Understanding Trade and Environment issues

1
Understanding Trade and Environment issues

• Alan Oxley
• Australian APEC Centre
• International Trade Strategies
• May 2002

2
The presentation

• The debate
• The international framework
• The interface
• Approaches

3
The Trade and Environment Debate

• The Doha WTO mandate
• The WTO Shrimp Turtle Decision
• The debate
• The issues

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The WTO Doha Mandate

• Environment now a mainstream negotiating issue in
  the WTO - for the first time
• An EU initiative (demand)
• This give the EU leverage
• Essential we understand the implications

5
The WTO Shrimp/Turtle Decision

• WTO Appellate Body ruled that the US may restrict
  imports of shrimp from four countries because
  they do not apply conservation policies to
  protect migratory turtles
• The WTO has approved unilateral trade sanctions
  to enforce environmental standards
• A shock result WTO does not permit unilateral
  sanctions
• Implications are unclear

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The debate

• EU and European environmental groups want new
  rights to restrict trade to protect the
  environment.
• The US wants to right to ban imports
  unilaterally
• Most countries are opposed

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EU environment goals

• To apply the following environment policies
  - to use The precautionary principle when
  regulating the environment
• - to use whole of life cycle management
  to regulate the environment. - to
  use ecolabels to certify whole of lifecycle
  management

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What does EU want in trade?

• To use trade sanctions to secure adoption of
  environment principles
• To exempt use of trade restrictions based on the
  precautionary principle from scientific
  challenge.
• To be able to restrict trade on the basis of the
  environmental impacts of how products are made or
  processed.
• To be able to protect EU agricultural producers
  from cheap exports on environmental grounds.

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US interests

• To protect right to use unilateral sanctions
• (Under the Clinton Administration) to include
  environment in trade agreements NAFTA and
  Jordan FTA. (not Bush Administration policy, but
  strong support for linkage among Democrats in the
  Congress )
• To protect science based controls on trade.

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The issues

• Respect for national sovereignty
• Effective environment policy
• Effective trade policy
• The balance of benefits

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The International framework

• The World Trade Organization
• The United Nations

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The WTO

• The basic activities
• The WTO Agreements
• Basic principles of the WTO
• How WTO provides economic benefit

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The Basic activities

• Create rules to govern trade
• Reduce barriers to trade

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The WTO Agreements

• Before 1994 (end of the Uruguay Round)- the
  GATT- a handful of minor agreements
• After 1994- GATT, GATS, TRIPs- eleven other
  agreements- a revised disputes system- a new
  organization

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Economic principles of GATT

• Promote exchange of goods
• Reflect comparative advantage - export what
  you produce best, import what others produce
  best
• GATT prevents discrimination - it curbs the
  powerful

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GATT establishes rights in international law

• The WTO rules are enforceable
• GATT protects the right to exploit comparative
  advantage
• GATT protects right to develop

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WTO and developing countries

• WTO is the only international system which can
  increase trade and raise living standards in
  developing countries
• Until 1994, Industrialized countries denied
  developing countries their full benefits
• - they restricted trade in garment,
  textiles and agriculture
• Final barriers are progressively being reduced
• Concern that US and EU will seek new rights to
  restrict trade

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WTO gives members wide discretion to protect the
environment

• Article XX exemptions are wide- WTO rules can
  be waived to protect human, animal and plant
  health and safety
• Some conditions - rights are not be abused for
  economic reasons,- sound science must underpin
  trade controls

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The United Nations

• Creates a mechanism for global security
• Fosters collaboration on global problems
• Promotes and brings into effect global treaties
• Hosts most environmental treaties

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Environment in the UN

• UNCED is the Supreme body - the UN Conference
  on Environment and Development (UNCED a
  special session of the UN General Assembly
• UNEP (United Nations Environment Program) a
  program of ECOSOC- UNEPs program is limited
  only to action taken by UN members- key
  activity is to support several international
• environment agreements

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UNCED

• Adopted Agenda 21
• Endorsed three conventions - climate change -
  biodiversity - desertification
• Adopted trade and environment principles
• Established the UN Commission on Sustainable
  Development to oversee Agenda 21

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MEAs supported by the UN -1

• CITES (banning trade in endangered species
• Basle (banning trade in hazardous waste)
• Montreal/Vienna (to protect the Ozone layer)
• Cartegena Protocol (restricting trade in certain
  GMOs)

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MEAs supported by the UN -2

• PIC convention on prior informed consent on
  trade in chemical
• POPs convention banning trade in persistent
  organic pollutants
• Kyoto Protocol - limiting greenhouse gasesALL
  BUT KYOTO HAVE TRADE PROVISIONS

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Convention banning trade in endangered species

• Lists species endangered and at risk
• Obliges parties not to trade in the products
  covered with non-partiesTrade bans conflict
  with WTO

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Basel Convention banning trade in hazardous
materials

• Defines certain products as hazardous
• Obliges parties to prohibit exports in those
  products unless the exporting government is
  satisfied that environmental management in the
  importing country is satisfactory
• Oblige parties to ban trade with non-parties
• A Protocol obliges parties to ban imports from
  OECD countries Trade bans conflict with WTO

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Vienna Convention/Montreal Protocol on
Chlorofluorocarbons

