trade, environment and development unctad module 2 trade and environment in the multilateral trading...

Trade , Environment and Development

UNCTAD

Module 2

Trade and Environment in the Multilateral Trading System

http://www.unfccc.de/issues/technology.html

• A number of GATT/WTO provisions are relevant for environment-related trade issues

• Key questions for developing countries are how WTO rights and obligations affect their ability to achieve sustainable development and to protect their trade interests against unnecessary adverse trade effects of environmental policies

• The WTO work programme adopted at Doha (November 2001) includes negotiations on certain trade and environment issues

TrainforTrade: Trade, Environment and Development

Background

Assist beneficiary developing countries in

• Enhancing their awareness and understanding of relevant GATT/WTO provisions

• Examining specific trade and environment issues that are being discussed (or will be negotiated) in the WTO

• Participating effectively in WTO negotiations and discussions on trade and environment

• Stimulating policy-making and coordination on trade and environment at the national level


Objectives of this module

Recent developments Environment-related provisions

within the GATT/WTO framework The mandate and work of the CTE Specific trade and environment

issues discussed within the WTO Cases brought before the Dispute

Settlement Mechanism (DSM) Issues for discussion

Structure of this presentation


Recent developments

TrainforTrade 2000: Trade, Environment and Development

• Environment is not a new issue in the WTO

• The objectives of sustainable development and environmental protection are stated in the preamble to the Agreement establishing the WTO

• During the Uruguay Round (UR) of Multilateral Trade Negotiations, environment-related provisions were included in several UR Agreements


Not a new issue

http://www.wto.org/english/thewto_e/thewto_e.htm

• During the Uruguay Round (UR) of Multilateral Trade Negotiations, environment-related provisions were included in several UR Agreements

Agriculture

TBT

SPS

TRIPS

Subsidies and countervailing measures

Services


The UR round agreements

• Established in 1995 in accordance with the UR Ministerial Decision on Trade and Environment

• Mandate: To identify the relationship between trade

measures and environmental measures in order to promote sustainable development

To make appropriate recommendations on whether any modifications of the provisions of the MTS are required

• The CTE covers all areas of the MTS including goods, services and intellectual property


Committee on Trade and Environment

• Several trade-related environmental disputes have been brought to GATT/WTO

• Some have noted that panels and the appellate body have become more conscious of the environmental dimension of their arguments

• Also concern about the implications of the development of case law (legal activism)

• Legal decisions arrived at under dispute settlement mechanisms will not necessarily take account of the same considerations currently discussed in the balanced agenda of the CTE and may not reflect the wishes of all member States


Dispute settlement

• Ministers agreed to negotiations on certain trade and environment issues

• Ministers also decided to continue the work on all issues of the CTE This 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


4th Ministerial Conference in Doha

http://www.wto-ministerial.org/english/thewto_e/minist_e/min01_e/min01_e.htm

Paragraph 6

• Strengthening of the commitment to the objective of sustainable development, as stated in the Preamble to the Marrakesh Agreement

• The aims of upholding and safeguarding an open and non-discriminatory multilateral trading system, and acting for the protection of the environment and the promotion of sustainable development can and must be mutually supportive


Ministerial Declaration [1]

http://www-chil.wto-ministerial.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm















http://www-chil.wto-ministerial.org/english/thewto_e/minist_e/min01_e/min01_e.htm

• Ministers take note of the efforts by Members to conduct national environmental assessments of trade policies on a voluntary basis

• Ministers welcome the WTO´s continued cooperation with UNEP and other inter-governmental environmental organizations

• Cooperation between the WTO and relevant international environmental and developmental organizations


Paragraph 6… [2]

• The relationship between existing WTO rules and specific trade obligations set out in MEAs

• The negotiations shall: be limited in scope to the applicability of

such existing WTO rules as among parties to the MEA in question

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

• Procedures for regular information exchange between MEA Secretariats and the relevant WTO committees, and the criteria for the granting of observer status


Negotiations on certain issues [1]

• The reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services

• Fisheries subsidies form part of the negotiations provided for in paragraph 28 (Trade Rules)


Negotiations on certain issues [2]

In pursuing work on all items on its agenda within its

current terms of reference, the CTE shall give particular attention to:• The effect of environmental measures on market

access, especially in relation to developing countries, in particular the LDCs,

• Situations, in which the elimination or reduction of trade restrictions and distortions would benefit trade, the environment and development

• The relevant provisions of the TRIPS Agreement • Labelling requirements for environmental

purposes


MD, para. 32 on CTE [1]

• 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


MD, para. 32 on CTE [2]

• The outcome of the work of the CTE and negotiations carried out under para. 31 shall:

• be compatible with the open and non-discriminatory nature of the MTS

• not add to or diminish the rights and obligations of Members under existing WTO agreements, in particular the SPS Agreement

• not alter the balance of these rights and obligations

• will take into account the needs of developing and least-developed countries


Qualifications

Ministers also:

• Recognize the importance of technical assistance and capacity building in the field of trade and environment to developing countries, in particular the LDCs (Paragraph 33)

• Encourage that expertise and experience be shared with Members wishing to perform environmental reviews at the national level (Paragraph 6)


MD, capacity building

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


Other role of the CTE

WTO principles


• National Treatment (NT) clause (Article III of GATT) ensures non-discrimination between domestic and imported goods

• Most Favoured Nation (MFN) clause (Article I of GATT) ensures that imports from all sources are subject to the same treatment

National environmental protection policies must not be adopted with a view to arbitrarily discriminating between foreign and domestically produced like products, or between like products imported from different trading partners


Non-discrimination

• WTO members must notify the WTO about measures that may have a significant impact on trade

• Notification obligations concerning environmental measures should not be more of a burden than is normally required

• The WTO Secretariat is to compile from its Central Registry of Notifications all information on environmental measures

• These are to be put in a single database that

all WTO members can access


Transparency - notification

• GATT Article XI requires that no prohibitions or restrictions other than duties, taxes or charges "shall be instituted or maintained on the importation or exportation of any product"

• This means that quantitative restrictions for environmental purposes would normally be

considered inconsistent with GATT rules

Exceptions (Art. XX) will be taken up later in this presentation


Elimination of Quantitative Restrictions

WTO Agreement with provisions relating to

enviroment


• The Preamble emphasizes the commitment of WTO Members to reform agriculture in a manner that takes account inter alia of the need to protect the environment

• “Green box” policies (domestic support measures with minimal impact on trade) are excluded from reduction commitments

• These include payments under clearly defined environmental programmes, under certain conditions (Annex II, para. 12)


Agreement on Agriculture (AoA)

• Article 20(c) determines that the reform process should take account inter alia of non-trade concerns (NTCs), including the objectives and concerns mentioned in the preamble


AoA: Non-trade concerns

• Seeks to ensure that technical regulations (mandatory) and standards (voluntary), as well as testing and certification procedures, do not create unnecessary obstacles to trade.

• The Preamble explicitly recognizes that legitimate objectives include: “the protection of human, animal or plant life or health, or for the protection of the environment”

• See module 3


Technical Barriers to Trade

• Preamble: No Member should be prevented from adopting or enforcing measures to protect human, animal or plant life, or health, subject to the requirement that these measures are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimintaion between Members where the same conditions prevail or a disguised restriction on international trade

• Article 2.1 contains similar language

• See Module 3


Sanitary and Phytosanitary Measures

• The TRIPS Agreement makes explicit reference to the environment in Section 5 on Patents

• Article 27.2 and 27.3 state that Members may exclude from patentability inventions, whose prevention within their territory is necessary to protect, amongst other objectives, human, animal or plant life or health or to avoid serious prejudice to the environment


TRIPS Agreement

Articles 27.2

Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect, ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by law


TRIPS: exclusions from patentability

• Article 27.3(b) …plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes.

• However, members shall provide for the protection of plant varieties either by patents or by an effective sui generis systems or any combination thereof


TRIPS: exclusions from patentability [1]

• Article 27.2 and 27.3 state that Members may exclude from patentability inventions, whose prevention within their territory is necessary to protect, amongst other objectives, human, animal or plant life or health or to avoid serious prejudice to the environment


TRIPS: exclusions from patentability [2]

• Adopted a separate declaration on Trips and Public Health:

• each provision of TRIPS should be read in the light of the object and purpose of the agreement

• each member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency

• clarification of procedures for import of generic drugs in countries with insufficient manufacturing facilities (parallel imports) befor end of 2002

• Establish a multilateral system of notification and registration of geographical indications for wines and spirits till 5th MM and addressing extension of protection of geographical indications to other products as part of work on implementation-related issues and concerns.

TRIPS Agreement: Doha MC


• “Non-actionable subsidies” include subsidies used to promote the adaptation of existing facilities to new environmental requirements Article 8(2)(c)

• In accordance with Article 31, the Subsidies Committee will review the operation of these provisions “with a view to determining whether to extend their application, either as presently drafted or in a modified form, for a further period.”


