these acts to the animals.

Sea turtles live around the world in subtropical and tropical areas. They spend their lives at sea, where they

migrate between their foraging and nesting grounds. In 1998, all species of sea turtles were included in

Appendix I of the 1973 Convention on International Trade in Endangered Species (CITES). Sea turtles have

been adversely affected by human activity, either directly (their meat, shells and eggs have been exploited), or

indirectly (incidental capture in fisheries, destruction of their habitats, pollution of the oceans). In particular,

shrimp may be harvested with commercial fishing technologies which adversely affect sea turtles.

To reduce the number of incidental killing of sea turtles by trawlers, under this regulation, the US required that

US shrimp trawlers use “turtle excluder devices” (TEDs) in their nets when fishing in waters where there is a

significant likelihood of encountering sea turtles. A TED is a trap door installed inside a trawling net that is

designed to allow shrimp to pass to the back of the net while directing sea turtles and other unintentionally

caught large objects out of the net.

In 1989, in an attempt to prevent the incidental killing of sea turtles by shrimp trawlers elsewhere in the world,

the US prohibited the imports of shrimp and shrimp products unless the exporting country was certified that it

had adopted essentially the same policy as the one applied to US shrimp trawlers, i.e. the use of TEDs.

II.B.2. 1998 DECISION

India, Malaysia, Pakistan and Thailand took the case to the WTO. In a 1998 WTO panel, the US ban was found

to be inconsistent with GATT Article XI (which prohibits the use of import restrictions) and not justified under

the general exceptions of Article XX(including those for certain environmental reasons. The Appellate Body

upheld the panel's finding that although the US measure was found to serve an environmental objective that

was recognized as legitimate under paragraph (g) of Article XX (which concerns the conservation of exhaustible

natural resources), it did not fulfil the requirements of the chapeau of Article XX.

The Appellate Body interpreted the phrase "exhaustible natural resources" under Article XX(g) broadly to

include not only mineral resources but also living species which may be susceptible of depletion. Moreover, the

Appellate Body accepted as a policy covered by paragraph (g) of Article XX, one that applied not only to turtles

within the US waters but also to those living beyond its national boundaries, provided that a "sufficient nexus"

existed between migratory and endangered sea turtles and the United States.

In reaching its conclusion that the US measure did not fulfil the requirements of the chapeau of Article XX, the

Appellate Body relied on several elements. The implementation of the measure lacked flexibility: it essentially

required shrimp trawlers in exporting Members to use TEDs (and be certified) if they wished to export to the

US. Moreover, the US provided countries in the western hemisphere – mainly in the Caribbean – assistance

and longer transition periods for their fishermen to start using TEDs. It did not give the same treatment to the

four Asian countries (India, Malaysia, Pakistan and Thailand) that filed the complaint with the WTO.

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The Appellate Body also held that a multilateral approach was preferable to unilateral trade measures to

address environmental problems reaching beyond national boundaries: the US should have engaged in

negotiations on the protection and conservation of sea turtles with all exporting Members, before enforcing the

import prohibition.

Therefore, the US measure was found inconsistent with GATT Article XX, not because it sought to protect the

environment (which was considered a legitimate basis for the measure) but because of the way in which the

US applied its measure.

Following this ruling, the United States revised its measure relating to the protection of sea turtles and set

forth new criteria for the certification of shrimp exporters.

II.B.3. COMPLIANCE STAGE

In 2000, Malaysia, once again, took legal action against the US since it was not satisfied with the corrective

measures that the US had taken to implement the findings of the Appellate Body. According to Malaysia, the

application of the new US measure resulted in arbitrary or unjustifiable discrimination because it still lacked

flexibility (the US continued to "unilaterally" impose its domestic standards on exporters) and because the US

had not negotiated and concluded an international agreement on the protection and conservation of sea

turtles.

The panel and the Appellate Body disagreed with Malaysia. They found that the revised measure was now

applied in a manner that indeed met the requirements of Article XX and thus complied with the ruling of the

Appellate Body. The US won the case because the revised measure was no longer applied in a manner that

constituted a means of arbitrary discrimination. First, the US demonstrated that it had made serious “good

faith” efforts to negotiate an international agreement for the protection of sea turtles with the parties to the

dispute. The Appellate Body pointed out that all that was required of the US was to provide all exporting

countries "similar opportunities to negotiate", and not necessarily to conclude, an international agreement.

Second, the new measure allowed "sufficient flexibility" by requiring that other Members' programmes simply

be "comparable in effectiveness" to the US programme, as opposed to the previous standard that they be

"essentially the same", i.e. require the use of TEDs.

II.C. US – GASOLINE

IN BRIEF

This case was brought by Venezuela and Brazil against the US (United States – Standards for Reformulated

and Conventional Gasoline, WTO dispute DS2). This dispute concerned certain requirements imposed by the

United States for the marketing of gasoline. However, domestic and foreign refiners of gasoline were subject to

different obligations. The United States sought to justify its measure under Article XX of the GATT 1994. The

panel and the Appellate Body reports were adopted in 1996.

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II.C.1. INTRODUCTION

Following a 1990 amendment to the Clean Air Act, the US Environmental Protection Agency (EPA) promulgated

the Gasoline Rule on the composition and emissions effects of gasoline, in order to reduce air pollution in the

US. From 1 January 1995 (coincidentally, also the date that the WTO came into being), the Gasoline Rule

permitted only gasoline of a specified cleanliness (“reformulated gasoline”) to be sold to consumers in the most

polluted areas of the country. In the rest of the country, only gasoline no dirtier than that sold in the base year

of 1990 (“conventional gasoline”) could be sold.

