Understanding Trade and Understanding Trade and Environment issuesEnvironment issues

Alan Oxley

Australian APEC Centre

International Trade Strategies

May 2002

The presentationThe presentation

The debateThe debate

The international frameworkThe international framework

The interfaceThe interface

ApproachesApproaches

The Trade and Environment The Trade and Environment DebateDebate

The Doha WTO mandate

The WTO Shrimp Turtle Decision

The debate

The issues

The WTO Doha MandateThe WTO Doha Mandate

Environment now a mainstream negotiating Environment now a mainstream negotiating issue in the WTOissue in the WTO

- for the first time - for the first time

An EU initiative (demand)An EU initiative (demand)

This give the EU leverageThis give the EU leverage

Essential we understand the implicationsEssential we understand the implications

The WTO Shrimp/Turtle DecisionThe WTO Shrimp/Turtle Decision WTO Appellate Body ruled that the US may restrict WTO Appellate Body ruled that the US may restrict

imports of shrimp from four countries because they do not imports of shrimp from four countries because they do not apply conservation policies to protect migratory turtlesapply conservation policies to protect migratory turtles

The WTO has approved unilateral trade sanctions to The WTO has approved unilateral trade sanctions to enforce environmental standardsenforce environmental standards

A shock result – WTO does not permit unilateral sanctionsA shock result – WTO does not permit unilateral sanctions

Implications are unclearImplications are unclear

The debateThe debate

EU and European environmental groups EU and European environmental groups want new rights to restrict trade to protect want new rights to restrict trade to protect the environment.the environment.

The US wants to right to ban importsThe US wants to right to ban imports unilaterally unilaterally

Most countries are opposedMost countries are opposed

EU environment goalsEU environment goals

To apply the following environment policies:To apply the following environment policies:

- to use “The precautionary principle” when - to use “The precautionary principle” when regulating the environment regulating the environment

- to use “whole of life cycle” management to- to use “whole of life cycle” management to regulate the environment. regulate the environment.

- to use ecolabels to certify whole of lifecycle - to use ecolabels to certify whole of lifecycle management management

What does EU want in trade?What does EU want in trade? To use trade sanctions to secure adoption ofTo use trade sanctions to secure adoption of

environment principles environment principles

To exempt use of trade restrictions based on the To exempt use of trade restrictions based on the precautionary principle from scientific challenge. precautionary principle from scientific challenge.

To be able to restrict trade on the basis of the To be able to restrict trade on the basis of the environmental impacts of how products are made environmental impacts of how products are made or processed.or processed.

To be able to protect EU agricultural producers To be able to protect EU agricultural producers from cheap exports on environmental grounds.from cheap exports on environmental grounds.

US interestsUS interests

To protect right to use unilateral sanctionsTo protect right to use unilateral sanctions

(Under the Clinton Administration) to (Under the Clinton Administration) to include environment in trade agreements – include environment in trade agreements – NAFTA and Jordan FTA. (not Bush NAFTA and Jordan FTA. (not Bush Administration policy, but strong support Administration policy, but strong support for linkage among Democrats in the for linkage among Democrats in the Congress )Congress )

To protect science based controls on trade.To protect science based controls on trade.

The issuesThe issues

Respect for national sovereigntyRespect for national sovereignty

Effective environment policyEffective environment policy

Effective trade policyEffective trade policy

The balance of benefitsThe balance of benefits

The International frameworkThe International framework

The World Trade OrganizationThe World Trade Organization

The United NationsThe United Nations

The WTOThe WTO

The basic activitiesThe basic activities

The WTO AgreementsThe WTO Agreements

Basic principles of the WTOBasic principles of the WTO

How WTO provides economic How WTO provides economic

benefitbenefit

The Basic activitiesThe Basic activities

Create rules to govern tradeCreate rules to govern trade

Reduce barriers to tradeReduce barriers to trade

The WTO AgreementsThe WTO Agreements Before 1994 (end of the Uruguay Round)Before 1994 (end of the Uruguay Round)

- the GATT- the GATT- a handful of minor agreements- a handful of minor agreements

After 1994After 1994

- GATT, GATS, TRIPs- GATT, GATS, TRIPs- eleven other agreements- eleven other agreements- a revised disputes system- a revised disputes system- a new organization- a new organization

