By Margrete Strand-Rangnes
Inside US Trade - Volume 17, No. 12Inside Washington Publishers
March 26, 1999 The Clinton Administration last week signalled that its efforts to highlight environmental protection in the global trade agenda will not involve a rewrite of existing World Trade Organization rules at this time. Instead, U.S. delegates told a WTO meeting on trade and environment, existing rules can be used to address two very controversial issues raised in the trade and environment debate.
At a March 15-16 high-level symposium, the U.S. said that existing WTO rules have "substantial flexibility" to allow the use of trade measures to enforce multilateral environmental agreements (MEAs). With this approach, the U.S. will rely on WTO panels and appellate bodies to interpret WTO rules in relation to trade sanctions imposed for environmental protection purposes on a case-by-case basis. The relevant rules are expressed in Article XX of the General Agreement on Tariffs & Trade, which allow exemptions from trade obligations for specified environmental and health purposes.
Similarly, U.S. officials indicated that existing WTO rules are sufficient to cover the use of so-called ecolabels to ensure that they do not pose disguised trade barriers. Ecolabels define a product as being environmentally sound either on the basis of product characteristics or on the way they are being processed or produced.
A U.S. official last week would not elaborate how trade rules could protect MEAs against successful WTO challenges, and acknowledged that the Administration had not fully worked out the details of its position. The Clinton Administration is "part way through the domestic process" for developing its positions, the official said. An informed source said there was still interagency tension on how to deal with trade and environment issues and the Administration still has not developed a "clear vision."
In its statements to the high-level symposium, the U.S. articulated its support of the use of trade measures to enforce MEAs while "being mindful of multilateral trade disciplines."
The U.S. position on MEAs as expressed at the Symposium on Trade and Environment would likely be backed by Canada and the European Union, even though both publicly called for clarification of the rules setting out when trade measures could be used to enforce environmental goals. This would give countries certainty and confidence that WTO rules protect enforcement of MEAs, these officials said. EU and Canadian officials said after the symposium that the need for such a clarification was not as pressing given a precedent-setting case ruling on the U.S. law banning shrimp imports to achieve protection of sea turtles. That decision, while ruling against the law, found that certain trade measures for environmental purposes could be found to be consistent with the WTO.
The U.S. reluctance to press for a clarification of WTO rules on MEAs may well be driven by the recognition that it would be impossible to garner the necessary support from developing countries for doing so, sources said. Developing countries fear that any use of trade sanctions for environmental purposes could lead to increased protectionism under the guise of environmental concerns.
Some sources warned that this strategy of allowing the WTO dispute settlement body to define how MEAs should be treated under trade rules was risky. At a minimum, there is the uncertainty that a new trade ruling could again make the interpretation of the rules more restrictive, he said.
In November 1998, the Appellate Body ruling on the U.S. ban on shrimp aimed at protecting sea turtles found that the U.S. only violated its WTO obligations in the way it implemented its law. This ruling opens up the possibility that countries can seek to defend enforcement of MEAs using the general exceptions found in Article XX of the General Agreement on Tariffs and Trade.
A U.S. official last week said there is "a lot of protection built into the WTO" for MEAs under Article XX of the GATT. That article allows for adoption or enforcement of certain measures to protect non-renewable resources or human and animal health provided the measures do not constitute a "means of arbitrary or unjustifiable discrimination" and that they are not a "disguised restriction on international trade."
One relevant provision is Article XX (b), which allows exceptions to WTO rules for measures "necessary to protect human, animal or plant life or health." The second relevant measure is Article XX (g), which deals with the "conservation of exhaustible natural resources if such measure are made in conjunction with restrictions on domestic production or consumption."
One source said future panel interpretations of Article XX could be influenced by whether a country was acting alone or in concert with a number of countries in imposing trade sanctions for environmental purposes. The source indicated that generally more than one country would have to institute a given trade measure. Sources said the rules were still not clear on what constituted a unilateral measure versus a multilateral one. Canada presented a paper at the symposium that set out criteria for the use of trade measures in MEAs.