The Gasoline Rule applied to all US refiners, blenders and importers of gasoline. It required any domestic

refiner that operated for at least 6 months in 1990, to establish an individual refinery baseline, which

represented the quality of gasoline produced by that refiner in 1990.

The Environmental Protection Agency also established a statutory baseline, intended to reflect average US

1990 gasoline quality. The statutory baseline was assigned to those refiners who did not operate for at least six

months in 1990, and to importers and blenders of gasoline. Compliance with the baselines was measured on an

average annual basis.

In 1995, Venezuela and Brazil initiated disputes against the United States challenging the consistency of the

Clean Air Act of 1990 ("CAA") with WTO rules. The two countries argued that the CAA discriminated against

foreign gasoline producers by applying stricter standards to imported gasoline than domestically refined

gasoline. Although this case dealt primarily with discrimination between foreign and domestic products, the

final Appellate Body report had important implications for the role of environmental measures in the WTO

trading system.

Under the CAA, the Environmental Protection Agency developed rules on the cleanliness and quality of

gasoline, with the aim of reducing air pollution in the United States. This Gasoline Rule mandated the sale and

use of cleaner "reformulated gasoline" in the most polluted areas of the country. In the rest of the country,

"conventional gasoline" could be sold so long as it was no dirtier than that sold in 1990.

To determine the appropriate level of cleanliness, the law required those US domestic gasoline refiners that

were in operation in 1990 to establish an individual refinery baseline representing the quality of their gasoline

in 1990. Imported gasoline, on the other hand, was required to comply with a "statutory baseline", which

reflected the average quality of US gasoline in 1990.

II.C.2. PANEL STAGE

Venezuela and Brazil argued that the CAA Gasoline Rule violated WTO obligations because it treated foreign

products less favourably than domestic products under Article III of the GATT 1994. They also argued that this

discrimination could not be justified under any of the exceptions provided for health and environmental

measures under Article XX of the GATT 1994.

The panel agreed with Venezuela and Brazil. The panel found that where the imported and domestic gasoline

products were chemically identical, they were "like products" for purposes of GATT Article III (national

treatment) and therefore must be treated the same. Because domestic gasoline producers were measured

against their own individual standard, while imported gasoline was held to a different standard of cleanliness,

the panel determined that the Gasoline Rule treated foreign gasoline less favourably than "like" domestic

gasoline.

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The panel also found that the CAA did not satisfy the requirements under any of the health and environment

exceptions provided for under Article XX of the GATT. The panel held that there was "no direct connection"

between the CAA Gasoline Rule and the environmental policy objectives cited by the United States, and that

the law was not the least trade-restrictive means of achieving the US objectives.

II.C.3. APPELLATE BODY STAGE

The only ruling appealed by the United States was the panel's conclusion that the Gasoline Rule was not

justified as an environmental protection measure under Article XX. Although the Appellate Body ultimately

upheld the panel's determination that the US measure was not consistent with WTO rules, it made important

changes to the panel's reasoning in this regard.

The Appellate Body determined that the US measure would have been justified as a legitimate environmental

measure had it not discriminated against imported gasoline unjustifiably. It explained that Article XX involves a

two-part test. First, a law must satisfy one of the ten exceptions relating to non-trade interests set out in

Article XX. In this case that was XX(g): measures "relating to the conservation of exhaustible natural

resources". The second step involves testing the manner in which the law is applied under the introductory

paragraph (also known as "chapeau") of Article XX. The purpose of the two-part test is to ensure that the

exceptions in Article XX are not "abused or misused".

Applying the above test, the Appellate Body first held that the panel erred when it applied a test of "necessity"

under Article XX(g) by requiring the US to choose the "least trade restrictive" option. Instead, the Appellate

Body required only that the measure be "related to" the environmental policy objective, as specifically provided

for in the provision. And while the panel reasoned that the "less favourable treatment" of imported gasoline

had to be "primarily aimed at" the conservation of natural resources, the Appellate Body stated that the entire

measure, taken as a whole, had to be primarily aimed at environmental conservation. Overturning the panel on

this point, the Appellate Body found that the Gasoline Rule as a whole was primarily aimed at environmental

conservation, and therefore provisionally satisfied Article XX(g).

Under step two of the test, the Appellate Body assessed whether the application of the Gasoline Rule was free

of "arbitrary or unjustifiable discrimination", as required under the "chapeau" of Article XX. Because the US did

not provide sufficient justification for the discriminatory effect of the Gasoline Rule, and since it could have

been formulated in a non-discriminatory way, the Appellate Body concluded that the treatment of gasoline

imports constituted "unjustifiable discrimination". Thus, the Gasoline Rule was inconsistent with the US' WTO

obligations and not justified under Article XX.

II.D. BRAZIL – RETREADED TYRES

IN BRIEF

This case was brought by the European Communities against Brazil (Brazil – Measures Affecting Imports of

Retreaded Tyres, WTO dispute DS332). The measure at issue was Brazil's import ban on retreated tyres. Brazil

argued that this measure was necessary to protect human, animal and plant life or health. According to Brazil,

the importation and use of retreaded tyres contributed to the accumulation of waste tyres with serious health

and environmental consequences. The panel and Appellate Body reports were adopted in 2007.

171

II.D.1. INTRODUCTION

At the end of 2005, the European Communities initiated a complaint in the WTO against a ban imposed by

Brazil on the importation of retreaded tyres. The objective of this ban was to reduce the accumulation of waste

tyres in Brazil, thereby reducing the risks posed to human health and the environment by mosquito-borne

diseases, tyre fires and toxic leaching. Brazil sought to prevent the further generation of waste tyres as much

as possible.