Economic principles of GATTEconomic principles of GATT

Promote exchange of goodsPromote exchange of goods

Reflect comparative advantageReflect comparative advantage

- export what you produce best, import - export what you produce best, import what others produce best what others produce best

GATT prevents discriminationGATT prevents discrimination

- it curbs the powerful - it curbs the powerful

GATT establishes rights in GATT establishes rights in international lawinternational law

The WTO rules are enforceableThe WTO rules are enforceable

GATT protects the right to exploit GATT protects the right to exploit comparative advantagecomparative advantage

GATT protects right to developGATT protects right to develop

WTO and developing countriesWTO and developing countries WTO is the only international system which can WTO is the only international system which can

increase trade and raise living standards in developing increase trade and raise living standards in developing countriescountries

Until 1994, Industrialized countries denied developing Until 1994, Industrialized countries denied developing countries their full benefits:countries their full benefits:

- they restricted trade in garment,- they restricted trade in garment, textiles and agriculture textiles and agriculture

Final barriers are progressively being reducedFinal barriers are progressively being reduced

Concern that US and EU will seek new rights to restrict Concern that US and EU will seek new rights to restrict tradetrade

WTO gives members wide discretion to WTO gives members wide discretion to protect the environmentprotect the environment

Article XX exemptions are wideArticle XX exemptions are wide

- WTO rules can be waived to protect human,- WTO rules can be waived to protect human, animal and plant health and safety animal and plant health and safety

Some conditions: Some conditions:

- rights are not be abused for economic reasons,- rights are not be abused for economic reasons,- sound science must underpin trade controls- sound science must underpin trade controls

The United NationsThe United Nations

Creates a mechanism for global securityCreates a mechanism for global security

Fosters collaboration on global problemsFosters collaboration on global problems

Promotes and brings into effect global Promotes and brings into effect global treatiestreaties

Hosts most environmental treatiesHosts most environmental treaties

Environment in the UNEnvironment in the UN UNCED is the Supreme bodyUNCED is the Supreme body

- the UN Conference on Environment and- the UN Conference on Environment and Development (UNCED – a special session of the Development (UNCED – a special session of the UN General Assembly UN General Assembly

UNEP (United Nations Environment Program) a program of UNEP (United Nations Environment Program) a program of ECOSOCECOSOC

- UNEP’s program is limited only to action taken- UNEP’s program is limited only to action taken by UN members by UN members

- key activity is to support several international - key activity is to support several international environment agreementsenvironment agreements

UNCEDUNCED Adopted Agenda 21Adopted Agenda 21

Endorsed three conventions:Endorsed three conventions:- climate change- climate change- biodiversity- biodiversity- desertification- desertification

Adopted trade and environment principlesAdopted trade and environment principles

Established the UN Commission on Sustainable Established the UN Commission on Sustainable Development to oversee Agenda 21Development to oversee Agenda 21

MEA’s supported by the UN -1MEA’s supported by the UN -1

CITES (banning trade in endangered CITES (banning trade in endangered speciesspecies

Basle (banning trade in hazardous waste)Basle (banning trade in hazardous waste)Montreal/Vienna (to protect the Ozone Montreal/Vienna (to protect the Ozone

layer)layer)Cartegena Protocol (restricting trade in Cartegena Protocol (restricting trade in

certain GMOs)certain GMOs)

MEA’s supported by the UN -2MEA’s supported by the UN -2

PIC – convention on prior informed consent PIC – convention on prior informed consent on trade in chemicalon trade in chemical

POPs – convention banning trade in POPs – convention banning trade in persistent organic pollutantspersistent organic pollutants

Kyoto Protocol - limiting greenhouse gasesKyoto Protocol - limiting greenhouse gases

ALL BUT KYOTO HAVE TRADE ALL BUT KYOTO HAVE TRADE PROVISIONSPROVISIONS

Convention banning trade in Convention banning trade in endangered speciesendangered species

Lists species endangered and at riskLists species endangered and at risk

Obliges parties not to trade in the products Obliges parties not to trade in the products covered with non-partiescovered with non-parties

[Trade bans conflict with WTO][Trade bans conflict with WTO]

Basel Convention banning trade Basel Convention banning trade in hazardous materialsin hazardous materials

