WTO AND ENVIRONMENT

INTRODUCTION

"Trade is a powerful engine of economic growth, and that economic growth is vital to
creating conditions which favour advancing environmental protection, improving social
conditions, or sustaining ethical values. By opening markets, particularly to exports from
developing countries, and by keeping markets open through clear and enforceable rules,
the global trading system is a natural ally of sustainable development"1.

Interaction between international trade and the environment is as old as trade itself.
However, awareness that the interaction has implications in public policy terms dates
back at least to the trade provisions in 1933 convention on fauna and flora. 2 In the late
1960’s environmental problems caused by the discharge of waste and other pollutants
into the natural environment emerged seriously, and so did concerns over the
implications for international competitiveness.

Over the past two decades, producers in countries with stricter environmental standards
have worried increasingly about the impact of those standards on their competitiveness in
world markets. At the same time, governments and firms in other countries have
expressed concern about new barriers being erected against imports produced under less
strict standards.

Most recently, there has been growing public concern with issues related to the pollution
of the global commons (for example, ozone depletion and climate change) as well as with
species diversity and the treatment of animals. This has raised important questions about
the use of trade policies to influence environmental measures in other countries.

Since trade and environment both affect the use of natural resources, they naturally
interact, and have had a long legacy of mutual mistrust. For both free-traders and
environmentalists, the inter-linkage has been a topic of contention and serves as a point

1
Speech by Renato Ruggiero, A shared responsibility: Global Policy Coherence For Our Global Age, December 9, 1997.
2
The full title of the convention, which is still in force, is the Convention Relative to the Preservation of Fauna and Flora in their
Natural State.

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of reference to NGOs as well as to industrial lobby groups. The debate initially was quite
contentious and unproductive as both parties differed greatly in their trust of market
forces and typically value the environment differently.3 Free traders feared that talk about
environmental protection will be used as an excuse by some economic sectors to gain
protection for themselves against competition from abroad. Environmentalists feared that
free trade will be used as an excuse to give inadequate weight to environmental goals and
excessive weight to maximization of market-measured GDP.

The environmental implications of international trade are becoming an important part of

multilateral and domestic policy agendas. This is particularly the case for trade relations
between developing and developed countries. To what extent developing countries
should devote their resources to lowering domestic environmental costs for their own
welfare and that of the world as whole has frequently been debated. The debate stems
from the widely held view that a tradeoff between economic growth and environmental
quality exists. Many policymakers in developing countries argue that they have the right
to pursue the same material aspirations by the same means as did the industrialized world
during it developmental stages and are thus willing to spend smaller percentages of their
productive resources for pollution abatement than developed countries. It is increasingly
recognized that the import of goods and services entails an implicit transfer of
environmental effects to the exporting country.

The relationship between trade and environment is a complex and highly debated issue.
Addressing this relationship is fundamental in order to achieve sustainable development.
As a result of increasing global economic inter-dependence and further trade
liberalisation as well as growing pressure on the environment and the use of natural
resources, there is an ever growing inter-face between trade and environment. It is widely
recognised that trade and environment can be mutually supportive, but, differences
remain on effective implementation. In fact, trade liberalisation and trade policy have
positive and negative impacts on the environment. However, a number of conditions
should be met to ensure that the net gains deriving from trade liberalisation will support
and reinforce the protection of the environment.

3
Copeland and Taylor, 2004.

2
The trade and environment debate is complex and varied, and it involves some of the
most fundamental WTO principles and rules, such as the concept of non-discrimination
and the definition of "like products". It is a horizontal issue that cuts across many
disciplines in WTO. For example, Multilateral Environmental Agreements have
consequences for trade which may come into conflict with the general aim of the WTO to
reduce trade barriers.

The WTO has no specific agreement dealing with the environment. However, the WTO
agreements confirm governments’ right to protect the environment, provided certain
conditions are met, and a number of them include provisions dealing with environmental
concerns.

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 RESEARCH METHODOLOGY

Aims and objectives

The project aims at studying the issues associated with the trade and the environment
debate. This paper begins with the genesis of the issue of trade and the environment and
examines the inter-relation between trade, environment and the WTO. The Paper further
tries to examine the relationship between certain Multilateral Environmental Agreements
(MEAs) and the WTO Agreements. The paper analyzes how environmental provisions
have permeated into the multilateral trading system, through the incorporation of
environmental provisions under new WTO agreements and the concern of the developing
countries with regard to the MEAs.

The Project covers the basic conceptual issues, as well as the genesis of trade and
environment as it has been dealt with in the WTO. The ultimate objective is to understand
the justification for policy linkages between trade and the environment and the rationale
for special trade rules to reflect environmental concerns.

Method of writing

The researcher has endeavored to use a combination of descriptive and analytical styles
of writing throughout this project. More emphasis has been placed on the analytical style
of writing.

Sources of Data

The main sources have been textbooks, articles and web-search.

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 EMERGING ENVIRONMENT DEBATE IN GATT/ WTO

Trade and environment, as an issue, is by no means new. 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.

Growing international concern about the impact of economic growth on social

development and the environment led to a call for an international conference on how to
manage the human environment, and the 1972 Stockholm Conference was the response.

The 1971 GATT study

In 1972, the UN held a Conference on the Human Environment in Stockholm. During the
preparations in 1971, the Secretariat of the General Agreement on Tariffs and Trade
(GATT) prepared a study entitled, "Industrial Pollution Control and International Trade".
The study focused on the implications of environmental protection policies on
international trade. It reflected the concern of trade officials at the time that such policies
could become obstacles to trade as well as could constitute a new form of protectionism
i.e. "green protectionism".

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.

EMIT - GATT Group on Environmental Measures and International Trade

In November 1971, the GATT Council of Representatives agreed to set up a Group on

Environmental Measures and International Trade (EMIT), which would be open to all
GATT members (i.e. GATT signatories). However, the decision also said group would
only convene at the request of GATT members. Therefore, it was not until 1991 when the
members of the European Free Trade Association (EFTA) asked for the EMIT Group to
be convened. (EFTA, at the time included Austria, Finland, Iceland, Liechtenstein,
Norway, Sweden and Switzerland.)

Developments: 1971–1991

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Between 1971 and 1991, 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 discussions:

 During the Tokyo Round of trade negotiations (1973–1979), participants took up

the question of the degree to which environmental measures (in the form of
technical regulations and standards) 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, and for them to be transparent.

 During the Uruguay Round (1986–1994), trade-related environmental issues were

once again taken up. Modifications were made to the TBT Agreement, and 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).

 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 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.

 In 1991, a dispute between Mexico and United States put the spotlight on the
linkages between environmental protection policies and trade. The case concerned

6
 a US embargo on tuna imported from Mexico, caught using "purse seine" nets
which caused the incidental killing of dolphins. Mexico appealed to 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 this period, 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 Stockholm
Conference continued throughout the 1970s and 80s.

In 1987, for example, 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".

As a result of these developments, the EMIT group’s proposal met with a positive
response. Despite some countries’ initial reluctance to have environmental issues
discussed in GATT, they agreed to have a structured debate on the subject.

In accordance with its mandate of examining the possible effects of environmental

protection policies on the operation of the General Agreement, the EMIT group
focused on the effects of environmental measures (such as eco-labelling schemes) on
international trade, the relationship between the rules of the multilateral trading
system and the trade provisions contained in multilateral environmental agreements
(MEAs) (such as the Basel Convention on the Transboundary Movement of
Hazardous Wastes), and the transparency of national environmental regulations with
an impact on trade.

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 Rio in 1992 and after

The activation of the EMIT group was followed by further developments in

environmental forums.

The 1992 UN Conference on Environment and Development (UNCED), also known

as the Rio "Earth Summit", drew 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.

The preparatory work for the 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 that was to be signed in 1994.

Trade and Environment in the WTO’s Founding Charter

The preamble to the Marrakesh Agreement establishing the World Trade

Organization refers to the importance of working towards sustainable development.
The first paragraph of the preamble4 recognizes sustainable development as an
integral part of the multilateral trading system, which illustrates the importance
placed by WTO members on environmental protection.

4
See under objectives of the WTO, in the next chapter

8
 WORLD TRADE ORGANIZATION

The World Trade Organization (WTO) is an international organization designed to

supervise and liberalize international trade. The WTO came into being on January 1,
1995, and is the successor to the General Agreement on Tariffs and Trade (GATT),
which was created in 1948. It represents the culmination of an eight-year process of trade
negotiations, known as the Uruguay Round. The WTO is located in Geneva, and is
administered by a secretariat that also facilitates ongoing trade negotiations and oversees
trade dispute resolution. There are currently 146 member countries of the WTO.

The WTO deals with the rules of trade between nations at a global level. It is responsible
for negotiating and implementing new trade agreements, and is in charge of policing
member countries' adherence to all the WTO agreements, signed by the bulk of the
world's trading nations and ratified in their parliaments. These documents provide the
legal ground rules for international commerce. The agreements are like contracts which
bind governments to keep their trade policies within the boundaries set by the
agreements.

Objectives of the WTO

The reasons for establishing the WTO and the policy objectives of this international
organization are set out in the preamble to the WTO Agreement. According to the
preamble, the parties to the WTO Agreement agreed to the terms of this agreement and
the establishment of the WTO "recognizing that their relations in the field of trade and
economic endeavour should be conducted with a view to raising the 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 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".

The ultimate objectives of the WTO are thus:

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  The increase of standards of living;

 The attainment of full employment;

 The growth of real income and effective demand; and

 The expansion of production of, and trade in, goods and services

However, it is clear from the Preamble that in pursuing these objectives the WTO must
take into account the need for preservation of the environment and the needs of the
developing countries. The Preamble stresses upon the importance of sustainable
economic development and of integration of developing countries, and in particular least-
developed countries, in the world trading system.

Functions of the WTO

Among the various functions of the WTO, these are regarded by analysts as the most
important:

 It oversees the implementation, administration and operation of the covered

agreements.

 It provides a forum for negotiations and for settling disputes.

Additionally, it is the duty of WTO to review the national trade policies, and to ensure the
coherence and transparency of trade policies through surveillance in global economic
policy-making. Another priority of the WTO is the assistance of developing, least-
developed and low-income countries in transition to adjust to WTO rules and disciplines
through technical cooperation and training. The WTO is also a center of economic
research and analysis, regular assessments of the global trade picture in its annual
publications and research reports on specific topics are produced by the organization.
Finally, the WTO cooperates closely with the two other components of the Bretton
Woods system, the IMF and the World Bank.

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The Uruguay Round

As mentioned earlier, the World Trade Organization represents the culmination of an

eight-year process of trade negotiations, known as the Uruguay Round.

The Uruguay Round commenced in September 1986 and continued until April 1994. The
Round, based on the GATT ministerial meeting in Geneva (1982), was launched in Punta
del Este in Uruguay (hence the name), followed by negotiations in Montreal, Geneva,
Brussels, Washington, D.C., and Tokyo, with the 20 agreements finally being signed in
Marrakech - the Marrakesh Agreement. The Round transformed the General Agreement
on Tariffs and Trade (GATT) into the World Trade Organization (WTO).

Despite the profile of the trade and environment issue in the mid to late stages of the
Uruguay Round,5 the negotiations concluded in the Round did not deal directly with
Trade and Environment issues. This was largely a reflection of the absence of reference
to the environment in the agenda of Uruguay Round. As a consequence, the WTO
agreements that emerged from the Round did not deal with environment as a standalone
issue. Environmental groups made much of the fact that their concerns were not reflected
in the 500 pages of legal texts that emerged from the Round, including the tariff
schedules, running to some 26,000 pages. This perceived neglect of the WTO to deal
directly with the Environmental problems was seen by environmentalists as squandering
a crucial chance to centrally address the trade and environment issue and establish broad
principles to guide the WTO in its future work.

On other environmental-related matters, the Uruguay Round generated results with

varying degrees of ambiguity. In the area of standards, the thrust of the agreements from
the round was to discipline trade barriers while allowing for differences in non-border
measures. Exactly how much discipline would be exerted on National regulations,
especially in the case of sanitary and phytosanitary standards, and what would constitute
sufficient scientific justification for standards that were higher than international
standards, remained unclear. Under the subsidies agreement the use of countervailing

5
A number of events contributed to raising the profile of trade and environment during the later part of Uruguay Round besides the
tuna/ dolphin dispute. These included the Earth Summit in Rio in June 1992, the vocal opposition of environmentalists to NAFTA and
the Uruguay Round decisions in the US.

11
measures to deal with 'unfair' trade practices in the form of lax environmental standards
was not permitted. But the agreement did imply that subsidies that take the form of
foregone revenue for environmental taxes can be countervailable if they are specific.

Nonetheless, trade and environment issues were important in developments running

parallel to the negotiations themselves, and in particular played a role in defining the
work programme for the WTO following the Round. At the ministerial meeting in
Marrakesh in April 1994, governments agreed that trade and environment should be on
the future agenda for the WTO, and that a Committee on Trade and the Environment
should be formed to assess trade and environment linkages.

Committee on Trade and Environment

When Ministers approved the results of the Uruguay Round negotiations in Marrakesh in
April 1994, they took a decision to begin a comprehensive work programme on trade and
environment in the WTO. During the past five years, this work programme has provided
the focus of discussions in the Committee on Trade and Environment (CTE). The CTE’s
main aim is to build a constructive relationship between trade and environmental
concerns.

The CTE has a two-fold mandate:

 first "to identify the relationship between trade measures and environmental
measures in order to promote sustainable development"; and

 second, "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".

This broad-based mandate covers goods, services, and intellectual property rights and
builds on work carried out in the previous GATT Group on Environmental Measures and
International Trade. Since 1997, the CTE has adopted a thematic approach to its work to
broaden and deepen the discussions and to allow all items of the work programme to be
addressed in a systematic manner. Discussions of the items on the work programme have

12
been clustered into two main areas: issues relevant to market access and issues related to
the linkages between the multilateral environment and trade agendas.

Important parameters which have guided CTE’s work

The Committee on Trade and Environment (CTE) has brought environmental and
sustainable development issues into the mainstream of the WTO’s work. There are
several important parameters which have guided the CTE’s work.

 The first parameter is that WTO competency for policy coordination in this area is
limited to trade and those trade-related aspects of environmental policies which
may result in significant trade effects for its Members. In other words, it is not
intended that the WTO should become an environmental agency. Nor should it
get involved in reviewing national environmental priorities, setting environmental
standards or developing global policies on the environment. That will continue to
be the task of national governments and of other inter-governmental organizations
better suited to the task;

 The second parameter is that increased national coordination as well as

multilateral cooperation is necessary to address environmental concerns; and

 The third parameter is that secure market access opportunities are essential to help
developing countries work towards sustainable development.

The contribution which the WTO could make to environmental protection was
recognized at the United Nations Conference on Environment and Development
(UNCED — the Earth Summit) in 1992, which stated that an open, equitable and non-
discriminatory multilateral trading system has a key contribution to make national and
international efforts for better protection and conservation of environmental resources
and promotion of sustainable development. Among the most important recommendations
of the UNCED to the GATT at the time was to implement the results of the Uruguay
Round.

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The CTE's in its first report in 1996, recognized that trade and environment are both
important areas of policy making and that they should be mutually supportive in order to
promote sustainable development. The report noted that the multilateral trading system
has the capacity to further integrate environmental considerations and enhance its
contribution to the promotion of sustainable development without undermining its open,
equitable and non-discriminatory character.

To raise awareness of the linkages between trade, environment and sustainable

development and to enhance the dialogue between policy makers from Ministries of both
trade and environment in WTO Member Governments, the WTO Secretariat has
organized a series of regional seminars on trade and environment for government
officials from developing and least-developed countries and countries with economies in
transition.

At its meeting in October 1999, the CTE agreed to continue to deepen the analysis of all
items on the work programme based on the thematic clusters of market access and the
linkages between the multilateral environment and trade agendas with the objective of
fulfilling the mandate of the CTE.

Main points of discussion of the CTE’s work programme

Some of the main points of discussion of the CTE’s work programme include the
following:

1. Trade measures applied pursuant to MEAs

Throughout the discussions on this issue in the WTO, it has become clear that the
preferred approach for governments to take in tackling transboundary or global
environmental problems is through cooperative, multilateral action under an MEA. While
some MEAs contain trade provisions, trade restrictions are not the only or necessarily the
most effective policy instrument to use in MEAs. In certain cases they can play an
important role. It has also been stated that the WTO already provides broad and valuable
scope for trade measures to be applied pursuant to MEAs in a WTO-consistent manner.

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As in the past few years, in June 1999 the CTE held an Information Session with
Secretariats of MEAs relevant to the work of the CTE to discuss the trade-related
developments in these agreements. At the June Session, presentations and papers were
provided by the Convention on the International Trade in Endangered Species of Wild
Fauna and Flora; the Montreal Protocol on Substances that Deplete the Ozone Layer; the
United Nations Framework Convention on Climate Change; the Intergovernmental
Forum on Forests; and the International Tropical Timber Organization. This meeting
illustrated how trade-related measures function in MEAs and helped to deepen the
understanding of the relationship between MEAs and the multilateral trading system.

2. Dispute settlement

A related item concerns the appropriate forum for the settlement of potential disputes that
may arise over the use of trade measures pursuant to MEAs. There is general agreement
that in the event a dispute arises between WTO Members who are also signatories to an
MEA, they should try first to resolve it through the dispute settlement mechanisms
available under that MEA. Were a dispute to arise with a non-party to an MEA, but with
another WTO Member, the WTO would provide the only possible forum for resolving
the dispute.

The CTE agrees that better policy coordination between trade and environmental policy
officials at the national level can help prevent situations from arising in which the use of
trade measures applied pursuant to the MEAs could become subject to disputes.
Furthermore, it is unlikely that problems would arise in the WTO over trade measures
agreed and applied among parties to an MEA. In the event of a dispute, however, WTO
Members are confident that the WTO dispute settlement provisions would be able to
tackle any problems which arise in this area, including those cases requiring input from
environmental experts.

3. Eco-labelling

Eco-labelling programmes are important environmental policy instruments. Eco-labelling

was discussed extensively in the GATT, and provided the basis in the CTE for a detailed

15
examination of related issues. The key requirement from the WTO’s point of view is that
environmental measures that incorporate trade provisions or that affect trade
significantly, should not discriminate between home-produced goods and imports, nor
between imports from or exports to different trading partners. Non-discrimination is the
cornerstone of secure and predictable market access and undistorted competition:
consumers are guaranteed a wider choice and producers better access to the full range of
market opportunities. Subject to that requirement being met, WTO rules place essentially
no constraints on the policy choices available to a country to protect its own environment
against damage either from domestic production or from the consumption of domestically
produced or imported products.

The CTE has acknowledged that well-designed, eco-labelling programmes can be

effective instruments of environmental policy. It notes that in certain cases such
programmes have raised significant concerns about possible trade effects. An important
starting point for addressing some of these trade effects is to ensure adequate
transparency in the preparation, adoption and application of eco-labelling programmes.
Interested parties from other countries should also be allowed to voice their concerns.
Discussion is continuing on how the use in eco-labelling programmes of criteria based on
non-product-related processes and production methods should be treated under the rules
of the WTO Agreement on Technical Barriers to Trade.

