Download/Adil Najam - Trade & Environm… · Edited by Adil Najam Mark Halle Ricardo Meléndez-Ortiz TRADE AND ENVIRONMENT A RESOURCE BOOK Trade and Environment A Resource Book Trade

Edited byAdil Najam Mark Halle

Ricardo Meléndez-Ortiz

TRADE AND ENVIRONMENTA RESOURCE BOOK

Trade and EnvironmentA Resource Book

Trade and environment policy is increasingly intertwined and thestakes are nearly always high in both trade and environmentalterms. These issues are often complex and discussions tend tobecome very specialized, challenging policy practitioners tounderstand and follow all the various sub-strands of trade andenvironment debates. This Resource Book seeks to demystify theseissues without losing the critical nuances.

This collaborative effort of some 61 authors from 34 countriesprovides relevant information as well as pertinent analysis on abroad set of trade and environment discussions while explaining,as clearly as possible, what are the key issues from a trade andenvironment perspective; what are the most important policydebates around them; and what are the different policy positionsthat define these debates.

The volume is structured and organized to be a reference documentthat is useful and easy to use. Our hope is that those activelyinvolved in trade and environment discussions—as practitioners,as scholars and as activists—will be able to draw on the analysisand opinions in this book to help them advance a closer synergybetween trade and environmental policy for the common goal ofachieving sustainable development.

TRADE AND ENVIRONMENT – A RESOURCE BOOKEdited by Adil Najam

, Mark Halle and Ricardo M

eléndez-Ortiz

FFOORR SSAALLEE && EEXXCCHHAANNGGEE

wwwwww..ttrraaddiinngg--ssooffttwwaarree--ccoolllleeccttiioonn..ccoomm

SSuubbssccrriibbee ffoorr FFRREEEE ddoowwnnllooaadd mmoorree ssttuuffff..

MMiirrrroorrss::

wwwwww..ffoorreexx--wwaarreezz..ccoomm

wwwwww..ttrraaddeerrss--ssooffttwwaarree..ccoomm

CCoonnttaaccttss

aannddrreeyybbbbrrvv@@ggmmaaiill..ccoomm aannddrreeyybbbbrrvv@@hhoottmmaaiill..ccoomm

aannddrreeyybbbbrrvv@@yyaannddeexx..rruu SSkkyyppee:: aannddrreeyybbbbrrvv

IICCQQ:: 7700996666443333

http://www.trading-software-collection.com/

mailto:[email protected]?subject=Subscribe

http://www.forex-warez.com/

http://www.traders-software.com/

mailto:[email protected]




Edited byAdil NajamMark Halle


T&E Resource.qx 10/17/07 4:39 PM Page i

Andrey

trading software col

© 2007 International Institute for Sustainable Development (IISD), International Centre forTrade and Sustainable Development (ICTSD) and the Regional and International NetworkingGroup (The Ring).

Trade and Environment: A Resource Book

Edited by Adil Najam, Mark Halle and Ricardo Meléndez-Ortiz

ISBN 978-1-895536-99-7

Published by International Institute for Sustainable Development, International Centre forTrade and Sustainable Development, The Regional and International Networking Group

This publication is available online athttp://www.trade-environment.orghttp://www.iisd.orghttp://www.ictsd.orghttp://www.ring-alliance.org

Cover photos from iStockphoto.

Readers are encouraged to quote and reproduce this material for educational, not-for-profitpurposes, provided the source is acknowledged.


Printed on 100% post-consumer recycled paper.

T&E Resource.qx 10/17/07 4:39 PM Page ii

The International Institute for Sustainable Development (IISD, http://www.iisd.org) con-tributes to sustainable development by advancing policy recommendations on internationaltrade and investment, economic policy, climate change, measurement and assessment, and nat-ural resources management. Through the Internet, we report on international negotiations andshare knowledge gained through collaborative projects with global partners, resulting in morerigorous research, capacity building in developing countries and better dialogue between Northand South. IISD’s vision is better living for all—sustainably; its mission is to champion innova-tion, enabling societies to live sustainably. IISD is registered as a charitable organization inCanada and has 501(c)(3) status in the United States. IISD receives core operating support fromthe Government of Canada, provided through the Canadian International DevelopmentAgency (CIDA), the International Development Research Centre (IDRC) and EnvironmentCanada; and from the Province of Manitoba. The institute receives project funding fromnumerous governments inside and outside Canada, United Nations agencies, foundations andthe private sector.

The International Centre for Trade and Sustainable Development (ICTSD,http://www.ictsd.org) was established in Geneva in September 1996 to contribute to a betterunderstanding of development and environment concerns in the context of international trade.As an independent nonprofit and nongovernmental organization, ICTSD engages a broad rangeof actors in ongoing dialogue about trade and sustainable development. With a wide networkof governmental, nongovernmental and intergovernmental partners, ICTSD plays a unique sys-temic role as a provider of original, non-partisan reporting and facilitation services at the inter-section of international trade and sustainable development. ICTSD facilitates interactionbetween policy-makers and those outside the system to help trade policy become more sup-portive of sustainable development. By helping parties increase capacity and become betterinformed about each other, ICTSD builds bridges between groups with seemingly disparateagendas. It seeks to enable these actors to discover the many places where their interests and pri-orities coincide, for ultimately sustainable development is their common objective.

The Regional and International Networking Group (The RING, http://www.ring-alliance.org)is a global alliance of predominantly Southern independent research and policy organizations.It was formed in 1991 to stimulate preparations for the 1992 Rio Earth Summit. In 1994 thegroup designed and implemented an ongoing program of capacity development, pooled andcollaborative research at regional and global levels, with the goal of creating a unique and influ-ential platform for international comparative policy research, action and advocacy. With anemphasis on South-South and South-North collaboration, the Ring aims to improve environ-ment and development policy formulation processes, and to increase the regional and localimpact of organizations working on sustainable development issues. Ring activities focus onstrategic development, capacity strengthening and planning within the individual organizations,water and people, sustainable livelihoods (including people’s technologies), multilateral envi-ronmental agreements, trade and environment, climate change, financing for development, andpeople-centred governance approaches for development.


iii

T&E Resource.qx 10/17/07 4:39 PM Page iii


iv

T&E Resource.qx 10/17/07 4:39 PM Page iv

Contributors vii

Acronyms and Abbreviations xi

Acknowledgements xvii

A User’s Guide – Adil Najam, Mark Halle and Ricardo Meléndez-Ortiz xix

Section I: Setting the ContextThe Evolution of the Trade and Environment Debate at the WTO – Hugo Cameron 3

Expert Opinion: The future of the trade and environment debate – Hector Torres 5

Expert Opinion: It’s time to make the global debate local – K.G. Anthony Hill 9

The Trade and Environment Policy Formulation Process – Doaa Abdel Motaal 17

Expert Opinion: The case for integrated assessment – Hussein Abaza 19

Expert Opinion: Policy should be made through negotiation, not litigation – Sabrina Shaw 23

Section II: Issues and Debates1. Agriculture – Malena Sell 29

Expert Opinion: Agriculture, environment and social justice – Adriano Campolina 31

Expert Opinion: Dealing with the hidden agenda on agricultural subsidies – Vangelis Vitalis 35

2. Biotechnology – Heike Baumüller 39

Expert Opinion: Making the Cartagena Protocol work – Veit Koester 41

Expert Opinion: Biotechnology and the multilateral trading system – Gustavo Alanís-Ortega 45

3. Capacity Building – Christophe Bellmann 49

Expert Opinion: The Andean experience on capacity building – Luisa Elena Guinand and 51María Elena Gutiérrez

4. Climate Change and Energy – Malena Sell 59

Expert Opinion: Doing trade and climate policy together – ZhongXiang Zhang 61

Expert Opinion: Can trade be an instrument of climate policy? – Gao Pronove 63

5. Dispute Resolution – Howard Mann and Yvonne Apea 67

Expert Opinion: Reforming the DSU – Welber Barral 69

Expert Opinion: PPMs, trade law and the environment – Robert Howse 73

6. Environmental Goods and Non-agricultural Market Access – Nathalie Bernasconi-Osterwalder, 77Linsey Sherman and Mahesh Sugathan

Expert Opinion: Liberalization of environmental goods: A double-edged sword 79or a panacea? – Beatrice Chaytor

Expert Opinion: Are environmental goods good for the South? – Magda Shahin 81


v

Contents

T&E Resource.qx 10/17/07 4:39 PM Page v


vi

7. Environmental Services – Mahesh Sugathan and Johannes Bernabe 87

Expert Opinion: Making trade liberalization work for the poor – Sitanon Jesdapipat 89

8. Environmental Technologies – Sandeep Singh 93

Expert Opinion: Encouraging trade in biofuels – Suani Teixeira Coelho 95

9. Fisheries Subsidies – Anja von Moltke 101

Expert Opinion: Fisheries subsidies and beyond – John Kurien 103

Expert Opinion: Fixing Cotonou’s rules of origin regime – Roman Grynberg and Natallie Rochester 107

10. Illegal Trade in Natural Resources – Duncan Brack 115

Expert Opinion: Illegal trade in tropical timber – Chen Hin Keong 117

11. Intellectual Property Rights – David Vivas-Eugui and Heike Baumüller 123

Expert Opinion: The limits of geographical indications – Dwijen Rangnekar 125

Expert Opinion: Protecting genetic resources – Manuel Ruiz 127

Expert Opinion: Focusing on the local agenda – Stella Wattimah Simiyu 131

12. Investment – Luke Eric Peterson 135

Expert Opinion: Investment rules for sustainable development – Konrad von Moltke 137

Expert Opinion: Investment law as if development mattered – Marcos A. Orellana 139

13. Multilateral Environmental Agreements – Vicente Paola B. Yu III 145

Expert Opinion: The logic of the WTO-MEA relationship – Alejandro Jara 147

Expert Opinion: MEA misconceptions and contradictions – Rob Monro 149

14. Policy Coherence – Otto Genee 159

Expert Opinion: Promoting policy coherence – Bernice Wing Yee Lee 161

Expert Opinion: New policy coherence challenges – Stéphane Guéneau 165

15. Regional Arrangements – Aaron Cosbey 169

Expert Opinion: Fostering sustainable development with RTAs – Hank Lim and Matthew Walls 171

Expert Opinion: The “shadow” trading system of RTAs – Adil Najam and Dirk Swart 175

16. Standards and Labelling – Tom Rotherham 179

Expert Opinion: Eco-labels from a Southern perspective – Veena Jha 181

Expert Opinion: Confronting eco-labelling myths – Nicola Borregaard and Annie Dufey 185

17. Trade Facilitation – Luke Eric Peterson 189

Expert Opinion: Putting the environment into trade facilitation – Sachin Chaturvedi 191

Section III: ResourcesThe Doha Ministerial Declaration: Annotating the Trade and Environment Linkages – 199Adil Najam and Trineesh Biswas

A Trade and Environment Timeline – Compiled by Trineesh Biswas 215

A Trade and Environment Glossary – Compiled by Sarah Mohan and Heike Baumüller 221

Online and In-print Resources – Compiled by Sarah Mohan, Heike Baumüller and Ruth Fend 239

T&E Resource.qx 10/17/07 4:39 PM Page vi

HUSSEIN ABAZA (Egypt) is the Chief of the Economics and Trade Branch of theUnited Nations Environment Programme (UNEP), based in Geneva.

GUSTAVO ALANÍS-ORTEGA (Mexico) is President of the Centro Mexicano deDerecho Ambiental (CEMDA) and teaches environmental law at theUniversidad Iberoamericana in Mexico City.

YVONNE APEA (Ghana), formerly Program Co-ordinator – Dispute Settlementat the International Centre for Trade and Sustainable Development (ICTSD), isnow Conference and Project Manager at the Economist Intelligence Unit.

WELBER BARRAL (Brazil) is a professor of law at the Federal University of SantaCatarina, Florianópolis, Brazil .

HEIKE BAUMÜLLER (Germany), formerly Program Manager – Environment andNatural Resources at the International Centre for Trade and SustainableDevelopment (ICTSD), is now an independent consultant working inCambodia.

CHRISTOPHE BELLMANN (Switzerland) is Programs Director at the InternationalCentre for Trade and Sustainable Development (ICTSD).

JOHANNES BERNABE (Philippines) served as a trade negotiator for his countryand is currently the Trade in Services Coordinator at the International Centrefor Trade and Sustainable Development (ICTSD).

NATHALIE BERNASCONI-OSTERWALDER (Switzerland/Canada) is the ManagingAttorney of the Geneva Office of the Center for International EnvironmentalLaw (CIEL).

NICOLA BORREGAARD (Chile) is Advisor to the Chilean Minister of Economyand Energy.

DUNCAN BRACK (United Kingdom) is an Associate Fellow with the Energy,Environment and Development Programme at Chatham House (the RoyalInstitute for International Affairs).

HUGO CAMERON (Canada) is an International Trade Expert with InternationalLawyers and Economists Against Poverty (ILEAP) and former Senior Associatewith the International Centre for Trade and Sustainable Development(ICTSD).

ADRIANO CAMPOLINA (Brazil) is the Regional Director for the Americas forActionAid International, based in Brazil.

1 All authors have expressed their personal opinions in their contributions. Their views do notnecessarily reflect those of the organizations with which they are affiliated.


vii

Contributors1

T&E Resource.qx 10/17/07 4:39 PM Page vii

SACHIN CHATURVEDI (India) is a Research Fellow at the Research andInformation System for Developing Countries (RIS), based in New Delhi,India.

BEATRICE CHAYTOR (Sierra Leone) served as a trade negotiator for her countryand is currently the Director of Policy, Planning and Research at the SierraLeone Ministry of Trade and Industry.

HYUN JUNG JO CHOI (Korea) is a graduate researcher at the Fletcher School ofLaw and Diplomacy, Tufts University.

SUANI TEIXEIRA COELHO (Brazil) is São Paulo State’s Deputy Secretary of Statefor the Environment and Head of the Brazilian Reference Center on Biomass,University of São Paulo.

