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WTO E-Learning WTO E-Learning – Copyright © February 2012

Trade and

Environment

Abstract

The link between trade and environmental protection, both the impact of environmental policies on trade, and

the impact of trade on the environment, was recognized as early as 1970 at the GATT time. Later, with the

creation of the WTO as a result of the Uruguay Round negotiations, allowing for the optimal use of the world’s

resources in accordance with the objective of sustainable development and seeking to protect and preserve the

environment are fundamental to the multilateral trading system. These goals, enshrined in the Preamble of

the Marrakesh Agreement, go hand in hand with the WTO’s objective to reduce trade barriers and eliminate

discriminatory treatment in international trade relations. For WTO Members, the aims of upholding and

safeguarding an open and non-discriminatory multilateral trading system, on the one hand, and acting for the

protection of the environment and the promotion of sustainable development, on the other, can and must be

mutually supportive. Through its goals, rules, institutions and forward-looking agenda, the WTO provides an

important means of advancing international environmental goals.

The Marrakesh Ministerial Decision also called for the creation of the Committee on Trade and Environment.

With its broad based mandate, the CTE has contributed to identifying and understanding the relationship

between trade measure and environmental measures in order to promote sustainable development. Two

important items of work of the CTE are the effects of environmental requirements on market access, and

labelling requirements for environmental purposes. Environmental requirements can impede trade and even

be used as an excuse for protectionism. The answer is not to weaken environmental standards, but to set

appropriate standards and enable exporters to meet them.

At the Doha Ministerial Conference in 2001, trade ministers launched, for the first time in the history of the

multilateral trading system, negotiations in the area of trade and environment. The mandate of negotiations,

contained in Paragraph 31 of the Doha Declaration covers the relationship between existing WTO rules and

specific trade obligations set out in multilateral environmental agreements (MEAs) (Paragraph 31(i));

procedures for regular information exchange between MEA Secretariats and the relevant WTO committees, and

the criteria for the granting of observer status (Paragraph 31(ii)); and the reduction or, as appropriate,

elimination of tariff and non-tariff barriers to environmental goods and services (Paragraph 31(iii)).

Since the entry into force of the WTO in 1995, the WTO Dispute Settlement Body has had to deal with a

number of disputes concerning environment-related trade measures. Such measures have sought to achieve a

variety of policy objectives — from conservation of sea turtles from incidental capture in commercial fishing to

the protection of human health from risks posed by air pollution. WTO jurisprudence has affirmed that WTO

rules do not take precedence over environmental concerns. WTO Members can adopt trade-related measures

to protect the environment and human health and life as long as such measures comply with GATT rules, or fall

under the exceptions to these rules. Article XX on General Exceptions lays down a number of specific instances

in which WTO Members may be exempted from GATT rules.

List of Figures

MODULE 1 THE WORLD TRADE ORGANIZATION ....................................................................11

Figure 1: WTO organization chart .............................................................................. 19

MODULE 3 THE RELATIONSHIP BETWEEN MULTILATERAL ENVIRONMENTAL AGREEMENTS AND

THE WTO.....................................................................................................51

Figure 1: Use of Trade Measures in MEAs ...................................................................... 56

Figure 2: WTO Principles ............................................................................................. 59

Figure 3: EC-Swordfish Example ................................................................................... 62

Figure 4: Paragraph 31(i) of the Doha Ministerial Declaration ........................................... 64

Figure 5: Main Approaches MEA negotiations in the CTESS .............................................. 66

Figure 6: Paragraph 31(II) mandate ............................................................................. 68

Figure 7: MEAs Granted Observer Status in the CTE ........................................................ 71

MODULE 4 ENVIRONMENTAL GOODS AND SERVICES NEGOTIATIONS .......................................... 77

Figure 1: Win-win-win outcome .................................................................................... 80

Figure 2: DDA Negotiations: Institutional Structure......................................................... 82

Figure 3: Identification of environmental goods, key challenges ....................................... 85

MODULE 5 ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS, LABELLING FOR

ENVIRONMENTAL PURPOSES ............................................................................. 97

Figure 1: Environment-related TBT Notifications (1991-2008) ......................................... 113

Figure 2: Objectives of the Measures regarding TBT STCs .............................................. 115

Figure 3: Environmental labelling STCs raised in the TBT Committee ............................... 129

Figure 4: Concerns on environmental labelling raised in the TBT Committee(1995-2010) .. 130

MODULE 6 WTO RULES AND ENVIRONMENTAL POLICIES ..................................................... 139

Figure 1: Analysis under article XX of GATT .................................................................. 150

List of Tables

MODULE 1 THE WORLD TRADE ORGANIZATION ....................................................................11

Table 1: GATT Rounds of negotiations ........................................................................... 13


THE WTO.....................................................................................................51

Table 1: Examples of MEAs and their Trade Measures ..................................................... 58


Table 1: Frameworks proposed by Members to liberalize environmental goods ................... 87



Table 1: Environmental Aspects of Selected TBT STCs .................................................... 116

Table 2: Environmental Labelling TBT Notifications (2000 – 2008) ................................... 129

Acronyms

APEC Asia-Pacific Economic Cooperation

CBD Convention on Biological Diversity

CAA Clean Air Act

CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora

CTD WTO Committee on Trade and Development

CTE WTO Committee on Trade and Environment

CTESS WTO Committee on Trade and Environment (Special Session)

CTG Council for Trade in Goods

DDA Doha Development Agenda

DPGS Domestically prohibited goods

DSB Dispute Settlement Body

DSU Dispute Settlement Understanding

EEE Electronic, electrical equipments

EFTA European Free Trade Association

EMIT GATT Group on Environmental Measures and International Trade

EU European Union

FAO Food and Agricultural Organization

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GHG Greenhouse gas

GMOS Genetically modified organisms

ISO International Organization for Standardization

IPRS Intellectual Property Rights

ITC International Trade Centre UNCTAD/WTO

ITLOS International Tribunal for the Law of the Sea

LCA Life cycle analysis

LDCS Least Developed Countries

LLDC Least developed of the Least Developed Countries

LMOS Living modified organisms

MEA Multilateral Environmental Agreement

MERCOSUR Common Market for the South

MFN Most-favoured-nation treatment

MRAS Mutual recognition agreements

MTS Multilateral trading system

NAMA Non-agricultural market access

NGO Non-governmental Organization

NTBS Non-tariff trade barriers

NTMS Non-tariff measures

ODS Ozone-depleting substances

OECD Organization for Economic Cooperation and Development

PIC Prior Informed Consent

PPMS Process and production methods

SCM Subsidies and Countervailing measures

SMES Small and medium size enterprises

SPS Sanitary and Phytosanitary measures

STOS Specific trade obligations

TBT Technical Barriers to Trade

TEDS Turtle excluder devices

TNC Trade Negotiations Committee

TPRB Trade Policy Review Body

TPRM Trade Policy Review Mechanism

TRIPS Trade-Related Aspects of Intellectual Property Rights

UNCED United Nations Conference on Environment and Development

UNCLOS United Nations Convention on the Law of the Sea

UNCPC United Nations Central Product Classification

UNCTAD United Nations Conference on Trade and Development

UNEP United Nations Environment Programme

UNFCCC United Nations Framework Convention on Climate Change

WCO World Customs Organization

WIPO World Intellectual Property Organization

WSSD World Summit on Sustainable Development

Table of Contents

MODULE 0 COURSE GUIDE ................................................................................................ 1

I. INTRODUCTION ............................................................................................................ 3

II. COURSE ORGANIZATION ............................................................................................... 4

II.A. OBJECTIVES .................................................................................................... 4

II.B. STRUCTURE AND DURATION OF THE COURSE ..................................................... 4

II.C. WHO IS WHO? ................................................................................................. 6

II.D. EVALUATION AND CERTIFICATE ......................................................................... 6

III. E-LEARNING WEBSITE .................................................................................................. 7

III.A. TRAINING MATERIALS ...................................................................................... 7

III.B. INTERACTIVE TOOLS ........................................................................................ 8

IV. USER AGREEMENT ........................................................................................................ 9

MODULE 1 THE WORLD TRADE ORGANIZATION .................................................................... 11

I. HISTORICAL BACKGROUND OF THE WTO ...................................................................... 13

II. OBJECTIVES OF THE WTO ........................................................................................... 15

III. FUNCTIONS OF THE WTO ............................................................................................ 17

IV. ORGANIZATIONAL STRUCTURE OF THE WTO ................................................................. 19

IV.A. THE MINISTERIAL CONFERENCE ...................................................................... 20

IV.B. THE GENERAL COUNCIL .................................................................................. 20

IV.C. THE COUNCILS .............................................................................................. 21

IV.D. THE SUBSIDIARY BODIES ............................................................................... 21

IV.E. DECISION-MAKING AT THE WTO ...................................................................... 23

IV.F. ON-GOING NEGOTIATIONS: THE DOHA DEVELOPMENT AGENDA ......................... 24

V. SUMMARY .................................................................................................................. 26

MODULE 2 INTRODUCTION TO TRADE AND ENVIRONMENT IN THE WTO ..................................... 29

I. ENVIRONMENTAL PROTECTION AND THE WTO ............................................................... 31

I.A. WTO GOALS - CONTRIBUTION TO SUSTAINABLE DEVELOPMENT AND PROTECTION

OF THE ENVIRONMENT ... ............................................................................... 31

I.B. WTO RULES - MEMBERS CAN ADOPT TRADE-RELATED MEASURES AIMED AT

PROTECTING THE ENVIRONMENT... .................................................................. 32

I.C. WTO INSTITUTIONS - ADVANCE DIALOGUE ON TRADE AND ENVIRONMENT

LINKAGES... .................................................................................................. 33

I.D. WTO FORWARD-LOOKING AGENDA - THE DOHA DEVELOPMENT AGENDA AND THE

ENVIRONMENT... ............................................................................................ 33

II. EMERGING ENVIRONMENT DEBATE IN THE GATT ........................................................... 34

II.A. THE STOCKHOLM CONFERENCE IN 1972 ........................................................... 34

II.B. GATT GROUP ON ENVIRONMENTAL MEASURES AND INTERNATIONAL TRADE (EMIT)34

II.C. UN CONFERENCE ON ENVIRONMENT AND DEVELOPMENT (UNCED) IN 1992 .......... 35

II.D. DEVELOPMENTS BETWEEN THE STOCKHOLM CONFERENCE IN 1972 AND THE RIO

SUMMIT IN 1992 ............................................................................................ 35

II.E. RIO EARTH SUMMIT AND AFTER ...................................................................... 36

III. THE MARRAKESH DECISION ON TRADE AND ENVIRONMENT AND THE WTO COMMITTEE ON

TRADE AND ENVIRONMENT ......................................................................................... 37

III.A. MARRAKESH DECISION ON TRADE AND ENVIRONMENT ...................................... 37

III.B. COMMITTEE ON TRADE AND ENVIRONMENT (CTE) ............................................. 38

IV. THE DOHA MANDATE .................................................................................................. 40

IV.A. TRADE AND ENVIRONMENT NEGOTIATIONS - CTESS .......................................... 40

IV.B. ITEMS OF FOCUS FOR THE CTE REGULAR WORK ................................................ 42

V. PARAMETERS OF THE TRADE AND ENVIRONMENT DISCUSSIONS IN THE WTO ................... 44

V.A. THE WTO IS NOT AN ENVIRONMENTAL PROTECTION AGENCY ............................. 44

V.B. GATT/WTO RULES PROVIDE SIGNIFICANT SCOPE FOR ENVIRONMENTAL

PROTECTION ................................................................................................. 44

V.C. INCREASED MARKET ACCESS FOR DEVELOPING COUNTRIES COULD CONTRIBUTE

TO ENVIRONMENTAL PROTECTION ................................................................... 45

V.D. TRADE AND ENVIRONMENT COORDINATION SHOULD BE ENHANCED ................... 45

VI. SUMMARY .................................................................................................................. 46


THE WTO..................................................................................................... 51

I. INTRODUCTION TO MEAS ............................................................................................ 53

I.A. BACKGROUND ............................................................................................... 53

I.B. TRADE MEASURES IN MEAS ............................................................................. 56

II. RELATIONSHIP BETWEEN MEAS AND THE WTO: POTENTIAL CONFLICT? .......................... 59

II.A. GATT ARTICLES I, III AND XI........................................................................... 59

II.B. GENERAL EXCEPTIONS OF GATT ARTICLE XX..................................................... 60

II.C. WHICH SYSTEM? ............................................................................................ 61

II.D. POTENTIAL CONFLICT? THE CASE OF EC - SWORDFISH ...................................... 61

III. NEGOTIATIONS ON THE RELATIONSHIP BETWEEN WTO AND MEA RULES.......................... 64

III.A. PARAGRAPH 31(I) MANDATE ........................................................................... 64

III.B. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ............................................. 65

IV. COLLABORATION BETWEEN WTO AND MEA SECRETARIATS ............................................. 68

IV.A. PARAGRAPH 31(II) MANDATE .......................................................................... 68

IV.B. INFORMATION EXCHANGE ............................................................................... 68

IV.C. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON INFORMATION EXCHANGE .. 69

IV.D. OBSERVER STATUS ........................................................................................ 71

IV.E. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON OBSERVER STATUS ........... 71

V. SUMMARY .................................................................................................................. 73


I. BACKGROUND ............................................................................................................ 79

I.A. POTENTIAL TO DELIVER WIN-WIN-WIN OUTCOMES ........................................... 79

I.B. ECONOMIC RATIONALE FOR REDUCING TARIFF AND NON TARIFF BARRIERS ON

ENVIRONMENTAL GOODS ................................................................................ 80

I.C. THE INSTITUTIONAL STRUCTURE OF NEGOTIATIONS ......................................... 81

II. IDENTIFICATION OF ENVIRONMENTAL GOODS .............................................................. 83

II.A. LIST OF ENVIRONMENTAL GOODS IDENTIFIED BY A NUMBER OF MEMBERS .......... 83

II.B. CHALLENGES IN IDENTIFYING ENVIRONMENTAL GOODS .................................... 84

III. TREATMENT FOR ENVIRONMENTAL GOODS ................................................................... 86

III.A. NAMA ........................................................................................................... 86

III.B. SPECIAL AND DIFFERENTIAL TREATMENT ......................................................... 86

III.C. DIFFERENT FRAMEWORKS ............................................................................... 86

IV. OTHER CONSIDERATIONS ........................................................................................... 89

IV.A. NON-TARIFF BARRIERS ................................................................................... 89

IV.B. TRANSFER OF TECHNOLOGY ............................................................................ 90

IV.C. ENVIRONMENTAL SERVICES ............................................................................ 90

V. WAY FORWARD .......................................................................................................... 92

VI. SUMMARY .................................................................................................................. 93



I. ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS ................................................ 99

I.A. ENVIRONMENTAL REQUIREMENTS .................................................................... 99

I.B. MARKET ACCESS ISSUES FACED BY DEVELOPING COUNTRIES ........................... 102

I.C. RELEVANT WORK IN THE CTE COMMITTEE ....................................................... 107

I.D. WORK IN OTHER RELEVANT WTO COMMITTEES ................................................ 113

II. LABELLING REQUIREMENTS FOR ENVIRONMENTAL PURPOSES ........................................ 118

II.A. INTRODUCTION ............................................................................................ 118

II.B. THE ISSUE OF PROCESS AND PRODUCTION METHODS ...................................... 122

II.C. CTE'S WORK ON ENVIRONMENTAL LABELLING .................................................. 124

II.D. ENVIRONMENTAL LABELLING AND THE TBT AGREEMENT ................................... 128

III. SUMMARY ................................................................................................................. 133

MODULE 6 WTO RULES AND ENVIRONMENTAL POLICIES ..................................................... 139

I. OVERVIEW OF GATT ARTICLE XX ................................................................................. 141

I.A. INTRODUCTION ............................................................................................ 141

I.B. KEY GATT DISCIPLINES ................................................................................. 143

I.C. GATT EXCEPTIONS ........................................................................................ 146

I.D. OTHER RELEVANT WTO TEXTS ........................................................................ 152

II. ENVIRONMENT-RELATED DISPUTES IN GATT/WTO ........................................................ 155

II.A. THE ‘BRAZIL – RETREATED TYRES’ DISPUTE ..................................................... 155

II.B. THE ASBESTOS CASE .................................................................................... 157

II.C. THE ‘SHRIMP-TURTLE’ DISPUTE ...................................................................... 159

II.D. THE US-GASOLINE DISPUTE ........................................................................... 161

III. SUMMARY ................................................................................................................. 164

SUPPORT DOCUMENTS ......................................................................................................... 167

REFERENCE LIST ............................................................................................................... 171

ANNEX 1 ............................................................................................................... 173

ANNEX 2 ............................................................................................................... 177

1

Course Guide ESTIMATED TIME: ½ hour

CONTENT

Organization of your course

Main functions of the E-Learning platform

The User Agreement

MODULE

0

3

I. INTRODUCTION

Welcome to the course "Trade and Environment"!

This Course Guide is envisaged to give you an overview of the organization of your course, as well as of the

main functions of the E-Learning platform.

At the end of the Course Guide, you will find the User Agreement, which was initially sent with your username

and password. We advise you to print this Guide and have it readily available throughout the course.

4

II. COURSE ORGANIZATION

II.A. OBJECTIVES

After successfully completing the elements of the E-Learning course "Trade and Environment" you will have:

enhanced knowledge of WTO discussions on trade and environment;

enhanced knowledge of WTO trade and environment negotiations;

enhanced knowledge of WTO rules and environmental policies; and

benefited from the establishment of a network of useful contacts between course participants and

experts from the WTO Secretariat.

To facilitate the achievement the objectives of the course, you will have access to training materials,

background documents and the interactive tools of the E-Learning platform.

WTO E-Learning courses are part of the WTO Progressive Learning Strategy (PLS). The primary aim of the PLS

is to promote higher levels of learning, with a view to sustaining the human and institutional capacity of

beneficiary countries to participate more effectively in the WTO.

This course is a level 2 (intermediate level) course in the specialist path of the PLS.

TO KNOW MORE

The PLS is the progressive, multi modular sequencing of products aimed at improving the delivery of WTO

technical assistance and training.

To know more about the WTO PLS: http://www.wto.org/english/tratop_e/devel_e/teccop_e/pls_e.pdf

To know more about WTO technical assistance and training, please refer to:

http://www.wto.org/english/tratop_e/devel_e/teccop_e/tct_e.htm

II.B. STRUCTURE AND DURATION OF THE COURSE

WTO E-Learning courses give you the flexibility to combine your training activities and professional

responsibilities. Furthermore, you will be able to wholly benefit from interactive activities such as Chat Sessions

with WTO Experts. WTO E-Learning is available for government officials.

While the WTO E-Learning material is freely available on the WTO E-Learning website, you have to register and

submit the nomination form in order to access the course exams and obtain a WTO certificate. Once your

registration process is complete, a username and password will be sent to you by email. Your access codes will

be available for a three month period. In this period, you will have to complete AND submit all exams. During

these three months a Trainer will be available to assist you with any questions you may have.

5

The estimated study time per course is 50-60 hours. Therefore, the course requires around 2 hours of study

per working day.

Note

You will have access to the E-Learning website during the duration of the course and your account will

expire at 23:59 (Geneva time) of the last day. In order to finalise the course in a timely manner, you

should submit the Final Exam before this deadline.

Structure of the course

Training materials The course is divided into 6 Modules. Each module contains training materials on a

specific issue, including explanatory texts and examples, which take two forms:

Illustrations: A simplified explanation of WTO provisions or theoretical points

developed throughout the module.

Case studies extracted from WTO jurisprudence, which show how WTO rules have

been interpreted by the Dispute Settlement Body.

Exercises Self-assessment exercises are available in each module. They allow you to

measure your personal progress in the course.

Your academic profile allows you track your progress, using graphs and charts.

End-of-module

Exams

Please note that you may take the end-of-module exam only once and it will count

towards your final average.

Final Exam The final Exam is the exam at the end of the last module of your course. This

exam covers all the issues addressed during the course. Take your time to

complete and submit it, since you will only be able to do it once and it counts

double in the calculation of your final average.

6

II.C. WHO IS WHO?

During your course, you will have the opportunity to interact with colleagues from other WTO Members and

Observers, as well as with WTO experts in the subject matter of the course and the E-Learning Unit.

Who is who?

Participants Government officials who are taking part in the course and have the potential to

interact and build a network.

Trainer Your Trainer is a WTO expert, who is available to guide you and respond to your

queries on the academic content of the course. Feel free to contact your Trainer

using the Internal Email Service, whenever you need some clarification.

Help Desk The E-Learning Help Desk is ready to assist you on technical issues related to the

functioning of the website.

II.D. EVALUATION AND CERTIFICATE

At the end of each module, you will have to complete and submit an exam. These exams contain

multiple-choice questions addressing the substantive content, as well as case studies, of the pertinent Module.

Should you have questions on the evaluation of your exams, please remember to first carefully read

the reasoning for correct answer, which you will see together with your test results.

The results of each exam will be taken into account for the calculation of your final average. After completing

the last module, you will find the Final Exam, which counts double in the calculation of your final average.

Note

You may only take the end-of-module exams once and they count towards the calculation of your final

average.

Upon successful completion of the course, the WTO Institute for Training and Technical Cooperation will issue

and send you a certificate, signed by the Director General, if you:

reach a final average of at least 60% of correct answers;

have more than 50% in each exam except in one. (This means: If the course has 5 Modules, you have

to have 4 exams above 50%.);

have taken part in the interactive activities (chat and/or forum).

Participants with outstanding results (i.e. a final average above 90% and no exam below 50%) will receive a

Certificate with Distinction.

7

III. E-LEARNING WEBSITE

The E-Learning website has been designed for you and to foster an efficient training experience and allow you

to interact with other participants and WTO experts. It contains the training materials for your course, as well

as background documentation and interactive tools.

You may take the Online Tutorial available on the website, to get familiar with the different functions and

interactive tools.

Note

In order to login, you should always enter the username and password that were sent to you.

III.A. TRAINING MATERIALS

E-Learning offers comprehensive courses. Each module consist of the following elements:

Training and theoretical materials on the WTO and its Agreements;

Illustrations and examples;

Case studies and exercises;

Text of the WTO Agreements and Official Documents;

Access to further information through hyperlinks or the module support documents;

End-of-module exam.

Furthermore, you will have access to the eLibrary, which contains background documents (WTO Agreements,

the Analytical Index of jurisprudence, Glossary of Trade Terms, Trade Policy Review Reports, List of

WTO members and Information on WTO Negotiations), as well as useful links to complement your study.

8

III.B. INTERACTIVE TOOLS

The E-Learning website offers interactive tools to foster the exchange among course participants, as well as

between participants and WTO experts. Please refer to the Online Tutorial for more detailed information on:

Interactive tools

Internal Email Service: Your own E-Learning email account! Use it to contact your Trainer, Help

Desk, other participants... and build-up your network.

News Forum: This is the place to discuss the latest WTO news of interest for you by

exchanging comments and views with other participants and trainers.

Chat Sessions: Chat Sessions with WTO Experts and Special Guests will be organized

during the course. An invitation with the date and time will be sent to you.

Important note

Do not wait to fully benefit from the interactive features of the E-Learning website! Take the first step in

contacting your Trainer and take the initiative in the process... talk about the most important trade issues

for your country and region with colleagues and share your knowledge and experiences.

9

IV. USER AGREEMENT

The use of the E-Learning platform, the training materials and interactive features is subject to the terms and

conditions contained in the User Agreement. You have automatically agreed to the User Agreement by using

the log-in details (username and password) that were sent to you. The User Agreement reads as follows:

1. The E-Learning platform is property of the World Trade Organization. It is managed by the E-Learning

Unit of the Institute for Training and Technical Cooperation and its objective is to deliver online courses

on the WTO and its Agreements, while taking full advantage of the internet and the latest multimedia

technologies.

2. The User is a trade official from a developing country or economy in transition, nominated by his/her

respective government. The User enjoys access to the E-Learning platform during the duration of the

course, under the following terms and conditions:

a. The WTO is the copyright holder of the content of the E-Learning platform. Training materials and

other tools available online shall not be disseminated without prior written authorization from the

WTO E-Learning Unit;

b. During the course, the User may print the training materials and documents available on the

E-Learning platform for his/her personal use only;

c. Citations and references to the course materials available on the E-Learning platform shall fully

acknowledge the source (i.e. WTO E-Learning course);

d. Only authorized Users (i.e. participants, nominated by their governments, who have received a

username and password) are entitled to use the E-Learning platform;

e. The User is responsible for maintaining the confidentiality of the username and password to access

the E-Learning platform. If you become aware of any unauthorized use of your account, you shall

notify the E-Learning Unit ([email protected]) immediately;

f. The utilization of the E-Learning platform and its contents shall be exclusively in relation to the

course that is being followed by the User;

g. Communications through email and the Discussion Forum may be monitored by the WTO to ensure

civility and compliance with the User Agreement;

h. If the User breaches the terms and conditions of this User Agreement, his/her right to access the

E-Learning Platform will be revoked unilaterally by the WTO.

mailto:[email protected]

11

The World Trade Organization ESTIMATED TIME: 2 ½ hours

OBJECTIVES OF MODULE 1

Present a synopsis of the historical background of the WTO

Present the objectives and some new key WTO principles

Explain the function and organizational structure of the WTO

Present the negotiations launched in the Doha Development Agenda

MODULE

1

13

I. HISTORICAL BACKGROUND OF THE WTO

IN BRIEF

From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the rules for much of

world trade. Although it appeared well established, for those 47 years it was a provisional agreement

serviced by only a de facto organization.

The GATT helped to establish a multilateral trading system that became progressively liberal through

successive rounds of trade negotiations. Conclusion of Uruguay Round negotiations led to the creation of

new agreements, such as the General Agreement on Trade in Services (GATS), and the establishment of the

World Trade Organization (WTO) in 1995.

Rounds of trade negotiations

Year Place/name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960-1961 Geneva, Dillon Round Tariffs 26

1964-1967 Geneva, Kennedy Round Tariffs and anti-dumping measures 62

1973-1979 Geneva, Tokyo Round Tariffs, non-tariff measures, "framework"

agreements

102

1986-1994 Geneva, Uruguay Round Tariffs, non-tariff measures, rules,

services, intellectual property, dispute

settlement, textiles, agriculture, creation of

WTO, etc

123

Table 1: GATT Rounds of negotiations

14

IN DETAIL

The project to establish a multilateral trading system to negotiate lower customs duties and the reduction or

elimination of other trade barriers and to stimulate the expansion of world trade originated in the 1940s.

It was supposed to go ahead on two tracks:

the creation of the International Trade Organization (ITO); and

the launching of multilateral tariff negotiations that involved the drafting of binding legal provisions

relating to the tariffs under a "General Agreement on Tariffs and Trade" (GATT)

The GATT was drafted, but the ITO was never created. However, the Interim Commission for the International

Trade Organization (ICITO) was established and served as a de facto Secretariat to the GATT Contracting

Parties.

From 1947 to 1994, Contracting Parties organized eight rounds of negotiations. The major ones were:

The Kennedy Round (1964-1967):

substantial reduction of tariff barriers.

The Tokyo Round (1973-1979):

first negotiations on non-tariff barriers;

plurilateral codes; and

the enabling clause (the first major decision on differential treatment and non-reciprocity for

developing countries).

The Uruguay Round (1986-1994):

creation of the WTO;

transformation of Tokyo Round plurilateral codes into multilateral agreements;

strengthened dispute settlement system; and

incorporation of the new agreements on trade in services and trade-related aspects of intellectual

property rights which considerably broadened the scope of the multilateral trade system.

Participants in the Uruguay Round of Multilateral Trade Negotiations concluded the Round by adopting the

"Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" (the Final Act). The

Final Act included the "Marrakesh Agreement Establishing the World Trade Organization" (the

WTO Agreement).

The WTO Agreement established a new organizational body, the World Trade Organization ("the WTO"), to

administer the Uruguay Round agreements.

http://www.wto.org/english/docs_e/legal_e/03-fa_e.htm

http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm

15

II. OBJECTIVES OF THE WTO

IN BRIEF

In the preamble to the Marrakesh Agreement establishing the WTO, the parties to the Agreement recognize

certain objectives they wish to attain through the multilateral trading system:

raise living standards;

ensure full employment;

ensure a large and steadily growing volume of real income and effective demand; and

expand the production of and trade in, goods and services, while allowing for the optimal use of the

world's resources in accordance with the objective of sustainable development.

The Agreement also recognizes the need for "positive efforts to ensure that developing countries, and

especially the least-developed among them, secure a share in the growth in international trade

commensurate with … their economic development".

IN DETAIL

The Preamble to the WTO Agreement encapsulates its objectives. It declares:

The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic endeavour should be conducted with a

view to raising standards of living, ensuring full employment and a large and steadily growing volume of real

income and effective demand, and expanding the production of and trade in goods and services, while

allowing for the optimal use of the world's resources in accordance with the objective of sustainable

development, seeking 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,

Recognizing further that there is need for positive efforts designed to ensure that developing countries, and

especially the least developed among them, secure a share in the growth in international trade

commensurate with the needs of their economic development. Being desirous of contributing to these

objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial

reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in

international trade relations...



16

The objectives of the WTO are not fundamentally different from the objectives contained in the preamble of the

GATT 1947. However, it is important to note the following two points:

Although the WTO's objectives do not mention trade liberalization as the means to establish free-trade

between Members, the drafters considered "substantial reduction of tariffs and other barriers to trade and the

elimination of discriminatory treatment in international trade relations" as important steps to achieving these

objectives.

A second means to achieve the noted objectives is the practice of Members of "entering into reciprocal and

mutually advantageous arrangements" as mentioned in the text of the GATT 1947.

Accordingly, the WTO adds three new dimensions to the objectives in the preamble of the GATT 1947. They

include:

the expansion of "the production of and trade in goods and services" to take into consideration the extension

of the coverage of the WTO subject matters. That is, while the GATT covered trade in goods, under the

WTO, coverage was expanded to another subject area – trade in services (see the GATS Agreement);

"the objective of sustainable development, seeking both to protect and preserve the environment and to

enhance the means for doing so …;"

the "development dimension" aiming at helping "…developing countries, and especially the least developed

among them, secure a share in the growth in international trade commensurate with the needs of their

economic development".

17

III. FUNCTIONS OF THE WTO

IN BRIEF

The WTO fulfils its objective by:

administering trade agreements between its Members;

serving as a forum for trade negotiations;

settling trade disputes;

reviewing Members trade policies;

assisting developing countries in trade policy issues, through technical assistance and training

programmes; and

cooperating with other international organizations.

IN DETAIL

Article III of the WTO Agreement expounds the functions of the WTO. They include:

(1) "The WTO shall facilitate the implementation, administration and operation, and further the objectives

of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for

the implementation, administration and operation of the Plurilateral Trade Agreements."

(2) "The WTO shall provide the forum for negotiations among its Members concerning their multilateral

trade relations in matters dealt with under the agreements in the Annexes to this Agreement … The

WTO may also provide a forum for further negotiations among its Members concerning their

multilateral trade relations, and a framework for the implementation of the results for such

negotiations, as may be decided by the Ministerial Conference."

The preceding paragraphs refer to the role of the WTO of providing a permanent institutional forum for trade

negotiations among its Members. These negotiations may be on subjects already covered under WTO

agreements or in respect of "new issues" to be disciplined by WTO agreements.

(3) "The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of

Disputes (DSU) in Annex 2 to this Agreement."

http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm#articleIII

http://www.wto.org/english/docs_e/legal_e/28-dsu_e.htm

http://www.wto.org/english/docs_e/legal_e/28-dsu_e.htm

18

The above paragraph refers to the role of the WTO as a forum for the settlement of disputes between its

Members in accordance with the disciplines and procedures elaborated in the Dispute Settlement

Understanding ("the DSU" in Annex 2 to the WTO Agreement). When Members are unable to reach a mutually

acceptable solution to a dispute arising under one of the agreements covered by the DSU, they may have

recourse to the Dispute Settlement Procedure.

(4) "The WTO shall administer the Trade Policy Review Mechanism (TPRM) provided for in Annex 3 to this

Agreement."

This function underscores the role of the WTO in the transparency mechanism designed by Members during the

Uruguay Round. The Trade Policy Review Mechanism (TPRM) was one of the few elements of the

WTO Agreement that formed part of the "Early Harvest" realized before the Uruguay Round ended.

Early Harvest is an expression which describes the agreement by GATT contracting parties at the "Mid-Term

Review" Ministerial Meeting of the Uruguay Round negotiations, in Montreal in 1988, that certain results of the

negotiations, on which a clear consensus already existed, would enter into force immediately, although on a

provisional basis. That is, their agreement that some fruits (of the negotiations) would be harvested early.

(5) "With a view to achieving greater coherence in global economic policy-making, the WTO shall

cooperate, as appropriate, with the International Monetary Fund and with the International Bank for

Reconstruction and Development and its affiliated agencies."

This final quote identifies one aspect that the Members need consider when they enter into negotiations to

design an international regulatory framework. They should cooperate with other multilateral agencies. The

quote also appears to be an implicit reference to the period when (in the context of the Havana Conference)

many participants considered that an ITO could be constituted under the UN umbrella, next to the IMF and the

World Bank. The ITO was envisioned as the third pillar of a system put in place to shape international

economic relations in the post-war reconstruction period - the Bretton Woods system.

EXERCISES:

1. What is the main objective of the WTO?

2. What are the main functions of the WTO?

http://www.wto.org/english/docs_e/legal_e/29-tprm_e.htm

19

IV. ORGANIZATIONAL STRUCTURE OF THE WTO

With a dense network of legal provisions and procedures to govern their trade transactions, WTO Members

established a working structure for the WTO to allow them to monitor the implementation and the development

of the WTO.

The General Council also meets as the Trade Policy Review Body and Dispute Settlement Body. The

negotiations mandated by the Doha Declaration take place in the Trade Negotiations Committee ("TNC") and

its subsidiaries. This now includes the negotiations on agriculture and services begun in early 2000. The TNC

operates under the authority of the General Council.

The WTO Agreement contains provisions that organize the work of the WTO. Members take their

consensus-based decisions through various bodies, which are open to all Members. The "legal structure" of the

WTO is shown in the diagram below:

Figure 1: WTO organization chart

20

IV.A. THE MINISTERIAL CONFERENCE

The Ministerial Conference is the highest authority in the WTO. Its sessions must take place at least once

every two years. The Ministerial Conference can take decisions on all matters under all multilateral trade

agreements.

IV.B. THE GENERAL COUNCIL

The General Council constitutes the second tier in the WTO Structure. It comprises representatives from all

Member countries, usually Ambassadors/Permanent Representatives based in Geneva. It meets regularly

(approximately once a month) to adopt decisions, mostly on behalf of the Ministerial Conference when the

Conference is not in session.

The General Council also meets as:

The Trade Policy Review Body (TPRB), with a different Chairperson, to carry out trade policy reviews as

mandated by the Decision on the Trade Policy Review Mechanism.

The Dispute Settlement Body (DSB), with a different Chairperson to administer the rules in the Understanding

on Rules and Procedures Governing the Settlement of Disputes (DSU). The DSB has the authority to establish

panels, adopt Panel and Appellate Body Reports, oversee the implementation of rulings and recommendations,

and authorize the suspension of concessions and other obligations under the agreements for which disputes

can be settled by the DSU - the "covered agreements".

The DSB establishes Panels on an ad hoc basis, at the request of a Member (or Members) usually with the

following terms of reference:

...to "examine, in the light of the relevant provisions in the respective covered agreements, the matter

referred to the DSB by the complaining Member and to make such findings as will assist the DSB in making

the recommendations or in giving the rulings provided in that/those agreement(s)".

The DSB also appoints persons to serve on the Appellate Body. The Appellate Body makes recommendations

to the DSB. Where adopted by the DSB, the Appellate Body and the Panel Report (as upheld, amended or

reversed by the Appellate Body) becomes binding on the disputing Members.

http://www.wto.org/english/thewto_e/minist_e/minist_e.htm

21

IV.C. THE COUNCILS

The Councils can be described as subsidiary bodies to the General Council. There are three Councils:

The Council for Trade in Goods (the Goods Council) oversees all the issues related to the Agreements on

trade in goods.

The Council for Trade in Services (the GATS Council) oversees all issues related to the GATS Agreement.

The Council for Trade-Related Aspects of Intellectual Property Rights (the TRIPS Council) oversees

issues related to the TRIPS Agreement.

These Councils are composed of all WTO Members and have subsidiary bodies (see below).

Several other bodies, which focus on specific issues, report to the General Council. They are usually called

Committees, Working Groups or Working Parties; they are:

Committee on Trade and Development (CTD);

Committee on Trade and Environment (CTE);

Committee on Regional Trade Agreements (CRTA);

Committee on Balance-of-Payment Restrictions (BOP Committee); and

Committee on Budget, Finance and Administration.

Working Parties on Accession;

Working Group on Trade, Debt and Finance; and

Working Group on Trade and Technology Transfer.

IV.D. THE SUBSIDIARY BODIES

The three Councils (for Goods, Services and TRIPS) have subsidiary bodies.