Subsidies and countervailing measures

The Committee on Trade and Environment


• The WTO is only competent to deal with trade; it is not an environmental agency. Its only task is to study issues that arise when environmental policies have a significant impact on trade

• Any solution that stems from the discussions within the CTE must support the principles of the WTO trading system


Background of CTE’s work

• Environmental policies and the MTS (item 2)• Environmental measures (item 3)

(a) Charges and taxes for environmental purposes

(b) Standards and technical regulations, packaging, labelling and recycling

• Transparency of environmental requirements with significant trade effects (item 4)

• Market access (item 6)(a) Environmental measures and market access(b) Environmental benefits of removing trade restrictions and distortions


Items on CTE agenda [1]

• Provisions of the MTS and trade measures for environmental purposes, including those pursuant to multilateral environmental agreements and their dispute settlement mechanisms (items 1 and 5)

• TRIPS and the environment (item 8)• The issue of exports of domestically prohibited

goods (DPGs) (item 7)• Decision on Trade and Services and the

Environment (item 9)• Relations with IGOs and NGOs (item 10)


Items on CTE agenda [2]

Selected issues


• Agriculture and environment• Services and envirionment• TRIPS and environment• TRIPS and the Convention on Biological

Diversity (CBD) • Precautionary principle• Genetically modified organisms (GMOs)• Domestically prohibited goods (DPGs)• “Like products”


Issues

Environmental protection is used as anargument both in favour and againstagricultural trade liberalization

Trade distortions• Agricultural trade distortions can have

negative environmental effects • “Win-win" situations arise when the removal

or reduction of trade restrictions and distortions yield both direct economic benefits for developing countries as well as positive environmental results

• Cairns Group and others


Agriculture and environment

Non-trade concerns• Some Members argue that certain domestic

support measures are justified for environmental reasons

• Multi-functionality:• advocated by EU, Norway, Switzerland, Iceland, South Korea

• US and “like-minded countries” support non-trade concerns in particular as regards rural development and food security (such measures, however, have to be transparent, MTS-compatible and not distorting production and trade)

• EU would like to introduce the precautionary principle into the issue of food security


Agriculture and environment

General Agreement on Trade in Services (GATS), negotiated in the UR:

• Progressively higher level of liberalization of trade in services, securing greater participation of developing countries

• Members have the right to regulate, and to introduce new regulations, on the supply of services within their territories to meet national policy objectives

• Given assymetries in the development of the services sector, developing countries have a particular need to exercise this right


Services and environment

Consists of:

• A framework of general rules and disciplines• Annexes addressing special conditions relating

to individual sectors• Liberalization commitments specific to the

service sectors and subsector’s listed in each country’s schedule

ExceptionsMembers are not prevented from taking meausresnecessary for the protection of inter alia humananimal and plant life


GATS

The WTO secretariat has divided services in 12categories and 155 subcategories. These include inter alia:

• Environmental services Sewage services Refuse disposal services Sanitation and similar services Other

• Health services• Tourisms and travel services


Service sectors

• Services are protected mainly by national domestic regulations on foreign direct investment and the participation of foreign service suppliers in domestic industries

• Civil society and some developing countries have raised concern on provision in Art. VI:4 requiring Members to develop disciplines to ensure that certain kinds of domestic regulation are not more burdensome than necessary to ensure the quality of the service


Protection in the service sectors

• The objectives of TRIPS include the promotion of technological innovation and transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and with a balance of rights and obligations (Article 7)

• In the WTO Council, Cuba, Dominican Republic, Honduras and Nicaragua proposed that circumstances under which Members have the right to use compulsory licences should include public interest, including public health and the protection of the environment


TRIPS and environment

• There should be mutual supportiveness between relevant provisions of the CBD and those of the WTO TRIPs Agreement

Many developing countries argue:• The TRIPS Agreement should support the

CBD provisions in the areas of biological resources and traditional knowledge systems


TRIPS and the CBD

• TRIPS does not mention CBD principles, in particular: Sovereignty Prior Informed Consent (PIC) Equitable sharing of benefits Protecting the rights of communities,

farmers and indigenous people

• CBD recognizes that TRIPS may affect CBD objectives


TRIPS/CBD

Is there a conflict between TRIPS and CBD?

Are TRIPS and CBD mutually supportive?