AARON COSBEY (Canada) is an Associate of and Senior Advisor to theInternational Institute for Sustainable Development (IISD).

ANNIE DUFEY (Chile) is Research Associate at the International Institute forEnvironment and Development (IIED).

OTTO GENEE (The Netherlands) is the Director of the Policy Coherence forDevelopment Unit at the Dutch Ministry of Foreign Affairs.

ROMAN GRYNBERG (Canada/Australia) is the Director for EconomicGovernance at the Pacific Islands Forum Secretariat.

STÉPHANE GUÉNEAU (France) is a Policy Analyst and at the Institute forSustainable Development and International Relations (IDDRI) in Paris, France.

LUISA ELENA GUINAND (Venezuela) is the Coordinator for Environment andSustainable Development at the General Secretariat of the Andean Community,

MARÍA ELENA GUTIÉRREZ (Peru) studies sustainable development and conserva-tion biology at the University of Maryland, U.S.

MARK HALLE (U.S./Italy) is the European Representative and Global Director ofthe Trade and Investment Program of the International Institute for SustainableDevelopment (IISD).

K.G. ANTHONY HILL (Jamaica) is a seasoned trade negotiator and was his coun-try’s Ambassador and Permanent Representative to the United Nations in Geneva.

ROBERT HOWSE (Canada) is the Alene and Allan F. Smith Professor of Law atthe University of Michigan Law School and a former Canadian trade diplomat.

ALEJANDRO JARA (Chile) is a Deputy Director-General of the World TradeOrganization (WTO) and was formerly the Chair of the WTO Committee onTrade in Services Special Session and Ambassador and PermanentRepresentative of his country to the WTO.

SITANON JESDAPIPAT (Thailand) is a Technical Advisor for the Red Cross/RedCrescent Climate Centre in the Netherlands.

VEENA JHA (India) is the coordinator of the UNCTAD Initiative on Strategiesand Preparedness for Trade and Globalization in India.


viii

T&E Resource.qx 10/17/07 4:39 PM Page viii

CHEN HIN KEONG (Malaysia) is the Senior Forest Trade Advisor to TRAFFICInternational, based in Malaysia.

VEIT KOESTER (Denmark) was with his country’s Ministry of Environment andis now the Chairman of the Compliance Committees of the Cartagena Protocoland the Aarhus Convention.

JOHN KURIEN (India) is a professor at the Centre for Development Studies,Thiruvananthapuram.

BERNICE WING YEE LEE (Hong Kong, China) was the Policy Analysis andStrategy Advisor at the International Centre for Trade and SustainableDevelopment (ICTSD).

HANK LIM (Singapore) is the Director of Research at the Singapore Institute ofInternational Affairs.

HOWARD MANN (Canada) is a practicing lawyer and the Senior InternationalLaw Advisor to the International Institute for Sustainable Development (IISD).

RICARDO MELÉNDEZ-ORTIZ (Colombia) is the Executive Director of theInternational Centre for Trade and Sustainable Development (ICTSD).

ROB MONRO (Zimbabwe) was head of Zimbabwe Trust, an NGO which wasone of the founders and promoters of the CAMPFIRE program.

DOAA ABDEL MOTAAL (Egypt) is Counsellor in the Cabinet of the Director-General of the World Trade Organization (WTO).

ADIL NAJAM (Pakistan), an IISD Associate, teaches international negotiationand diplomacy at the Fletcher School of Law and Diplomacy, Tufts University.

MARCOS A. ORELLANA (Chile) is Senior Attorney with the Center forInternational Environmental Law (CIEL) in Washington, D.C., and AdjunctProfessor at American University Washington College of Law.

LUKE ERIC PETERSON (Canada) is Editor of Investment Treaty News, a report-ing service published by the International Institute for SustainableDevelopment (IISD).

GAO PRONOVE (Philippines) is the Executive Director of Earth CouncilGeneva.

DWIJEN RANGNEKAR (United Kingdom/India) is a Senior Research Fellow atthe School of Law and Centre for the Study of Globalisation andRegionalisation, Warwick University.

NATALLIE ROCHESTER (Jamaica) is a Services Analyst with the CaribbeanRegional Negotiating Machinery.

TOM ROTHERHAM (United Kingdom) is Head of the Corporate Responsibilitypractice at Radley Yeldar Consulting and an Associate at the InternationalInstitute for Sustainable Development (IISD).

MANUEL RUIZ (Peru) is Director of the Program on International Affairs andBiodiversity of the Peruvian Society for Environmental Law (SPDA).


ix

T&E Resource.qx 10/17/07 4:39 PM Page ix


x

MALENA SELL (Finland) is Program Officer, Environment and Agriculture atthe International Centre for Trade and Sustainable Development (ICTSD).

MAGDA SHAHIN (Egypt) is her country’s Assistant Foreign Minister forInternational Economic Affairs and earlier served as her country’s Ambassadorto Greece and chief trade negotiator.

SABRINA SHAW (Canada) is an Associate at the International Institute forSustainable Development (IISD), currently on leave from the World TradeOrganization (WTO), where she served as Secretary to the Committee onTrade and Environment (CTE).

LINSEY SHERMAN (Canada) is studying law at the University of Ottawa and wasa researcher with the Center for International Environmental Law (CIEL) whenshe contributed to this book.

STELLA WATTIMAH SIMIYU (Kenya) is a Research Scientist with the NationalMuseums of Kenya.

SANDEEP SINGH (India) is with The Energy and Resources Institute (TERI) inNew Delhi, India.

MAHESH SUGATHAN (India) is the Economic and Trade Policy AnalysisCoordinator at the International Centre for Trade and SustainableDevelopment (ICTSD).

DIRK SWART (South Africa) is a non-academic staff member at CornellUniversity and an independent researcher.

HECTOR TORRES (Argentina) served as a trade negotiator for his country and isnow an Executive Director at the International Monetary Fund (IMF).

VANGELIS VITALIS (New Zealand) is a former Chief Advisor at the OECD andcurrently a Senior Trade Negotiator for the New Zealand Ministry of ForeignAffairs and Trade.

DAVID VIVAS EUGUI (Venezuela) is Program Manager – Intellectual Property atthe International Centre for Trade and Sustainable Development (ICTSD).

THE LATE KONRAD VON MOLTKE (Germany) was a Senior Fellow at theInternational Institute for Sustainable Development (IISD) and AdjunctProfessor of Environmental Studies at Dartmouth College.

ANJA VON MOLTKE (Germany) serves as an Economic Affairs Officer at theEconomics and Trade Branch of the United Nations Environment Programmein Geneva.

MATTHEW WALLS (Canada) is a freelance journalist and environmental consult-ant based in Singapore.

VICENTE PAOLO B. YU III (Philippines) is Program Coordinator of the GlobalGovernance for Development Program of the South Center in Geneva.

ZHONGXIANG ZHANG (The Netherlands) is a Senior Fellow at the East-WestCenter, Honolulu, Hawaii, and visiting professor at the Chinese Academy ofSocial Sciences, Peking University and Chinese Academy of Sciences, Beijing.

T&E Resource.qx 10/17/07 4:39 PM Page x

AB Appellate Body

ABS access and benefit-sharing

ACP African, Caribbean and the Pacific

AFP Asia Forest Partnership

AoA Agreement on Agriculture

APEC Asia Pacific Economic Cooperation (Forum)

ASEAN Association of Southeast Asian Nations

AU African Union

BITs bilateral investment treaties

BOT build-operate-transfer

BTA border tax adjustment

CAF Andean Development Corporation

CAN Community of Andean Nations

CAP Common Agricultural Program (of the European Union)

CARICOM Caribbean Community

CBD Convention on Biological Diversity

CBFP Congo Basin Forest Partnership

CCAMLR Convention on the Conservation of Antarctic Marine Living Resources

CCICED China Council for International Cooperation on Environment and Development

CDM Clean Development Mechanism

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

CTD Committee on Trade and Development

CTE Committee on Trade and Environment

CTE-SS CTE in Special Session

CTS-SS Council for Trade in Services-Special Session

DDA Doha Development Agenda

DPGs domestically prohibited goods

DSM dispute settlement mechanism


xi

Acronyms and Abbreviations

T&E Resource.qx 10/17/07 4:39 PM Page xi


xii

DSU Dispute Settlement Understanding

EC European Communities

EEZ exclusive economic zone

EFTA European Free Trade Association

EGS environmental goods and services

EIA environmental impact assessment

EMIT (Group on) Environmental Measures and International Trade

EPPs environmentally preferable products

EST environmentally sound technology

EU European Union

FAO Food and Agriculture Organization

FDI foreign direct investment

FLEG Forest Law Enforcement and Governance

FLEGT Forest Law Enforcement, Governance and Trade (Initiative)

FPA Fisheries Partnership Agreement

FTA free trade agreement

FTAA Free Trade Agreement of the Americas

G8 Group of Eight

G90 Group of Ninety

G10 Group of Ten

G33 Group of Thirty-Three

G20 Group of Twenty

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GEN Global Eco-labelling Network

GIs geographical indications

GMOs genetically modified organisms

GSP generalized systems of preference

GURTs genetic use restriction technologies

ICAs international commodity agreements

ICC International Chamber of Commerce

ICFTU International Confederation of Free Trade Unions

ICJ International Court of Justice

ICSF International Collective in Support of Fish Workers

T&E Resource.qx 10/17/07 4:39 PM Page xii

ICSID International Centre for Settlement of Investment Disputes

ICTSD International Centre for Trade and Sustainable Development

IDB Inter-American Development Bank

IEA International Energy Agency

IEC International Electrotechnical Commission

IFC International Finance Corporation

IFOAM International Federation of Organic Agriculture Movements

IGC Intergovernmental Committee (on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore at WIPO)

IISD International Institute for Sustainable Development

ILEAP International Lawyers and Economists Against Poverty

ILO International Labour Organization

IMF International Monetary Fund

IPOA-IUU International Plan of Action to Prevent, Deter and Eliminate Illegal, Unreported, Unregulated Fishing

IPPC International Plant Protection Convention

IPR intellectual property right

ISBs international standards bodies

ISEAL International Social and Environmental Accreditation and Labelling Alliance

ISO International Organization for Standardization

ITPGRFA International Treaty on Plant Genetic Resources for Food and Agriculture

ITTA International Tropical Timber Agreement

ITU International Telecommunication Union

IUU illegal, unreported and unregulated (fishing)

IUCN The World Conservation Union

LDCs least-developed countries

LMOs living modified organisms

MAI Multilateral Agreement on Investment

MDGs Millennium Development Goals

MEAs multilateral environmental agreements

MFN most favoured nation

MMT methylcyclopentadienyl manganese tricarbonyl


xiii

T&E Resource.qx 10/17/07 4:39 PM Page xiii




MMiirrrroorrss::



CCoonnttaaccttss



IICCQQ:: 7700996666443333









xiv

MT metric tons

NAFTA North America Free Trade Agreement

NAMA non-agricultural market access

NFIDs net food-importing developing countries

NGMA Negotiating Group on Market Access

NGOs non-governmental organizations

NGR Negotiating Group on Rules

NTBs non-tariff barriers

NTMs non-tariff measures

OECD Organisation for Economic Co-operation and Development

OIE World Organization for Animal Health

OPEC Organization of the Petroleum Exporting Countries

PCD policy coherence for development

PCT Patent Cooperation Treaty

PIC prior informed consent

POPs persistent organic pollutants

PPMs process and production methods

PPPs public-private partnerships

PRONAF National Program for Strengthening Family Farming (in Brazil)

PRSP poverty reduction strategy paper

REACH Registration, Evaluation and Authorization of Chemicals

The Ring The Regional and International Networking Group

RTA regional trade agreement

S&DT special and differential treatment

SCM subsidies and countervailing measures

SIA sustainability impact assessment

SIDS small island developing states

SME small and medium-sized enterprise

SPS sanitary and phytosanitary (measures)

STOs specific trade obligations

TA technical assistance

TACB technical assistance and capacity building

TBT technical barriers to trade

T&E Resource.qx 10/17/07 4:39 PM Page xiv


xv

TEDs turtle excluder devices

TK traditional knowledge

TNC Trade Negotiations Committee

TPRM Trade Policy Review Mechanism

TRIMs trade-related investment measures

TRIPS Trade-related Aspects of Intellectual Property Rights

U.K. United Kingdom

UN CPC UN Provisional Central Product Classification

UN United Nations

UNCCD United Nations Convention to Combat Desertification

UNCED United Nations Conference on Environment and Development

UNCHE United Nations Conference on the Human Environment

UNCLOS United Nations Convention on the Law of the Sea

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Programme

UNEP United Nations Environment Programme

UNFCCC United Nations Framework Convention on Climate Change

UNPIC United Nations Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides inInternational Trade

UPOV International Union for the Protection of New Varieties of Plants

U.S. United States

W/120 WTO Services Sectoral Classification list

WCO World Customs Organization

WHO World Health Organization

WIPO World Intellectual Property Organization

WSSD World Summit on Sustainable Development

WTO World Trade Organization

WWF Worldwide Fund for Nature (World Wildlife Fund in some countries)

T&E Resource.qx 10/17/07 4:39 PM Page xv


xvi

T&E Resource.qx 10/17/07 4:39 PM Page xvi

Throughout the process of producing this book, we have been inspired by the chapter authorswho responded to our call for thought-provoking and thoughtful essays and supported a longand tedious review and editing process with patience, grace and goodwill. The views expressedby the authors are entirely their own and do not imply any institutional positions, either by theirown institutions or by IISD/ICTSD/The Ring.

In addition to the chapter authors, a large number of individuals and institutions were involved inthe intense process of consultation with literally hundreds of practitioners, scholars, activists andnegotiators from all over the developing world. In particular, we would like to thank the institutionsthat assisted in organizing the various regional consultations: Environnement et Développement duTiers Monde (ENDA), Senegal; Recursos e Investigación Para El Desarrollo Sustentable (RIDES),Chile; IUCN – The World Conservation Union, Sri Lanka; Sustainable Development PolicyInstitute (SDPI), Pakistan; African Centre for Technology Studies (ACTS), Kenya; Trade Law Centrefor Southern Africa (TRALAC), South Africa; and the Chinese Academy of International Trade andEconomic Cooperation (CAITEC), China.