Defines certain products as hazardousDefines certain products as hazardous

Obliges parties to prohibit exports in those products unless Obliges parties to prohibit exports in those products unless the exporting government is satisfied that environmental the exporting government is satisfied that environmental management in the importing country is satisfactorymanagement in the importing country is satisfactory

Oblige parties to ban trade with non-partiesOblige parties to ban trade with non-parties

A Protocol obliges parties to ban imports from OECD A Protocol obliges parties to ban imports from OECD countries countries [Trade bans conflict with WTO][Trade bans conflict with WTO]

Vienna Convention/Montreal Vienna Convention/Montreal Protocol on ChlorofluorocarbonsProtocol on Chlorofluorocarbons

Bans production and consumption of designated Bans production and consumption of designated chemicals deemed harmful to the Ozone Layerchemicals deemed harmful to the Ozone Layer

Requires parties to ban trade with non-partiesRequires parties to ban trade with non-parties

[Trade bans conflict with WTO][Trade bans conflict with WTO]

Cartegena ProtocolCartegena Protocol Establishes global notification point for advice on release of Establishes global notification point for advice on release of

Living Modified Organisms (LMOs)Living Modified Organisms (LMOs)

Obliges some exporters to secure prior consent to importers to Obliges some exporters to secure prior consent to importers to tradetrade

Permits parties to ban imports of LMOsPermits parties to ban imports of LMOs

Obliges parties to trade with non-parties on terms comparable Obliges parties to trade with non-parties on terms comparable to trade with partiesto trade with parties

[Trade bans conflict with WTO][Trade bans conflict with WTO]

Agreement on Prior informed Agreement on Prior informed consentconsent

Obliges parties to secure consent of importers Obliges parties to secure consent of importers before exporting designated chemical productsbefore exporting designated chemical products

[No conflict with WTO][No conflict with WTO]

Convention banning Persistent Convention banning Persistent Organic Pollutants (Rotterdam)Organic Pollutants (Rotterdam)

Bans listed chemicalsBans listed chemicals

Obliges parties not to export prohibited products to non-partiesObliges parties not to export prohibited products to non-parties

[Trade bans conflict with WTO][Trade bans conflict with WTO]

Comparing Cartegena and WTO import Comparing Cartegena and WTO import regimesregimes

SPSSPS Restrictions are to protect Restrictions are to protect

human, animal and plant life human, animal and plant life and healthand health

Restrictions based on Restrictions based on - international standards,or - international standards,or

- science and risk- science and risk assessment assessment

Exporters have right to Exporters have right to contest controls in WTO contest controls in WTO disputes systemsdisputes systems- non-complying measures- non-complying measures must be removed must be removed

CARTEGENACARTEGENA Restrictions are to contribute Restrictions are to contribute

to obviating adverse effects to obviating adverse effects on biodiversity *on biodiversity *

Legal right to impose Legal right to impose restrictions restrictions withoutwithout scientific scientific justification **justification **

Exporter have right to request Exporter have right to request reviewreviewof import controlsof import controls- no recourse to- no recourse to independent arbitration independent arbitration

Conflict and confusionConflict and confusion

WTO does not permit discrimination in WTO does not permit discrimination in trade or use of trade sanctionstrade or use of trade sanctions

Several MEAs create discrimination and Several MEAs create discrimination and use trade sanctionsuse trade sanctions

Countries oppose one thing in the WTO Countries oppose one thing in the WTO and support it in the UNand support it in the UN

The interfaceThe interface

MEAs and the WTOMEAs and the WTO

The precautionary principleThe precautionary principle

EcolabellingEcolabelling

MEAs and the WTOMEAs and the WTO

The debate is about what should be done in The debate is about what should be done in the WTO – amend it permit trade sanctions the WTO – amend it permit trade sanctions in MEAs?in MEAs?

- this is what the EU wants from the Doha- this is what the EU wants from the Doha Round Round

NOTE: Why is this question only asked NOTE: Why is this question only asked about WTO rules?about WTO rules?