The Goods Council has 11 committees working on specific subjects (such as agriculture, market access,

subsidies, and anti-dumping measures). These committees are composed of all Members.

The Services Council's subsidiary bodies deal with financial services, domestic regulations, GATS rules and

specific commitments. It does not have a permanently fixed number of subsidiary bodies. For example, the

Negotiating Group on Basic Telecommunications was dissolved in February 1997 when its work ended.

22

EXERCISES:

3. Please arrange the following WTO bodies in hierarchical order:

- General Council;

- Council for Trade in Services;

- Ministerial Conference.

4. Please state the function of the following WTO bodies:

(a) General Council;

(b) Council for Trade in Services;

(c) Ministerial Conference.

23

IV.E. DECISION-MAKING AT THE WTO

CONSENSUS VERSUS...

The WTO is a Member-driven, consensus-based organization.

Consensus is defined as a situation in which no Member, present at a meeting where a decision is taken,

formally objects to the proposed decision. The definition is contained in Footnote 1 to Article IX of the

WTO Agreement:

"The Body concerned shall be deemed to have decided by consensus on a matter submitted for its

consideration, if no Member present at the meeting when the decision is taken, formally objects to the

proposed decision."

Consensus allows all Members to ensure their interests are properly considered.

...VOTING

Where consensus is not possible, the WTO agreement permits voting — a vote being won by a tally of the

majority of votes cast, and based on the principle "one Member, one vote".

The WTO Agreement envisages voting whenever a decision cannot be arrived at by consensus. Nevertheless,

voting has rather been exercised in the following four specific kinds of situations:

a three-quarters majority of WTO Members in the Ministerial Conference or the General Council can

adopt an interpretation of any of the multilateral trade agreements;

the Ministerial Conference, by a three-quarters majority, can waive an obligation imposed on a Member

by a multilateral agreement;

all Members or a two-thirds majority (depending on the provision of the agreement) can take a decision

to amend provisions of the multilateral agreements;

a two-thirds majority in the Ministerial Conference or the General Council in between conferences, can

take a decision to admit a new Member.

FORMALS AND INFORMALS

Important breakthroughs are often, but no always, made in formal meetings, or in the higher level Councils.

Since decisions are generally made by consensus, without voting, WTO informal consultations play a vital role

in bringing the diverse Membership to an agreement.

One tier below the formal meetings is informal meetings. Informal meetings, such as Heads of Delegations

(HOD), also include the full membership. More complex issues tend to be discussed in smaller groups. A

http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm#fntext1

http://www.wto.org/english/docs_e/legal_e/04-wto_e.htm#articleIX

24

recent common practice is for the chairperson of a negotiating group to attempt to forge a compromise by

holding consultations with delegations in twos or threes, or in groups of 20-30 (of the most interested

delegations).

These smaller meetings have to be handled sensitively. The key is to ensure that everyone is kept informed

even if they are not in a particular consultation or meeting (the process must be "transparent"), and that they

have an opportunity to participate or to provide input (it must be "inclusive").

HAVE YOU EVER HEARD OF THE "GREEN ROOM"?

The "Green Room" is an expression originated from the informal name given to the GATT Director-General's

conference room, which was green. The term nowadays refers to small meetings, which are at times called by

the Director-General, and can take place anywhere, even during Ministerial Conferences.

Market access negotiations also involve small groups, but for a completely different reason. The outcome is a

multilateral package of individual countries' commitments, which are the result of numerous informal bilateral

bargaining sessions, and in the interest of individual countries, (examples are the tariff, and market access

negotiations on trade in services.)

Consequently, informal consultations play a vital role in facilitating consensus, but they do not appear in

organizational charts because they are informal. However, informal consultations are not separate from formal

meetings. They are necessary to facilitate formal decisions in the Councils and Committees. Nor are the

formal meetings unimportant. Formal meetings are the forums for exchanging views, putting countries'

positions on the record, and ultimately confirming decisions.

IV.F. ON-GOING NEGOTIATIONS: THE DOHA DEVELOPMENT

AGENDA

At the Ministerial Conference in Doha, Qatar in November 2001, Members decided to launch a new round of

negotiations, and pursuant to their decision, adopted the Doha Development Agenda and its accompanying

work programme.

The Doha Ministerial Declaration, which sets the negotiating mandate, required WTO Members to set up a

Trade Negotiations Committee (TNC). The TNC then established negotiating mechanisms and is supervising

the current negotiations under the authority of the General Council.

Negotiations are taking place:

In new negotiating groups, on:

Market access;

WTO rules (anti-dumping, subsidies, regional trade agreements); and

Trade Facilitation.

http://www.wto.org/english/tratop_e/dda_e/dda_e.htm

25

In existing bodies, on:

agriculture: in special sessions of the Agriculture Committee;

services: in special sessions of the Services Council;

geographical indications (a multilateral registration system): in special sessions of the Council

for Trade-Related Aspects of Intellectual Property Rights (TRIPS). Other TRIPS issues are

addressed in regular TRIPS Council meetings;

Dispute Settlement Understanding: in special sessions of the Dispute Settlement Body;

Environment: in special sessions of the Trade and Environment Committee; and

Negotiations on outstanding implementation issues: in relevant bodies according to

paragraph 12 of the Doha Ministerial Declaration.

Considerable emphasis is placed on special and differential treatment for developing countries (S&D). S&D is

an integral part of the WTO Agreements. All negotiations and other aspects of the Doha Agenda's work

programme are to fully incorporate this principle. According to the Doha Development Declaration

(paragraph 44) and the Decision on Implementation-Related Issues and Concerns, all S&D provisions are to be

reviewed to make them more precise, effective and operational. These reviews are carried out in special

sessions of the Trade and Development Committee.

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_implementation_e.htm

26

V. SUMMARY

OBJECTIVES OF THE WTO

Improve the welfare of the peoples of the Member countries.

FUNCTIONS OF THE WTO

Facilitate the implementation, administration and operation, and furthering of the objectives of the

WTO Agreements (including the Plurilateral Agreements);

Serve as a forum for trade negotiations;

Administer the Dispute Settlement Understanding (DSU);

Administer the Trade Policy Review Mechanism (TPRM); and

Cooperate with the IMF and the IBRD (World Bank) to achieve coherence in global economic

policy/making.

STRUCTURE OF THE WTO

Ministerial Conference

|

General Council (also DSB and TPRB)

|

Councils for Goods, Services, Intellectual Property

|

Committees

|

Sub-Committees

27

PROPOSED ANSWERS:

1. The objective of the WTO is to improve the welfare of the peoples of the Member countries (standard of

living, employment, income, etc.) by expanding the production of, and trade in, goods and services. The

expansion of the production and trade of goods and services is to be achieved through negotiations

leading to trade liberalization.

This objective should be attained in accordance with sustainable development and with due consideration

of the development needs of developing countries.

2. The main functions of the WTO are to:

administer trade agreements;

serve as a forum for trade negotiations;

settle trade disputes;

review Member's trade policies;

assist developing countries with trade policy issues, through technical assistance and training

programmes; and

cooperate with other international organizations.

3. (a) Ministerial Conference;

(b) General Council;

(c) Council for Trade in Services;

4. The Ministerial Conference is the highest authority of the WTO. It meets at least once every two years.

During the interim, the Conference is represented by the General Council. It meets regularly

(approximately once a month) to adopt decisions and to carry out its functions as the Trade Policy Review

Body and the Dispute Settlement Body.

The Council for Trade in Services (CTS ) is one the three Councils beneath the General Council. The CTS

oversees the functioning of the General Agreement on Trade in Services and reports to the General

Council. The CTS is open to all Members and meets several times a year in regular session and, for the

conduct of the ongoing services negotiations in Special Session.

All Members participate in the work of all WTO Bodies.

The WTO continues the GATT principle of taking decision by "consensus".

29

Introduction to Trade and

Environment in the WTO ESTIMATED TIME: 5 hours


Provide an overview of the linkage between environmental protection and the WTO

Present the historical background of the WTO trade and environment discussions

Explain the Marrakesh Decision on Trade and Environment and the creation of the

WTO Committee on Trade and Environment

Provide an overview of the Doha mandate on trade and environment

Explain the parameters of the trade and environment debate in the WTO

MODULE

2

31

I. ENVIRONMENTAL PROTECTION AND THE

WTO

IN BRIEF

Allowing for the optimal use of the world’s resources in accordance with the objective of sustainable

development and seeking to protect and preserve the environment are fundamental to the WTO. These

goals, enshrined in the Preamble of the Marrakesh Agreement, go hand in hand with the WTO’s objective to

reduce trade barriers and eliminate discriminatory treatment in international trade relations. For WTO

Members, the aims of upholding and safeguarding an open and non-discriminatory multilateral trading

system, on the one hand, and acting for the protection of the environment and the promotion of sustainable

development, on the other, can and must be mutually supportive.

Through its goals, rules, institutions and forward-looking agenda, the WTO provides an important means of

advancing international environmental goals.

IN DETAIL

I.A. WTO GOALS - CONTRIBUTION TO SUSTAINABLE

DEVELOPMENT AND PROTECTION OF THE

ENVIRONMENT ...

An important element of the WTO’s contribution to sustainable development and protection of the environment

comes in the form of furthering trade opening in goods and services to promote economic development, and by

providing stable and predictable conditions that enhance the possibility of innovation. It is the potential impact

of economic growth and poverty alleviation that makes trade a powerful ally of sustainable development. The

purpose of trade liberalization and the WTO’s key principle of non-discrimination promotes the efficient

allocation of resources, economic growth and increased income levels that in turn provide additional

possibilities for protecting the environment. The importance of trade’s contribution to efforts on sustainable

development and the environment has been recognized in such forums as the 1992 Rio Summit, 2002

Johannesburg Summit and 2005 UN World Summit.

The multilateral trading system is an important tool to carry forward international efforts aimed at achieving

sustainable development goal. The WTO’s founding agreement recognizes sustainable development as a central

principle, and it is an objective running through all subjects in current Doha negotiations.


32

THE PREAMBLE TO THE MARRAKESH AGREEMENT

The Parties to this Agreement,

"...Recognizing that their relations in the field of trade and economic endeavour should be conducted with

a view to raising standards of living, ensuring full employment and a large and steadily growing volume of

real income and effective demand, and expanding the production of and trade in goods and services, while

allowing for the optimal use of the world’s resources in accordance with the objective of sustainable

development, seeking 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"

I.B. WTO RULES - MEMBERS CAN ADOPT TRADE-RELATED

MEASURES AIMED AT PROTECTING THE

ENVIRONMENT...

The commitment of WTO members to sustainable development and the environment can also be seen in WTO

rules. In general terms the rules, with their fundamental principles of non-discrimination, transparency and

predictability, help set the framework for members to design and implement measures to address

environmental concerns. Moreover, WTO rules, including specialized agreements such as the Agreement on

Technical Barriers to Trade (TBT) which deals with product regulations, standards, testing and certification

procedures and the Agreement on Sanitary and Phytosanitary Measures (SPS) which concerns food safety and

animal and plant health, provide scope for environmental objectives to be followed and for necessary

trade-related measures to be adopted. WTO rules set up the appropriate balance between the right of

members to take regulatory measures, including trade restrictions, to achieve legitimate policy objectives

(e.g., protection of human, animal or plant life or health, and natural resources) and the rights of other

members under basic trade disciplines. For example, GATT Article XX on General Exceptions lays out a number

of specific instances in which members may be exempted from GATT rules. The provision seeks, among other

things, to ensure that environmental measures are not applied arbitrarily and are not used as disguised

protectionism. (see Module 6)

Since the entry into force of the WTO in 1995, the WTO Dispute Settlement Body has had to deal with a

number of disputes concerning environment-related trade measures. Such measures have sought to achieve a

variety of policy objectives — from conservation of sea turtles from incidental capture in commercial fishing to

the protection of human health from risks posed by air pollution. WTO jurisprudence has affirmed that WTO

rules do not take precedence over environmental concerns. The WTO's dispute settlement allowed a member

in 2001 to maintain its ban on the importation of asbestos so it could protect its citizens and construction

workers. In the US — Shrimp dispute, the WTO pushed members towards a strengthening of their

environmental collaboration; it required that a cooperative environmental solution be sought for the protection

of sea turtles between the parties to the conflict. (see Module 6)

http://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm


http://www.wto.org/english/docs_e/legal_e/15sps_01_e.htm

http://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm#articleXX

33

I.C. WTO INSTITUTIONS - ADVANCE DIALOGUE ON TRADE

AND ENVIRONMENT LINKAGES...

The WTO also supports sustainable development and the environment through its specialized committees and

bodies. One unique institutional venue is the Committee on Trade and Environment (CTE). As a forum for

dialogue on trade and the environment, the Committee is an incubator for ideas on how to move the discussion

forward. Already, this is bearing fruit. Some issues first raised in the CTE have become fully-fledged

negotiations — for instance, on fisheries subsidies and on the relationship between the WTO and multilateral

environmental agreements (MEAs). Other WTO bodies are also important. For example, the committee

administering the TBT Agreement is where governments share information on actions they are taking and

discuss how some environmental regulations may affect trade.

I.D. WTO FORWARD-LOOKING AGENDA - THE DOHA

DEVELOPMENT AGENDA AND THE ENVIRONMENT...

The current Doha Round of negotiations gives members a chance to achieve an even more efficient allocation

of resources on a global scale through the continued reduction of obstacles to trade. The Round is also an

opportunity to pursue win-win-win results for trade, development and the environment. For example, the

Doha Round is the first time when environmental issues have featured explicitly in the context of a multilateral

trade negotiation and the overarching objective is to enhance the mutual supportiveness of trade and

environment. Members are working to liberalize trade in goods and services that can benefit the environment.

They are also discussing ways to maintain a harmonious co-existence between WTO rules and the specific

trade obligations in various agreements that have been negotiated multilaterally to protect the environment.

Other parts of the Doha negotiations are also relevant to the environment (e.g. aspects of the agriculture

negotiations and the negotiations on fisheries subsidies disciplines). The Doha Development Agenda also has a

section specifying the priority items in the CTE’s regular work.

Since environmental problems often transcend national borders, the response must involve concerted action at

the international level. WTO members have long recognized the need for coherence amongst international

institutions in addressing global environmental challenges. The current negotiations on the WTO- multilateral

environmental agreements (MEAs) relationship provide a unique opportunity for creating positive synergies

between the trade and environment agendas at the international level. In addition, there is regular and routine

contact between the WTO Secretariat and secretariats of MEAs.

EXERCISES:

1. How is sustainable development and environmental protection enshrined in the Marrakesh Agreement?

2. How can trade provides a means to advance international environmental goals?

34

II. EMERGING ENVIRONMENT DEBATE IN THE

GATT

IN BRIEF

Trade and environment, as an issue, is by no means new. The link between trade and environmental

protection — both the impact of environmental policies on trade, and the impact of trade on the environment

— was recognized as early as 1970. There were important developments in the environmental forum and

emerging environment debate took place in the GATT during 1972-1992.

IN DETAIL

II.A. THE STOCKHOLM CONFERENCE IN 1972

Growing international concern about the impact of economic growth on social development and the

environment led to a call for an international conference on how to manage the human environment. The UN

Conference on the Human Environment held in Stockholm in 1972 was the response.

During the preparatory phase to the Stockholm Conference, the Secretariat of the General Agreement on

Tariffs and Trade (GATT) was requested to make a contribution. On the Secretariat's own responsibility, a

study entitled "Industrial Pollution Control and International Trade" was prepared. It focused on the

implications of environmental protection policies on international trade, reflecting the concern of trade officials

that such policies could become obstacles to trade, as well as constitute a new form of protectionism (i.e.

"green protectionism").

In 1971, GATT Director-General presented the study to GATT members (CONTRACTING PARTIES), and urged

them to examine what the implications of environmental policies might be for international trade. In the

discussions that followed, a number of GATT members suggested that a mechanism be created in GATT for the

implications to be examined more thoroughly.

II.B. GATT GROUP ON ENVIRONMENTAL MEASURES AND

INTERNATIONAL TRADE (EMIT)

Subsequently, the GATT Council of Representatives agreed to set up a Group on Environmental Measures and

International Trade (the "EMIT" group), which would be open to all GATT members. However, the decision

also said that the group would only convene at the request of GATT members. It was not until 1991 when the

members of the European Free Trade Association (EFTA, at the time included Austria, Finland, Iceland,

Liechtenstein, Norway, Sweden and Switzerland) asked for the EMIT Group to be convened.

35

II.C. UN CONFERENCE ON ENVIRONMENT AND

DEVELOPMENT (UNCED) IN 1992

Why, after 20 years of EMIT’s inactivity, did EFTA make the request? EFTA referred to the upcoming 1992

United Nations Conference on Environment and Development (UNCED), also known as the Rio "Earth

Summit", and said that GATT should contribute. In addition, there were a few new developments in both trade

and the environment in those 20 years.

II.D. DEVELOPMENTS BETWEEN THE STOCKHOLM

CONFERENCE IN 1972 AND THE RIO SUMMIT IN 1992

Between 1972 and 1992, environmental policies began to have an increasing impact on trade, and with

increasing trade flows, the effects of trade on the environment had also become more widespread. This led to

a number of development in the trade and environment discussions:

During the Tokyo Round of trade negotiations (1973–1979), participants took up the question of the

degree to which environmental measures (in the form of technical regulations and standards) could

form obstacles to trade. The Tokyo Round Agreement on Technical Barriers to Trade (TBT), also known

as the "Standards Code", was negotiated. Amongst other things, it called for non-discrimination in the

preparation, adoption and application of technical regulations and standards, and for them to be

transparent.

In 1982, a number of developing countries expressed concern that products prohibited in developed

countries on the grounds of environmental hazards, health or safety reasons, continued to be exported

to them. With limited information on these products, they were unable to make informed decisions

regarding their import. At the 1982 GATT ministerial meeting, members decided to examine the

measures needed to bring under control the export of products prohibited domestically (on the grounds

of harm to human, animal, plant life or health, or the environment). This led to the creation, in 1989, of

a Working Group on the Export of Domestically Prohibited Goods and Other Hazardous Substances.

The 1991 tuna and dolphin dispute between Mexico and United States put the spotlight on the linkages

between environmental protection policies and trade. The case concerned a US embargo on tuna

imported from Mexico, caught using "purse seine" nets which caused the incidental killing of dolphins.

Mexico appealed to GATT on the grounds that the embargo was inconsistent with the rules of

international trade. The panel ruled in favour of Mexico based on a number of different arguments.

Although the report of the panel was not adopted, its ruling was heavily criticised by environmental

groups who felt that trade rules were an obstacle to environmental protection.

During the Uruguay Round (1986–1994), trade-related environmental issues were once again taken up.

Modifications were made to the TBT Agreement, and certain environmental issues were addressed in the

General Agreement on Trade in Services, the Agreements on Agriculture, Sanitary and Phytosanitary

Measures (SPS), Subsidies and Countervailing Measures, and Trade-Related Aspects of Intellectual

Property Rights (TRIPS).

During this same period, important developments were also taking place in environmental forums. The

discussion on the relationship between economic growth, social development and environment that

began at the 1972 Stockholm Conference continued throughout the 1970s and 80s. In 1987, the World

36

Commission on Environment and Development produced a report entitled Our Common Future (also

known as the Brundtland Report), in which the term "sustainable development" was coined. The report

identified poverty as one of the most important causes of environmental degradation, and argued that

greater economic growth, fuelled in part by increased international trade, could generate the necessary

resources to combat what had become known as the "pollution of poverty".

As a result of the above developments, the EMIT group’s proposal met with a positive response. Despite some

countries’ initial reluctance to have environmental issues discussed in GATT, they agreed to have a structured

debate on the subject. In accordance with its mandate of examining the possible effects of environmental

protection policies on the operation of the General Agreement, the EMIT group focused on the effects of

environmental measures (such as eco-labelling schemes) on international trade, the relationship between the

rules of the multilateral trading system and the trade provisions contained in MEAs (such as the Basel

Convention on the Transboundary Movement of Hazardous Wastes), and the transparency of national

environmental regulations with an impact on trade.

II.E. RIO EARTH SUMMIT AND AFTER

The activation of the EMIT group was followed by further developments in environmental forums. The 1992

UNCED drew attention to the role of international trade in poverty alleviation and in combating environmental

degradation. The Rio declaration stated that an open, equitable and non-discriminatory multilateral trading

system had a key contribution to make to national and international efforts to better protect and conserve

environmental resources and promote sustainable development. Agenda 21, the programme of action adopted

at the conference, also addressed the importance of promoting sustainable development through, amongst

other means, international trade.

The preparatory work for the summit had itself influenced developing countries’ approach discussing trade and

environment issues in the EMIT group. The concept of "sustainable development" had established a link

between environmental protection and development at large. These moves were about to yield more concrete

results within the trading system. The environment and trade were to be linked more explicitly in the new

constitution of the multilateral trading system that was to be signed in 1994.

EXERCISES:

3. What are the main environment-related developments in the GATT during 1972-1992?

4. What are the major environmental events that have impacted the trade and environment debates?

37

III. THE MARRAKESH DECISION ON TRADE AND

ENVIRONMENT AND THE WTO COMMITTEE

ON TRADE AND ENVIRONMENT

IN BRIEF

Towards the end of the 1986–94 Uruguay Round (and two decades after the EMIT group was set up in

GATT), attention was once again drawn to trade-related environmental issues, and the role of the

soon-to-be-created World Trade Organization. The preamble of the Marrakesh Agreement refers to the

importance of working towards sustainable development. The Marrakesh Ministerial Decision called for the

creation of the Committee on Trade and Environment. With its broad based mandate, the CTE has

contributed to identifying and understanding the relationship between trade measure and environmental

measures in order to promote sustainable development.

IN DETAIL

III.A. MARRAKESH DECISION ON TRADE AND ENVIRONMENT

The Marrakesh Agreement, establishing the WTO, was signed in April 1994 as a result of the Uruguay Round

negotiations. Its preamble refers to the importance of working towards sustainable development. The fact

that the first Paragraph of the preamble recognizes sustainable development as an integral part of the

multilateral trading system illustrates the importance placed by WTO members on environmental protection.

(see above)

In Marrakesh, ministers also signed a "Decision on Trade and Environment" (see Annex 1) which states that:

"There should not be, nor need be, any policy contradiction between upholding and safeguarding an open,

non-discriminatory and equitable multilateral trading system on the one hand, and acting for the protection

of the environment, and the promotion of sustainable development on the other."

The Marrakesh Ministerial Decision also called for the creation of the Committee on Trade and Environment. It

mandates the committee to:

identify the relationship between trade measures and environmental measures in order to promote

sustainable development

make appropriate recommendations on whether any modifications of the provisions of the multilateral

trading system are required, compatible with the open, equitable and non-discriminatory nature of the

system.

38

III.B. COMMITTEE ON TRADE AND ENVIRONMENT (CTE)

Created in 1995, the CTE has followed a comprehensive 10-point work programme (see below). It covers a

range of relevant issues, from trade and the environment in general to trade barriers, taxes and individual

sectors such as services and intellectual property, and relations with environmental organizations.

The Original 10-point Work Programme of the CTE

Items 1 and 5 (now in negotiations) - Trade rules, environment agreements, and disputes

Relationship between the rules of the multilateral trading system and the trade measures contained in MEAs,

and between their dispute settlement mechanisms.

Item 2 - Environmental protection and the trading system

Relationship between environmental policies relevant to trade and environmental measures with significant

trade effects and the provisions of the multilateral trading system (MTS).

Item 3 (now an item of focus) - How taxes and other environmental requirements fit in

Relationship between the provisions of the MTS and: (a) charges and taxes for environmental purposes; and

(b) requirements for environmental purposes relating to products, such as standards and technical

regulations, and packaging, labelling and recycling requirements.

Item 4 - Transparency of environmental trade measures

Provisions of the MTS dealing with the transparency of trade measures used for environmental purposes.[1]

Item 6 (item of focus) - Environment and trade liberalization

How environmental measures affect market access, especially in relation to developing countries and least

developed countries; and the environmental benefits of removing trade restrictions and distortions.

Item 7 - Domestically prohibited goods

Exports of domestically prohibited goods (DPGs), in particular hazardous waste.

Item 8 (item of focus) - Intellectual property

Relevant provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

Item 9 – Services

The work programme envisaged in the Decision on Trade in Services and the Environment.

Item 10 (now in negotiations) - The WTO and other organizations

Relationship and appropriate arrangements between WTO bodies and intergovernmental and

non-governmental organizations (NGOs).

1 See environmental database (documents WT/CTE/EDB/---).

39

The CTE is composed of all WTO Members and a number of observers from inter-governmental organizations.

It reports to the WTO's General Council. The CTE first convened in early 1995 to examine the different items of

its mandate. In preparation for the Singapore Ministerial Conference, in December 1996, the CTE summarized

the discussions which it held since its establishment, as well as the conclusions reached in a report presented

at the Conference.[2]

Since then, it has met approximately two-three times a year. It has held a number of

information sessions with MEA secretariats to deepen Members' understanding of the relationship between

MEAs and WTO rules, and organized a number of public symposia for non-governmental organizations (NGOs).

With its broad based mandate, the CTE has contributed to identifying and understanding the relationship

between trade measure and environmental measures in order to promote sustainable development.

Although the CTE has not recommended any changes to the rules of the MTS, its work has led to some trade

and environment issues migrating to negotiations as key components of the Doha round (negotiations). One

example is fisheries (under the Rules negotiations): this is an area where eliminating fishery subsidies can help

protect fish stock.

EXERCISES:

5. What are the 2 main points of the Marrakesh Ministers Decisions on Trade and Environment?

6. What are the CTE original items of work?

7. What are the main achievements of the CTE so far?

2 See document WT/CTE/1.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/1.WPF

40

IV. THE DOHA MANDATE

IN BRIEF

At the Fourth WTO Ministerial Conference in Doha, Qatar, in November 2001, WTO Members reaffirmed their

commitment to environmental protection and agreed to embark on a new round of trade negotiations[3]

,

including negotiations on certain aspects of the linkage between trade and environment. In addition to

launching new negotiations, the Doha Ministerial Declaration requested the CTE, in pursuing work on all

items in its terms of reference, to focus on three of those items.

Moreover, the Doha Ministerial Declaration strongly reaffirmed Members' commitment to the objective of

sustainable development as stated in the Preamble to the Marrakesh Agreement (see Paragraph 6). Ministers

also called on the Trade and Environment and Trade and Development Committees to act as forums for

identifying and debating the environmental and developmental aspects of the negotiations, in order to help

achieve the objective of sustainable development.

Furthermore, Paragraph 28 of the Doha Ministerial Declaration instructs Members "to clarify and improve

WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing

countries". These negotiations are taking place in the Negotiating Group on Rules.

The Doha mandate has placed trade and environment work at the WTO on two tracks:

The CTE Special Session (CTESS) has been established to deal with the negotiations (mandate

contained in Paragraph 31 of the Doha Ministerial Declaration).

The CTE Regular deals with the non-negotiating issues of the Doha Ministerial Declaration together

with its original agenda contained in the 1994 Marrakesh Decision on Trade and Environment

(mandate contained in paragraphs 32, 33 and 51).

IN DETAIL

IV.A. TRADE AND ENVIRONMENT NEGOTIATIONS - CTESS

The negotiations on trade and the environment is part of the Doha Development Agenda, with an overarching

objective to enhance the mutual support of trade and environmental policies. In the Doha Round, WTO

members are negotiating certain aspects of the link between trade and the environment, particularly the

relationship between the WTO’s agreements and those of other agencies, and market access for environmental

goods and services. These negotiations take place in "Special Sessions" of the Committee on Trade and

Environment (CTESS).

3 Relevant of the Doha Ministerial Declaration can be found in Annex 2.

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm

41

Paragraph 31 of the Doha Ministerial Declaration launched negotiations, "with a view to enhancing the mutual

supportiveness of trade and environment" and "without prejudging their outcome", on the following issues:

PARAGRAPH 31(I) - RELATIONSHIP BETWEEN WTO RULES AND MEAS

SPECIFIC TRADE OBLIGATIONS

Paragraph 31(i) mandates Members to negotiate on the relationship between WTO rules and specific

trade obligations set out in MEAs. Negotiations are limited in scope to the applicability of such existing

WTO rules as among parties to the MEA in question. Moreover, the negotiations are not to prejudice the

WTO rights of any Member that is not a party to the MEA in question. (see Module 3)

PARAGRAPH 31(II) - INFORMATION EXCHANGE

Negotiations were mandated in Paragraph 31(ii) on procedures for information exchange between MEAs

and the relevant WTO committees, and on the criteria for the granting of observer status in WTO

bodies. (see Module 3)

PARAGRAPH 31(III) – ENVIRONMENTAL GOODS AND SERVICES

Negotiations were launched in Paragraph 31(iii) on the reduction or, as appropriate, the elimination of

tariff and non-tariff barriers to environmental goods and services. (see Module 4)

The end of Paragraph 32 is also relevant to these negotiations. It adds that:

This qualification is designed to caution against altering through these negotiations the balance of rights

and obligations of WTO Members under existing agreements. The outcome… of the negotiations carried out

under Paragraph 31(i) and (ii) shall be compatible with the open and non-discriminatory nature of the

multilateral trading system, shall not add to or diminish the rights and obligations of Members under

existing WTO agreements, in particular the Agreement on the Application of the Sanitary and Phytosanitary

Measures, nor alter the balance of these rights and obligations, and will take into account the needs of

developing and least-developed countries.

Negotiations under Paragraph 31 are taking place in the Committee on Trade and Environment in Special

Session (CTESS). The Committee reports to the TNC.

The Trade and Environment chapter of the Doha Round also includes negotiations aimed at clarifying and

improving WTO disciplines on fisheries subsidies. These negotiations are taking place in the Rules Group.

42

IV.B. ITEMS OF FOCUS FOR THE CTE REGULAR WORK

In addition to launching negotiations in the areas listed above, the Doha Ministerial Declaration provides the

CTE with a special mandate. Paragraph 32 of the Doha Declaration instructs the CTE, in pursuing work on all

agenda items within its current terms of reference, to give particular attention to three items.

PARAGRAPH 32 – MARKET ACCESS, TRIPS AND LABELLING

(i) The effect of environmental measures on market access, especially in relation to developing

countries, in particular the least-developed among them, and those situations in which the elimination

or reduction of trade restrictions and distortions would benefit trade, the environment and development

("win-win-win situations") (see Module 5)

(ii) The relevant provisions of the intellectual property (TRIPS) Agreement

(iii) Labelling requirements for environmental purposes (See Module 5)

Work on these issues should include the identification of any need to clarify relevant WTO rules. The

Committee shall report to the Fifth Session of the Ministerial Conference, and make recommendations, where

appropriate, with respect to future action, including the desirability of negotiations.

Paragraph 32 also requests the CTE to report to the Fifth Ministerial Conference in Cancún on the progress

made in discussing the above-mentioned items, and to make recommendations, where appropriate, with

respect to future action, including the desirability of negotiations. At its meeting of 7 July 2003, the CTE

adopted its report to the Fifth Ministerial Conference in Cancún. This report covered the work undertaken by

the regular session of the CTE between the Fourth (Doha) and the the Fifth (Cancún) Ministerial Conference of

the WTO. It contains a factual summary of those issues that have been discussed and that are covered by the

reporting requirement in paragraphs 32 and 33 of the Doha Ministerial Declaration.[4]

PARAGRAPH 33 – TECHNICAL ASSISTANCE, CAPACITY BUILDING AND

ENVIRONMENTAL REVIEWS

Paragraph 33 reads: "We recognize the importance of technical assistance and capacity building in the field of

trade and environment to developing countries, in particular the least-developed among them. We also

encourage that expertise and experience be shared with Members wishing to perform environmental reviews at

the national level. A report shall be prepared on these activities for the Fifth Session."

Following this mandate, technical assistance, capacity building and environmental reviews have been standing

items on the agenda of the CTE, where Members and observers organizations exchange information in

these areas.

4 See document WT/CTE/8.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/8.doc

43

PARAGRAPH 51 - SUSTAINABLE DEVELOPMENT

Paragraph 51 explicitly calls on the CTE, together with the Committee on Trade and Development, to act as a

forum within which the environmental and developmental aspects of the negotiations can be debated, in order

to help achieve the objective of sustainable development.

As a result, sustainable development has been a standing item on the agenda of the CTE. The committee

decided to look at the subject by sector. In 2006, the Secretariat compiled developments related to the

environment in the various negotiating groups: agriculture, non-agricultural market access, rules, services and

trade and environment.[5]

The purpose was to help members identify and debate the issues as prescribed in

Paragraph 51.

EXERCISES:

8. What is the overarching objective of the Doha trade and environment negotiations?

9. What are the three Doha trade and environment negotiation items?

10. The Doha Ministerial Declaration instructed the CTE to organize its work in what manner?

5 See document WT/CTE/W/243, 27 November 2006.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/W243.doc

44

V. PARAMETERS OF THE TRADE AND

ENVIRONMENT DISCUSSIONS IN THE WTO

As previously stated, environmental issues were taken up in the GATT/WTO as a result of numerous

developments at the international level in trade and environmental fora. Whilst developed countries were

subjected to increased pressure from environmental interest groups to reconcile what they perceived as

"incompatibilities" between trade and environmental policies, developing countries feared that environmental

concerns would be addressed at the expense of international trade. In particular, they feared that a new

"green" conditionality would be attached to market access opportunities. Within this context, certain

parameters have guided trade and environment discussions in the WTO, including the following:

V.A. THE WTO IS NOT AN ENVIRONMENTAL PROTECTION

AGENCY

In the Preamble to the Marrakesh Agreement, WTO Members affirm the importance of working towards

sustainable development. In addition, the Ministerial Decision on Trade and Environment states that the aim of

the work of the CTE is to make "international trade and environmental policies mutually supportive". WTO

Members recognize, however, that the WTO is not an environmental protection agency and that it does not

aspire to become one. Its competence in the field of trade and environment is limited to trade policies and to

the trade-related aspects of environmental policies which have a significant effect on trade.

In addressing the link between trade and environment, WTO Members do not operate on the assumption that

the WTO itself has the answer to environmental problems. However, they believe that trade and environmental

policies can complement each other. Environmental protection preserves the natural resource base on which

economic growth is premised, and trade liberalization leads to the economic growth needed for adequate

environmental protection. To address this, the WTO's role is to continue to liberalize trade, as well as to ensure

that environmental policies do not act as obstacles to trade, and that trade rules do not stand in the way of

adequate domestic environmental protection.

V.B. GATT/WTO RULES PROVIDE SIGNIFICANT SCOPE FOR

ENVIRONMENTAL PROTECTION

WTO Members believe that GATT/WTO rules already provide significant scope for Members to adopt national

environmental protection policies. GATT rules impose only one requirement in this respect, which is that of

non-discrimination. WTO Members are free to adopt national environmental protection policies provided that

they do not discriminate between imported and domestically produced like products (national treatment

principle), or between like products imported from different trading partners (most-favoured-nation clause).

Non-discrimination is one of the main principles on which the multilateral trading system is founded. It secures

predictable access to markets, protects the economically weak from the more powerful, and guarantees

consumer choice.

45

V.C. INCREASED MARKET ACCESS FOR DEVELOPING

COUNTRIES COULD CONTRIBUTE TO ENVIRONMENTAL

PROTECTION

The special situation of developing countries and the need to assist them in their process of economic growth is

widely recognized and accepted in the WTO. From the point of view of developing countries, where poverty is

the number one policy preoccupation and the most important obstacle to environmental protection, the

opening up of world markets to their exports is essential. WTO Members recognize that trade liberalization for

developing country exports, along with financial and technology transfers, is necessary in helping developing

countries generate the resources they need to protect the environment and work towards sustainable

development. As many developing and least-developed countries are heavily dependent on the export of

natural resources for foreign exchange earnings, trade liberalization is expected to improve allocation and more

efficient use of their resources, as well as enhance export opportunities for their manufactured goods.

V.D. TRADE AND ENVIRONMENT COORDINATION SHOULD

BE ENHANCED

It is widely believed by WTO Members that improved coordination at the national level between trade and

environmental officials can contribute to eliminating policy conflicts between trade and environment at the

international level. Lack of coordination has, in the past, contributed to the negotiation of potentially conflicting

agreements in trade and environmental fora. In addition, it is widely recognized that multilateral cooperation

through the negotiation of MEAs constitutes the best approach for resolving transboundary (regional and

global) environmental concerns.

MEAs provide a safeguard against unilateral attempts to address environmental problems. Unilateral solutions

are often discriminatory, and frequently involve the extraterritorial application of environmental standards.

UNCED clearly endorsed consensual and cooperative multilateral environmental solutions to global

environmental problems. Such solutions reduce the risks of arbitrary discrimination and disguised

protectionism, and reflect the international community's common concern and responsibility for global

resources.

EXERCISES:

11. What are the main parameters of the trade and environment discussions in the WTO?

46

VI. SUMMARY

ENVIRONMENTAL PROTECTION AND THE WTO

Allowing for the optimal use of the world’s resources in accordance with the objective of sustainable

development and seeking to protect and preserve the environment are fundamental to the WTO. These

goals, enshrined in the Preamble of the Marrakesh Agreement, go hand in hand with the WTO’s objective to

reduce trade barriers and eliminate discriminatory treatment in international trade relations.

