PRESS BRIEF

TRADE AND ENVIRONMENT IN THE WTO

Background to WTO work on trade and environment

    When Trade Ministers approved the results of the Uruguay Round negotiations in Marrakesh in April 1994, they also took a Decision to begin a comprehensive work programme on trade and environment in the WTO. Their Decision ensured that the subject has been given and will continue to be given a high profile on the WTO agenda.

    The issue of trade and environment was not included for negotiation in the Uruguay Round, but certain environmental concerns were nevertheless addressed in the results of the negotiations. The Preamble to the WTO Agreement includes direct references to the objective of sustainable development and to the need to protect and preserve the environment. The new Agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary Measures take explicitly into account the use by governments of measures to protect human, animal and plant life and health and the environment. The Agreement on Agriculture exempts direct payments under environmental programmes from WTO Member' commitments to reduce domestic support for agricultural production, subject to certain conditions. The Agreement on Subsidies and Countervailing Measures treats as a non-actionable subsidy government assistance to industry covering up to 20 per cent of the cost of adapting existing facilities to new environmental legislation. And both the TRIPs and the Services Agreements contain environment-related provisions. More generally, and as was recognized in the results of the UN Conference on Environment and Development in 1992 (the "Earth Summit"), an open, equitable and non-discriminatory multilateral trading system has a key contribution to make to national and international efforts to better protect and conserve environmental resources and promote sustainable development.

    The WTO Committee on Trade and Environment has brought environmental and sustainable development issues into the mainstream of WTO work. The Committee's first Report, which is being submitted to the WTO Ministerial Conference in Singapore, notes that the WTO is interested in building a constructive relationship between trade and environmental concerns. Trade and environment are both important areas of policymaking and they should be mutually supportive in order to promote sustainable development. 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.

The Marrakesh Ministerial Decision on Trade and Environment

    Trade Ministers in Marrakesh agreed to establish a WTO Committee on Trade and Environment (CTE) with a broad-based remit covering all areas of the multilateral trading system -- goods, services and intellectual property. The CTE has been given both analytical and prescriptive functions: to identify the relationships between trade and environmental measures in order to promote sustainable development, and to make recommendations on whether any modifications to the provisions of the multilateral trading system are required. The CTE is forwarding its first report on its work to the WTO Ministerial Conference in Singapore.

    Two important parameters have guided the CTE's work. One is that WTO competence 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, there is no intention that the WTO should become an environmental agency, nor that it should 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 intergovernmental organizations better suited to the task. The second parameter is that if problems of policy coordination to protect the environment and promote sustainable development are identified through the CTE's work, steps taken to resolve them must uphold and safeguard the principles of the multilateral trading system which governments spent seven years strengthening and improving through the Uruguay Round negotiations.

    The CTE's work programme was set out initially in ten areas of work. A start on the work programme was made soon after the Marrakesh Ministerial meeting, under the authority of the WTO Preparatory Committee, and from 1 January 1995, with the coming into force of the WTO Agreement, the Committee on Trade and Environment was formally established to continue work in this area. The CTE process has been driven by proposals from individual WTO Members on issues of importance to them. The CTE adopted its Report on 8 November 1996 and it has been forwarded through the General Council to Ministers at the Ministerial Conference.

    The following is a brief review of the items of the CTE's work programme. A more detailed discussion and the conclusions and recommendations to Ministers are contained in the CTE's Report to the Ministerial Conference. The Report (WT/CTE/1, dated 12 November 1996) is available from the WTO Secretariat and can be accessed at the following internet address: http:\\www.wto.org\Trade+Env\tocte.html

    The relationship between the provisions of the multilateral trading system and trade measures for environmental purposes, including those pursuant to multilateral environmental agreements

    A range of provisions in the WTO can accommodate the use of trade-related measures needed for environmental purposes, including measures taken pursuant to multilateral environmental agreements (MEAs). Those that are cited regularly as being of key importance are the provisions relating to non-discrimination (MFN and national treatment) and to transparency. Beyond that, and subject to certain important conditions, the exceptions clauses contained in Article XX of the GATT allow a WTO Member legitimately to place its public health and safety and national environmental goals ahead of its general obligation not to raise trade restrictions or to apply discriminatory trade measures. These provisions have been a major focus of work of the CTE and will be kept under review in the future work programme.

    Trade measures applied pursuant to MEAs

    One area of particular focus in the CTE's discussion has been the relationship between WTO provisions and trade measures applied pursuant to MEAs. It has been clear throughout the discussions on this issue in the GATT/WTO that the preferred approach for governments to take in tackling transboundary or global environmental problems is cooperative, multilateral action under an MEA. That was the approach endorsed by political leaders at the highest level in 1992 at the UNCED, and its appeal is quite evident from the point of view of the WTO which is dedicated to finding cooperative, multilateral solutions to problems in the area of trade. In the Report which the CTE has forwarded to the Ministerial Conference, WTO Members state that the WTO supports multilateral solutions to global and transboundary environmental problems and that unilateral actions in this context should be avoided.

