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Trade measures used in environmental agreements

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Trade measures used in environmental agreements

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- Examples?
- Why use trade measures in environmental agreements?

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What are the general principles of the WTO?

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What are the general principles of the WTO?

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--> Why are these principles the way they are?

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European Commission - European Commission

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Krasner defined a regime as a set of 'principles, norms, rules, and decision-making procedures around which actors' expectations converge in a given area of international relations'.

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Krasner defined a regime as a set of 'principles, norms, rules, and decision-making procedures around which actors' expectations converge in a given area of international relations'.

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What are clashes between the environmental and trade regime?

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What are clashes between the environmental and trade regime?

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https://www.sciencedirect.com/science/article/pii/S1389934108000762

Naomi Klein ..

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Regimes and the principles: how do the principles differ?

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Regimes and the principles: how do the principles differ?

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Trade regime:
•National treatment

•Most-favored-nation

•‘Like’ products are treated alike

•Burden of proof lies with party taking measures

•Environmental measures permissible...

•If not discriminatory (not arbitrary or unjustified; applicable to domestic and foreign products)

•If necessary (proportional, least trade-distorting)

--> Preventing disguised trade protectionism!

Environmental regime:
•Precautionary principle

•Process and production methods

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- What is the importance of the definition of 'like' products for trade and the environment?

--> Process and production methods (eg. Produced in sustainable energy efficient manner etc.)

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 “unincorporated PPMs” (or “non-product related 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.

Problem: Extraterritoriality

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What is the Sanitary and Phytosanitary measures (SPS) agreement? 

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What is the Sanitary and Phytosanitary measures (SPS) agreement? 

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- Why is there such a thing as an SPS agreement?

1. Members have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, provided that such measures are not inconsistent with the provisions of this Agreement.

2. Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence, except as provided for in paragraph 7 of Article 5.

7. In cases where relevant scientific evidence is insufficient, a Member may provisionally adopt sanitary or phytosanitary measures on the basis of available pertinent information, including that from the relevant international organizations as well as from sanitary or phytosanitary measures applied by other Members. In such circumstances, Members shall seek to obtain the additional information necessary for a more objective assessment of risk and review the sanitary or phytosanitary measure accordingly within a reasonable period of time.

--> Control of pests and diseases, harmful substances

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“The precautionary principle enables decision-makers to adopt precautionary measures when scientific evidence about an environmental or human health hazard is uncertain and the stakes are high.”

- What are examples where the precautionary principle is applied or can be applied?

https://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_IDA(2015)573876

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Technical Barriers to Trade (TBT) Agreement: What are technical barriers to trade?

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Technical Barriers to Trade (TBT) Agreement: What are technical barriers to trade?

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- What is the TBT agreement for?

•Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.

• Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.

•

--> Safety certificates, product labelling etc.

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Can a country ban imports of non-organically produced fruit and vegetables?

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Can a country ban imports of non-organically produced fruit and vegetables?

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•Imports can in principle not be restricted under the WTO, except based on its rules and regulations for exemptions.
- What exemptions does the WTO allow for?

•Article XX – General Exceptions

•Sanitary and Phytosanitary measures (SPS Agreement)

•Technical Barriers to Trade (TBT Agreement)

- Follow WTO principles: National Treatment, Most-Favored-Nation (MFN) --> non-discrimination (like products have to be treated alike) principles.

•Only if domestic producers also have to produce organically and if the rule is applied to all trading partners.

•Only if the product is different --> you can regulate maximum residue limits, but not how it is produced

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Does the WTO care about the environment? 

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Does the WTO care about the environment? 

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- Are trade measures taken under MEAs compatible with WTO rules?
- Asymmetrical power of trade regime?
- 'Disciplinary environmentalism'?

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Issues: Environment, health

In April 1997, Ethyl, a US chemical company, launched an ISDS dispute over the Canadian ban of MMT, a toxic gasoline additive containing a known human neurotoxin. Canadian legislators banned MMT over public health and environmental concerns. The additive was already banned in the US at the time. The case was settled in June 1998 for US$13 million paid to Ethyl. The settlement also required Canada to lift the ban and post advertising saying MMT was safe (NAFTA invoked).

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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,

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What type of reasoning do you recognize?

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What type of reasoning do you recognize?

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•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.

•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. This promotes the efficient allocation of resources, economic growth and increased income levels that in turn provide additional possibilities for protecting the environment.

https://www.wto.org/english/tratop_e/envir_e/envt_intro_e.htm

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Sustainable development and environmental protection are goals of the WTO...

Allowing for the optimal use of the worlds 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 WTOs 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.

Trade liberalization and stable and predictable trade conditions support the environment...

An important element of the WTOs 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. This 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 trades contribution to efforts on sustainable development and the environment has been recognized in such forums as the 1992 Rio Summit, 2002 Johannesburg Summit, the 2005 UN World Summit, and the UN 2030 Agenda for Sustainable Development.

Under 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 (which deals with product regulations), and the Agreement on Sanitary and Phytosanitary Measures (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.

A number of WTO cases have covered environmental measures...

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.

WTO institutions advance dialogue and understanding of 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 Technical Barriers to Trade Agreement (which deals with regulations, standards, testing and certification procedures) is where governments share information on actions they are taking and discuss how some environmental regulations may affect trade.

The Doha Development Agenda and the environment...