Ethical, economic, environmental and social issues related with patenting of life forms

Several proposals by developing countries


TRIPS/CBD: key issues

• We instruct the Council for TRIPS, in pursuing its work programme including under the review of Article 27.3(b), the review of the implementation of the TRIPS Agreement under Article 71.1 and the work foreseen pursuant to paragraph 12 of this Declaration, to examine, inter alia, the relationship between the TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and folklore, and other relevant new developments raised by Members pursuant to Article 71.1


Doha Ministerial Declaration, para 19 [1]

• In undertaking this work, the TRIPS Council shall be guided by the objectives and principles set out in Articles 7 and 8 of the TRIPS Agreement and shall take fully into account the development dimension


Doha Ministerial Declaration, para 19 [2]

• Absence of full scientific certainty should not be used as a reason to postpone measures to prevent environmental damage (Principle 15 of the Rio Declaration, see next slide)

• The principle is part of the body of national and international environmental law

• Biosafety Protocol (module 5)• There are differing views on whether and in

which cases the WTO should provide greater scope for the use of the precautionary principle

• The abuse of the precautionary principle for protectionist purposes needs to be avoided


Precautionary principle [1]

Principle 15 of the Rio Declaration

“In order to protect the environment, the precautionary approach shall be widely applied by Member States in accordance with their capabilities.

Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation”



WTO’s Appellate Body note on PP in

international law:

“It is regarded by some as having crystallized into a general principle of customary international environmental law. Whether it has been widely accepted by Members … appears less than clear … We note that … the PP, at least outside the field of international environmental law, still awaits authoritative formulation.”



• National measures must be based on “sound science” and on an assessment of risks (Article 5.1) - this is often very difficult/costly in developing countries

• Governments are allowed, under certain conditions, to take provisional measures where relevant scientific information is insufficient (Article 5.7, see next slide)

• Beef/hormone case


The SPS Agreement

• “In cases where relevant scientific evidence is insufficient, a Member may provisionally adopt sanitary or phytosanitary measures on the basis of available pertinent information, …

• In such circumstances, Members shall seek to obtain the necessary information necessary for a more objective assessment of risk and review the SPS measures accordingly, within a reasonable period of time” - the latter is a controversial issue


Article 5.7 of the SPS Agreement

• The precautionary principle is not explicitly mentioned in the EC Treaty, except in the environment field. However, the European Commission considers that this principle also covers the protection of human, animal and plant health

• The Community has the objective “to clarify and strengthen the existing WTO framework for the use of the precautionary principle in the area of food safety” (White Paper on Food Safety,

COM(1999)718final, January 2000)


EU position

• Proportional to the chosen level of protection• Non-discriminatory in their application• Consistent with similar measures already taken• Based on examination of potential benefits and

costs of action or lack of action (including, where appropriate and feasible, an economic cost/benefit analysis)

• Subject to review, in the light of new scientific data• Capable of assigning responsibility for producing

the scientific evidence necessary for a more comprehensive risk assessment (burden of proof)

European Commission, Communication on the use of the precautionary principle, February 2000


EU: Measures based on the precautionary principle should be:

http://europa.eu.int/index_en.htm


• A prior approval (marketing authorisation) requirement reverses the burden of proof by treating products as dangerous, unless and until businesses do the scientific work necessary to demonstrate that they are safe

• Where there is no prior authorisation procedure, a specific precautionary measure might be taken to place the burden of proof upon the upon the producer, manufacturer or importer, but this cannot be made a general rule



Burden of proof

• The precautionary principle should be considered within a structured approach to the analysis of risk which comprises three elements: Risk assessment, Risk management, Risk communication

• The precautionary principle is particularly relevant to the management of risk

• Judging what is an "acceptable" level of risk for society is an eminently political responsibility



EU: PP and risk management



• Products that are prohibited for sale or severely restricted in the domestic market of certain countries (DPGs) may nevertheless be exported to [developing] countries without adequate information being provided of health and environmental risks

• Developing countries lack infrastructure to control imports of DPGs


Domestically Prohibited Goods (DPGs) [1]

• Progress has been made in designing multilateral agreements and instruments to regulate trade in DPGs

The Rotterdam Convention on Prior Informed Consent,

The Convention on Persistent Organic Pollutants (POPS),

The Basel Convention



• There are, however, still important gaps, for example in terms of product coverage and membership

• New concern has arisen, for example in the context of the “mad-cow disease.” In the CTE it has been proposed to keep this issue under review

• A DPG notification system was established by a Ministerial decision in 1982; it remains in force today, but is not being used in

practice



• WTO: products may not be distinguished on the basis of their process and production methods (PPMs), unless these have an impact on the final characteristics of the product

• Environmental point of view: interest in distinguishing products based on environmental effects during production. For examle: Do timber products originate from sustainably

managed forests? Has tuna been caught without incidental kill of

dolphins (“dolphine-safe” tuna)? Does shrimp fishing affect turtles?


Like products: concepts and issues [1]

• Concerns: Making market access subject to

compliance with unilaterally determined PPM standards can result in protectionism and undermine the MTS

Harmonization of non-product related (PPMs) is not desirable

Spill-over effects to other areas, e.g. labor standards?