Retreaded tyres are produced by reconditioning used tyres by stripping the worn tread from a used tyre's

skeleton and replacing it with new material. Under international safety standards, passenger car tyres may

only be retreaded once. In Brazil's tropical climate, discarded tyres provide a breeding ground for mosquitoes

because they collect rainwater. Mosquitoes then contribute to the spread of diseases such as dengue, malaria

and yellow fever. Stockpiles of tyres also pose a risk of fires that may result in the emission of hazardous

chemicals, as well as toxic leaching into the ground.

II.D.2. WAS THE MEASURE NECESSARY TO PROTECT HUMAN, ANIMAL

OR PLANT LIFE OR HEALTH AGAINST RISKS ARISING FROM THE

ACCUMULATION OF WASTE TYRES? THE PROVISIONAL

JUSTIFICATION UNDER ARTICLE XX(B)

Brazil's import ban was found to be inconsistent with GATT Article XI (general elimination of quantitative

restrictions). However, Brazil sought justification under the general exceptions of Article XX. The panel, later

upheld by the Appellate Body, found that Brazil's ban was provisionally justified under paragraph (b) of

Article XX as it was a measure "necessary to protect human, animal or plant life or health" against risks arising

from the accumulation of waste tyres.

Brazil's ban targeted retreaded tyres because they have a shorter lifespan and would become waste sooner

than new tyres. Therefore, the product subject to the import ban (i.e. retreaded tyre) was not the product (i.e.

waste tyre) generating the risks to human, animal or plant life or health, that the import ban purports to

address. The panel took the view that the risk being addressed need not involve the exact product affected by

the measure. The panel found therefore that the policy goal of Brazil's measure fell within the range of policies

covered by Article XX(b) on the basis of the existence of health risks of mosquito-borne diseases, tyre fires and

toxic leaching associated with the accumulation of waste tyres in Brazil.

The panel also found that the measure was "necessary" to achieve its policy goal. In previous cases, the

Appellate Body explained that the "necessity" of a measure should be assessed by weighing and balancing a

series of factors, including: (i) the relative importance of the common interests or values the measure is

intended to protect; (ii) the extent to which the measure contributes to achieving its objective; and (iii) the

trade-restrictiveness of the measure. Following this analysis, the panel concluded that, in the light of the

importance of the interests protected by the objective of the import ban, the contribution of the ban to the

achievement of its objective outweighed its trade restrictiveness.

As to how much the import ban contributes to the achievement of Brazil's aim (of reducing waste tyres to

reduce risks to health and the environment), the panel conducted a qualitative analysis. It found that the

import ban on retreaded tyres can encourage Brazilian producers to retread local used tyres, which would not

have been retreaded otherwise; and the use of imported retreaded tyres may be substituted for by new tyres,

which have a longer lifespan. Thus, the import ban was found capable of contributing to the reduction of waste

172

tyres in Brazil, which in turn would lead to a reduction in risks to health and the environment. The Appellate

Body confirmed this finding and noted that the "material contribution" of an import ban could consist of a

quantitative or qualitative analysis.

A measure can however not be considered "necessary" (in line with Article XX(b)), if a WTO-consistent

alternative measure, or less WTO-inconsistent measure, is "reasonably available" and would achieve the same

objective. The panel examined the alternatives suggested by the European Communities, such as domestic

measures to reduce the number of waste tyres (e.g. to encourage domestic retreading and improve

retreadability of domestic used tyres) or to improve the management of waste tyres (e.g. collection and

disposal methods), and concluded that they did not constitute reasonably available alternatives to the

import ban.

II.D.3. WAS THE MEASURE APPLIED IN A MANNER THAT CONSTITUTED

A MEANS OF UNJUSTIFIABLE DISCRIMINATION OR A DISGUISED

RESTRICTION TO TRADE? THE "CHAPEAU" OF ARTICLE XX

Although provisionally justified under paragraph (b) of Article XX, Brazil's import ban was found to be applied

in a manner that constituted a means of unjustifiable discrimination and a disguised restriction to trade, as

prohibited by the introductory clause of Article XX. Therefore, Brazil's ban was in the end found not to be

justified under Article XX(b).

Unjustifiable and arbitrary discrimination was found to arise from two situations: (i) the exemption from the

import ban on retreaded tyres of tyres originating from MERCOSUR countries; and (ii) the importation of used

tyres through domestic court injunctions (obtained to override the general ban on importing used and

retreaded tyres) as used tyres, like retreaded tyres, are likely to become waste sooner than new tyres.

Concerning the MERCOSUR exemption, the Appellate Body, reversing the panel's ruling, found that the fact

that the exemption resulted from a decision of the MERCOSUR arbitral tribunal was not an acceptable rationale

for the discrimination, because it bears no relation with the legitimate objective pursued by the import ban,

and even goes against this objective. The Appellate Body also disagreed with the panel's conclusion that the

fact that the MERCOSUR exemption give rise to only a very limited number of imports of retreaded tyres did

not result in a situation of arbitrary or unjustifiable discrimination (following a quantitative approach to the

evaluation of discrimination).

In relation to the imports of used tyres under court injunctions, the Appellate Body disagreed with the panel

that these imports have resulted in the import ban being applied in a manner that constitutes unjustifiable

discrimination and a disguised restriction on international trade only to the extent that such imports have taken

place in volumes that significantly undermine the achievement of the objective of the import ban. The

Appellate Body also considered the panel's finding that the imports of used tyres under court injunctions have

not resulted in arbitrary discrimination; and found instead, that the imports of used tyres under court

injunctions resulted in the import ban being applied in a manner that constitutes arbitrary or unjustifiable

discrimination within the meaning of the chapeau of Article XX.