Jointly implemented by the International Centre for Trade and Sustainable Development (ICTSD),the International Institute for Sustainable Development (IISD) and The Ring for SustainableDevelopment, the “Southern Agenda for Trade and Environment Project” benefited from the intellectual and managerial talents of these institutions. In this regard, we are espe-cially grateful to Heike Baumüller and Hugo Cameron (at ICTSD) and David Boyer (at IISD) whohave been critical to the intellectual substance as well as the management of the process. Importantinputs were also provided by Sarah Mohan (at ICTSD) and Sabrina Shaw, Trineesh Biswas andStuart Slayen (at IISD) at various stages in the process. Hyun Jung Choi of the Fletcher Schoolof Law and Diplomacy, Tufts University, provided invaluable editorial and research assistance inpulling together the final drafts of the various chapters. The book was designed by Don Berg.

Finally, and importantly, this book, and the larger research project of which it is a part, wouldnot have been possible without the generous financial support provided by the InternationalDevelopment Research Centre (IDRC), Canada; the Swiss Agency for Development andCooperation (SDC); the Norwegian Ministry of Foreign Affairs (NMFA); and the SwedishInternational Development Cooperation Agency (SIDA). We thank them for believing in andsupporting the “Southern Agenda on Trade and Environment Project.”

Although influenced and supported by so many, the views expressed in this book are entirelythose of the authors and do not imply official endorsement by any of the sponsor organizationsor agencies.

A.N., M.A.H., R.M.-O.


xvii

Acknowledgements

T&E Resource.qx 10/17/07 4:39 PM Page xvii


xviii

T&E Resource.qx 10/17/07 4:39 PM Page xviii

We hope that this book is not just readable, but also useful and useable.

This book flows from the realization that the trade and environment policy debate is technicallycomplex, is becoming highly specialized and is full of cumbersome—and not always useful—jargon. As a result, it has become increasingly difficult to understand and follow all the variousstrands of trade and environment debates. This is not only true for new entrants into the policydebates, but also for seasoned practitioners who may have been focusing only on some elementsof trade and environment discussions, or on adjacent discussions within either the broader tradepolicy arena or the broader environmental policy space. This can also impose particular and sig-nificant stress on developing country capacities to participate in these discussions. More impor-tantly, there is the danger of the policy focus becoming ever-narrower and, therefore, missing thecross-issue connections that are sometimes central to resolving complex and inter-linked policychallenges.

Our ambition, therefore, is to produce a volume that provides relevant information as well aspertinent analysis on a broad set of trade and environment discussions while explaining as clear-ly as possible (a) what are the key issues from a trade and environment perspective; (b) what arethe most important policy debates around them; and (c) what are the different policy positionsthat define these debates. We call this a “Resource Book” because that is exactly what we wantit to be—a resource for policy practitioners, scholars and activists that gives them a clear andeasy-to-use map of ongoing and upcoming trade and environment discussions. But we want itto also provide our readers with a nuanced understanding of where these debates are heading,and why.

This book is a truly and deeply collaborative effort. As many as 61 authors from 34 differentcountries have contributed to this volume. We believe that this is a truly global collection ofsome of the best minds that work on these issues. They bring with them a wealth of experienceand insight from the worlds of practice, scholarship and activism. While focusing on all aspectsof the trade and environment debate, we have consciously tried to give special emphasis to devel-oping country concerns and aspirations within this debate because these concerns are under-rep-resented in the global discussions and they are particularly central to the quest for meaningfulresponses to the trade and environment challenges we face.

The book is organized as a reference volume because we hope and expect it to be used as such.However, while providing clear, unambiguous and easy-to-understand information is an impor-tant priority for us, this volume does not shy away from opinion and analysis. Indeed, as editorswe have welcomed and encouraged it. What we have done, however, is to clearly differentiatebetween items that are principally informational and those that are opinion and analysis.

The remainder of the book is divided into three sections. The first section sets the context bydescribing the evolution of the broader trade and environment debate and then describing thepolicy formulation process within which these debates take place. The second section constitutesthe bulk of the volume and is organized around a set of 17 key issues and debates. Each of theseissues is first presented in a background section which is mostly informational and is then elab-


xix

A User’s GuideAdil Najam, Mark Halle and Ricardo Meléndez-Oritz

T&E Resource.qx 10/17/07 4:39 PM Page xix

orated upon in a set of short Expert Opinion essays which provide provocative and thought-pro-voking ideas and analysis related to that issue. For easier reading, each background section isstructured identically – a general introduction lays out the essentials of what the issue is, how ithas evolved, and what aspects are currently in debate; this is followed by a discussion of “inter-ests and faultlines” which focuses on aspects of the issue which are of particular importance to,or particularly contentious for, key parties; finally, there is a section on “trends and future direc-tions” which looks towards the future of the debate and tries to chart where the debate is likelyto head and why. While the tone and presentation of the background sections is informational,the Expert Opinion essays are meant to be provocative articulations of some of the cutting edgethinking on each of these issues, and particularly on what might be done to resolve the mostthorny debates related to them. A total of 34 Expert Opinion essays from some of the leadingexperts and practitioners from all over the world are included in the book. Finally, the third sec-tion provides additional informational resources that may be useful to the reader. Importantly, this section includes a version of the Doha Ministerial Declaration which is anno-tated to highlight all the various trade and environment connections contained in it; not onlyin the sections that relate to these issues directly but also to the indirect connections. This sec-tion also includes a timeline of the trade and environment debate, a trade and environment glos-sary, and a list of useful online and in-print resources. Important technical terms and conceptsare highlighted in the background sections, as you see here, and then explained in the Trade andEnvironment glossary.

The goal of this organization of the Resource Book is to retain the richness and nuance of thediscussion while making the volume as accessible and useable for the reader as possible. This isnot a book that needs to be read from one end to the other—although we hope that many will.This is a volume that invites the reader to flick through it, that helps the reader quickly findwhat they are looking for, and then, hopefully, excites the reader enough about the subject tokeep reading more. Our hope is that those actively involved in trade and environment discus-sions—as practitioners, as scholars and as activists—will not only find this volume to be a use-ful thing to keep on their bookshelf, but useable enough to keep closer at hand; maybe on theirdesks.


xx

T&E Resource.qx 10/17/07 4:39 PM Page xx

Section I Setting the Context

Setting the Context

1

I

T&E Resource.qx 10/17/07 4:39 PM Page 1


2


The relationship between trade and environ-ment has evolved over time. The inclusion ofenvironmental issues on the negotiating agen-da of the World Trade Organization (WTO)at the Doha Ministerial in 2001 moved thisrelationship into the spotlight. However, thisis by no means a new relationship; indeed, aswe will see below, this is a relationship that hasgone through many phases and will continueto evolve in the future.

The Early YearsAt a fundamental level, the production andexchange of goods and services relies on theenvironment in the form of natural resources.Trade in everything from shrimp to shampooimplies an environmental impact of somesort. The trade-environment relationship is,in fact, imbedded within the original text ofthe General Agreement on Tariffs and Trade(GATT), which was adopted in 1947 as thebasis for the post-war global trading system.Among the exceptions to the GATT’s coreprinciples were provisions stating that noth-ing in the GATT would prevent membercountries from adopting or enforcing meas-ures either “necessary to protect human, ani-mal or plant life or health” or “relating to theconservation of exhaustible natural resources”(Article XX, paragraphs (b) and (g), respec-

tively). However, Article XX also says thatsuch measures cannot be disguised restric-tions on trade applied for protectionistintent. This provision has since become afocal point for the trade and environmentdebate at the GATT and WTO.

Amidst growing environmental awareness thatemerged in the late 1960s and the early 1970s,GATT members established a Group onEnvironmental Measures and InternationalTrade (EMIT) in 1971. However, without asingle request for it to be convened, the EMITGroup lay dormant for 20 years. Nevertheless,trade and environment lingered in the GATThallways. At the 1972 UN Conference on theHuman Environment in Stockholm, theGATT Secretariat presented a paper on theimplications of environmental protection poli-cies and how these could become obstacles totrade. Further, discussions during the TokyoRound of the GATT (1973–79) over trade-related technical regulations and standardsimplemented for environmental purposes ledto the adoption of the Agreement on TechnicalBarriers to Trade (TBT), or the “StandardsCode,” in 1979. The TBT Agreement calledfor transparency in the application of technicalregulations and standards and marked the firstreference to the environment in a GATTagreement.

Setting the Context

3

I

The Evolution of the Trade andEnvironment Debate at the WTO

Hugo Cameron

•“By the close of the 1990s, the field of trade and environment was receiving

much more attention than at its start. Among other issues, eco-labelling, trade ingenetically modified organisms (GMOs) and perverse subsidies in natural resource

sectors were providing policy-makers with a host of new challenges.”

•


While trade officials were factoring the envi-ronment into international trade agreements,trade measures were being used as a tool toadvance global environmental goals. In 1975,the Convention on International Trade inEndangered Species of Wild Fauna and Flora(CITES) entered into force, mandating a sys-tem of trade bans and restrictions on traffic inendangered species. Trade restrictions subse-quently formed key elements of other multi-lateral environmental agreements (MEAs),including those on trade in ozone-depletingsubstances (Montreal Protocol, 1987) andhazardous wastes (Basel Convention, 1989).By 2003, according to a paper released by theWTO Secretariat, there were no fewer than14 MEAs with trade-related provisions,including a number of others with potentialtrade effects. The two streams of internation-al interaction on environment and trade con-tinued to evolve in parallel until they begancoming into increasing contact with eachother in the 1990s.

The 1990s: A RockyDecadeThe 1990s marked the coming of age of thetrade-environment debate. In 1991, theEuropean Free Trade Association (EFTA)finally prompted the EMIT Group to meetin order to study the trade and environmentlinkage and provide input to the 1992 RioEarth Summit. Leaders at the Rio Summitrecognized the substantive links betweeninternational trade and environment byagreeing to make policies in the two areasmutually supportive in favour of sustainabledevelopment. The entry into force andimplementation of several major MEAs thatincluded trade restrictions as enforcementmeasures was starting to draw the concern ofthe trade community. Meanwhile, Northernenvironmental groups were increasingly wor-ried that GATT rules could chill or roll backdomestic environmental legislation.

Two GATT panel decisions against the UnitedStates in the Tuna-Dolphin dispute cases con-

firmed the fears of environmentalists. Thesedecisions also provoked major concern on thepart of developing countries about the envi-ronment becoming a barrier to their exports,based on how they were produced or harvest-ed. The first case was brought before theGATT by Mexico, which argued against aUnited States (U.S.) law imposed in 1990 thatprohibited tuna imports from countries lackingappropriate dolphin conservation programs.Mexico believed that the U.S. legislation vio-lated its GATT rights by prescribing extraterri-torially how it should catch its exported tuna.The U.S. defended its action on the groundsthat its neighbour was taking insufficient meas-ures to prevent the accidental capture of dol-phins by its tuna fishers. The GATT panelruled in 1991 that the U.S. could not suspendMexico’s trading rights by prescribing unilater-ally the process and production methods(PPMs) by which that country harvested tuna.The U.S. eventually lifted its embargo follow-ing an extensive domestic “dolphin safe”labelling campaign and negotiations withMexico. A subsequent case brought against theU.S. tuna embargo by the European Union(EU) on behalf of the Netherlands Antilles in1992 found that the U.S. dolphin conservationpolicy was GATT-consistent and could beapplied extraterritorially. However, it broadlyupheld the first panel decision by ruling thatthe actual measure used (i.e., the tuna embargo)was neither “necessary” (along the lines ofArticle XX), nor GATT-consistent. The Tuna-Dolphin cases brought into sharp focus howdiffering environmental norms between devel-oped and developing countries could prove asource for conflict.

Partly as a result of the Tuna-Dolphin cases,trade and environment linkages were alsobeing recognized at the regional level. Forinstance, in 1994 the U.S., Mexico andCanada signed the North American Free TradeAgreement (NAFTA), which included a side-accord on regional environmental coopera-tion. The side-agreement—and the tri-nation-al organization it created—was intended tohelp ensure the effective implementation of


4


existing environmental laws among signato-ries. Similar provisions subsequently foundtheir way into bilateral trade agreementssigned by the U.S. and Canada with otherdeveloping country trading partners, in orderto guard against lower environmental stan-dards as a source of comparative advantage.Environmental cooperation elements havesince also been included in a number ofregional trade arrangements.

The 1990s also saw the conclusion of theeight-year Uruguay Round negotiations andthe creation of the WTO on January 1, 1995.By then, the trade body’s ranks had swelled to128 Members, over three-quarters of whichwere developing countries. In addition toincluding preambular language claiming sus-tainable development as an objective, theWTO agreements established a Committeeon Trade and Environment (CTE), includeda new Agreement on the Application ofSanitary and Phytosanitary (SPS) Measures,and instituted a strengthened dispute settle-ment mechanism. The CTE, a regular meet-ing of all WTO Members, was mandated toidentify the relationship between trade andenvironmental measures and make appropri-ate recommendations on whether any modi-fications to WTO rules were required. Whilethe Committee has provided a valuableforum to enhance understanding of thetrade-environment relationship, it has strug-gled to fulfill its mandate, and many haveaccused it of being little more than a talkingshop. The SPS Agreement elaborated onArticle XX by setting out parameters for theapplication of measures to protect human,animal and plant life or health. The new dis-pute settlement mechanism rules, whichmade it virtually impossible for losing coun-tries to overturn decisions by panels or thenew Appellate Body (AB), were a major con-cern for environmental groups. They wereworried that the WTO now had real teeth toforce countries to dismantle environmentallaws, should these come under challenge inthe multilateral trading system.