Through its goals, rules, institutions and forward-looking agenda, the WTO provides an important means of

advancing international environmental goals.

HISTORY OF THE TRADE AND ENVIRONMENT DEBATE

The link between trade and environmental protection — both the impact of environmental policies on trade,

and the impact of trade on the environment — was recognized as early as 1970. This led to the

establishment of the GATT EMIT Group in 1971 and a number of development during 1971-1994 in the trade

and environment discussions. For example, trade-related environmental issues were taken up both at the

Tokyo Round and the Uruguay Round Negotiations. The tuna and dolphin dispute between Mexico and

United States put the spotlight on the linkages between environmental protection policies and trade.

During the same period, important developments were also taking place in environmental fora, for example,

the 1987 Brundtland Report, which identified poverty as one of the most important causes of environmental

degradation, and the 1992 Rio "Earth Summit", which drew attention to the role of international trade in

poverty alleviation and in combating environmental degradation.

THE MARRAKESH AGREEMENT AND DECISION ON TRADE AND ENVIRONMENT

As a result of the above development, trade and the environment were linked more explicitly in the new

constitution of the multilateral trading system signed in 1994. The preamble of the Marrakesh Agreement

refers to the importance of working towards sustainable development. Also, the Marrakesh Decision on

Trade and Environment states that: "There should not be, nor need be, any policy contradiction between

upholding and safeguarding an open, non-discriminatory and equitable multilateral trading system on the

one hand, and acting for the protection of the environment, and the promotion of sustainable development

on the other." The Marrakesh Decision also called for the creation of the Committee on Trade and

Environment (CTE) to promote sustainable development. The CTE, created in 1995, has followed a

comprehensive work programme covering range of trade and environment issues, from trade rules and

MEAs, labelling, environmental measures and market access to services and intellectual property.

THE DOHA MANDATE

At Doha in November 2001, WTO Members reaffirmed their commitment to environmental protection and

agreed to embark on a new round of trade negotiations. The Doha Development Agenda (DDA) includes

trade and environment elements, with an overarching objective to enhance the mutual supportiveness of

trade and environmental policies.

47

The DDA has placed trade and environment work at the WTO on two tracks:

Under Paragraph 31, the CTE Special Session (CTESS) has been established to deal with the

negotiations on the following: relationship between WTO rules and MEAs specific trade obligations;

information exchange; and environmental goods and services.

Under Paragraphs 32, 33 and 51, the CTE Regular deals with the non-negotiating issues of the DDA

together with its original agenda contained in the 1994 Marrakesh Decision on Trade and

Environment.

PARAMETERS OF THE TRADE AND ENVIRONMENT DISCUSSION IN THE WTO

Environmental issues were taken up in the GATT/WTO as a result of numerous developments at the

international level in trade and environmental fora. Whilst developed countries were subjected to increased

pressure from environmental interest groups to reconcile what they perceived as "incompatibilities" between

trade and environmental policies, developing countries feared that environmental concerns would be

addressed at the expense of international trade. In particular, they feared that a new "green" conditionality

would be attached to market access opportunities. Within this context, certain parameters have guided trade

and environment discussions in the WTO, including the following: the WTO is not an environmental

protection agency; GATT/WTO Rules provide significant scope for environmental protection; increased

market access for developing countries is necessary in helping them generate the resources needed to

protect the environment; and trade and environment coordination should be enhanced.

48

PROPOSED ANSWERS:

1. Enshrined in the Preamble of the Marrakesh Agreement, the goals of allowing for the optimal use of the

world’s resources in accordance with the objective of sustainable development and seeking to protect and

preserve the environment go hand in hand with the WTO’s objective to reduce trade barriers and

eliminate discriminatory treatment in international trade relations.

2. Trade provides a means to advance international environmental goals in the following ways: trade's

potential impact of economic growth and poverty alleviation is a powerful ally of sustainable

development; furthering trade opening in goods and services promotes economic development and

provides stable and predictable conditions that enhance the possibility of innovation that can contribute to

environmental protection; the WTO’s key principle of non-discrimination promotes the efficient allocation

of resources, economic growth and increased income levels that in turn provide additional possibilities for

protecting the environment.

3. The main environment-related developments in the GATT during 1972-1992 are:

the Tokyo Round negotiations (1973–1979), when participants took up the question of the

degree to which environmental measures could form obstacles to trade, and the TBT Agreement

was negotiated;

the creation in 1989 of a Working Group on the Export of Domestically Prohibited Goods and

Other Hazardous Substances due to the concerns expressed by a number of developing countries

that products prohibited in developed countries on the grounds of environmental hazards, health

or safety reasons, continued to be exported to them;

in 1991, the tuna and dolphin dispute between Mexico and United States that put the spotlight

on the linkages between environmental protection policies and trade, and although the report of

the panel was not adopted, its ruling was heavily criticised by environmental groups who felt that

trade rules were an obstacle to environmental protection; and

the Uruguay Round negotiations, when trade-related environmental issues were once again

taken up, and modifications were made to the TBT Agreement, certain environmental issues

were addressed in the General Agreement on Trade in Services, the Agreements on Agriculture,

Sanitary and Phytosanitary Measures (SPS), Subsidies and Countervailing Measures, and

Trade-Related Aspects of Intellectual Property Rights (TRIPS).

4. The major environmental events that have impacted the trade and environment debates are:

the UN Conference on the Human Environment held in Stockholm in 1972, responding to the

growing international concern about the impact of economic growth on social development and

the environment;

the 1987 Brundtland Report, identifying poverty as one of the most important causes of

environmental degradation, and in which the term "sustainable development" was coined; and

the 1992 Rio "Earth Summit", drawing attention to the role of international trade in poverty

alleviation and in combating environmental degradation. Agenda 21, the programme of action

adopted at the conference, also addressed the importance of promoting sustainable development

through, amongst other means, international trade.

49

5. The 2 main points of the Marrakesh Decision on trade and environment are: (i) "There should not be, nor

need be, any policy contradiction between upholding and safeguarding an open, non-discriminatory and

equitable multilateral trading system on the one hand, and acting for the protection of the environment,

and the promotion of sustainable development on the other"; (ii) the creation of the Committee on Trade

and Environment.

6. The 10 original work items of the CTE are: Items 1 and 5 - trade Rules, MEAs and disputes; Item 2 -

environmental protection and the trading system; Item 3 - relationship between the provisions of the

multilateral trading system and: charges and taxes for environmental purposes; and requirements for

environmental purposes relating to products, such as standards and technical regulations, and packaging,

labelling and recycling requirements; Item 4 - transparency of environmental trade measures; Item 6 –

environmental measures and market access; Item 7 - domestically prohibited goods; Item 8 -

intellectual property; Item 9 - services; Item 10 - the WTO and other organizations.

7. With its broad based mandate, the CTE has contributed to identifying and understanding the relationship

between trade measure and environmental measures in order to promote sustainable development.

Although the CTE has not recommended any changes to the rules of the multilateral trading system, its

work has led to some trade and environment issues migrating to negotiations as key components of the

Doha round (negotiations). One example is fisheries (under the Rules negotiations): this is an area

where eliminating fishery subsidies can help protect fish stock.

8. The overarching objective of the Doha negotiations on trade and the environment is to enhance the

mutual support of trade and environmental policies.

9. The three negotiation items are: paragraph 31(i) - Relationship between WTO Rules and MEAs Specific

Trade Obligations; paragraph 31(ii) - procedures for information exchange between MEAs and the

relevant WTO committees, and on the criteria for the granting of observer status in WTO bodies; and

paragraph 31(iii) –on the reduction or, as appropriate, the elimination of tariff and non-tariff barriers to

environmental goods and services.

10. The Doha Ministerial Declaration instructs the CTE, in pursuing work on all agenda items within its current

terms of reference, to give particular attention to three items: environmental measures and market

Access; TRIPS; and Labelling requirements for environmental purposes.

11. The main parameters are: the WTO is not an environmental protection agency; GATT/WTO rules provide

significant scope for environmental protection; increased market access for developing country exports

is necessary in helping developing countries generate the resources needed to protect the environment;

and to improve trade and environment officials coordination at the national level can contribute to

eliminating policy conflicts between trade and environment at the international level.

51

The relationship between

Multilateral Environmental

Agreements and the WTO ESTIMATED TIME: 6 hours


Present an introduction to multilateral environmental agreements (MEAs)

Explore the relationship between MEAs and the WTO, including potential for conflict

Provide an overview of the Doha negotiating mandate on the relationship between

MEAs and the WTO

MODULE

3

53

I. INTRODUCTION TO MEAS

IN BRIEF

MEAs have emerged as an important means for countries to tackle environmental problems, particularly

those regional or global in scope. A number of these MEAs contain provisions for trade measures to control

trade, in order to prevent damage to the environment or as a tool to encourage compliance with the

objectives of MEAs. While MEAs are to be encouraged, the WTO had wrestled with the issue of how to

address the trade provisions, which several of these agreements contain.

IN DETAIL

I.A. BACKGROUND

It has been widely recognized by both environmental and trade policy-makers that multilateral solutions to

transboundary environmental problems, whether regional or global, are preferable to unilateral solutions.

Resort to unilateralism runs the risk of arbitrary discrimination and disguised protectionism which could

damage the MTS.

The UNCED has strongly endorsed the negotiation of MEAs to address global environmental problems. Agenda

21 of the Rio Conference states that measures should be taken to "avoid unilateral action to deal with

environmental challenges outside the jurisdiction of the importing country. Environmental measures

addressing transborder or global environmental problems should, as far as possible, be based on international

consensus."

WTO Members have been discussing the issue of the relationship between WTO and MEAs since 1995, as the

issue also forms part of the work programme of the Regular CTE.

RECALL

The Marrakech Ministerial Decision on Trade and Environment, sets out the Work Programme of the

Committee on Trade and Environment. Items 1 and 5 cover the relationship between the rules of the

multilateral trading system and the trade measures contained in MEAs, and between their dispute

settlement mechanisms.

Whilst MEAs are to be encouraged, the CTE has wrestled with the issue of how to address the trade provisions

which several of these agreements contain. It is reported that there are over 250 MEAs currently in force. Out

of these agreements, about 20 would actually include trade-related provisions. It has been argued, therefore,

that the dimension of the problem should not be exaggerated.

54

Montreal Protocol

There is no exhaustive list of MEAs containing trade measures. However, discussions in WTO have tended to

focus mainly on the following agreements:

the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their

Disposal;

the Convention on Biological Diversity (CBD) and the Cartagena Protocol on Biosafety;

the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);

the Montreal Protocol on Substances that

Deplete the Ozone Layer;

the Rotterdam Convention on the Prior

Informed Consent Procedure for Certain

Hazardous Chemicals and Pesticides in

International Trade;

the Stockholm Convention on Persistent

Organic Pollutants; and

the United Nations Framework Convention

on Climate Change (UNFCCC) and its Kyoto

Protocol.

Example: The Montreal Protocol on substances that deplete the Ozone Layer

The Montreal Protocol is often cited as an example of successful multilateral cooperation to tackle a global

environmental problem. In fact, in 2003, then United Nations Secretary General Kofi Annan termed the

Montreal Protocol "perhaps the single most successful international environmental agreement to date".

The Montreal Protocol on Substances that Deplete the Ozone Layer (adopted in 1987, entered into force in

1989), a protocol to the Vienna Convention of the Protection of the Ozone Layer, is an international treaty

designed to protect the ozone layer by gradually phasing out the production of certain chemical substances

that deplete the ozone layer, so-called ozone depleting substances (e.g. CFCs).

By 2010, the Parties to the Protocol had phased out the consumption of 98 per cent of all the chemicals

controlled by the Protocol. Global observations have verified that atmospheric levels of key ozone depleting

substances are going down and it is believed that with implementation of the Protocol’s provisions the ozone

layer should return to pre-1980 levels by the middle of this century.

One of the main reasons for the Protocol's success has been its ability to engage the global community to

respond. In 2009 the Montreal Protocol became the first United Nations treaty to achieve universal

ratification. The Protocol's wide Membership has helped ensure that all countries are actively engaged in

reducing their negative impact of the ozone layer, with no countries free-riding on the actions of others.

Another possible reason for the Protocol's success is the support it provides developing countries. With the

assistance of the Multilateral Fund for the Implementation of the Montreal Protocol, developing countries

had, by mid 2010, permanently phased out over 270,000 tonnes of ozone depleting substances that had

been used to produce various products and have eliminated virtually all of their production of CFCs and

halons.

http://www.basel.int/


http://www.cbd.int/

http://bch.cbd.int/protocol/

http://www.cites.org/

http://ozone.unep.org/


http://www.pic.int/

http://www.pic.int/

http://www.pic.int/

http://www.pic.int/

http://chm.pops.int/default.aspx


http://unfccc.int/2860.php


http://unfccc.int/kyoto_protocol/items/2830.php


55

More information can be found on the Ozone Secretariat's website.

EXERCISES:

1. When and why are multilateral solutions to environmental problems preferred to unilateral solutions?

2. Please give examples of MEAs discussed in the WTO?


56

I.B. TRADE MEASURES IN MEAS

IN BRIEF

Trade measures in MEAs may be used for several purposes. For instance, such measures can be used to

control trade in order to prevent damage to the environment. Trade measures can also be used as tools to

encourage compliance with the objectives of the MEAs, for instance, in cases where the threat of such

measure may encourage a non-party to comply.

Trade measures can take the form of an export and/or import ban; export and/or import permits and

licenses; packaging, labelling or transportation requirements; notification requirements; or reporting

requirements. Such measures may be taken vis-à-vis another country party to the MEA, or against a

country that is not party to that MEA

Mainly used:Mainly used:

•• For monitoring and controlling trade For monitoring and controlling trade

•• To encourage compliance with MEA To encourage compliance with MEA

requirements requirements

•• As a means of enforcing MEA objectives As a means of enforcing MEA objectives

•• As an incentive for nonAs an incentive for non--parties to adhereparties to adhere

Trade Measures in MEAsTrade Measures in MEAs

A country

Party to the

MEA

A country nonA country non--

Party to the MEAParty to the MEA

Measure may be

taken against:

Figure 1: Use of Trade Measures in MEAs

57

IN DETAIL

The following table contains some examples of MEAs and the trade measures they contain.

MEA Objective Trade Measure

Basel

Convention

Reduce transboundary movements of

hazardous wastes; minimize the

generation, in terms of quantity and

hazardousness, of wastes; and promote

the environmentally sound management

of hazardous and other wastes.

Parties may only export a hazardous waste to

another party that has not banned its import

and that consents to the import in writing.

Parties may not import from or export to a

non-party. They are also obliged to prevent

the import or export of hazardous wastes if

they have reason to believe that the wastes

will not be treated in an environmentally

sound manner at their destination.

CITES Regulate international trade in wildlife for

conservation purposes. Provides

framework for sound management of

wildlife trade based on the best biological

information available; analyses how

different types of trade regulations can

affect specific populations.

CITES bans commercial international trade in

an agreed list of threatened species. It also

regulates and monitors (by use of permits,

quotas and other restrictive measures) trade

in other species that might become

endangered.

Montreal

Protocol

Develop a regime that limits the release of

ozone-depleting substances (ODS) into

the atmosphere.

The Protocol lists certain substances as ozone

depleting, and bans all trade in those

substances between parties and non-parties.

Similar bans may be implemented against

parties as part of the Protocol's

non-compliance procedure. The Protocol also

contemplates allowing import bans on

products made with, but not containing,

ozone-depleting substances—a ban based on

process and production methods.

Rotterdam

(PIC)

Convention

Promote shared responsibility and

cooperative effort among Parties in the

international trade of certain hazardous

chemicals in order to protect human

health and the environment from potential

harm and to contribute to their

environmentally sound use. This is done

by facilitating information exchange about

their characteristics, by providing for a

national decision-making process on their

import and export and by disseminating

these decisions to Parties.

Under the Convention, Parties can decide,

from the Convention's agreed list of chemicals

and pesticides, which ones they cannot

manage safely and, therefore, will not import.

When trade in the controlled substances does

take place, labelling and information

requirements must be followed. Decisions

taken by the parties must be trade neutral—if

a party decides not to consent to imports of a

specific chemical, it must also stop domestic

production of the chemical for domestic use,

as well as imports from any non-party.

58

CBD and

Protocol on

Biosafety

CBD: ensure conservation of biological

diversity, sustainable use of its

components and fair and equitable sharing

of the benefits arising out of the utilization

of genetic resources.

Biosafety Protocol: Ensure an adequate

level of protection in the field of safe

transfer, handling and use of Living

Modified Organisms (LMOs) that may have

adverse effects on the conservation and

sustainable use of biological diversity, also

taking into account risks to human health.

Parties may restrict the import of some living

genetically modified organisms as part of a

carefully specified risk management

procedure. LMOs that will be intentionally

released to the environment are subject to an

advance informed agreement procedure, and

those destined for use as food, feed or

processing must be accompanied by

documents identifying them.

Table 1: Examples of MEAs and their Trade Measures

TIP

Further information on MEAs containing trade measures and their relevant provisions can be found in a

document entitled "Matrix on Trade Measures Pursuant to Selected Multilateral Environmental Agreements"

(TN/TE/S/5/Rev.2).

EXERCISES:

3. Why do some MEAs use trade measures?

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/tn/te/S5R2.doc

59

II. RELATIONSHIP BETWEEN MEAS AND THE

WTO: POTENTIAL CONFLICT?[1]

IN BRIEF

Measures taken pursuant to MEAs could give rise to questions of consistency with WTO rules, such as the

non-discrimination principle, or the prohibition of quantitative restrictions.

IN DETAIL

II.A. GATT ARTICLES I, III AND XI

Under GATT Article I, any advantage, or privilege granted by a country to any product originating in

any other country shall be accorded to like products originating in the territories of all other Members.

Pursuant to GATT Article III, WTO Members must not discriminate between imported and domestic like

products.

Under GATT Article XI, no prohibitions or restrictions other than duties, taxes or other charges such as

quotas, import or export licenses shall be applied on the import or export of any product.

Article I:

The Most Favoured Nation

Article III:

The National Treatment

Article XI:

The Prohibition of

quantitative restrictions

WTO PrinciplesWTO Principles

Any advantage, Any advantage,

or privilege or privilege

granted by a granted by a

country to any country to any

product product

originating in originating in

any other any other

country shall be country shall be

accorded to accorded to like like

productsproducts

originating in the originating in the

territories of territories of allall

other Membersother Members

WTO Members WTO Members

must not must not

discriminate discriminate

between imported between imported

and domestic and domestic like like

productsproducts

No prohibitions or restrictions No prohibitions or restrictions other other

than duties, taxes or other chargesthan duties, taxes or other charges

such as quotas, import or export such as quotas, import or export

licenses shall be applied on the licenses shall be applied on the

import or export of any productimport or export of any product

Non-discrimination

Figure 2: WTO Principles

1 See also Module 5 on WTO Rules and Environmental Policies.

60

The situation could materialize where an MEA authorizes trade between its parties in a specific product, but

bans trade in that very same product with non-parties (hence, an inconsistency with the Most Favoured Nation

(MFN) clause, which requires countries to grant equivalent treatment to "like" imported products).

Example: The Montreal Protocol on substances that deplete the Ozone Layer

Article 4 of the Montreal Protocol on Substances that Deplete the Ozone Layer bans imports of controlled

ozone depleting substances from non-Parties to the Protocol, who may be Members of WTO. Under the

Protocol, similar restrictions are not imposed vis-à-vis other Parties. The application of such a measure

could give rise to questions relating to GATT Article I (MFN); Article III (National treatment); or GATT

Article XI (Prohibition of quantitative restrictions).

II.B. GENERAL EXCEPTIONS OF GATT ARTICLE XX

In the context of a dispute arising over the application of a trade measure under an MEA, the respondent could

invoke a defence under GATT Article XX.

According to Article XX, a Member can justify derogating from its obligations in respect of a measure that is

either necessary to protect human, animal or plant life or health, or that relates to the conservation of

exhaustible natural resources, provided certain conditions are met.

The relevant parts of Article XX of GATT read:

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) necessary to protect human, animal or plant life or health;

(...)

(g) relating to the conservation of exhaustible natural resources if such measures are made

effective in conjunction with restrictions on domestic production or consumption;

(...)

One can assume that a measure taken pursuant to an MEA would most likely fall under at least one of the

exceptions described in Article XX (i.e. the protection of human, animal or plant life or health, or the

conservation of exhaustible natural resources).


61

However, in order to be able to justify a derogation from its GATT/WTO obligations, the Member having taken

the measure would still have to meet the test of the chapeau of Article XX (i.e. that the measure does not

constitute unjustifiable or arbitrary discrimination, or a disguised restriction on international trade).

TIP

For a GATT-inconsistent environmental measure to be justified under Article XX, a Member must perform a

two-tier analysis, proving:

first, that its measure falls under at least one of the exceptions (e.g. paragraphs (b) or (g), and then,

that the measure satisfies the requirement of the introductory paragraph (the "chapeau" of

Article XX), i.e. that the measure is not applied in a manner which could constitute "a means of

arbitrary of unjustified discrimination between countries where the same conditions prevail", and is

not "a disguised restriction on international trade".

II.C. WHICH SYSTEM?

Some WTO Members have expressed the fear that MEA-related disputes could be brought to the WTO dispute

settlement system. While disputes between two parties to an MEA, who are both WTO Members, would most

likely be settled in the MEA, disputes between an MEA party and a non-party (both of whom are WTO

Members) would most probably come to the WTO since the non-party would not have access to the dispute

settlement provisions of the MEA.

It has been argued that the WTO should not wait until it is asked to resolve an MEA-related dispute and a panel

is asked to opine on the relationship between the WTO and MEAs. It is WTO Members that should themselves,

through negotiations, resolve the issue.

To date, no disputes regarding trade provisions contained in an MEA have come to the WTO. Some WTO

Members have argued in the CTE that the existing principles of public international law suffice in governing the

relationship between WTO rules and MEAs. The 1969 Vienna Convention on the Law of Treaties as well as the

principles of customary law could themselves define how WTO rules interact with MEAs.

The legal principles of "lex specialis" (the more specialized agreement prevails over the more general) and of

"lex posterior" (the agreement signed later in date prevails over the earlier one) emanate from public

international law, and some have argued that these principles could help the WTO in defining its relationship

with MEAs. Others have argued that there is a need for greater legal clarity.

II.D. POTENTIAL CONFLICT? THE CASE OF EC - SWORDFISH

Although there has never been a formal dispute between the WTO and an MEA, the EC-Swordfish case has

illustrated the risk of conflicting decisions rendered by two bodies having competence over a certain matter.

62

In this case, the European Union (EU) asserted that its fishing vessels operating in the South East Pacific were

not allowed, under Chilean legislation, to unload their swordfish in Chilean ports. The EU considered that, as a

result, Chile made transit through its ports impossible for swordfish. The EU claimed that the above-mentioned

measures were inconsistent with GATT 1994, and in particular Articles V and XI.

Chile however maintained that the EU had failed to cooperated with Chile to ensure the conservation of

swordfish, a highly migratory species, in violation of the UN Convention on the Law of the Sea. As a result,

conservation measures had been necessary to take to ensure sustainable fisheries for swordfish.

EC EC –– Swordfish (2000)Swordfish (2000)

ChileChile

EU fails to cooperate with coastal state to ensure

the conservation of highly migratory species, in

violation of UN Convention on Law of the Sea

EU EU failsfails to cooperate to cooperate withwith coastalcoastal state to state to ensureensure

thethe conservation conservation ofof highlyhighly migratorymigratory speciesspecies, in , in

violation violation ofof UN Convention on Law UN Convention on Law ofof thethe SeaSea

Need conservation measures to ensure

sustainable fisheries for swordfish

NeedNeed conservation conservation measuresmeasures to to ensureensure

sustainablesustainable fisheriesfisheries for for swordfishswordfish

Chile prohibits unloading of swordfish in its ports in

violation of GATT Articles V (freedom of transit) and

XI (prohibition on quantitative restrictions)

Chile Chile prohibitsprohibits unloadingunloading ofof swordfishswordfish in in itsits ports in ports in

violation violation ofof GATT Articles V (GATT Articles V (freedomfreedom ofof transit) transit) andand

XI (prohibition on quantitative restrictions)XI (prohibition on quantitative restrictions)

EUEU

Requests access to Chilean ports to re-export

swordfish to the markets of NAFTA

RequestsRequests accessaccess to to ChileanChilean ports to reports to re--export export

swordfishswordfish to to thethe marketsmarkets ofof NAFTANAFTA

Figure 3: EC-Swordfish Example

On 12 December 2000, the Dispute Settlement Body (DSB) established a panel further to the request of the

EU. In March 2001, the EU and Chile agreed to suspend the process for the constitution of the panel (this

agreement was further reiterated in November 2003).

Proceedings in the Case Concerning the Conservation and Sustainable Exploitation of Swordfish Stocks in the

South-Eastern Pacific Ocean were instituted on 19 December 2000 at the ITLOS by Chile and the EU. Chile

requested, inter alia, the ITLOS to declare whether the EU had fulfilled its obligations under UNCLOS Articles 64

(calling for cooperation in ensuring conservation of highly migratory species), 116-119 (relating to

conservation of the living resources of the high seas), 297 (concerning dispute settlement) and 300 (calling for

good faith and no abuse of right). The EU requested, inter alia, the Tribunal to declare whether Chile had

violated Articles 64, 116-119 and 300 of UNCLOS, mentioned above, as well as Articles 87 (on freedom of the

high seas including freedom of fishing, subject to conservation obligations) and 89 (prohibiting any State from

subjecting any part of the high seas to its sovereignty).

On 9 March 2001, the parties informed the ITLOS that they had reached a provisional arrangement concerning

the dispute and requested that the proceedings before the ITLOS be suspended.

63

EXERCISES:

4. What are the WTO provisions that could be related to trade measures taken pursuant to MEAs.

5. In the context of a dispute arising over the application of a trade measure under an MEA, the respondent

could invoke a defence under which relevant parts of GATT Article XX?

64

III. NEGOTIATIONS ON THE RELATIONSHIP

BETWEEN WTO AND MEA RULES

IN BRIEF

At the Doha Ministerial Conference, agreement was reached to commence negotiations on certain aspects of

the WTO-MEA relationship. More specifically, Members have agreed to negotiate on the "relationship

between existing WTO rules and specific trade obligations (STOs) set out in MEAs".

IN DETAIL

III.A. PARAGRAPH 31(I) MANDATE

«With a view to enhancing the mutual

supportiveness of trade and environment, we

agree to negotiations, without prejudging their

outcome, on:

Mandate under Paragraph 31 (i) of Mandate under Paragraph 31 (i) of

the Doha Ministerial Declarationthe Doha Ministerial Declaration

«The relationship between existing WTO rules and specific trade

obligations set out in multilateral environmental agreements

(MEAs). The negotiations shall be limited in scope to the

applicability of such existing WTO rules as among parties to the

MEA in question. The negotiations shall not prejudice the WTO

rights of any Member that is not a party to the MEA in question.»

Figure 4: Paragraph 31(i) of the Doha Ministerial Declaration

WTO Members have basically agreed to clarify the relationship between WTO rules and MEAs, rather than

leaving the matter to the WTO's dispute settlement (in the event of the lodging of a formal dispute). However,

they have explicitly stated that the negotiations should be limited to defining how WTO rules apply to WTO

Members that are party to an MEA.

In other words, they should not venture into their applicability between a party and a non-party to an MEA.

The reason for this limitation is that while WTO Members were willing to let the negotiations define the

relationship between WTO rules and MEAs they have joined, they were not ready to let them alter their WTO

rights and obligations vis-à-vis MEAs they were not part of.

65

Moreover, paragraph 32 of the Doha Ministerial Declaration carefully circumscribes the negotiations under

paragraph 31(i) and (ii): "The outcome of the negotiations carried out under paragraph 31(i) and (ii) shall be

compatible with the open and non-discriminatory nature of the multilateral trading system, shall not add to or

diminish the rights and obligations of Members under existing WTO agreements, in particular the SPS

Agreement, nor alter the balance of these rights and obligations, and will take into account the needs of

developing and least-developed countries."

In the early stages of the negotiations, discussions focused on the scope of the negotiating mandate. For

instance, delegations have examined the different components of the mandate, such as the terms "existing

WTO rules," "STOs," "set out in MEAs," "MEAs," and "among parties to the MEA in question".

On the different components of the mandate, the bulk of the discussion has revolved around the terms "MEAs,"

"STOs," and the notion of measures being "set out in MEAs". On "MEAs", while some believe that there is a

need to define the concept so as not to overstep the boundaries of the mandate, others do not view this as

necessary. Some focus was placed on six MEAs that could contain STOs.[2]

However, Members have not

agreed to limiting the discussion to any particular number of MEAs.

On "STOs," several Members believe that these must be measures that are explicitly provided for and

mandatory under MEAs. However, Members have not excluded other kinds of trade measures contained in

MEAs and whether they could also be considered STOs.

In parallel to these discussions on the terms of the mandate, Members have also embarked on an exercise of

sharing their national experiences in the negotiation and domestic implementation of trade measures under

MEAs. Over the years, in the CTESS, a number of Members have shared their national experiences on the

negotiation and implementation of STOs in MEAs.[3]

III.B. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME

More recently, a few Members have begun to look ahead at the possible outcomes that the mandate could

deliver. There are five main proposals for an outcome currently on the table.

2 These six MEAs are: the Basel Convention, the Convention of Biological Diversity and the Cartagena Protocol

on Biosafety, the Convention of International Trade in Endangered Species of Wild Fauna and Flora, the

Montreal Protocol on Substances that Deplete the Ozone Layer, the Rotterdam Convention and the Stockholm

Convention.

3 A number of submissions by Members, sharing their national experiences, are listed in Section IV.B of

document TN/TE/INF/4/Rev.14. For example, see the European Union's submission: "Putting MEA/WTO

Governance into Practice: the EC's Experience in the Negotiation and Implementation of MEAs" (TN/TE/W/53).

http://docsonline/imrd/directdoc.asp?DDFDocuments/t/tn/te/INF4R14.doc

http://docsonline/imrd/directdoc.asp?DDFDocuments/t/tn/te/W53.doc

66

These are:

EU: The EU has been seeking to include in an outcome some basic governing principles on the

WTO-MEA relationship, such as mutual supportiveness; no subordination; deference; and

transparency. It proposed that WTO committees and panels "defer" to the expertise of MEAs on

environment-related matters. This aspect was strongly criticized by a number of delegations who

consider that it would extend well beyond the scope of the mandate. The EU proposal was presented in

the form of a Ministerial Decision.

Australia and Argentina: A proposal by Australia and Argentina focuses on the importance of

national coordination to ensure a mutually supportive relationship of trade and environment.

It proposes that Members continue to share their experience relating to the negotiation and

implementation of STOs in MEAs in the regular CTE. The Australian/Argentinean proposal has garnered

wide support in the negotiation. It was presented in the form of a report by the CTESS.

Norway: Norway has made an attempt to strike a balance between the proposals of the EU and of

Australia and Argentina. The text proposed by Norway suggests, for instance, to acknowledge that both

MEAs and the WTO Agreement are instruments of international law of equal standing between parties to

the agreements; and all obligations under international law should be implemented harmoniously and

in good faith; and that all WTO bodies and Member States be mindful of this mutual supportiveness

when "negotiating, interpreting, implementing and applying WTO rules and MEAs".

African Group: The proposal by the African Group addresses the issue of technical assistance and

capacity-building in the area of trade and environment. More specifically, it suggests the establishment

of a Group of Experts on Trade and Environment from which WTO Members, and in particular

developing countries, could seek advice on the implementation of MEA measures to ensure that it

remains consistent with WTO rules.

Switzerland: The proposal by Switzerland focuses mainly on conflict avoidance, closely resembling the

EU proposal in that they both address WTO disputes. The Swiss proposal puts forth three elements to

be included in the final outcome in the form of a Ministerial Decision: (i) the availability of a non-

adjudicatory procedure, e.g. requesting the CTE Chair to act as facilitator, to help Members find

solutions to their differences of opinions regarding the relationship between existing WTO rules and

STOs in MEAs; (ii) the encouragement to use the expertise of MEAs during consultations pursuant to

Article 4 of the DSU; and (iii) that Panels for disputes on this issue should possess or have available the

necessary expertise.

Two main approaches in CTESSTwo main approaches in CTESS

Relationship has Relationship has

been working well; been working well;

nothing to “fix”; no nothing to “fix”; no

conflict to date; conflict to date;

existing rules provide existing rules provide

sufficient scope sufficient scope

(US, Australia, Argentina, (US, Australia, Argentina,

several developing countries)several developing countries)((EC, SwitzerlandEC, Switzerland))

Need to clarify Need to clarify

WTOWTO--MEA MEA

relationship; conflict relationship; conflict

can always arise; “all can always arise; “all

good relationships good relationships

can be improved..”can be improved..”

Figure 5: Main Approaches MEA negotiations in the CTESS

67

The main ideas put forward in these various proposals have been discussed in detail by Members. The next

phase of work will involve to revert to these ideas and see which ones could form part of an outcome in this

area. The Chairman of the negotiating group has announced that following a phase of dedicated discussions on

the key elements proposed in Members' submissions, the Committee would engage in text-based negotiations.

EXERCISES:

6. How is Paragraph 31(i) negotiations limited in scope?

7. WTO panels already have the right to consult outside sources for advice. Why then are some Members

opposed to a relevant proposal under Paragraph 31(i)?

68

IV. COLLABORATION BETWEEN WTO AND MEA

SECRETARIATS

IN BRIEF

In addition to the relationship between MEA measures and WTO rules, the negotiations have also covered

the issue of information exchange between the WTO and MEA secretariats and observer status.

IN DETAIL

IV.A. PARAGRAPH 31(II) MANDATE

Doha Mandate of Negotiations: Relationship between Doha Mandate of Negotiations: Relationship between

WTO and MEA secretariatsWTO and MEA secretariats

««With a view to enhancing the mutual With a view to enhancing the mutual

supportiveness of trade and environment, we supportiveness of trade and environment, we

agree to agree to negotiationsnegotiations, without prejudging their , without prejudging their

outcome, on:outcome, on:

Mandate under Paragraph 31(ii) of Mandate under Paragraph 31(ii) of

the Doha Ministerial Declarationthe Doha Ministerial Declaration

(ii) procedures for regular (ii) procedures for regular information information

exchangeexchange between between MEA SecretariatsMEA Secretariats and and

the the relevant WTO committeesrelevant WTO committees, and the , and the

criteria for the granting of criteria for the granting of observer statusobserver status.”.”

Figure 6: Paragraph 31(II) mandate

IV.B. INFORMATION EXCHANGE

Close cooperation between MEA Secretariats and WTO Committees is essential to ensure that the trade and the

environment regimes continue to evolve in a coherent and mutually supportive manner. The importance of

this goal was recognized in the Plan of Implementation of the 2002 World Summit on Sustainable Development

(WSSD) in Johannesburg, which calls for efforts to "strengthen cooperation among UNEP and other United

Nations bodies and specialized agencies, the Bretton Woods institutions and WTO, within their mandates."

Various forms of cooperation and information exchange between WTO and MEA secretariats are already in

place. These include information sessions held by the CTE with MEA Secretariats; the organization by the

WTO Secretariat of side events held in the margins of MEA Parties' meetings; exchange of documents; and

collaboration between the WTO, UNEP and MEAs in providing technical assistance to developing countries on

trade and the environment.

69

IV.C. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON

INFORMATION EXCHANGE

So far in the discussions, a number of concrete elements that could form part of an outcome in this area have

been put forward by Members. These elements essentially consolidate or formalize existing practices. They

are formulated as follows:

The CTE shall hold information exchange sessions with MEA secretariats on a regular basis. The

sessions will provide opportunity for two-way information exchanges between MEA and WTO

secretariats and their respective memberships on topics of common interest. The CTE shall hold

information exchange sessions initially on an annual basis; identify the topics and develop the agenda

for discussion at the information exchange sessions; coordinate, as appropriate, with other WTO

committees that may have an interest in the topics to be discussed.

The WTO Secretariat should consult with MEA secretariats with regard to the timing of the information

exchange sessions so as to facilitate the active participation of relevant secretariats and delegates and

should collaborate with MEA secretariats in the preparation of any background documents for the

information exchange sessions.

The CTE shall review the frequency of, and procedures for, the information exchange sessions after five

years and consider any adjustments in light of the experience gained.

The WTO Secretariat shall facilitate appropriate access by MEA secretariats to derestricted

WTO documents on a reciprocal basis and make information from MEA secretariats available to

WTO Members, including through the use of indexing and internet-based tools. Access to derestricted

WTO documents by MEA secretariats shall be facilitated in accordance with the General Council Decision

of 14 May 2002 on Procedures for the Circulation and Derestriction of WTO documents.[4]

The WTO Secretariat shall continue to collaborate with MEA secretariats, as appropriate, in the

organization of enhanced trade and environment-related technical assistance and capacity-building

activities, especially for developing countries. The activities should aim, inter alia, at promoting

domestic trade and environment coordination."