173

II.E. US – TUNA II

IN BRIEF

This case was brought by Mexico against the US (United States — Measures Concerning the Importation,

Marketing and Sale of Tuna and Tuna Products, WTO dispute DS381). The case concerned the dolphin-safe

labelling requirements contained in the Dolphin Protection and Consumer Information Act (DPCIA) enacted by

the United States (US) in 1990. According to these requirements, tuna products from tuna caught by using the

fishing technique of "setting on dolphins" - which consists of chasing and encircling schools of dolphins to catch

the tuna that swim underneath - cannot be labelled "dolphin-safe". In relation to other fishing techniques, the

US dolphin-safe provisions established requirements for the use of the dolphin-safe label that varied depending

on the oceanic region concerned. The most stringent requirements applied to the Eastern Tropical Pacific (ETP),

where the phenomenon of tuna-dolphin association is most frequent, and where most of the Mexican fleet fish

for tuna by "setting on dolphins".

II.E.1. INTRODUCTION

Together, the US measures in question established the conditions that tuna products had to comply with in

order to be labelled dolphin-safe. These conditions varied depending on the area where the tuna contained in

the tuna product is caught (i.e. inside or outside the eastern tropical Pacific Ocean (ETP)), and the type of

vessel and fishing method by which it is harvested (with or without the use of the so-called "purse seine nets").

In particular, tuna products made from tuna caught by "setting on dolphins" (that is, chasing and encircling

dolphins with a net in order to catch the tuna associating with them) were not eligible for a "dolphin-safe" label

in the United States.

This case was brought by Mexico against the United States. In 2011 the panel found that under the US

measures as they were applied, tuna caught by large vessels (boats with 363 metric tons carrying capacity) in

the ETP (the area where the Mexican fleet normally fished for tuna), could only be labelled dolphin-safe if an

independent observer certified that the tuna was not caught by "setting on dolphins"; and that no dolphins

were killed or seriously injured during the fishing trip where the tuna was caught. For tuna harvested outside

the ETP, the US measures simply required a certification by the captain of the vessel that the tuna was not

caught by setting on dolphins.

According to the United States, the objectives of the US dolphin-safe provisions were two. On one hand,

ensuring that consumers are not misled or deceived about whether tuna products contain tuna that was caught

in a manner that adversely affected dolphins; and on the other hand, contributing to the protection of dolphins,

by ensuring that the US market was not used to encourage fishing fleets to catch tuna in a manner that

adversely affected dolphins.

II.E.2. PANEL STAGE

The panel first determined whether the US dolphin-safe labelling provisions constitute a technical regulation

under the TBT Agreement. The panel found that they do, and in particular that the measures are mandatory

within the meaning of Annex 1.1 of the Agreement. One of the members of the panel expressed a dissenting

174

opinion on this particular issue but sided with the majority for the rest of the report. The panel then examined

Mexico's claims under Articles 2.1, 2.2, and 2.4 of the TBT Agreement.

The panel then rejected Mexico's first claim by finding that the US dolphin-safe labelling provisions do not

discriminate against Mexican tuna products and are therefore not inconsistent with Article 2.1 of the

TBT Agreement. Despite finding that Mexican tuna products are like tuna products originating in the

United States or any other country within the meaning of Article 2.1 of the TBT Agreement, the panel

concluded that Mexican tuna products are not afforded less favourable treatment than tuna products of US and

other origins in respect of the US dolphin safe labelling provisions on the basis of their origin.

With respect to Mexico's claim under Article 2.2 of the TBT Agreement, the panel found that Mexico had

demonstrated that the US dolphin-safe labelling provisions were more trade-restrictive than necessary to fulfil

the legitimate objectives of: (i) ensuring that consumers are not misled or deceived about whether tuna

products contain tuna that was caught in a manner that adversely affected dolphins; and (ii) contributing to

the protection of dolphins, by ensuring that the US market is not used to encourage fishing fleets to catch tuna

in a manner that adversely affected dolphins, taking account of the risks non-fulfilment would create. The

panel's conclusion was based on the following two findings: (i) that the US dolphin-safe labelling provisions

only partly addressed the legitimate objectives pursued by the United States; and (ii) that Mexico had provided

the panel with a less trade restrictive alternative, namely the "dolphin-safe" definition and certification

developed within the framework of the Agreement on the International Dolphin Conservation Program (AIDCP),

capable of achieving the same level of protection of the objective pursued by the US dolphin-safe labelling

provisions.

Regarding Mexico's claim under Article 2.4 of the TBT Agreement, the panel found that the US dolphin-safe

labelling provisions were not in violation of such provision, which requires technical regulations to be based on

relevant international standards, where this is possible. Despite finding that the standard referred to by Mexico

was a relevant international standard for the purposes of the US dolphin-safe provisions and that the

United States had not used it as basis for its measures, the panel concluded that this standard was not

appropriate or effective to achieve the US objectives.

The panel declined to rule in addition on Mexico's non-discrimination claims under the GATT, and therefore

exercised judicial economy with respect to Mexico's claims under Articles I:1 and III:4.

II.E.3. APPELLATE BODY STAGE

First, the Appellate Body upheld the panel's finding that the the US "dolphin-safe" labelling measure was a

"technical regulation" within the meaning of the TBT Agreement. The Appellate Body noted that the measure

consisted of legislative, regulatory, and judicial acts of the US federal authorities and included administrative

provisions. The Appellate Body added that the measure established a single and legally mandated definition of

a "dolphin-safe" tuna product and prescribed in a broad and exhaustive manner the conditions that apply for

making any assertion as to the "dolphin-safety" of a tuna product. The Appellate Body found, on this basis,

that the panel did not err in characterizing the measure as a "technical regulation" within the meaning of

Annex 1.1 to the TBT Agreement.