To qualify an MEA must be open to all countries, reflect broad-based international support and include precise language authorizing the use of trade measures and under what conditions, the Canadian proposal said. It noted however that trade with countries that trade with countries that have not ratified a given MEA would still be permitted if they achieved equivalent environmental protection. The proposal also said that negotiators must have "explicitly considered the use of trade measures in MEAs." This would include a clear definition on how and under what terms specified trade measures could be used to enforce environmental goals.
Three existing key MEAs fall into the grey area of when and how trade measures can be instituted since they do not have explicit rules and are generally enforced after one country decides another member is not honoring the agreement. These include the Montreal Protocol on Substances that Deplete the Ozone Layer, which primarily regulates the use of chlorofluorocarbons, the Basel Convention on the Control of Trans-Boundary Movement of Hazardous Wastes and Their Disposal, and the Convention on International Trade in Endangered Species of Wild Fauna and Flora.
On ecolabeling, the U.S. is relying on the rules of the Agreement on Technical Barriers to Trade, according to a U.S. official. The TBT is the most relevant example of WTO rules that could cover ecolabelling, but not the only agreement that could be applied, the official said. The official would not give other examples of agreements that could be relevant. Under the TBT, ecolabeling practices would have to be transparent and non-discriminatory.
The WTO Committee on Trade and Environment has examined proposals for ensuring that ecolabelling falls within WTO rules but was only able to come to consensus on the principle of transparency (Inside U.S. Trade, Aug. 2, 1996, p. 9). One outstanding issue is whether the TBT agreement covers ecolabels based on process and production methods (PPMs) rather than product characteristics, sources said. The U.S. argues that it does since there is nothing in the agreement that says PPMs are not allowed, a U.S. official said. The official expected that the ecolabeling discussion would come up again in the WTO's Committee on Trade and Environment (CTE). However, critics have questioned the ability of the committee to deliver a clear decision given that it has been unable to come up with recommendations for years. In an effort to move the environment debate broadly onto the WTO agenda, the U.S. has proposed that the CTE merely advise negotiators on environmental issues. The U.S. is describing its proposal as "rejuvenating" the CTE, which it termed "ineffective" in the past.
A joint proposal announced at the symposium by New Zealand highlights a newly popular approach to environmental protection in the trade context. New Zealand proposed eliminating government subsidies and other market distortions that lead to the overcapacity of fisheries industries and subsequently the problem of overfishing. The proposal, signed by Australia, Iceland, New Zealand, Philippines and the United States, fall under the "win-win" approach, which seeks to address environmental concerns through trade liberalization. The U.S. urged the WTO to identify more "win-win" possibilities and pointed to the elimination of restrictions on the sale of environmental goods and services.
Also at the high-level symposium, the U.S. announced its intention to conduct a environmental impact assessment of the upcoming round of multilateral negotiations. One environmental nongovernmental source said the assessment should be conducted by the Environmental Protection Agency and involve many chances for environmental groups to provide comments. Other WTO members who will be conducting impact assessments include Canada and the European Union.
The U.S. opening statement, presented by USTR General Counsel Sue Esserman, noted that the U.S. would provide a written review of the agreement early enough in the process to be used in formulating national positions for the new round of negotiations.
The U.S. also pressed the need for more transparency and accessibility of WTO processes. Specifically, Esserman said "the presumption should be that WTO documents must be available to the public unless there is a compelling reason to restrict them." Canada also tabled a proposal for greater transparency, which it released prior to the high-level symposium.
The U.S. also reiterated its belief that the WTO must recognize the right of members to achieve and maintain appropriate levels of health, safety and environmental protection. It also expressed its support for cooperation agreements between the WTO and international environmental institutions, similar to ones enjoyed by the International Monetary Fund and the World Bank.
The director general of the World Trade Organization Renato Ruggiero also suggested the creation of a World Environmental Organization which could serve as an equal voice with the WTO. Sources said questions surrounding this suggestion include whether a new organization needs to be formed that encompasses all environmental organizations and agreements or whether the United Nations Environmental Program should be strengthened and regarded in that capacity.
Various statements presented to the symposium and the two Canadian papers are available to subscribers of Inside U.S. Trade's electronic service World Trade Online. Call for a free trial subscription to access the website.
Margrete Strand Rangnes is MAI Project Coordinator at Public Citizen Global Trade Watch
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