• Bans production and consumption of designated
  chemicals deemed harmful to the Ozone Layer
• Requires parties to ban trade with non-parties
  Trade bans conflict with WTO

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Cartegena Protocol

• Establishes global notification point for advice
  on release of Living Modified Organisms (LMOs)
• Obliges some exporters to secure prior consent to
  importers to trade
• Permits parties to ban imports of LMOs
• Obliges parties to trade with non-parties on
  terms comparable to trade with parties Trade
  bans conflict with WTO

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Agreement on Prior informed consent

• Obliges parties to secure consent of importers
  before exporting designated chemical products
  No conflict with WTO

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Convention banning Persistent Organic Pollutants
(Rotterdam)

• Bans listed chemicals
• Obliges parties not to export prohibited products
  to non-parties Trade bans conflict with WTO

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Comparing Cartegena and WTO import regimes

• CARTEGENA
• Restrictions are to contribute to obviating
  adverse effects on biodiversity
• Legal right to impose restrictions without
  scientific justification
• Exporter have right to request reviewof import
  controls- no recourse to independent
  arbitration

• SPS
• Restrictions are to protect human, animal and
  plant life and health
• Restrictions based on
• - international standards,or - science and
  risk assessment
• Exporters have right to contest controls in WTO
  disputes systems- non-complying measures must
  be removed

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Conflict and confusion

• WTO does not permit discrimination in trade or
  use of trade sanctions
• Several MEAs create discrimination and use trade
  sanctions
• Countries oppose one thing in the WTO and support
  it in the UN

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The interface

• MEAs and the WTO
• The precautionary principle
• Ecolabelling

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MEAs and the WTO

• The debate is about what should be done in the
  WTO amend it permit trade sanctions in MEAs?-
  this is what the EU wants from the Doha
  RoundNOTE Why is this question only asked
  about WTO rules?

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The precautionary principle

• Employ no risk strategies to protect the
  environment rather than managed risk
  strategiesWhy? So political judgements can be
  made in favour of environmental arguments
• Impact on trade? Compare the terms of
  decision-making in the WTO with the Cartegena
  Protocol

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Article XX of the GATT
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   ((b) (b)
necessary to protect human, animal or plant
life or health
36
The Objective of the Cartegena Protocol (Article
1) lays down the criteria for taking decisions to
restrict imports to contribute to ensuring an
adequate level of protection in the field of the
safe transfer, handling and use of living
modified organisms resulting from biotechnology
that may have adverse effects on the conservation
and sustainable use biological diversity, taking
into account risks to human health and
specifically focussing on transboundary
movements
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Ecolabelling

• The Ecolabel certifies that products meet whole
  of lifecycle environmental impacts
• The product must be made in a way that meets
  every environmental standard set in the importing
  economy.
• If not, its imports is banned. The importer sets
  the standard

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What are the positions of industrialised
economies on these issues?
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Are the MEAs good environment policy?
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Most of the MEAs breach UNCED principles

• The trade and environment principles adopted at
  UNCED urged- respect for national sovereignty-
  avoidance of use of trade sanctions- members of
  the UN to enter collaborative international
  agreements to provide global solutions instead
  of using trade coercion

48
Studies show poor environmental value of the
trade measures in MEAs

• UNCTAD and the OECD have both made studies of the
  environmental value of the trade measures in the
  MEAs and assessed it as low
• Many private studies show trade measures are
  generally ineffective to protect the environment

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The problem? conflicting rulesThe source? -
new rules in MEAsAre they desirable rules?If
the rules are not desirable, why change the WTO?
Review the issue
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The new rules in the MEAs

• Use trade coercion to secure objectives
• Allow trade to be restricted according to how a
  product is made or handled (PPM)
• NOTE it is not the norm in international
  treaties to impose conditions on non-parties

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Who wants the new rules? The EU
The UNEP SecretariatWho doesnt? UNCED
trade and environment principles UNCTAD
assessment of MEAs OECD assessment of
MEAs Most members of the WTO
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What is wrong with the new rules? 1 Trade
coercion is the rule of the jungle 2
Restricting trade by how a product is made
- undermines the capacity of the
WTO to provide benefits - forces
first world environment
standards on everyone 3. Why not use instead
purpose-made conventions where countries
adopt common measures into national law?
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Approaches
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The basic, global problem

• Lack of common understanding
• Lack of effective communication
• Weak policy processes

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Methodical approaches are required

• What is the environmental problem?
• What is the best way to address it?
• Does trade impede the solution?
• What trade controls currently exist?
• Is the problem a trade and environment problem?

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

• The issue is restoring respect for national
  sovereignty and ruling out trade coercion in
  both the WTO and the UN environmental fora.
• The Problem is not in the WTO it is poor
  environment policy in the UN.
• This problem cannot be fixed by trade officials
  alone

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Action to solve the problem

• Clear positions are required by governments on
  each of the following issues - sovereignty
• - discrimination
• - coercion - leverage
• - precautionary principle
• - production process methods/ecolabelling
• - sound principles in trade policy - sound
  principles in environment policy
• The fundamental principles of good international
  governance need to be restated

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Action to solve the problem

• Specific outcomes must be secured1. Achieve
  domestic coherence on trade and environment
  policies2. Re-align environment work in the UN
  with fundamental UN principles - cease
  including ineffective and inappropriate
  provisions in environment agreements3.
  Protect fundamental provisions in the WTO