Second, the Appellate Body reversed the panel's finding that the US "dolphin-safe" labelling provisions were

not inconsistent with Article 2.1 of the TBT Agreement. The Appellate Body reasoned that there was an

inconsistency because, first, by excluding most Mexican tuna products from access to the "dolphin-safe" label

while granting access to most US tuna products and tuna products from other countries, the measure modified

175

the conditions of competition in the US market to the detriment of Mexican tuna products. Next, the

Appellate Body scrutinized whether, in the light of the factual findings made by the panel and undisputed facts

on the record, the detrimental impact from the measure stemmed exclusively from a "legitimate regulatory

distinction". In particular, the Appellate Body examined whether the different conditions for access to a

"dolphin-safe" label were "calibrated" to the risks to dolphins arising from different fishing methods in different

areas of the ocean, as the United States had claimed. The Appellate Body noted the panel's finding that the

fishing technique of "setting on dolphins" was particularly harmful to dolphins and that this fishing method had

the capacity of resulting in observed and unobserved adverse effects on dolphins. At the same time, the panel

was not persuaded that the risks to dolphins from other fishing techniques were insignificant and do not under

some circumstances rise to the same level as the risks from setting on dolphins. The Appellate Body further

noted the panel's finding that, while the US measure fully addressed the adverse effects on dolphins resulting

(including observed and unobserved effects) from "setting on dolphins" in the ETP, it did not address mortality

arising from fishing methods other than setting on dolphins in other areas of the ocean. Under these

circumstances, the Appellate Body found that the measure at issue was not even-handed in the manner in

which it addressed the risks to dolphins arising from different fishing techniques in different areas of the ocean.

Regarding Mexico's claim under Article 2.2 of the TBT Agreement, the Appellate Body reversed the panel's

finding that Mexico had demonstrated that the US "dolphin-safe" labelling provisions were more trade

restrictive than necessary to fulfil the United States' legitimate objectives. In doing so, the Appellate Body

reasoned, inter alia, that the panel had not conducted a proper analysis and comparison between the

challenged measure and the alternative measure proposed by Mexico, and also noted that the latter would not

make an equivalent contribution to the United States' objectives as the former in all ocean areas. On this basis,

the Appellate Body reversed the panel's finding that the measure was inconsistent with Article 2.2 of the

TBT Agreement.

Finally, the Appellate Body did not disagree with the panel's conclusion that the US measure at issue was not

inconsistent with Article 2.4 of the TBT Agreement. The Appellate Body reversed however the panel's

intermediate finding that the "dolphin-safe" definition and certification developed within the framework of the

Agreement on the International Dolphin Conservation Program (AIDCP) was a "relevant international standard"

within the meaning of Article 2.4 of the TBT Agreement. In particular, the Appellate Body concluded that the

panel erred in finding that the AIDCP, to which new parties can accede only by invitation, is "open to the

relevant body of every country and is therefore an international standardizing organization" for purposes of

Article 2.4 of the Agreement.

EXERCISES

10. Why is it that in the Brazil – Retreaded Tyres case, Brazil's import ban on retreaded tyres was

provisionally justified under GATT Article XX, but was subsequently considered inconsistent with the

"chapeau" of the provision?

11. Why is it that in EC – Asbestos case, the Appellate Body concluded that the EC's import ban on

asbestos-containing products did not contravene Article III:4 of the GATT 1994?

12. In the US – Gasoline case, what were the reasons that led the Appellate Body to the conclusion that the

Gasoline Rule was inconsistent with the chapeau of Article XX?

176

III. SUMMARY

Under WTO rules, Members may adopt trade-related measure to protect the environment and human health

and life, as long as such measures comply with GATT rules or fall under the exceptions to these rules, subject

to certain specified conditions.

Certain measures taken to achieve environmental protection goals may, by their very nature, restrict trade

and thereby impact on the WTO rights of other Members. They may violate basic trade rules, such as the

non-discrimination obligation and the prohibition of quantitative restrictions.

Article XX of the GATT 1994 lays down a number of specific instances in which WTO Members may be

exempted from GATT rules. The exceptions contained in paragraphs (b) and (g) of Article XX are of particular

relevance to human health and environmental protection. Pursuant to these two paragraphs, WTO Members

may adopt policy measures that are inconsistent with GATT disciplines, but necessary to protect human,

animal or plant life or health (paragraph (b)), or relating the conservation of exhaustible natural resources

(paragraph (g)).

The Appellate Body has used a process of "weighing and balancing" of several factors to determine whether a

measure is necessary to protect human, animal or plant life or health under Article XX(b). These factors

include: (i) the contribution made by the measure at issue to the stated health policy objective; (ii) the

importance of the common interests or values protected by the measure; and (iii) the impact of the measure

on international trade. The measure is also compared with possible alternative measures capable of achieving

the same objective, to determine if they are less trade-restrictive than the measure adopted.

For a measure to be "relating" to the conservation of natural resources under Article XX(g), it is necessary to

establish a substantial relationship between the measure and the conservation objective. In other words, the

measure must be "reasonably related" to the stated policy goal of preserving exhaustible natural resources.

Moreover, for a measure to be covered by Article XX, its application must not constitute a means of arbitrary

or unjustifiable discrimination, or a disguised restriction on international trade. This is required by the

introductory paragraph ("chapeau") of Article XX. The design and flexibility of the measure, as well as the

efforts made by the Member adopting the measure to enter into cooperative arrangements with the affected

countries, are factors that may be evaluated to determine if a measure is applied in a manner that constitutes

a means of arbitrary or unjustifiable discrimination, or a disguised restriction on international trade.

The interface between trade and environment is also addressed in a number of WTO agreements. These

provisions include Article XIV of GATS that, similar to GATT Article XX, contains general exceptions to the

substantive disciplines of GATS. The TBT, SPS, TRIPS, SCM and Agriculture agreements also include

provisions designed to accommodate environmental issues.

