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