The Evolution of the Trade and Environment Debate at the WTO

5

I

The future ofthe trade andenvironmentdebateA Conversation withHector Torres

Has the trade andenvironment debatelost steam? I wouldsay that the debate has seen little progresssince the December 1996 Singapore Ministerialand has been going around in circles. When theUruguay Round was finished, there was a bigpush from the United States to include envi-ronment in the WTO. The Committee on Tradeand Environment (CTE) was entrusted with aclear mandate and was tasked to present itsfindings at the Singapore Ministerial. However,by the time Singapore came around, the U.S.had lost interest in trade and environment andthe CTE was pushed back to the periphery andstripped of its clear negotiating mandate.

Since then, the discussions have been stuck ina rut. Neither developing countries nor the cur-rent U.S. Republican administration are deman-deurs, willing to push the trade and environ-ment debate to the forefront. Although theEuropeans have an interest in pursuing astronger environmental agenda, they seem tohave neither the willingness nor sufficientstrength to push this debate forward.

However, even though trade and environmentin the WTO is now stalled, there are a few areaswhere the debate needs to go if it is to becomemeaningful, especially from a developing coun-try perspective. I can think of at least threespecific issues that need to become part offuture trade and environment negotiations.

1. The Primacy of National Legislation. First,an unending and fierce debate has ragedbetween countries that prefer to pursuedeveloping international standards andthose that prefer a national approach toenvironmental legislation and regulations. Ican understand the argument for nationallegislation and have no problem with it.

continued on page 7


Andrey


A number of WTO disputes added furtherdepth to the trade-environment debate, andunderlined the difference in approach to theissue between developing and developedcountries, notably the U.S. The 1998Shrimp-Turtle dispute case, brought by fourAsian countries against the U.S., proved alandmark in that it put into doubt the ration-ale that discrimination based on PPMs wasnot compatible with WTO rules. The WTOAppellate Body ultimately determined that,while the disputed U.S. law prohibitingshrimp imports caught without the use of“turtle excluder devices” was justifiable underArticle XX, it had been implemented in a dis-criminatory fashion. In other words, theAppellate Body did not require the U.S. todismantle its law, but only change the way itwas implemented. The decision was particu-larly disturbing to Thailand, India and anumber of other developing countries, whowere deeply concerned with the approach tointerpretation of WTO law applied by theAppellate Body. They felt that the ruling per-mitted Members to discriminate against“like” products based on non-product-relatedPPMs, an issue that had not been negotiatedin the Uruguay Round. From their perspec-tive, the Shrimp-Turtle decision could beinterpreted as allowing Members to take uni-lateral actions based on the way in whichproducts are produced (i.e., the way in whichshrimp are harvested), and that these actionscould be justified under Article XX as long asthey were not implemented in an arbitrary ordiscriminatory manner.

By the close of the 1990s, the field of tradeand environment was receiving much moreattention than at its start. Among other issues,eco-labelling, trade in genetically modifiedorganisms (GMOs) and perverse subsidies innatural resource sectors were providing poli-cy-makers with a host of new challenges.Supply chain issues were gaining prominence,and the use of private-sector green procure-ment schemes, for instance by European gro-cery retailers, was leading to a reorganizationof international production and of relations

between exporters, distributors and con-sumers. Dramatic street protests by environ-mental and other groups at the WTO’s failedSeattle Ministerial Conference in 1999 servedto remind trade negotiators that the multilat-eral trading system needed to find a way toaddress how it dealt with the environment.However, developing countries remainedwary, not least because they saw their owntrade and environment concerns—such asgreen protectionism, the export of domesti-cally prohibited goods and the equitable treat-ment of their biological resources—take aback seat to developed country trade andenvironment issues at the WTO.

Doha and BeyondAt the Doha Ministerial Conference in 2001,WTO Members decided to launch negotia-tions that, for the first time, would includetrade and environment as part of the negoti-ating agenda. The negotiating issues agreedunder Paragraph 31 of the Doha MinisterialDeclaration were primarily those advocatedby developed countries: the relationshipbetween WTO rules and specific trade obli-gations in MEAs; observer status for MEAsecretariats; and the liberalization of trade inenvironmental goods and services. Thisreflected the perception that accepting anenvironmental mandate remained a trade-offfor developing countries, which have notbeen demandeurs in these areas.

Paragraphs 32, 33 and 51 make up Doha’s“non-negotiating” trade and environmentmandate. Paragraph 32 focuses the work ofthe CTE on three areas: the effect of envi-ronmental measures on market access; therelevant provisions of the Agreement onTrade-related Aspects of Intellectual PropertyRights (TRIPS); and eco-labelling. Paragraph33 outlines the importance of capacity build-ing and encourages environmental impactassessments. Paragraph 51 instructs the CTEand the Committee on Trade andDevelopment to “each act as a forum to iden-tify and debate developmental and environ-


6


mental aspects of the negotiations, in order tohelp achieve the objective of having sustain-able development appropriately reflected.”

Importantly, Paragraph 6 of the Preamble tothe Doha Declaration makes a detailed casefor the trade and environment linkage:

We strongly reaffirm our commitment tothe objective of sustainable development,as stated in the Preamble to the MarrakechAgreement. We are convinced that theaims of upholding and safeguarding anopen and non-discriminatory multilateraltrading system, and acting for the protec-tion of the environment and the promo-tion of sustainable development can andmust be mutually supportive. We takenote of the efforts by Members to conductnational environmental assessments oftrade policies on a voluntary basis. We rec-ognize that under WTO rules no countryshould be prevented from taking measuresfor the protection of human, animal orplant life or health, or of the environmentat the levels it considers appropriate, sub-ject to the requirement that they are notapplied in a manner which would consti-tute a means of arbitrary or unjustifiablediscrimination between countries wherethe same conditions prevail, or a disguisedrestriction on international trade, and areotherwise in accordance with the provi-sions of the WTO Agreements. We wel-come the WTO’s continued cooperationwith UNEP and other inter-governmentalenvironmental organizations.

The Doha Declaration also makes the linkagein other key areas. For example, on agriculture,the Declaration highlights “the need to protectthe environment” as one of the non-trade con-cerns that should be taken into account in thenegotiations. On intellectual property rights,the Doha Declaration instructs the TRIPSCouncil to examine the relationship betweenthe TRIPS Agreement and the Convention onBiological Diversity (CBD), the protection oftraditional knowledge and folklore. On fish-eries, Paragraph 28 of the Declaration man-


7

I

continued from page 5

However, as a global citizen, I believe that theinternational arena should demand enforce-ability and accountability in the implementa-tion of national environmental regulations.Once nations have set their environmental lawsand regulations, they should have an interna-tional obligation to ensure that these laws andregulations are implemented. We resist thepush for international regulations in the nameof sovereignty, but bad governance at homemeans that national laws are not necessarilyenforced.

In developing countries, implementation ofnational environmental laws remains unsatis-factory. Politicians tend to enact environmen-tal legislation in response to popular discon-tent or concern over the state of the environ-ment or international pressures. However, thecapacity and/or willingness to enforce existinglegislation remain low. It is fair for developingnations to demand the right to develop theirown environmental standards and regulationsto match their economic development. But it isthe obligation of every country to enforce itsnational environmental legislation. The futureof the trade and environment link will bedetermined not just by the international regu-lations to which we agree, but also by how wellwe enforce our domestic regulations pertainingto both trade and environment.

2. Shift of Focus from PPMs to Consumptionand Disposal. There is an urgent need forthe debate to look at the entire productlifecycle rather than just one part of it.Much of the trade and environment debateto date has revolved around process andproduction methods (PPMs). This is, ofcourse, very important. However, it is nowtime that the focus of the debate be broad-ened to include the entire product lifecycle,which includes not just externalities stem-ming from the production of goods, but alsofrom their consumption and disposal. Theobsessive focus on PPMs unfairly shifts theburden onto developing countries as thevillains of environmental degradation and

continued on page 8



8


ends up targeting outdated production meth-ods mostly used in developing countries, with-out being equally vigilant about externalitiesstemming from lavish consumption and irre-sponsible disposal. Some of the most severeenvironmental effects come not from PPMs,but from consumption and disposal of prod-ucts.

Beyond this, it should be noted that thedebate over whether PPMs are consistent withWTO rules could be solved by delving into theoriginal intention of the 1995 TechnicalBarriers to Trade (TBT) Agreement and the sub-sequent practice of countries. There is a subtledifference in the definition between technicalregulations and standards that leaves room forthe argument that PPMs unrelated to the prod-uct could be used in standards to differentiate“like” products. To make the situation evenmore confusing, many of the countries thatargue that the use of PPMs to differentiate“like” products is WTO-inconsistent, actuallyuse PPMs in eco-labelling and other voluntarylabelling schemes (for example, to differenti-ate organic food). This could be clarifiedthrough legal interpretation, but it would befar more desirable to settle the issue at thepolitical level, where agreement can be soughton when and where PPMs are an acceptablemeans to differentiate products.

3. Tariff Escalation and Export Taxes. Weneed to carefully consider the perverse eco-nomic and environmental effects of the tar-iff escalation that developing countriesface. Given the capital constraints thatmany developing nations face, they arecompelled to raise capital either by bor-rowing, by attracting investment or bygenerating trade surpluses. Both borrowingand attracting investment pose difficultiesand depend on factors that go beyond theirdomestic policies. Thus, developing nationsoften need to rely on their capacity to gen-erate trade surpluses to service their capi-tal requirements. Developing nations wouldlike to trade in value-added exports asthese create more employment and greater

opportunities for sustainable development.However, the more value developing coun-tries add to their exports and the higherthey go up the production value chain, themore tariffs these products face because oftariff escalation in export markets.

In addition to being a drag to develop-ment, tariff escalation leads to perverseeffects on the environment. Due to tariffescalation on value-added exports, manydeveloping nations need to rely almostexclusively on trade in commodities, whichface lower tariffs. This turns out to be anincentive for the over-exploitation of natu-ral resources. The problem is compoundedbecause some developing countries tax orrestrict exports of commodities in order tooffset the effects of tariff escalation ontheir processing industries. By taxingexported commodities, developing coun-tries are providing cheap inputs to process-ing industries to offset the trade conse-quences of tariff escalation. These effectsthus feed into a perverse cycle that ulti-mately leads to over-exploitation of naturalresources with negative consequences forthe environment.

In short, if the trade and environment debateis to make any meaningful progress, it has tobroaden its focus to include three key dimen-sions. First, it has to broaden its focus toinclude the enforcement of national regula-tions as an international obligation. Second, ithas to broaden its focus to encompass theexternalities stemming from the entirety of theproduct lifecycle, including consumption anddisposal. Third, and importantly, the debatehas to examine the impact of policy failuresand market instruments—rather than just theimpact of environmental regulations—on nat-ural resources and environmental quality.

Written by Adil Najam and Hyun Jung Jo Choibased on a conversation with Hector Torres.Hector Torres, from Argentina, served as a tradenegotiator for his country and is now anExecutive Director at the International MonetaryFund (IMF). The opinions above were expressedin his personal capacity.


dates Members to “clarify and improve WTOdisciplines on fisheries subsidies, taking intoaccount the importance of this sector to devel-oping countries.”

Less than a year after the launch of the Dohanegotiations, leaders at the 2002 WorldSummit on Sustainable Development(WSSD) sent a clear message to WTO nego-tiators to step up their efforts to integrate sus-tainable development objectives into thetrade round. Amongst other commitments,the Plan emphasized the phase-out of harm-ful fisheries and energy subsidies and dis-couraged the use of unilateral actions to dealwith environmental challenges outside coun-tries’ jurisdictions.

Since Doha, Members have met several timesin the CTE in Special Session to address thenegotiating mandate. European countrieshave remained the most active supporters ofthe MEA-WTO relationship discussions.Some of the larger developing countries haveengaged actively on different aspects of themandate, for instance by analyzing thepotential benefits (and pitfalls) for theireconomies of further trade liberalization inenvironmental goods and services. However,modest progress has continued over this timeand, slowly but surely, the trade and environ-ment agenda has started digging in its rootswithin the corridors of the WTO.

Interests and Fault LinesThe major players in the debate on the trade-environment relationship have traditionallybeen European countries and the U.S.Developing countries have recently becomemore engaged, particularly around specificissue-areas, such as the relationship betweenthe TRIPS Agreement and the CBD. North-South alliances around certain issues, such asfisheries subsidies, have also emerged. Inaddition, non-governmental and inter-gov-ernmental bodies have made invaluable con-tributions to the field. Table 1 summarizesthe involvement of these actors from before1990 to the present.


9

I

It’s time tomake the globaldebate localBy Amb. K.G.Anthony Hill

The barriers hadalready been breached.It was left to theyouthful, sometimesorganized non-governmental groups to admin-ister the coup de grace. To the rootsy, rockingreggae beat of Bob Marley, down came theBerlin Wall in 1989. The era of NGO activismwas in full swing. “Seattle” was still to come.

It was a decade earlier that the quickly con-gealing Washington Consensus of privatization,liberalization and “outing” the State had bul-lied its way into the consciousness of theSouth. The transnationalization of businesswas opening markets, expanding its networksof consumers.

The pressure of North-centred NGO idealismand realism had moved the U.S. Congress topressure the World Bank to pay attention tothe environment in its client countries.Notwithstanding, one of the Bank’s senior offi-cers with the cold logic of the sinecuredbureaucrat, observed that the trade-off forgrowth was a certain degree of environmentaldegradation and pollution.

Transnational business, it seemed, was not per-turbed. No pressure from them on Congress.After all, they were the beneficiaries of sub-stantial business in environment-relatedinvestment projects, through OECD export cred-its and multilateral financing. The sums intransacting cross-border trade and projectdesign and construction are quite substantial.More to the point, a significant percentage isin areas that are quite definitely environment-affecting, energy-intensive projects.

There is no gainsaying that the spread of less-than-safe-and-friendly environmental technol-ogy and the rise in greenhouse gases haveincreased ambient temperatures around theworld with adverse effects felt mainly in poorcountries.

continued on page 11



10

Table 1: Key actors and the evolution of the trade and environment debate.