4. WTO Transparency Provisions

The WTO transparency provisions fulfil an important role in ensuring the proper
functioning of the multilateral trading system. They help to prevent unnecessary trade
restrictions and distortions and ensure that WTO Members provide information about
changes in their regulations. They can also provide a valuable first step in ensuring that
trade and environment policies are developed and implemented in a mutually supportive
way. Trade-related environmental measures should not be required to meet more onerous
transparency requirements than other measures that affect trade. The CTE has stated that
no modifications to WTO rules are needed to ensure adequate transparency for trade-
related environmental measures. In 1998, the CTE also established a WTO

16
Environmental Database which can be accessed electronically by WTO Members. The
WTO Secretariat updates this database annually by reviewing all the environment-related
notifications. The Environmental Database is seen as an important step towards
increasing the transparency of trade-related environmental measures notified by WTO
Members.

5. Export of domestically prohibited goods

During the mid-1980’s, concerns were raised by a number of developing country GATT
Contracting Parties that they were importing certain hazardous or toxic products without
knowing the full environmental or public health dangers such products could pose. In the
late 1980’s, a GATT Working Party examined ways of treating trade in goods which are
severely restricted or banned for sale on the domestic market of an exporting country. A
key consideration was that the importing country should be fully informed about the
products it was receiving and have the right to reject them if it felt such products caused
environmental or public health problems.

Several MEAs have been negotiated in the last few years to deal with problems of trade
in environmentally hazardous products (e.g. the Basel Convention and London
Guidelines). The WTO does not intend to duplicate work that has already been
accomplished elsewhere in the area of domestically prohibited goods. WTO Members, in
the context of the CTE, have agreed to support the efforts of the specialized inter-
governmental environmental organizations that are helping to resolve such problems.
However, they have noted that there may be a complementary role for the WTO to play
in this area.

6. Trade liberalization and sustainable development

Further liberalization of international trade, both in goods and services, has a key role to
play in advancing economic policy objectives in Member countries. In that respect, WTO
Members have already made an important contribution to sustainable development and
better environmental protection world-wide by concluding the Uruguay Round
negotiations. This contribution will steadily increase as the results of the Round move

17
towards full implementation. The UN Conference on Environment and Development (the
“Earth Summit”) also recognized an open, non-discriminatory trading system to be a
prerequisite for effective action to protect the environment and to generate sustainable
development. This is based on the perspective that countries, particularly developing
countries, are dependent on trade as the main source of continued growth and prosperity.

The CTE is continuing to tackle this item of its work programme in the context of the
built-in agenda for further trade liberalization initiatives contained in the results of the
Uruguay Round negotiations. The CTE has noted that the removal of trade restrictions
and distortions, in particular high tariffs, tariff escalation, export restrictions, subsidies
and non-tariff barriers, has the potential to yield benefits for both the multilateral trading
system and the environment. Discussions in 1999 included the sectors of agriculture and
fisheries, energy, forestry, non-ferrous metals, textiles and clothing, leather and
environmental services. The discussions highlighted areas where the removal of trade
restrictions and distortions can be beneficial for the environment, trade and development,
providing “win-win-win” opportunities.

7. Trade in services and TRIPS

The CTE also is to examine the role of the WTO in relation to the links between
environmental measures and the new trade agreements reached in the Uruguay Round
negotiations on services and intellectual property. Discussion on these two items of the
work programme have broken new ground since there was very little understanding of
how the rules of the trading system might affect or be affected by environmental policies
in these areas.

With respect to the General Agreement on Trade in Services (GATS) and the
environment, the CTE has noted that its discussions so far have not led to the
identification of any measures that Members feel may be applied for environmental
purposes to services trade which are not already adequately covered by GATS provisions.
In the case of intellectual property rights, WTO Members have acknowledged that the
Agreement on Trade-related Intellectual Property Rights (TRIPS) plays an essential role
in facilitating access to and the transfer of environmentally-sound technology and

18
products. However, further work is required in this area, including clarifying the
relationship between the TRIPS Agreement and the Convention on Biological Diversity.

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 WTO AGREEMENTS

Introduction

Environmental issues began to be systematically addressed in the WTO following the

Decision on Trade and Environment taken towards the end of the Uruguay Round at
Marrakesh in 1994. The Committee on Trade and Environment was established in the
same year, with the explicit mandate to resolve environmental issues in the trading
system. Some new agreements under the WTO also contained environmental provisions.
In 2001 the environment was explicitly put on the negotiating agenda in the Doha
Ministerial Declaration in 2001. Today the environment has been mainstreamed into the
multilateral trading system, and has significant implications for shaping future rules
under the WTO regime.

The WTO's agreements are the legal foundation for the international trading system that
is used by the bulk of the world's trading nations. Most of the WTO agreements are the
result of the 1986–94 Uruguay Round negotiations, signed at the Marrakesh ministerial
meeting in April 1994. The WTO’s agreements are often called the Final Act of the 1986
- 1994 Uruguay Round of trade negotiations. These agreements are also called the
WTO’s Trade Rules.

The WTO agreements cover goods, services and intellectual property. They spell out the
principles of liberalization, and the permitted exceptions. They include individual
countries’ commitments to lower customs tariffs and other trade barriers, and to open and
keep open services markets. They set procedures for settling disputes. They prescribe
special treatment for developing countries. They require governments to make their trade
policies transparent by notifying the WTO about laws in force and measures adopted, and
through regular reports by the secretariat on countries’ trade policies.

Important WTO Agreements

Some of the important WTO Agreements are summarized below.

The General Agreement on Tariffs and Trade (GATT)

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The General Agreement on Tariffs and Trade was the outcome of the failure of
negotiating governments to create the International Trade Organization (ITO). GATT
was formed in 1947 and lasted until 1994, when it was replaced by the World Trade
Organization. The Bretton Woods Conference had introduced the idea for an organization
to regulate trade as part of a larger plan for economic recovery after World War II. As
governments negotiated the ITO, 15 negotiating states began parallel negotiations for the
GATT as a way to attain early tariff reductions. Once the ITO failed in 1950, only the
GATT agreement was left. The GATT's main objective was the reduction of barriers to
international trade. This was achieved through the reduction of tariff barriers, quantitative
restrictions and subsidies on trade through a series of agreements. The GATT was a
treaty, not an organization. The functions of the GATT were taken over by the World
Trade Organization which was established during the final round of negotiations in early
1990s.

The history of the GATT can be divided into three phases: the first, from 1947 until the
Torquay Round, largely concerned which commodities would be covered by the
agreement and freezing existing tariff levels. A second phase, encompassing three
rounds, from 1959 to 1979, focused on reducing tariffs. The third phase, consisting only
of the Uruguay Round from 1986 to 1994, extended the agreement fully to new areas
such as intellectual property, services, capital, and agriculture. Out of this round the
WTO was born.

In 1993 the GATT was updated (GATT 1994) to include new obligations upon its
signatories. One of the most significant changes was the creation of the World Trade
Organization (WTO).

GATT was a set of rules agreed upon by nations and the WTO is an institutional body.
The WTO expanded its scope from traded goods to trade within the service sector and
intellectual property rights. Although it was designed to serve multilateral agreements,
during several rounds of GATT negotiations (particularly the Tokyo Round) plurilateral
agreements created selective trading and caused fragmentation among members. WTO
arrangements are generally a multilateral agreement settlement mechanism of GATT.

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Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

The agreement recognises that widely varying standards in the protection and
enforcement of intellectual property rights and the lack of a multilateral framework of
principles, rules and disciplines dealing with international trade in counterfeit goods have
been a growing source of tension in international economic relations. Rules and
disciplines were needed to cope with these tensions. To that end, the agreement addresses
the applicability of basic GATT principles and those of relevant international intellectual
property agreements; the provision of adequate intellectual property rights; the provision
of effective enforcement measures for those rights; multilateral dispute settlement; and
transitional arrangements.

Part I of the agreement sets out general provisions and basic principles, notably a
national-treatment commitment under which the nationals of other parties must be given
treatment no less favourable than that accorded to a party’s own nationals with regard to
the protection of intellectual property. It also contains a most-favoured-nation clause, a
novelty in an international intellectual property agreement, under which any advantage a
party gives to the nationals of another country must be extended immediately and
unconditionally to the nationals of all other parties, even if such treatment is more
favourable than that which it gives to its own nationals.

Part II addresses each intellectual property right in succession. With respect to copyright,
parties are required to comply with the substantive provisions of the Berne Convention
for the protection of literary and artistic works, in its latest version (Paris 1971), though
they will not be obliged to protect moral rights as stipulated in Article 6bis of that
Convention. It ensures that computer programs will be protected as literary works under
the Berne Convention and lays down on what basis data bases should be protected by
copyright. Important additions to existing international rules in the area of copyright and
related rights are the provisions on rental rights. The draft requires authors of computer

22
programmes and producers of sound recordings to be given the right to authorize or
prohibit the commercial rental of their works to the public. A similar exclusive right
applies to films where commercial rental has led to widespread copying which is
materially impairing the right of reproduction. The draft also requires performers to be
given protection from unauthorized recording and broadcast of live performances
(bootlegging). The protection for performers and producers of sound recordings would be
for no less than 50 years. Broadcasting organizations would have control over the use that
can be made of broadcast signals without their authorization. This right would last for at
least 20 years.

With respect to trademarks and service marks, the agreement defines what types of signs
must be eligible for protection as a trademark or service mark and what the minimum
rights conferred on their owners must be. Marks that have become well-known in a
particular country shall enjoy additional protection. In addition, the agreement lays down
a number of obligations with regard to the use of trademarks and service marks, their
term of protection, and their licensing or assignment. For example, requirements that
foreign marks be used in conjunction with local marks would, as a general rule, be
prohibited.

In respect of geographical indications, the agreement lays down that all parties must
provide means to prevent the use of any indication which misleads the consumer as to the
origin of goods, and any use which would constitute an act of unfair competition. A
higher level of protection is provided for geographical indications for wines and spirits,
which are protected even where there is no danger of the public’s being misled as to the
true origin. Exceptions are allowed for names that have already become generic terms,
but any country using such an exception must be willing to negotiate with a view to
protecting the geographical indications in question. Furthermore, provision is made for
further negotiations to establish a multilateral system of notification and registration of
geographical indications for wines.

Industrial designs are also protected under the agreement for a period of 10 years.
Owners of protected designs would be able to prevent the manufacture, sale or

23
importation of articles bearing or embodying a design which is a copy of the protected
design.

As regards patents, there is a general obligation to comply with the substantive provisions
of the Paris Convention (1967). In addition, the agreement requires that 20-year patent
protection be available for all inventions, whether of products or processes, in almost all
fields of technology. Inventions may be excluded from patentability if their commercial
exploitation is prohibited for reasons of public order or morality; otherwise, the permitted
exclusions are for diagnostic, therapeutic and surgical methods, and for plants and (other
than microorganisms) animals and essentially biological processes for the production of
plants or animals (other than microbiological processes). Plant varieties, however, must
be protectable either by patents or by a sui generis system (such as the breeder’s rights
provided in a UPOV Convention). Detailed conditions are laid down for compulsory
licensing or governmental use of patents without the authorization of the patent owner.
Rights conferred in respect of patents for processes must extend to the products directly
obtained by the process; under certain conditions alleged infringers may be ordered by a
court to prove that they have not used the patented process.

With respect to the protection of layout designs of integrated circuits, the agreement
requires parties to provide protection on the basis of the Washington Treaty on
Intellectual Property in Respect of Integrated Circuits which was opened for signature in
May 1989, but with a number of additions: protection must be available for a minimum
period of 10 years; the rights must extend to articles incorporating infringing layout
designs; innocent infringers must be allowed to use or sell stock in hand or ordered
before learning of the infringement against a suitable royalty: and compulsory licensing
and government use is only allowed under a number of strict conditions.

Trade secrets and know-how which have commercial value must be protected against
breach of confidence and other acts contrary to honest commercial practices. Test data
submitted to governments in order to obtain marketing approval for pharmaceutical or
agricultural chemicals must also be protected against unfair commercial use.

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The final section in this part of the agreement concerns anti-competitive practices in
contractual licences. It provides for consultations between governments where there is
reason to believe that licensing practices or conditions pertaining to intellectual property
rights constitute an abuse of these rights and have an adverse effect on competition.
Remedies against such abuses must be consistent with the other provisions of the
agreement.

Part III of the agreement sets out the obligations of member governments to provide
procedures and remedies under their domestic law to ensure that intellectual property
rights can be effectively enforced, by foreign right holders as well as by their own
nationals. Procedures should permit effective action against infringement of intellectual
property rights but should be fair and equitable, not unnecessarily complicated or costly,
and should not entail unreasonable time-limits or unwarranted delays. They should allow
for judicial review of final administrative decisions. There is no obligation to put in place
a judicial system distinct from that for the enforcement of laws in general, nor to give
priority to the enforcement of intellectual property rights in the allocation of resources or
staff.

The civil and administrative procedures and remedies spelled out in the text include
provisions on evidence of proof, injunctions, damages and other remedies which would
include the right of judicial authorities to order the disposal or destruction of infringing
goods. Judicial authorities must also have the authority to order prompt and effective
provisional measures, in particular where any delay is likely to cause irreparable harm to
the right holder, or where evidence is likely to be destroyed. Further provisions relate to
measures to be taken at the border for the suspension by customs authorities of release,
into domestic circulation, of counterfeit and pirated goods. Finally, parties should provide
for criminal procedures and penalties at least in cases of wilful trademark counterfeiting
or copyright piracy on a commercial scale. Remedies should include imprisonment and
fines sufficient to act as a deterrent.

The agreement would establish a Council for Trade-Related Aspects of Intellectual

Property Rights to monitor the operation of the agreement and governments’ compliance

25
with it. Dispute settlement would take place under the integrated GATT dispute-
settlement procedures as revised in the Uruguay Round.

With respect to the implementation of the agreement, it envisages a one-year transition

period for developed countries to bring their legislation and practices into conformity.
Developing countries and countries in the process of transformation from a centrally-
planned into a market economy would have a five-year transition period, and least-
developed countries 11 years. Developing countries which do not at present provide
product patent protection in an area of technology would have up to 10 years to introduce
such protection. However, in the case of pharmaceutical and agricultural chemical
products, they must accept the filing of patent applications from the beginning of the
transitional period. Though the patent need not be granted until the end of this period, the
novelty of the invention is preserved as of the date of filing the application. If
authorization for the marketing of the relevant pharmaceutical or agricultural chemical is
obtained during the transitional period, the developing country concerned must offer an
exclusive marketing right for the product for five years, or until a product patent is
granted, whichever is shorter.

Subject to certain exceptions, the general rule is that the obligations in the agreement
would apply to existing intellectual property rights as well as to new ones.

The General Agreement on Trade in Services (GATS)

The General Agreement on Trade in Services (GATS) came into force in 1995 and
constitutes the legal framework through which World Trade Organization (WTO)
Members progressively liberalize trade in services, including health-related services.
Within the GATS framework, trade in health services is understood as the provision of
specialized and general health personnel, nursing services, hospital services, ambulance
services, and physiotherapeutic and paramedical services provided by medical and dental
laboratories.

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GATS allows WTO Members to choose which service sectors to open up to trade and
foreign competition. To date, only 50 WTO Members have made some type of
commitment on health services under GATS, much less than in financial services (100
Members). Liberalization of financial services may have implications for health systems
through its impact on health insurance.

Individual Members' commitments to open markets in specific sectors - and how open
those markets will be - are the outcome of negotiations. The commitments appear in
“schedules” that list the sectors being opened, the extent of market access offered in those
sectors (e.g. whether there are any restrictions on foreign ownership), and any limitations
on national treatment (whether some rights granted to local companies will not be granted
to foreign companies). For example, a Member could require all foreign-owned hospitals
to provide 25% of beds to care for the uninsured, but this would have to be scheduled as a
national treatment limitation (if it were not already a requirement for locally-owned
hospitals).

The overall aim of GATS is to liberalize trade in services. The agreement covers four
different modes (modes 1-4 trade in services) all of which affect health:

Mode 1 Cross-border supply

Health services provided from the territory of one Member State in the territory of
another Member State. This is usually via interactive audio, visual and data
communication. The patient therefore has the opportunity to consult with physicians in a
different country, as do local doctors. Typical examples include Internet consultation,
diagnosis, treatment and medical education. This form of supply can bring care to under-
served areas, but can be capital intensive and divert resources from other equally pressing
needs.

Mode 2 Consumption abroad

This usually covers incidents when patients seek treatment abroad or are abroad when
they need treatment. This can generate foreign exchange, but equally can crowd out local

27
patients and act as a drain on resources when their treatment is subsidized by the sending
government.

Mode 3 Foreign commercial presence

Health services supplied in one Member State, through commercial presence in the
territory of another Member State. This covers the opening up of the health sector to
foreign companies, allowing them to invest in health operations, health management and
health insurance. It is argued that, on the one hand, FDI can make new services available,
contribute to driving up quality and create employment opportunities. On the downside, it
can help create a two-tier health system and an internal brain-drain - and thus exacerbate
inequity of health provision.

Mode 4 Movement of natural persons (individuals rather than companies)

The temporary movement of a commercial provider of services (for example, a doctor)

from their own country to another country to provide his or her service under contract or
as a member of staff transferred to a different country. This is one of the most contentious
areas for health, as there is concern that it will increase the brain drain of health personnel
from poor to rich countries. However, GATS is concerned only with health professionals
working in other countries on a temporary basis. Brain drain refers to the emigration of
educated, qualified, and skilled people from poorer countries to richer countries. WHO's
Human Resources for Health initiative aims to increase individual countries' pools of
qualified health staff.

The extent to which GATS will have an impact on public services such as health and
education is controversial. GATS comes into the equation when countries decide to allow
foreign private suppliers to provide services.

Opponents of GATS are convinced that it will limit a state's sovereign powers to protect
human health, and ensure provision of good quality, affordable health services.
Specifically, they fear that progressive liberalization of services under GATS will force
WTO Members to privatize health care currently provided by governments, and that

28
these changes will be irreversible. They are also concerned that the capacity of states to
regulate health-related services will be eroded.

The counter-argument stresses that GATS allows WTO Members to decide for
themselves which sectors will be liberalized and to define country-specific conditions on
the form that liberalization will take. Some WTO Members have already indicated they
will not be requesting or offering commitments on health services in the current
negotiations. Those states that do proceed are not obliged to respond positively to any
particular request. Nor is there any requirement for reciprocity. Moreover, the Doha
declaration specifically reaffirmed the right of Members to regulate or introduce new
regulations on the supply of services. Defenders of GATS therefore argue that national
control over policy and practice has been enhanced.