• Recent developments Shrimp/turtle Asbestos


Like products: concepts and issues [2]

Dispute settlement


• Allows WTO Members to apply, under specific conditions, otherwise inconsistent trade measures

Preamble:

"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, …..


GATT Article XX on General Exceptions

Relevant paragraphs:

(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


GATT Article XX on General Exceptions

GATTGATT• United States (US) - Restrictions on Imports United States (US) - Restrictions on Imports

of Tuna and Tuna Products, 1982of Tuna and Tuna Products, 1982• Canada- Measures Affecting Exports of Canada- Measures Affecting Exports of

Unprocessed Herring and Salmon, 1988Unprocessed Herring and Salmon, 1988• Thailand-Restrictions on Imports and Thailand-Restrictions on Imports and

Internal Taxes on Cigarettes, 1990Internal Taxes on Cigarettes, 1990• US - Restrictions on Imports of Tuna, 1991US - Restrictions on Imports of Tuna, 1991• US - Restrictions on Imports of Tuna, 1994US - Restrictions on Imports of Tuna, 1994• US - Taxes on Automobiles, 1994US - Taxes on Automobiles, 1994


Environment-related cases [1]

WTOWTO• United States - Standards for Reformulated United States - Standards for Reformulated

and Conventional Gasoline, 1996and Conventional Gasoline, 1996• EC Measures Concerning Meat and Meat EC Measures Concerning Meat and Meat

Products (Hormones), 1998Products (Hormones), 1998• United States - Import Prohibition of Certain United States - Import Prohibition of Certain

Shrimp and Shrimp Products, 1998Shrimp and Shrimp Products, 1998• EC- Measures Affecting Asbestos and

Asbestos Containing Products, 2000


Environment-related cases [2]

• Cigarettes: not “necessary” within the meaning of Article XX (b)

• Tuna (1991): Tuna (1991): not justified under either XX(b) not justified under either XX(b) or XX(g)or XX(g)

• Tuna (1994): Tuna (1994): not justified under either XX(b) not justified under either XX(b) or XX(g)or XX(g)

• Meat and meat products: Not “necessary”

within the meaning of Article XX (b)


Rulings “against environment”

• Reformulated Gasoline and Shrimp-Turtle: in both cases, the AB reversed the findings of the panels and found that the measures in question were justified under Article XX(g), but failed to meet the requirements of the Chapeau of Article XX

• Asbestos: the AB confirmed that France’s import ban was consistent with GATT Articles XX (b) and (g) and did not conflict with the Chapeau of Article XX


Evolution…

Transparency• Concern in developed countries, NGOs• Transparency has been improved, e.g. by

lifting restrictions on documents and posting them on the WTO web site immediately after their distribution to WTO members

Balance• Concern that developing countries find it

difficult to use dispute settlement (procedural, financial and on account of low trade volumes as lever)

• Creation of Advisory Centre on WTO Law (Geneva)


Debate on dispute settlement

• What is the mandated role of the Appellate Body in interpretation of GATT/WTO principles?

• Amicus curae briefs by NGOs (e.g. in “shrimp-turtle” case) Environmental inputs to panels and AB Should NGOs [and interest groups] play a

role in dealing with intergovernmental disputes?

NGOs in developed countries have larger financial and technical means to submit such briefs

• Environment-related issues in mandated DSU review


Environment-related issues

UNCTAD/CBTF contribution and

possible follow up


At the national and regional levels:

Assist beneficiary countries in

• Enhancing understanding of trade and

environment issues negotiated and/or

discussed in WTO, e.g. through studies

and training programmes

• Promoting national co-ordination, e.g.

through policy dialogues

http://www.unep-unctad.org/cbtf


What can CBTF do?

http://www.unep-unctad.org/cbtf

Direct participation in WTO negotiations anddiscussions CBTF projects may promote the effective

participation of developing countries, for example in the CTE

Reflecting developing country concerns Results of UNCTAD and UNEP meetings

and projects have been presented to CTE and other WTO bodies

CBTF may further encourage this process


Effective participation in WTO

Issues for discussion


• What are the potential benefits and risks of trade and environment negotiations in the WTO?

• What should be the priorities for Viet Nam? What are the key issues? How should they be handled in Viet Nam? On which WTO bodies should Viet Nam focus?

• How can CBTF be most useful? Training programme? Policy dialogues?


What should be priorities for Viet Nam?

Thank you very much


trade, environment and development unctad module 2 trade and environment in the multilateral trading...

Documents

trade measures

trade interests

certain trade

environment mandate

cte specific trade

environmental measures

relevant gattwto provisions

ur agreementstrainfortrade