Actors Pre-1990s 1990s Seattle-Doha Post-Doha

Europe • Intra-EU • Support for MEAs • Support for • Push for broad harmonization clarification of MEA- interpretation of Doha

• Support for WTO relationship mandatemultilateral • Seek recognition of • Support negotiations solutions to eco-labelling in on eco-labellingenvironmental WTO agreementsproblems

US • Support for MEAs • Use of unilateral • Support for • Not a demandeur on trade-based increased WTO-MEA negotiationssolutions to transparency and • Support liberalization environmental NGO participation of environmental problems goods and services

• Rejection of the precautionary principle in trade

Developing • Concern over • Market access • Resistance to • Reluctant acceptance Countries trade in concerns, inclusion of of WTO environmental

domestically especially over environmental agendaprohibited goods unilateral use of negotiations in • Push for narrow (DPGs) trade measures for the WTO interpretation of Doha

• Support for MEAs environmental environment mandate• Suspicion over purposes • Strengthened

use of trade • Support for “Southern” agendameasures for TRIPS-CBD environmental linkagepurposes

IGOs • Some key • Implementation of • UNEP, WTO and • Limited inclusion of (including agreements MEAs with trade UNCTAD collaborate MEAs and UNEP at CTE MEAs) adopted: CITES, measures and on building negotiations on

Montreal Protocol, negotiation/ synergies MEA-WTO relationshipBasel Convention adoption of new • Important

• UNEP, OECD MEAs capacity building contribute on • Rio Earth Summit rolecoordination and highlights trade- • Certain MEAs analysis environment accredited as

linkages observers to CTE

NGOs • Little NGO • Rapid emergence • Major protests at • Concern over MEA-WTO involvement of civil society Seattle highlight mandate

groups focusing public concern • Important on trade and • Lobbying in Europe contributions made environment and elsewhere through capacity

pressures the WTO building, analysis, and to include trade increasing and environment specialization and on agenda knowledge


The European Union, frequently supportedby “like-minded” countries such asSwitzerland and Norway, has been the centralproponent of including environmental issuesin trade discussions at the multilateral level.This position is informed, to a great extent,by the EU’s support for multilateral environ-mental solutions and the influence of envi-ronmental groups. However, most othercountries have remained suspicious ofEurope’s enthusiasm for environmental issuesat the WTO, particularly its support for theprecautionary principle in instances of scien-tific uncertainty. Developing countries, inparticular, are wary of European efforts topush eco-labelling and the clarification of theMEA-WTO relationship. They view theseefforts as an attempt by the EU to seek addi-tional space to block imports in sensitive sec-tors and obtain trade-offs for concessions inother areas, such as agriculture.

The EU has made increasing efforts to inte-grate its trade strategy with the principles ofsustainable development. In addition to con-ducting sustainability impact assessments(SIAs) of all its new trade arrangements, theEU has launched initiatives to help develop-ing countries gain from sustainable trade.These include the promotion of trade in sus-tainably-produced products, funding fortechnical assistance on trade and environ-ment and an online “help desk” for develop-ing country exporters to navigate Europe’soften cumbersome import standards.However, many remain unconvinced andsome developing countries have expressedconcern that SIAs could enable hidden pro-tectionism under the guise of environmentaland social concerns.

The United States has a mixed track recordon trade and environment. On the one hand,its support for PPM-based trade measures atthe WTO, reform of fisheries subsidies rules,and inclusion of environmental provisions inregional and bilateral trade arrangementspoints to an appreciation for balancing tradepolicy with effective implementation of envi-


11

I


It was finally at the World Trade Organization(WTO) that these two “interests” met. One topress for negotiations on trade in services; andthe other to press for trade and environment.Irresistible! The negotiators from developedcountries, yielding to their often-contendingconstituencies, secured consensus for theagenda. When the city-named negotiations of“green” Seattle and “Neanderthal” Cancun“failed,” the innovative politico-bureaucratsremained with “Development” Doha as thepromise of rule-making and market opening.

How can the intellectual playing field be lev-elled? How can developing country negotiatorsnavigate the tributaries of issues complicatedby design? What specifically can be done torescue the WTO-centred economic enterprise ofinternational trade as it is besieged from with-in and without? And how do we make sense ofthe seamless connections between productionof goods; delivery of goods and services; thetechnologies of production and transport; thefinancing of trade; the effect of, and on theenvironment; and how all these are facilitatedby institutions endowed with capacity?

The General Agreement on Tariffs and Trade(GATT) embodies principles that are indispen-sable for civilized discourse among materiallyunequally endowed partners. Who would wishto “negotiate” binding commitments, if thereis no firm expectation that the word is as goodas a bond and the agreement is law, binding onall parties and administered with equity? Theprinciples of national treatment and non-dis-crimination are tempered, as always, by equi-ty; the recognition of “infant industry”;“exceptions”; “safeguards”; and “special andmore favourable treatment for developingcountries.”

The objectives of full employment, the opti-mum use of all resources (and here I include“human,” though not to be equated to a barrelof oil), sustainable development and condi-tions of competition are certainly ones to beanchored. The problem arises when interestspush so hard and fast that the dynamic equi-librium of wealth-generating, welfare-enhanc-ing international trade and finance is so dis-turbed that inequity results.




12


The generic term “South” was always contrived.When equated with “Third,” the die was cast.Thus was lumbered the “Third World.” So too,the term “developing countries.” These termshave outlived their utility. At the same time,where is the serious, practical collaborationamong developing countries in general, South-South cooperation? Where is the collaborationand involvement of all their stakeholders in afocused way, and with the fulsome support oftheir heads of government and state?

The governments of developing countries andtheir private sectors, NGOs, academics andcitizens should be more intensively engagedamong themselves in the unfolding negotia-tions on the inter-related environment-facili-tating measures for trade. The technical assis-tance and capacity building of the WTO, deliv-ered by a Secretariat, can be self-serving andcounterproductive. There is a pressing needfor local circumstances to be the basis forinformation and knowledge driving theirnegotiating positions.

There is clear and indisputable evidence thatefficient trade facilitation is welfare-enhanc-ing. There is equally clear evidence that thepollution from road, air and sea transportbears heavily on the environment. As negoti-ations on trade facilitation take place underthe Doha mandate, it is also clear that with-out fulfillment of trade-facilitation supply-side commitments, it will be difficult fordeveloping countries to meet their end of thebargain and secure the balance of benefitsfrom the negotiations.

The WTO dispute resolution mechanisms, theiroperation and their decisions—so hugelyoversold—are fast becoming instruments ofinequity, in defiance of common sense, and ofthe values and principles of its predecessor,the GATT. Can there be any doubt thatunchecked, the present practices will taint,even distort, production and trading patterns?The adjudication of any likely disputes in thefield of trade facilitation could be quite inter-esting. Is it premature to consider what thesemight be? Could one be the failure to fulfillthe commitments for infrastructure, or techni-cal assistance?

Both technology and finance are critical com-ponents of all trade. However, note their dif-ferential treatment in the present agenda.

They are not integral to the ongoing negotia-tions. The Committees on the Transfer ofTechnology and Trade and Finance are studygroups, with little chance of their findingsmaking their way into the rules of rights andobligations. This lack of seamlessness doesnot seem to make sense.

The question arises whether the negotiationson both market access commitments and ruleson environmental goods and services will con-tribute to improving the environment in gen-eral and the specific objectives of sustainabledevelopment.

The conventional lens of “North-South” negoti-ations at the multilateral level is clearly not onethat is likely to lead to optimum productiveresults across the board. The increasing numberof regional trade agreements is now in the sameorder of magnitude as multilateral environmen-tal agreements. Trade-related environmentalsolutions may well have to be dealt with moreat the regional level, if the desired welfare ben-efits from trade liberalization are to be realized.The trade impact assessment tools and Agenda21 principles must therefore be used.

An important consideration will be the institu-tional arrangements that will accompany theseincreased regional arrangements. Establishing aWorld Environment Organization would beoverkill. It would only add layers of non-produc-tive bureaucracies, detracting from the necessaryfocus at the national and regional level.

No. The answer is not to overload the carryingcapacity of the international organizationallandscape with more and more politico-bureaucracies, which, in turn, become purvey-ors of their own agendas while developingcountries continue to be mesmerized by poli-cy dialogues and other buzzwords emanatingfrom outside their societies.

It may well be that the WTO itself should scaleback its ambitions.

Ambassador K.G. Anthony Hill, from Jamaica,is a seasoned trade negotiator and was hiscountry’s former Permanent Ambassador to theUnited Nations in Geneva.


ronmental regulations. On the other hand,its refusal to “play by the rules” in key MEAswith trade-related elements—such as thoseon biodiversity, climate change and biosafe-ty—has made its trading partners skeptical ofits environmental intentions. At Doha, theU.S. was less enthusiastic than the EU aboutincluding trade and environment on thenegotiating agenda. Indeed, the U.S. ensuredthat the negotiations would not open upmore space for consideration of the precau-tionary principle in WTO rules, and hassince sided with developing countries inadvocating a limited interpretation of theMEA-WTO mandate.

Developing countries have engaged in tradeand environment issues at the GATT at leastsince the 1980s. In 1982, a number of devel-oping countries at the GATT expressed con-cern that products prohibited in developedcountries due to environmental hazards,health or safety concerns—such as certainchemicals and pesticides—continued to beexported to them. With limited informationon these products, developing countriesmade the case that they were unable to makeinformed decisions regarding their import.Domestically prohibited goods (DPGs) sub-sequently became a standing item on theagenda of the CTE, though the issue hasreceived less attention since 2001 due to thefocus of CTE discussions around the Dohaissues.

While developing countries have been activecontributors on trade and environment at theWTO, they have traditionally taken a defen-sive position. This is due primarily to con-cerns that trade-related environmental meas-ures could be used as barriers to their exports.Developing countries have also stronglyobjected to any leeway in WTO rules for theuse of unilateral or extraterritorial trade meas-ures to enforce environmental norms. Theyargue that countries should be able to settheir own environmental priorities, takinginto account their level of development, andthat they should not be subject to the domes-

tic environmental standards set in othercountries. At the same time, developingcountries have advocated a range of issuesthat reflect Southern trade and environmentinterests. In addition to concerns surround-ing trade in DPGs, many developing coun-tries have sought to reconcile the TRIPSAgreement with the CBD. For their part, theleast developed countries (LDCs) haveemphasized the importance of financialresources for technical assistance to meetNorthern environmental and health stan-dards.

Developing countries have also joinedNorth-South coalitions. These include the“Friends of Fish” which, in pushing for disci-plines on fisheries subsidies, groupsArgentina, Chile, Ecuador, Peru and thePhilippines together with Australia, Iceland,New Zealand, Norway and the U.S. North-South cooperation has further emerged onenvironmental aspects of agriculture, with awide coalition of developing and developedagriculture-exporting countries (the CairnsGroup) denouncing the environmentally-harmful effects of agricultural subsidies.Argentina, Chile and Uruguay have joinedAustralia, Canada and the U.S. in opposingrestrictions on transboundary movements ofGMOs under the CBD’s Biosafety Protocol,while some African countries have voicedsupport for the EU’s precautionary approachto GMO imports.

Developing countries agreed to the MEA-WTO linkage mandate from Doha, but onlyas part of a wider package that containedother trade-off issues, including reductions inagricultural subsidies. Since Doha, manydeveloping countries have participatedactively in the negotiations, for the most partpreferring a narrow approach to the mandateto ensure talks do not result in further regu-latory space for environmental provisionsthat could restrict their exports. Some devel-oping countries are also cautiously exploringpotential benefits from liberalization of tradein environmental goods and services.


13

I


Intergovernmental organizations haveplayed a key role alongside WTO Membersin the discussions on the trade-environmentrelationship. Secretariats from relevant MEAshave been regular invitees to the CTE andhave participated in a limited fashion in theenvironment negotiations in the DohaRound. The United Nations EnvironmentProgramme (UNEP) has played a useful rolein highlighting synergies and mutual sup-portiveness between MEAs and the WTO.UNEP has been an observer at the CTE since1995 and, as host of the 1992 Rio Summit,was instrumental in elaborating the linksbetween the trade and environment regimes.Together with the UN Conference on Tradeand Development (UNCTAD), UNEP hasengaged in extensive capacity building andresearch activities for developing countries ontrade and environment.

Many non-governmental groups haveemerged in both the North and South to fol-low the multifaceted issues around trade andenvironment. The number of these groupsmushroomed in the mid-to-late 1990s, duein large part to the coming into force of theWTO and to the growing public interest inpursuing sustainable development. The fieldsof expertise of NGOs active in trade andenvironment are varied, and their impact canbe substantial, especially through interactionwith trade policy-makers. In particular, thesegroups have contributed significantly asmonitors of the trade policy-making process,as knowledge providers, information dissem-inators and capacity builders.

Trends and FutureDirectionsOver the next five to 10 years, the environ-ment is likely to remain on the trade agenda,

but in different ways than it is now. OnceWTO Members come closer to mutually-agreed terms around the relationship betweenWTO rules and MEAs, further space couldopen up to address areas of trade and envi-ronment concern to developing countries.China, India and Brazil—all members of theGroup of Twenty (G20) of developing coun-tries opposed to Northern agriculture subsi-dies—can be expected to bring their owntrade-environment priorities to the table,including the environmental benefits ofreductions in agricultural support. The ques-tion of GMOs is also likely to challenge thetrade-environment relationship for years tocome.

Changes in modes of international produc-tion, partly as a result of trade negotiations,are likely to shift issues of priority in tradeand environment to more concrete areas,such as negotiating mutual recognition agree-ments for different product standards in dif-ferent countries. Global supply chains andconsumer preferences can also be expected toplay an increasingly important role. Somedeveloping countries, which can afford to,have already adopted their own domesticlabelling and certification schemes inresponse to consumer preferences in theNorth. To continue meeting these challengesand to advance sustainable development, allcountries will have to resist pressures to buildprotectionist fences and instead promotecooperation on green spaces. As neighboursin a globalized world economy, trade andenvironment cannot afford not to get along.