The precautionary principleThe precautionary principle

Employ “no risk” strategies to protect the Employ “no risk” strategies to protect the environment rather than managed risk strategiesenvironment rather than managed risk strategies

Why? So political judgements can be made in Why? So political judgements can be made in favour of environmental argumentsfavour of environmental arguments

Impact on trade? Compare the terms of decision-Impact on trade? Compare the terms of decision-making in the WTO with the Cartegena Protocolmaking in the WTO with the Cartegena Protocol

Article XX of the GATTArticle XX of the GATT Subject to the requirement that such Subject to the requirement that such measures are not applied in a manner which would measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable constitute a means of arbitrary or unjustifiable discrimination between countries where the same discrimination between countries where the same conditions prevail, or a disguised restriction on conditions prevail, or a disguised restriction on international trade, international trade, nothing in this Agreement shall nothing in this Agreement shall be construed to prevent the adoption or be construed to prevent the adoption or enforcement by any contracting party of measures:enforcement by any contracting party of measures:    ((((bb)) (b) necessary to protect human, animal or (b) necessary to protect human, animal or plantplant life or health;life or health;

The Objective of the Cartegena Protocol (Article The Objective of the Cartegena Protocol (Article 1) lays down the criteria for taking decisions to 1) lays down the criteria for taking decisions to restrict imports:restrict imports:

““to contribute to ensuring to contribute to ensuring an adequate levelan adequate level of of protection in the field of the safe transfer, protection in the field of the safe transfer, handling and use of living modified organisms handling and use of living modified organisms resulting from biotechnology that resulting from biotechnology that may have may have adverse effectsadverse effects on the conservation and on the conservation and sustainable use biological diversitysustainable use biological diversity, taking into , taking into account risks to human health and specifically account risks to human health and specifically focussing on transboundary movements”focussing on transboundary movements”

EcolabellingEcolabelling

The Ecolabel certifies that products meet The Ecolabel certifies that products meet “whole of lifecycle” environmental impacts“whole of lifecycle” environmental impacts

The product must be made in a way that The product must be made in a way that meets every environmental standard set in meets every environmental standard set in the importing economy.the importing economy.

If not, its imports is banned. The importer If not, its imports is banned. The importer sets the standardsets the standard

What are the positions of What are the positions of industrialised economies on industrialised economies on

these issues?these issues?

Issue Unilateral measures to protect the environment

EU Opposed

US Not opposed: defends own measures vigorously

Canada Opposed

Switzerland

Australia Opposed

New Zealand Opposed

Issue Legitimize discriminatory trade measures in MEAs

EU Wants WTO rules “Clarified”to protect measures from challenge

US Opposed: existing provisions in WTO sufficient

Canada Generally opposed, favours “clarification”

Switzerland Generally supports legitimization

Australia Opposed, WTO rules adequate

New Zealand Limited support

Issue Restrict trade on product and processing grounds (ppms)

EU Wants WTO rules “clarified”to allow whole of life cycle regulation

US

Canada Want issue examined.

Switzerland Same position as EU

Australia Opposed

New Zealand

Issue Enacting the Precautionary Principle

EU* Favours WTO applying version favoured by EU and in Cartagena

US Opposed: support SPS science based measures

Canada Same as US

Switzerland

Australia Same as US

New Zealand Same as US* Position qualified after Doha

Issue Ecolabelling

EU Legitimize labels verifying compliance with whole of lifecycle management

US Supports transparency, opposes whole of life cycle ecolabelling

Canada Supports voluntary whole of life cycle ecolabelling

Switzerland Wants clarification of WTO rules

Australia

New Zealand

Issue Subsidies with environmental impacts

EU Examine trade distorting subsidies in energy

US Eliminate fishing subsidies, allow subsidies to address environment issues

Canada Address distorting impact in fisheries and forests

Switzerland Wants clarification of WTO rules

Australia Eliminate export subsidies

New Zealand Eliminate export & fish subsidies

Issue Environmental impact assessments of trade agreements

EU

US Support

Canada Support

Switzerland

Australia Support

New Zealand

Are the MEA’s good Are the MEA’s good environment policy?environment policy?