The political dynamic around GATS may be somewhat different from that affecting the
Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. Many
developing countries are keen to welcome foreign direct investment and to secure access
in the north for their professionals. Many developed countries, on the other hand, are
nervous about the political and economic effects of liberalization on publicly-funded
health services.

GATS is a complex treaty and it does not lay down minimum standards as TRIPS does.
Rather, it takes shape through the process of negotiation. Overall, there is lack of
empirical data on the level of international trade in health-related services, as well as on
the effects of liberalization in specific countries. Finally, trade in services is increasing in
any case (often through bilateral negotiations), thus making attribution to GATS very
difficult.

Certain other WTO Agreements are as follows:

Agreement on Agriculture

The WTO Agreement on Agriculture was one of the many agreements which were
negotiated during the Uruguay Round.

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The implementation of the Agreement on Agriculture started with effect from January 1,
1995. As per the provisions of the Agreement, the developed countries would complete
their reduction commitments within 6 years, i.e., by the year 2000, whereas the
commitments of the developing countries would be completed within 10 years, i.e., by
the year 2004. The least developed countries are not required to make any reductions.

The products, which are included within the purview of this agreement are what are
normally considered as part of agriculture except that it excludes fishery and forestry
products as well as rubber, jute, sisal, abaca and coir.

Salient Features

The WTO Agreement on Agriculture contains provisions in 3 broad areas of agriculture

and trade policy: market access, domestic support and export subsidies.

Market Access

This includes tariffication, tariff reduction and access opportunities. Tariffication means
that all non-tariff barriers such as quotas, variable levies, minimum import prices,
discretionary licensing, state trading measures, voluntary restraint agreements etc. need to
be abolished and converted into an equivalent tariff. Ordinary tariffs including those
resulting from their tariffication are to be reduced by an average of 36% with minimum
rate of reduction of 15% for each tariff item over a 6 year period. Developing countries
are required to reduce tariffs by 24% in 10 years. Developing countries as were
maintaining Quantitative Restrictions due to balance of payment problems, were allowed
to offer ceiling bindings instead of tariffication.

Special safeguard provision allows the imposition of additional duties when there are
either import surges above a particular level or particularly low import prices as
compared to 1986-88 levels.

It has also been stipulated that minimum access equal to 3% of domestic consumption in
1986-88 will have to be established for the year 1995 rising to 5% at end of the
implementation period.

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Domestic support

For domestic support policies, subject to reduction commitments, the total support given
in 1986-88,measured by the total Aggregate Measurement of Support (AMS) should be
reduced by 20% in developed countries (13.3% in developing countries). Reduction
commitments refer to total levels of support and not to individual commodities. Policies
which amount to domestic support both under the product specific and non-product
specific categories at less than 5% of the value of production for developed countries and
less than 10% for developing countries are also excluded from any reduction
commitments. Polices which have no or at most minimal trade distorting effects on
production are excluded from any reduction commitments (Green Box-Annex 2 of the
Agreement on Agriculture - http://www.wto.org). The list of exempted green box policies
includes such policies which provide services or benefits to agriculture or the rural
community, public stock holding for food security purposes, domestic food aid and
certain de-coupled payments to producers including direct payments to production
limiting programmes, provided certain conditions are met.

Special and Differential Treatment provisions are also available for developing country
members. These include purchases for and sales from food security stocks at
administered prices provided that the subsidy to producers is included in calculation of
AMS. Developing countries are permitted untargeted subsidised food distribution to meet
requirements of the urban and rural poor. Also excluded for developing countries are
investment subsidies that are generally available to agriculture and agricultural input
subsidies generally available to low income and resource poor farmers in these countries.

Export Subsidies

The Agreement contains provisions regarding member's commitment to reduce Export

Subsidies. Developed countries are required to reduce their export subsidy expenditure by
36% and volume by 21% in 6 years, in equal instalment (from 1986-1990 levels). For
developing countries the percentage cuts are 24% and 14% respectively in equal annual
installment over 10 years. The Agreement also specifies that for products not subject to
export subsidy reduction commitments, no such subsidies can be granted in the future.

31
The Sanitary and Phytosanitary Measures Agreement

The Agreement on the Application of Sanitary and Phytosanitary Measures sets out the
basic rules for food safety and animal and plant health standards.

It allows countries to set their own standards. But it also says regulations must be based
on science. They should be applied only to the extent necessary to protect human, animal
or plant life or health. And they should not arbitrarily or unjustifiably discriminate
between countries where identical or similar conditions prevail.

Member countries are encouraged to use international standards, guidelines and

recommendations where they exist. However, members may use measures which result in
higher standards if there is scientific justification. They can also set higher standards
based on appropriate assessment of risks so long as the approach is consistent, not
arbitrary.

The agreement still allows countries to use different standards and different methods of
inspecting products.

Key Features

All countries maintain measures to ensure that food is safe for consumers, and to prevent
the spread of pests or diseases among animals and plants. These sanitary and
phytosanitary measures can take many forms, such as requiring products to come from a
disease-free area, inspection of products, specific treatment or processing of products,
setting of allowable maximum levels of pesticide residues or permitted use of only
certain additives in food. Sanitary (human and animal health) and phytosanitary (plant
health) measures apply to domestically produced food or local animal and plant diseases,
as well as to products coming from other countries.

Protection or protectionism?

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Sanitary and phytosanitary measures, by their very nature, may result in restrictions on
trade. All governments accept the fact that some trade restrictions may be necessary to
ensure food safety and animal and plant health protection. However, governments are
sometimes pressured to go beyond what is needed for health protection and to use
sanitary and phytosanitary restrictions to shield domestic producers from economic
competition. Such pressure is likely to increase as other trade barriers are reduced as a
result of the Uruguay Round agreements. A sanitary or phytosanitary restriction which is
not actually required for health reasons can be a very effective protectionist device, and
because of its technical complexity, a particularly deceptive and difficult barrier to
challenge.

The Agreement on Sanitary and Phytosanitary Measures (SPS) builds on previous GATT
rules to restrict the use of unjustified sanitary and phytosanitary measures for the purpose
of trade protection. The basic aim of the SPS Agreement is to maintain the sovereign
right of any government to provide the level of health protection it deems appropriate, but
to ensure that these sovereign rights are not misused for protectionist purposes and do not
result in unnecessary barriers to international trade.

Justification of measures

The SPS Agreement, while permitting governments to maintain appropriate sanitary and
phytosanitary protection, reduces possible arbitrariness of decisions and encourages
consistent decision-making. It requires that sanitary and phytosanitary measures be
applied for no other purpose than that of ensuring food safety and animal and plant
health. In particular, the agreement clarifies which factors should be taken into account in
the assessment of the risk involved. Measures to ensure food safety and to protect the
health of animals and plants should be based as far as possible on the analysis and
assessment of objective and accurate scientific data.

International standards

The SPS Agreement encourages governments to establish national SPS measures

consistent with international standards, guidelines and recommendations. This process is

33
often referred to as "harmonization". The WTO itself does not and will not develop such
standards. However, most of the WTO’s member governments (132 at the date of
drafting) participate in the development of these standards in other international bodies.
The standards are developed by leading scientists in the field and governmental experts
on health protection and are subject to international scrutiny and review.

International standards are often higher than the national requirements of many countries,
including developed countries, but the SPS Agreement explicitly permits governments to
choose not to use the international standards. However, if the national requirement results
in a greater restriction of trade, a country may be asked to provide scientific justification,
demonstrating that the relevant international standard would not result in the level of
health protection the country considered appropriate.

Adapting to conditions

Due to differences in climate, existing pests or diseases, or food safety conditions, it is

not always appropriate to impose the same sanitary and phytosanitary requirements on
food, animal or plant products coming from different countries. Therefore, sanitary and
phytosanitary measures sometimes vary, depending on the country of origin of the food,
animal or plant product concerned. This is taken into account in the SPS Agreement.
Governments should also recognize disease-free areas which may not correspond to
political boundaries, and appropriately adapt their requirements to products from these
areas. The agreement, however, checks unjustified discrimination in the use of sanitary
and phytosanitary measures, whether in favour of domestic producers or among foreign
suppliers.

Alternative measures

An acceptable level of risk can often be achieved in alternative ways. Among the
alternatives — and on the assumption that they are technically and economically feasible
and provide the same level of food safety or animal and plant health — governments
should select those which are not more trade restrictive than required to meet their health
objective. Furthermore, if another country can show that the measures it applies provide

34
the same level of health protection, these should be accepted as equivalent. This helps
ensure that protection is maintained while providing the greatest quantity and variety of
safe foodstuffs for consumers, the best availability of safe inputs for producers, and
healthy economic competition.

Risk Assessment

The SPS Agreement increases the transparency of sanitary and phytosanitary measures.
Countries must establish SPS measures on the basis of an appropriate assessment of the
actual risks involved, and, if requested, make known what factors they took into
consideration, the assessment procedures they used and the level of risk they determined
to be acceptable. Although many governments already use risk assessment in their
management of food safety and animal and plant health, the SPS Agreement encourages
the wider use of systematic risk assessment among all WTO member governments and
for all relevant products.

Transparency

Governments are required to notify other countries of any new or changed sanitary and
phytosanitary requirements which affect trade, and to set up offices (called "Enquiry
Points") to respond to requests for more information on new or existing measures. They
also must open to scrutiny how they apply their food safety and animal and plant health
regulations. The systematic communication of information and exchange of experiences
among the WTO’s member governments provides a better basis for national standards.
Such increased transparency also protects the interests of consumers, as well as of trading
partners, from hidden protectionism through unnecessary technical requirements.

A special Committee has been established within the WTO as a forum for the exchange
of information among member governments on all aspects related to the implementation
of the SPS Agreement. The SPS Committee reviews compliance with the agreement,
discusses matters with potential trade impacts, and maintains close co-operation with the
appropriate technical organizations. In a trade dispute regarding a sanitary or

35
phytosanitary measure, the normal WTO dispute settlement procedures are used, and
advice from appropriate scientific experts can be sought.

Agreement on Subsidies and Countervailing Measures

The Agreement on Subsidies and Countervailing Measures (“SCM Agreement”)

addresses two separate but closely related topics: multilateral disciplines regulating the
provision of subsidies, and the use of countervailing measures to offset injury caused by
subsidized imports.

Multilateral disciplines are the rules regarding whether or not a subsidy may be provided
by a Member. They are enforced through invocation of the WTO dispute settlement
mechanism. Countervailing duties are a unilateral instrument, which may be applied by a
Member after an investigation by that Member and a determination that the criteria set
forth in the SCM Agreement are satisfied.

Structure of the Agreement

Part I provides that the SCM Agreement applies only to subsidies that are specifically
provided to an enterprise or industry or group of enterprises or industries, and defines
both the term “subsidy” and the concept of “specificity.” Parts II and III divide all
specific subsidies into one of two categories: prohibited and actionable(1), and establish
certain rules and procedures with respect to each category. Part V establishes the
substantive and procedural requirements that must be fulfilled before a Member may
apply a countervailing measure against subsidized imports. Parts VI and VII establish the
institutional structure and notification/surveillance modalities for implementation of the
SCM Agreement. Part VIII contains special and differential treatment rules for various
categories of developing country Members. Part IX contains transition rules for
developed country and former centrally-planned economy Members. Parts X and XI
contain dispute settlement and final provisions.

Coverage of the Agreement

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Part I of the Agreement defines the coverage of the Agreement. Specifically, it
establishes a definition of the term “subsidy” and an explanation of the concept of
“specificity”. Only a measure which is a “specific subsidy” within the meaning of Part I
is subject to multilateral disciplines and can be subject to countervailing measures.

Definition of subsidy Unlike the Tokyo Round Subsidies Code, the WTO SCM
Agreement contains a definition of the term “subsidy”. The definition contains three
basic elements: (i) a financial contribution (ii) by a government or any public body within
the territory of a Member (iii) which confers a benefit. All three of these elements must
be satisfied in order for a subsidy to exist.

The concept of “financial contribution” was included in the SCM Agreement only after a
protracted negotiation. Some Members argued that there could be no subsidy unless there
was a charge on the public account. Other Members considered that forms of government
intervention that did not involve an expense to the government nevertheless distorted
competition and should thus be considered to be subsidies. The SCM Agreement
basically adopted the former approach. The Agreement requires a financial contribution
and contains a list of the types of measures that represent a financial contribution, e.g.,
grants, loans, equity infusions, loan guarantees, fiscal incentives, the provision of goods
or services, the purchase of goods.

In order for a financial contribution to be a subsidy, it must be made by or at the direction

of a government or any public body within the territory of a Member. Thus, the SCM
Agreement applies not only to measures of national governments, but also to measures of
sub-national governments and of such public bodies as state-owned companies.

A financial contribution by a government is not a subsidy unless it confers a “benefit.” In

many cases, as in the case of a cash grant, the existence of a benefit and its valuation will
be clear. In some cases, however, the issue of benefit will be more complex. For example,
when does a loan, an equity infusion or the purchase by a government of a good confer a
benefit? Although the SCM Agreement does not provide complete guidance on these
issues, the Appellate Body has ruled (Canada – Aircraft) that the existence of a benefit is
to be determined by comparison with the market-place (i.e., on the basis of what the

37
recipient could have received in the market). In the context of countervailing duties,
Article 14 of the SCM Agreement provides some guidance with respect to determining
whether certain types of measures confer a benefit. the context of multilateral disciplines,
however, the issue of the meaning of “benefit” is not fully resolved.

Specificity

Assuming that a measure is a subsidy within the meaning of the SCM Agreement, it
nevertheless is not subject to the SCM Agreement unless it has been specifically provided
to an enterprise or industry or group of enterprises or industries. The basic principle is
that a subsidy that distorts the allocation of resources within an economy should be
subject to discipline. Where a subsidy is widely available within an economy, such a
distortion in the allocation of resources is presumed not to occur. Thus, only “specific”
subsidies are subject to the SCM Agreement disciplines. There are four types of
“specificity” within the meaning of the SCM Agreement:

• Enterprise-specificity. A government targets a particular company or companies

for subsidization;

• Industry-specificity. A government targets a particular sector or sectors for

subsidization.

• Regional specificity. A government targets producers in specified parts of its

territory for subsidization.

• Prohibited subsidies. A government targets export goods or goods using

domestic inputs for subsidization.

Categories of Subsidies

The SCM Agreement creates two basic categories of subsidies: those that are prohibited,
those that are actionable (i.e., subject to challenge in the WTO or to countervailing
measures). All specific subsidies fall into one of these categories.

Prohibited subsidies

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Two categories of subsidies are prohibited by Article 3 of the SCM Agreement. The first
category consists of subsidies contingent, in law or in fact, whether wholly or as one of
several conditions, on export performance (“export subsidies”). A detailed list of export
subsidies is annexed to the SCM Agreement. The second category consists of subsidies
contingent, whether solely or as one of several other conditions, upon the use of domestic
over imported goods (“local content subsidies”). These two categories of subsidies are
prohibited because they are designed to directly affect trade and thus are most likely to
have adverse effects on the interests of other Members.

The scope of these prohibitions is relatively narrow. Developed countries had already
accepted the prohibition on export subsidies under the Tokyo Round SCM Agreement,
and local content subsidies of the type prohibited by the SCM Agreement were already
inconsistent with Article III of the GATT 1947. What is most significant about the new
Agreement in this area is the extension of the obligations to developing country Members
subject to specified transition rules (see section below on special and differential
treatment), as well as the creation in Article 4 of the SCM Agreement of a rapid (three-
month) dispute settlement mechanism for complaints regarding prohibited subsidies.

Actionable subsidies

Most subsidies, such as production subsidies, fall in the “actionable” category.

Actionable subsidies are not prohibited. However, they are subject to challenge, either
through multilateral dispute settlement or through countervailing action, in the event that
they cause adverse effects to the interests of another Member. There are three types of
adverse effects. First, there is injury to a domestic industry caused by subsidized imports
in the territory of the complaining Member. This is the sole basis for countervailing
action. Second, there is serious prejudice. Serious prejudice usually arises as a result of
adverse effects (e.g., export displacement) in the market of the subsidizing Member or in
a third country market. Thus, unlike injury, it can serve as the basis for a complaint
related to harm to a Member's export interests. Finally, there is nullification or
impairment of benefits accruing under the GATT 1994. Nullification or impairment

39
arises most typically where the improved market access presumed to flow from a bound
tariff reduction is undercut by subsidization.

The creation of a system of multilateral remedies that allows Members to challenge

subsidies which give rise to adverse effects represents a major advance over the pre-
WTO regime. The difficulty, however, will remain the need in most cases for a
complaining Member to demonstrate the adverse trade effects arising from subsidization,
a fact-intensive analysis that panels may find difficult in some cases(2).

Agricultural subsidies

Article 13 of the Agreement on Agriculture establishes, during the implementation period

specified in that Agreement (until 1 January 2003), special rules regarding subsidies for
agricultural products. Export subsidies which are in full conformity with the Agriculture
Agreement are not prohibited by the SCM Agreement, although they remain
countervailable. Domestic supports which are in full conformity with the Agriculture
Agreement are not actionable multilaterally, although they also may be subject to
countervailing duties. Finally, domestic supports within the “green box” of the
Agriculture Agreement are not actionable multilaterally nor are they subject to
countervailing measures. After the implementation period, the SCM Agreement shall
apply to subsidies for agricultural products subject to the provisions of the Agreement on
Agriculture, as set forth in its Article 21.

Countervailing Measures

Part V of the SCM Agreement sets forth certain substantive requirements that must be
fulfilled in order to impose a countervailing measure, as well as in-depth procedural
requirements regarding the conduct of a countervailing investigation and the imposition
and maintenance in place of countervailing measures. A failure to respect either the
substantive or procedural requirements of Part V can be taken to dispute settlement and
may be the basis for invalidation of the measure.

Substantive rules A Member may not impose a countervailing measure unless it

determines that there are subsidized imports, injury to a domestic industry, and a causal

40
link between the subsidized imports and the injury. As previously noted, the existence of
a specific subsidy must be determined in accordance with the criteria in Part I of the
Agreement. However, the criteria regarding injury and causation are found in Part V. One
significant development of the new SCM Agreement in this area is the explicit
authorization of cumulation of the effects of subsidized imports from more than one
Member where specified criteria are fulfilled. In addition, Part V contains rules regarding
the determination of the existence and amount of a benefit.

Procedural rules

Part V of the SCM Agreement contains detailed rules regarding the initiation and conduct
of countervailing investigations, the imposition of preliminary and final measures, the use
of undertakings, and the duration of measures. A key objective of these rules is to ensure
that investigations are conducted in a transparent manner, that all interested parties have a
full opportunity to defend their interests, and that investigating authorities adequately
explain the bases for their determinations. A few of the more important innovations in the
WTO SCM Agreement are identified below:

• Standing. The Agreement defines in numeric terms the circumstances under

which there is sufficient support from a domestic industry to justify initiation of
an investigation.

• Preliminary investigation. The Agreement ensures the conduct of a preliminary

investigation before a preliminary measure can be imposed.