TIP

More information on information exchange can be found in the Secretariat's note "Existing forms of

cooperation and information exchange between UNEP/MEAs and the WTO" (TN/TE/S/2/Rev.2). This note

contains information on, inter alia, MEA information sessions in the CTE, WTO side events in MEAs, and WTO

technical assistance events in which MEAs participated or were represented.

4 WT/L/452.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/tn/te/S2R2.doc

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/L/452.doc

70

EXERCISES:

8. Why is information exchange between the WTO and MEAs important?

9. What are the current forms of information exchange between the WTO and MEAs?

71

IV.D. OBSERVER STATUS

The issue of criteria for the granting of observer status to MEA Secretariats is also part of the negotiations.

Several MEA Secretariats and international organizations have already been granted observership to the CTE,

and a number of them are also invited to attend meetings of the CTESS, as "ad hoc" observers. The

negotiations could further enhance the participation of these organizations in the work of various WTO

committees.

MEAs granted Observer

Status in the CTE

As well as ....

UNCTAD

Figure 7: MEAs Granted Observer Status in the CTE

IV.E. MEMBERS' PROPOSALS ON A POSSIBLE OUTCOME ON

OBSERVER STATUS

With respect to observer status, the elements drawn from Members' proposals are the following:

Members reaffirm that requests for observer status of international intergovernmental organizations are

subject to the criteria and procedures set out in Annex 3 of the Rules of Procedure for Sessions of the

Ministerial Conference and Meetings of the General Council.[5]

Members further reaffirm that

WTO committees shall make the decision to grant observer status to an MEA on the basis of a written

request and consider requests for observer status on a case-by-case basis.

In examining requests for observer status by MEAs, WTO committees should consider, inter alia, the

following criteria:

the relevance of the MEA's scope of work to the WTO committee to which a request is addressed

(e.g. whether the MEA contains commitments that have potential implications for international

trade), as well as the relevance of the WTO committee's scope of work to the MEA;

5 WT/L/161.

http://www.wto.org/english/tratop_e/envir_e/envir_e.htm#observers

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/L/161.wpf

72

the MEA secretariat's participation in WTO committees and its prior contribution to WTO work,

including workshops, capacity building activities and preparation of documents;

or the mutual benefit that may accrue to the WTO committee and the MEA from the MEA

secretariat's participation in meetings of the WTO committee;

the MEA's membership, e.g., whether it broadly reflects the membership of WTO;

the reciprocity provided by the MEA to the WTO with respect to access to proceedings,

documents, and other aspects of observer status.

In the event that the WTO committee cannot reach a decision with respect to a particular MEA observer

status request, it should consider inviting the MEA secretariat concerned on an ad hoc,

meeting-by-meeting basis."

This part of the mandate is tied to some extent to the current political deadlock over the issue of observer

status of international organizations in the General Council.

While negotiations may result in the adoption of criteria for the granting of observer status to MEAs, that would

complement existing criteria for observer status of international organizations contained in the Rules of

Procedure of the General Council, it is not clear whether formal observership would be granted to MEAs

because of the blockage over this issue.

It should be noted that while certain MEAs already have observer status in WTO bodies, other requests that

came after the deadlock are still pending. These include, for example, requests by the Basel Convention on the

Transboundary Movements of Hazardous Wastes, the Ozone Secretariat of the Montreal Protocol on Substances

that Deplete the Ozone Layer, and the International Tropical Timber Organization in the Regular CTE, and

requests by the Convention on Biological Diversity in the TRIPS Council, the SPS and TBT Committees.

It should be noted that despite the deadlock, several WTO Committees have developed a practice of granting

observer status to international organizations on an ad hoc, meeting-by-meeting basis. While no

intergovernmental organizations have observer status in the CTESS, a number of them are invited on an ad-

hoc/meeting-by-meeting basis. This practice could therefore allow MEAs in many cases to continue to

participate in the work of WTO Committees.[6]

EXERCISES:

10. Why is MEA observership important in the CTE and the CTESS?

6 A full list of intergovernmental organizations granted observer status to the CTE can be found on the WTO

website.

http://www.wto.org/english/thewto_e/igo_obs_e.htm#envir

73

V. SUMMARY

TRADE AND ENVIRONMENT NEGOTIATIONS IN THE WTO

At the Doha Ministerial Conference in 2001, trade ministers launched, for the first time in the history of

the multilateral trading system, negotiations in the area of trade and environment. These negotiations

cover three elements: (i) relationship between existing WTO rules and specific trade obligations set

out in MEAs; (ii) procedures for regular information exchange between MEA Secretariats and the

relevant WTO committees, and the criteria for the granting of observer status; and (iii) reduction or,

as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.

THE RELATIONSHIP BETWEEN WTO AND MEA RULES

MEAs have been negotiated to deal with environmental problems in a multilateral setting. CTE has

wrestled with the issue of how to address the trade provisions which several of these agreements

contain.

Trade measures containing in MEAs can include export and/or import ban, export and/or import

permits and licenses, packaging, labelling or transportation requirements, notification requirements or

reporting requirements.

Measures taken pursuant to MEAs could give rise to questions of consistency with WTO rules, such as

the non-discrimination principle, or the prohibition of quantitative restrictions. In the context of a

dispute arising over the application of a trade measure under an MEA, the respondent could invoke a

defence under GATT Article XX.

Negotiations On The Relationship Between WTO And MEA Rules

A number of proposals for an outcome under Paragraph 31(i) have been put forth by Members. These

include the following: Members continue to share their experience relating to the negotiation and

implementation of specific trade obligations in MEAs in the regular CTE; inclusion of some basic

governing principles on the WTO-MEA relationship (e.g. mutual supportiveness, no subordination,

deference and transparency); acknowledge that both MEAs and the WTO Agreement are instruments

of international law of equal standing between parties to the agreements; and the establishment of a

Group of Experts on Trade and Environment from which WTO Members, and in particular developing

countries, could seek advice on the implementation of MEA measures.

COLLABORATION BETWEEN WTO AND MEA SECRETARIATS

On information exchange between the WTO and MEA secretariats and observer status, a number of

elements that could form part of an outcome in this negotiation have been put forward by Members.

These include consolidating or formalizing existing practices such as information sessions held by the

CTE with MEA Secretariats; the organization by the WTO Secretariat of side events held in the

margins of MEA Parties' meetings; exchange of documents; and collaboration between the WTO,

UNEP and MEAs in providing technical assistance to developing countries on trade and the

environment.

74

PROPOSED ANSWERS:

1. Multilateral negotiated solutions to environmental problems are preferred to unilateral solutions when the

environmental problem being addressed is regional or global in scope. Cooperation to address such

environmental problems helps to ensure that the most efficient solution is put in place and that efforts to

reduce environmental damage are not hindered by "free-riders". Furthermore, resort to unilateralism

runs the risk of arbitrary discrimination and disguised protectionism which could damage the multilateral

trading system.

2. Examples of MEAs discussed in the WTO are:

the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their

Disposal; the Convention on Biological Diversity (CBD) and the Cartagena Protocol on Biosafety;

the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); the

Montreal Protocol on Substances that Deplete the Ozone Layer; the Rotterdam Convention on the Prior

Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade; the

Stockholm Convention on Persistent Organic Pollutants; and the United Nations Framework Convention

on Climate Change (UNFCCC) and its Kyoto Protocol.

3. MEAs can use trade measures for a number of reasons:

for monitoring and controlling trade

to encourage compliance with MEA requirements

as a means of enforcing MEA objectives

as an incentive for non-Parties to adhere

4. The relevant WTO Principles that could relate to trade measures taken pursuant to an MEA include:

GATT Article I, any advantage, or privilege granted by a country to any product originating in any

other country shall be accorded to like products originating in the territories of all other

Members;

GATT Article III, WTO Members must not discriminate between imported and domestic like

products; and

GATT Article XI, no prohibitions or restrictions other than duties, taxes or other charges such as

quotas, import or export licenses shall be applied on the import or export of any product.

5. In the context of a dispute arising over the application of a trade measure under an MEA, the respondent

could invoke a defence under GATT Article XX:

necessary to protect human, animal or plant life or health;

relating to the conservation of exhaustible natural resources if such measures are made effective

in conjunction with restrictions on domestic production or consumption;

6. The scope of Paragraph 31(i) negotiations are limited to: existing WTO rules; specific trade obligations

set out in MEAs; and applicability of such existing WTO rules as among parties to the MEA in question.

7. Several Members are of the opinion that dispute settlement falls outside the mandate of paragraph 31(i)

of the Doha Declaration. Furthermore, it has been argued that deference to MEA expertise could result in

WTO law being subordinated to rules contained in MEAs.



http://www.cbd.int/

http://bch.cbd.int/protocol/

http://www.cites.org/



http://www.pic.int/

http://www.pic.int/






75

8. Information exchange between the WTO and various MEAs is essential to ensure that the trade and the

environment regimes continue to evolve in a coherent and mutually supportive manner.

9. Current forms of information exchange between the WTO and MEAs include information sessions held by

the CTE with MEA Secretariats; the organization by the WTO Secretariat of side events held in the

margins of MEA Parties' meetings; exchange of documents; and collaboration between the WTO, UNEP

and MEAs in providing technical assistance to developing countries on trade and the environment.

10. MEA observership in the CTE and the CTESS is important to establish means for information exchange

between the WTO and other multilateral institutions. Observer status for MEAs allows these organizations

to follow discussions on matters of direct interest to them.

77

Environmental Goods and

Services Negotiations ESTIMATED TIME: 6 hours


Introduce and provide the rationale for the environmental goods negotiations

contained in the Doha mandate on trade and environment

Give an overview of the current state of negotiations on environmental goods

including product identification, treatment and key challenges

Present some other issues taken up in the negotiations including cross-cutting

issues, such as non-tariff barriers and transfer of technology, and environmental

services

MODULE

4

79

I. BACKGROUND

IN BRIEF

One of the key element of negotiations in the area of Trade and Environment concerns the liberalization of

trade in environmental goods and services. The mandate contained in Paragraph 31(iii) of the Doha

Ministerial Declaration reads as follows:

"With a view to enhancing the mutual supportiveness of trade and environment, we agree to negotiations,

without prejudging their outcome, on:

... the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental

goods and services."

IN DETAIL

I.A. POTENTIAL TO DELIVER WIN-WIN-WIN OUTCOMES

These negotiations could result in fewer and lower barriers to trade in environmental goods and services,

therefore improving global market access to more efficient, diverse, and less expensive goods and services

that can contribute to environmental objectives. This is important because environmental technologies are

often needed to effectively and efficiently deal with environmental problems.

Increasing access to, and use of, environmental goods and services can yield a number of environmental

benefits, such as reducing air and water pollution, facilitating resource conservation and improving energy

efficiency. In addition, market opening in these sectors can be a powerful tool for economic development by

generating economic growth and employment and enabling the transfer of valuable skills and technology

embedded in such goods and services. In short, the Doha mandate provides an unprecedented opportunity

for the multilateral trading system to contribute to furthering mutual supportiveness of trade and the

environment.

As environmental goods and services are produced and used by developed and developing countries alike,

liberalizing trade is seen as a way to improve market access and to further the trade, environmental and

developmental goals of WTO Members.

In this regard, negotiations under Paragraph 31(iii) of the Doha Ministerial Declaration are considered to have

the potential to deliver "win-win-win" outcomes for trade, the environment and development, thereby

contributing to broader sustainable development goals.

First, negotiations will result in a win for trade with the reduction or elimination of tariff and non-tariff

barriers (NTBs), as domestic purchasers, including business and governments at all levels, will be able

to acquire environmental technologies at lower costs.

80

Second, negotiations will result in a win for the environment by improving access to high quality

environmental goods needed to protect the environment or to help mitigate climate change. This can

lead to direct quality of life benefits for citizens in all countries in terms of a cleaner environment, while

satisfying basic human needs such as improved access to safe water, sanitation or clean energy. In

addition, the use of environmental goods can reduce negative externalities in the form of detrimental

environmental and human health effects and can assist in the realization of important energy efficiency

gains.

Finally, the negotiations could also result in a win for development to the extent that liberalization can

assist developing countries in obtaining the tools needed to address key environmental priorities as part

of their ongoing development strategies, such as those identified in the Johannesburg Plan of

Implementation of the World Summit on Sustainable Development (WSSD).

Opportunity for “win-win-win” outcome

Increased availability / access to green

goods and services, environmentally-

friendly technology and know-how

Lower prices through tariff reductions

(Eliminate gap between green goods

and their standard counterpart)

Assist developing countries in obtaining

tools needed to address key

environmental priorities as part of their

ongoing development strategies

tradetrade

environmentenvironment

developmentdevelopment

Figure 1: Win-win-win outcome

I.B. ECONOMIC RATIONALE FOR REDUCING TARIFF AND

NON TARIFF BARRIERS ON ENVIRONMENTAL GOODS

There is a twofold rationale for reducing tariffs and other trade barriers regarding environmentally-friendly

goods and technologies. First, reducing or eliminating import tariffs and non-tariff barriers for these types of

products should reduce their price and therefore facilitate their deployment at the lowest possible cost. Access

to low-cost and more environmentally-friendly technologies may be particularly important for industries which

comply with mandatory environmental regulations. Reducing or eliminating import tariffs and non-tariff

barriers in these types of products will reduce their price and make them more accessible.

A number of studies have shown that tariff reductions can ease the economic barriers to the use of

environmentally friendly technologies. This is particularly important in sectors where cost is the principle

81

obstacle to the deployment of such technologies, such as the renewable energy sector.[1]

In such cases, the

reduction or removal of tariffs could contribute significantly to improving access to these goods.

The second reason for reducing tariffs and other trade barriers is that trade liberalization of

environmentally-friendly goods would provide incentives to producers and provide them with domestic

expertise to expand the production and export of these goods. It is argued that trade liberalization of such

goods would allow developing countries, in particular, to promote the industrial diversification of their

economies and realize economies of scale.[2]

Increased trade allows larger markets for environmental goods,

leading to profits from economies of scale and gives producers the opportunity to learn and benefit from

technological advances.[3]

Furthermore, the increased competition from market opening can foster technological innovation in areas

related to protection of the environment. Trade liberalization of environmental goods, in particular in

developing countries, could help increase local capabilities for innovation and adaptation of domestic

technology rather than foster dependence on transfer of foreign technology.[4]

I.C. THE INSTITUTIONAL STRUCTURE OF NEGOTIATIONS

So far, most of the discussions relating to Paragraph 31(iii) have taken place in the CTESS. However, the

mandate is also relevant to the work of other negotiating groups, such as the Council for Trade in Services in

Special Session as regards to environmental services; and the negotiating group on Non-Agricultural Market

Access (NAMA) as regards to industrial products. If product coverage were to extend to agricultural goods, the

work of the Committee on Agriculture in Special Session would also be relevant to the mandate under

Paragraph 31(iii).

1 Steenblik and Matsuoka (2008), Facilitating trade in selected climate change-mitigation technologies in the

electricity generation and heavy industry sectors, COM/TAD/ENV/JWPTE(2008)28.

2 Claro and Lucas (2007), Environmental goods: trade flows, policy considerations and negotiating strategies,

in ICTSD Trade in Environmental Goods and Services and Sustainable Development, Domestic Considerations

and Strategies for WTO negotiations, Policy Discussion Paper, pp. 32-60.

3 Stern (2006), The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge,

308 p.

4 Claro and Lucas (2007), Environmental goods: trade flows, policy considerations and negotiating strategies,

in ICTSD Trade in Environmental Goods and Services and Sustainable Development, Domestic Considerations

and Strategies for WTO negotiations, Policy Discussion Paper, pp. 32-60.

http://www.oecd.org/dataoecd/28/45/45979086.pdf

82

Trade Negotiations Trade Negotiations

Committee (TNC)Committee (TNC)

Negotiating Negotiating

Group on Group on

Market Market

AccessAccess

Negotiating Negotiating

Group on Group on

RulesRules

Special Special

Session of Session of

the the

Committee on Committee on

AgricultureAgriculture

Special Special

Session of Session of

the Council the Council

for Trade in for Trade in

ServicesServices

Special Session Special Session

of the Dispute of the Dispute

Settlement BodySettlement Body

CTE CTE

Special Special

SessionSession

TRIPS Special TRIPS Special

SessionSession

GENERAL COUNCIL

DDA Negotiations: Institutional StructureDDA Negotiations: Institutional Structure

Figure 2: DDA Negotiations: Institutional Structure

EXERCISES:

1. Please explain how the Doha Paragraph 31(iii) negotiations could deliver a "win-win-win" outcome.

2. What is the economic rationale for liberalizing trade in environmental goods and services?

83

II. IDENTIFICATION OF ENVIRONMENTAL

GOODS

IN BRIEF

For the negotiations under Paragraph 31(iii) undertaken in the CTE in Special Session, the most significant

challenge to date has been that there is no internationally agreed definition of an "environmental good", nor

is there any agreement on the criteria that should apply to their identification.

IN DETAIL

II.A. LIST OF ENVIRONMENTAL GOODS IDENTIFIED BY A

NUMBER OF MEMBERS

Since the beginning of the negotiations, a number of delegations have put forward goods which they consider

to be environmental. The Members that have identified environmental goods are: Canada, the European

Union, Japan, Korea, New Zealand, Norway, Chinese Taipei, Switzerland and the United States of America

(which together form the "Group of Friends"), Qatar, Saudi Arabia, Singapore and the Philippines.

A broad range of products (amounting to over 600 HS tariff lines) have been put forward to date. These

products have been categorized by Members according to their environmental use. The main categories in

which the goods fall, include:

Renewable energy;

Waste water management and potable water treatment;

Management of solid and hazardous waste and recycling systems;

Air pollution control;

Clean up or remediation of soil and water;

Heat and energy management;

Natural resources protection;

Noise and vibration abatement;

Environmental monitoring, analysis and assessment equipment;

Cleaner or more resource efficient technologies and products;

Environmentally preferable products, based on end use or disposal

characteristics.

84

Note

A compilation list made up of all submissions on environmental goods submitted by Members can be found

in Annex II to the Report by the Chairman to the Trade Negotiating Committee for the purposes of the TNC

stocktaking exercise (TN/TE/19).

II.B. CHALLENGES IN IDENTIFYING ENVIRONMENTAL

GOODS

II.B.1. ENVIRONMENTAL FRIENDLINESS AS A RELATIVE CONCEPT

The concept of "environmental friendliness" of goods is a relative one. Some

goods considered as environmentally friendly in certain countries could be

seen as unfriendly in others. Similarly, some goods may be considered as

environmental when compared to other products but could still be

environmentally harmful (e.g. natural gas, which was proposed by Qatar and

Saudi Arabia).

While some goods, such as wind turbines or solar panels, may seem to be

intrinsically environmental, there are many other industrial goods that may

not come across as being environmental per se, but which are nevertheless

essential when carrying out environmental activities or projects. In fact, this is the case for most of the goods

that have been proposed by Members under Paragraph 31(iii), many of which are industrial goods that have

different types of applications, some of which may be environmental, others not.

II.B.2. MULTIPLE USE

The "multiple use" of goods is a source of concern for several Members in the CTESS.

In particular, some countries have been worried about the scope of the liberalization

exercise under Paragraph 31(iii). This is particularly the case given that many of the

goods considered in the context of Paragraph 31(iii) negotiations will already be

subject to tariff cuts as a result of NAMA negotiations.

With respect to the goods put forward so far, Members have proposed specific product

descriptions, or "ex outs", which could serve to identify with more specificity environmental goods in the

national tariff nomenclatures. That being said, there are many outstanding questions as to how environmental

goods can be identified under the Harmonized System and whether ex-outs can easily be implemented at the

border, especially in developing country Members.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/TN/TE/19.doc

85

II.B.3. INDUSTRIAL VS. AGRICULTURAL GOODS

As regards the type of goods covered under Paragraph 31(iii), there is nothing in the

mandate that suggests that negotiations should be limited to industrial goods. In

principle, agricultural goods could also be covered. Although some delegations have

indicated an interest in goods classified under the Harmonized System as agricultural

products - namely ethanol - there is no formal proposal on the table at this stage suggesting to include such

products under Paragraph 31(iii).

II.B.4. RAPIDLY EVOLVING TECHNOLOGY

Another challenge in the identification of environmental goods has to do

with the fact that environmental technology is evolving rapidly. Goods that

are considered environmentally friendly today may no longer be

environmental in five or ten years time. In the context of ongoing DDA

negotiations, this gives rise to the question as to whether the mandate in

Paragraph 31(iii) calls for a one-off liberalization exercise, or whether some

kind of review mechanism should be included in the outcome to ensure that

the liberalization exercise indeed benefits the environment.

•• No agreed definition or criteria (work in OECD, No agreed definition or criteria (work in OECD,

APEC APEC –– “defining by doing”)“defining by doing”)

•• Coverage: industrial Coverage: industrial andand agricultural goods?agricultural goods?

•• Majority of goods proposed have “multiple uses” Majority of goods proposed have “multiple uses”

(not just environmental)(not just environmental)

•• Technical issues relating to tariff classification Technical issues relating to tariff classification

(ability to distinguish at border; use of ex(ability to distinguish at border; use of ex--outs)outs)

•• Constant evolution of the technology (Review Constant evolution of the technology (Review

mechanism needed? “one off” exercise?)mechanism needed? “one off” exercise?)

Identifying goods/product coverage: Identifying goods/product coverage:

Some challengesSome challenges

Figure 3: Identification of environmental goods, key challenges

EXERCISES:

3. Try to identify examples of environmental goods that could fall under the various categories mentioned in

section III.A. (e.g. renewable energy, air pollution control, etc.).

4. Briefly summarize the challenges Members have faced in identifying environmental goods.

86

III. TREATMENT FOR ENVIRONMENTAL GOODS

IN BRIEF

In addition to identifying environmental goods under the Paragraph 31(iii) mandate, Members have to

negotiate the treatment that will apply to such goods.

IN DETAIL

III.A. NAMA

As mentioned above, most of the goods proposed so far are industrial goods that will already be subject to

tariff cuts as a result of negotiations in the NAMA Group. The fact that environmental goods were singled out

in the DDA mandate would seem to suggest that goods considered as "environmental" should be subject to

additional tariff cuts, but the question remains open at this stage.

III.B. SPECIAL AND DIFFERENTIAL TREATMENT

WTO Members have agreed that "the negotiations and the other aspects of the Work Programme shall take

fully into account the principle of special and differential treatment for developing and least-developed

countries..." (Doha Ministerial Declaration, Para. 50). Any provisions for special and differential treatment

should form an "integral part" of the outcome of the negotiations, and be "precise, effective and operational"

(Doha Ministerial Declaration, Para. 44).

Furthermore, as regards to non-agricultural market access, the Doha Declaration states that any outcome

should "take fully into account the special needs and interests of developing and least-developed country

participants, including through less than full reciprocity in reduction commitments" (Doha Ministerial

Declaration, Para. 16). Several proposals have touched upon the issue of special and differential treatment

under Paragraph 31(iii), or the treatment to apply to environmental goods more generally.

III.C. DIFFERENT FRAMEWORKS

Different frameworks have been proposed by Members for environmental goods liberalization. These include:

to negotiate a list of environmental goods that would be subject to liberalization;

to proceed on the basis of requests and offers;

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#organization

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#special

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#marketaccess

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#marketaccess

87

to liberalize goods required in the context of environmental projects; or to negotiate categories of

environmental goods which could then be subject to liberalization in the context of environmental

projects.

The following table briefly outlines the different frameworks that have been proposed by Members for

environmental goods liberalization.

Approach Proposing Member(s) Details

List approach Group of Friends, Philippines, Saudi

Arabia, Qatar and Singapore

Members submit lists of environmental goods,

along with tariff lines, proposed for

liberalization.

Request and

offer

Brazil Interested Members would draw up their own

individual list of goods to be liberalized on an

MFN basis. Negotiations would proceed on a

bilateral basis.

Integrated

Approach

Argentina Members would multilaterally agree on

"categories of environmental activities". In

accordance with these categories, Members

would then identify specific goods used in the

context of national projects. Similarly, goods

required in the context of the Kyoto Protocol's

Clean Development Mechanism would qualify

for tariff concessions.

Table 1: Frameworks proposed by Members to liberalize environmental goods

There is no agreement yet on the framework for modalities under Paragraph 31(iii) negotiations, and the

various approaches remain on the table for the moment. The treatment to be given to environmental goods

varies depending on the proposed modalities.

In the context of the list approach by the Group of Friends, Members would have to negotiate the treatment

that would apply to the various goods identified on a list. In this regard, it was suggested that tariffs could be

eliminated as soon as possible for developed country Members and those developing country Members

declaring themselves in a position to do so; for other developing country Members, tariffs could be eliminated

by "X" years thereafter.

The Group of Friends further suggested that special and differential treatment for developing country Members

could take the form of lower rates of liberalisation, different timeframes for the elimination of tariffs, or

additional flexibilities, including product exemptions.

In the context of the request and offer approach proposed by Brazil, interested Members would draw their own

individual list of goods. These goods would be liberalised on an MFN basis as a result of bilateral or plurilateral

negotiations.

88

Both the identification of goods and their treatment would take place in the context of the request-offer

process and, as such, would be driven by the individual Members engaging in this process. Therefore,

developing country Members could decide on the proportion of goods to be liberalized, as well as on their own

levels of reduction.

Under the integrated approach proposed by India and Argentina, Members would first agree multilaterally on

categories of environmental activities; in accordance with these categories, they would then proceed to

identify environmental goods which would be subject to tariff reduction or elimination in the context of national

environmental projects. The elimination of tariff and NTBs in relation to the goods selected would therefore be

limited in time. In other words, tariff concessions would be made only for the duration of the project in which

the goods are used.

EXERCISES:

5. Describe the main frameworks that have been proposed by Members for liberalizing trade in

environmental goods.

6. How could the concept of S&D treatment feature into the list approach?

89

IV. OTHER CONSIDERATIONS

IN BRIEF

In Paragraph 31(iii), Ministers also call on WTO Members to reduce or eliminate non-tariff barriers (NTBs) to

trade in environmental goods. The importance of this part of the mandate has been underscored by several

WTO Members.

Also, a number of WTO Members have noted that additional efforts are likely to be required to ensure that

effective transfer of the technology actually takes place in practice, although Paragraph 31(iii) does not

explicitly refer to "technology transfer."

It has been stated that the provision of environmental services is closely linked to trade in related goods.

Some Members have indicated that the development of their list of environmental goods had been informed

by the types of products used in environmental services.

IN DETAIL

IV.A. NON-TARIFF BARRIERS

While the elimination of tariffs is an important means of making environmental goods more affordable and

widely available, NTBs can be equally, or even more significant, impediments to trade in such goods.

In this context, approval, mutual recognition procedures as well as financial and technological support

measures could facilitate the entry of environmental goods into the markets of developed country Members. It

has been proposed that, as appropriate, specifically identified NTBs on environmental goods should be

addressed and reduced to the maximum extent possible so as to facilitate trade in environmental goods.

So far, discussions in the CTESS on the NTB component of the mandate

have been relatively limited but some examples of NTBs have been

mentioned by Members. These include, for instance: complications related

to customs procedures; immigration procedures; local content

requirements; and lack of intellectual property rights protection.

Some proposals have also alluded to problems relating to the lack of

international standards, including with respect to energy efficient goods

(Japan) and organically produced food (Brazil). It was further suggested

that Members consider establishing a structured work programme to

address NTBs faced by developing country Members in the export of

environmental goods.

90

IV.B. TRANSFER OF TECHNOLOGY

As noted above, reducing tariff and non-tariff barriers to environmental goods and services is one way of

reducing the cost and increasing the availability of environmental technologies. However, a number of WTO

Members have noted that additional efforts are likely to be required to ensure that effective transfer of the

technology actually takes place in practice.

Although Paragraph 31(iii) does not explicitly refer to "technology transfer", it is understood that liberalizing

tariff and non-tariff barriers to trade in environmental goods and services can contribute to making these

goods and services more affordable and available, which in turn may facilitate access to relevant technologies.

The transfer of technology not only impacts production and trade in goods but also in services. Thus, and in

keeping with the mandate of Paragraph 37 of the Doha Declaration, viable methods to ensure technology

transfer to developing country Members for sustainable use of resources must be explored and implemented.

A number of developing countries have noted that environmental goods negotiations provide an opportunity

within the WTO mandate to increase flows of technology to developing countries, and that an explicit focus on

opportunities for doing so will be particularly important in order to achieve "wins" for the environmental and

developmental dimensions of the Paragraph 31(iii) mandate.

Considering that the environmental goods sector is only just emerging in most developing countries, it has

been underlined that an important outcome of the negotiations should be to strengthen this sector in

developing Members. Some Members have provided examples of aid and technical assistance activities that

have contributed to technology transfer with respect to certain environmental goods.

IV.C. ENVIRONMENTAL SERVICES

It has been stated that the provision of environmental services is closely linked to trade in related goods.

Indeed, there are many environmental activities that entail the use of goods in conjunction with the delivery of

services. Some Members have indicated that the development of their list of environmental goods had been

informed by the types of products used in environmental services.

The current classification of environmental services is based on the Services Sectoral Classification List

developed during the Uruguay Round, which is in turn largely based on the United Nations Provisional Central

Product Classification (CPC).

The environmental services sector includes:

1. sewage services;

2. refuse disposal services;

3. sanitation and similar services; and

4. other environmental services.

Although the "other" category does not refer to any CPC item, it presumably includes the remaining elements

of the CPC environmental services category, e.g. cleaning of exhaust gases, noise abatement services, nature

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and landscape protection services, and other environmental protection services not included elsewhere. This

list has been used by many Members in their schedules of specific commitments.

TIP

More information on the United Nations Provisional Central Product Classification (CPC) can be found on the

United Nations Statistics Divisions website.

Environmental services are covered by the negotiations in the Council for Trade in Services in Special Session.

The main negotiating method in the area of services is the request and offer approach, which is similar to the

request offer approach traditionally used in the goods negotiations. As a result of these negotiations, some

Members may take additional specific commitments in the area of environmental services.

It has been reported that as of April 2003, some 47 Members had already undertaken specific commitments in

at least one sub-sector of the environmental services sectors. Most of them, however, have undertaken

specific commitments in several, and for some Members, in all sub-sectors. The number of commitments

across sub-sectors is roughly equal.

As compared to other services sectors, such as tourism, financial services or telecommunications, liberalization

bound under the GATS in environmental services appears rather limited. However, one should remember that

Members' policies may be more liberal in practice than is reflected in their schedules.

Environmental services is a sector where most trade takes place through commercial presence (mode 3) with

the accompanying presence of natural persons (mode 4). Cross-border trade (mode 1) and consumption

abroad (mode 2) are of limited relevance; they may offer an avenue for some supporting services, but appear

to be technically unfeasible for a number of relevant activities. These patterns are reflected in specific

commitments undertaken by Members.

Note

In 2010, the WTO Secretariat produced a Background Note on Environmental Services, with the view of

stimulating discussions in the Council on the sector of environmental services (S/C/W/320). The note

outlines general patterns and trends of environmental services markets, main features of the

environmental services market, environmental services classifications, and the application of GATS to

trade in environmental services.

EXERCISES:

7. Give examples of possible NTBs to trade in environmental goods.

8. Explain why transfer of technology is an important element for developing countries of an outcome under

the environmental goods negotiations?

9. How will an outcome under paragraph 31(iii) contribute to the overarching objective of the trade and

environment negotiations?

http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=9&Lg=1

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/S/C/W320.doc

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V. WAY FORWARD

In July 2008, the Chairman of the CTESS proposed a work programme

to take forward the discussions under Paragraph 31(iii). This work

programme calls upon Members to identify environmental goods of

interest to them, without prejudice to the modalities or treatment that

will apply to such goods.

The objective of this exercise is to draw up the "universe" of

environmental goods that could potentially be liberalized under the

mandate. Once defined, this universe could provide a basis to engage

Members in more substantive discussions on goods of interest and point

to areas where commonalities may be found, with a view to achieving

an outcome on this important mandate.

To date, several Members have made contributions to this universe of

environmental goods, and the Committee will need to start reviewing

what is on the table. Focused discussions on any subset of goods that

seem to garner particular support, such as goods relating to renewable

energy or climate change mitigation and adaptation, could be taken up

first.

In parallel, discussions must continue to advance on other aspects of the mandate. To date, few suggestions

have been formulated on how to deal with issues such as NTBs, S&D treatment or development-related issues

in the context of the Paragraph 31(iii) mandate, and further outcome-specific proposals will be required in

order for Members to make progress on these important aspects.

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VI. SUMMARY

ENVIRONMENTAL GOODS AND SERVICES NEGOTIATIONS IN THE WTO

At the Doha Ministerial Conference in 2001, trade ministers launched, for the first time in the history of

the multilateral trading system, negotiations in the area of trade and environment.

These negotiations include the reduction or, as appropriate, elimination of tariff and non-tariff barriers

to environmental goods and services.

Liberalization of trade in environmental goods can facilitate access to, and encourage the use of,

environmental technologies, which can in turn stimulate innovation and technology transfer to

developing countries. Moreover, developing country Members may have a rapidly growing commercial

interest in some of the environmental goods that are being discussed.

IDENTIFICATION OF ENVIRONMENTAL GOODS

There is no internationally agreed definition of an "environmental good". Nor is there any agreement

on the criteria that should apply to their identification. To date, in the negotiations, Members have put

forward a broad range of products which they consider to be "environmental." These products can be

categorized into a set of categories based on their environmental benefit or rationale, including: air

pollution control, renewable energy, waste management, environmental technologies, and others.

Members have faced a number of specific challenges in the identification of environmental goods:

Environmental friendliness is a relative concept. Goods that are considered environmentally

friendly in one country might not be in another country.

Numerous environmental goods also have alternative "non-environmental" uses. Additionally,

HS-6 categories are broad and can include both environmental and non-environmental products

under the same tariff heading. Some Members have suggested using ex-outs in order to

narrow the scope of liberalization.

Members have to consider whether their negotiating mandate is limited to industrial goods or

also agricultural goods.

Environmental technology is rapidly evolving. Goods that are considered environmental today

may not be environmental in 10 years time.

Different frameworks have been proposed by Members for environmental goods liberalization. These

include:

to negotiate a list of environmental goods that would be subject to liberalization;

to proceed on the basis of requests and offers;

to liberalize goods required in the context of environmental projects; or

to negotiate categories of environmental goods which could then be subject to liberalization in

the context of environmental projects.

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OTHER CONSIDERATIONS IN THE ENVIRONMENTAL GOODS NEGOTIATIONS

The negotiating mandate under Paragraph 31(iii) also calls for the elimination or reduction of non-tariff

barriers to trade in environmental goods. While NTBs can be even more important impediments to

trade than tariffs, to date, discussions in the CTESS on NTBs have been relatively limited.

While the removal of tariff and non-tariff barriers to trade in environmental goods is one way of

reducing the cost and increasing the accessibility of such goods, a number of WTO Members have

noted that additional efforts are likely to be required to ensure that effective transfer of the technology

actually takes place in practice. While technology transfer is not a part of the mandate under

paragraph 31(iii), discussions have taken place on the issue in the CTESS.

Negotiations on liberalizing trade in environmental services are taking place in the Council for Trade in

Services. Trade in environmental services is often directly tied to trade in environmental goods,

therefore, a successful outcome in both sets of negotiations will prove to be mutually supportive.

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PROPOSED ANSWERS:

1. A successful outcome under Paragraph 31(iii) will result in a triple win for WTO Members: a win for the

environment, a win for trade and a win for development. The environmental benefits would come from

better access to safe water, sanitation or clean energy; trade benefits, since producers of such goods and

technologies can find new markets; and development wins because poor countries can better afford the

tools needed to address key environmental priorities as part of their ongoing development strategies.

2. There is a twofold rationale. First, reducing or eliminating import tariffs and non-tariff barriers for

environmental goods and services would reduce their price and therefore facilitate their deployment.

Access to low-cost and more environmentally-friendly technologies may be particularly important for

industries which must comply with environmental regulations. Second, trade liberalization of

environmentally-friendly goods and services would provide incentives to producers to expand the

production and export of these goods and services. Increased trade allows larger markets, leading to

profits from economies of scale, and provides producers the opportunity to benefit from technological

advances. This would allow, in particular, developing countries to promote diversification of their

economies.

3. Examples of environmental goods include:

Renewable energy: solar panels, wind turbines, solar water heaters

Waste water management and potable water treatment: waterless urinals, composting toilets

Management of solid and hazardous waste and recycling systems: waste containers, biomass boilers

Air pollution control: air or vacuum pumps, fuel efficient vehicles

Clean up or remediation of soil and water: oil skimmers

Heat and energy management: glass fibres for thermal insulation of buildings, electricity meters

Natural resources protection: fishing nets that include turtle excluder devices (TEDs)

Noise and vibration abatement: industrial mufflers

Environmental monitoring, analysis and assessment equipment: thermostats, gas or smoke analysis

apparatus

Cleaner or more resource efficient technologies and products: solar stoves

Environmentally preferable products, based on end use or disposal characteristics: fabrics made with

biodegradable or sustainable sources (e.g. jute vs. synthetic)

4. The challenges Members have faced identifying environmental goods stem from the fact that there is no

internationally agreed definition of an "environmental good". Nor is there any agreement on the criteria

that should apply to their identification. Specific challenges include:

The concept of "environmental friendliness" is relative. Goods that may be considered

environmentally friendly in one country might not be in another. Similarly, goods could be

considered environmentally preferable when compared to other products, but could still be

harmful to the environment. This challenge applies to most industrial goods identified by

Members in the negotiations.

