Briefing note: Trade and environment

The key principles of sustainable development and the protection of the environment are enshrined in the Marrakesh Agreement, the founding charter of the WTO, in which the preamble recognizes the need "both to protect and preserve the 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”.

Ministers also signed a "Decision on Trade and Environment", which states that efforts to uphold the multilateral trading system and to protect the environment must be complementary. The WTO’s principles aim to ensure members’ environmental measures are not unnecessary trade barriers, unjustifiable discrimination or protectionism in disguise. The WTO also provides a forum for discussions and negotiations on environmental issues as they relate to trade.

WTO rules prohibit members from discriminating against products from different trading partners. However, Article XX of the General Agreement on Tariffs and Trade, particularly paragraphs (b) and (g), lays out exemptions for necessary measures to protect human, animal or plant life or health or to conserve exhaustible natural resources. These exemptions are provided on the condition that the measure must not constitute a “means of arbitrary or unjustifiable discrimination” or a “disguised restriction on international trade”. Several other WTO texts also address the balance between trade and environment goals.

The WTO has also handled disputes concerning environment-related trade measures, such as the conservation of sea turtles and the welfare of seals. WTO jurisprudence has affirmed that WTO rules do not take precedence over environmental concerns. These have also required members to pursue environmental solutions in a cooperative manner.

 

Negotiations and MC10 outcomes

Members have been confronted with issues that require further clarification when it comes to implementing trade commitments vis-à-vis fulfilling international treaty obligations to protect the environment. There has also been interest in using market opening to favour environmentally friendly goods and services.

Negotiations on trade and the environment were launched in November 2001 as part of the Doha Development Agenda (DDA). Specifically, the talks cover three areas as provided by Paragraph 31 (i) (ii) and (iii): the applicability of existing WTO rules in relation to obligations set out in multilateral environmental agreements (MEAs), procedures for coordinating with MEA secretariats, and the reduction or elimination of tariff and non-tariff barriers to environmental goods and services. Negotiations on these are carried out by the Committee on Trade and Environment Special Session (CTESS).

There have been proposals to recognize principles of mutual support, no subordination, and recognition of respective expertise in approaching issues that concern both MEAs and the WTO. Related to these are proposals on the exchange of information between the WTO and MEAs and the provision of observer status to certain MEA bodies. There have also been proposals for an approach to disputes that would oblige a WTO panel to call in the expertise of the MEA involved in the issue. The establishment of a ’Group of Experts on Trade and Environment’ and provision of technical assistance has also been suggested to advise members in need on ways to secure flexibilities.

As for the reduction of trade barriers for environmental goods and services, several members have suggested different approaches for identifying which products can qualify for lower or zero tariffs. There are six separate lists for such, covering 409 unique tariff lines. Members have also identified several possible non-tariff barriers that may need tackling although to this point limited work has taken place. There has also been limited discussion on environmental services in the CTESS although some work on this takes place in the Council for Trade in Services Special Session.

Besides these initiatives, negotiations have also been launched on disciplines for fisheries subsidies which contribute to overfishing. These talks, meanwhile, are carried out under the Negotiating Group on Rules. A separate briefing note on fisheries subsidies can be accessed here.

At the close of the 10th Ministerial Conference in Nairobi, members agreed on a ministerial declaration which acknowledges that "international trade can play a role towards achieving sustainable, robust and balanced growth for all." Furthermore, the declaration states that there is a strong commitment of all members to advance negotiations on the remaining Doha Round issues. It also acknowledges that members have different views on how to address the negotiations.

 

Environmental Goods Agreement

Separately, 17 WTO members* have been negotiating an Environmental Goods Agreement (EGA) with binding tariff concessions to be taken by the parties. Talks were launched in July 2014 and since then the participating members have identified 450 environmental goods. Once agreed, the tariff concessions will be offered to all WTO members on a most-favoured-nation (MFN) basis. Progress in the negotiations is reported by EGA parties to the Committee on Trade and Environment at its meetings.

On 14 December 2015, Australia’s Minister for Trade and Investment Andrew Robb (EGA chair) issued a statement saying that there has been considerable progress and a high degree of convergence in many areas of the negotiations and that negotiators would be re-engaging early in 2016. Director-General Roberto Azevêdo welcomed this, saying that the  agreement will be an important contribution of the international trade community towards realizing the complementary benefits of trade and environmental policy.  Read more here.

*The 17 WTO members are: Australia, Canada, China, Costa Rica, the European Union, Hong Kong China, Iceland, Israel, Japan, Republic of Korea, New Zealand, Norway, Singapore, Switzerland, Chinese Taipei, Turkey and the United States.