14



15

I

Min

iste

rial

Co

nfe

ren

ce

Gen

eral

Co

un

cil

Gen

eral

Co

un

cil m

eeti

ng

as

the

Dis

pu

te S

ettl

emen

t Bo

dy

Trad

eN

ego

tiat

ion

sC

om

mit

tee

Co

un

cil f

or

Trad

e in

Go

od

s

Co

mm

itte

e o

nTr

ade

and

Envi

ron

men

t(C

TE)

Co

mm

itte

e o

nTr

ade

and

Dev

elo

pm

ent

(CTD

)

Co

un

cil

for

Trad

e-re

late

dA

spec

ts o

fIn

telle

ctu

alPr

op

erty

Rig

hts

(TRI

PS)

Co

un

cil f

or

Trad

ein

Ser

vice

s

Co

mm

itte

e o

nM

arke

t A

cces

sC

om

mit

tee

on

Ag

ricu

ltu

re

Co

mm

itte

e o

nTr

ade

and

Eniv

ron

men

tSp

ecia

l(N

ego

tiat

ing

)Se

ssio

n(C

TE-S

S)

Co

mm

itte

e o

nTr

ade

and

Dev

elo

pm

ent

Spec

ial

(Neg

oti

atin

g)

Sess

ion

(CTD

-SS)

TRIP

S Sp

ecia

l(N

ego

tiat

ing

)Se

ssio

n

Neg

oti

atin

gG

rou

po

n M

arke

t A

cces

s(N

AM

A)

Neg

oti

atin

g G

rou

po

n R

ule

s

Co

mm

itte

e o

nA

gri

cult

ure

Spec

ial

(Neg

oti

atin

g)

Sess

ion

Co

un

cil f

or

Trad

e in

Ser

vice

sSp

ecia

l(N

ego

tiat

ing

)Se

ssio

n

Co

mm

itte

e o

nSu

bsi

die

s an

dC

ou

nte

rvai

ling

Mea

sure

s

neg

oti

ates

on

en

viro

nm

enta

lg

oo

ds,

th

e re

lati

on

ship

bet

wee

n M

EAs

and

th

eW

TO, a

nd

mo

re

neg

oti

ates

on

imp

rove

dW

TO d

isci

plin

es o

nfis

her

ies

sub

sid

ies

neg

oti

ates

on

th

ere

lati

on

ship

bet

wee

n t

he

TRIP

S A

gre

emen

t an

d t

he

Co

nve

nti

on

on

Bio

log

ical

Div

ersi

ty

neg

oti

ates

on

ag

ricu

ltu

ral

liber

aliz

atio

n a

nd

exe

mp

tio

ns

for e

nvi

ron

men

tal p

rog

ram

s(“

Gre

en B

ox” e

xem

pti

on

s)

neg

oti

ates

on

lib

eral

izat

ion

of t

ariff

s o

n fo

rest

,fis

her

ies

and

oth

ern

atu

ral r

eso

urc

e p

rod

uct

s

neg

oti

ates

on

lib

eral

izat

ion

of s

ervi

ces

incl

ud

ing

envi

ron

men

tal

serv

ices

mak

es a

nd

ad

op

ts ru

ling

s o

n e

nvi

ron

men

tal i

ssu

es t

hat

ari

se in

dis

pu

tes

bet

wee

n M

emb

ers,

so

met

imes

eff

ecti

vely

“cre

atin

g la

w”

in t

he

abse

nce

of c

lari

ty in

th

e W

TO A

gre

emen

ts t

hem

selv

esan

d la

ck o

f ag

reem

ent

in o

ng

oin

g n

ego

tiat

ion

s

Figu

re 1

. Ann

otat

ed o

rgan

ogra

m o

f th

e W

orld

Tra

de O

rgan

izat

ion.



16


It is impossible to discuss the trade and envi-ronment policy formulation process withoutenquiring about the nature of the policy rela-tionship involved. Does trade and environ-mental policy differ from the policy relation-ship between trade and any other non-com-mercial consideration? Arguably, there isnothing intrinsically different about the tradeand environment relationship that distin-guishes it from, let us say, the “trade andhealth” or “trade and national security” rela-tionships. All relationships involving tradeand non-commercial concerns tend to sharethe same set of challenges in the policy for-mulation process, with the principal chal-lenge being that of reconciling trade objec-tives with broader public policy goals.

However, of the many “trade and” relation-ships, trade and environment tends to cap-ture public and media attention the most,since it is a subject that is not only close topeople’s minds, but also to their hearts. TheTuna-Dolphin dispute, settled under theGeneral Agreement on Tariffs and Trade(GATT), and the Shrimp-Turtle dispute, set-tled under the World Trade Organization(WTO), captivated public attention withimages of drowning dolphins and sea tur-tles—species that can easily stir emotions. Tosome extent, the trade and environment rela-tionship has now come to symbolize all the“trade and” relationships, pointing to the ever

expanding reach of the multilateral tradingsystem. The multilateral trading system todayno longer stops at a country’s borders, or attariffs; it goes beyond those borders to ensurethat health, environmental and other types ofregulations do not constitute unnecessaryobstacles to trade. So how then do countriesformulate policies at the complex trade andenvironment interface?

Actors and InstitutionsPolicy Formulation at the National Level

All “trade and” issues involve more complexpolicy formulation processes than do theissues that are mainly commercial in nature.They typically involve a broader set of inter-ests; a broader set of actors; and a broader setof fora within which policy deliberation andformulation take place. At the national level,a multitude of different actors can beinvolved in the formulation of trade andenvironmental policies, including govern-mental bodies, industry, non-governmentalorganizations (NGOs), various internationalorganizations and, in many developing coun-tries, aid agencies.

Governmental actors can consist of the dif-ferent agencies responsible for trade and forenvironmental policy; or, depending on theissue, more specialized institutions dealingwith natural resources (such as ministries of

Setting the Context

17

I

The Trade and Environment PolicyFormulation Process

Doaa Abdel Motaal

•“…it is mainly developed countries that have the financial resources to bring environmental experts to WTO meetings held in Geneva from their capitals.

Developing countries seldom do so…”

•


fisheries or energy). At the national level,industry is involved in policy formulationmainly in order to advance the “economicpoint of view” on an issue, and NGOs toadvance the economic, developmental orenvironmental angles. The regional offices ofinternational organizations such as the WorldBank, the International Monetary Fund(IMF), the United Nations EnvironmentProgramme (UNEP) and the United NationsDevelopment Programme (UNDP) caninfluence policy formulation by giving policyguidance to governments, or funding target-ed studies and projects. Moreover, aid agen-cies in developing countries can play a partic-ularly influential role in giving policy adviceand direction to governments.

Whereas the coordination process at thenational level among different actors andstakeholders is often led by trade agencies,some countries have established special inter-ministerial task forces to explore the tradeand environment policy interface. These tendto act as more neutral fora for policy deliber-ation, supposedly giving equal weight toenvironmental considerations as they do totrade.

Figure 1: Policy formulation at the nationallevel.

Policy Formulation at the InternationalLevel

On the international stage, the actors dependon the institutions in which trade and envi-ronment, or environment and trade, discus-sions take place. The principal trade institu-tions are the WTO and the United Nations

Conference on Trade and Development(UNCTAD), and the principal environmen-tal institutions are multilateral environmentalagreements (MEAs) and UNEP. To a largeextent, however, trade and environment dis-cussions at the international level revolvearound developments in the WTO.

There are a number of reasons for this. First,while MEAs often negotiate trade measuresfor environmental purposes within theiragreements, there are no institutional spaceswithin MEAs in which governments may dis-cuss all aspects of the trade and environmentrelationship, nor is there such a forum with-in UNEP. The WTO’s Committee on Tradeand Environment (CTE)—a forum exclu-sively reserved for trade and environment dis-cussions among governments—has no paral-lel in any other international institution.

To explain, whereas discussions may be heldin the Convention on Biological Diversity(CBD) on the relationship between theWTO Agreement on Trade-related Aspects ofIntellectual Property Rights (TRIPS) and theCBD, other aspects of the trade and environ-ment relationship cannot be discussed in thatMEA. Thus, in MEAs, the trade and envi-ronment relationship is only addressed in afragmented way. While this is not a weaknessof the MEAs, and could perhaps even betheir strength in that they are able to addressnarrower and better-defined sets of issues, itstill means that the WTO offers the onlyplatform at the international level for a moregeneral, cross-cutting debate. Second,because much of the trade and environmentdiscussion at the international level isdesigned to influence WTO rules (with theenvironmental community wanting to relaxor “green” those rules), and because trade andenvironment disputes have a tendency togravitate towards the WTO, the WTO hascome to occupy centre stage.

Principal Fora within the WTO

How, then, is trade and environmental policyformulated within that organization? What

Differential GovernmentalActors (trade, natural

resources, etc.)

Regional Offices ofInternational Organizations

Ex. UNEP/UNDP

Industry

NGOs

Aid Agencies

Policy Formulation atthe National Level


18


are the relevant fora within the WTO? Whenthe WTO was established in 1995, the CTEwas created as a forum for dialogue on thevarious linkages between trade and the envi-ronment. It was asked to examine the tradeand environment relationship in relation toall areas of WTO rules (i.e., issues related to“goods,” to “services” and to “intellectualproperty”), and advise the WTO GeneralCouncil on the need for changing WTOrules. It was the very first forum created with-in the WTO for “making recommendations”on policy formulation in the area of trade andenvironment.

In terms of its mandate and institutional set-up, the CTE was strong in some respects, butweak in others. It was strong in the sense thatit reported to one of the highest decision-making bodies of the WTO (the GeneralCouncil is second only to the WTO’sMinisterial Conference), and also because itsmandate was to explore the trade and envi-ronment relationship in relation to all areas ofWTO rules (i.e., issues related to “goods”area, to “services” and to “intellectual proper-ty”). However, it was weak in the sense that,unlike certain other committees of theWTO, it could not itself alter any WTOAgreement. Any change of rules can only beproposed by the CTE to the GeneralCouncil, and it is up to the Council to decidewhat to do with a proposal. However, sinceits establishment, the CTE has not recom-mended any change to the rules of the multi-lateral trading system.

In addition to the CTE, a number of otherWTO bodies discuss issues that are relevantto the trade and environment relationship,such as the Committee on Technical Barriersto Trade (TBT) and the Negotiating Groupon Rules, on environmental product require-ments and environmental impacts of subsi-dies. While these other committees do nothold discussions on trade and environmentin a general sense, they tackle very specificaspects of the trade and environment rela-tionship, like that of fisheries subsidies.

The Trade and Environment Policy Formulation Process

19

I

The case forintegratedassessment By Hussein Abaza

Environment needs tobe put at the centreof all planning andde c i s i o n - ma k i ngprocesses and tradeneeds to be seen as a means of achieving sus-tainable development and poverty reduction;not an end in itself.

Traditional sectoral approaches to developingpolicies, plans and programs have proven to beineffective. We therefore need to move towardsdeveloping integrated policies that are basedon a full understanding of the linkages andinteractions among the environmental, socialand economic dimensions of sustainable devel-opment. Environmental and natural resources,and the services they provide, can and shouldbe deployed to achieve economic and socialobjectives. Environmental policies can bedesigned to promote sustainable trade andpoverty reduction. On the other hand, environ-mentally-sound trade policies can also bedesigned to promote sound environmentalmanagement and poverty reduction.

Moreover, it is essential that policies at thenational level go hand-in-hand with interna-tional-level decision-making. Likewise, inter-national agreements should also be designedto take account of the national implications ofsuch agreements. International initiatives aregenerally designed and concluded to addresssectoral issues—whether environmental,social or economic—and international meet-ings to address sustainable development havebeen devoid of operational mechanisms torealize their objectives.

The global environmental crisis is not beingeffectively addressed and trade liberalizationis contributing to resource depletion and envi-ronmental degradation on a massive scale.And yet, the benefits of trade are not beingdistributed equitably—the gap between richand poor, North and South, continues towiden while extreme poverty and hunger




20


persist. Major shifts in mindset are needed toensure the complementarity of economic,trade and environmental policies that realizethe objectives of sustainable developmentand broader poverty reduction.

While there is no lack of international fora,agreements or pronouncements, there is a lackof real political will and genuine commitmentbacked by the necessary institutional and finan-cial mechanisms. Multilateral environmentalagreements (MEAs) are toothless and weak andthe United Nations Environment Programme(UNEP) needs to be strengthened. While someprogress is being made on some of theMillennium Development Goals (MDGs), we arestill a very long way from achieving them. TheWorld Trade Organization (WTO) pays lip service,at best, to environmental concerns. To contin-ue to have international instruments that onlyaddress one dimension will fail to deliver uponthe goal of sustainable development.

The international community is reactive. In mostcases, it addresses a crisis in response to inter-national calls for action, but fails to deal withthe root causes. Often, international institutionslack the necessary authority to implement andmonitor proposed solutions. Therefore, interna-tional institutions need to change the way theyoperate and the process needs to be fed byempirical research and scientific studies basedon national experiences. Integrated assessmentand planning is one way through which we canstart to make the necessary changes. It can beused as a tool to design trade policies thatreduce environmental and social impacts andmaximize the net development gains from trade.Ideally, trade agreements need to be subjectedto such an assessment to provide a holistic pic-ture from a global perspective.

Efforts need to be consolidated to develop anintegrated assessment framework that builds onthe experiences and knowledge of countries andinternational institutions in this area. Such aninitiative could be developed by adopting a wideconsultative process. It then needs to be sub-jected to a broad peer review process and scruti-ny by governments, and relevant institutionsand organizations. Such a framework may beendorsed by the international community as avoluntary tool to be adopted and used initially

at the national level by countries to ensure thatpolicies—including trade policies—are devel-oped and implemented to achieve sustainabilityand poverty reduction. It could also be extend-ed for the assessment and design of regional andinternational policies and agreements.

The development of such a framework will assistin pooling international efforts towards adopt-ing a widely acceptable tool to be adapted atthe national level in the formulation and designof sustainable development polices, plans andprograms. This will save resources and effort andprovide a consistent message and an agreedapproach for national-level policy design andimplementation for sustainable development.The initiative will contribute to enhanced coor-dination by international development institu-tions and bilateral aid agencies. It should resultin a framework document and modalities forfacilitating its use and application as a first stepat the country level, then eventually at theregional and international levels. It shouldassist in achieving the following objectives:

1. Ensure that the economic, environmental andsocial considerations are analyzed and con-sidered at all stages of the design and imple-mentation of a plan, program and policy.