96

Many environmental goods also have other "non-environmental" uses. Challenges exist in

ensuring that the goods benefiting from trade liberalization under Paragraph 31(iii) are in fact

being used for environmental purposes.

Members have to define the scope of negotiations, whether to liberalize trade in industrial

environmental goods only, or to also include agricultural environmental goods.

Environmental technology is rapidly evolving. Goods that are considered environmental today

may not be environmental in 10 years time. In the context of ongoing DDA negotiations, this

gives rise to the question as to whether the mandate in Paragraph 31(iii) calls for a one-off

liberalization exercise, or whether some kind of review mechanism should be included in the

outcome to ensure that the liberalization exercise indeed benefits the environment.

5. Under the list approach, Members submit lists of environmental goods of interest to them. Members

would then negotiate the treatment that would apply to the various goods identified on a list. Under the

request and offer approach, interested Members would draw up their own individual list of goods to be

liberalized on an MFN basis. Negotiations would proceed on a bilateral basis. Under the integrated

approach, Members would first agree multilaterally on categories of environmental activities;

in accordance with these categories, they would then proceed to identify environmental goods which

would be subject to tariff reduction or elimination in the context of national environmental projects. The

elimination of tariff and NTBs in relation to the goods selected would therefore be limited in time. In

other words, tariff concessions would be made only for the duration of the project in which the goods are

used.

6. Under the list approach, it has been suggested that tariffs could be eliminated as soon as possible for

developed country Members and those developing country Members declaring themselves in a position to

do so; for other developing country Members, tariffs could be eliminated by "X" years thereafter. The

Group of Friends further suggested that special and differential treatment for developing country Members

could take the form of lower rates of liberalisation, different timeframes for the elimination of tariffs, or

additional flexibilities, including product exemptions.

7. NTBs could include complications related to customs procedures, immigration procedures, local content

requirements and intellectual property rights protection.

8. Technology transfer is important in order to achieve "win" for the developmental dimension of the

Paragraph 31(iii) mandate. Because the environmental goods sector is just emerging in most developing

countries, it has been underlined that an important outcome of the negotiations should be to strengthen

this sector in developing Members.

9. Recall that the overarching objective of the Doha negotiations on trade and the environment is to

enhance the mutual support of trade and environmental policies. A successful outcome under

Paragraph 31(iii) will result in a triple win for WTO Members (i.e. environmental, trade and developmental

benefits) enhancing the mutual supportiveness of trade and environment.

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Environmental Requirements and

Market Access, Labelling for

Environmental Purposes ESTIMATED TIME: 8 hours


Part one of Module 5 deals with environmental requirements and market access. It

gives an overview of environment requirements; explains market access issues

faced by developing countries; and provides a general summary of relevant work

in the Committee on Trade and Environment (CTE) and the Committee on

Technical Barriers to Trade (TBT).

Part two of Module 5 deals with labelling for environmental purposes. It gives an

overview of environmental labelling; explains the issue of process and production

methods (PPMs) related to environmental labelling schemes; provides a general

summary of relevant work in the CTE; and descries relevant disciplines in the TBT

Agreement.

MODULE

5

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I. ENVIRONMENTAL REQUIREMENTS AND

MARKET ACCESS

IN BRIEF

Environmental requirements and market access: preventing ‘green protectionism’

Environmental requirements are requirements adopted to achieve environmental objectives. These

requirements can impede trade and even be used as an excuse for protectionism. The answer is not to

weaken environmental standards, but to set appropriate standards and enable exporters to meet them.

I.A. ENVIRONMENTAL REQUIREMENTS

I.A.1. WHAT ARE ENVIRONMENTAL REQUIREMENTS?

Environmental requirements are requirements adopted to achieve environmental objectives. They may be in

the forms of ban and restriction; product-content requirements; product performance requirements;

packaging, waste management and recycling requirements; charges and taxes; labelling requirements; and

testing, inspection and certification.

Examples of environmental requirements ...

Requirements on products: Requirements aimed at ensuring a certain standard on product characteristic

and performance for the pursuance of environmental objectives, usually take the form of (mandatory) technical

regulations. These requirements can be product-content requirements or maximum residue limits, such as

bans and restrictions on the use of certain hazardous pesticides on tea and cotton, certain chemical agents for

the conservation of leather, and the use of certain dyes for textiles. They can also be minimum product

performance standards, such as energy efficiency requirements on electronic and electrical appliances, or

maximum emissions standards on vehicles.

Labelling requirements: Environmental-labels inform consumers and raise their awareness about the

environmental characteristics of a product. Frequently, they aim at changing both consumers' and producers'

behaviour in favour of environmentally-friendly production, products, technologies and consumption. They tend

to take the form of (voluntary) standards, and may lead to the award of eco-labels.

Packaging and disposal requirements: These requirements aim at reducing the quantity of packaging

waste, facilitating its recovery, reuse, recycling or disposal, obliging producers to take more direct

responsibility for tackling the environmental problems they poses. They are applied to alter the characteristics

of packaging, for instance, its recyclability, recycled content and bans on certain types of packaging material or

substances, as well as how packaging is disposed of, for instance, handling requirements, take-back obligations

and deposit-refund schemes.

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I.A.2. RECENT TRENDS[1]

Proliferation and growing complexity

Consumers, producers, regulators and other stakeholders are becoming increasingly aware of environmental

and health issues, and are looking for versatile tools to address these effectively. As a result, environmental

requirements have proliferated, in particular in developed countries. They are becoming more complex, aimed

at fulfilling not only environmental objectives but often also other public policy objectives, connecting to health,

food safety, environmental and occupational safety concerns. These requirements may be stringent, have

broad impacts and subject to frequent changes. They often differ from market to market. Since they are

multidimensional, involving various groups of stakeholders, they are more difficult to harmonize.

Rise in private sector voluntary initiatives

Among the two forms of environmental requirements – namely, mandatory technical regulations and voluntary

standards. The importance of private voluntary standards is on the rise, for instance, in food and beverage,

fisheries and forestry sectors. These private standards may include more stringent specifications than those

contained in government technical regulations and are evolving fast. Even when a standard is voluntary

de jure, it may, in many cases, have to be met, and become commercial imperatives for certain markets, in

particular if they are integrated into the supply chains. In such cases, a clear separation between mandatory

and voluntary requirements is not clearly felt at the level of the producer and exporter.

Increase in global supply-chain driven requirements

With a globalized production system, producers and exporters are obliged to meet specifications required by

multinational companies. For example, in the electronic sector, where production of components and assembly

operations are increasingly outsourced, global supply-chain driven requirements are on the rise. There is also

an increase in requirements imposed by big retailers along the global supply chain. Producers, including small

and medium-sized enterprises (SMEs) have to abide by requirements set by global supply chains or risk being

phased out as input providers. For example, in the food sector, one of the global purchasing standards is the

Good Agricultural Practice (GlobalGAP) launched by the Euro Retailer Produce Working Group, which includes

the leading supermarkets in Europe[2]

.

1 Based on OECD Trade Policy Studies 2005 and the UNCTAD Trade and Environment Review 2006

(WT/CTE/W/244).

2 GLOBALGAP is a global partnership of voluntary members, bringing together like-minded parties with the shared vision of harmonising Good Agricultural Practice (G.A.P.) world-wide. The partnership is open to any organisation agreeing to the Terms of Reference committed to responding to consumer concerns on food safety, animal welfare, environmental protection and worker welfare.


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EXERCISES:

1. What are environmental requirements, give three examples?

2. What are the recent trends in environmental requirements?

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I.B. MARKET ACCESS ISSUES FACED BY DEVELOPING

COUNTRIES

IN BRIEF

Developing-country producers, in particular the small and medium size enterprises, may find it challenging to

implement environmental requirements in export markets. They may find it difficult to make the needed

investments. There is the lack of infrastructure, capital and skill, and insufficient access to information and

technology.

Developing-country responses to environmental requirements vary, ranging from a firefighting approach to a

holistic approach to harness the sustainable development benefits. A number activities, including improving

information flows, technical assistance and capacity building, have been carried out both at the national and

international level to ease the challenges faced by developing countries.

I.B.1. BACKGROUND[3]

The extent to which a country is affected by environmental requirements depends on how diversify or

concentrate its exports is (i.e. whether or not its total exports is concentrated in products that are subject to

environmental requirements in major export markets). Often, developing countries' exports are concentrated

in a small number of products and sectors (e.g. textiles and clothing, leather and leather products, footwear,

timber, wooden furniture and paper, food and fishery products) in which environmental requirements apply. A

large share of their exports are of low value-added products which derived from natural resource intensive

industries and compete on the basis of price in international markets. Therefore, developing countries may

find it difficult to compensate for a loss of competitiveness in these sectors.

In developing countries, SMEs account for a large share of their exports but export only a small share of their

total output. Comparing to large firms, adjustment to environmental requirements is generally more difficult

for SMEs. Investments required to comply with some environmental standards and regulations, such as

installations for recycling industrial waste or waste water treatment, may not be economical on a small scale.

The problems are exacerbated in the case of SMEs that are often family-run, located in urban areas with

deficient infrastructure, working with obsolete technologies, with a weak market and financial position and little

scope for improvement.

The relatively weak domestic environmental legislation and demand for environment-friendly products in

developing countries, does not necessarily allow developing country producers to compensate the investments

needed for production-method changes, and makes it more challenging for them to comply with stringent

environmental requirements in developed country markets.

3 Document WT/CTE/W/26.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/W26.wpf

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I.B.2. MAIN CHALLENGES

Lack of information

Usually, there is no real problem in getting information to a country. However, disseminating the information

to domestic industry in a timely manner requires effective communication networks, and it could be a

challenge, in particular for LDCs and SMEs in developing countries. In some cases, exporting country

governments or industries may be caught by surprise and therefore have insufficient time to respond to the

requirements before their exports are affected. Other times, problems could be due to the lack of awareness,

even in cases where it would have been easy to conform with requirements. Recently, with WTO notification

procedures on draft regulations and the possibility of information diffusion through the internet, challenges

regarding the lack of information has become less common.

Lack of capacity and resources

Some developing country producers may not have the needed knowledge to comply with environmental

requirements. This is particularly the case when changes in processes and production methods are required,

and the know-how is lacking due to insufficient prior research. In some cases, exporters, in particular SMEs,

may not be able to understand fully the details of the requirements due to technical complexity. Often, they

lack the capital to invest in the new processes and production methods (e.g. pollution control installation,

specific machinery or chemical agents). Difficulties may also arise due to the lack of substitution products, that

are sometimes proprietary or expensive and not readily available to developing-country producers, in

particular SMEs.

Proliferation of heterogeneous requirements

One of the main challenges for developing country exporters is the need to both keep up with changing

requirements and deal with divergent measures in different markets. The associated costs include the

expenditure on information and conformity assessment, as well as the loss of economies of scale. Concerns

can be heard regarding requirements that assume "one size fits all" and therefore do not take into account the

special circumstances of developing countries. Possible solutions can be to develop relevant international

standards or to negotiate equivalence agreements.

Costs of conformity assessment

In many developing countries, local certification bodies are not recognized or accredited by the importing

countries' authorities. In some cases, there may be a lack of supporting infrastructure such as laboratories,

metrology, data and technologies. For example, importers may fix a very low limit on residues that has to be

measured by sophisticated laboratory equipment operated by highly qualified technicians. This leaves

exporters with no choice but to pay the high cost of using laboratories and certifying bodies recognized by, and

usually based in, importing countries. The situation can be particularly difficult for SMEs who need to provide

“proof of compliance” with diverse requirements in different markets. Although mutual recognition agreements

(MRAs) could provide a solution to multiple certifications, their use has generally been limited, since the

conclusion of MRAs tend to be complex and time-consuming.

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I.B.3. DEVELOPING-COUNTRY RESPONSES[4]

Developing-country responses to environmental requirements vary. It depends, for instance, on the

characteristics of the industry, producers and countries involved. More advanced developing countries tend to

attract subcontractors, subsidiaries and branches of large companies from developed countries, and therefore

tend to be informed of, or prepared for new requirements. Many of the large producers may be partly or

wholly owned by companies based in OECD countries, and therefore be able to obtain the needed knowledge

and capital to adapt to new processes and production methods. On the other hand, LDC and locally owned

SMEs may be less able to adapt, and are particularly hard hit by new environmental requirements in export

markets.

A firefighting approach

It appears that most developing countries adopt a firefighting, rather than strategic, approach to addressing

environmental requirements in key export markets. Their exporters have only been able to react to, not

anticipate, new requirements. In the absence of a proactive approach, attention will continue more likely to

focus on problem-solving or negative impacts prevention rather than harnessing the sustainable development

benefits (i.e. to maximize positive effects associated with environmental protection, resource and

material-efficiency, occupational safety and public health, and thereby raising productivity and welfare gains).

A holistic approach

Some developing countries address environmental requirements in a more holistic way, attempting to promote

reconciliation at a high level of environmental protection and stronger growth in exports. The impetus appears

to be coming from a desire to promote policy coherence and regulatory reform to make government

regulations more efficient and trade-friendly. Proactive policies of this kind can be observed in China, the

Philippines and Thailand on their adjustment strategies to new electronic electrical equipments (EEE)

environmental requirements in the global markets and their need to address problems related to the growing

domestically generated EEE waste. Actions include information-sharing; better understanding on

environmental requirements in key export markets; participation in standard-setting consultations where

there are significant implications for exporters; coordinating efforts to assess implications of new

requirements; raising general public's awareness on environmental and health issues; improving

infrastructure for waste management; developing an appropriate legislative framework and enforcing

environmental regulations; collaboration between government and private sector stakeholders; training and

strengthened research; and enhancing SMEs' capabilities to adopt environmental management systems.

New market opportunities

There is a general growing demand in developed countries for environmentally preferable products. For

instance, the demand for organic agricultural products has been growing faster than overall food products over

the past two decades. This presents promising export opportunities for producers and exporters of organic

products in developing countries. In addition to income generation, organic agriculture also has the potential

to offer a range of local and national sustainable development opportunities.



105

Improving information flows

On improving information flows to key actors at the national level, some countries operates an early warning

system aimed at helping exporters to anticipate new environmental requirements (e.g. the system of the

Brazil's national standards institute INMETRO). Information provided can cover areas such as requirements set

out in environmental measures; market opportunities offered by the measures; and the most effective ways

for producers to adjust to the measures. Some other vehicles for disseminating information can be holding

workshops and seminars, sending information missions or undertaking longer-term outreaching projects to

exporters. Such "outreach" activities with direct interaction with producers and exporters provides an effective

means of transferring information and knowledge.

I.B.4. ACTIVITIES TO EASE DEVELOPING COUNTRIES' CHALLENGES[5]

A number of activities could usefully ease developing countries' market-access challenges as a result of

environmental requirements.

Procedures for the preparation, implementation and review of environmental requirements

Environmental requirements, if well designed and implemented, can minimize their unnecessary trade barriers,

create new export opportunities for developing countries, while improving environmental performance. Needs

have been highlighted for inclusiveness and transparency to facilitate participation of developing country in

stakeholder consultations and ex-ante assessments. The usefulness of periodic reviews to avoid regulations

and standards becoming obsolete has also been underlined. In general, international environmental NGOs and

businesses, when developing standards, have shown themselves to be responsive to developing countries'

concerns and have often consulted with developing-country representatives of affected industries.

Information and communication

To improve information flow, at the multilateral level, the WTO Sanitary and Phytosanitary Measures (SPS)

Agreement and the Technical Barriers to Trade (TBT) Agreement provide disciplines on transparency. WTO

Members are obliged to notify draft regulation and standards, including environmental requirements, and to

provide opportunities for comments and consultations. Moreover, the UNCTAD’s Consultative Task Force on

Environmental Requirements and Market Access for Developing Countries aims to promote dialogue between

developed and developing countries, and enhance understanding on trends in environmental requirements and

the appropriate adjustment policies in developing countries.

Capacity building and technical assistance

There is a substantial role of targeted capacity-building initiatives from bilateral and multilateral donors to

assist developing countries to overcome challenges regarding environmental requirements. Capacity building

may cover a broad range of activities aimed at improving a country's human, scientific, technological,

organizational and institutional capacities and resources. Although these initiatives may not be able to address



106

short-term problems of market access, in the long run they can increase the ability of exporters and their

governments to anticipate and react positively to new environmental requirements. For example, on organic

agriculture, at the multilateral level, the International Task Force on Harmonization and Equivalence in Organic

Agriculture was created by the International Federation of Organic Agricultural Movements, the Food and

Agriculture Organization (FAO) and the UNEP-UNCTAD Capacity Building Task Force on Trade, Environment and

Development provide capacity building activities. Capacity building initiatives are also carried out by

Multilateral environmental agreements (MEAs). For example, the Montreal Protocol's mechanism provides

financial and technical assistance, including technology transfer, to reduce the cost of developing countries on

measures to control emissions of ozone-depleting substances. There are also private organization initiatives.

For instance, the Marine Stewardship Council assists developing countries in sustainable managed fishery.

Finally, south-south cooperation (e.g. on information, knowledge/experiences sharing and research activities)

among countries with similar problems has been encouraged.

EXERCISES:

3. What are the main challenges faced by developing countries producers in complying with environmental

requirements in export markets?

4. What can developing countries do to address new environmental requirements in the global markets in a

proactive way?

5. What can be done in the preparation, implementation and review of environmental requirements to ease

the challenges faced by developing countries?

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I.C. RELEVANT WORK IN THE CTE COMMITTEE

IN BRIEF

The CTE gives particular attention to the subject of environmental requirements and market access. The

effect of environmental measures on market access, especially for developing countries and in particular to

the least developed among them, is one of the items of work of the Committee. In 2001, the Doha

Ministerial Declaration instructed the CTE to give particular attention to this subject.

I.C.1. CTE WORK PROGRAMME

The effect of environmental measures on market access is one of the items (Item 6) on the Committee’s work

programme established in the 1994 Ministerial Decision on Trade and Environment. In 2001, the Doha

Ministerial Declaration instructed the Committee to give particular attention to this subject.

Marrakesh Declaration - Item 6 - (First Part)

The effect of environmental measures on market access, especially in relation to developing countries, in

particular to the least developed among them

Doha Declaration - Paragraph 32(i) (First Part)

We instruct the Committee on Trade and Environment, in pursuing work on all its on its agenda within its

current terms of reference, to give particular attention to: the effect of environmental measures on market

access, especially in relation to developing countries, in particular the least developed among them.

I.C.2. GENERAL DISCUSSION SINCE 1995

Environmental requirements and market access is a main area of work of the CTE. It is particularly important

as it holds the key to the complementarities that exist between sound trade and environmental policy-making.

Moreover, improved market access for developing countries' products is key to the goal of achieving

sustainable development. Since the establishment of the CTE, discussions under this work item have covered

a large number of issues that aim generally at overcoming market access challenges while pursuing legitimate

environmental policy objectives.

In the early years, discussions took place in the context of a number of general principles contained in the

1992 Rio Declaration on Environment and Development (e.g. the principle of common but differentiated

responsibility; poverty is a basic cause for environmental degradation; polluter pays principle; and the

importance of multilateral cooperation).

http://www.wto.org/english/docs_e/legal_e/marrakesh_decl_e.htm

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#32

108

Further discussions highlighted a list of issues that could be useful to overcome market access challenges due

to environmental requirements: transparency; notification; early warning; impact assessment; consultation

and taking into account comments on draft measures; technical assistance and capacity building to assist

compliance; and coordination within exporting countries.

I.C.3. KEY ASPECTS OF THE DISCUSSIONS

Key aspects of the CTE discussions on environmental requirements and market access are: (i) positive

potential of environmental requirements for sustainable trade; (ii) key concerns and developing countries'

specific conditions; and (iii) ways to enable compliance to environmental requirements.

Positive potential of environmental requirements for sustainable trade

The positive potential of environmental requirements, such as environmental standards, for sustainable trade

has been highlighted on a number of occasions in the CTE: they are seen as capable of creating market

opportunities and offering developing countries the possibility to use their comparative advantage in exporting

their products to markets where environmental protection is an important consideration. It has been recalled

that the WSSD in 2002 reiterated the need to support WTO compatible voluntary market-based initiatives for

the creation and expansion of domestic and international markets for environmentally friendly goods. In the

discussion, some Members have mentioned concrete examples where environment-related trade measures,

sometimes even in the form of bans, resulted in a positive environmental outcome. For instance, Malaysia's

export controls on unprocessed logs were levied to meet developmental and sustainable developmental objectives

and had helped to reduce the rate of deforestation. The European Communities cited the example of the

German ban imposed on carcinogenic Azo dyes for public health reasons, which resulted in a dangerous

substance being removed more quickly. In the 2003 Cancùn Report[6]

, several Members also felt that more

weight had to be given to the identification of trade opportunities for sustainable growth.

Key concerns and developing countries' specific conditions

The fact that environmental requirements could affect exports adversely has been acknowledged on several

occasions. Developing countries faced particular difficulties in adjusting to the increasing number of

environmental requirements in their export markets and some environmental measures required prohibitive

compliance costs. A study presented by India in October 2000 highlighted various reasons for the vulnerability

of developing countries when environmental measures were introduced in developed countries, including

inadequate access to information and technology as well as lack of necessary skills and capital. One particular

concern raised by developing country Members was the difficulties encountered by their SMEs to comply with

certain environmental measures. Developing country Members also expressed concerns that environmental

requirements adopted by developed countries did not take into account the country-specific natural and socio-

economic conditions of developing countries.

6 WT/CTE/8 (July 2003).


109

Enabling compliance to environmental requirements

Most environmental requirements are in the form of technical regulations and standards, and some of them are

based on international standards. The importance of improving the participation of developing countries in

international standard setting activities has been highlighted on a number of occasions, in particular as a way

of mitigating negative trade effects. Moreover, flexibility in the application of environmental measures was

seen as key, including through longer time-frames. Also, several Members emphasized the principles of

equivalence and mutual recognition. In order to enable exporters to meet environmental requirements,

technical assistance, capacity building and technology transfer, as well as investment in domestic infrastructure

were seen as key. It has also been proposed to use the Integrated Framework to mainstream capacity building

and technical assistance to enable developing countries to respond to environment-related challenges that

impacted on trade. In this regard, Aid for Trade is also a conduit mentioned in general but not taken up in the

CTE context.

I.C.4. A NUMBER OF GENERAL VIEWS

Legitimate policy objectives

WTO Member governments consider that the protection of the environment and health are legitimate policy

objectives. But they also acknowledge that measures designed to meet these objectives could hinder exports.

And they agree that sustainable development depends on improved market access for developing countries’

products.

Principle 11 of the 1992 Rio Declaration[7]

Principle 11 of the 1992 Rio Declaration on Environment and Development Environmental says that standards,

objectives and priorities do need to reflect the particular environmental and developmental context to which

they apply. In other words, environmental standards applied by some countries could be inappropriate. They

could cause unwarranted economic and social cost to others, particularly developing countries, by hindering

exports. SMEs are especially vulnerable.

World Summit on Sustainable Development (WSSD) in Johannesburg in 2002

The Plan of Implementation adopted at the WSSD in Johannesburg in 2002 has reiterated the need to support

voluntary, WTO-compatible market-based initiatives for the creation and expansion of domestic and

international markets for goods which are environmentally friendly.

7 Principle 11 says "States shall enact effective environmental legislation. Environmental standards, management objectives and priorities should reflect the environmental and development context to which they apply. Standards applied by some countries may be inappropriate and of unwarranted economic and social cost to other countries, in particular developing countries."

110

Effective participation of developing countries

It is recognized that it is essential to involve developing countries in the design and development of

environmental measures as a way of mitigating negative trade effects. Similarly, the facilitation of effective

participation of developing countries in the early stages of the international standard-setting process is

important. Once developed, flexibility in the application of environmental measures is seen as key.

WTO Agreements

WTO Agreements do have enough scope to ensure that environmental measures do not unduly restrict exports.

Examples include the SPS Agreement — which deals with food safety and animal and plant health — and the

TBT Agreement — which deals with product standards and labelling. These Agreements ensure that

environmental measures do not unduly restrict exports.

Need for a balance

A balance is needed between safeguarding market access and protecting the environment. WTO Member

governments agree that there is a need to examine how environmental measures could be designed so that

they are: consistent with WTO rules; inclusive; take into account capabilities of developing countries; and

meet the legitimate objectives of the importing country.

The answer

The answer is not to weaken environmental standards, but to enable exporters to meet them.

I.C.5. RECENT DISCUSSIONS

In the past four years, CTE discussions focused on the following areas: organic agricultural products; biofuels;

and private voluntary standards

Organic agricultural products

In 2007-2008, a number of developing countries (Uganda, Kenya, India, China and Egypt) shared their

national and regional experiences in exporting organic agricultural products. The growing consumers' demand

for these products could provide new market opportunities for farmers, in particular small holders, in

developing countries. The development of this sector could have positive effects not only on income

generation, but also on the conservation of natural resources and social development. While highlighting the

possible contribution of organic production to creating a win-win-win situation for trade, the environment and

development, Members also raised concerns on the difficulties faced by producers due to the proliferation of

both different government regulations and private voluntary standards, the lack of international standards, as

well as the high cost of multiple inspection, certification and accreditation requirements. The importance of

providing the possibility for small holder group certification, as well as a multilateral solution on harmonization,

equivalency and mutual recognition was emphasized.[8]

8 WT/CTE/M/46.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/M46.doc

111

Biofuels

In the early years of the CTE, the topic of biofuels was discussed mainly on the basis of Brazil's presentation of

its national experience with the use of ethanol fuel. Brazil was of the view that the use of ethanol had several

environmental benefits, in particular for the reduction of greenhouse gases (GHG) emissions. Brazil was

concerned however that, similar to the traditional energy sources, ethanol faced high tariffs, and was of the

view that improved market access for ethanol could provided a concrete example of a "win-win" situation for

trade and environment. It was suggested then that the CTE could play a role in analyzing ways to improve

market access for alternative energy sources, such as ethanol. The European Communities recognized the

environmental contribution of the use of bioethanol to reducing GHG emissions, but recalled that other

environmental aspects should not be underestimated, i.e. increased use of pesticides and fertilisers, loss of

biodiversity from monoculture, and deforestation to gain extra land for cultivation, and that an adequate

ecological balance should be explored to safeguard sustainable agricultural production. Later on in 2008,

national experiences were also shared by Australia and China on biofuels policies and production. Some

delegations recognized the need to promote sustainable production of biofuels and the risk of opacity and

market segmentation created by the proliferation of certification schemes. The importance of a balance

between comprehensiveness of criteria for biofuels certification and the feasibility of implementation was

highlighted. However, some countries cautioned about the infancy of national biofuels policies in place.[9]

Private voluntary standards

The issue of private voluntary standards as such was taken up for the first time in the CTE in 2009.[10]

Members, including developed and developing countries, raised concerns on: the de facto mandatory nature of

these requirements; the difficulties in keeping up with rapid proliferation of private schemes; their effect on

market access, in particular for SMEs in developing countries; the lack of transparency of some of the

schemes; and the difficulties faced by producers to participate in standards development. The need for more

transparency and harmonization in this area has generally been emphasized. Argentina and a number of

delegations also raised concerns on the non-product related processes and production methods (npr-PPMs)

content of some private standards. Some emphasized that these requirements should not become a condition

for market access, and should conform with the rules of the Code of Good Practice for the Preparation,

Adoption and Application of Standards under the TBT Agreement. Other emerging concerns related to the lack

of scientific basis in standards development; insufficient data; the large variety of methodologies used; and

the need for disciplines governing the development and implementation of standards that go beyond

transparency disciplines. The European Communities and the United States expressed caution in this debate,

and highlighted the need to reflect on the right format and approach for discussions on standards prepared by

private entities.

In July 2009, the Secretariat organized a Workshop on Environment-related Private Standards, Certification

and Labelling Requirements. A variety of environment-related private standards, certification and labelling

schemes in the fisheries, coffee, horticulture and forestry sectors were presented. Information was provided in

areas such as standard-setting process; suitability of standards to producers; conformity assessment

procedures; distribution of costs and benefits; and relationship between government regulations and private

9 WT/CTE/M/46.

10 WT/CTE/M/47 (July 2009) and WT/CTE/M/48 (November 2009).




112

standards. It was explained that private standards responded greatly to the concerns of NGOs and consumer

organizations, but were also influenced by big retailers in developed countries that wanted to differentiate

products. The general issues that were discussed related to proliferation and harmonization, transparency and

standard development processes, environmental impact and effectiveness, and capacity building.

Opportunities and challenges faced, in particular by producers and exporters in developing countries, were also

addressed. On transparency and standard development processes, a recurring theme throughout the event

was the recognition of the existence of key principles and best practice guidelines available to standard setters,

for example, the TBT Agreement, ISO Guides, the FAO Code and the various ISEAL Codes.[11]

EXERCISES:

6. How are Principle 11 of the Rio Declaration and the Plan of Implementation of the World Summit on

Sustainable Development relevant to the CTE discussions on environmental requirements and

market access?

7. In the past 4 years, the CTE discussions on environmental requirements and market access have been

focussing on what subjects?

11 See report of the workshop in JOB(09)/136.

113

I.D. WORK IN OTHER RELEVANT WTO COMMITTEES

IN BRIEF

The TBT and SPS Committees provide a unique framework for work on environmental requirements through

notifications and debates at committee meetings.[12]

I.D.1. NOTIFICATIONS

WTO Members regularly notify their environmental measures to the WTO. Over the past years, the number of

such notifications has steadily increased, in particular those under the TBT and SPS agreements.[13]

Recently,

in average, around 10 percent of all proposed regulations notified under the TBT and SPS agreements indicate

environment protection as the objective, covering a wide range of sectors and measures.

TBT notifications (more about TBT Agreement in part 2 of Module 4)

53

8467

114

270

35 36

42

3541

89

98 97

100110

122

156

180

0

50

100

150

200

250

300

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Figure 1: Environment-related TBT Notifications (1991-2008)

The notified TBT environment-related measures related to, among others, chemicals, ozone depleting

substances, volatile organic compound, waste, toxic and hazardous substances, fertilisers and pesticides, gas,

12 In 2006, the Secretariat prepared a note considering the work in these two committees on environment-related information which Members have notified and specific trade concerns (STCs) which they have raised (document JOB(06)263).

13 WT/CTE/EDB1, 2, 3, 4, 5, 6, 7 and 8.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/EDB1.doc








114

bio-fuels, other liquid fuels and petroleum products, electronic and electrical appliances, vehicles, vessels,

engines and motors, buildings, batteries, tyres, drugs, wood, food and agricultural products.

These measures included general environmental requirements, ban and prohibition, performance and efficiency

standards, technical or quality specifications, safety specifications, eco-design requirements, classification,

harmonization, labelling and packages requirements, handling, transportation, storage and distribution

requirements, testing, certification and other conformity assessment procedures. They aimed at environmental

protection in areas such as increased energy/fuel efficiency, energy/resources conservation, greenhouse gas

emission reduction (including meeting national emission or renewable energy targets), pollution reduction,

waste, radioactive waste, chemicals and toxic substances management, recycling and recovery, protection of

animal and plant health, biodiversity, promotion of sustainable production and consumption, compliance with

multilateral environmental agreements (e.g. Kyoto Protocol and Montreal Protocol), and contribution to

mitigation of climate change. Among the above, measures related to energy conservation and efficiency were

the most frequently notified.

SPS notifications

The SPS Agreement is very similar to the TBT Agreement, but covers a narrower range of measures. It

covers measures that are taken by countries to ensure the safety of foods, beverages and feedstuffs from

additives, toxins or contaminants, or for the protection of countries from the spread of pests or diseases. It

recognizes the right of Members to adopt SPS measures but stipulates that they must be based on a risk

assessment, should be applied only to the extent necessary to protect human, animal or plant life or health,

and should not arbitrarily or unjustifiably discriminate between countries where similar conditions prevail.

Article 5.7 of the SPS Agreement allows Members to take SPS measures in cases where the scientific

evidence is insufficient, provided that these measures are only provisional, and that a more objective

assessment of risk is being conducted. In general, the TBT and SPS Agreements are designed to complement

one another.

Frequently, the SPS environment-related notifications related to, among others, sanitary and phytosanitary

requirements for the importation of nursery stocks of forest and plant species; fruits and seeds; wild birds

and eggs; live fish, live animals and animal products; animal feed and veterinary products; fertilizers and

pesticides; toxic chemicals and bio-chemical products. Some other measures related to wood packaging

material; quarantine requirements; import risk analysis (IRA); environmental and toxicological evaluation

procedures. They aimed solely or partly at protecting animal health, plants from animal/plant pests or

diseases, and the territory from other damage from pests (e.g. protection against the outbreak of Avian

Influenza).

I.D.2. SPECIFIC TRADE CONCERNS

WTO Members regularly use the TBT and SPS committee meetings to raise specific concerns on potential

adverse trade effects or any perceived non-compliance with the obligations of the Agreements of other

115

Members' measures. These specific trade concerns (STCs) relate normally to existing measures or draft

measures notified to the Committees. In the case of the TBT Committee, in 1995-2010, 271 STCs have been

raised[14]

, of which approximately 21 percent are environment-related measures.[15]

Most frequently, these

environment-related STCs involve the following product groups: chemicals, electrical and electronic

equipment, fertilizers and other industrial goods. These include environmental concerns related to the control

of hazardous substances, emissions reduction and resource and waste management. They cover measures

such as bans and restrictions, production rules, labelling (e.g. energy efficiency labelling schemes), eco-design,

fuel economy and emission standards, pollution control requirements, collection, treatment, recycling and

recovery, certification and registration, risk assessment and sustainable management schemes.[16]

Among the

environment-related STCs, the most frequently invoked concern is to avoid unnecessary barriers to trade.

Others, for example, relate to the need for more information or clarification. Most of these STCs were raised at

more than one meeting. For example, around 26 percent were raised at more than five meetings, and a few

have been on the agenda for several years.

Figure 2: Objectives of the Measures regarding TBT STCs

14 290 STCs in the SPS Committee.

15 This number may not necessarily represent the full range of TBT trade concerns that exist among Members. Many trade concerns are dealt with bilaterally, and not raised at the Committee level.

16 For more information, TBT STCs can be found in document G/TBT/GEN/74/--.

109

64

57

49

41

41

23

20

7

4

0 20 40 60 80 100 120

Human Health/Safety

Not specified

Environment

Other

Quality

Harmonization

Security

Animal/Plant Health

Consumer Information, Labelling

Prevention of Deceptive Practices

116

Environmental Concerns Products affected Type of measures

Control of hazardous

substances

Chemical products Registration, risk assessment and

management, labelling obligations

and restrictions

Electrical and electronic equipment Bans on the use of certain

substances, collection, treatment,

recycling and recovery

Fertilizers Limits on the use of certain

substances in fertilizers (e.g.

arsenic, cadmium, lead, chromium

and mercury etc.)

Emissions reduction Energy-using products such as

electrical and electronic equipment

(e.g. air conditioners, refrigerators

and lamps) and other household or

office appliances

Eco-design requirements (e.g.

standby and off-mode electric power

consumption) and energy efficiency

labelling scheme

Taxis, road vehicles, passenger cars

with compression ignition engines and

aircrafts

Emission standards, particle filters

for diesel engines, registration,

certification and fuel economy

standards

Resource management Wood Certification for sustainable

management forests, tracing

systems for sustainably produced

wood and labelling

Seal products Ban on the marketing, transit,

import and export of seal products

Organic agricultural and aquaculture

products

Production and labelling rules

Waste management Various industrial goods Promotion of waste reduction, reuse

and recycling, post consumption

collection, take-back obligations and

substitution of substances

Table 1: Environmental Aspects of Selected TBT STCs

117

EXERCISES:

8. Explain how the TBT and SPS Committees provide a framework for work on environmental requirements

and market access.

118

II. LABELLING REQUIREMENTS FOR

ENVIRONMENTAL PURPOSES

II.A. INTRODUCTION

IN BRIEF

Often, environmental labels are used to improve the sale or image of environmentally friendly products;

raise consumer environmental awareness; provide timely information on certain environmental aspects of

products and their processes and production methods; and direct manufacturers to account for the

environmental impacts of their products and production. They can contribute to the development of a more

environmentally conscious market. They can also have impacts on the market, in particular with their recent

proliferation and increasing complexity.

II.A.1. TYPES OF ENVIRONMENTAL LABELLING SCHEMES

There are different types of environmental labelling schemes, depending on their design and implementation,

for example:

Voluntary or mandatory: Most environmental labelling schemes are voluntary (e.g. environmental

labels on detergents and paper products). However, sometimes, they can be mandatory requirements

imposed by governments (e.g. fuel economy for automobiles).