• Undertakings. The Agreement places limitations on the use of undertakings to

settle CVD investigations, in order to avoid Voluntary Restraint Agreements or
similar measures masquerading as undertakings

• Sunset. The Agreement requires that a countervailing measure be terminated after

five years unless it is determined that continuation of the measure is necessary to
avoid the continuation or recurrence of subsidization and injury.

41
 • Judicial review. The Agreement requires that Members create an independent
tribunal to review the consistency of determinations of the investigating authority
with domestic law.

Transition Rules and Special and Differential Treatment

Developed countries

Members not otherwise eligible for special and differential treatment are allowed three
years from the date on which for them the SCM Agreement enters into force to phase out
prohibited subsidies. Such subsidies must be notified within 90 days of the entry into
force of the WTO Agreement for the notifying Member.

Developing countries

The SCM Agreement recognizes three categories of developing country Members: least-
developed Members (“LDCs”), Members with a GNP per capita of less than $1000 per
year which are listed in Annex VII to the SCM Agreement, and other developing
countries. The lower a Member's level of development, the more favourable the treatment
it receives with respect to subsidies disciplines. Thus, for example, LDCs and Members
with a GNP per capita of less than $1000 per year listed in Annex VII are exempted from
the prohibition on export subsidies. Other developing country Members have an eight-
year period to phase out their export subsidies (they cannot increase the level of their
export subsidies during this period). With respect to import-substitution subsidies, LDCs
have eight years and other developing country Members five years, to phase out such
subsidies. There is also more favourable treatment with respect to actionable subsidies.
For example, certain subsidies related to developing country Members' privatization
programmes are not actionable multilaterally.. With respect to countervailing measures,
developing country Members' exporters are entitled to more favourable treatment with
respect to the termination of investigations where the level of subsidization or volume of
imports is small.

Members in transformation to a market economy

42
Members in transformation to a market economy are given a seven-year period to phase
out prohibited subsidies. These subsidies must, however, have been notified within two
years of the date of entry into force of the WTO Agreement (i.e., by 31 December 1996)
in order to benefit from the special treatment. Members in transformation also receive
preferential treatment with respect to actionable subsidies.

Dispute Settlement

The SCM Agreement generally relies on the dispute settlement rules of the DSU.
However the Agreement contains extensive special or additional dispute settlement rules
and procedures providing, inter alia, for expedited procedures, particularly in the case of
prohibited subsidy allegations. It also provides special mechanisms for the gathering of
information necessary to assess the existence of serious prejudice in actionable subsidy
cases.
Agreement on Technical Barriers to Trade

This agreement clarifies the Agreement on Technical Barriers to Trade reached in the
Tokyo Round. It seeks to ensure that technical negotiations and standards, as well as
testing and certification procedures, do not create unnecessary obstacles to trade.
However, it recognizes that countries have the right to establish protection, at levels they
consider appropriate, for example for human, animal or plant life or health or the
environment, and should not be prevented from taking measures necessary to ensure
those levels of protection are met. The agreement therefore encourages countries to use
international standards where these are appropriate, but it does not require them to change
their levels of protection as a result of standardization.

Innovative features of the revised agreement are that it covers processing and production
methods related to the characteristics of the product itself. The coverage of conformity
assessment procedures is enlarged and the disciplines made more precise. Notification
provisions applying to local government and non-governmental bodies are elaborated in
more detail than in the Tokyo Round agreement. A Code of Good Practice for the
Preparation, Adoption and Application of Standards by standardizing bodies, which is

43
open to acceptance by private sector bodies as well as the public sector, is included as an
annex to the agreement.

Agreement on Trade Related Aspects of Investment Measures

The agreement recognizes that certain investment measures restrict and distort trade. It
provides that no contracting party shall apply any TRIM inconsistent with Articles III
(national treatment) and XI (prohibition of quantitative restrictions) of the GATT. To this
end, an illustrative list of TRIMs agreed to be inconsistent with these articles is appended
to the agreement. The list includes measures which require particular levels of local
procurement by an enterprise (“local content requirements”) or which restrict the volume
or value of imports such an enterprise can purchase or use to an amount related to the
level of products it exports (“trade balancing requirements”).

The agreement requires mandatory notification of all non-conforming TRIMs and their
elimination within two years for developed countries, within five years for developing
countries and within seven years for least-developed countries. It establishes a Committee
on TRIMs which will, among other things, monitor the implementation of these
commitments. The agreement also provides for consideration, at a later date, of whether it
should be complemented with provisions on investment and competition policy more
broadly.

While both MEAs and the WTO agreements are the result of multilateral cooperation to
pursue mutually beneficial goals, the approach in MEAs is based on mutual cooperation
while that in the WTO is rule-based.

44
 MULTILATERAL ENVIRONMENTAL AGREEMENTS

Definition

An MEA is a legally binding instrument between two or more nation states that deals
with some aspect of the environment.

Aside from the requirement that they deal with some aspect of the environment, two
elements of the definition are very important to understand:

1. Legally binding

Multilateral environmental agreements are legal instruments binding countries that have
agreed to become parties through ratification or accession. For the countries which have
only signed and not as yet ratified, they are nonetheless not expected to do anything that
will affect the aims and purposes of the MEA. They are not declarations of intention or
avowals; they are rules of law. As such, they are a powerful tool for the implementation
of policies with environmental protection and sustainable development goals. Civil
society actors can make use of MEAs to achieve environment-related objectives.

2. Between two or more nation states

The better-known environmental agreements are multilateral in the sense that they
involve many nations and deal with broad aspects of environment (climate, biodiversity,
etc.). However, an MEA can be any treaty between two or more nation-states if and when
this instrument deals with direct environmental objectives.

MEAs offer a framework for collectively addressing environmental problems on the basis
of policy consensus and science. In addition, as environmental challenges become more
and more complex, MEAs increasingly provide a comprehensive approach to effectively
and equitably deal with those challenges. Thus, most MEAs include a broad range of
provisions that take into account issues such as: the lack and inadequacy of data and other
information; the need for broad stakeholder participation; the different levels at which
countries have contributed to the problem and can contribute to the solution; and the need
for incentives to take action. In addition to addressing environmental problems, many of
45
the measures contained in MEAs also have positive social and economic impacts. For
example, the harmonization of standards and practices encouraged by many MEAs is
designed to enhance environmental protection, but may also have positive effects on
trade and the economy by avoiding trade distortions, facilitating the technical and legal
implementation of standards and technical regulations, and assisting consumers in their
decision-making.

Trade-related measures are sometimes also needed and incorporated in MEAs to address
other types of problems, such as the lack of adequate data and information for policy
development or decision-making and the absence of incentives to contribute to the
protection of public environmental goods. Trade-related measures also play an important
role in supporting other MEA provisions, including the phase-out of certain substances,
and ensuring the effectiveness of MEAs, for example by assisting in compliance and
enforcement.

Basic information on selected MEAs

Following is very basic information on the most salient global MEAs. Some of these
conventions are directly administered by UNEP while others fall within different United
Nation’s or other regional organization’s administration.

Ramsar Convention on Wetlands

Other names Ramsar convention Convention’s charge is to

Signature Ramsar promote the conservation
Date 02.02.1971 and wise use of all wetlands
Date of entry 01.12.1975 through local, regional, and
into force national actions and
Link http://www.ramsar.org international cooperation, as
a contribution towards
achieving sustainable
development worldwide.

Convention on International Trade in Endangered Species of Wild Flora and

Fauna

Other names CITES Aims to ensure that

46
Signature Washington, D.C international trade in
Date 03.03.1973 specimens of wild animals
and plants does not threaten
Date of entry 01.07.1975 their survival. Subjecting
into force international trade in
Link http://www.cites.org specimens of selected
species to certain controls
via licensing of import,
export, re-export, and
introduction from the sea of
species.

Convention on the Conservation of Migratory Species of Wild Animals

Other names CMS or Bonn Convention Aims to conserve terrestrial,

marine, and avian species
Signature Bonn that migrate across or out of
Date 23.06.1979 national limits. The
Date of entry 01.11.1983 protection of these animals
into force by conserving or restoring
Link http://www.cms.int their habitats and mitigating
obstacles to migration is
sought through this
agreement.

Convention for the Protection of the Ozone Layer

Other names Vienna Convention Aims at establishing the

framework for co-oparation,
Signature Vienna development and policies,
Date 22.09.1988 and formulation of agreed
Date of entry 1988 measures in order to protect
into force human health and the
Link http://ozone.unep.org environment against adverse
effects resulting or likely to
result from human activities
which modify the ozone
layer (art.2).

Montreal Protocol on Substances that Deplete the Ozone Layer

Other names Montreal Protocol Aims at protecting the

Signature Montreal ozone layer by taking
date 16.09.1987 measures to control global
Date of entry 01.01.1989 emissions of substances that
into force deplete it. Its

47
Link http://www.unep.org/ozone definitive objective is the
elimination of these
materials based on scientific
developments, taking into
account technical and
economic considerations as
well as developmental
needs of developing
countries.

Convention on the Control of Transboundary Movements of Hazardous Wastes

and
their Disposal

Other names Basel Convention Ensure that management of

hazardous wastes and other
Signature Basel wastes including their
Date 22.3.1989 transboundary movement
Date of entry 8.05.1994 and disposal is consistent
into force with the protection of
Link http://www.basel.int human health and the
environment whatever the
place of disposal.

Convention on the Prior Informed Consent Procedure for Certain Hazardous

Chemicals and Pesticides in International Trade

Other names Rotterdam Convention / To promote shared

PIC responsibility and
Signature Rotterdam cooperative efforts among
date 10.09.1998 Parties in the international
Date of entry 24.02.2004 trade of certain hazardous
into force chemicals in order to protect
Link http://www.pic.int human health and the
environment from potential
harm and to contribute to
their
environmentally sound use.

Convention on Persistent Organic Pollutants

Other names Stockholm Convention / To protect human health

POPS and the environment from
persistent organic
Signature Stockholm pollutants.
date 22.5.2001 The convention guards

48
Date of entry 13.02.2005 human health from
into force chemicals that remain intact
Link http://www.pops.int in the environment for long
periods,
become widely distributed
geographically, accumulate
in the fatty tissue of living
organisms and are toxic to
humans and wildlife.

United Nations Framework Convention on Climate Change

Other names UNFCCC Achieve stabilization of

Signature New York greenhouse gas
date 9.5.1992 concentrations in the
Date of entry 21.03.1994 atmosphere at a level that
into force would prevent dangerous
Link http://unfccc.int anthropogenic interference
with climate. Level to be
accomplished within
sufficient
timeframe to allow
ecosystems
to adapt naturally to climate
change, to ensure the non-
threat to food production
and enable economic
development to proceed in a
sustainable way.

Protocol to the United Nations Framework Convention on Climate Change

Other names Kyoto Protocol Ensure that aggregate

anthropogenic carbon
Signature Kyoto dioxide equivalent
date 11.12.1997 emissions of the greenhouse
Date of entry 16.02.2005 gases listed in Annex A to
into force the Protocol do not exceed
the assigned amounts, with
a view to reducing overall
emissions of such gases by
at least 5 per cent below
1990 levels in the
commitment period 2008 –
2012. Besides setting
binding constraints on

49
 greenhouse gas emissions,
the Protocol encourages the
use of economic incentives
to meet with the changes.
The Kyoto Protocol is an
amendment to the UN
Framework Convention on
Climate Change.

Convention on Biological Diversity

Other names CBD To conserve biological

Signature date Rio de Janeiro 5.6.1992 diversity, the sustainable
Date of entry into force 21.03.1994 use of its components and
Link http://www.biodiv.org the fair and equitable
sharing of the benefits
arising out of the utilisation
of genetic resources, taking
into account
all rights over those
resources.

Protocol on Bio-safety to the Biodiversity Convention

Other names Cartagena Protocol Ensure an adequate level of

protection in safe transfer,
Signature Montreal handling and use of living
date 29.1.2000 modified organisms
Date of entry 11.09.2003 resulting from
into force biotechnology that may
Link http://www.biodiv.org have adverse effects on the
conservation and
sustainable use of biological
diversity, taking also into
account risks to human
health, and specifically
focusing on transboundary
movements.

MEAs and International Law

50
The main method available under international law for countries to work together on
global environmental issues is the multilateral environmental agreement (MEA). MEAs
are agreements between states which may take the form of “soft-law”, setting out non-
legally binding principles which parties will respect when considering actions which
affect a particular environmental issue, or “hard-law” which specify legally-binding
actions to be taken to work toward an environmental objective.

Multilateral environmental agreements must conform to international public law (as must
all international instruments of this type3). The compliance is guided by the 1969 Vienna
Convention on the Law of Treaties. This treaty, which entered into force in 1980,
prescribes the components and general guidelines for the development, negotiation and
adoption of international treaties.

How does a multilateral agreement enter into force internationally?

MEAs enter into force after a series of institutional processes take place. Subsequent to a
global agreement’s negotiation, several steps and measures need to be taken at national
and international levels to ensure it becomes enforceable. Basically, the phases that an
agreement goes through after negotiation of a draft text(s) is agreed are as follows:

• Adoption: Upon finalising the negotiation of text, a treaty will be first “adopted”
then “signed”. This is a proclamation that usually takes place upon the finalization of
a conference specially convened to negotiate the treaty. The adoption of the treaty
signals the ending of text negotiation and the beginning of the process that an
international treaty passes through before enforceability.

• Signature: A country begins a process of endorsing a treaty by “signing” it.

However, for multilateral agreements, this is a necessary but not sufficient step for
the application of the treaty. It is understood that when a state becomes a treaty’s
signatory it expresses its readiness to proceed with the steps needed to fulfil entering
into force procedures. This action is at times called “Signature Subject to
Ratification, Acceptance or Approval.”

51
• Ratification, acceptance, or approval: Action by which a state specifies its assent
to being bound by the treaty after completion of required national constitutional
procedures for ratification or accession or approval depending upon the country’s
legal system. The treaty’s depository keeps track of ratification/acceptance/
approval. This is particularly important since a certain quantity of states must ratify a
treaty before it enters into force. Ratification and acceptance/approval also implies
that a country will enact national implementing legislation to put national effect to
the multilateral treaty.

• Entry into force: Normally, multilateral treaties enter into force after an established
period has elapsed subsequent to a set number of states ratifying or acceding to the
agreement. Some agreements have other terms that must be met so that it enters into
force.

• Accession: This is the act by which a state accepts to become a party to an

agreement whose text has been negotiated, adopted and signed by other countries.
Basically, this act has the same denotation as ratification, the only difference being
that accession occurs after negotiations have taken place.

• Withdrawal or denouncing: Countries can (and do) withdraw or denounce

themselves from some international agreements in accordance with the procedure set
in that instrument. If the treaty has a denunciation clause or is silent about this
matter, a state may withdraw after a certain period of notice or after consent of
contracting parties.

Mechanisms used for implementing agreements

When a country indicates its commitment to an international accord, this needs to be

followed by a decision or an action in the form of establishing a mechanism for
implementing the agreement in the country. The most common mechanisms used have
either been enacting acts or laws in the country to implement what has been agreed at the
international level, or incorporating these agreements in domestic policy in the form of
creating national incentive or disincentive schemes. It is worth noting that sometimes

52
countries have used a combination of both these mechanisms, while at other times, there
has been no action at all and no implementation mechanisms were established. The two
mechanisms used by countries are discussed below.

1. Enacting laws

A country can enact a domestic law that incorporates what has been agreed upon at the
multilateral level. The advantage of this is that when the domestic law includes
internationally agreed provisions, it becomes legally binding in nature. This indicates a
strong commitment on the part of a country to implement these provisions. However, as
noted earlier, such laws are often not enforced in many developing countries for reasons
such as an inadequate legal system, long waiting lists for hearing cases, low penalties
attached etc. This implies that actual implementation of the laws may not take place.

The following are a few examples of enactment of local laws in response to international
agreements. The Philippines passed an act known as the Toxic Substances and Hazardous
and Nuclear Waste Act of 1990, which was inspired by the Montreal Protocol. The Act
bans the importation, storage and transportation of toxic nuclear wastes into or through
the Philippines. In response to the Basel Convention on the Control of Transboundary
Movements of Hazardous Wastes and their Disposal, an administrative order was issued
by the Department of Environment and Natural Resources which restricts importing
recyclable materials containing hazardous substances. In response to the United Nations
Conference on Environment and Development, in 1992, the country promulgated
Republic Act 7586 of 1992, which provides for the establishment of a national integrated
protected areas system to conserve and use biodiversity in a sustainable manner. As a
response to the United Nations Framework Convention on Climate Change, an executive
order was issued establishing an inter-agency committee on climate change. In order to
comply with provisions of the Conference held in Stockholm in 1972, Malaysia enacted
the Environment Quality Act in 1974 and established the Department of Environment.
Many Pacific island countries have prepared comprehensive environ-mental legislation,
largely in response to the call in the Rio Declaration for countries to enact environment
legislation for the elimination of unsustainable patterns of production and consumption.

53
The examples are Fiji’s Sustainable Development Bill, Tonga’s environment assessment
planning bill and Vanuatu’s comprehensive environmental and resource management
legislation.

2. Incorporating provisions in domestic policy

The incorporation of provisions of agreements signed at the international level in national

policy can include giving tax incentives, and export or import subsidies, imposing bans,
introducing licensing requirements, setting standards etc., in the country to adhere to
what is agreed upon at the international level. The advantage is that once these
international provisions become part of domestic policy, they are immediately
mainstreamed in national plans and priorities, which facilitates their implementation. In
addition, it avoids problems associated with the implementation of laws, such as lengthy
legal procedures to enforce these agreements. However, it should be cautioned that
because a provision becomes national policy it does not necessarily mean that it is going
to be implemented. There are many domestic policies which have poor implementation
records.

The following examples show how different countries have incorporated provisions of
international agreements in their domestic policy. The Republic of Korea has given
domestic industries incentives to adopt ISO 14000 standards to meet the rapidly emerging
international norms and standards. Moreover, the central and local governments, as well
as government financial organizations, are encouraged to purchase products bearing the
ISO labels. The Environment Labelling Association, an NGO, was established to
authorize the use of environmental labelling and to manage the labelled products.
However, these fast responses to external agreements are thought to be the consequence
of not only elevated environment awareness but mainly the country’s externally oriented
economy.

In response to the Montreal Protocol, Philippines drafted the Philippines Country

Programme detailing its plan for the phase-out of ozone depleting substances (partial
phase-out in the commercial, industrial and consumers sectors by 1998 and total phase-

54
out by 2010). It granted incentives such as tax exemptions to shift to non-ozone depleting
substance technologies through the Board of Investment.

Fiji responded to the Vienna Convention and the Montreal Protocol by giving incentives
to research and development activities, and developed a nonchemical quarantine
treatment technology which has given its agricultural products a competitive advantage in
the international markets.