3. Analyze the sustainability implications offuture plans, policies and programs inaccordance with countries’ sustainabledevelopment goals.

4. Identify “win-win” options and assesstrade-offs.

5. Enhance public participation in decision-making, including involvement of margin-alized and affected communities.

6. Promote inter-ministerial dialogue andcoordination.

7. Promote capacity development at thenational level in the design and implemen-tation of sustainable development policiesthat enhance sound environmental man-agement and poverty reduction.

Hussein Abaza, from Egypt, is the Chief of theEconomics and Trade Branch of the UnitedNations Environment Programme (UNEP), basedin Geneva. This essay is written in his personalcapacity.


In 2001, the launch of what some have calledthe “Doha Development Agenda” (DohaRound) multiplied the number of WTO forawithin which trade and environment policyformulation takes place. The CTE in SpecialSession (CTE-SS) was created to act as a spe-cial arm of the regular CTE, and to conductnegotiations on the trade and environmentissues agreed to in Doha. Furthermore, vari-ous other new negotiating groups were creat-ed, some of which are negotiating on issueslinked to trade and environment. Forinstance, the Council for Trade in Services inSpecial Session is looking at liberalizing tradein environmental services (such as waste dis-posal services), and the Negotiating Groupon Rules (NGR) is looking at improvingWTO disciplines on fisheries subsidies. Thenegotiating groups that were created in theDoha Round are, of course, more powerfulfora than the regular bodies of the WTO inthe sense that they have been mandated toeither examine the potential for changingWTO rules in certain areas, or for makingcertain changes right away.

Figure 2: Principal fora for trade and envi-ronment discussions within the WTO.

The CTE-SS, for one, is more powerful thanthe regular CTE in that it can make changes tothe rules of the WTO if it so chooses. Onecondition is that the CTE-SS not change theoverall balance of rights and obligations underWTO agreements. However, it is also true thatthe CTE’s influence is broader in that it hasinstructions under the Doha mandate toexamine the environmental aspects of all DohaRound negotiations. Therefore, it can make

enquiries about the developments taking placein the different negotiating groups, as well aslaunch discussions on how environmentalconsiderations can best be integrated.However, it remains to be seen if the CTE willindeed succeed in injecting environmentalconsiderations into the negotiating process.

To influence the outcome of discussions inthe WTO, various other actors/fora conducttrade and environment work of their own.UNCTAD helps developing countries in for-mulating their national positions, and inreinforcing the “developmental” aspects ofWTO work. UNEP attempts to developcoordinated positions among the MEAs onWTO issues, so as to give better environ-mental guidance to the WTO. Industry con-tinuously lobbies WTO Members, throughindustry associations and chambers of com-merce, mainly to ensure that environmentalrequirements do not become obstacles totrade. And, finally, NGOs and civil societyexercise pressure on the WTO to ensure thatconsumer, environmental and developmentalconcerns, as well as many other interests areconsidered in policy formulation. They alsocontribute amicus curiae briefs (“friends ofthe court” briefs) to influence the course ofthe WTO dispute settlement process.

Principal Actors within the WTO andwithin Environmental Fora

For the most part, governmental trade or for-eign affairs representatives are the ones wholead trade and environment discussions inthe WTO. However, in the CTE and theCTE-SS, some countries are occasionally rep-resented by delegations that not only consistof trade officials, but also of environmentalones. Occasionally, specialists in technicalfields, such as in the areas of forestry or fish-eries, are included. However, it is mainlydeveloped countries that have the financialresources to bring environmental experts toWTO meetings held in Geneva from theircapitals. Developing countries seldom do so,and, in the past, have generally only done so

Other Regular Bodies(Ex. TBT Committee)

Other Negotiating Groups(Ex. the Negotiating Group

on Rules)

CTE

CTE in Special Session

Dispute SettlementBodyPrincipal Fora within the WTO


21

I


when UNEP has financed their environmen-tal representatives to attend UNEP meetingsorganized back-to-back with the CTE. WhenCTE meetings are attended by environmen-tal officials, discussions can have a greaterenvironmental focus. However, there is nocontinuity in their participation. In othermore technical WTO committees, it is morecommon for countries, both developed anddeveloping, to bring capital-based experts tomeetings, such as in the TBT Committee.

In many areas of WTO work, country group-ings—like the Group of Twenty (G20) or theCairns Group on agriculture—can play animportant role in policy coordination andformulation at the regional and internationallevels. However, in the environment area, nosuch groupings exist. The Asia PacificEconomic Cooperation (APEC) forumcountries, the Association of Southeast AsianNations (ASEAN) countries and the Africancountries have sometimes spoken in onevoice for their regions in the CTE, but thishas been rare, reflecting little policy coordi-nation at the regional level, or a limited con-vergence of interests. In the CTE-SS, regionalgroupings have spoken in unison on evenfewer occasions.

Within MEAs, the main players tend to begovernmental environment officials andNGOs. Most countries tend to send theirenvironmental officials to MEAs, includingofficials working in highly specialized fields,such as fisheries. In MEAs, NGOs also play animportant role in the policy formulationprocess where they are allowed to attend meet-ings as observers. Their rights as observerssometimes extend to the right to intervene inmeetings. Moreover, numerous NGOs organ-ize side events at MEA meetings, to make theirpositions known. In the WTO, only intergov-ernmental organizations can be grantedobserver status. Thus, UNEP and UNCTADhave observer status in the CTE. Increasingly,trade representatives, mainly from developedcountries, are starting to attend MEA meet-ings. This has been especially the case in the

MEAs that have, or that risk having, a sub-stantial impact on trade. For instance, in thenegotiations of the Biosafety Protocol, somecountries included environmental as well astrade experts in their delegations.

Interests and Fault LinesMany assumptions are made about policyformulation at the international level in thetrade and environment field. The first is thatall policies are “formulated” and are the resultof active governmental deliberation. The sec-ond, related assumption is that policies at theinternational level are determined by deci-sions at the national level, and not thereverse. The third is that inconsistent posi-tions taken by countries in different interna-tional fora must be the result of insufficientnational coordination. A country taking oneposition in a trade forum, and another in anenvironmental forum, must be a countrywhose trade and environment officials are notproperly coordinating. While these assump-tions are sometimes true, sometimes they arenot. WTO deliberations show that the reali-ties of the policy formulation process arecomplex and simple assumptions seldomexplain the course that decisions take.

In the WTO, different countries have showndifferent levels of engagement in trade andenvironment negotiations. While numerousproposals have been forwarded by developedcountries in the newly launched negotiations,there have been very few proposals fromdeveloping countries to the CTE-SS. Asiandeveloping countries, followed by the LatinAmerican, are the most active. However, nota single African proposal had been submittedto the CTE-SS (as of May 2007). There arevarious factors that may explain the morelimited engagement of developing countriesin trade and environment negotiations.While some disengagement is the result ofdeliberate decisions that governments take,some is also the result of countries underesti-mating the gains that may be achieved frommore active participation.


22


Deliberate disengagement can be motivatedby a variety of factors. First, trade and envi-ronment, as an area, may not be of equalimportance to all countries. Countries withlimited representation in Geneva (includingmany developing and least developed coun-tries) may prefer to channel the little negoti-ating resources that they have towards marketaccess, rather than environmental, negotia-tions. Second, for some of the smaller playersin the WTO, in particular those that areopposed to environment negotiations, it maybe more efficient to allow the bigger playersthat share their position to argue their case.These countries may choose to only substan-tially engage at crunch time, when key deci-sions are taken. Both of these factors wouldreflect very deliberate disengagement, andactive policy or strategy formulation.

However, not all disengagement is deliberate.Some negotiators may underestimate theimportance of trade and environment negoti-ations, only to suffer the consequences later(for instance, in terms of dispute settlement).For countries that fall into this category, poli-cies are not “formulated,” nor are interna-tional decisions based on national interests.Instead, it is the decisions at the internationallevel that tend to fill in the domestic policygap.

There is a widespread view among certaingovernmental actors, scholars and activiststhat potential inconsistencies between WTOrules and the trade obligations in MEAs arethe result of insufficient national coordina-tion. While there is certainly insufficientcoordination in many countries, it is some-times the case that governments deliberatelyargue different positions in different fora. Forinstance, many have wondered why it is thatAfrican countries who were principal deman-deurs for strict trade measures in severalMEAs, like the ban on the transboundarymovement of hazardous waste between devel-oped and developing countries in the BaselConvention, have not given their blessing inthe WTO to the trade measures contained in


23

I

Policy shouldbe madethrough negotiation,not litigationBy Sabrina Shaw

Will the Doha man-date bring us closerto policy coordinationand coherence between trade and environ-mental policy? Or will these issues continue tobe thrashed out by dispute settlement rul-ings? And, if so, why should we worry?

Despite all the fanfare, the fact remains thatthe Doha Round negotiating agenda directlyfocuses on only three aspects of the complextrade and environment linkage: informationexchange between the WTO and multilateralenvironmental agreements (MEAs); the rela-tionship between WTO rules and MEA tradeobligations between parties; and liberaliza-tion of environmental goods and services. Thisrepresents only a small subset of the myriadissues being debated in the Committee onTrade and Environment (CTE).

Yet, there is a rather misleading impressionthat trade and environment has finally “madeit” into mainstream WTO negotiations. It has,but only minimally. Indeed, some would sug-gest that by defining a narrow negotiatingagenda, the Doha mandate has sidelined anumber of controversial issues. For example,clarifying the relationship between WTO rulesand MEA trade-related provisions betweenMEA parties, is of much less concern thanmeasures taken by MEA non-parties; an issuethat has been long debated but remains out-side the Doha agenda.

Notwithstanding the Doha Round negotia-tions, the WTO dispute settlement mechanismhas been—at least until now—the forum ofchoice for clarifying trade and environmentuncertainties. When economic interests aresufficiently strong, disputes gravitate towardsthe WTO dispute system, regardless of whetherthere exists an appropriate regional or multi-lateral forum to deal with such issues.




24


This is so primarily because, unlike theInternational Court of Justice (ICJ) and MEAdispute resolution systems, the WTO has anautomatic and compulsory enforcement mech-anism as well as a relatively quick turnaroundfor resolving disputes.

A growing list of cases—Gasoline, Shrimp-Turtle, Asbestos and Hormones—is evidence ofthis reality. The nuanced decisions in thesecases illustrate the ability of the WTOAppellate Body to respond in a measuredmanner to “non-trade” concerns. Yet, it is alsoa fact that jurisprudence has become de factotrade and environment policy.

Doha had raised the hope that we might nowmove from trade and environment policy-mak-ing by jurisprudence to consensus-based nego-tiations. However, the CTE Special Session ismired in a vortex of definitional debates, andone is left to wonder whether the WTOAppellate Body will remain the real arbiter ofthe trade and environment relationship.

To be fair, WTO jurisprudence has made consid-erable progress in recent years towards clarify-ing that WTO rules provide sufficient flexibilityto accommodate legitimate environmentalmeasures. The Appellate Body has shown rea-soned restraint by focusing only on thespecifics of the environment-related cases thathave come before it, and avoiding generalizedor generalizable verdicts on politically chargedissues such as genetically modified organisms(GMOs) or the precautionary principle.

However, too many of the most controversialtrade and environment issues remain unre-solved, and are likely to remain unresolvedeven after the Doha Round concludes. Theseinclude such perennial challenges as discrimi-nation based on non-product-related processand production methods (PPMs), trade inGMOs and MEA trade measures against non-parties.

While the WTO judiciary is forging ahead ininterpreting the rights and obligations of WTO

Members, continuing to do so in the absenceof a negotiated consensus of the WTO mem-bership runs the risk of undermining the polit-ical legitimacy of the trade and environmentpolicy process as well as of the dispute settle-ment system. Insofar as the “creative ambigu-ities” in the WTO agreements are the result ofcompromises and negotiated outcomes, thequestion is whether it will be left to the dis-pute settlement system to clarify these ambi-guities or whether Members can garner thepolitical will to provide guidance on how tointerpret WTO rules.

The temptation to resort to the dispute set-tlement process is clear. It is easier to initiatea dispute than to forge consensus among 150Member states to deal with controversialissues. However, sustainable outcomes in theWTO must be built on trade-offs and compro-mises that can only emerge from negotiationsamong the broader membership, especiallyincluding developing countries.

Policy-making through litigation createsunpredictability. It also takes decision-makingpower away from Member states. No matterhow accurate the judicial interpretations maybe from a technical and legal perspective, thelegitimacy of the WTO stems from its Memberstates and trade and environment policyshould also emanate from this constituency.

The trade and environment issues containedin the Doha negotiating agenda are a goodstart, but many more issues—and more con-troversial issues—still need to be resolved.The WTO should look towards consensus-basednegotiation rather than litigation andjurisprudence as the preferred means ofresolving them.

Sabrina Shaw, from Canada, is an Associate atthe International Institute for SustainableDevelopment (IISD), currently on leave fromthe World Trade Organization (WTO) Secretariat,where she served as Secretary to the Committeeon Trade and Environment (CTE).


MEAs. The explanation could lie in the factthat these countries see the WTO and MEAsas playing fundamentally different roles.While they want to regulate trade under var-ious MEAs, they also want a strong WTOthat is capable of protecting them against anydisguised restrictions on trade (green protec-tionism). Thus, some countries may simplytry to obtain the most they can out of differ-ent fora—even if this means certain inconsis-tencies—since different regimes play differ-ent roles. Their intention would be to seethese different fora balance each other out onthe international stage.

Trends and FutureDirectionsThe focus of the current WTO negotiationson trade and environment has been on theways in which policy is formulated. In thenegotiations, WTO Members are not onlylooking at the relationship between WTOand MEA obligations, but are also exploringmechanisms for greater coordination andinformation flow between the WTO and

MEA secretariats. Whereas WTO Membershave serious differences in these negotiations,one issue on which they all agree is the needfor greater national coordination betweentrade and environment officials. ManyMembers have argued that coherencebetween these two policy areas would be keyto averting potential WTO-MEA disputes.