Single or multiple sector/issue: Some labels focus on a specific product sector with multiple

criteria, looking into products' entire life cycle (e.g. wood products, coffee and fisheries), while others

focus on certain environmental issues and may cover several product categories (e.g. organic

production, recycle material and energy efficiency).

Information or rating: Some labels provide direct information or quantitative data on products'

environmental performance, while others provide rating or select leadership based on criteria and

comparison (e.g. electronic and electrical appliances).

Self declared or third party: Often labelling schemes require third party verification, but some labels

are in the form of self declaration.

Government or non-governmental: Labelling schemes can be government-run or

privately-administered. There are also voluntary government-sponsored schemes. On the other hand,

a programme can be government-run, and subject to independent third-party certification. Many

governments were among the first to recognise the benefits of environmental labelling, and started

programmes that now successfully label many hundreds of environmentally preferable products.

119

ISO Classification

Labelling schemes can be classified based on the following International Standards Organization (ISO)

classification:

Type I labels are defined as voluntary, multiple-criteria-based programmes, administered by

third parties. Under these programmes, a license is awarded which authorises the use of an

environmental label intended to indicate the environmental preferability of a product, based on

life cycle considerations. These programmes provide a license to manufacturers to use a mark,

owned by an independent body, on their products.

Type II labels are self-declared environmental claims. Under the ISO’s definition, these are

environmental claims that are made, without independent third-party certification, by

manufacturers, importers, distributors, retailers, or anyone else likely to benefit from such a

claim.

Type III labels can be generally described as declarations of quantified environmental data

relating to a product.

Eco-labels

Eco-labels are specific environmental labelling schemes that based on life-cycle analysis or

“cradle-to-grave” approach (raw material, production, consumption and disposal). In general, eco-label

criteria are set so that only a small percentage of products in a product category (typically, 5 to 30%)

can meet these criteria. The purpose is to selectively identify a sub-set of products that are

environmentally preferable to other products in the same category. Examples of eco-labelling labelling

schemes include: the German Blue Angel (covers different product groups e.g., heating systems,

copying machines and paper products); the Japanese Eco Mark (covering around 69 product categories,

including stationary products - ballpoint and marker pens, mechanical pencils, correction products and

notebooks); and the Danish Nordic Swan label (e.g. on toilet paper, paper towels and detergents).

Recently, eco-labelling schemes have been developed in many more countries, such as the Brazilian

eco-label Qualidade Ambiental; the China Environmental Labelling Scheme, the Chinese Taipei

launched the eco-label Green Mark; the Indian Ecomark; the Green Choice Philippines; and the Korea

Eco-Label.

http://www.abnt.org.br/

http://www.abnt.org.br/

http://www.sepacec.com/cecen/labelling

http://greenmark.epa.gov.tw/english/index.asp

http://envfor.nic.in/cpcb/ecomark/ecomark.html

mailto:[email protected]

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II.A.2. IMPACTS OF ENVIRONMENTAL LABELLING REQUIREMENTS[17]

The effects of environmental labels on producers, consumer behaviour, markets and the environment are

closely linked: producer and consumer behaviour will, to a certain extent, affect markets, and may in turn lead

to effects on the environment.

Impacts on producers

Industries’ behaviour worldwide has changed, with many making improvements to their environmental

performance as they strive to meet consumers’ increased demand for environmentally preferable products.

This also has an influence on suppliers since manufacturers are increasingly demanding proof of their products’

environmental soundness in order to prevent future liability or negative publicity. Environmental labels may

serve as a communication tool, allowing for environmental benchmarking. The criteria of an environmental

label may help orient companies’ R&D activities and internal requirements.

Impacts on consumers

Some studies reveal consumers willingness to pay more for eco-labelled products. The effects depend on

consumers’ levels of education and environmental involvement, the media and the type of additional

information available. In general, environmental labels seem to raise consumers’ awareness of environmental

issues and change their purchasing behaviour while leading manufacturers to increasingly produce

environmentally preferable goods.

Impacts on environmental protection

Environmental labels can contribute to the development of a more environmentally conscious market (and

market behaviour) and help set standards for product development and manufacturing, directives and support

programmes, and contribute to a systematic approach in decision-making (e.g. life cycle assessment). They

can also have a multiplier effect (raising public awareness for environmentally preferable products beyond the

labelled product group), and make the public aware of the environmental impacts of consumption, and can

therefore be employed to influence national policies.

The environmental effectiveness of environmental labelling requirements in terms of measuring improvements

to the environment is difficult to evaluate — owing mainly to difficulties in isolating environmental benefits

achieved through eco-labelling from environmental benefits attained by other environmental measures.

Impacts on the market

The impact of environmental-labelling requirements on the market is directly linked to the general level of

environmental awareness and, consequently, the consumer demand for green products. Environmental

labelling schemes have greater impact when they become a requirement imposed by retailers or when they are

used as instruments for “green” public procurement and institutional purchasing. No hard evidence could be

found of changes in trade flows arising from the selected environmental labelling programmes.

17 Effects of Eco-labelling Schemes: Compilation of Recent Studies, OECD, 2005.

121

II.A.3. RECENT TRENDS IN ENVIRONMENTAL LABELS

Proliferation

The use of labelling requirements by governments, industry and non-governmental organizations for

environmental purposes is increasing. The reason can be found in growing global concern for environmental

protection on the part of governments, businesses and the public. Environmental labelling schemes are

increasingly become an integral part of a government “environmental toolbox”. Moreover, as businesses

recognise that environmental concerns may be translated into a market advantage, various environmental

declarations/claims/labels (e.g. natural, recyclable, eco-friendly, low energy and recycled content) have

emerged on products and services. These labels are common in the marketplace and become “price of entry”

for competition. However, the proliferation of labelling schemes could confuse consumers (i.e. prevent them

from being able to recognize or trust any particular label) and could make it difficult for exporters to meet the

many different criteria and requirements.

Competing schemes

There are in essence two markets in which labelling schemes compete - the market for the label and the

market for the product, itself. The market for the label includes not only competition between programmes

that make the same claim, but also competition between and among programmes making different claims for

the same product. For instance, a farm-raised fish that could qualify for one of several competing labels

indicating that it was produced under environmentally friendly conditions, could also qualify for an organic

label, a fair trade label, a country-of-origin label, or a label indicating freshness or making health claims.

Increase in complexity

The growing complexity and diversity of environmental labelling schemes raise difficulties for developing

countries, and particularly SMEs in export markets. Increasingly, environmental labelling requirements tend to

be based on life-cycle analysis, i.e. the consideration of the environmental effects of a product from its

production to its final disposal. In practice, life-cycle analysis is not easy to conduct. Frequently, criteria are

related not only to environmental issues but other sustainability aspects of the process of production or of the

product itself.

Niche market

Some schemes provide price premiums or discounts, thus provide a profitable niche market for labelled goods.

Examples include organic apparel goods where labels differentiate clothes made from organic cotton from

conventional apparel; and dolphin-safe labels where some consumers’ decisions are influenced by moral and

ideological reasons and are willing to pay “to avoid personally contributing to dolphin mortality as a result of

tuna fishing.”

EXERCISES:

9. What are eco-labels?

10. What are the potential impacts of environmental labelling requirements on environmental protection?

11. How can environmental labelling schemes provide a niche market for labelled goods?

122

II.B. THE ISSUE OF PROCESS AND PRODUCTION METHODS

IN BRIEF

A particularly thorny issue in the labelling debate has been the use of criteria linked to processes and production

methods (PPMs), in particular non-product-related PPMs

II.B.1. PRODUCT-RELATED AND NON-PRODUCT-RELATED PPMS

Labelling requirements for environmental purposes can cover product-related PPMs and non-product-related

PPMs.

Product-related PPMs - the use of a different production method (e.g. no chlorine) may be visible in

the final product (paper not bleached), so it is a PMM that is related to the characteristics of the final

product.

Non-product related PPMs (nprPPMs) - the use of a different production method (e.g. filters to

reduce pollution,...) may not be visible in the final product, so it is a PMM that is not related to the

characteristics of the final product.

II.B.2. LEGAL QUESTIONS

It is generally accepted that labelling schemes addressing physical characteristics and product-related PPMs fall

within the scope of TBT; question remains with respect to nprPPMs and their WTO compatibility.

Are nprPPM-based schemes covered by the TBT Agreement?

If they are, are they consistent with it?

If they are not, under which other WTO Agreement would they fall?

WTO Members agree that countries are within their rights under WTO rules to set criteria for the way products

are produced, if the production method leaves a trace in the final product, for example cotton grown using

pesticides leaving pesticide residue in the cotton itself. However, they disagree about discriminatory measures

based on nprPPMs (or "unincorporated PPMs”), i.e. process and production methods which leave no trace in the

final product. For example you cannot tell whether a table has been produced from sustainably managed wood

by simply looking at it.

The key question is: are these measures consistent with WTO agreements? Many developing countries argue

that measures which discriminate between products based on unincorporated PPMs, such as some eco-labels,

should be considered WTO inconsistent.

123

The issue of unincorporated PPMs has triggered a legal discussion in the WTO on the extent to which the TBT

Agreement covers and allows unincorporated PPM-based measures. Currently, a major challenge to the

effectiveness of the TBT Agreement is the increasing use of process-based (not only in the area of the

environment, but also in the areas such as social and labour standards as well as animal welfare), as opposed

to product-based, regulations and standards.

II.B.3. CTE DISCUSSIONS

The CTE has discussed extensively the question of whether eco-labelling based on life-cycle analysis (LCA) or

non product-related PPMs were covered by the TBT Agreement. Since eco-labels were often based on a

mixture of criteria relating to product and performance characteristics, product-related and non product-related

PPMs, some Members were of the view that it would not be practical to separate the coverage under WTO

provisions of eco-labelled products according to the nature of the criteria used, and that all criteria involved in

granting an eco-label should be covered by WTO disciplines. According to some Members, the TBT Agreement

provided sufficient flexibility to permit non-product-related PPM-based eco-labelling to be used, subject to

appropriate trade disciplines. However, several other Members argued that the TBT Agreement did not cover

standards based on non product-related PPMs. In their view, accepting non product-related PPMs and LCA

under the TBT Agreement would permit one country to impose its environmental priorities on another since

these schemes reflected exclusively the environmental preferences of the importing country. There was an

objection to any attempt through CTE work on eco-labelling to extend the scope of the TBT Agreement to

permit the use of standards based on non product-related PPMs.[18]

A number of developing countries also reported difficulties in complying with standards based on non

product-related PPMs. These problems were particularly acute for SMEs, because e.g. of difficulties in

obtaining and adapting the required technology.

Until today, fundamental differences of views remain on the WTO compatibility of measures based on non

product-related PPMs.[19]

In order to dispel misinterpretations of the TBT Agreement and prevent the use of

labelling for protectionist purposes, it has been proposed, prior to the Doha Ministerial Conference, to further

discuss this issue in the CTE.

EXERCISES:

12. What is the key legalistic question concerning nprPPMs?

18 WT/CTE/1 (November 1996).

19 WT/CTE/8 (July 2003).

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/1.wpf


124

II.C. CTE'S WORK ON ENVIRONMENTAL LABELLING

IN BRIEF

Labelling requirements for environmental purposes is one of the subjects assigned to the CTE. It is part of

an item (3b) on the Committee’s work programme in which the Committee is assigned to consider the

relationship between the provisions of the WTO’s agreements and the requirements governments make for

products in order to protect the environment. In 2001, the Doha Ministerial Conference made labelling

requirements for environmental purposes an issue of special focus for the CTE.

Marrakesh Declaration - Item 3(b)

The relationship between the provisions of the multilateral trading system and requirements for

environmental purposes relating to products, such as standards and technical regulations, and

packaging, labelling and recycling requirements

Doha Declaration - Paragraph 32(iii)

We instruct the Committee on Trade and Environment, in pursuing work on all its on its agenda within

its current terms of reference, to give particular attention to: labelling requirements for environmental

purposes.

II.C.1. CTE DISCUSSIONS

Environmental labelling schemes are complex, causing concerns about developing countries’ and small

businesses’ ability to export. How do you use labelling to inform consumers about environmental protection

without jeopardizing these weaker players? Opinions are divided.

Effective policy tools

Members have debated the possible trade effects of eco-labelling schemes on a number of occasions. Some

Members believed these schemes were effective policy tools to encourage the use of environmentally sound

products and services and that it would be difficult to imagine a less trade restrictive alternative, as

eco-labelling schemes were voluntary and relied on the market mechanism of consumer choice. Moreover,

empirical evidence so far had not revealed any significant trade effects of eco-labelling. Also later on, in

Cancùn, most Members agreed that voluntary, participatory, market-based and transparent environmental

labelling schemes were potentially efficient economic instruments in order to inform consumers about

environmentally friendly products. As such, they could help move consumption on to a more sustainable

footing. Moreover, they tended, generally, to be less trade restrictive than other instruments.[20]

20 WT/CTE/8 (July 2003).

http://www.wto.org/english/docs_e/legal_e/marrakesh_decl_e.htm

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125

Negative market access effects

However, other Members reported that negative market access effects were real and that the environmental

efficiency and effectiveness of eco-labelling schemes had yet to be fully determined. This is particularly the

case when label criteria are determined through consultations only with interested parties at the national level.

For example, a common complaint by the users of eco-labels has been that eco-labelling criteria tend to focus

on local concerns and do not address the views of foreign suppliers, nor the specific environmental situation in

the countries of these suppliers. For instance, an eco-label developed in a country with a serious air pollution

problem may put the emphasis on air pollution control measures, whereas the main environmental problem in

the foreign country could have to do with water and not air. Concerns have been also raised about the lack of

transparency, potential for discrimination, proliferation, growing complexity and diversity of environmental

labelling schemes. It has also been noted that environmental labelling schemes could be misused for the

protection of domestic markets.

Developing countries concerns

Several developing country Members reported that developing countries were severely affected by

environmental requirements such as eco-labelling schemes. Some of the problems faced by developing

countries resulted from the multiplicity of eco-labelling schemes in developed countries, their differing criteria,

the increased costs in complying with eco-labels and the need for greater transparency. One of the main

concerns was that eco-labelling criteria did not take into account the conditions of individual developing

countries. These schemes often necessitated the acceptance of inappropriate criteria, mainly as a result of a

lack of participation of all interested countries in their formulation. This is especially the case with labelling

based on life-cycle analysis and the use of nprPPM criteria. These requirements could create difficulties for

developing countries, and particularly small and medium-sized enterprises in export markets.[21]

Several Members pointed to the adverse impact on SMEs in developing countries, especially the impact of

eco-labels on their market access opportunities. SMEs lacked the technical expertise to adhere to such

schemes. Compliance costs and lack of capacity of developing country industries, particularly SMEs, should be

taken into account in designing eco-labelling criteria. Some Members noted that for developing countries, and

their SMEs in particular, difficulties arose along with the growing complexity and diversity of environmental

labelling schemes in export markets.

Technical assistance and capacity building

Developing country Members urged developed country Members to provide them with the necessary technical

assistance and capacity building to improve their environmental performance and their market access. It was

necessary to ensure the effective participation of developing countries, sufficient technology transfer, and

credit lines for developing country producers. The principle of common but differentiated responsibility was

recalled in this context and the idea that developing countries should be given longer periods to phase-in

environmental standards was mentioned. Another idea was to establish partnerships in order to adapt to these

eco-labels, especially in terms of compliance costs.

21 For further information, see document WT/CTE/W/150, 29 June 2000, "Information Relevant to the Consideration of the Market Access Effects of Eco-Labelling Schemes", Note by the Secretariat.


126

Adequate WTO disciplines

Most Members were also of the view that existing WTO disciplines were adequate to deal with the issue of

environmental labelling, including specific trade concerns that could arise. In their view, no compelling

argument had been made for the need for a common understanding or guidance to be negotiated. Nor was it

clear that further work on this issue needed to include the clarification of existing rules. The TBT and SPS

Agreements had created the appropriate balance of rights and obligations for both mandatory and voluntary

labelling programmes.[22]

National experience sharing

Several Members have shared their national experience in developing and implementing eco-labelling schemes.

For instance, Brazil presented its voluntary eco-labelling programmes in the leather and forestry sectors, which

aimed to encourage Brazilian consumer awareness, and ensure the competitiveness of Brazilian forestry and

leather and footwear products in the international market. Japan explained the development process of its

Eco-mark programme, which allowed for public review and participation by industry, consumers, and

academia. India reported the introduction of an eco-label called Indian Eco Mark, which did not have any

positive effect on domestic consumption. Iceland presented a report of the Working Group to the Nordic

Council of Ministers on a new eco-labelling scheme, which provided fishing communities with market incentives

to support responsible and sustainable fisheries management. Some other Members explained the difficulties

they had in meeting the requirements of eco-labels in general. For instance, Colombia presented evidence of

reduced market access due to eco-labelling schemes in the bananas, flowers and textiles sector. Venezuela

reported difficulties in complying with eco-labels when exporting tuna to the United States. This exchange of

national experience has illustrated the variety of approaches that have been adopted on eco-labelling by WTO

Members and highlighted the perceived environmental benefits and cost effectiveness of the different

approaches. Members generally encouraged further experience sharing on eco-labelling in order to enhance an

understanding of the various approaches used.

Work in other international organizations

The work of other international organizations on eco-labelling has been presented both by the WTO Secretariat

and by organizations themselves. For instance, the WTO Secretariat prepared in 1997 a note explaining the

work underway in other fora on eco-labelling.[23]

II.C.2. RECENT WORK IN THE CTE

Recent CTE work on environmental labelling touch upon the following: energy efficiency labelling schemes

and carbon labelling schemes.

22 WT/CTE/8 (July 2003).

23 WT/CTE/W/45.


http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/W45.wpf

127

Energy efficiency labelling schemes

Lately, the CTE work on labelling requirements for environmental purposes has been focussing on national

experience exchange on energy efficiency labelling schemes. At the meeting of May 2007, the United States

gave a presentation on the US “Energy Star” energy efficiency programme, a voluntary performance based

labelling scheme covering more than 50 product categories. This self-certification scheme was created with the

objectives to reduce greenhouse gas emissions and to facilitate consumers to identify and purchase products

with enhanced energy efficiency. There is a demand for these products in the market, since energy efficient

appliances, equipment, window and doors could cut down consumers' energy bills. Information was provided

on how the relevant requirements are developed with guiding principles and involving public notifications as

well as stakeholder consultations; how the label is used inside and outside the US; how the integrity of the

label can be protected; and how coordination efforts have been made with other WTO Members on

harmonization of specifications and testing procedures. At the meeting of November 2008, Australia informed

the CTE of its national experience on minimum energy performance standards and mandatory labelling

requirements that had led to an increase in sales of energy efficient appliances in Australia.

Carbon labelling schemes

Concern over climate change has stimulated interest in estimating the total amount of greenhouse gasses

(GHG) produced during the different stages in the “life cycle” of goods and services. Carbon labelling schemes

and their related standards intend to reflect the total amount of GHGs produced during the different stages in

the “life cycle” of goods and services — i.e. their production, processing, transportation, sale, use and disposal.

It allows comparison of carbon footprint values between different products, between the same product from

different producers, and between the same product from the same producer in different locations. In

2009-2010, a number of delegations mainly from the Southern Hemisphere (e.g. Argentina, Australia, Kenya,

New Zealand, Colombia and Uruguay) raised concerns over the recent proliferation of unilateral voluntary

carbon footprint labelling schemes. Some countries believed that these schemes often did not reflect the

entire life cycle of a product by only focusing on transportation, and generally lacked consistency. Concerns

were also raised on challenges related to data collection and high costs, the effectiveness of these schemes, as

well as their possible trade impacts.

It was proposed that the CTE should study various initiatives being developed at the international and national

levels (both by governments and private bodies) and assess their trade impacts, effectiveness and

environmental benefits. In this respect, an Information Exchange session was organized in February 2010.[24]

Members in the process of developing such schemes could also be invited to share their experiences in the

Committee.[25]

EXERCISES:

13. What is the view of most WTO Members on the effectiveness of eco-labelling as a policy tool?

24 WT/CTE/M/49/Add.1.

25 WT/CTE/M/50.

http://docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/CTE/M49A1.doc


128

II.D. ENVIRONMENTAL LABELLING AND THE TBT

AGREEMENT

IN BRIEF

Most members believe that existing disciplines on technical barriers to trade are adequate to deal with

environmental labelling, and that the TBT Agreement has created the appropriate balance of rights and

obligations for both mandatory and voluntary labelling programmes. For voluntary environmental labelling

schemes, the TBT Agreement contains a “Code of Good Practice for the Preparation, Adoption and

Application of Standards”. Agencies and organizations that develop labelling requirements are encouraged to

accept this Code.

II.D.1. CHOICE OF FORUM

Since 1995, discussion on eco-labelling has been taking place in parallel both in the CTE and the TBT

Committee. Some Members preferred discussing eco-labelling in the CTE, believing that the subject was

mentioned explicitly in the CTE's work programme; the issues it raised went beyond the mandate of the TBT

Committee; and it avoided an examination of WTO rules. With the DDA mandating the CTE to give particular

attention to labelling requirements for environmental purposes, some Members were of the view that the CTE

needed to intensify its work on environmental labelling and the discussion in the CTE could then be used as an

input to the debate in the TBT Committee. On the other hand, some Members favoured discussions on the

impact of eco-labelling to take place in the TBT Committee. They argued that the TBT Committee was better

suited for the task of deliberating WTO rules vis-à-vis labelling since it was already discussing labelling in

general, including environmental labelling. Environmental labelling STCs have been regularly raised in the TBT

Committee. They argue that the TBT Committee is better suited for the task of examining WTO rules vis-à-vis

labelling since it is already discussing labelling in general. “Technical barriers to trade” covers product

standards and labelling, and the latter, including environmental labelling, is regularly discussed in the TBT

Committee under “specific trade concerns”. They were of the view that it would be unwise for the CTE either

to pre-empt or to duplicate such work and more preferable to consider the results of the work carried out in

the TBT Committee before taking a decision on the course of action for the CTE.

II.D.2. TBT COMMITTEE'S WORK ON ENVIRONMENTAL LABELLING

REQUIREMENTS

Notifications

Environmental labelling measures have been frequently notified to the TBT Committee by WTO Members to

improve transparency. These labelling requirements relate to environmental issues such as GMOs, energy

efficiency, emissions reduction, toxic and hazardous substances, waste management, natural resources

conservation and organic products.

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Year

Total number of

TBT notifications

Number of environmental

labelling notifications

Percentage of

environmental labelling

notifications

2000 639 15 2.3%

2001 601 23 3.8%

2002 622 15 2.4%

2003 896 21 2.3%

2004 718 14 1.9%

2005 902 23 2.5%

2006 1,037 30 2.9%

2007 1,235 30 2.4%

2008 1,654 39 2.4%

2000-2008 8,304 210 2.5%

Table 2: Environmental Labelling TBT Notifications (2000 – 2008)

Specific trade concerns

Moreover, environmental labelling related STCs are frequently raised in the TBT Committee. The concerns,

ranging from seeking further information to challenging the legitimacy of the measures, are often resolved

through discussions at committee meetings.

0

1

2

3

4

5

6

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Years

Nu

mb

er o

f C

on

cern

s

Figure 3: Environmental labelling STCs raised in the TBT Committee

130

1

4

6

6

7

9

12

16

16

0 2 4 6 8 10 12 14 16 18

Technical assistance

Special and differential treatment

Legitimacy, rationale

Discrimination

International Standard

Reasonable interval

Transparency

Further information, clarification

Unnecessary Barriers to Trade

Issu

es

ra

ised

Frequency

Figure 4: Concerns on environmental labelling raised in the TBT Committee (1995-2010)

II.D.3. TBT DISCIPLINES

The TBT Agreement seeks to ensure that product specifications, whether mandatory or voluntary (known as

technical regulations and standards), as well as procedures to assess compliance with those specifications

(known as conformity assessment procedures), do not create unnecessary obstacles to trade. In its Preamble,

the Agreement recognizes the right of countries to adopt such measures at the level which they consider

appropriate, and recognizes in Article 2.2 the protection of human, animal or plant life or health, and the

protection of the environment as being legitimate objectives for countries to pursue. The Agreement calls for

non-discrimination and the avoidance of unnecessary trade barriers in the preparation, adoption and

application of standards, technical regulations and conformity assessment procedures. It also encourages

Members to harmonize these specifications with international standards. Transparency through notifications

and the establishment of national enquiry points is a central feature of the Agreement.

Most Members are of the view that existing WTO disciplines are adequate to deal with the issue of

environmental labelling, including specific trade concerns that could arise. For these Members, the Agreement

has created the appropriate balance of rights and obligations for both mandatory and voluntary labelling

programmes. The issue is one of satisfactory implementation of the Agreements.

131

II.D.4. TRANSPARENCY AND DEVELOPING COUNTRIES' PARTICIPATION

The importance of transparency in the development and implementation of eco-labels has been reiterated on a

number of occasions. Information on regulations had to be properly disseminated for foreign producers not to

be at a disadvantage and not to suffer unnecessary losses. The benefits that have been highlighted included:

reduction of the risk that environmental criteria in eco-labelling schemes only reflect national

considerations;

reflection of different environmental approaches;

ensuring that foreign producers or countries with significant trade interests in a labelled product have

both timely and effective input throughout the entire eco-labelling process;

avoidance of negative impact on market access, including unnecessary discrimination;

increase of the legitimacy of such schemes; and

promotion of the understanding of eco-labelling schemes.

Members generally agreed that participation of all relevant stakeholders in developing and implementing

eco-labelling scheme was crucial to reduce the risk of a negative impact on market access. The participation of

developing countries in particular needed to be improved so as to ensure that their interests were taken into

account. The existence of multiple schemes and constantly changing criteria and the lack of capacity made

developing countries' participation more difficult. Developing countries tended to be standard-takers rather

than standard-setters and it was pointed that international standards were frequently skewed towards

developed country interests. Information from international standards setting organizations was shared in the

Committee, from instance from ISO on its efforts to improve developing countries' participation in standards

development.

II.D.5. TBT CODE OF GOOD PRACTICE FOR THE PREPARATION,

ADOPTION AND APPLICATION OF STANDARDS

With respect to voluntary environmental labelling schemes, the TBT Agreement's Code of Good Practice for the

Preparation, Adoption and Application of Standards (Annex 3 of the TBT Agreement) is important, and

acceptance of this Code by the bodies developing labelling requirements is encouraged. The Code contains

similar disciplines as the main TBT Agreement itself. Members generally agreed on the desirability of

standardizing bodies preparing eco-labelling schemes to adhere to the TBT Code of Good Practice, as this

would help address trade concerns, while maintaining an environmentally-credible eco-labelling programme.

Early on, a specific proposal had been made to confirm that the provisions of the TBT Agreement and its Code

of Good Practice apply to all eco-labelling schemes, whether voluntary or mandatory, and whether

administered by governmental or non-governmental bodies. Members also discussed whether voluntary

eco-labelling standards were subject to the transparency provisions of the TBT Code of Good Practice. Some

Members encouraged the acceptance of this Code by the bodies developing labelling requirements.

Moreover, it was recalled that the TBT Committee's Decision on the "Principles for the Development of

International Standards" provided useful guidance. This decision contained principles for the development of

international standards, including environmental labelling standards. These were: transparency, inclusiveness

or openness (that all stakeholders be involved in the development of the standard), impartiality and

http://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm#annexIII

http://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm#annexIII

132

consensus, effectiveness and relevance, coherence, and, wherever possible, responsiveness to the needs and

interests of developing countries.

II.D.6. HARMONIZATION, MUTUAL RECOGNITION AND EQUIVALENCE

Given the growing number of eco-labelling schemes, the importance of harmonization or equivalence among

standards as well as mutual recognition of conformity assessment results was discussed on several occasions.

The importance of regional harmonization of environmental requirements was also mentioned. Harmonization

could help avoid trade and market distortions or consumers' confusion. Several Members repeatedly insisted on

the importance of equivalence and mutual recognition in order to take into account different approaches and

circumstances of Members and facilitate trade. It was indicated that a more flexible use of equivalence and

mutual recognition was important to developing country exporters, particularly SMEs. For developing

countries, the recognition of the equivalence of their own labelling/certification systems was an area of

particular concern; it was important to concentrate on assisting developing countries to design schemes that

supported environmental objectives within their own domestic context. Some countries also noted that

equivalence could be complex to implement in particular in environmental areas where life cycle analysis was

applied to different eco-systems.

EXERCISES:

14. What is the view of most WTO members regarding the TBT disciplines dealing with environmental

labelling?

133

III. SUMMARY

PART 1. ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS

Introduction

Environmental requirements are requirements adopted to achieve environmental objectives. Recently,

consumers, producers, regulators and stakeholders are becoming increasingly aware of environmental and

health problems, and are looking for versatile tools to address them effectively. As a result, in particular in

developed countries, environmental requirements are becoming increasingly complex, aimed at fulfilling not

only environmental objectives but often also other public policy objectives.

Developing country exporters, in particular SMEs, may face challenges to implement environmental

requirements, for instance due to the proliferation of heterogeneous requirements, resources restraints, the

lack of information and capacity, as well as costly conformity assessment procedures. Developing countries'

responses to environmental requirements vary, ranching from a fire-fighting approach to a holistic approach

that attempts to promote reconciliation at a high level of environmental protection and stronger growth in

exports. Approaches such as early warning, improve information flow, targeted capacity-building initiatives

are undertaken by government and non-governmental agencies at the national and international levels to

respond to the challenges.

There is a general view that environmental requirements, if well designed and implemented, can create new

export opportunities for developing countries while improving the environmental performance of affected

industries. Needs have been highlighted, including inclusiveness and transparency, facilitating participation

of developing country representatives in stakeholder consultations and ex-ante assessments; the usefulness

of periodic reviews to avoid regulations and standards becoming obsolete or out of date; and delays in

implementation to address difficulties faced by developing countries.

CTE discussions

Effects of environmental measures on market access is a subject important to the work of the CTE (DMD

Paragraph 32 (i)). The discussion in the CTE has highlighted a list of issues that could be useful to overcome

market access challenges: transparency, notification, early warning, consultation, impact assessment, taking

into account comments while a measure is being prepared, technical assistance and capacity building to

assist the implementation of environmental requirements, and coordination within exporting countries.

Various views have been expressed among WTO Members, including the following:

WTO Member governments consider that the protection of the environment and health are legitimate

policy objectives. But they also acknowledge that measures designed to meet these objectives could

hinder exports. The answer is not to weaken environmental standards, but to enable exporters to

meet them.

WTO Agreements (e.g. TBT and SPS Agreements) have enough scope to ensure that environmental

measures do not unduly restrict exports. So, a balance is needed, between safeguarding market

access and protecting the environment. There is a need to examine how environmental measures

could be designed so that they are: consistent with WTO rules; inclusive; take into account

capabilities of developing countries; and meet the legitimate objectives of the importing country.

134

Environmental standards, objectives and priorities do need to reflect the particular environmental and

developmental context to which they apply — so says Principle 11 of the 1992 Rio Declaration on

Environment and Development.

It is recognized that it is essential to involve developing countries in the design and development of

environmental measures as a way of mitigating negative trade effects. Once developed, flexibility in

the application of environmental measures is seen as key.

The Plan of Implementation adopted at the World Summit on Sustainable Development (WSSD) in

Johannesburg in 2001 has reiterated the need to support voluntary, WTO-compatible market-based

initiatives for the creation and expansion of domestic and international markets for goods which are

environmentally friendly.

The CTE could look at incentives and means to assist developing countries to identify products, and

develop export markets or environmentally friendly products in areas where these countries enjoy a

comparative advantage.

Recently, the CTE discussion has been focusing on a number of specific environmental requirements,

including organic product requirements, biofuel certification, private voluntary standards and carbon

footprint measures.

TBT and SPS Committees' work

Furthermore, the TBT and SPS Committees provide a unique framework for work on environment-related

regulations and standards through notifications and debates at committee meetings on specific trade

concerns.

PART 2. LABELLING REQUIREMENTS FOR ENVIRONMENTAL PURPOSES

Introduction

Increasingly, labels are used to inform consumers that a labelled product is more environmentally friendly

relative to other products in the same category. The objectives are to improve the sale or image of a

labelled products; raise consumer environmental awareness; provide accurate and timely information to

consumers; and direct manufacturers to account for the environmental impact of their products.

There are different types of labelling schemes (e.g. voluntary or mandatory, single or multiple issues, self

declaration or third party verification, or government-run or privately-administered schemes). Eco-labels

are specific environmental labelling schemes that based on life-cycle analysis or “craddle-to-grave” approach

(raw material, production, consumption and disposal). The effects of eco-labels on producers, consumer

behaviour, markets and the environment are closely linked: producer and consumer behaviour will, to a

certain extent, affect markets, and may in turn lead to effects on the environment. Recently, there is an

increase in environmental labelling requirements and in their complexity.

PPM issues

A particularly thorny issue in the labelling debate has been the use of criteria linked to processes and

production methods (PPMs). Labelling requirements for environmental purposes can cover product-related

PPMs and non-product-related PPMs. It is generally accepted that labelling programs addressing physical

characteristics and product-related PPMs fall within the scope of TBT; question remains with respect to

nprPPMs and their WTO compatibility.

135

The issue of unincorporated PPMs has triggered a legal discussion in the WTO on the extent to which the TBT

Agreement covers and allows unincorporated PPM-based measures. Currently, a major challenge to the

effectiveness of the TBT Agreement is the increasing use of process-based (not only in the area of the

environment, but also in the areas such as social and labour standards as well as animal welfare), as

opposed to product-based, regulations and standards.

CTE discussions

Labelling for environmental purposes is one of the subjects assigned to the CTE (DMD Paragraph 32(iii)).

Environmental labelling schemes are complex, causing concerns about developing countries’ and small

businesses’ ability to export. WTO Members generally agree that voluntary, participatory, market-based and

transparent environmental labelling schemes are potentially efficient economic instruments to inform

consumers about environmentally friendly products. Moreover, they tend to be less trade restrictive than

other instruments. However, environmental labelling schemes could be misused for the protection of

domestic markets. Hence, these schemes need to be non-discriminatory and not result in unnecessary

barriers or disguised restrictions on international trade.

A common complaint by the users of eco-labels has been that eco-labelling criteria tend to focus on local

concerns and do not address the views of foreign suppliers, nor the specific environmental situation in the

countries of these suppliers. Concerns have been also raised about the lack of transparency, potential for

discrimination, proliferation, growing complexity and diversity of environmental labelling schemes. This is

especially the case with labelling based on life-cycle analysis and the use of nprPPM criteria. These

requirements could create difficulties for developing countries, and particularly SMEs in export markets.

There are divergent views among Members on the appropriate forum to discuss the issue of environmental

labelling. Some Members are of the view that, considering the mandate contained in paragraph 32(iii) of the

Doha Ministerial Declaration, which instructs the CTE to give particular attention to labelling requirements for

environmental purposes, the CTE needs to intensify its work on environmental labelling. Many other

Members, however, different view. They argue that the TBT Committee is better suited for the task of

examining WTO rules vis-à-vis labelling since it is already discussing labelling in general. “Technical barriers

to trade” covers product standards and labelling, and the latter, including environmental labelling, is

regularly discussed in the TBT Committee under “specific trade concerns”.

TBT disciplines

Most members believe that existing TBT disciplines are adequate to deal with environmental labelling, and

that the TBT Agreement has created the appropriate balance of rights and obligations for both mandatory

and voluntary labelling programmes. For voluntary environmental labelling schemes, the TBT Agreement

contains a “Code of Good Practice for the Preparation, Adoption and Application of Standards”. The TBT

Agreement provides a number of principles that countries must adhere to in the development of labelling

requirements, such as non-discrimination, to avoid unnecessary trade obstacles, harmonization,

transparency, equivalency and mutual recognition.

136

PROPOSED ANSWERS:

1. Environmental requirements are requirements adopted to achieve environmental objectives. They can be

requirements aimed at ensuring a certain standard on product characteristic and performance to pursue

environmental objectives (e.g. energy efficiency requirements on electronic and electrical appliances);

environmental-labels to inform consumers and raise their awareness about the environmental

characteristics of a product; and packaging requirements that aim at reducing the quantity of packaging

waste, facilitating its recovery, reuse, recycling or disposal, and obliging producers to take more direct

responsibility for tackling the environmental problems they poses.

2. Recent trends in environmental requirements include:

proliferation and growing complexity;

rise in private sector voluntary initiatives; and

increase in global supply-chain driven requirements.

3. The main challenges faces by developing country producers in complying environmental requirements in

export markets are:

lack of information;

lack of capacity and resources;

difficulties to keep up with proliferating heterogeneous requirements; and

high costs of related testing and certification requirements.

4. Developing countries can address new environmental requirements in the global market in a proactive

way by adopting a holistic approach aiming at achieving environmental protection and stronger export

growth at the same time. Actions can include information-sharing; raising general public's awareness

on environmental and health issues; coordination and collaboration between government and private

sector stakeholders; improving infrastructure; developing a appropriate legislative framework and

enforcing environmental regulations; training and strengthened research; and enhancing SMEs'

capabilities to adopt environmental management systems.