After the Montreal Protocol, India conducted three workshops for small and medium-
sized enterprises in 1996 to assist them in phasing out ozone depleting substances, gave
full exemptions from all forms of duties on goods required to phase out these substances
for all enterprises, banned their export to developed countries, imposed licensing for
using the substances as inputs, and prepared comprehensive regulations on phase-out of
the substances.

However, as mentioned earlier, the incorporation of agreements in domestic policy does

not necessarily lead to effective implementation. The following examples illustrate that
point.

Following the Rio Conference, Pacific island countries developed their own national
programme called Capacity 21 to implement Agenda 21 of the Rio Conference. The
national programmes aimed to promote the role of NGOs and landowners and to help
them to come together with other stakeholders in developing a framework for the
integration of environment with development. However, despite the initial enthusiasm,
the programmes seem to have lost momentum in most of the countries. The Tonga case
study reports that there has been little progress in pursuing the call for improved
collection, analysis and presentation of environmental data and information. As a result,
periodic analysis of environment conditions and trends is not undertaken. There is neither
a programme of action to this effect nor have resources been allocated for this activity.
The situation is the same for other Pacific island countries.

Nepal developed a national conservation strategy in 1988, and an environment policy and
action plan in 1993 to incorporate international environment agreements in domestic

55
policy. However, in practice, it appears that these obligations remain in oblivion, so much
so that it is hard to obtain information on a specific convention from the government
agency which is directly concerned with its implementation (ESCAP, 1999(a)).

Sri Lanka introduced policies to phase out the use of ozone depleting substances before
the prescribed deadline of 2010 set by the Montreal Protocol. However, the resource
crunch is the most important obstacle that the country faces in trying to implement this
policy.

While both MEAs and the WTO agreements are the result of multilateral cooperation to
pursue mutually beneficial goals, the approach in MEAs is based on mutual cooperation
while that in the WTO is rule-based.

56
 MULTILATERAL ENVIRONMENTAL AGREEMENTS AND THE
MULTILATERAL TRADING SYSTEM

One of the key issues in the debate over how best to reconcile the two objectives of
environmental protection and trade liberalisation revolves around the inter-relationship
between Multilateral Environmental Agreements (MEAs) and the Multilateral Trading
System.

Multilateral Environmental Agreements

Transboundary and global environmental problems are of international concern and it is

increasingly recognised that they can effectively be addressed through international co-
operation within the framework of Multilateral Environmental Agreements (MEAs).

Globalization requires new integrated approaches to define effective policies in all the
relevant socio-economic dimensions. Many environmental problems, such as
Transboundary air/ water pollution or resource over-exploitation, have international or
global dimensions and cannot successfully be addressed through national policies alone.
For transboundary problems, international co-operation is required to achieve effective
policies for pollution abatement or to prevent resource depletion. Such co-operative
approaches can also ensure that, from an economic point of view, there is some leveling
of competitiveness playing field for economic agents in countries that are parties to such
agreements. An increased number of agreements have been negotiated, signed, ratified
and implemented in order to consolidate international co-operation to address
environmental problems.

MEAs are instrumental in addressing environmental concerns at the global level, such as
ozone depletion, climate change, endangered species of wild fauna and flora, etc.

As Principle 12 of the Rio Declaration states, international agreement is clearly

preferable to unilateral action in tackling transboundary or global environmental
problems. Over 200 MEAs now exist with memberships varying from a relatively small
group to over 180 countries, which means effectively the whole world. The main global
MEAs include:

57
 Those covering biodiversity and wildlife, including the 1946 International
Convention for the Regulation of Whaling; the 1971 Ramsar Convention on
Wetlands of International Importance; the 1973 Convention on International
Trade in Endangered Species (CITES); the 1979 Bonn Convention on the
Conservation of Migratory Species; the 1992 UN Convention on Biological
Diversity and its protocol, the 2000 Cartagena Protocol on biosafety;1 and the
1994 International Tropical Timber Agreement.

 Those designed to protect the atmosphere, including the 1979 UN Economic

Commission for Europe (UNECE) Convention on Long-Range Transboundary
Air Pollution (together with five protocols on particular pollutants: nitrogen
oxides, volatile organic compounds, sulphur, heavy metals and persistent organic
pollutants); the 1985 Vienna Convention for the Protection of the Ozone Layer,
and its protocol, the 1987 Montreal Protocol on Substances that Deplete the
Ozone Layer; and the 1992 UN Framework Convention on Climate Change, and
its protocol, the 1997 Kyoto Protocol (agreed but not yet in force).

 Those dealing with the marine environment, including the 1972 London
Convention on the Prevention of Marine Pollution by Dumping of Wastes and
other Matter; the 1973 Convention for the Prevention of Pollution from Ships, and
its protocol, the 1978 Marpol Protocol; and the 1982 UN Convention on the Law
of the Sea, together with an implementing agreement, the 1995 Agreement on
Conservation and Management of Straddling Fish Stocks and Highly Migratory
Fish Stocks (agreed but not yet in force).

 Those regulating the use of chemicals, including the 1998 Rotterdam Convention
on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and
Pesticides in International Trade and the 2001 Stockholm Convention on
Persistent Organic Pollutants (both agreed but not yet in force). The Montreal
Protocol could be considered under this category, since it regulates the production
and consumption of ozone-depleting chemicals.

58
  Those dealing with waste, including the 1989 Basel Convention on the Control of
Transboundary Movements of Hazardous Wastes and their Disposal (see also
under marine environment).

 Others including the 1991 Espoo Convention on Environmental Impact

Assessment, the 1992 UN Convention to Combat Desertification, and the 1998
Aarhus Convention on Access to Information, Public Participation in Decision-
making and Access to Justice in Environmental Matters.

In addition, there are important regional agreements, such as the 1966 International
Convention for the Conservation of Atlantic Tunas, the 1979 Bern Convention on the
Conservation of European Wildlife and Natural Habitats, the 1982 Convention on the
Conservation of Antarctic Marine Living Resources, and the 1992 Ospar Convention for
the Protection of the Marine Environment of the North East Atlantic. Together these
global and regional MEAs provide an extensive framework for the protection of the
global environment.

In general the last two decades have seen the extension of MEAs from agreements
covering the protection of particular species of endangered wildlife (many of the earlier
MEAs dealt with individual populations, such as Arctic polar bears) to ever wider areas
of economic activity.

Trade measures in MEAs

Almost thirty of these MEAs6, incorporate trade measures, regulating or restraining the
trade in particular substances or products, either between parties to the treaty and/or
between parties and nonparties.

6
The WTO Secretariat lists 31 MEAs containing potential trade measures, though some of these are regional rather than global
agreements, and protocols are included along with their parent conventions under single headings, though for most purposes it makes
more sense to treat them as different agreements (Matrix on Trade Measures Pursuant to Selected Multilateral Environmental
Agreements, WT/CTE/W/160.Rev.2, TN/TE/S/5, 25 April 2003).

59
The term 'Trade Measures' is often taken to mean restrictions on trade in the forms of
bans or embargoes. There is a very wide variety of policies and measures included in
MEAs that may impact international trade. They include:

 Reporting requirement: the extent of trade in a particular product must be

monitored and reported;

 Labelling or other identification requirement: products in trade must be identified

in some way, depending on their product and/or process characteristics;

 Requirement for movement documents / notification and consent: the import

and/or export of particular products cannot proceed without the presence of some
combination of permits or licenses or other documents indicating the consent of
the states involved in the trade to the movement of the products.

 Export and/or import bans (targeted): trade in specified products with particular
states (generally, non-complying parties or non-parties) is not permitted.

 Export and/or import bans (general): trade in specified products with any state is
not permitted. In general this accompanies production and consumption bans
within the state applying the trade measure; there may also be specified
exemptions.

 Market transformation measures: taxes, charges, subsidies or other forms of fiscal

measures, and non-fiscal measures such as government procurement, may be
applied to products (whether domestic or imported) as a means of growing market
share for desired products, and reducing it for non-desired products, with the aim
of complying with the requirements of the MEA.

These trade measures are often set out in the texts of the MEAs themselves. In some
cases, however, they derive from decisions of the parties after the MEAs enter into force
and are not described explicitly in the agreement. In other cases, aspects of the ways in
which trade measures are applied may be affected by decisions of the parties.

60
Why Trade Restrictions have been incorporated in MEAs

There are three broad sets of reasons why trade restrictions have been incorporated in
MEAs:

 To provide a means of monitoring and controlling trade in products where the

uncontrolled trade would lead to or contribute to environmental damage. This
may extend to a complete exclusion of particular products from international
trade.

 To provide a means of complying with the MEA’s requirements.

 To provide a means of enforcing the MEA, by forbidding trade with non-parties

or non-complying parties.

Inter-relationships between MEA trade measures and WTO Rules.

The WTO agreements themselves contain measures allowing for environmental

considerations. The Agreement establishing the WTO recognises that trade should be
conducted 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 so7. This was reaffirmed in the Doha
Declaration in 2001: “We strongly reaffirm our commitment to the objective of
sustainable development, as stated in the Preamble to the Marrakesh Agreement. We are
convinced that 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”.8

The Doha negotiating agenda deals explicitly with the topic of MEAs in paragraph 31,
which agrees to negotiations on the relationship between existing WTO rules and specific
trade obligations set out in multilateral environmental agreements.

7
Marrakesh Agreement Establishing the World Trade Organization, preamble, para 2
8 WTO Doha Ministerial Declaration, 14 November 2001, para 6.

61
MEAs are, like the WTO agreements, multilateral in scope, they do not involve unilateral
measures (trade-related or otherwise) and therefore tend to avoid the kind of arbitrary and
discriminatory behaviour that most WTO agreements are designed to reduce. In practice,
however, the debate has not been an easy one. The WTO Committee on Trade and
Environment (CTE) has been examining the relationship since 1995, yet has failed to
reach any real conclusion.9

Interaction of MEA trade measures with the WTO

The interaction of MEA trade measures with the multilateral trading system centered
around the GATT and overseen by the WTO has remained one of the key issues of the
trade and environment debate almost since its beginnings in the early 1990s.

There is a conflict between MEA trade measures and the WTO, and what constitutes a
‘conflict’ would be a matter of interpretation of the MEA and the various agreements
under the WTO. A general conflict does not exist unless one treaty requires a particular
course of action that is either prohibited in the other instrument, or the latter instrument
requires the opposite course of action. The incompatibility emerges where a party to both
treaties cannot comply with the obligations under both treaties simultaneously.10

The basic WTO rules require WTO members not to discriminate between other WTO
member’s ‘like products’, or between domestic and international production. MEA based
measures could potentially run foul of these requirements where imports are treated less
favourably than domestic goods in the market, which, may sometimes be the case,
particularly where enforcement measures are being taken against non-complying parties
or non- parties. The exceptions to WTO requirements listed in GATT Article XX11 make
no reference to MEAs (not surprisingly, since very few MEAs existed when the GATT

9
WTO, Report of the General Council to the Ministerial Conference of Singapore, 12 November 1996.

10
Trade Measures in Multilateral Environmental Agreement, pp. 198.200.

11
GATT Article XX (“General Exception”) is a broad umbrella clause, which allows countries to take measures of unilateral trade
restrictions for various reasons, including the pursuit of environmental protection. Subject to non-discrimination (Articles I “Most
favoured nation” and II “National treatment”) or disguised protectionism, it allows for restrictions under Art. XX (b) “necessary to
protect human, animal, or plant life or health”, and XX (g) “relating to the conservation of exhaustible natural resources if such
measure are made effective in conjunction with restriction on domestic production or consumption”.

62
was first written). However, the exceptions for the protection of animals, human and
public health, and the conservation of exhaustible natural resources may be applicable;
some of these exceptions have been used in various environment-related cases at the
WTO, though to date none of these have involved measures taken under MEAs.

The threat of a WTO challenge to the MEAs Trade Measure, however, has arisen in a
number of discussions within CITES, and may become more common as CITES listings
increasingly cover economically important sectors such as fish and timber. Some
commercial entities in the industrial waste shipment industry have expressed concerns
over the proposed overall ban on trade between industrialised and developing countries
under the Basel Convention, and queried whether a distinction based on the state of
import or export, rather than the actual capacity of states to engage in environmentally
sound recycling, can be justified.12

Similarly, the threat of a conflict with WTO rules has been raised in almost all recent
MEA negotiations, generally by those opposed to the principle of the MEA and/or its
effective enforcement, and there have been various attempts to write ‘savings clauses’
into the agreements, ensuring that they remain subordinate to WTO disciplines. In some
cases, e.g. the UN Straddling Stocks Agreement, trade measures were not included in
order to obtain wider political support.

In recent years, matters of WTO-consistency have also arisen in discussions within many
MEAs themselves, and also in wider forums, such as the World Summit on Sustainable
Development in autumn 2002. The lack of clarity on the issue, and the uncertainty about
the outcome of any WTO dispute, has thus led many to call for some kind of resolution of
the potential conflict.

Relationship between key MEAs and the WTO agreements

Against this background, it is worth examining the details of the relationship between a
number of key MEAs and the WTO agreements. The first three, i.e. CITES, the Montreal
12
J. Crawford and P. Sands, ‘The Availability of Article 11 Agreements in the Context of the Basel Convention.s Recyclable Ban
Amendment’ (Ottawa: ICME, 1997).

63
Protocol and the Basel Convention, were all negotiated before the WTO came into
existence, and do not contain any WTO-consistency language, thereby arguably creating
a special system of trade rules that exist outside the scope of WTO rules. 13 Negotiations
on later MEAs saw much greater awareness of the potential conflicts, often seeing
specific language incorporated into the MEAs in an attempt to deal with the issue, the so-
called ‘savings clauses’.

CITES

Out of all the MEAs considered here, CITES is the one under which the greatest number
of enforcement-related trade measures, directed against non-complying parties and non-
parties, has been taken. The agreement’s Secretariat has aimed, however, to build mutual
supportiveness with the WTO into its operations, adopting a five-year strategic plan that
includes the goal of ensuring the continuing recognition and acceptance of CITES
measures by the WTO and ensuring the mutual supportiveness of decision-making
processes between CITES and the WTO.

The treaty contains language that could ensure mutual supportiveness with WTO
requirements. Article XIV(2) stipulates that: ‘the provisions of the present Convention
shall in no way affect the provisions of any domestic measures or the obligations of
Parties deriving from any treaty, convention, or international agreement relating to other
aspects of trade, taking, possession or transport of specimens which is in force or
subsequently may enter into force for any Party including any measure pertaining to the
customs, public health, veterinary or plant quarantine fields’. The WTO Agreement on
Sanitary and Phytosanitary Measures (the SPS Agreement) might possibly apply, and be
used to assess the WTO-compatibility of the basic CITES trade measures, the
requirements for import and export licenses.

Montreal Protocol

13
V. Yu, .Discussion Paper on the World Trade Organisation and Multilateral Environmental Agreements. (Geneva: Friends of the
Earth, 2002), p. 7.

64
The issue of the Montreal Protocol’s relationship with the GATT was raised during the
original negotiations in 1985-1987.14 A sub-group provisionally concluded that that the
proposed trade measures against non-parties could be justifiable under Article XX(b), and
possibly XX(g), of the GATT. They had in mind the precedent of CITES, whose trade
measures had never been objected to, and were also confident that because the proposed
trade measures were to be applied pursuant to a multilateral agreement, and not on a
unilateral, ad hoc, basis, there would be no problem with the GATT.

Consultations were held with a legal expert from the GATT Secretariat in April and
September 1987. No definite opinion was given, the expert provided advice as to whether
particular language was relatively closer to or further away from traditional
interpretations of the GATT. The GATT lawyer stressed that, the judgement as to
whether a proposed action to implement the trade restrictions satisfied Article XX lay
with GATT Contracting Parties normally in the context of a complaint by one GATT
Party against another’.15 The GATT Secretariat was presented with an advance copy of
the proposed trade provisions, but did not respond.16 The lack of any formal objection
from the GATT Secretariat, however qualified its advice, was seen as a green light for
further negotiations, helping the US to convince the EU of the value of the proposed trade
measures.

The Protocol’s trade measures against non-parties are probably inconsistent with the
GATT principles of most-favoured nation, national treatment, and the elimination of
quantitative restrictions. In 1999 the Ozone Secretariat issued a communication to the
WTO Committee on Trade and Environment17 noting that the measures could be ‘saved’
under Article XX since the ozone layer is an exhaustible natural resource and its
depletion adversely affects human, animal and plant life and health, there would not be

14
Brack, International Trade and the Montreal Protocol, section 4.2.

15
Report of the Ad Hoc Working Group on the Work of its Third Session - cited in Rosalind Twum-Barima and Laura B. Campbell,
Protecting the Ozone Layer through Trade Measures: Reconciling the Trade Provisions of the Montreal Protocol and the Rules of the
GATT (Geneva: UNEP, 1994), p.63.

16
Ibid., p. 63, n113.

17
WT/CTE/W/115.

65
any arbitrary or unjustifiable discrimination since the Montreal Protocol is a multilateral
instrument based on an international consensus relating to the scientific assessment of
what is necessary to protect the ozone layer. Moreover, it contains provisions that exempt
non-parties from trade restrictions if they comply with the control measures under the
Protocol - hence there is no arbitrary and justifiable discrimination between countries
where the same conditions prevail.

There has never, of course, been a GATT or WTO challenge to the Protocol’s trade
measures, but as discussed above, less trade-restricting alternatives have been suggested,
though none would appear to be as effective. In 1996, the then Director of the WTO
Trade and Environment Division questioned both the necessity and efficacy of the trade
provisions, suggesting, that at least in his view, they would not be saved by Article XX.18

Basel Convention

The "Basel Convention on the Control of Transboundary Movements of Hazardous

Wastes and their Disposal" controls the international trade in hazardous wastes. The
Convention, which was adopted in 1989 and entered into force in 1992, was negotiated to
establish a "notice and consent" regime for the export of hazardous waste to importing
countries. Under the Convention's provisions, trade in hazardous wastes generally cannot
take place:

• without the importing country's written consent to a particular export; or

• where the exporting country has reason to believe that the particular wastes will
not be handled in an environmentally sound manner.

As with the Montreal Protocol and CITES, there is no explicit GATT-compatibility

language in the Basel Convention. As a result, there is no specific requirement that WTO
obligations are to be taken into consideration when adopting or implementing any trade
measures relating to hazardous wastes, suggesting that the parties intended to keep

18
House of Commons Environment Committee, Inquiry into World Trade and the Environment, evidence session of 14 February
1996. A. Rutgeerts, ‘Trade and Environment: Reconciling the Montreal Protocol and the GATT’, 33(4) JWT 61-86 (1999), p. 76.