Since 1995, a number of panel and Appellate Body proceedings have examined environmental or human

health-related measures under GATT Article XX. The most relevant disputes from an environmental

perspective are Brazil – Retreaded Tyres, EC – Asbestos, US – Shrimp, US – Gasoline ( US – Tuna II is also

important but it concerned claims under the TBT Agreement, not the GATT). In light of the jurisprudence, it is

fair to say that WTO rules provide ample space for environmental concerns to be accommodated. Even if a

measure is found to be inconsistent with basic WTO disciplines, it may be justifiable under one of the

exceptions, for example, if it pursues an environmental or human health objective, and if its application does

not reveal protectionist intent.

177

PROPOSED ANSWERS:

1. WTO Members may adopt measures that are inconsistent with one or more disciplines of the GATT 1994

without infringing upon those disciplines, if the objective of the measures is the protection of human,

animal or plant life or health, or the conservation of exhaustible natural resources. This is by virtue of

Article XX of the GATT 1994, General Exceptions, that contains a list of specific instances in which WTO

Members may be exempted from GATT rules. In particular, Articles XX(b) and (g) respectively allow WTO

Members to justify GATT-inconsistent measures if these are either necessary to protect human, animal or

plant life or health, or if the measures relate to the conservation of exhaustible natural resources.

2. In broad terms, the principle of non-discrimination requires that "like" domestic and foreign products are

treated the same, or in other words, that imported products that are like domestic products are not

treated less-favourably.

3. In WTO case law, four criteria have been used in determining whether products are “like”:

(i) the physical properties of the products;

(ii) the extent to which the products are capable of serving the same or similar end-uses;

(iii) the extent to which consumers perceive and treat the products as alternative means of performing

particular functions in order to satisfy a particular want or demand; and

(iv) the international classification of the products for tariff purposes.

4. (i)-Article XX(b); (ii)-Both; (iii)-Article XX(g); and (iv)-Article XX(g) or both.

5. To determine whether a measure is “necessary” to protect human, animal or plant life or health under

GATT Article XX(b), the Appellate Body has evaluated the weight or importance of several factors. These

factors include: (i) the contribution made by the environmental measure to the policy objective; (ii) the

importance of the common interests or values protected by the measure; and (iii) the impact of the

measure on international trade. If this analysis yields a preliminary conclusion that the measure is

necessary, this result must be confirmed by comparing the measure with possible alternative measures.

The objective of this comparison is to determine whether these alternatives are less trade-restrictive

while providing an equivalent contribution to the achievement of the objective pursued. If the alternatives

are not less trade-restrictive or if they fail to contribute in an equivalent manner, the challenged measure

is considered necessary under Article XX(b) of the GATT 1994.

6. In EC – Asbestos case, the Appellate Body concluded that the term "relating", as used in GATT

Article XX(g), implies that the measure at issue must be “reasonably related” to the stated policy goal of

conservation of exhaustible natural resources. In other words, for a measure to be “relating” to the

conservation of natural resources, a substantial relationship between the measure and the conservation

objective needs to be established.

7. In the US – Shrimp case, the Appellate Body considered that the United States had not sufficiently

explored the possibility of entering into cooperative arrangements with the countries affected by the

import restrictions on shrimp and shrimp products, to mitigate the administrative burdens arising from

the measure. The fact that the United States had “treated WTO Members differently” by adopting a

cooperative approach regarding the protection of sea turtles with some Members but not with others also

showed that the measure was applied in a manner that discriminated among WTO Members in an

unjustifiable manner.

178

8. A technical regulation, which requires that certain electronic products to perform at certain energy

efficiency levels, is allowed under the TBT Agreement even if it may have adverse impacts on trade, as

long as it complies with the disciplines set out by that agreement, such as non-discrimination and

avoidance of unnecessary obstacles to trade.

9. In Brazil – Retreaded Tyres, unjustifiable and arbitrary discrimination was found to arise from two

situations: (i) the exemption from the import ban on retreaded tyres originating from MERCOSUR

countries; and (ii) the importation of used tyres through domestic court injunctions (obtained to override

the general ban on importing used and retreaded tyres). The Appellate Body considered that there was no

acceptable rationale for the discrimination, because this difference in treatment bears no relationship to

the legitimate objective pursued by the import ban, and even goes against it. The Appellate Body

considered that this situation resulted in arbitrary or unjustifiable discrimination, thus contravening the

chapeau of Article XX of the GATT 1994.

10. The Appellate Body concluded that the very serious health risks inherent in products containing asbestos

must be taken into consideration when assessing whether the products at issue were "like products"

under Article III:4. The Appellate Body considered that the carcinogenic nature of asbestos fibres meant

that a product containing asbestos fibres has quite different physical properties to a product that does

not. Moreover, the Appellate Body was persuaded that the health risks associated with products

containing asbestos fibres would influence consumers' behaviour in relation to those products. Thus, the

products compared were not "like" and the EC had consequently not breached Article III:4.

11. In US – Gasoline, the Appellate Body considered that the United States did not provide sufficient

justification for the discriminatory effect of the Gasoline Rule. According to the Appellate Body, such rule

could have been formulated in a non-discriminatory way. Thus, the Appellate Body concluded that the

application of the Gasoline Rule resulted in discriminatory treatment of gasoline imports and that this

difference in treatment was "unjustifiable" under the chapeau of Article XX.