5. Environmental requirements, if well designed and implemented, can minimize their unnecessary trade

barriers, create new export opportunities for developing countries, while improving the environmental

performance of affected industries. Needs have been highlighted for inclusiveness and transparency to

facilitate participation of developing country representatives in stakeholder consultations and ex-ante

assessments. The usefulness of periodic reviews to avoid regulations and standards becoming obsolete,

and delays in the implementation of requirements by developing countries have also been underlined.

6. Principle 11 of the 1992 Rio Declaration on Environment and Development Environmental says that

standards, objectives and priorities do need to reflect the particular environmental and developmental

context to which they apply. In other words, environmental standards applied by some countries could

be inappropriate. They could cause unwarranted economic and social cost to others, particularly

developing countries, by hindering exports. Small and medium sized enterprises (SMEs) are especially

vulnerable.

The Plan of Implementation adopted at the World Summit on Sustainable Development (WSSD) in

Johannesburg in 2002 has reiterated the need to support voluntary, WTO-compatible market-based

137

initiatives for the creation and expansion of domestic and international markets for goods which are

environmentally friendly.

7. In the past four years, under its agenda item environmental requirements and market access, the CTE

has held focussed discussions on organic agricultural products, biofuels and private voluntary standards.

8. The TBT and SPS Committees provide a unique framework for work on environmental requirements

through notifications to provide transparency, and opportunities for comments and consultations.

Moreover, WTO Members regularly use the TBT and SPS committee meetings to raise specific concerns on

potential adverse trade effects or any perceived non-compliance with the obligations of the Agreements of

other Members' measures, including environmental measures.

9. Eco-labels are specific environmental labelling schemes that based on life-cycle analysis or “craddle-to-

grave” approach (raw material, production, consumption and disposal). In general, eco-label criteria are

set so that only a small percentage of products in a product category (typically, 5 to 30%) can meet these

criteria. The purpose is to selectively identify a sub-set of products that are environmentally preferable to

other products in the same category.

10. Environmental labels can contribute to the development of a more environmentally conscious market. For

example, they can have a multiplier effect to raise public awareness for environmentally preferable

products beyond the labelled product group, and make the public aware of the environmental impacts of

consumption.

11. Some environmental labelling schemes provide price premiums or discounts to producers, thus provide a

profitable niche market for labelled goods, for examples organic products.

12. The key legalistic question concerning non-product-related PPMs are:

Are nprPPM-based schemes covered by the TBT Agreement?

If they are, are they consistent with it?

If they are not, under which other WTO Agreement would they fall?

13. Most WTO Members agree that voluntary, participatory, market-based and transparent environmental

labelling schemes are potentially efficient economic instruments in order to inform consumers about

environmentally friendly products. As such, they could help move consumption on to a more sustainable

footing. Moreover, they tend, generally, to be less trade restrictive than other instruments.

14. Most members believe that existing disciplines on technical barriers to trade are adequate to deal with

environmental labelling, and that the TBT Agreement has created the appropriate balance of rights and

obligations for both mandatory and voluntary labelling programmes. For voluntary environmental

labelling schemes, the TBT Agreement contains a “Code of Good Practice for the Preparation, Adoption

and Application of Standards”. Agencies and organizations that develop labelling requirements are

encouraged to accept this code.

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WTO Rules and Environmental

Policies ESTIMATED TIME: 7 hours


Provide an overview of Article XX of the GATT 1994 addressing, in particular, its

role in allowing WTO Members to adopt trade-related measures to protect the

environment

Identify some key WTO disciplines and explain their relation with the exceptions

contained in Article XX of the GATT 1994

Identify other provisions contained in various WTO Agreements that are relevant

for the protection of the environment

Provide an overview of the existing environment-related panel and Appellate Body

decisions and determine whether in light of this jurisprudence, Members may adopt

measures to address environmental concerns without infringing upon its GATT and

WTO commitments

MODULE

6

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I. OVERVIEW OF GATT ARTICLE XX

I.A. INTRODUCTION

IN BRIEF

WTO Members can adopt trade-related measures to protect the environment and human health and life as

long as such measures comply with GATT rules, or fall under the exceptions to these rules.

Article XX on General Exceptions lays down a number of specific instances in which WTO Members may be

exempted from GATT rules.

IN DETAIL

Measures aimed at protecting the environment come in various shapes and forms. Under WTO rules, as

confirmed by WTO jurisprudence, Members can adopt trade-related measures aimed at protecting the

environment, subject to certain specified conditions. These measures are not necessarily discussed at the

WTO. And those that come up for discussion are not necessarily raised as formal disputes; they are often

raised and discussed at the Committee level. However, certain measures taken to achieve environmental

protection goals may, by their very nature restrict trade and thereby impact on the WTO rights of other

Members. They may violate basic trade rules, such as the non-discrimination obligation and the prohibition of

quantitative restrictions. The Appellate Body in Brazil – Retreaded Tyres recognized that such a tension may

exist between, on the one hand, international trade and, on the other hand, public health and environmental

concerns. This is why exceptions to such rules are particularly important in the trade and environment context.

These exceptions exist to ensure a balance between the right of Members to take regulatory measures,

including trade restrictions, to achieve legitimate policy objectives (e.g. the protection of human, animal or

plant life and health, and natural resources) and the rights of other WTO Members under basic trade rules.

Since the entry into force of the WTO in 1995, the WTO dispute settlement body has had to deal with a number

of disputes concerning such measures. Four disputes are particularly relevant: the US – Gasoline case (clean

air), the US – Shrimp case (turtles), the EC – Asbestos case (human life and health) and the Brazil – Retreaded

Tyres case (human, animal and plant life and health).

So far, these disputes have been brought in relation to the application of GATT rules. Several other WTO

agreements may be relevant to the protection of the environment as well. In particular, the TBT Agreement

and the SPS Agreement seek to ensure that requirements that products must fulfil for environmental purposes

do not create unnecessary obstacles to international trade. At the same time, these agreements recognize

explicitly Members' rights to protect animal or plant health and the environment at the level they choose.

In light of the jurisprudence to date, it is fair to say that WTO rules provide ample space for environmental

concerns to be accommodated. Even if a measure is found to be inconsistent with basic WTO disciplines, it may

be justifiable under one of the exceptions, for example, if it pursues an environmental or human health

objective and if its application does not reveal a protectionist intent.


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I.A.1. WTO MEMBERS HAVE THE RIGHT TO ADOPT TRADE-RELATED

MEASURES TO PROTECT THE ENVIRONMENT...

WTO Members can adopt trade-related measures to protect the environment and human health and life as long

as such measures comply with GATT rules, or fall under the exceptions to these rules. This right has been

reaffirmed by panels and the Appellate Body time and again.

In the first case decided by the new WTO dispute settlement body, US – Gasoline, the Appellate Body asserted

WTO Members' autonomy to determine their own environmental policies. The Appellate Body cautioned,

however, that a balance needed to be maintained between market access obligations, on the one hand, and

the right of Members to invoke the environmental justifications foreseen in the GATT, on the other, so that one

objective is not eroded or compromised by the pursuit of another.

I.A.2. AND EVEN TO BE EXEMPTED FROM BASIC GATT PROVISIONS, AS

LONG AS THE MEASURES ARE JUSTIFIED UNDER ARTICLE XX

Article XX on General Exceptions lays down a number of specific instances in which WTO Members may be

exempted from GATT rules. Two exceptions are of particular relevance to environmental and human health

protection: Articles XX(b) and (g) allow WTO Members to justify GATT-inconsistent measures if these are either

necessary to protect human, animal or plant life or health, or if the measures relate to the conservation of

exhaustible natural resources, respectively.

In addition, the introductory paragraph of Article XX (its “chapeau”) has been designed to prevent the misuse

of trade-related measures. Pursuant to the chapeau, an environmental measure may not be “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.” These additional safeguards seek

mainly to ensure that, by allowing a measure to be inconsistent with GATT rules through the use of exceptions,

protectionism is not introduced through the back door.

EXERCISES

1. Please briefly explain whether it is possible under the GATT 1994 to adopt measures aimed at protecting

the environment even if those measures have trade-restrictive effects that contravene the GATT

disciplines.

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I.B. KEY GATT DISCIPLINES

IN BRIEF

Certain measures taken to achieve environmental protection goals may, by their very nature, restrict trade and

thereby impact on the WTO rights of other Members. They may violate basic trade rules, such as the

non-discrimination obligation and the prohibition of quantitative restrictions. This is why exceptions to such

rules, as contained in Article XX, are particularly important in the trade and environment context. Article XX

being an exception clause, it comes into play only once a measure is found to be inconsistent with GATT rules.

I.B.1. THE PRINCIPLE OF NON-DISCRIMINATION

First, the principle of non-discrimination stipulates that a Member shall not discriminate:

between “like” products from different trading partners (giving them equally “most favoured-nation” or

MFN status, GATT Article I); and

between its own and like foreign products (giving them “national treatment”, GATT Article III).

“LIKE” PRODUCTS

If trade-related environmental or health measures are to be consistent with WTO rules, they cannot result in

discrimination between “like” products. Therefore, the principle of non-discrimination raises two key questions:

Are products at issue “like” products? If so, is the foreign product treated less favourably than the domestic

product or than another foreign product?

To take an example from public health protection, in the EC – Asbestos case, which dealt with measures

(prohibiting the import, sale and use of asbestos) to address the dangers posed to human health from an

exposure to asbestos and products containing asbestos, Canada – the complainant – had to prove that

products (containing asbestos) imported from Canada to France were like French domestic substitutes (PVA,

cellulose and glass fibres) and that the French regulation accorded imported products “less favourable

treatment” than like domestic products.

In fact, in this case, the Panel found that domestic and imported products were “like”. However, the Appellate

Body reversed this finding and explained that several criteria should have been taken into account by the Panel

in the determination of likeness, including the competitive relationship between products, but also the “risk” to

health posed by the two products, due to their different physical characteristics.

If two products are found to be “like”, the question remains whether imported products are treated in a less

favorable manner than domestic products. In the US – Gasoline case, for instance, the Panel ruled that a US

measure aimed at regulating the composition and emission effects of gasoline in order to reduce air pollution in

the United States violated Article III of the GATT: imported gasoline was effectively prevented from benefiting

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from sales conditions as favourable as domestic gasoline; therefore, the Panel found that imported gasoline

was treated less favourably than domestic gasoline.

In WTO case law, four criteria have been used in determining whether products are “like”:

(i) the physical properties of the products;

(ii) the extent to which the products are capable of serving the same or similar end-uses;

(iii) the extent to which consumers perceive and treat the products as alternative means of performing

particular functions in order to satisfy a particular want or demand; and

(iv) the international classification of the products for tariff purposes.

A RELATED QUESTION: THE ISSUE OF PROCESSES OR PRODUCTION METHODS (PPMS)

An important question in relation to environmental measures is whether products may be treated differently

because of the way in which they have been produced even if the production method used does not leave a

trace in the final product, i.e. even if the physical characteristics of the final product remain identical (referred

to as non-product-related processes and production methods).

When comparing two products, different processes or production methods (PPMs) used in the manufacture of

such products do not per se render these products “unlike”. For instance, governments may want to

discriminate between wood products derived from sustainably grown forest and wood where the production

method is unknown. Under such a scenario, the determination of the likeness of the two types of wood may be

particularly challenging. For such reasons, the analysis of likeness between two products should be carried out

on a case-by-case basis, as pointed out by the Appellate Body in EC – Asbestos.

Although not dealing with such questions in the context of GATT Articles I or III (the measure was an import

ban found to be inconsistent with Article XI), the dispute in US – Shrimp provides an interesting example of

discrimination between products on the basis of PPMs that may be provisionally justifiable under Article XX(g).

The dispute concerned the manner in which fishermen harvested shrimp. Certain production methods,

involving the use of fishing nets and shrimp trawl vessels, resulted in a high rate of incidental killing of sea

turtles, as turtles can be trapped and drowned by the nets used to harvest shrimp. The United States aimed to

reduce the killing of turtles by imposing an import ban on shrimp harvested by methods which may lead to the

incidental killing of sea turtles. In order to avoid the ban, exporters were required to demonstrate the use of

TEDs (turtle excluder devices which limit the incidental catch of endangered sea turtles), or similar equipment,

when harvesting shrimp. The Appellate Body viewed the United States' measure as directly connected to the

policy of conservation of sea turtles. The measure was thus considered to be provisionally justified under

Article XX(g).

I.B.2. THE PROHIBITION OF QUANTITATIVE RESTRICTIONS

Certain environmental measures (such as bans) may also violate the second key discipline of the GATT, which

is contained in Article XI and provides, among other things, that restrictions on the importation or sale of

products from other WTO Members are prohibited. In the US – Shrimp case, the US embargo was found to be


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inconsistent with Article XI: the United States had prohibited the import of shrimp originating from

non-certified countries, i.e. countries that did not use a technology known as TEDs.

EXERCISES

2. Please briefly explain what the principle of non-discrimination requires in relation to domestic and

imported products.

3. In WTO case law, four criteria have been used in determining whether products are “like”. What are

these criteria?

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I.C. GATT EXCEPTIONS

IN BRIEF

GATT Article XX on General Exceptions lays down a number of specific instances in which WTO Members may

be exempted from GATT rules. Two exceptions are of particular relevance to the protection of the

environment: paragraphs (b) and (g) of Article XX. Pursuant to these two paragraphs, WTO Members may

adopt policy measures that are inconsistent with GATT disciplines, but necessary to protect human, animal or

plant life or health (paragraph (b)), or relating to the conservation of exhaustible natural resources

(paragraph (g)).

GATT Article XX on General Exceptions consists of two cumulative requirements. For a GATT-inconsistent

environmental measure to be justified under Article XX, a Member must perform a two-tier analysis proving:

First, that its measure falls under at least one of the exceptions (e.g. paragraphs (b) to (g), two of the ten

exceptions under Article XX) and,

Second, that the measure satisfies the requirements of the introductory paragraph (the “chapeau” of

Article XX), i.e. that it is not applied in a manner which would constitute “a means of arbitrary or unjustifiable

discrimination between countries where the same conditions prevail”, and is not “a disguised restriction on

international trade”.

I.C.1. ENVIRONMENTAL POLICIES COVERED BY ARTICLE XX

WTO Members' autonomy to determine their own environmental objectives has been reaffirmed on a number

of occasions (e.g. in US – Gasoline, Brazil – Retreaded Tyres). The Appellate Body also noted, in the

US - Shrimp case, that conditioning market access on whether exporting Members comply with a policy

unilaterally prescribed by the importing Member was a common aspect of measures falling within the scope of

one or other of the exceptions of Article XX.

In past cases, a number of policies have been found to fall within the realm of these two exceptions:

policies aimed at reducing the consumption of cigarettes, protecting dolphins, reducing risks to human

health posed by asbestos, reducing risks to human, animal and plant life and health arising from the

accumulation of waste tyres (under Article XX(b)); and

policies aimed at the conservation of tuna, salmon, herring, dolphins, turtles, clean air (under

Article XX(g)).

Interestingly, the phrase “exhaustible natural resources” under Article XX(g) has been interpreted broadly

to include not only “mineral” or “non-living” resources but also living species which may be susceptible to

depletion, such as sea turtles. To support this interpretation, the Appellate Body noted, in the US – Shrimp

case, that modern international conventions and declarations made frequent references to natural resources as

embracing both living and non-living resources. Moreover, in order to demonstrate the exhaustible character of

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sea turtles, the Appellate Body noted that sea turtles were included in Appendix 1 on species threatened with

extinction of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES).

Also in the US – Shrimp case, the Appellate Body accepted as a policy covered by Article XX(g) one that

applied not only to turtles within the United States waters but also to those living beyond its national

boundaries. The Appellate Body found that there was a sufficient nexus between the migratory and endangered

marine populations involved and the United States for purposes of Article XX(g).

I.C.2. DEGREE OF CONNECTION BETWEEN THE MEANS AND THE

ENVIRONMENTAL POLICY OBJECTIVE

In order for a trade-related environmental measure to be eligible for an exception under Article XX, paragraphs

(b) and (g), a Member has to establish a connection between its stated environmental policy goal and the

measure at issue. The measure needs to be either:

necessary for the protection of human, animal or plant life or health (paragraph (b)) or

relating to the conservation of exhaustible natural resources (paragraph (g)).

To determine whether a measure is “necessary” to protect human, animal or plant life or health under

Article XX(b), a process of weighing and balancing a series of factors has been used by the Appellate Body,

including the contribution made by the environmental measure to the policy objective, the importance of the

common interests or values protected by the measure and the impact of the measure on international trade. If

this analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by

comparing the measure with its possible alternatives, which may be less trade restrictive while providing an

equivalent contribution to the achievement of the objective pursued.

In the Brazil – Retreaded Tyres case, for instance, the Appellate Body found that the import ban on retreaded

tyres was “apt to produce a material contribution to the achievement of its objective”, i.e. the reduction in

waste tyre volumes. The Appellate Body also found that the proposed alternatives, which were mostly remedial

in nature (i.e. waste management and disposal), were not real alternatives to the import ban, which could

prevent the accumulation of tyres.

The Appellate Body also recognized in Brazil – Retreaded Tyres that certain complex environmental problems

may be tackled only with a comprehensive policy comprising a multiplicity of interacting measures. The

Appellate Body pointed out that the results obtained from certain actions – for instance, measures adopted in

order to address global warming and climate change – can only be evaluated with the benefit of time.

In EC – Asbestos, the Appellate Body also found, as a result of a process of weighing and balancing a series of

factors, that there was no reasonably available alternative to a trade prohibition. This was clearly designed to

achieve the level of health protection chosen by France and the value pursued by the measure was found to be

“both vital and important in the highest degree”. The Appellate Body made the point that the more vital or

important the common interests or values pursued, the easier it was to accept as necessary measures

designed to achieve those ends.

For a measure to be “relating” to the conservation of natural resources, a substantial relationship between the

measure and the conservation of exhaustible natural resources needs to be established. In the words of the

Appellate Body, a Member has to establish that the means (i.e. the chosen measure) are “reasonably related”

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to the ends (i.e. the stated policy goal of conservation of exhaustible natural resources). Moreover, in order to

be justified under Article XX(g), a measure affecting imports must be applied “in conjunction with restrictions

on domestic production or consumption” (the even-handedness requirement).

In the US – Gasoline case, the United States had adopted a measure regulating the composition and emission

effects of gasoline in order to reduce air pollution in the United States. The Appellate Body found that the

chosen measure was “primarily aimed at” the policy goal of conservation of clean air in the United States and

thus fell within the scope of paragraph (g) of Article XX. As far as the second requirement of paragraph (g) is

concerned, the Appellate Body ruled that the measure met the “even-handedness” requirement, as it affected

both imported and domestic products.

In the US – Shrimp case, the Appellate Body considered that the general structure and design of the measure

in question were “fairly narrowly focused” and that it was not a blanket prohibition of the importation of shrimp

imposed without regard to the consequences to sea turtles; thus, the Appellate Body concluded that the

regulation in question was a measure “relating to” the conservation of an exhaustible natural resource within

the meaning of Article XX(g). The Appellate Body also found that the measure in question had been made

effective in conjunction with the restrictions on domestic harvesting of shrimp, as required by Article XX(g).

RECALL

WTO Members' autonomy to determine their own environmental objectives.

In order for a trade-related environmental measure to be eligible for an exception under Article XX,

paragraphs (b) and (g), a Member has to establish that the measure is necessary for the protection of

human, animal or plant life or health (paragraph (b)) or that it is relating to the conservation of

exhaustible natural resources (paragraph (g)).

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I.C.3. THE IMPORTANCE OF THE MANNER IN WHICH TRADE-RELATED

ENVIRONMENTAL MEASURES ARE APPLIED

The introductory clause of Article XX (its chapeau) emphasizes the manner in which the measure in question is

applied. Specifically, the application of the measure must not constitute a “means of arbitrary or unjustifiable

discrimination” or a “disguised restriction on international trade”.

The chapeau requires that the measure does not constitute an abuse or misuse of the provisional justification

made available under one of the paragraphs of Article XX, that is to say, is applied in good faith. In

Brazil - Retreaded Tyres, the Appellate Body recalled that the chapeau serves to ensure that Members' right to

avail themselves of exceptions is exercised in good faith in order to protect legitimate interests, not as a means

to circumvent one Member's obligations towards other WTO Members. In other words, Article XX embodies the

recognition by WTO Members of the need to maintain a balance between the right of a Member to invoke an

exception and the rights of the other Members under the GATT.

WTO jurisprudence has highlighted some of the circumstances which may help to demonstrate that the

measure is applied in accordance with the chapeau. These include relevant coordination and cooperation

activities undertaken by the defendant at the international level in the trade and environment area, the design

of the measure, its flexibility to take into account different situations in different countries as well as an

analysis of the rationale put forward to explain the existence of a discrimination (the rationale for the

discrimination needs to have some connection to the stated objective of the measure at issue).

THE ROLE OF INTERNATIONAL COORDINATION AND COOPERATION

In the US – Gasoline decision, the Appellate Body considered that the United States had not sufficiently

explored the possibility of entering into cooperative arrangements with affected countries in order to mitigate

the administrative problems raised by the United States in their justification of the discriminatory treatment.

Moreover, in the US – Shrimp case, the fact that the United States had “treated WTO Members differently” by

adopting a cooperative approach regarding the protection of sea turtles with some Members but not with

others also showed that the measure was applied in a manner that discriminated among WTO Members in an

unjustifiable manner.

At the compliance stage, in US – Shrimp (Article 21.5), the Appellate Body found that, in view of the serious,

good faith efforts made by the United States to negotiate an international agreement on the protection of sea

turtles, including with the complainant, the measure was now applied in a manner that no longer constitutes a

means of unjustifiable or arbitrary discrimination.

The Appellate Body also acknowledged that, “'as far as possible', a multilateral approach is strongly preferred”

over a unilateral approach. But, it added that, although the conclusion of multilateral agreements was

preferable, it was not a prerequisite to benefit from the justifications in Article XX to enforce a national

environmental measure.

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THE FLEXIBILITY OF THE MEASURE TO TAKE INTO ACCOUNT DIFFERENT SITUATIONS IN

DIFFERENT COUNTRIES

In the US – Shrimp case, the Appellate Body was of the view that rigidity and inflexibility in the application of

the measure (e.g. by overlooking the conditions in other countries) constituted unjustifiable discrimination. It

was deemed not acceptable that a Member would require another Member to adopt essentially the same

regulatory programme without taking into consideration that conditions in other Members could be different

and that the policy solutions might be ill-adapted to their particular conditions.

In order to implement the panel and Appellate Body recommendations, the United States revised its measure

and conditioned market access on the adoption of a programme comparable in effectiveness (and not

essentially the same) to that of the United States. For the Appellate Body, in US – Shrimp (Article 21.5), this

allowed for sufficient flexibility in the application of the measure so as to avoid “arbitrary or unjustifiable

discrimination”.

THE DESIGN OF THE MEASURE

Finally, an environmental measure must not constitute a “disguised restriction on international trade”, i.e.

must not result in protectionism. In past cases, it was found that the protective application of a measure could

most often be discerned from its “design, architecture and revealing structure”. For instance, in US – Shrimp

(Article 21.5), the fact that the revised measure allowed exporting countries to apply programmes not based

on the mandatory use of TEDs, and offered technical assistance to develop the use of TEDs in third countries,

showed that the measure was not applied so as to constitute a disguised restriction on international trade.

Figure 1: Analysis under article XX of GATT

ANALYSIS UNDER ARTICLE XX OF GATT

FALLS WITHIN PARAGRAPH (B)? FALLS WITHIN PARAGRAPH (G)?

NECESSITY TEST

ANALYSIS UNDER THE CHAPEAU

IS THE MEASURE "RELATING" TO?

ARBITRARY OR UNJUSTIFIABLE

DISCRIMINATION?

DISGUISED RESTRICTION TO

INTERNATIONAL TRADE?

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RECALL

Under the introductory clause ("chapeau") of Article XX of the GATT 1994, for a measure to be covered by

this provision, the application of the measure must not constitute a “means of arbitrary or unjustifiable

discrimination” or a “disguised restriction on international trade”.

EXERCISES

4. How does the two-tiered analysis to determine whether a measure is justifiable under GATT Article XX

apply in a hypothetical case of an import ban on pesticides which pollute groundwater aquifers?

5. Please indicate whether each one of the following trade-related measures could be more appropriately

covered by either paragraph (b) or paragraph (g) or both paragraphs of Article XX (for example, a

measure prohibiting the importation of carcinogenic products could be more adequately covered by

paragraph (b) of Article XX; a measure imposing an import ban on portable heat radiators that generate

considerable air pollution would be more appropriately covered by paragraph (g) of Article XX):

(i) A measure that restricts the marketing of toys made with lead-containing paint;

(ii) A measure that prohibits the importation of tuna that is caught using a fishing technique that

is harmful to dolphins;

(iii) A measure that establishes quantitative restrictions on the importation of pesticides that

pollute groundwater reservoirs;

(iv) A measure that requires that imported products bearing a label informing the carbon

emissions generated during their fabrication.

6. Please describe the process of "weighing and balancing" to determine whether a measure is "necessary"

to protect human, animal or plant life or health under Article XX(b) of the GATT 1994.

7. What is the meaning of the term "relating" in GATT Article XX(g)?

8. How was a measure considered as constituting a means of arbitrary or unjustifiable discrimination in the

US – Shrimp case?

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I.D. OTHER RELEVANT WTO TEXTS

IN BRIEF

Trade and environment interface is also addressed in a number of different WTO Agreements and Decisions.

These include the General Agreement on Trade in Services (GATS), the Agreement on Technical Barriers to

Trade (TBT), the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), the Agreement

on Trade-Related Aspects of Intellectual Property (TRIPS), the Agreement on Subsidies and Countervailing

Measures, the Agreement on Agriculture, the Marrakesh Decision on Trade and Environment, and Decision on

Trade in Services and the Environment.

I.D.1. THE GENERAL AGREEMENT ON TRADE IN SERVICES

Negotiated during the 1986–94 Uruguay Round, the General Agreement on Trade in Services (GATS) contains

a “general exceptions” clause, Article XIV, similar to GATT Article XX. The GATS Article starts with an

introduction (“chapeau”) that is identical to that of GATT Article XX.

Addressing environmental concerns, paragraph (b) allows WTO Members to adopt policy measures that would

normally be inconsistent with GATS if this is “necessary to protect human, animal or plant life or health”

(identical to GATT Article XX(b)). As under GATT, this must not result in arbitrary or unjustifiable discrimination

and must not constitute protectionism in disguise.

I.D.2. THE AGREEMENT ON TECHNICAL BARRIERS TO TRADE (TBT)

The TBT Agreement seeks to ensure that product specifications, whether mandatory or voluntary (known as

technical regulations and standards), as well as procedures to assess compliance with those specifications

(known as conformity assessment procedures), do not create unnecessary obstacles to trade. In its preamble,

the Agreement recognizes countries’ rights to adopt such measures to the extent they consider appropriate –

for example, to protect human, animal or plant life or health, or the environment.

Moreover, Members are allowed to take measures to ensure that their standards of protection are met. (This is

known as adopting “conformity assessment procedures”.)

Among the agreement’s important features are:

non-discrimination in the preparation, adoption and application of technical regulations, standards, and

conformity assessment procedures;

avoiding unnecessary obstacles to trade;

harmonizing specifications and procedures with international standards as far as possible;

the transparency of these measures, through governments notifying them to the WTO Secretariat and

establishing national enquiry points.

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I.D.3. THE AGREEMENT ON THE APPLICATION OF SANITARY AND

PHYTOSANITARY MEASURES (SPS)

The SPS Agreement deals with food safety, and human, animal and plant health and safety regulations. It

recognizes Members’ rights to adopt SPS measures but stipulates that they must be based on a risk

assessment, should not create unnecessary obstacles to trade (should be applied only to the extent necessary

to protect human, animal or plant life or health), and should not arbitrarily or unjustifiably discriminate

between Members where similar conditions prevail. The Agreement encourages Members to adapt their SPS

measures to the areas (regions, countries or parts of countries) that supply their imports.

The SPS Agreement complements the Technical Barriers to Trade Agreement. It allows Members to adopt SPS

measures for environmental purposes, but subject to such requirements as risk assessment,

non-discrimination and transparency.

I.D.4. THE AGREEMENT ON TRADE-RELATED ASPECTS OF

INTELLECTUAL PROPERTY (TRIPS)

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) refers explicitly to the

environment in Section 5, which deals with patents. It says (in paragraphs 2 and 3 of Article 27 – Arts 27.2

and 27.3 for short – of Section 5) that Members can make certain inventions ineligible for patenting:

To protect human, animal or plant life or health, to avoid serious harm to the environment. A Member

can exclude an invention from patentability if it believes the invention has to be prevented (within its

territory) for these and certain other objectives.

Plants and animals. Micro-organisms have to be eligible for patenting. So do non-biological and

microbiological processes for the production of plants or animals. Invented plant varieties have to be

also eligible for protection either by patenting, or by an effective system specially created for the

purpose (“sui generis”), or a combination of the two. Otherwise, plants and animals do not have to be

eligible for patenting.

These provisions are designed to address the environmental concerns related to intellectual property

protection. The TRIPS Agreement allows Members to refuse to patent inventions that may endanger the

environment (provided their commercial exploitation is prohibited as a necessary condition for the protection of

the environment). For ethical or other reasons, they can also exclude plants or animals from patentability,

subject to the conditions described above.

I.D.5. THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING

MEASURES (SCM)

The SCM Agreement, which applies to non-agricultural products, is designed to regulate the use of subsidies.

Under the Agreement, certain subsidies referred to as “non-actionable” are generally allowed. Amongst the

non-actionable subsidies that had been provided for under Article 8 were subsidies used to promote the

adaptation of existing facilities to new environmental requirements (Article 8.2(c)). However, this provision




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expired in its entirety at the end of 1999. It was intended to allow Members to capture “positive environmental

externalities” when they arose.

I.D.6. THE AGREEMENT ON AGRICULTURE

Adopted during the 1986–94 Uruguay Round, the WTO Agriculture Agreement seeks to reform trade in

agricultural products, and provide a basis for market-oriented policies. In its preamble, the agreement

reiterates Members’ commitment to reform agriculture in a manner that protects the environment.

Under the agreement, domestic support measures with minimal impact on trade (known as “green box”

policies) are allowed and are excluded from reduction commitments – they are listed in Annex 2 of the

Agreement. Among them are expenditures under environmental programmes, provided that they meet certain

conditions. Again, the exemption enables governments to capture “positive environmental externalities”.

I.D.7. RELEVANT DECISIONS

Two ministerial decisions addressing environmental issues were adopted at the end of the Uruguay Round. A

ministerial Decision on Trade and Environment created the Committee on Trade and Environment (CTE) with

the aim of making international trade and environmental policies support each other. The decision contains the

work programme of the CTE.

Ministers also adopted a Decision on Trade in Services and the Environment. It instructs the CTE to examine

and report on the relationship between services trade and the environment, including the issue of sustainable

development, in order to determine if any modifications of GATS Article XIV are required. The CTE has taken

up this issue as part of its work programme.

EXERCISES

9. Please establish the argument that a technical regulation, which requires certain electronic products to

perform at certain energy efficiency levels, would be acceptable under one or more WTO agreements

even if this measure may have adverse impacts on trade.

http://www.wto.org/english/docs_e/legal_e/14-ag_01_e.htm

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II. ENVIRONMENT-RELATED DISPUTES IN

GATT/WTO

IN BRIEF

Since the entry into force of the WTO in 1995, panel and appellate body proceedings have involved in the

examination of environmental or health-related measures under GATT Article XX. Four disputes are

particularly relevant: the US – Gasoline case (clean air), the US – Shrimp case (turtles), the EC – Asbestos

case (human life and health) and the Brazil – Retreaded Tyres case (human, animal and plant life and health).

II.A. THE ‘BRAZIL – RETREADED TYRES’ DISPUTE

IN BRIEF

This case was brought by the European Communities against Brazil (Brazil – Measures Affecting Imports of

Retreaded Tyres, WTO case No. 332). The measure at issue was Brazil's import ban on retreated tyres. Brazil

argued in that case that this measure was necessary to protect human, animal and plant life or health.

According to Brazil the importation and use of retreaded tyres contributed to the accumulation of waste tyres

with serious health and environmental consequences. The Appellate Body and panel reports were adopted

in 2007.

II.A.1. INTRODUCTION

At the end of 2005, the European Communities initiated a complaint in the WTO against a ban imposed by

Brazil on the importation of retreaded tyres. The objective of Brazil's import ban was to reduce the

accumulation of waste tyres in Brazil, and thereby reduce the risks posed to human health and the

environment by mosquito-borne diseases, tyre fires and toxic leaching. Brazil sought to prevent the further

generation of waste tyres as much as possible.

Retreaded tyres are produced by reconditioning used tyres by stripping the worn tread from a used tyre's

skeleton and replacing it with new material. Under international safety standards, passenger car tyres may

only be retreaded once. In Brazil's tropical climate, discarded tyres provide a breeding ground for mosquitoes

because they collect rainwater. Mosquitoes then contribute to the spread of diseases such as dengue, malaria

and yellow fever. Stockpiles of tyres also pose a risk of fires that may result in the emission of hazardous

chemicals, as well as toxic leaching into the ground.



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II.A.2. A MEASURE NECESSARY TO PROTECT HUMAN, ANIMAL OR

PLANT LIFE OR HEALTH AGAINST RISKS ARISING FROM THE

ACCUMULATION OF WASTE TYRES?

Brazil's import ban was found to be inconsistent with GATT Article XI (general elimination of quantitative

restrictions). However, Brazil sought justification under Article XX(b). First, the Panel, later upheld by the

Appellate Body, found that Brazil's ban was provisionally justified under Article XX(b) as it was "necessary to

protect human, animal or plant life or health" against risks arising from the accumulation of waste tyres.

Brazil's ban targeted retreaded tyres because they have a shorter lifespan and would become waste sooner

than new tyres. Therefore, the product subject to the import ban (i.e. retreaded tyre) is not the product (i.e.

waste tyre) generating the risks to human, animal or plant life or health that the import ban purports to

address. The Panel took the view that the risk being addressed need not involve the exact product affected by

the measure. The Panel found therefore that the policy goal of Brazil's measure fell within the range of policies

covered by Article XX(b) on the basis of the existence of health risks of mosquito-borne diseases, tyre fires and

toxic leaching associated with the accumulation of waste tyres in Brazil.

The Panel also found that the measure was "necessary" to achieve that policy goal. In previous cases, the

Appellate Body had explained that the "necessity" of a measure should be assessed by weighing and balancing

a series of factors, including: (i) the relative importance of the common interests or values the measure is

intended to protect; (ii) the extent to which the measure contributes to achieving the objective; and (iii) the

trade-restrictiveness of the measure. Following this analysis, the Panel concluded that, in the light of the

importance of the interests protected by the objective of the import ban, the contribution of the ban to the

achievement of its objective outweighed its trade restrictiveness.

As to how much the import ban contributes to the achievement of Brazil's aim (of reducing waste tyres to

reduce risks to health and the environment), the panel conducted a qualitative analysis. It found that the

import ban on retreaded tyres can encourage Brazilian producers to retread local used tyres, which would not

have been retreaded otherwise; and the use of imported retreaded tyres may be substituted for by new tyres,

which have a longer lifespan. Thus, the import ban was found capable of contributing to the reduction of waste

tyres in Brazil, which in turn would lead to a reduction in risks to health and the environment. The Appellate

Body confirmed this finding and noted that the "material contribution" of an import ban could consist of a

quantitative or qualitative analysis.

A measure can however not be considered "necessary" (in line with Article XX(b)), if a WTO-consistent

alternative measure, or less WTO-inconsistent measure, is "reasonably available" and would achieve the same

objective. The Panel examined the alternatives suggested by the European Communities, such as domestic

measures to reduce the number of waste tyres (e.g. to encourage domestic retreading and improve

retreadability of domestic used tyres) or to improve the management of waste tyres (e.g. collection and

disposal methods), and concluded that they did not constitute reasonably available alternatives to the

import ban.

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II.A.3. A MEASURE APPLIED IN A MANNER THAT CONSTITUTES A

MEANS OF UNJUSTIFIABLE DISCRIMINATION AND A DISGUISED

RESTRICTION TO TRADE?

Although provisionally justified under paragraph (b) of Article XX, Brazil's import ban was found to be applied

in a manner that constituted a means of unjustifiable discrimination and a disguised restriction to trade, as

prohibited by the introductory clause of Article XX. Therefore, Brazil's ban was eventually not found to be

justified under Article XX(b).

Unjustifiable and arbitrary discrimination was found to arise from two situations: (i) the exemption from the

import ban on retreaded tyres of tyres originating from MERCOSUR countries; and (ii) the importation of used

tyres through domestic court injunctions (obtained to override the general ban on importing used and

retreaded tyres) as used tyres, like retreaded tyres, are likely to become waste sooner than new tyres.

Concerning the MERCOSUR exemption, the Appellate Body, reversing the Panel's ruling, found that the fact

that the exemption resulted from a decision of the MERCOSUR arbitral tribunal was not an acceptable rationale

for the discrimination, because it bears no relationship to the legitimate objective pursued by the Import Ban,

and even goes against this objective, to however small a degree. The Appellate Body also disagreed with the

Panel's conclusion that the MERCOSUR exemption giving rise to only a very limited number of imports of

retreaded tyres did not result in a situation of arbitrary or unjustifiable discrimination (following a quantitative

approach to the evaluation of discrimination).