66
hazardous waste a distinct and separate class of products, not subject to international
trade obligations.19

Kyoto Protocol

Only parties to the Kyoto Protocol can participate in the Kyoto mechanisms i.e.
emissions trading, joint implementation and the Clean Development Mechanism. As a
result, markets in emission permits or the CDM’s ‘certified emission reductions’ (CERs)
would be barred to nonparties (at least, in the sense of being able to earn credits for
greenhouse gas emissions). However, most commentators have held that licenses or
permits provided by the parties to the Kyoto Protocol are a form of government
regulatory activity, and would not be equivalent to either a good or a service under WTO
disciplines.20

This view is not universally shared, however, and the application of CDM criteria to
determine whether credits can be obtained under the Protocol could potentially be
considered to be burdensome, not transparent or generally incompatible with the
requirements of the General Agreement on Trade in Services (GATS). Although the
GATS is limited in its scope, some aspects of the Kyoto mechanisms could entail
‘services or service-related functions’ such as brokerage or consulting services. 21 The
allocation of permits could also be seen as a violation of the subsidies agreement, but this
depends more on how the allocation process is designed rather than being a subsidy in
principle. In addition to the CERs, it could include the services employed in the

19
Yu, Discussion Paper on the World Trade Organisation and Multilateral Environmental Agreements, p. 9.

20
G. Wiser, .Frontiers in Trade: The Clean Development Mechanism and the General Agreement on Trade in Services. (CIEL:
Washington DC, 2001), p. 5, argues that CERs would neither be a good nor a service, but a licence instilling a future right to pollute
and therefore not subject to WTO scrutiny. See also, S. Charnovitz, .Improving Synergies in International Trade and Climate Policy.,
(2003); A. Appleton, .The World Trade Organisation.s View: Emissions Reductions in a Free Trade World. (Paper for Swiss RE
Centre for Global Dialogue in Rüschlikon, Switzerland, 2001); J. Werksman, ‘Greenhouse Gas Emissions Trading and the WTO’, 8
RECIEL 251 (1999); and T. L. Brewer, .The Kyoto Protocol and the WTO: Institutional Evolution and Adaptation. (Centre for
European Policy Studies: CEPS Policy Brief No. 28, 2002).

21
Wiser, .Frontiers in Trade., p. 3; J. Werksman, .Greenhouse Gas Emissions Trading and the WTO.. The US has proposed in the
GATS Committee that services activities in support of the protection of ambient air and climate, such as services to reduce exhaust
emissions and other emissions to improve air quality, be included as an environmental service.

67
development and management of CDM projects as well as the financial services related
to trade in CERs.22

More likely areas for WTO conflicts may arise under other policy measures affecting
trade. As pointed out earlier, parties with emission reduction targets will have to
implement a wide variety of policies and measures to curb greenhouse gas emissions.
Article 2 of the Protocol lists a wide range of potential areas for action, including energy
efficiency, renewable energy sources (and advanced technologies in general), removal of
market distortions such as subsidies, and transport. It is virtually inevitable that some of
these measures, for example, carbon or energy taxes will affect, or be perceived to affect,
the prices and competitiveness of a wide range of products, particularly those
manufactured though energy-intensive processes. It is quite possible, then, that parties
could claim justification from the Kyoto Protocol for measures that then compensate their
own industries, for example via border tax adjustments on imports and exports.

Convention on Biological Diversity

No specific trade measures are authorized under the Convention on Biological Diversity
(CBD), although several of the issues it covers may impact trade, such as access and
benefit-sharing arrangements, alien species, incentive measures for the conservation and
sustainable use of components of biological diversity, provisions concerning knowledge,
innovations and practices of indigenous and local communities, impact assessment,
liability and redress, sustainable use, agricultural biodiversity, and the relationship
between intellectual property rights (IPRs) and the relevant provisions of the CBD and
the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS
Agreement).

Probably because it does not contain specific trade obligations, the CBD also contains no
language addressing its relationship with the GATT or the other WTO agreements.
Article 22 specifies that the CBD is not to affect the rights and obligations deriving from
existing international agreements, unless those rights and obligations would cause serious

22
Wiser, .Frontiers in Trade., p. 5.

68
damage or threat to biological diversity. As the Convention entered into force in
December 1993, it predated the WTO agreements that came into force at the end of the
Uruguay Round, rendering this ‘savings clause’ inapplicable, and leaving any potential
conflict to be resolved under the customary international legal rules of treaty
interpretation.23 The CBD does not predate the GATT itself, however, so arguably the
WTO dispute settlement bodies could end up interpreting what constitutes ‘serious
damage or threat to biodiversity’ in the case of a challenge under the WTO.

It has long been recognised that the CBD, with its emphasis on state sovereignty over
genetic resources, and the TRIPS Agreement’s protection of private property rights, may
lead to an ‘intrinsic conflict of objectives’ between the two agreements, 24 Paragraph 19 of
the Doha Declaration calls for a specific examination of their relationship. Measures
under Article 15 of the CBD, which permits States to limit or place conditions on access
to genetic resources, could in theory be WTO-inconsistent, though it would depend on
their design, and whether they treated foreign companies (for example by charging for
resource use) differently to domestic enterprises.25

There may also be conflicts between the CBD and the TRIPS Agreement under Article
27.2 of the TRIPS Agreement, which allows WTO members to exclude from
patentability inventions for the purpose of protecting ordre public or morality, including
to protect human, animal and plant life or health or to avoid serious prejudice to the
environment. Article 27.3(b) allows members to exclude plants and animals from being
patented but prohibits members from excluding micro-organisms, non-biological and
microbiological processes from patenting. WTO members may still exclude certain life-
forms from patentability where it might interfere with a country’s ability to preserve
genetic resources or traditional knowledge. However, the area of potential conflict is

23
The TRIPS Agreement does not address the TRIPS-CBD interface, although Article 2(2) of the TRIPS Agreement states that
nothing in Parts I to IV can derogate from existing obligations that the WTO member may have under a variety of specific intellectual
property treaties. Arguably, the CBD would not be a ‘specific intellectual property treaty’.

24
IISD/CIEL, The State of Trade Law and the Environment: Key Issues for the Next Decade . Working Paper (Geneva: IISD/CIEL,
2003), p. 46.

25
T. Schoenbaum, .International Trade and Environmental Protection., in P. Birnie & A. Boyle, International Law and the
Environment (OUP).

69
whether WTO members would be obliged to provide intellectual property protection to
plant parts such as cells or genes conferred in other jurisdictions by countries that have
allowed for such patentability, which would then have implications for access and
benefit-sharing regimes.

Cartagena Protocol

The Cartagena Protocol regulates the transboundary movement of ‘living modified

organisms’ (LMOs), thereby directly affecting trade, and debates around the relationship
between the Protocol and the WTO were a major feature of the long-drawn-out
negotiations on this MEA.26 The agreement’s preamble states that the Protocol and the
WTO agreements are to be mutually supportive, that the Protocol cannot be interpreted as
implying a change in the rights and obligations of a party under any existing international
agreements, and that such statements are not intended to subordinate the Protocol to other
international agreements.

Parties are also entitled to take stricter measures than those prescribed under the Protocol,
although such action is required to be consistent with the objectives of the Protocol and
be in accordance with other international law obligations, which would include WTO
commitments. These could include obligations under the GATT, GATS, SPS and TBT
Agreements, but the most relevant is the SPS Agreement, which allows WTO members
to take SPS measures necessary for the protection of human, animal or plant life or
health. Its applicability will depend on the characterization of the measure, its purported
objective, and whether food safety or human, plant or animal health is the primary goal.
Trade restrictions for socio-economic or cultural considerations, or labelling schemes for
the purpose of providing information to the consumer, would fall under the requirements
of the TBT Agreement. Under the Protocol, the parties can take into account socio-
economic considerations in the risk assessment process, but this is subject to a savings
clause requiring the parties to act consistently with their international obligations.

26
Christoph Bail, Robert Falkner and Helen Marquard (eds), The Cartagena Protocol on Biosafety: Reconciling trade in
biotechnology with environment and development? (London: Royal Institute of International Affairs, 2002), chapters 49 and 50

70
The Protocol’s labelling requirement for products containing LMOs might be challenged
under either the SPS or TBT Agreements.27 Under the former, mandatory labels for a
food safety measure are required to be based on ‘scientific principles’ and ‘sufficient
scientific evidence’. A dispute in this area could call into question the compatibility of all
labelling systems with WTO disciplines. The application of the WTO agreements to
mandatory or voluntary ecolabelling initiatives is currently unclear and disputed by
parties.28

Stockholm and Rotterdam Conventions

As with the Cartagena Protocol, the two chemicals conventions were negotiated against a
background of increasing awareness of the trade-environment interaction. The preamble
to the Stockholm Convention recognises that the Convention and other international
agreements in the field of trade and the environment are mutually supportive. Similarly,
the preamble to the Rotterdam Convention reinforces the mutual supportiveness of trade
and environment, stating that the Convention does not change the rights and obligations
of the parties under any existing international agreement to chemicals in international
trade or to environmental protection, and affirms that there is to be no hierarchy between
the Convention and other international agreements.

The Doha Mandate on MEAs

These negotiations aim to reaffirm how important it is for trade and environmental
policies to work together for the benefit of both. They focus on how WTO rules are to
apply to WTO members that are parties to environmental agreements, in particular to
clarify the relationship between certain trade measures taken under the environmental
agreements, and WTO rules.

27
Where the measure aims to ensure food safety, it would be subject to the SPS Agreement. If the objective is for the purposes of
consumer protection or environmental protection, it would fall under TBT Agreement disciplines. What becomes problematic is when
the measure is based on a multiplicity of objectives, such as seen with the proposed EU Regulation of GMOs. COM (2002) 559 final
(October 2002).

28
D. French, ‘The International Regulation of Genetically Modified Organisms: Synergies and Tensions in World Trade’, 3 Env
Liability 127-139 (2001), p. 132; M. Stilwell and R. Tarasofsky, .Towards Coherent Environmental and Economic Governance: Legal
and Practical Approaches to MEA-WTO Linkages. (Geneva: WWF/CIEL, 2001), p. 9.

71
At the 2001 Doha Ministerial Conference, members agreed to negotiate on the
relationship between WTO rules and the MEAs, particularly those that contain “specific
trade obligations” (STOs). These negotiations take place in special sessions of the Trade
and Environment Committee. Members agreed that the scope of these negotiations would
be limited to applicability of WTO rules to WTO members that have signed the MEA
under consideration.

Since the beginning of the negotiations, discussions have focused on the scope of the
negotiating mandate (including the definition of specific trade obligations) and on
potential outcomes of the negotiations. In parallel, members have also embarked on an
exercise of sharing their national experiences in the negotiation and domestic
implementation of trade measures under MEAs.

Following the Doha ministerial conference in November 2001, the MEA-WTO

relationship was revisited at the World Summit on Sustainable Development (WSSD) in
Johannesburg in August/September 2002. The call for the enhancement of mutual
supportiveness between trade and environment was renewed, though only after many
delegations had expressed their concern with the draft text proposed by Australia and the
US, which aimed to ensure the WTO-compatibility of any trade or trade-related activities,
implying a hierarchical relationship, with environment subordinate to trade. The final
wording in the WSSD Plan of Implementation reinforced the mutually supportive
language between trade, environment and development, with the promotion of mutual
supportiveness between the multilateral trading system and environmental agreements,
consistent with sustainable development goals, in support of the WTO work
programme.29 By agreeing to avoid deviating from the agreed language in the Doha
Ministerial Declaration, the parties may have missed an opportunity to operationalise
mutual supportiveness30 - though possibly this was never realistically possible.

Developing Countries and MEAs

29
Johannesburg Plan of Implementation, Art. 92.

30
Kevin R. Gray, ‘World Summit on Sustainable Development: Accomplishments and New Directions?’, 52:1 International and
Comparative Law Quarterly (2003).

72
Developing countries often express the strongest resistance to any codification of the
MEA relationship in the WTO agreements. Developing countries tend to argue that trade-
related measures, even if carried out pursuant to a MEA, will have a negative economic
impact through restricting market access, and that the costs of compliance can be
significantly outweighed by any perceived environmental and developmental benefits. It
should be noted, however, that this is probably more a perception than a reality, and (in
common with other countries) developing countries. Environment negotiators often hold
very different views from their trade counterparts.

MEAs can, however, address developing country concerns by offering facilities through
which parties are given financial assistance, technology transfer and other incentives to
ease the difficulty of implementation. Moreover, market access can improve for some
products directly regulated by the MEA. Effective attention to development issues will
render it easier for WTO members to integrate MEAs into their international trade
strategies. Efforts by UNEP, UNCTAD and the WTO to improve capacity-building in
this area can lead to better awareness of the MEA-WTO relationship and therefore
greater coordination in developing countries.

73
 TRADE & ENVIRONMENT IN CONFLICT – CASE LAWS

Case 1: Tuna-Dolphin Case

Introduction

The U.S. Marine Mammal Protection Act placed bans on imports of tuna harvested by a
method called purse seining which results in killings of marine mammals in excess of
U.S. standards. It placed embargoes on countries such as Mexico to restrict imports from
countries that import tuna from Eastern Tropical Pacific and export that tuna to the
United States. It was in the first panel (GATT I) that Mexico challenged the MMPA.

GATT found that the United States violated Article XI of GATT, by adopting
quantitative restrictions on imports. The United States in turn used GATT's Article III:4
as an instrument in arguing the restrictions were internal regulations. This argument was
rejected by GATT I's panel on the grounds that Article III restrictions were only to be
applied to "products" and not "processes" by which products were produced. Thus, the
panel concluded that Article III:4 was not relevant. Three years later the GATT Tuna-
Dolphin II case occurred, a separate panel from the first, and it came to the same
conclusion about Article III:4. GATT II decided the embargoes were not helpful in
furthering U.S. conservation objectives. Also, these objectives could have been achieved
only if the primary exporter changed its policies and practices. France and the EC were
among the 34 countries who demanded that the GATT Council adopt a dispute panel
report condemning the U.S. legislation on banning imports of "non-dolphin friendly
tuna", or in other words tuna caught with purse seine driftnets. They argued that "the
issue needs a multilateral base because if one nation enforces strict regulations for
protection of dolphins," then the actions of all nations will be obstructed.

Description

The tuna/dolphin controversy provides a useful and current case study in the conflict
between global free trade and international environmental protection. Furthermore, there
are numerous laws in the United States and in other industrialized countries which rely on
trade measures to achieve environmental objectives. Effective international agreements

74
are not quickly made, and in turn irreparable harm such as species loss may occur. As for
one of environment's most well known dilemmas; the dolphin/tuna story, the
reconciliation of global free trade goals and international environmental protection are to
be addressed.

Fishing induced dolphin mortality could be eliminated by prohibiting the use of purse-
seine gear in fishing for yellowfin tuna associated with dolphins. There is little likelihood
that all the nations fishing in the Eastern Tropical Pacific Ocean (ETP) would agree to the
prohibition since purse-seining is the only economically efficient means of gathering
tuna. The act of purse-seining begins where dolphin schools are encircled with mile long
nets that "purse" the fish, dolphins and other sea life by drawing the cable attached to the
net, thus gathering all the contents. The animals become trapped and eventually drown.
This technique has incidentally killed over 6 million dolphins over the years from the
time of the first purse-seine net invention.

Different environmental regulations have mushroomed out of this one problem. The main
imposers of environmental improvement have been by the MMPA (Marine Mammal
Protection Act), the EPA (Environmental Protection Agency), and GATT (General
Agreement on Tariffs and Trade), they have all worked diligently to reduce dolphin
mortalities. Deaths caused by US vessels are now reduced to less than 1,000 annually due
to the environmental eyes watching. However, vessels flying foreign flags such as the
Mexican one are estimated to exceed 50,000 deaths per year.

In GATT I, Mexico challenged the US MMPA's restrictions on fishing operations. The

U.S. created standards so that other countries seeking to export tuna harvested in the ETP
to the US have to adopt similar environmental programs as the US. Mexico won the case
in that the U.S. violated Article XI of GATT. The US argued that the restrictions were
internal regulations enforced at the point of entry as permitted by Article III:4;
nevertheless, GATT I's panel put aside this argument aside on grounds that Article III
restrictions could only be applied to products and not processes by which the product was
produced.

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This conclusion was reached in part by analogizing internal regulations to internal taxes,
which may also be applied at the point of entry under Article III:2. This article noted that
taxes levied directly on products were eligible for border adjustments (those taxes
collected at the point of entry). On the other hand, certain taxes not directly levied on
products were not eligible for border adjustment. The panel did not mention that there
was disagreement as to the eligibility of certain other taxes not levied directly on
products, including taxes on capital equipment, energy, machinery, and transport. These
taxes would seem to have had provided a closer analogy as to regulations affecting
production processes of the tuna. Also, since regulating dolphin mortality incidental to
fishing operations does not affect the final product, the panel concluded Article III:4 did
not apply. Next, the panel realized the US embargo was really a quantitative restriction
prohibited under Article XI. The panel for GATT I concluded at that point that a country
can only control the production or consumption of a natural resource if the production is
within its own jurisdiction. This is a crucial issue taken into GATT II's case as well.

Another issue raised in GATT I and relevant in GATT II was Article XX sections b, d
and g. The United States argued that even if the restrictions placed on them were
prohibited in other provisions of GATT, the restrictions could be utilized as exceptions to
the general obligations of Article XX(b), (d), and (g). Article XX states that "...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". Section B enforces the humanitarian rights of the matter saying,
nothing shall prevent the protection of humans, animals, health, etc.; Section D measures
the securement of compliance with laws which are consistent with the provisions of the
above agreement; Section G relates to the conservation of exhaustible natural resources,
in this case dolphin, when dealing with restrictions of consumption and production. From
these laws, Panel 1 concluded that Article XX(b) was not to be used extra-
jurisdictionally. Furthermore, if the extra-jurisdictionality rule was useful, the measures
brought before the panel were not "necessary" as in conjunction with Article XX.
Necessary according to GATT means that no GATT consistent measures (the cooperation
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efforts of all countries to protect dolphins in the process of tuna fishing) were available at
the time.

In looking at the MMPA regulations, the panel found that the US' measures were too
unpredictable to be considered as "necessary" to protect dolphins since the rate of
Mexican dolphin takings as compared to the US' were linked together. "Mexican
authorities could not know in advance whether they were in compliance with the
MMPA." Article XX(g) couldn't be applied extra-jurisdictionally as well because the
panel interpreted the rules as being taken in "conjunction with restrictions on domestic
production or consumption to mean that they must be primarily aimed at rendering
"effective" those restrictions." A country can only control its production/consumption
only if it is under its jurisdiction. Article XX(g) must not have been meant to have been
applied extra-jurisdictionally. In addition, the US measures did not meet Article XX(g)
requirements in that they relate to conservation of the natural resource, dolphins. At the
same time section D was thrown out since the MMPA was clashing with GATT.

In June, 1992, the EEC (mainly France) requested GATT to establish a dispute resolution
panel to review US restriction policies dealing with the import of tuna under the federal
MMPA. In 1994, the panel announced that the US embargo violated the GATT
prohibition of quantitative restrictions. The MMPA prohibits the taking of marine
mammals (dolphins) in the act of tuna fishing where purse seine nets are used. This bar is
inclusive of those nations that import tuna from nations that do both exporting/importing
of tuna. In GATT II, the United States is not entitled under GATT to use trade measures
to force other countries to adopt its own domestic policies, environmental or otherwise.
To satisfy the terms of the US law, it is not enough to kill fewer dolphins, a country also
has to adopt fishing methods which conform to those used by US fishing fleets.