179

Support Documents

Module 2 – Introduction to Trade and Environment in the WTO

Trade and Environment at the WTO

http://www.wto.org/english/res_e/publications_e/trade_env_e.htm

WT/MIN(01)/DEC/1 ............................................................................Marrakesh Ministerial Declaration

WT/MIN(05)/DEC ............................................................................................ Doha Work Programme

WT/CTE/EDB/1-8 ........................................................................................... Environmental Database

Module 3 –Relationship between MEAs and the WTO (Paragraphs 31(i) and (ii))

TN/TE/W/68 .................... Proposal for a Decision of the Ministerial Conference on Trade and Environment,

Submission by the European Union

TN/TE/W/72/Rev.1........... Proposal for an outcome on Trade and Environment Concerning Paragraph 31(i)

of the Doha Ministerial Declaration, Submission by Australia and Argentina

TN/TE/W/77 ...................... Proposal for Elements of a Decision of the Ministerial Conference on Trade and

Environment, Paragraph 31(i), Submission by Switzerland

TN/TE/W/78 ................................. Draft Decision for an outcome under Doha paragraphs 31(i) and 31(ii),

Communication from the United States

Job(08)/33 ...................... Proposal for a Decision of the Ministerial Conference on Trade and Environment,

Submission by Norway

Job(08)/38 ..................... Proposal for the Establishment of a Group of Experts on Trade and Environment,

Submission by the African Group

Elements of a draft text under Paragraph 31(ii) of the Doha Declaration

TN/TE/S/5/Rev.2 ..................... Matrix on Trade Measures Pursuant to Selected Multilateral Environmental

Agreements, Note by the Secretariat

Module 4 – Environmental Goods and Services Negotiations (Paragraph 31(iii))

JOB/TE/2 ................................... Continued work under Paragraph 31(iii) – Submission by the Philippines

TN/TE/W/75 and Add.1 .............. Japan's Proposal on Environmental Goods and Services, Paragraph 31(iii)

of the Doha Ministerial Declaration

TN/TE/W/74 ................. The Doha Round and Climate Change, Submission by Argentina, Paragraph 31(iii)

Job(09)/169 and Add.1 .......... Continued Work Under Paragraph 31(iii) of the Doha Ministerial Declaration,

Submission by the Kingdom of Saudi Arabia

Job(07)/146 .................. Environmental Goods for Development, Submission from Brazil, Paragraph 31(iii)

Job(09)/184 ....................................... Scheme for Request and Offer Procedure in Environmental Goods,

Non-paper by Brazil, Paragraph 31(iii)

180

Job(09)/132 .......................... Communication Under Paragraph 31(iii) of the Doha Ministerial Declaration,

Non-paper by Canada, the European Communities, Japan, Korea, New Zealand, Norway, the Separate

Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Switzerland and the United States

Job(07)/137 ................... Revision of the Synthesis of Submissions on Environmental Goods (TN/TE/W/63)

– Informal Note by the Secretariat

Workshop on Environmental Goods and Services (2010)

http://www.wto.org/english/tratop_e/envir_e/events_feb10_e/event_18feb10_e.htm

Trade and Environment Negotiations in General

TN/TE/18 ............................... Report by the Chairman, Ambassador Manuel A. J. Teehankee to the Trade

Negotiations Committee (TNC)

Module 5 – Environmental Requirements and Market Access and labelling (Paragraph 32(i))

WT/CTE/1 ............................................................................................................... 1996 CTE Report

WT/CTE/8 ........................................... Report to the 5th Session of the Ministerial Conference in Cancún

– Paragraphs 32 and 33 of the Doha Ministerial Declaration

WT/CTE/W/45 ........................... Eco-Labelling – Overview of Current Work in Various International For a

– Note by the WTO Secretariat

WT/CTE/W/150 ....................... Information Relevant to the Consideration of the Market Access Effects of

Eco-Labelling Schemes – Note by the Secretariat

JOB(06)/263 ....... Environmental Requirements and Market Access: Work in the TBT and SPS Committees

- Note by the Secretariat

WT/CTE/W/244 ........ Environmental Requirements and Market Access: Recent Work in OECD and UNCTAD

Job(09)/136/Rev.1 ............................ Report on the Workshop on Environment-related Private Standards,

Certification and Labelling Requirements - Note by the Secretariat

WT/CTE/M/49/Add.1 ........... Summary Report of the Information Session on Product Carbon Footprint and

Labelling Schemes

JOB/TE/9 .................................... Eco-Labelling: Overview of Current Work in Various International For a

– Note by the Secretariat

JOB/TE/7 ........................ Environmental Labelling-related Specific Trade Concerns and Notifications in the

TBT Committee – Note by the Secretariat

Agreement on Technical Barriers to Trade

Module 6 – WTO Rules and Environmental Policies

WT/CTE/W/203 ........................... GATT/WTO Dispute Settlement practice relating to the GATT Article XX,

Paragraphs (b), (d) and (g) – Note by the Secretariat (8 March 2002)

Others

WTO-UNEP ........................................................................ Report on Trade and Climate Change (2009)

WTO Trade and Environment Website

http://www.wto.org/english/tratop_e/envir_e/envir_e.htm

WT/INF/5/Rev.9 .................................................................. A list of trade and environment documents

181

Reference List

DISCLAIMER:

"Academic Reference for further information: The references below are not recommendations, but actually a

short list of materials for those interested to read more about the subject covered by the course. The WTO is

not responsible for the content or quality of such materials, which do not necessarily represent the views of the

WTO Members or the WTO Secretariat."