In relation to the imports of used tyres under court injunctions, the Appellate Body disagreed with the panel

that these imports have resulted in the import ban being applied in a manner that constitutes unjustifiable

discrimination and a disguised restriction on international trade only to the extent that such imports have taken

place in volumes that significantly undermine the achievement of the objective of the import ban. The

Appellate Body also considered the panel's finding that the imports of used tyres under court injunctions have

not resulted in arbitrary discrimination; and found instead, that the imports of used tyres under court

injunctions resulted in the import ban being applied in a manner that constitutes arbitrary or unjustifiable

discrimination within the meaning of the chapeau of Article XX.

As a result, the Dispute Settlement Body requested Brazil to bring its measure into compliance with its WTO

obligations.

II.B. THE ASBESTOS CASE

IN BRIEF

This case was brought by Canada against the European Communities (European Communities – Measures

Affecting Asbestos and Asbestos-containing Products, WTO dispute DS135). The decisions in this case

rejected Canada's challenge to France's import ban on asbestos and asbestos-containing products, reinforcing

the view that the WTO agreements support Members' ability to protect human health and safety at the level

of protection they deem appropriate. The Appellate Body and panel reports were adopted in 2001.



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II.B.1. INTRODUCTION

In 1998, Canada, the world's largest exporter of asbestos, challenged the French ban on importation of

asbestos and products containing asbestos fibres. The French Government imposed the ban in 1997 in

response to concerns about the serious consequences for human health caused by exposure to asbestos fibres.

Asbestos is the name of a group of highly fibrous minerals with separable, long and thin fibres. Chrysotile

asbestos is generally considered to be a highly toxic material, exposure to which poses significant threats to

human health (such as asbestosis, lung cancer and mesothelioma). However, due to certain qualities (such as

resistance to very high temperature), chrysotile asbestos has been widely used in various industrial sectors.

Canada claimed that the ban violated France's WTO obligations. Although Canada did not dispute the health

risks associated with exposure to chrysotile asbestos, it argued that a distinction should be made between

chrysotile fibres and chrysotile asbestos secured within a cement matrix. Canada challenged the French Decree

insofar as it prohibited, among other things, the use of cement-based products containing chrysotile asbestos

fibres. Canada argued that the Decree altered the conditions of competition between, on the one hand,

substitute fibres of French origin and, on the other hand, chrysotile fibres from Canada. Accordingly, Canada

submitted that the Decree breached France's national treatment obligations under Article III GATT because it

imposed less favourable treatment on imported products containing asbestos as compared to domestic

products containing substitutes for asbestos. But the European Communities (on behalf of France) argued that

France wanted to halt the spread of asbestos-related health risks, particularly for those exposed occasionally

and very often unwittingly to asbestos when working with products containing asbestos, and that a ban on

products containing asbestos was the only way to achieve its chosen level of protection. The EC requested the

panel to confirm that the Decree was compatible with Article III:4, or alternatively, was justified to protect

human health within the meaning of Article XX(b).

II.B.2. PANEL STAGE

The panel found that France's measures violated Article III:4 GATT, on the basis that France was in effect

discriminating between supposedly "like products". The panel was persuaded that cement-based products that

contained asbestos fibres, and cement-based products that didn't, were "like products" and thus comparable

under Article III:4. In coming to this conclusion, the panel relied on the end-uses of the respective products,

noting that they were the same, but excluded from its consideration the health risks associated with asbestos

fibres. However, the panel then agreed with the EC that the measure was justified under Article XX(b) because

it was necessary to protect human life and health.

II.B.3. APPELLATE BODY STAGE

In response, Canada appealed the panel's decision. The Appellate Body essentially upheld panel’s ruling in

favour of the EC, but modified the reasoning in a number of important ways. First, the Appellate Body

considered that the very serious health risks inherent in products containing asbestos should have been taken

into consideration by the panel when it assessed "like products" under Article III:4. The key is assessing the

competitive relationship between allegedly "like products". The Appellate Body considered that the

carcinogenic nature of asbestos fibres meant that a product containing asbestos fibres has quite different

physical properties to a product that does not. Moreover, the Appellate Body was persuaded that the health

159

risks associated with products containing asbestos fibres would influence consumers' behaviour in relation to

those products. Thus, the products compared were not "like" and the EC had consequently not breached

Article III:4.

The Appellate Body then examined the arguments made with respect to Article XX, and reaffirmed the panel's

finding that majority scientific opinion agreed that asbestos represents a serious risk to human health. The

Appellate Body considered that the objective pursued by France, namely the preservation of human life or

health, is "both vital and important in the highest degree" and consequently it was easier for the EC to prove

the necessity of the asbestos ban. The Appellate Body also confirmed that WTO Members have the right to

determine the level of protection of health that they consider appropriate in a given situation, and upheld the

panel's finding that there was no reasonable alternative available to France (e.g. the controlled use of asbestos

products as suggested by Canada) to achieve its objective.

II.C. THE ‘SHRIMP-TURTLE’ DISPUTE

IN BRIEF

This case was brought by India, Malaysia, Pakistan and Thailand against the US (United States – Import

Prohibition of Certain Shrimp and Shrimp Products, WTO case No. 58). The measure at issue in this dispute

was an import ban imposed by the United States on shrimp and shrimp products. According to the United

States, this measure was related to the conservation of sea turtles that the United States considered as

exhaustible natural resources. The panel and Appellate Body reports were adopted in 1998 and the compliance

reports in 2001 (the compliance case was only brought by Malaysia).

II.C.1. INTRODUCTION

In early 1997, India, Malaysia, Pakistan and Thailand brought a joint complaint against a ban imposed by the

US on the importation of certain shrimp and shrimp products. The protection of sea turtles was at the heart of

the ban.

A US regulation of 1973 listed as endangered or threatened five species of sea turtles that occur in US waters,

and prohibited their “take” within the US, in its territorial sea and the high seas. (“Take” means harassment,

hunting, capture, killing or attempting to do any of these.)

Sea turtles live around the world in subtropical and tropical areas. They spend their lives at sea, where they

migrate between their foraging and nesting grounds. In 1998, all species of sea turtles were included in

Appendix I of the 1973 Convention on International Trade in Endangered Species (CITES). Sea turtles have

been adversely affected by human activity, either directly (their meat, shells and eggs have been exploited), or

indirectly (incidental capture in fisheries, destruction of their habitats, pollution of the oceans). In particular,

shrimp may be harvested with commercial fishing technology which adversely affect sea turtles.



160

To reduce the number of incidental killing of sea turtles by trawlers, under this regulation, the US required that

US shrimp trawlers use “turtle excluder devices” (TEDs) in their nets when fishing in waters where there is a

significant likelihood of encountering sea turtles. (A TED is a trap door installed inside a trawling net that is

designed to allow shrimp to pass to the back of the net while directing sea turtles and other unintentionally

caught large objects out of the net.)

In 1989, in an attempt to prevent the incidental killing of sea turtles by shrimp trawlers elsewhere in the world,

the US prohibited the imports of shrimp and shrimp products unless the exporting country was certified that it

had adopted essentially the same policy as the one applied to US shrimp trawlers, i.e. the use of TEDs.

II.C.2. 1998 DECISION

India, Malaysia, Pakistan and Thailand took the case to the WTO. In a 1998 Panel, the US ban was found to be

inconsistent with GATT Article XI (which prohibits the use of import restrictions) and could not be justified

under Article XX (which deals with general exceptions to the rules, including for certain environmental

reasons). The Appellate Body upheld the Panel's finding that although the US measure was found to serve an

environmental objective that was recognized as legitimate under paragraph (g) of Article XX (which concerns

the conservation of exhaustible natural resources), it did not fulfil the requirements of the chapeau of

Article XX.

The Appellate Body interpreted the phrase "exhaustible natural resources" under Article XX(g) broadly to

include not only mineral resources but also living species which may be susceptible of depletion. Moreover, the

Appellate Body accepted as a policy covered by paragraph (g) of Article XX one that applied not only to turtles

within the US waters but also to those living beyond its national boundaries. A "sufficient nexus" was required

to exist between the migratory and endangered sea turtles and the United States.

In reaching its conclusion that the US measure did not fulfil the requirements of the chapeau of Article XX, the

Appellate Body relied on several elements. The implementation of the measure lacked flexibility: it essentially

required shrimp trawlers in exporting Members to use TEDs (and be certified) if they wished to export to the

US. Moreover, the US provided countries in the western hemisphere – mainly in the Caribbean – assistance

and longer transition periods for their fishermen to start using TEDs. It did not give the same treatment to the

four Asian countries (India, Malaysia, Pakistan and Thailand) that filed the complaint with the WTO.

The Appellate Body also held that a multilateral approach was preferable to unilateral trade measures to

address environmental problems reaching beyond national boundaries: the US should have engaged in

negotiations on the protection and conservation of sea turtles with all exporting Members, before enforcing the

import prohibition.

Therefore, the US measure was found inconsistent with GATT Article XX, not because it sought to protect the

environment but because of the way in which the US applied its environmental measure.

Following this ruling, the United States revised its measure relating to the protection of sea turtles and set

forth new criteria for the certification of shrimp exporters.

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II.C.3. COMPLIANCE STAGE

In 2000, Malaysia again took legal action against the US since it was not satisfied with the corrective measures

that the US had taken to implement the findings of the Appellate Body. According to Malaysia, the application

of the new US measure resulted in arbitrary or unjustifiable discrimination because it still lacked flexibility (the

US continued to "unilaterally" impose its domestic standards on exporters) and because the US had not

negotiated and concluded an international agreement on the protection and conservation of sea turtles.

The Panel, upheld by the Appellate Body, disagreed with Malaysia. It found that the revised measure was now

applied in a manner that met the requirements of Article XX and thus complied with the ruling of the Appellate

Body. The US won the case because the revised measure was no longer applied in a manner that constituted a

means of arbitrary discrimination. First, the US demonstrated that it had made serious “good faith” efforts to

negotiate an international agreement for the protection of sea turtles with the parties to the dispute. The

Appellate Body pointed out that all that was required of the US, was to provide all exporting countries "similar

opportunities to negotiate", and not necessarily to conclude, an international agreement. Second, the new

measure allowed "sufficient flexibility" by requiring that other Members' programmes simply be "comparable in

effectiveness" to the US programme, as opposed to the previous standard that they be "essentially the same",

i.e. require the use of TEDs.

II.D. THE US-GASOLINE DISPUTE

IN BRIEF

This case was brought by Venezuela and Brazil against the US (United States – Standards for Reformulated

and Conventional Gasoline, WTO case No. 2). This dispute concerned certain requirements imposed by the

United States for the marketing of gasoline. However, domestic and foreign refiners of gasoline were subject

to different obligations. The United States sought to justify its measure under Article XX of the GATT 1994.

The panel and the Appellate Body reports were adopted in 1996.

II.D.1. INTRODUCTION

Following a 1990 amendment to the Clean Air Act, the US Environmental Protection Agency (EPA) promulgated

the Gasoline Rule on the composition and emissions effects of gasoline, in order to reduce air pollution in the

US. From 1 January 1995 (coincidentally, also the date that the WTO came into being), the Gasoline Rule

permitted only gasoline of a specified cleanliness (“reformulated gasoline”) to be sold to consumers in the most

polluted areas of the country. In the rest of the country, only gasoline no dirtier than that sold in the base year

of 1990 (“conventional gasoline”) could be sold.

The Gasoline Rule applied to all US refiners, blenders and importers of gasoline. It required any domestic

refiner that operated for at least 6 months in 1990, to establish an individual refinery baseline, which

represented the quality of gasoline produced by that refiner in 1990.



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The Environmental Protection Agency also established a statutory baseline, intended to reflect average US

1990 gasoline quality. The statutory baseline was assigned to those refiners who did not operate for at least six

months in 1990, and to importers and blenders of gasoline. Compliance with the baselines was measured on an

average annual basis.

In 1995, Venezuela and Brazil initiated disputes against the United States challenging the consistency of the

Clean Air Act of 1990 ("CAA") with WTO rules. The two countries argued that the CAA discriminated against

foreign gasoline producers by applying stricter standards to imported gasoline than domestically refined

gasoline. Although this case dealt primarily with discrimination between foreign and domestic products, the

final Appellate Body report had important implications for the role of environmental measures in the WTO

trading system.

Under the CAA, the Environmental Protection Agency developed rules on the cleanliness and quality of

gasoline, with the aim of reducing air pollution in the United States. This Gasoline Rule mandated the sale and

use of cleaner "reformulated gasoline" in the most polluted areas of the country. In the rest of the country,

"conventional gasoline" could be sold so long as it was no dirtier than that sold in 1990.

To determine the appropriate level of cleanliness, the law required those US domestic gasoline refiners that

were in operation in 1990 to establish an individual refinery baseline representing the quality of their gasoline

in 1990. Imported gasoline, on the other hand, was required to comply with a "statutory baseline", which

reflected the average quality of US gasoline in 1990.

II.D.2. PANEL STAGE

Venezuela and Brazil argued that the CAA Gasoline Rule violated WTO obligations because it treated foreign

products less favourably than domestic products under Article III of the GATT 1994. They also argued that this

discrimination could not be justified under any of the exceptions provided for health and environmental

measures under Article XX of the GATT 1994.

The panel agreed with Venezuela and Brazil. The panel found that where the imported and domestic gasoline

products were chemically identical, they were "like products" for purposes of Article III GATT (national

treatment) and therefore must be treated the same. Because domestic gasoline producers were measured

against their own individual standard, while imported gasoline was held to a different standard of cleanliness,

the panel determined that the Gasoline Rule treated foreign gasoline less favourably than domestic gasoline.

The panel also found that the CAA did not satisfy the requirements under any of the health and environment

exceptions provided for under Article XX of the GATT 1994. The panel held that there was "no direct

connection" between the CAA Gasoline Rule and the environmental policy objectives cited by the United States,

and that the law was not the least trade-restrictive means of achieving the US objectives.

II.D.3. APPELLATE BODY STAGE

The only ruling appealed by the United States was the panel's conclusion that the Gasoline Rule was not

justified as an environmental protection measure under Article XX. Although the Appellate Body ultimately

upheld the panel's determination that the US measure was not consistent with WTO rules, it made important

changes to the panel's reasoning in this regard.

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The Appellate Body determined that the US measure would have been justified as a legitimate environmental

measure had it not discriminated against imported gasoline unjustifiably. It explained that Article XX involves

a two-part test. First, a law must satisfy one of the ten exceptions relating to non-trade interests set out in

Article XX. In this case that was XX(g), measures "relating to the conservation of exhaustible natural

resources". The second step involves testing the manner in which the law is applied under the introductory

paragraph of Article XX. The purpose of the two-part test is to ensure that the exceptions in Article XX are not

"abused or misused".

Applying the above test, the Appellate Body first held that the panel erred when it applied a test of "necessity"

under Article XX(g) by requiring the US to choose the "least trade restrictive" option. Instead, the Appellate

Body required only that the measure be "related to" the environmental policy objective, as specifically provided

for in the provision. And while the panel reasoned that the "less favourable treatment" of imported gasoline

had to be "primarily aimed at" the conservation of natural resources, the Appellate Body stated that the entire

measure, taken as a whole, had to be primarily aimed at environmental conservation. Overturning the panel

on this point, the Appellate Body found that the Gasoline Rule as a whole was primarily aimed at environmental

conservation, and therefore provisionally satisfied Article XX(g).

Under step two of the test, the Appellate Body then assessed whether the application of the Gasoline Rule was

free of "arbitrary or unjustifiable discrimination", as required under the introductory paragraph of Article XX.

Because the US did not provide sufficient justification for the discriminatory effect of the Gasoline Rule, and

since it could have been formulated in a non-discriminatory way, the Appellate Body concluded that the

treatment of gasoline imports constituted "unjustifiable discrimination". Thus, the Gasoline Rule was

inconsistent with the US's WTO obligations and not justified under Article XX.

EXERCISES

10. Why is it that in the Brazil – Retreaded Tyres case, Brazil's import ban on retreaded tyres was

provisionally justified under GATT Article XX, but was subsequently considered inconsistent with the

"chapeau" of the provision?

11. Why in EC – Asbestos case, did the Appellate Body conclude that the EC's import ban on

asbestos-containing products did not contravene Article III:4 of the GATT 1994?

12. In the US – Gasoline case, what were the reasons that led the Appellate Body to the conclusion that the

Gasoline Rule was inconsistent with the chapeau of Article XX?

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III. SUMMARY

Under WTO rules, Members may adopt trade-related measure to protect the environment and human health

and life as long as such measures comply with GATT rules or fall under the exceptions to these rules, subject

to certain specified conditions.

Certain measures taken to achieve environmental protection goals may, by their very nature, restrict trade

and thereby impact on the WTO rights of other Members. They may violate basic trade rules, such as the

non-discrimination obligation and the prohibition of quantitative restrictions.

Article XX of the GATT 1994 lays down a number of specific instances in which WTO Members may be

exempted from GATT rules. The exceptions contained in paragraphs (b) and (g) of Article XX are of particular

relevance to human health and environmental protection. Pursuant to these two paragraphs, WTO Members

may adopt policy measures that are inconsistent with GATT disciplines, but necessary to protect human,

animal or plant life or health (paragraph (b)), or relating the conservation of exhaustible natural resources

(paragraph (g)).

The Appellate Body has used a process of "weighing and balancing" of several factors to determine whether a

measure is necessary to protect human, animal or plant life or health under Article XX(b). These factors

include (i) the contribution made by the measure at issue to the stated health policy objective; (ii) the

importance of the common interests or values protected by the measure; and (iii) the impact of the measure

on international trade. The measure is also compared with possible alternative measures capable of

achieving the same objective, to determine if they are less trade-restrictive than the measure adopted.

For a measure to be "relating" to the conservation of natural resources under Article XX(g), it is necessary to

establish a substantial relationship between the measure and the conservation objective. In other words, the

measure is "reasonably related" to the stated policy goal of preserving exhaustible natural resources.

Moreover, for a measure to be covered by Article XX, its application must not constitute a means of arbitrary

or unjustifiable discrimination or a disguised restriction on international trade. This is required by the

introductory paragraph ("chapeau") of Article XX. The design and flexibility of the measure as well as the

efforts made by the Member adopting the measure to enter into cooperative arrangements with the affected

countries, are factors that may be evaluated to determine if a measure is applied in a manner that constitutes

a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.

Trade and environment interface is also addressed in a number of WTO agreements. These provisions include

Article XIV of GATS that, similar to GATT Article XX, contains general exceptions to the substantive disciplines

of GATS. The TBT, SPS, TRIPS, SCM and Agriculture agreements also include provisions designed to

accommodate environmental issues.

Since 1995, a number of panel and appellate body proceedings have involved the examination of

environmental or human health-related measures under GATT Article XX. The most relevant disputes from an

environmental perspective are Brazil – Retreaded Tyres, EC – Asbestos, US – Shrimp and US – Gasoline. In

light of the jurisprudence, it is fair to say that WTO rules provide ample space for environmental concerns to

be accommodated. Even if a measure is found to be inconsistent with basic WTO disciplines, it may be

justifiable under one of the exceptions, for example, if it pursues an environmental or human health objective

and if its application does not reveal a protectionist intent.

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PROPOSED ANSWERS:

1. WTO Members may adopt measures that are inconsistent with one or more disciplines of the GATT 1994

without infringing upon those disciplines if the objective of the measures is the protection of human,

animal or plant life or health, or the conservation of exhaustible natural resources. This is by virtue of

Article XX of the GATT 1994, General Exceptions, that contains a list of specific instances in which WTO

Members may be exempted from GATT rules. In particular, Articles XX(b) and (g) respectively allow WTO

Members to justify GATT-inconsistent measures if these are either necessary to protect human, animal or

plant life or health, or if the measures relate to the conservation of exhaustible natural resources.

2. In broad terms, the principle of non-discrimination requires that "like" domestic and foreign products are

treated the "same", or in other words, that imported products that are like domestic products are not

treated less-favourably.

3. In WTO case law, four criteria have been used in determining whether products are “like”:

(i) the physical properties of the products;

(ii) the extent to which the products are capable of serving the same or similar end-uses;

(iii) the extent to which consumers perceive and treat the products as alternative means of performing

particular functions in order to satisfy a particular want or demand; and

(iv) the international classification of the products for tariff purposes.

4. The first step of the two-tiered analysis to determine whether the import ban on pesticides is justifiable

under Article XX of the GATT 1994, would be evaluating if this measure falls under one or more of the

exceptions listed in Article XX. Since underground water may possibly be considered as an exhaustible

natural resource, the measure could probably be considered as provisionally justified under Article XX(g)

of the GATT 1994. The second step in this analysis would require a determination of whether the

measure satisfies the requirements of the "chapeau" of Article XX, that is to say, a determination of

whether the import ban on pesticides is not applied in a manner which would constitute a means of

arbitrary or unjustifiable discrimination between countries where the same conditions prevail, and is not a

disguised restriction on international trade.

5. (i)-Article XX(b); (ii)-Both; (iii)-Article XX(g); and (iv)-Article XX(g) or both.

6. To determine whether a measure is “necessary” to protect human, animal or plant life or health under

GATT Article XX(b), the Appellate Body has evaluated the weight or importance of several factors. These

factors include: (i) the contribution made by the environmental measure to the policy objective; (ii) the

importance of the common interests or values protected by the measure; and (iii) the impact of the

measure on international trade. If this analysis yields a preliminary conclusion that the measure is

necessary, this result must be confirmed by comparing the measure with possible alternative measures.

The objective of this comparison is to determine whether these alternatives are less trade-restrictive

while providing an equivalent contribution to the achievement of the objective pursued. If the

alternatives are not less trade-restrictive or if they fail to contribute in an equivalent manner, the

challenged measure is considered necessary under Article XX(b) of the GATT 1994.

7. In EC – Asbestos case, the Appellate Body concluded that the term "relating", as used in GATT

Article XX(g), implies that the measure at issue must be “reasonably related” to the stated policy goal of

conservation of exhaustible natural resources. In other words, for a measure to be “relating” to the

166

conservation of natural resources, a substantial relationship between the measure and the conservation

objective needs to be established.

8. In US – Shrimp case, the Appellate Body considered that the United States had not sufficiently explored

the possibility of entering into cooperative arrangements with the countries affected by the import

restrictions on shrimp and shrimp products, to mitigate the administrative burdens arising from the

measure. The fact that the United States had “treated WTO Members differently” by adopting a

cooperative approach regarding the protection of sea turtles with some Members but not with others also

showed that the measure was applied in a manner that discriminated among WTO Members in an

unjustifiable manner.

9. A technical regulation, which requires that certain electronic products to perform at certain energy

efficiency levels, is allowed under the TBT Agreement even if it may have adverse impacts on trade as

long as it complies with the disciplines set out by that agreement, such as non-discrimination and

avoidance of unnecessary obstacles to trade.

10. In Brazil – Retreaded Tyres, unjustifiable and arbitrary discrimination was found to arise from two

situations: (i) the exemption from the import ban on retreaded tyres originating from MERCOSUR

countries; and (ii) the importation of used tyres through domestic court injunctions (obtained to override

the general ban on importing used and retreaded tyres). The Appellate Body considered that there was

no acceptable rationale for the discrimination, because this difference in treatment bears no relationship

to the legitimate objective pursued by the import ban, and even goes against this objective. The

Appellate Body considered that this situation resulted in arbitrary or unjustifiable discrimination, thus

contravening the chapeau of Article XX of the GATT 1994.

11. The Appellate Body concluded that the very serious health risks inherent in products containing asbestos

must be taken into consideration when assessing whether the products at issue were "like products"

under Article III:4. The Appellate Body considered that the carcinogenic nature of asbestos fibres meant

that a product containing asbestos fibres has quite different physical properties to a product that does

not. Moreover, the Appellate Body was persuaded that the health risks associated with products

containing asbestos fibres would influence consumers' behaviour in relation to those products. Thus, the

products compared were not "like" and the EC had consequently not breached Article III:4.

12. In US – Gasoline, the Appellate Body considered that the United States did not provide sufficient

justification for the discriminatory effect of the Gasoline Rule. According to the Appellate Body such rule

could have been formulated in a non-discriminatory way. Thus, the Appellate Body concluded that the

application of the Gasoline Rule resulted in discriminatory treatment of gasoline imports and that this

difference in treatment was "unjustifiable" under the chapeau of Article XX.

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Support Documents

Module 1 – Introduction to Trade and Environment in the WTO

Trade and Environment at the WTO

http://www.wto.org/english/res_e/publications_e/trade_env_e.htm

WT/MIN(01)/DEC/1 ........................................................................... Marrakesh Ministerial Declaration

WT/MIN(05)/DEC ............................................................................................ Doha Work Programme

WT/CTE/EDB/1-8 .......................................................................................... Environmental Database

Module 2 –Relationship between MEAs and the WTO (Paragraphs 31(i) and (ii))

TN/TE/W/68 ................... Proposal for a Decision of the Ministerial Conference on Trade and Environment,

Submission by the European Union

TN/TE/W/72/Rev.1.......... Proposal for an outcome on Trade and Environment Concerning Paragraph 31(i)

of the Doha Ministerial Declaration, Submission by Australia and Argentina

TN/TE/W/77 ..................... Proposal for Elements of a Decision of the Ministerial Conference on Trade and

Environment, Paragraph 31(i), Submission by Switzerland

TN/TE/W/78 ................................ Draft Decision for an outcome under Doha paragraphs 31(i) and 31(ii),

Communication from the United States

Job(08)/33 ..................... Proposal for a Decision of the Ministerial Conference on Trade and Environment,

Submission by Norway

Job(08)/38 .................... Proposal for the Establishment of a Group of Experts on Trade and Environment,

Submission by the African Group

Elements of a draft text under Paragraph 31(ii) of the Doha Declaration

TN/TE/S/5/Rev.2 .................... Matrix on Trade Measures Pursuant to Selected Multilateral Environmental

Agreements, Note by the Secretariat

Module 3 – Environmental Goods and Services Negotiations (Paragraph 31(iii))

JOB/TE/2 .................................. Continued work under Paragraph 31(iii) – Submission by the Philippines

TN/TE/W/75 and Add.1............. Japan's Proposal on Environmental Goods and Services, Paragraph 31(iii)

of the Doha Ministerial Declaration

TN/TE/W/74 ................ The Doha Round and Climate Change, Submission by Argentina, Paragraph 31(iii)

Job(09)/169 and Add.1 .......... Continued Work Under Paragraph 31(iii) of the Doha Ministerial Declaration,

Submission by the Kingdom of Saudi Arabia

Job(07)/146 ................. Environmental Goods for Development, Submission from Brazil, Paragraph 31(iii)

168

Job(09)/184 ....................................... Scheme for Request and Offer Procedure in Environmental Goods,

Non-paper by Brazil, Paragraph 31(iii)

Job(09)/132 ......................... Communication Under Paragraph 31(iii) of the Doha Ministerial Declaration,

Non-paper by Canada, the European Communities, Japan, Korea, New Zealand, Norway, the Separate

Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Switzerland and the United States

Job(07)/137 .................. Revision of the Synthesis of Submissions on Environmental Goods (TN/TE/W/63)

– Informal Note by the Secretariat

Workshop on Environmental Goods and Services (2010)

http://www.wto.org/english/tratop_e/envir_e/events_feb10_e/event_18feb10_e.htm

Trade and Environment Negotiations in General

TN/TE/18 .............................. Report by the Chairman, Ambassador Manuel A. J. Teehankee to the Trade

Negotiations Committee (TNC)

Module 4 – Environmental Requirements and Market Access and labelling (Paragraph 32(i))

WT/CTE/1 .............................................................................................................. 1996 CTE Report

WT/CTE/8 ........................................... Report to the 5th Session of the Ministerial Conference in Cancún

– Paragraphs 32 and 33 of the Doha Ministerial Declaration

WT/CTE/W/45 ........................... Eco-Labelling – Overview of Current Work in Various International For a

– Note by the WTO Secretariat

WT/CTE/W/150 ...................... Information Relevant to the Consideration of the Market Access Effects of

Eco-Labelling Schemes – Note by the Secretariat

JOB(06)/263 ....... Environmental Requirements and Market Access: Work in the TBT and SPS Committees

- Note by the Secretariat

WT/CTE/W/244 ....... Environmental Requirements and Market Access: Recent Work in OECD and UNCTAD

Job(09)/136/Rev.1........................... Report on the Workshop on Environment-related Private Standards,

Certification and Labelling Requirements - Note by the Secretariat

WT/CTE/M/49/Add.1 ........... Summary Report of the Information Session on Product Carbon Footprint and

Labelling Schemes

JOB/TE/9 ................................... Eco-Labelling: Overview of Current Work in Various International For a

– Note by the Secretariat

JOB/TE/7 ....................... Environmental Labelling-related Specific Trade Concerns and Notifications in the

TBT Committee – Note by the Secretariat

Agreement on Technical Barriers to Trade

Module 5 – WTO Rules and Environmental Policies

WT/CTE/W/203 .......................... GATT/WTO Dispute Settlement practice relating to the GATT Article XX,

Paragraphs (b), (d) and (g) – Note by the Secretariat (8 March 2002)

169

Others

WTO-UNEP ....................................................................... Report on Trade and Climate Change (2009)

WTO Trade and Environment Website

http://www.wto.org/english/tratop_e/envir_e/envir_e.htm

WT/INF/5/Rev.9 ................................................................. A list of trade and environment documents

171

Reference List

DISCLAIMER:

"Academic Reference for further information: The references below are not recommendations, but actually a

short list of materials for those interested to read more about the subject covered by the course. The WTO is

not responsible for the content or quality of such materials, which do not necessarily represent the views of the

WTO Members or the WTO Secretariat."

World Trade Report 2010, Trade in Natural Resources

2008 OECD Environmental Outlook

Håkan Nordström and Scott Vaughan, WTO’s “Special Studies” series of publications: Trade and

Environment

Alexandre Charles Kiss, Dinah Shelton, Guide to international environmental law

Philippe Sands, Principles of International Environmental Law

Erich Vranes, Trade and the Environment, Fundamental Issues in International and WTO Law

173

Annex 1

MARRAKESH DECISION ON TRADE AND ENVIRONMENT[1]

Ministers,

Meeting on the occasion of signing the Final Act Embodying the Results of the Uruguay Round of Multilateral

Trade Negotiations at Marrakesh on 15 April 1994,

Recalling the preamble of the Agreement establishing the World Trade Organization (WTO), which states that

members’ "relations in the field of trade and economic endeavour should be conducted with a view to raising

standards of living, ensuring full employment and a large and steadily growing volume of real income and

effective demand, and expanding the production of and trade in goods and services, while allowing for the

optimal use of the world’s resources in accordance with the objective of sustainable development, seeking 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,"

Noting:

the Rio Declaration on Environment and Development, Agenda 21, and its follow-up in GATT, as

reflected in the statement of the Chairman of the Council of Representatives to the CONTRACTING

PARTIES at their 48th Session in December 1992, as well as the work of the Group on Environmental

Measures and International Trade, the Committee on Trade and Development, and the Council of

Representatives;

the work programme envisaged in the Decision on Trade in Services and the Environment; and

the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights,

Considering that there should not be, nor need be, any policy contradiction between upholding and

safeguarding an open, non-discriminatory and equitable multilateral trading system on the one hand, and

acting for the protection of the environment, and the promotion of sustainable development on the other,

Desiring to coordinate the policies in the field of trade and environment, and this without exceeding the

competence of the multilateral trading system, which is limited to trade policies and those trade-related

aspects of environmental policies which may result in significant trade effects for its members,

1 Adopted by ministers at the meeting of the Uruguay Round Trade Negotiations Committee in Marrakesh on

14 April 1994.

174

Decide:

to direct the first meeting of the General Council of the WTO to establish a Committee on Trade and

Environment open to all members of the WTO to report to the first biennial meeting of the Ministerial

Conference after the entry into force of the WTO when the work and terms of reference of the

Committee will be reviewed, in the light of recommendations of the Committee,

that the TNC Decision of 15 December 1993 which reads, in part, as follows:

"(a) to identify the relationship between trade measures and environmental measures, in order to promote

sustainable development;

(b) to make appropriate recommendations on whether any modifications of the provisions of the

multilateral trading system are required, compatible with the open, equitable and non-discriminatory nature

of the system, as regards, in particular:

the need for rules to enhance positive interaction between trade and environmental measures,

for the promotion of sustainable development, with special consideration to the needs of

developing countries, in particular those of the least developed among them; and

the avoidance of protectionist trade measures, and the adherence to effective multilateral

disciplines to ensure responsiveness of the multilateral trading system to environmental

objectives set forth in Agenda 21 and the Rio Declaration, in particular Principle 12; and

surveillance of trade measures used for environmental purposes, of trade-related aspects of

environmental measures which have significant trade effects, and of effective implementation of

the multilateral disciplines governing those measures;"

constitutes, along with the preambular language above, the terms of reference of the Committee on Trade and

Environment,

that, within these terms of reference, and with the aim of making international trade and environmental

policies mutually supportive, the Committee will initially address the following matters, in relation to

which any relevant issue may be raised:

the relationship between the provisions of the multilateral trading system and trade measures for

environmental purposes, including those pursuant to multilateral environmental agreements;

the relationship between environmental policies relevant to trade and environmental measures

with significant trade effects and the provisions of the multilateral trading system;

the relationship between the provisions of the multilateral trading system and:

(a) charges and taxes for environmental purposes;

(b) requirements for environmental purposes relating to products, including standards and

technical regulations, packaging, labelling and recycling;

the provisions of the multilateral trading system with respect to the transparency of trade

measures used for environmental purposes and environmental measures and requirements which

have significant trade effects;

175

the relationship between the dispute settlement mechanisms in the multilateral trading system

and those found in multilateral environmental agreements;

the effect of environmental measures on market access, especially in relation to developing

countries, in particular to the least developed among them, and environmental benefits of

removing trade restrictions and distortions;

the issue of exports of domestically prohibited goods;

that the Committee on Trade and Environment will consider the work programme envisaged in the

Decision on Trade in Services and the Environment and the relevant provisions of the Agreement on

Trade-Related Aspects of Intellectual Property Rights as an integral part of its work, within the above

terms of reference,

that, pending the first meeting of the General Council of the WTO, the work of the Committee on Trade

and Environment should be carried out by a Sub-Committee of the Preparatory Committee of the World

Trade Organization (PCWTO), open to all members of the PCWTO,

to invite the Sub-Committee of the Preparatory Committee, and the Committee on Trade and

Environment when it is established, to provide input to the relevant bodies in respect of appropriate

arrangements for relations with intergovernmental and non-governmental organizations referred to in

Article V of the WTO.

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Annex 2

DOHA MANDATE ON TRADE AND ENVIRONMENT[1]

Paragraph 31. With a view to enhancing the mutual supportiveness of trade and environment, we agree to

negotiations, without prejudging their outcome, on:

(i) the relationship between existing WTO rules and specific trade obligations set out in multilateral

environmental agreements (MEAs). The negotiations shall be limited in scope to the applicability of such

existing WTO rules as among parties to the MEA in question. The negotiations shall not prejudice the WTO

rights of any Member that is not a party to the MEA in question;

(ii) procedures for regular information exchange between MEA Secretariats and the relevant WTO

committees, and the criteria for the granting of observer status;

(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods

and services.

We note that fisheries subsidies form part of the negotiations provided for in Paragraph 28.

Paragraph 32. We instruct the Committee on Trade and Environment, in pursuing work on all items on its

agenda within its current terms of reference, to give particular attention to:

(i) the effect of environmental measures on market access, especially in relation to developing countries,

in particular the least-developed among them, and those situations in which the elimination or reduction

of trade restrictions and distortions would benefit trade, the environment and development;

(ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property

Rights; and

(iii) labelling requirements for environmental purposes.

Work on these issues should include the identification of any need to clarify relevant WTO rules. The

Committee shall report to the Fifth Session of the Ministerial Conference, and make recommendations, where

appropriate, with respect to future action, including the desirability of negotiations. The outcome of this work

as well as the negotiations carried out under Paragraph 31(i) and (ii) shall be compatible with the open and

non-discriminatory nature of the multilateral trading system, shall not add to or diminish the rights and

obligations of members under existing WTO agreements, in particular the Agreement on the Application of

Sanitary and Phytosanitary Measures, nor alter the balance of these rights and obligations, and will take into

account the needs of developing and least-developed countries.

1 Ministerial declaration adopted on 14 November 2001.

178

Paragraph 33. We recognize the importance of technical assistance and capacity building in the field of trade

and environment to developing countries, in particular the least-developed among them. We also encourage

that expertise and experience be shared with members wishing to perform environmental reviews at the

national level. A report shall be prepared on these activities for the Fifth Session.

Paragraph 51. The Committee on Trade and Development and the Committee on Trade and Environment shall,

within their respective mandates, each act as a forum to identify and debate developmental and environmental

aspects of the negotiations, in order to help achieve the objective of having sustainable development

appropriately reflected.