    While some MEAs contain trade provisions, the Report notes that trade restrictions are not the only nor necessarily the most effective policy instrument to use in MEAs, but that in certain cases they can play and important role. It also states that the WTO already provides broad and valuable scope for trade measures to be applied pursuant to MEAs in a WTO-consistent manner. To date, few MEAs contain trade provisions and no problem has arisen in the WTO over the use of trade measures applied pursuant to MEAs. A number of proposals have been put forward in the CTE to broaden the scope available under WTO provisions for the use of trade measures applied pursuant to MEAs, including some that would create an "environmental window" for the use of discriminatory trade measures against non-parties to MEAs, but these proposals have not attracted consensus support in the CTE.

    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; is it the WTO, or is it the dispute settlement mechanisms that exists in the MEAs themselves? There is general agreement that in the event a dispute arises between WTO Members who are each Parties to an MEA over the use of trade measures they are applying among themselves pursuant to the MEA, they should consider in the first instance trying to resolve it through the dispute settlement mechanisms available under the MEA. Were a dispute to arise with a non-party to an MEA, however, the WTO would provide the only possible forum for the settlement of the dispute.

    In the Report, WTO Members note 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 MEAs could become subject to disputes. Furthermore, they note that problems are unlikely to 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 in cases when resort to environmental expertise is needed.

    Eco-labelling

    Eco-labelling programmes are important environmental policy instruments. Eco-labelling was discussed extensively in the GATT, and that laid the basis in the CTE for a detailed examination of the issues involved. The key requirement from the WTO's point of view is that environmental measures that incorporate trade provisions or that affect trade significantly do 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: it guarantees consumer choice and it gives producers 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 Report states that well-designed eco-labelling programmes can be effective instruments of environmental policy. It notes that in certain cases they have raised significant concerns about their possible trade effects. An important starting point for addressing some of those trade concerns is by ensuring adequate transparency in their preparation, adoption and application, including affording opportunities for participation in their preparation by interested parties from other countries. Further discussion is needed 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.

    WTO transparency provisions

    WTO transparency provisions fulfil an important role in ensuring the proper functioning of the multilateral trading system, in helping to prevent unnecessary trade restriction and distortion from occurring, in providing information about market opportunities and in helping to avoid trade disputes from arising. They can also provide a valuable first step in ensuring that trade and environment polices 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 Report states that no modifications to WTO rules are required to ensure adequate transparency for trade-related environmental measures. The WTO Secretariat will compile from the Central Registry of Notifications all notifications of trade-related environmental measures and collate these in a single database which can be accessed by WTO Members.

    The issue of the export of domestically prohibited goods

    Concerns were raised by a number of developing country GATT Contracting Parties in the mid-1980s that certain hazardous or toxic products were being exported to them without them being fully informed about the environmental or public health dangers the products could pose. In the late-1980s a GATT Working Party examined ways of treating trade in goods which are severely restricted or banned for sale on the domestic market of the 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 they would cause it environmental or public health problems.

    In the period since the GATT Working Party ended its discussions, several MEAs have been negotiated 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.

    In the CTE Report, WTO Members agree to support the efforts of the specialized inter-governmental environmental organizations that are helping to resolve the problems which exist. However, they note that there may be a complementary role for the WTO to play in this area. As an initial step, the Secretariat will survey the information already available in the WTO on trade in domestically prohibited goods.

    Trade liberalization and sustainable development

    Further liberalization of international trade flows, both in goods and services, has a key role to play in advancing economic policy objectives in Member countries. In that respect, WTO Member countries have already made an important contribution to sustainable development and better environmental protection worldwide through the conclusion of the Uruguay Round negotiations. This contribution will steadily increase as the results of the Round move towards full implementation. The UNCED 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 tackling this Item of its work programme in the context of the built-in agenda for further trade liberalisation initiatives contained in the results of the Uruguay Round negotiations. In its Report, the CTE notes 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. Further analytical and empirical work will take place on this issue.

    Trade in Services and TRIPs

    The Marrakesh Decision calls for the CTE 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. Discussions 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 Report notes that discussions in the CTE 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 particular in Article XIV (b).

    In the case of intellectual property, WTO Members state in the CTE Report that the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) plays an essential role in facilitating access to and transfer of environmentally-sound technology and products. However, they have noted that further work will be required in this area, including on clarifying the relationship between the TRIPs Agreement and the Convention of Biological Diversity.

    Further work

    WTO Members believe that work in the WTO on contributing to build a constructive relationship between trade, environment and sustainable development needs to continue. They have recommended, therefore, that the CTE should continue its work, reporting to the WTO General Council, with the same mandate and terms of reference which were given it by Ministers in Marrakesh in 1994.


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