World Trade Report 2010, Trade in Natural Resources

2008 OECD Environmental Outlook

Håkan Nordström and Scott Vaughan, WTO’s “Special Studies” series of publications: Trade and

Environment

Alexandre Charles Kiss, Dinah Shelton, Guide to international environmental law

Philippe Sands, Principles of International Environmental Law

Erich Vranes, Trade and the Environment, Fundamental Issues in International and WTO Law

183

Annex 1

MARRAKESH DECISION ON TRADE AND ENVIRONMENT[1]

Ministers,

Meeting on the occasion of signing the Final Act Embodying the Results of the Uruguay Round of Multilateral

Trade Negotiations at Marrakesh on 15 April 1994,

Recalling the preamble of the Agreement establishing the World Trade Organization (WTO), which states that

members’ "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,"

Noting:

the Rio Declaration on Environment and Development, Agenda 21, and its follow-up in GATT, as

reflected in the statement of the Chairman of the Council of Representatives to the CONTRACTING

PARTIES at their 48th Session in December 1992, as well as the work of the Group on Environmental

Measures and International Trade, the Committee on Trade and Development, and the Council of

Representatives;

the work programme envisaged in the Decision on Trade in Services and the Environment; and

the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights,

Considering 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,

Desiring to coordinate the policies in the field of trade and environment, and this without exceeding the

competence of the multilateral trading system, which is limited to trade policies and those trade-related

aspects of environmental policies which may result in significant trade effects for its members,

Decide:

to direct the first meeting of the General Council of the WTO to establish a Committee on Trade and

Environment open to all members of the WTO to report to the first biennial meeting of the Ministerial

1 Adopted by ministers at the meeting of the Uruguay Round Trade Negotiations Committee in Marrakesh on

14 April 1994.

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Conference after the entry into force of the WTO when the work and terms of reference of the

Committee will be reviewed, in the light of recommendations of the Committee,

that the TNC Decision of 15 December 1993 which reads, in part, as follows:

"(a) to identify the relationship between trade measures and environmental measures, in order to promote

sustainable development;

(b) to 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, as regards, in particular:

the need for rules to enhance positive interaction between trade and environmental measures,

for the promotion of sustainable development, with special consideration to the needs of

developing countries, in particular those of the least developed among them; and

the avoidance of protectionist trade measures, and the adherence to effective multilateral

disciplines to ensure responsiveness of the multilateral trading system to environmental

objectives set forth in Agenda 21 and the Rio Declaration, in particular Principle 12; and

surveillance of trade measures used for environmental purposes, of trade-related aspects of

environmental measures which have significant trade effects, and of effective implementation of

the multilateral disciplines governing those measures;"

constitutes, along with the preambular language above, the terms of reference of the Committee on Trade and

Environment,

that, within these terms of reference, and with the aim of making international trade and

environmental policies mutually supportive, the Committee will initially address the following matters,

in relation to which any relevant issue may be raised:

the relationship between the provisions of the multilateral trading system and trade measures for

environmental purposes, including those pursuant to multilateral environmental agreements;

the relationship between environmental policies relevant to trade and environmental measures

with significant trade effects and the provisions of the multilateral trading system;

the relationship between the provisions of the multilateral trading system and:

(a) charges and taxes for environmental purposes;

(b) requirements for environmental purposes relating to products, including standards and

technical regulations, packaging, labelling and recycling;

the provisions of the multilateral trading system with respect to the transparency of trade

measures used for environmental purposes and environmental measures and requirements which

have significant trade effects;

the relationship between the dispute settlement mechanisms in the multilateral trading system

and those found in multilateral environmental agreements;

the effect of environmental measures on market access, especially in relation to developing

countries, in particular to the least developed among them, and environmental benefits of

removing trade restrictions and distortions;

the issue of exports of domestically prohibited goods;

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that the Committee on Trade and Environment will consider the work programme envisaged in the

Decision on Trade in Services and the Environment and the relevant provisions of the Agreement on

Trade-Related Aspects of Intellectual Property Rights as an integral part of its work, within the above

terms of reference,

that, pending the first meeting of the General Council of the WTO, the work of the Committee on Trade

and Environment should be carried out by a Sub-Committee of the Preparatory Committee of the World

Trade Organization (PCWTO), open to all members of the PCWTO,

to invite the Sub-Committee of the Preparatory Committee, and the Committee on Trade and

Environment when it is established, to provide input to the relevant bodies in respect of appropriate

arrangements for relations with intergovernmental and non-governmental organizations referred to in

Article V of the WTO.

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Annex 2

DOHA MANDATE ON TRADE AND ENVIRONMENT[1]

Paragraph 31. With a view to enhancing the mutual supportiveness of trade and environment, we agree to

negotiations, without prejudging their outcome, on:

(i) the relationship between existing WTO rules and specific trade obligations set out in multilateral

environmental agreements (MEAs). The negotiations shall be limited in scope to the applicability of such

existing WTO rules as among parties to the MEA in question. The negotiations shall not prejudice the WTO

rights of any Member that is not a party to the MEA in question;

(ii) procedures for regular information exchange between MEA Secretariats and the relevant WTO

committees, and the criteria for the granting of observer status;

(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods

and services.

We note that fisheries subsidies form part of the negotiations provided for in Paragraph 28.

Paragraph 32. We instruct the Committee on Trade and Environment, in pursuing work on all items on its

agenda within its current terms of reference, to give particular attention to:

(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;

(ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property

Rights; and

(iii) labelling requirements for environmental purposes.

Work on these issues should include the identification of any need to clarify relevant WTO rules. The

Committee shall report to the Fifth Session of the Ministerial Conference, and make recommendations, where

appropriate, with respect to future action, including the desirability of negotiations. The outcome of this work

as well as 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

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.

1 Ministerial declaration adopted on 14 November 2001.

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Paragraph 33. 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.

Paragraph 51. The Committee on Trade and Development and the Committee on Trade and Environment shall,

within their respective mandates, each act as a forum to identify and debate developmental and environmental

aspects of the negotiations, in order to help achieve the objective of having sustainable development

appropriately reflected.