Most of the MEA’s breach Most of the MEA’s breach UNCED principlesUNCED principles

The trade and environment principles The trade and environment principles adopted at UNCED urgedadopted at UNCED urged

- respect for national sovereignty- respect for national sovereignty- avoidance of use of trade sanctions- avoidance of use of trade sanctions- members of the UN to enter- members of the UN to enter collaborative international agreements to collaborative international agreements to provide global solutions instead of using provide global solutions instead of using trade coercion trade coercion

Studies show poor Studies show poor environmental value of the environmental value of the trade measures in MEAstrade measures in MEAs

UNCTAD and the OECD have both UNCTAD and the OECD have both made studies of the environmental value made studies of the environmental value of the trade measures in the MEAs and of the trade measures in the MEAs and assessed it as lowassessed it as low

Many private studies show trade Many private studies show trade measures are generally ineffective to measures are generally ineffective to protect the environmentprotect the environment

The problem? – conflicting rulesThe problem? – conflicting rules

The source? - new rules in MEAsThe source? - new rules in MEAs

Are they desirable rules?Are they desirable rules?

If the rules are not desirable, why If the rules are not desirable, why change the WTO?change the WTO?

Review the issueReview the issue

The new rules in the MEAsThe new rules in the MEAs

Use trade coercion to secure objectivesUse trade coercion to secure objectives

Allow trade to be restricted according to Allow trade to be restricted according to how a product is made or handled (PPM)how a product is made or handled (PPM)

NOTE: it is NOTE: it is notnot the norm in international the norm in international treaties to impose conditions on non-partiestreaties to impose conditions on non-parties

Who wants the new rules? Who wants the new rules?

The EU The EU

The UNEP Secretariat The UNEP Secretariat

Who doesn’t?Who doesn’t?

UNCED UNCED – trade and environment principles– trade and environment principles

UNCTADUNCTAD – assessment of MEAs – assessment of MEAs

OECD OECD – assessment of MEAs– assessment of MEAs

Most members of the WTOMost members of the WTO

What is wrong with the new rules?What is wrong with the new rules?

1 Trade coercion is the rule of the1 Trade coercion is the rule of the jungle jungle

2 Restricting trade by how a product is2 Restricting trade by how a product is made: made: - undermines the capacity of the- undermines the capacity of the WTO to provide benefits WTO to provide benefits - forces first world environment- forces first world environment standards on everyone standards on everyone

3. Why not use instead purpose-made 3. Why not use instead purpose-made conventions where countries adopt conventions where countries adopt common measures into national law? common measures into national law?

ApproachesApproaches

The basic, global problemThe basic, global problem

Lack of common understandingLack of common understanding

Lack of effective communicationLack of effective communication

Weak policy processesWeak policy processes

Methodical approaches are Methodical approaches are requiredrequired

What is the environmental problem?What is the environmental problem?

What is the best way to address it?What is the best way to address it?

Does trade impede the solution?Does trade impede the solution?

What trade controls currently exist?What trade controls currently exist?

Is the problem a “trade and environment” Is the problem a “trade and environment”

problem?problem?

The issue is no longer just conflict between The issue is no longer just conflict between WTO and MEA provisionsWTO and MEA provisions

The issue is restoring respect for national sovereignty and The issue is restoring respect for national sovereignty and

ruling out trade coercion ruling out trade coercion

in both the WTO and the UN environmental fora.in both the WTO and the UN environmental fora.

The Problem is not in the WTO it is poor environment policy The Problem is not in the WTO it is poor environment policy in the UN.in the UN.

This problem cannot be fixed by trade officials aloneThis problem cannot be fixed by trade officials alone

Action to solve the problemAction to solve the problem Clear positions are required by governments on each of Clear positions are required by governments on each of

the following issues:the following issues:

- sovereignty- sovereignty- discrimination- discrimination- coercion- coercion - leverage - leverage- precautionary principle- precautionary principle- production & process methods/ecolabelling- production & process methods/ecolabelling- sound principles in trade policy- sound principles in trade policy- sound principles in environment policy- sound principles in environment policy

The fundamental principles of good international governance need The fundamental principles of good international governance need to be restatedto be restated

Action to solve the problemAction to solve the problem Specific outcomes must be secured:Specific outcomes must be secured:

1. Achieve domestic coherence on trade and1. Achieve domestic coherence on trade and environment policies environment policies

2. Re-align environment work in the UN with2. Re-align environment work in the UN with fundamental UN principles fundamental UN principles

- cease including ineffective and- cease including ineffective and inappropriate provisions in environment inappropriate provisions in environment agreements agreements

3. Protect fundamental provisions in the WTO3. Protect fundamental provisions in the WTO