Ensuring compatibility between multilateral environmental agreements and World Trade Organization rules

Balancing MEAs with WTO rules
Ensuring environment related trade measures conform to international obligations

Description

Fostering effective Multilateral Environment Agreements (MEAs) to tackle particular environmental problems is self evident. The importance of a framework to help ensure compatibility between MEAs and WTO rules raises all the questions of trade versus environmental needs.

Context

The WTO deals with setting rules for the international trade in goods. It was set up in 1994 at the end of the Uruguay Round (named after the country where the negotiations in that round started), on the basis of the General Agreement on Tariffs and Trade (GATT), founded in 1947. (Negotiations on establishing rules for the world trade system have taken place in various "rounds", which have been held since 1947.) During and after the Uruguay Round, the power of the GATT/WTO was expanded as the member states started to negotiate rules on issues other than just trade in goods. The WTO's remit has been extended to trade in services, intellectual property rights and sanitary and phytosanitary measures (health of plants and animals and food safety) – all of which have environmental impacts.

One of the issues that has emerged since the URA, is the compatibility of Multilateral Environment Agreements (MEAs) that permit trade restrictions and other trade-related measures to further the objectives of their particular agreements, with WTO rules. There are several MEAs that describe trade measures as options for the parties, giving rise to potential conflict with WTO Agreements. These include the Convention on Biological Diversity and the Montreal Protocol on substances that Deplete the Ozone Layer. Article XX of GATT does provide for exemptions from WTO rules. The two provisions relating to the environment are Articles XX(b) and (g). Article XX(b) allows for measures that are necessary to protect human, animal or plant life or health. Article XX (g) allows for exceptions relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption. There have been a number of WTO trade disputes, involving the imposition of trade measures for environmental purposes, although no multilateral environmental agreement sanctioned such action (e.g. tuna-dolphin dispute, shrimp-turtle dispute, gasoline imports-air pollution requirements).

A further area of potential conflict between MEAs and WTO rules relates to non-product related process and production methods. Under WTO rules, members cannot discriminate between "like products". However, several MEAs permit trade restriction measures on the basis of how a good is produced, in order to discourage unsustainable methods of production. Similar issues arise in regard to eco-labelling.

This strategy features in the framework of Agenda 21 as formulated at UNCED (Rio de Janeiro, 1992), now coordinated by the United Nations Commission on Sustainable Development and implemented through national and local authorities.

Implementation

The relationship of Multilateral Environmental Agreements (MEAs) and WTO rules have yet to be finalized. The EU insists that Multilateral Environmental Agreements are the best way to tackle international environmental problems. Trade interests threatened to undermine MEAs.

European Commission Vice-President Sir Leon Brittan, speaking at a high level WTO meeting on trade and the environment in Geneva (March 1999), "Where an MEA commands wide support among WTO members, we need to be more confident than at present that WTO trade rules do accommodate the aims of the parties to the MEA, and therefore allow the necessary trade measures to be taken under such an MEA. If, to achieve that confidence, we need a new interpretation of, or even a textual amendment to, WTO rules, I believe we should go down that route."

Claim

Although the WTO agreements include the term "sustainable development" in their preambles, their primary objective is to liberalize trade. Thus, "sustainability" issues are secondary. The WTO has done little to further sustainability and a lot to harm it.

Trade and environment can no longer be seen as two separate issues by the World Trade Organisation (WTO), sustainable development must be placed at the heart of WTO decision making - including within the Millennium Round. We need to reconcile the competing demands of economic growth, environmental protection and social development. Pursuing any of these three at the expense of the other two will inevitably lead to an unbalanced approach. If we get the balance wrong in one direction or another, we will end up either with inadequate recognition in trade policy terms of legitimate environmental concerns, or with green protectionism.

The power of the WTO lies in its international dispute settlement mechanisms that allows countries to impose severe economic sanctions against another member of the WTO that violates the rules. For example, as a result of WTO ruling, the USA can impose trade sanctions against the EU for not opening its borders to US beef treated with growth hormones. The WTO Dispute Panel argued that the precautionary principle only allows for temporary measures to be taken, in the absence of scientific proof (a warped application of the precautionary principle not reflecting the spirit of this principle as outlined in the Rio Declaration (Agenda 21).

Protecting Multilateral Environmental Agreements (MEAs) from trade challenge should be a priority for the US and EU. WTO rules must be reformed to preserve from WTO challenge both existing and future MEAs that may have trade effects.