The latest panel report on GATT II relates to the secondary tuna embargo, only this time
the France has replaced Mexico. It adopts somewhat of a different reasoning from GATT
I. The three man panel says GATT rules do not in principle disbar countries from using
trade measures to protect "the global commons" or environmental resources outside their
jurisdiction. The panel argues that these measures have to be designed directly in order to
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protect the resource in question, dolphins. Further, they do not have to satisfy the
criterion that no other more GATT consistent measure is available. On both counts, it is
saying that the US embargo is a failure. The United States is in an appealing position of
undermining its own environmental protections, such as its embargo on imports of tuna
caught by methods that also kill dolphins. "The US is shooting itself in the foot by
attacking EU's law." The US views it as "we have our obligations and the European's
have theirs". Article XX(g) was interpreted by the second panel as such:

1. Article XX(g) must be invoked to further policies to conserve exhaustible natural

resources.

2. "must be related to the conservation of exhaustible natural resources and made

effective in conjunction with the restrictions on domestic production or consumption."

3. The measure can not be applied in a manner that would constitute a means of arbitrary
or unjustifiable discrimination between countries where the same conditions prevail, or a
disguised restriction on international trade.

Utilizing the components of Article XX seen above, the panel rejected the EEC's
contention that dolphins are not an exhaustible natural resource. The depletion of the
stocks of dolphins are not relevant at any given time. The main issue here is whether the
resource could be depleted, and they can be. Next, Article XX(g) was reviewed. Panel 2
stated the article could be applied extra- jurisdictionally and they also concluded that
Article XX(g) didn't support the protection of resources located within the territory of the
country invoking it. The article lacked limitation when it came to the location of the
living things being protected, i.e. dolphins. Looking at Article XX(g) part 2, panel 2
added to panel 1's decision in that under both the primary and intermediate nation
embargoes GATT's basic problem with the Marine Mammal Protection Act, is that it
requires other nations to change internal policies. With the Mexican case, the United
States insisted that Mexico was to make the same calculations and adopt same solutions,
or else lose its opportunity to offer their tuna to American consumers. Since then the
tuna-dolphin case has since become a potent symbol of friction between environmental

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and trade policies and of the heat it can generate. GATT seems to have been bothered by
the broad brush of the U.S. measure:

"the tuna is embargoed simply on the basis of a country's policies, regardless of whether
an individual tuna may have been caught without harming dolphins."

Case 2: Gasoline case

One of the first WTO cases brought up by Venezuela and later Brazil, against the US.
The panel report was adopted in 1996. The case did not challenge a country’s right to set
environmental standards. The central question was about discrimination — whether the
US measure discriminated against imported gasoline and in favour of domestic refineries.

On 23 January 1995,

Venezuela complained to the Dispute Settlement Body that the United States was
applying rules that discriminated against gasoline imports. Venezuela formally requested
consultations with the United States, as required under WTO dispute settlement process.

The case arose because the United States applied stricter rules on the chemical
characteristics of imported gasoline than it did for domestically refined gasoline.

Venezuela said this was unfair because US gasoline did not have to meet the same
standards — it violated the “national treatment” principle and could not be justified under
exceptions to normal WTO rules for health and environmental conservation measures.

Just over a year later (on 29 January 1996) the dispute panel completed its final report.
(By then, Brazil had joined the case, lodging its own complaint in April 1996. The same
panel considered both complaints.) The dispute panel agreed with Venezuela and Brazil.

The US was found to be violating WTO rules because it discriminated against the
gasoline imports.

The United States appealed.

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The Appellate Body completed its report, and the Dispute Settlement Body adopted the
report on 20 May 1996, one year and four months after the complaint was first lodged.
The appeal report upheld the panel’s conclusions (although it made some changes to the
panel’s legal interpretation).

The United States and Venezuela then took six and a half months to agree on what the
United States should do. The agreed period for implementing the solution was 15 months
from the date the appeal was concluded (20 May 1996 to 20 August 1997). The Dispute
Settlement Body monitored progress — the United States submitted “status reports” on
9 January and 13 February 1997, for example.

The United States agreed with Venezuela that it would amend its regulation within
15 months, and on 26 August 1997 it reported to the Dispute Settlement Body that a new
regulation had been signed on 19 August.

Case 3: Shrimp turtle case

The Shrimp/Turtle dispute symbolizes the controversy between proponents and

opponents of the World Trade Organization (WTO). Supporters of the WTO downplay
the significance of the Shrimp/Turtle decision by claiming that the Appellate Body ruled
only that the United States failed to apply its ban on shrimp imports in a
nondiscriminatory way. In contrast, critics of the WTO often cite Shrimp/Turtle as proof
that the WTO completely ignores the environment to promote liberalized trade. Both
views are only partially correct. In truth, the Appellate Body interpreted the rules of the
General Agreement on Trade and Tariffs (GATT) very narrowly. While the Appellate
Body found that the United States applied its ban on shrimp imports discriminatorily, it
also imposed interpretative hurdles that make it virtually impossible for a WTO Member
to impose trade measures to protect the environment or natural resources.

In Shrimp/Turtle, several Asian countries complained that Section 609 of the Endangered
Species Act constituted an impermissible restriction on trade under the GATT. Section
609 and its implementing regulations prohibited the importation of shrimp into the United
States unless a country's shrimping program requires shrimpers to use turtle excluder

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devices (TEDs) comparable in effectiveness to those used in the United States and the
country has in place a credible enforcement effort. Shrimp may not be imported into the
United States unless U.S. officials have certified that the importing nation has
implemented a turtle conservation program that is "comparable" to U.S. restrictions.

The Shrimp/Turtle dispute again highlighted the inability of a Member to tax or regulate
products differently based on the way the product is produced. Products with the same or
similar physical characteristics or end uses are "like products" and must be taxed and
regulated the same. Under Section 609, however, the United States regulated shrimp
differently based on the way they were caught, not based on any physical differences in
the shrimp itself. Just as in Tuna/Dolphin, Shrimp/Turtle found that the United States was
impermissibly regulating shrimp from countries that use TEDs differently from countries
that did not use them. According to the panel, shrimp is shrimp, regardless of the manner
in which it is produced, and must be treated the same.

Shrimp/Turtle confirms that any measure that taxes or regulates a product differently
because of the way it is produced, caught, or otherwise brought to market, will be deemed
inconsistent with the rules of the GATT. The Fact Sheet prepared by the New Democrat
Coalition thus incorrectly states that Shrimp/Turtle did not rule against the restrictions.

After finding that Section 609 violated the GATT, the Appellate Body further ruled that
Section 609 could not be justified under the GATT's Article XX exception for measures
relating to the conservation of exhaustible natural resources. Although the Appellate
Body found that Section 609 fell with the category of measures protected this exception,
it ruled that Section 609 did not meet the requirements of the "Chapeau" to Article XX.

The Article XX Chapeau states that a measure otherwise inconsistent with the GATT
may be permissible, provided that the measure does not constitute (1) a means of
arbitrary or unjustifiable discrimination between countries where the same conditions
prevail, or (2) a disguised restriction on international trade. On its face, the Chapeau
permits some discrimination but the discrimination must not be unjustifiable or arbitrary.
In ruling that Section 609 constituted unjustifiable discrimination and arbitrary
discrimination, the Appellate Body made the test for determining whether the measure

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constitutes unjustifiable or arbitrary discrimination exceedingly difficult to meet, in part
because of its inconsistent reasoning.

On the one hand, the Appellate Body found that application of Section 609 constituted
unjustifiable discrimination and arbitrary discrimination, because the United States
required all importing countries to adopt a comprehensive regulatory program that was
essentially the same as the U.S. program, without inquiring into the appropriateness of
that program for the conditions prevailing in the exporting countries. Appellate Body
Decision.

The Appellate Body thus ruled that treating all Members the same constitutes
discrimination and that this discrimination is unjustifiable and arbitrary. While treating all
foreign and U.S. shrimpers the same may be unfair, it cannot be called discriminatory. In
trade, "discrimination" is the failure to treat all products alike.31 The Appellate Body
makes clear that the United States must inquire into the "appropriateness of the regulatory
program for the conditions prevailing in those exporting countries." Appellate Body
Decision, para. 165. In essence, it suggests that the United States must treat countries
differently.

On the other hand, however, the Appellate Body ruled that treating Members differently
also constitutes unjustifiable and arbitrary discrimination. It ruled that the failure of the
United States to reach an international agreement with the complaining WTO Members
was "unjustifiable discrimination," because the United States completed an agreement to
protect sea turtles with Latin American countries.32 Although the United States made
attempts to negotiate with the complaining Members, the Appellate Body found that the
United States failed to act as quickly with the Asian countries as it did with the Latin
American countries.33 The Appellate Body concluded that the "failure to have prior
consistent recourse to diplomacy as an instrument of environmental protection policy ...

31
See, e.g., Black's Law Dictionary, page 467 (6th ed. 1990); see also American Heritage Dictionary: New
College Edition (1979) ("discrimination" means "to make a clear distinction").
32
Appellate Body Decision, paras. 171, 172.
33
Appellate Body Decision, para. 166.

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produces discriminatory impacts on countries exporting shrimp to the United States with
which no international agreements are reached or even seriously attempted." 34

The Appellate Body's findings are of concern for at least four reasons. First, whereas the
Appellate Body first ruled that treating Members the same constitutes unjustifiable and
arbitrary discrimination (where the Member fails to account for the conditions prevailing
in a given country), it later ruled that treating Members differently also constitutes
unjustifiable and arbitrary discrimination.

Second, the Appellate Body's conclusion that the failure to negotiate an international
agreement with all relevant Members "is plainly discriminatory and, in our view,
unjustifiable" makes the use of unilateral measures virtually impossible. To save Section
609, then, the United States must attempt, at a minimum, "serious negotiations" with all
countries that are currently not certified as having comparable legislation to protect sea
turtles before it imposes trade sanctions against that nation. This requirement imposes a
very serious obstacle to the use of trade measures to protect the environment and is
without support in any language of any WTO agreement.

Third, the Appellate Body stated that the U.S. sea turtle agreement with Latin American
countries suggests that those countries "marked out the equilibrium line" between
environmental and trade goals and that "multilateral procedures are available and
feasible."35 However, just as the Appellate Body noted that conditions may differ in some
countries, a country's willingness to negotiate an international treaty, and to include
similar provisions in that treaty, may also differ. The Appellate Body used the successful
negotiation of one treaty to conclude that the United States and Asian countries could
successfully negotiate a treaty with provisions that similarly balance trade and
environmental goals. That conclusion is far from obvious, however.

Fourth, the decision is discouraging because all international treaties and institutions with
jurisdiction over sea turtles consider all species of sea turtles to be threatened or
endangered. The critical status of sea turtles worldwide suggests that action must be taken

34
Appellate Body Decision, para. 167.
35
Appellate Body Decision, para. 170.

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sooner rather than later. The Appellate Body decision, however, suggests that just the
opposite is required to be consistent with the rules of the WTO.

The reasoning of the Appellate Body and the four concerns highlighted in this analysis
indicate that the Fact Sheet of the New Democrat Coalition understates the impact of
Shrimp/Turtle. The Fact Sheet suggests that the U.S. must merely treat all countries fairly
in order to remedy Section 609. The Appellate Body's interpretation of unjustifiable and
arbitrary discrimination makes plain, however, that all WTO Members will have great
difficulty saving trade-related environmental measures through GATT's Article XX
exceptions.

Case Studies on MEAs

Case Study 1–The Kyoto Protocol: International Agreement, Domestic implications

The Issue: The threat of ratifying the Kyoto Protocol, a binding international agreement
which is not necessarily favorable to various U.S. industries and interest groups, has
prompted the proposal of domestic legislation related to some aspects of the Protocol.
Whether this legislation will be passed is one issue. If it is passed, whether the legislation
will serve as a substitute to the United States ratifying the Protocol, or as a stepping stone
towards ratification, remains to be unseen. But the impact and power of American
interest groups and industries on U.S. foreign policy is apparent in this issue.
International agreements are highly correlated with our nation's domestic economy and
the numerous parties associated with it..

Description: The Kyoto process involves nearly every government in the world and the
means by which their people power their industries, transport their goods and themselves,
heat their homes and cook their suppers.

Background

The United Nations Framework Convention on Climate Change (UNFCCC) is an

agreement that was reached by 165 nations in 1992. The participating countries agreed to
work together to combat global warming and climate change. At the third meeting of the

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UNFCCC in December, 1997, 175 nations agreed to the Kyoto Protocol. The Protocol
sets a legally binding agreement for 39 developed countries to reduce their greenhouse
gas emissions by 5.2 percent (using 1990 as the base year) for the years 2008 to 2012.
Specifically, the United States must reduce emissions by 7 percent, the European Union
by 8 percent, and Japan 6 percent (Boukhari, 1998:12). The Protocol does not mandate
any reductions for developing countries. The treaty provides that each country show
progress towards that goal by 2005.

The UNFCCC points out that it is only fair that developed countries initially take on the
burden of reducing emissions, exempting, at this point in time, developing nations.
Historically, developed countries are the one mostly responsible for greenhouse gases.
Currently, industrial nations account for 64 percent of carbon dioxide emissions (Srodes,
1998: 15). All the early industrializers such as Europe and the United States created their
wealth by polluting the atmosphere, therefore they should have the largest role in
cleaning it up. Developing countries have a right to economic development, even if it
comes at a time period much later than developed nations. At this point in time, these
poorer nations do not have the technological or economic resources to cope with the
problem. If they are allowed to develop and prosper, they will achieve these resources,
and be able to participate in the future fight against emissions reduction (UNFCCC
"Understanding...", 1999).

The Controversy

The Kyoto Protocol has been receiving vast amounts of attention in the United States
from politicians, businesses, industries, interest groups and organizations. This is
because the Protocol has implications for each of the aforementioned groups. There is a
general consensus that curbs on carbon dioxide emissions will impact domestic trade,
jobs, and consumers. Specifically, the agreement is expected to have significant effects
on the Chemicals, Petroleum Refining, Paper, Iron and Steel, Aluminum, and Cement
Industries. It will affect the entire Energy Industry, with effects spilling over to the jobs
and consumers connected with it (Global Climate Coalition, 1999). Consequentially,
there are a vast number of interest groups associated with these industries who oppose the

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Protocol. However, even the opponents of Kyoto agree that something must be done to
combat emissions problems. They also agree that even if Kyoto is not ratified, there is
likely to be some sort of regulatory standard in the future regardless. This attitude has
prompted industries to lobby for legislation that may help them with this dilemma.

A partial solution welcome to many of these interest groups would be S.547, the Credit
for Voluntary Reductions Act, introduced in the Senate March 4, 1999 by Senator John
Chafee. This bipartisan legislation addresses the concerns of many companies. Should
the Protocol win ratification and take affect in 2008, companies want to be sure they get
credit for any reductions they achieve before that time. The bill gives credits that can be
financially valuable for early actions to control waste gases that Kyoto would strictly
limit. It gives ton for ton credits to companies that can document reductions in their
greenhouse gas emissions under various voluntary federal programs (Chafee, 1999). The
legislation was immediately heralded by both concerned industries and environmentalists.

The Global Climate Coalition (GCC) is an organization comprised of trade associations

and companies whose goal is to coordinate participation on global climate change. One
of its largest members (although the group has recently collectively disbanded) is the
American Automobile Manufacturers Association. The GCC argues that ratification of
the Kyoto Protocol would cause redistribution of output, employment, and emissions
from developed to developing countries, harming significantly the six aforementioned
energy intensive industries (Global Climate Coalition, 1999). The GCC cites various
studies that have concluded that prices will rise for U.S. consumers while wages will fall
or jobs be eliminated completely for workers whose employment is associated with the
Energy Industry. What the GCC does support is legislation such as S. 547, the promotion
of voluntary programs. "Voluntary programs let the marketplace dictate the best way to
meet environmental goals" (ibid.). The GCC asserts that voluntary agreements are more
effective because they encourage industry innovation to address environmental problems
and cooperation between business and government. They also assert that environmental
objectives are achieved faster with voluntary programs than with mandates and
regulations. The recent proposal of S.547 seems to be an important victory for the
lobbying efforts of the GCC and its members.

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An option available to businesses that is specified under the Kyoto Protocol is emissions
trading. Emissions trading in part was developed to reduce the economic costs of the
treaty. Emissions trading encourages countries to cut emissions below assigned levels so
they can "sell" the difference. Trading allows companies who do not meet carbon dioxide
emissions quotas to buy excess emissions certificates from those who do. A company can
receive credit against its company's emissions limits by buying emissions rights from
companies that have reduced emissions below their own limits. Or a company could
receive credit for helping developing nations reduce their own emissions, such as by
financing emissions reducing technology. Either way, trading can reduce the economic
impact of emissions controls for developed countries (Fialka, 1998: A8). Trading
entitles major energy consumers such as the United States, or countries such as Japan,
where its expensive to cut emissions, to "buy" the right to pollute from others (Boukhari,
1998: 12). The United States is hoping to meet three quarters of its Kyoto requirements
by buying permits from other countries (ibid.).

Emissions trading is something that also represents the influence of big business and
domestic politics on treaty negotiations. The Clinton Administration delegates to the
Kyoto summit, under presure from lobbying efforts and Congress, had to fight to allow
emissions trading into the original agreement, as it was opposed by the European Union
and Brazil (Paemen, 1998:28). This was seen as a major victory for the U.S. delegates.
There are reasons why some countries oppose emissions trading. There is some fear that
emissions trading will not decrease overall carbon dioxide emissions. There is also fear
that trading will become a substitute to the alternative of countries and companies
pursuing new technological advances in emissions reductions. On the other hand, some
believe that trading can promote technological leadership and the development of
international technology pools in efforts to attain more permits (ibid.).

Two more opponents to ratification of the Kyoto Protocol are the National Association
of Manufacturers and the U.S. Chamber of Commerce. The two organizations have
funded the Global Climate Information Project, and its thirteen million dollar media
campaign opposing Kyoto.

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But there is an outpouring of money associated with the Protocol on both sides of the
fence. It is interesting to note that some large businesses, who will be restricted by the
Protocol's standards and possible financially hurt should it be implemented, support the
treaty. Some of these supporters include General Motors, British Petroleum, Monsanto,
and United Technologies. General Motors was previously a member of the Global
Climate Coalition until the GCC adopted their current position on the Kyoto Protocol.
General Motors realizes the growing importance for the need to do something about
climate change. It appears they are willing to take responsibility for their part of the
problem, even if it is at a financial cost to the company. However, the portrayal of the
company as an environmental crusader and absorbing the costs of emissions reduction
may be just as financially valuable as opposing the standards and not implementing and
reductions measures.