The Doha Round of negotiations focused on achieving more efficient allocation of resources on a global scale through the continued reduction of obstacles to trade and on pursuing win-win-win results for trade, development and the environment. The Doha Round is the first time environmental issues have featured explicitly in the context of a multilateral trade negotiation. Other parts of the Doha negotiations are also relevant to the environment, for example some aspects of the agriculture negotiations and also disciplines on fisheries subsidies. The Doha Development Agenda also has a section specifying the priority items in the CTEs regular work.

International efforts on the environment...

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-MEA 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 multilateral environmental agreements.

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Allowing for the optimal use of the worlds 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 WTOs objective to reduce trade barriers and eliminate discriminatory treatment in international trade relations.

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According to WTO’s website:
Trade and environment

Sustainable development and protection and preservation of the environment are fundamental goals of the WTO. They are enshrined in the Marrakesh Agreement, which established the WTO, and complement the WTO’s objective to reduce trade barriers and eliminate discriminatory treatment in international trade relations. While there is no specific agreement dealing with the environment, under WTO rules members can adopt trade-related measures aimed at protecting the environment provided a number of conditions to avoid the misuse of such measures for protectionist ends are fulfilled.The WTO contributes to the protection and preservation of the environment through its objective of ensuring sustainable development and avoiding protectionism, through its rules and enforcement mechanism, and through work in different WTO bodies.

https://www.wto.org/english/tratop_e/envir_e/envir_e.htm

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GATT Article XX on General Exceptions lays out 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, then,

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.

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 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).

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:

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 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).

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.

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.

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GATT Article XX on General Exceptions lays out 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.

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Issues: Environment, mining

The US industry challenged in 2008 Canadian environmental requirements affecting their plans to open a basalt quarry and a marine terminal in Nova Scotia. The investors planned to blast, extract and ship out large quantities of basalt from the proposed 152-hectare project, located in a key habitat for several endangered species, including one of the world’s most endangered large whale species. A government-convened expert review panel concluded that the project would threaten the local communities. On these recommendations, the government of Canada rejected the project. In 2015 the ISDS tribunal decided that the government’s decision hindered the investors’ expectations. Bilcon won and received US$7 million in damages, plus interest (NAFTA invoked).

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Do businesses sometimes support environmental regulation?

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Do businesses sometimes support environmental regulation?

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High regulatory pressure:

Hedging

•Minimize compliance costs à propose self-regulation or market based solutions

•Leveling compliance costs à internationalize national environmental policies

Support

•Competitive advantage for products with lower compliance costs

•Creating demand for products necessary for compliance

•Banning of products can create a market for its substitutes
(Meckling)

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International Investment Agreements and the Environment

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International Investment Agreements and the Environment

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•International investment treaties protect foreign investors against expropriation

•Under the agreements: Expropriation requires compensation from government

•Broad understanding of expropriation, including policies made for common good that reduce future income of investors (Philip Morris – plain packaging)

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Relational (instrumental) power:

•Lobbying of state representatives, at home and in international negotiations

•Strong organizational and financial resources

•Established channels of access and influence (policy networks, corporatism)

•Provision of policy relevant information and knowledge

Structural (market) power:

•Structural importance of business for economic growth, innovation and employment

•Based on implicit or explicit threat of disinvestment, capital flight

•Technological knowledge shaping regulatory options

•Indirect influence over agenda-setting and political outcomes: ‘non-decision making’
(Bachrach and Baratz)

Discursive power:

•Communication strategies to shape public and elite perceptions

•Framing of environmental issues that require business involvement and solutions

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- What is private environmental governance?
- What explains the rise of private environmental governance?
- What limits government regulation on the environment?
- How does private environmental governance/private sustainability standards work?
- What are some of the problems of private sustainability standards?

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MEMBER INFORMATION

This page gathers key information on Pakistan's participation in the WTO. Pakistan has been a WTO member since 1 January 1995 and a member of GATT since 30 July 1948.

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Acceptance of multilateral instruments

Membership of plurilateral agreements

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MEMBER INFORMATION This page gathers key information on Pakistan's participation in the WTO. Pakistan has been a WTO member since 1 January 1995 and a member of GATT since 30 July 1948.

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MEMBER INFORMATION

This page gathers key information on the Bolivarian Republic of Venezuela's participation in the WTO. The Bolivarian Republic of Venezuela has been a WTO member since 1 January 1995 and a member of GATT since 31 August 1990.

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Acceptance of multilateral instruments

Membership of plurilateral agreements

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WTO | Bolivarian Republic of Venezuela - Member information

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MEMBER INFORMATION This page gathers key information on the Bolivarian Republic of Venezuela's participation in the WTO. The Bolivarian Republic of Venezuela has been a WTO member since 1 January 1995 and a member of GATT since 31 August 1990.

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MEMBER INFORMATION

This page gathers key information on Switzerland's participation in the WTO. Switzerland has been a WTO member since 1 July 1995 and a member of GATT since 1 August 1966.

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Acceptance of multilateral instruments

Membership of plurilateral agreements

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MEMBER INFORMATION This page gathers key information on Switzerland's participation in the WTO. Switzerland has been a WTO member since 1 July 1995 and a member of GATT since 1 August 1966.

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What are the environmental challenges to the global economy?

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What are the environmental challenges to the global economy?

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What are the challenges of the global economy to the environment?

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What are the challenges of the global economy to the environment?