There is much disagreement just over what ratification of Kyoto really means, as
numerous studies have been conducted by groups paid by both pro and against parties to
the Protocol. What the exact numbers are concerning job loss, changing energy prices,
the amount of emissions that will actually be eliminated, and at what rate emissions
actually speed the deterioration of the environment, are in dispute.

The Energy Information Administration, part of the U.S. Department of Energy, authored
a report entitled "Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic
Activity." The EIA estimates higher energy prices, which in turn will reduce consumer
energy consumption and will change the amount and kind of resources used. The EIA
concludes that the cost of the Protocol to the American economy will depend on the
amount of permits that can be purchased internationally, and on the number of projects to
reduce emissions and develop sinks that absorb greenhouse gases both in developing
countries and on the domestic front (Energy Information Administration, 1998). In other
words, at this time the effects, depending on various circumstances, are immeasurable.
The EIA examined six cases with different reductions in carbon emissions, adding and
subtracting different factors from each case, and arriving at different conclusions ranging
from best case to worse case scenarios. A different study by DOE concluded that a
national investment in energy efficiency technologies can reduce U.S. emissions whereby

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energy savings will equal costs. In essence, emissions reduction achieved through
technology improvements will not necessarily increase the nation's energy bill (Global
Climate Coalition, 1999).

Many opponents of the protocol emphasize the potential loss of thousands of U.S. jobs
because they expect companies to relocate to developing countries to take advantage of
the lack of emissions standards. Research published in a British journal, Energy Policy,
estimated there would be 23,000 jobs lost in the U.S. aluminum industry and anywhere
from 7,500 to 75,000 jobs lost in the chemical manufacturing sector (Anonymous, 1999:
32). A study by WEFA, the Wharton Economic Forecasting Associates, estimates U.S.
job loss in trade related industries totaling 751,000 between 2001 and 2020 (Srodes,
1998: 14). They also estimate that U.S. aluminum smelters and paper producers will be
forced out of business, petroleum refinery output would be reduced by 20 percent, and 30
percent of the chemical, steel and cement industries would be forced to move elsewhere
(ibid.)

The above concern is basically the same concern of opponents of greater globalization
and freer trade. During NAFTA negotiations, the United States harbored some of the
same protests: jobs lost to the developing countries, certain industries being hurt, and the
question of whether environmental standards will truly be improved. There is no doubt
that globalization of markets hurts labor-intensive industries in developed countries,
simultaneously having positive aspects for developing countries. In sum, the Kyoto
Protocol may not be directly to blame for some of the negative impacts on the U.S.
economy that some are claiming it will have. The negative impacts may merely be the
result of the ever-changing world economy.

The Senate will not ratify the Protocol until it is amended to include the participation of
developing countries in emissions reduction. Amendments mean putting in provisions to
the international agreement that 175 countries did not agree to, the ever-present problem
of U.S. foreign economic policy and its relation to treaty negotiations.

Conclusion

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While it is too early to tell if S. 547 will pass, the bill seems like it would satisfy many of
the participants in the debate over the ratification of the Kyoto Protocol. I spoke with
Dan Dellich, the Committee Aid on Environment and Public Works, which is chaired by
John Chafee. Dellich believes that at this time Chafee, although concerned about the
environment, would oppose ratification of the Protocol. The current problems with the
agreement such as the lack of enforcement provisions and developing country
participation, are too significant to be overlooked. Dellich asserts that the bill is
indirectly related to the Protocol, and Chafee sees it neither as a substitution nor as a
stepping stone towards Kyoto's ratification. The passing of S. 547 is expected to be
difficult because it is the first legislation of its kind, it will take a a lot of effort to explain
it to people, and "...because there is a lot of money involved and a lot of politics
involved" with it (Dellich, 1999). That statement reaffirms the power of domestic
parties stemming from their concerns with both domestic and international legislation.

A Case Study 2 - Virunga National Park

Virunga National Park (Parc National des Virunga, PNVi), in the eastern part of the
Democratic Republic of Congo, is Africa’s oldest and most diverse park. Stretching along
the Congolese border with Uganda and Rwanda, PNVi has more bird, mammal and
reptile species than any other on the continent. But for the past two decades, the park and
the surrounding area in North Kivu province have experienced near-constant violent
conflict. For the local population, the result has been widespread suffering: death, rape,
displacement, sickness and starvation.

Beyond the humanitarian crisis, conflict has threatened the species, habitats and
communities that depend on PNVi for their survival. The park is in crisis: its governance
systems have collapsed; its boundaries are encroached upon by the surrounding local and
refugee populations; its habitats are being destroyed by overfishing and charcoal
production; and its animals are killed for meat and ivory.

Conflict has significantly contributed to the fact that the United Nation’s environmental
conventions are not able to achieve their stated objectives in the park. Multilateral
environmental agreements (MEAs), designed to protect such globally-significant

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ecosystems, have thus far been unable to address the threats to the park. Despite the
proliferation of relevant environmental conventions and the DRC’s participation in them,
environmental destruction continues in PNVi.

Using PNVi and the Great Lakes conflicts as a case study, this paper analyzes where
entry points exist for policy-makers and conservationists to use five existing international
environmental agreements to better protect biodiversity and ecosystems in times of
conflict: UNESCO WHC, CBD, CMS, CITES and Ramsar. While not an exhaustive
study, the paper identifies some of the shortcomings of existing agreements, where entry
points might exist and what other international policy instruments and fora could be used
to help protect important ecosystems like PNVi.

The UN MEAs are not designed or expected to offer practical solutions to conservation
crises on the ground; it is up to the national governments of the signatory states, and their
conservation authority, to enforce and achieve Convention goals. Their sovereignty must
be respected by the other parties. However the MEAs, their COPs and their Secretariats
can help them do so by building capacity, improving information gathering (i.e., the
IPCC model) and supporting underfunded budgets. This analysis reveals a number of
specific opportunities for elevating environment-conflict issues to international policy
levels to help save important ecosystems in times of conflict.

Case Study 3 - Invasive Alien Species, Multilateral Environmental Agreements and

site management

Parties to conventions and agreements requiring site-based action face particular

challenges in dealing with invasive alien species. Globally these are notably the Ramsar
Convention on Wetlands, World Heritage Convention, UNESCO’s Man and the
Biosphere Programme and the Convention on Migratory Species and its range state
Agreements,

The ecological character of many designated sites is being compromised by invasives, so

managing these biodiversity ‘jewels in the crown’ in the context of the impacts of
invasives is a high priority for us. A major challenge in achieving this is, however, to

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provide protected area managers with the best possible knowledge, tools and access to
expert assistance so that they can recognize and address invasives in their management
planning and implementation, and be helped in raising awareness of invasives amongst
their local community stakeholders.

To achieve this requires particularly:

• better understanding of invasive issues;

• improved invasives identification knowledge;

• more consistent inclusion of invasives and the threats from them in site descriptions
when listing/designation of sites, leading to;

• enhanced incorporation of monitoring for invasives in management planning

objectives;

• improved vulnerability and early warning assessment tools, especially in relation to

changing vulnerability through climate change effects; and

• better access to, and sharing of, experience and expert advice on management
options and control and eradication.

The GISP, and the CBD work we are developing here, is producing a wealth of relevant
materials. Now the task of the site-based agreements is to get this into the hands of their
site managers - in a form they can use.

So how are the agreements and conventions tackling this? First through all affording
increased recognition to invasives. Second, by working together increasingly,
particularly where sites are designated in delivery of commitments to more than one
instrument.

Amongst the joint invasives initiatives underway through the site-related instruments, I
will highlight four:

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First, development of Joint management and monitoring guidance: Ramsar and
Man and the Biosphere Programme are both currently preparing further guidance to their
site managers on good practice in management planning and monitoring, including a
focus on invasives. The guidance will be harmonized and made available to manager
networks, under both instruments and tested and promoted through demonstration
implementation on sites designated under both instruments.

Second, increasing management expertise and capacity at an inter-regional scale:

The CMS African-Eurasian Migratory Waterbird Agreement is, in collaboration with the
Ramsar Convention, developing a UNEP-GEF funded project to demonstrate good
practice management, incorporating invasive species management, for a network of key
wetlands (Ramsar sites) for migratory waterbirds in Africa, Europe and the Middle East,
and through this to build site management capacity and transfer of experience at a
flyway-scale.

Third, Site manager awareness and networks: Ramsar, working with its partner
organizations IUCN and Wetlands International, has started implementation work on
African wetland invasives to produce accessible wetland invasive awareness materials for
site managers, and increase invasives management capacity through regional managers’
workshops and establishing networks for exchange of experience. This will bring
together managers of Ramsar sites, Biosphere Reserves and World Heritage Sites in the
region.

Fourth, Joint action in specific shared protected areas to provide expertise and
advice on managing invasives problems: The World Heritage and Ramsar Conventions
have recently mounted a joint advisory mission to assist Senegal in developing
management for the control of an urgent aquatic invasive problem, here from the water
fern Salvinia, in the Djoudj National Park, Senegal. This site has been listed as both a
Heritage Site in Danger and on the Ramsar Convention’s Montreux Record. The mission
brought together a wide range of local, national and international stakeholders. Their
recommendations have now led to the two Conventions funding work to develop a
comprehensive management planning, implementation and monitoring process for the

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site that will incorporate invasives control through enhanced local capacity and local
community involvement. Furthermore this has brought in technical expertise through the
GISP, and is being developed in collaboration also with broader-scale European
Commission funded work on invasives management in the Senegal river basin, and with
the CMS African-Eurasian Waterbird Agreement, since this site is internationally
important for its migratory waterbirds, as the distinguished delegate from Senegal
reported to us yesterday.

It is our further intention to bring together the outcomes and experiences of this suite of
joint site-management related work, and other related activity, to promote consistent and
enhanced management response to invasive alien species throughout our extensive
combined network of key protected areas for biodiversity. All these initiatives will draw
importantly on the tools and guidance tools and guidance prepared by GISP and CBD.

To aid on the ground delivery of effective action, we consider it vital that the options for
future invasives work through priorities under the planned GISP2 and any future CBD
focus on invasives includes enhancing information transfer and implementation at the
local manager and community stakeholder level, as well as effective collaboration
between the site-based environmental agreements.

Case Study 4 - The Aarhus Convention

“Although regional in scope, the significance of the Aarhus Convention is global. It is by

far the most impressive elaboration of principle 10 of the Rio Declaration, which stresses
the need for citizen’s participation in environmental issues and for access to information
on the environment held by public authorities. As such it is the most ambitious venture in
the area of environmental democracy so far undertaken under the auspices of the United
Nations.”

- Kofi A. Annan, Secretary-General of the United Nations

The Aarhus (Århus) Convention on Access to Information, Public Participation in

Decision- Making and Access to Justice in Environmental Matters is an MEA that applies
mainly across Europe1. The explicit objective of the Aarhus Convention is as follows:

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“In order to contribute to the protection of the right of every person of present and future
generations to live in an environment adequate to his or her health and wellbeing, each
Party shall guarantee the rights of access to information, public participation in decision-
making, and access to justice in environmental matters in accordance with the provisions
of this Convention.”

Some of the Aarhus Convention’s key attributes are:

• Rights-based approach

• Establishing of minimum standards

• Non-discrimination

• Inclusion of regional institutions and international bodies

• Open to accession by non-ECE countries

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 POSSIBLE SOLUTION TO THE CONFLICTS BETWEEN THE WTO &
ENVIRONMENT

Productive multilateral discussions require the identification of realistic reform proposals

on the central issues of the trade and environment debate. But before they address any
proposals, it would be helpful for the trade and environmental communities to reach a
common understanding of what will be needed to achieve certain kinds of reforms - an
agreed framework for action.

A Framework for Action

A useful way to think about efforts to resolve trade and environment conflicts is to
organize proposals into groups defined by the necessary degree of government
involvement or negotiation. On this basis, one can envisage three categories of initiatives:

First, measures for which there may be sufficient informal support from WTO Members
for the Director-General and the Secretariat to act without formal decision-taking by
Members. In cases like these, consultation would be a necessary and sufficient
requirement for action.

Second, initiatives that would require the collective approval of Members, but would not
necessarily require changes in formal rules or obligations.

Finally, objectives that could only be achieved through formal changes in rules, which
would probably require a comprehensive trade round.

By helping establish a shared understanding of the steps necessary to achieve certain

reforms, this framework can facilitate cooperation and build confidence between the trade
and environmental communities.

Several critical trade and environment issues must be addressed within this framework.

 Transparency and Public Access. Dialogue between the WTO and civil society
has improved in recent years, but interaction between the two could still be more
productive. During future WTO symposia, for NGOs, for example, the WTO

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 Secretariat could organize government-civil society working groups that would
address specific trade and environment issues. Funding from the WTO’s regular
budget should be allocated both for the WTO’s NGO symposia and for the
participation of developing country officials in the WTO’s new regional seminars
on trade and environment issues, in which representatives of regional NGOs
participate. Finally, the WTO General Council should examine NGO proposals
for a “Standing Conference” on trade and environment issues.

 Trade Liberalization and the Environment. Eliminating trade restrictions and

distortions can produce “win-win” outcomes in many sectors: environmental
benefits and improved market access. New Zealand and the United States, for
example, have urged the WTO’s Committee on Trade and Environment to
consider the potential environmental benefits of removing trade-distorting
subsidies in the fisheries sector. Agricultural subsidies and market access
restrictions distort trade and exacerbate over-production and other environmental
problems.

Governments, with the support of NGOs, need to do more to identify sectors in

which the removal of trade distortions would simultaneously benefit trade and the
environment. Once promising targets have been identified, governments have a
responsibility to put them on the negotiating agenda.

 Multilateral Environmental Agreements (MEAs) and the WTO. Several countries

have urged the WTO to address the possibility that measures inconsistent with
WTO rules could be applied under Multilateral Environmental Agreements
(MEAs). A potential remedy would be to amend certain WTO Agreements or to
draft an “Understanding on Interpretation.”

The goal of enhancing the mutual supportiveness of trade and environmental treaties
must be achieved not only through the establishment of an appropriate framework for
interaction between international organizations, but also through the operation of
fundamental legal principles relating to the harmonious interpretation and application of
treaty rules. States that are both parties to an MEA and to the WTO should normally aim

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at fulfilling both sets of obligations in a consistent way, following an interpretation of the
relevant legal rules that avoids any potential conflict between them.

One essential condition for making sure that trade and environment are mutually
supportive is to ensure that the trade liberalisation process is paralleled with the
development and strengthening of effective and non-protectionist environmental
legislation, at national, regional and international levels. Environmental policies could, in
turn, provide an incentive for technological innovations, promote economic efficiency
and, consequently, improve productivity. Having recognised the need for such policies,
one should also ensure that trade rules do not unnecessarily constrain but rather support
and promote the ability of countries to develop and implement adequate and non-
protectionist environmental measures, at both national and international levels.

Trade policy as such has also a role to play in actively supporting sustainable trade flows
and, in particular, environmentally friendly trade. Trade policy and trade related
instruments should be further encouraged to act as a sustainable driver by providing
incentives for more sustainable trade flows. This is valid at the multilateral level but even
more so at the regional and bilateral levels where the identification of positive synergies
among trading partners as well as convergence and/or co-operation should be easier than
is the case at the international level. Trade tools could, for instance, be instrumental in
making tangible progress towards more sustainable consumption and production patterns.
Economic instruments also need to be more actively developed, notably with a view to
allow for the necessary internalisation of external environmental costs. In addition,
positive synergies between trade, environment and development should be further
considered, particularly regarding the elimination of environmentally damaging subsidies
and the promotion of environmentally friendly goods and services, with a special focus
on those originating in Developing Countries (DCs).

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 CONCLUSION

Environmentalists and trade advocates have clashed frequently in recent years.

Environmentalists argue that international trade rules restrict the legitimate use of trade
measures to enforce environmental standards internationally and undermine
environmental standards at home. Trade officials argue that trade measures are not the
appropriate tools to deal with environmental problems, and the World Trade Organization
(WTO) is not the appropriate institution. They contend that environmentalists need to put
their own house in order rather than resort to trade measures to achieve their objectives.

Studies by the various environmentalists provide that the effect of trade liberalization on
the environment can be subdivided into three categories (i) product effect, (ii) structural
effect, and (iii) scale effect. (i) The product effect of trade is positive when trade
liberalization expands the market for goods produced in an environmentally sound
manner and/or environmental services like resource saving technology. Negative product
effect results when goods directly harmful to the ecosystem are exchanged
internationally. (ii) The structural effect of trade is the trade-induced change in the
industrial composition and consumption, and depends on the pollution intensity of
national output. The effect on the environment is positive if expanding export sectors are
less polluting on average than contracting import-competing sectors; and negative if the
opposite holds. (iii) The scale effect of trade results from enhanced economic activity,
including higher levels of production, resource extraction, and transportation. The impact
on the environment is typically negative due to the greater pollution generated.

The study on the interface of trade and environment, as well as the evaluation of trade
measures within MEAs indicate that trade restrictions are not the only nor necessarily the
most effective policy instrument to achieve the environmental objective of the MEAs.

The root cause of environmental degradation following trade liberalization is not trade
per se, but the underlying market or regulatory failures. A WTO Secretariat Report on
Trade and Environment (WTO 1999) recognized the theoretical and empirical literature
that trade is rarely the root cause of environmental degradation (except under the scale
effect) and that most environmental problems result from polluting production processes,

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certain kinds of consumption, and the disposal of waste products. The WTO report
observed that trade would unambiguously raise welfare if proper environmental policies
were in place. An expansion of trade can conceivably produce large negative
environmental effects to outweigh the conventional benefits from liberalization only if a
country lacks domestic environmental policy that reflects its environmental values
(GATT 1992: 2). Indeed, a lack of appropriate environmental policies creates problems
not just in the trade sector, but through every facet of a country’s economic life.

Conflict between environmental protection and the rules and institutions of the trading
system is not inevitable. Indeed, the two can play mutually supportive roles.

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 BIBLIOGRAPHY

Websites

www.wto.org

www.environmentallaw.org

www.unece.org/env/pp

http://www.gdrc.org

Books

WTO and International Trade, M.B. Rao, Vikas publishing House Pvt Ltd, New Delhi;

The WTO, Trade and the Environment, edited by Gary Sampson and John Whalley;

WTO in the new Millennium, Commentary, published and edited by Academy of

Business Studies;

The World Trade Organisation, Dr. S.R. Myneni, published by Asia Law House;

The World Trade Organisation (Law Practice and Policy), Mitsuo Matsushita, Thomas J.
Schoenbaum and Petros C. Mavroidis, published by Oxford University Press Inc., New
York;

Reforming the World Trading System (Legitimacy, Efficiency, and Democratic

Governance), edited by Ernst-Ulrich Petersmann, published by Oxford University Press
Inc., New York;

Guide to the WTO and the Developing Countries, by Peter Gallagher, published by
Kluwer Law International P.O. Box 85889, 2508 CN The Hague, The Netherlands;

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