The trend towards placing such a strongemphasis on policy formulation indicates justhow central the policy formulation process isto the trade and environment debate. A polit-ical signal by the WTO on the importance ofsuch coordination could lead to greater collab-oration among different governmental bodiesat the national level and to greater resourcesbeing allocated to such collaboration on theinternational stage. While this would not elim-inate all policy inconsistency—some of whichmay be deliberate—it would eliminate theinconsistency that results from insufficientcoordination. As with all “trade and” issues,the multiplicity of interests, actors and fora,makes it crucial to have effective and inclusiveprocesses of policy formulation.


25

I



26


Section II Issues and Debates

Issues and Debates

27

II



28


Agriculture lies at the heart of the currentround of trade negotiations.

This is an area in which developing countriesare seeking to rectify historic imbalances dueto massive developed country subsidies andhigh levels of protection, including tariffescalation. Certain developing countries arelooking for new market opportunities, whileothers are seeking to protect their vulnerablerural populations consisting mainly of subsis-tence farmers. While some developed coun-tries have offensive interests, others are seek-ing both to continue to support their farmersin addressing “non-trade concerns”—such asthe environment, rural landscapes and foodsecurity—and to manage the adjustment of ahighly distorted sector towards greater mar-ket orientation, which will involve dealingwith powerful vested interests.

Agriculture is a major polluter and driver ofglobal environmental change. The environ-mental impacts of agriculture are expandingas the agricultural frontier reaches moreremote areas. This expansion takes place atthe expense of natural habitat, leading to bio-diversity loss. Habitat protection also leads tothe maintenance of important ecosystemservices, such as carbon sequestration andwatershed management, which have no mar-ket value.

The Millennium Ecosystem Assessment hassingled out agriculture as one of the majordrivers of ecosystem conversion and degrada-tion. Sustainable agriculture itself is also close-ly linked to the provision of ecosystem servic-es, including the maintenance of healthy soilsand agrobiodiversity. Unsustainable farmingpractices, on the other hand, produce envi-ronmental externalities, such as soil degrada-tion and erosion. Agricultural runoff, in turn,leads to fresh-water and marine pollution inadjacent areas, including the build-up of siltand eutrophication. Unsustainable water useand irrigation triggers falling water tables, thedepletion of aquifers and salinization of soils.In addition, current high-input, intensiveagriculture is a major source of pollution fromfertilizers and pesticides, and is heavilydependent on the input of climate change-inducing fossil fuels.

Agricultural pollution is difficult to deal withgiven that it is not clearly identified as end-of-pipe, but rather as a non-point source of pollu-tion. There are no quick fixes; solutions aremainly related to better management practices.Highly industrialized farming as practiced indeveloped and certain developing countries canbe juxtaposed with small-scale subsistencefarming, often in marginal areas, which addspressure on the land. Both come with theirown set of environmental implications.

Issues and Debates

29

IIAgricultureMalena Sell

•“While the numbers quoted for the amount of subsidies developed countries paytheir farmers vary across sources, one thing is clear: the subsidies amount to bil-lions of dollars per year, and developing countries have no way of competing.”

•


Current agricultural subsidies are usually notgeared towards environmental protection,but rather towards promoting increased pro-duction, and have often led to the exacerba-tion of environmental problems associatedwith agriculture. In the ongoing negotiations,developed countries are generally pressuredto decouple their subsidies from production,which would ease the pressure on the land,make a dent in overproduction and possiblyopen up global markets for developing coun-tries which are currently dominated by subsi-dized developed country products.

Change will not come rapidly, however.Negotiations addressing the “three pillars” ofagriculture—export subsidies, domestic sup-port and market access—began in 2000under the WTO Agreement on Agriculture’s(AoA) “built-in agenda.” In 2001, theseissues were folded into the Doha Round.This means that Members have to strike dealsand make trade-offs across all trade sectorsrather than being constrained to agriculturealone. As part of the single undertaking, agri-culture negotiations were originally set to becompleted on January 1, 2005. This deadlinehas passed, and the negotiations are progress-ing step-by-step, with partial agreementsstruck in Geneva and Hong Kong since thebreakdown of negotiations in Cancun inSeptember 2003. Delegates are moving froma framework for negotiating modalities,towards pre-modalities and ultimatelytowards the actual modalities—the reductionformulae including percentages for tariff andsubsidy cuts, criteria for domestic support,schedules, deadlines and transition periods.After the modalities are agreed, WTOMembers fill in the individual schedules oftariff and subsidy reduction, with on-the-ground implementation coming only gradu-ally following the conclusion of the traderound.

In the agriculture negotiations, the fate of allthree pillars will determine the outcome froman environmental perspective: the amount oftariff reduction will be decisive with regard to

what extent more international trade in agri-cultural products actually takes place. Inaddition, the current round seeks to disci-pline the amount of subsidies available toagriculture, with export subsidies set to bephased-out.

Subsidies under the AoA are categorized intothree “boxes.” The Amber Box includes mostdomestic support measures that are consid-ered to distort production and trade. Thesemeasures are slated for reduction, if not com-plete elimination. Blue Box measures are anexemption from the general rule that all sub-sidies linked to production must be reducedor kept within defined minimal levels. Themeasures typically include production-limit-ing programs, i.e., payments made accordingto acreage or animal numbers on conditionthat milk/meat production quotas are notexceeded. The only Members that have noti-fied Blue Box measures to the WTO are theEU, Iceland, Norway, Japan and the U.S.Green Box measures should not have distort-ing effects in agricultural markets; at the veryworst, their effects must be minimally trade-distorting. They include funds for research;exceptions for the promotion of food securi-ty stocks; direct payments to producers thatare decoupled from current prices or produc-tion levels; structural adjustment assistance;safety-net programs; environmental pro-grams; and regional assistance programs.These measures, which tend not to be aimedat particular products, must be funded fromgovernment revenue, and must not involveprice support.

In terms of domestic support, the greatestpressure is on lowering trade-distortingAmber Box support. Amber Box and BlueBox support to production-limiting pro-grams will be capped. The Green Box, orAnnex II of the AoA, includes subsidies forenvironmental purposes (among others).These are allowed to be, at the most, “mini-mally trade-distorting,” although no func-tional definition of this concept exists.


30


Interests and Fault LinesIn the context of the WTO, environmentalissues have been clustered with other non-trade concerns, such as food security, struc-tural adjustment, rural development andpoverty alleviation. In practice, the environ-ment debate has been confined to a discus-sion of the Green Box and the future of sub-sidies for environmentally friendly farmingpractices.

While negotiations related to the Green Boxwill have important implications for thefuture environmental impacts of agriculture,this will be but one determinant, and onemore relevant for developed countries giventhat they are the big subsidizers.Environmental issues related to sheer scaleeffects of agriculture and globally shiftingcropping patterns fall outside the discussionat the WTO.

Negotiating Groups and Positions

The fifth WTO Ministerial Conference inCancun in September 2003 marked a shift innegotiating dynamics. This shift was mainlytriggered by imbalances in the area of agri-culture. In the lead-up to Cancun, the U.S.and EU drafted a joint compromise text onagriculture, which, in practice, served as thebasis for negotiations. Developing countriesreacted with outrage, feeling that their inter-ests had not been incorporated—and bandedtogether into a new grouping, the Group ofTwenty (G20), to challenge the status quo.The group was led by Brazil, South Africa,India, Argentina and China. While commen-tators immediately began the countdown forthe break-up of the group, it held together.Negotiations following Cancun have shownthat the new dynamic had come to stay anda new set of five countries—Australia, Brazil,the EU, India and the United States—hasemerged at the heart of the deal-making.

This does not, however, mean that develop-ing countries make up a unified group onagriculture at the WTO. Developing country

Agriculture

31

IIAgriculture,environmentand social justiceBy AdrianoCampolina

Any analysis of theimpacts of agricultur-al trade on the envi-ronment needs to consider the often-over-looked diversity that exists within the agricul-tural sector. Considering the enormous differ-ences within the sector, it is necessary to lookcarefully at how trade policies can have dif-ferent impacts on different agricultural areasand, therefore, different impacts on the envi-ronment.

It is possible to devise various analytical cate-gories upon which to base a thorough analysisof the agricultural sector. Scholars have, forexample, suggested the existence of three“rural worlds,” comprised of: (a) wealthy andindustrialized farmers, who are connected toglobal markets through contracts withagribusiness, have superior access to resourcesand capital, and use input-intensive methodsof production; (b) small-scale and family farm-ers, who face declining returns and increasedrisks, lack capital, information and resources,and are vulnerable to globalization; and (c)subsistence farmers and landless labourers,who are seasonal, migrant or family labourers,with little or no land.

In Brazil, the government has recognized thesedifferent categories in the agricultural sectorand their different circumstances and needsand devised two separate credit systems. Thefirst focuses on the so-called agriculturapatronal, which encompasses larger farms,defined as containing more than two perma-nent labourers. The second is PRONAF (theNational Program for Strengthening FamilyFarming), which benefits small-scale farmerswho use family workers, are located in ruralareas and generate at least 80 per cent of theirearnings from farming activities. The recogni-tion of the special needs of family farming wasa result of years of struggle by the Brazilian



Andrey



32


peasant movement. As a result, PRONAF creditnow offers lower interest rates, among othermeasures.

It is also necessary to recognize the differentcircumstances and needs of rural agriculturalcommunities with respect to trade policy.ActionAid has analyzed the impacts of tradeliberalization on small- and large-scale farmersin Brazil during its unilateral liberalization inthe 1990s. During that period, the large-scalefarmers tended to defend trade liberalizationpolicies, particularly improved market access.The priority of small-scale farmers, on the otherhand, was to seek protection from dumping andcheap imports. Given Brazil’s active member-ship in the Cairns Group, the government hadmostly responded to the needs of the largefarmers and its agenda had centred on elimi-nating export subsidies, reducing domestic sup-port and increasing market access. Analyzingthe evolution of the prices of the crops in thisperiod, ActionAid found that prices fell muchmore for family-farmed agricultural products(decreasing by 4.74 per cent per year), than forlarge-scale agriculture (decreasing by 2.56 percent per year).

If we look at the environmental impacts ofagriculture, once again the different agricultur-al “worlds” will have different impacts. Usingthe case of Brazil again, 45 per cent of thecountry’s area is used for agriculture. Theimpacts of commercial agriculture based onGreen Revolution techniques—e.g., high use offertilizers and agrochemicals, monoculture,mechanization, large-scale farms and intensiveirrigation—include deforestation, soil erosionand contamination and biodiversity loss.

On the other hand, agriculture can also pro-vide many environmental services, such as soiland water conservation, and sustainable useand conservation of biodiversity. Some expertssuggest that small-scale farmers are bestplaced to provide these environmental servic-es. This is because: (a) their economic logic isnot based on maximizing capital returns orshort-term profits, but on attending to familyneeds and maintaining the long-term produc-tive potential of the land (perceived as familypatrimony); (b) as a production and consump-

tion unit, small-scale farmers value diversitythrough shared crops and diverse livestockdistributed in a balanced way; (c) the organ-ization of labour in the small-scale farmingunit favours the technical practices requiredfor sustainable agriculture; and (d) familyfarmers have a long-lasting, deep-rooted andpositive relationship with their land and canrecognize the particular potential of the agro-ecosystem and use it in their economic repro-duction strategies.

We need to urgently review our approach totrade negotiations in the agricultural sector,considering how trade liberalization impactssmall-scale farmers, how this sector is well-placed to provide environmental services andthat most of the global poor are small-scalefarmers, peasants, landless or rural labourers.The main outcome of trade negotiationsshould be a set of rules that enable, strength-en and protect small-scale farmers.

It is crucial to remove the trade distortionsthat currently allow rich countries to dumptheir agricultural products on Southern mar-kets. However, putting an end to dumpingshould be closely linked with ensuring therights of developing countries to protect andconsolidate their small-scale farming. It is,therefore, important to eliminate export sub-sidies and reduce domestic support in theNorth. Yet, it is equally important to ensurespecial and differential treatment (S&DT) fordeveloping countries to allow them to protectthe key crops of their small-scale farmers toenable a stable economy and food security(i.e., Special Products), including the right toraise tariffs and create a Special SafeguardMechanism.

Trade rules should allow developing countriesto implement the public policies they deemappropriate in order to strengthen, consoli-date and develop their peasant and small-scale agricultural sectors. Such an approachcould maximize the positive interactionsamong agriculture, environment and socialjustice.

However, this approach will require concertedefforts to defeat strong protectionist interests



interests in agriculture are as varied as thecountries themselves. The G20 is generallyperceived as focusing on expanding agricul-tural export opportunities—this is, however,a truth with modification, as India is one ofthe dominant forces of the G20 and clearlyseeks protection for its small and vulnerablefarmers and their livelihoods. The Group ofThirty-Three (G33), an alliance of develop-ing countries including many from Africa,the Caribbean and the Pacific (ACP), focuseson securing the designation of effective“Special Products” for developing coun-tries—for which lower tariff reductionswould be required—and a “Special SafeguardMechanism” to shield developing countriesagainst import surges. There is a certain over-lap between the members of the G20 and theG33, and India and China coordinate closelywith the G33.

The Group of Ninety (G90)—the largestcoalition of Members operating in the WTO—comprises least developed countries(LDCs), the ACP countries and the AfricanUnion. The group has actively coordinatedpositions around major events such asMinisterials. The group argues that any agri-culture deal should allow its members to pur-sue agricultural policies that are supportive oftheir development goals, poverty reductionstrategies, and food security and livelihoodconcerns. A special case within the G90 arethe so-called net food-importing developingcountries (NFIDs)—many of them alsoLDCs—which do not produce enough fooddomestically, and actually benefit from lowworld market prices and cheap imports.

Among other players, the Cairns Group—acoalition of 17 agricultural exporting coun-tries, which account for one-third of theworld’s agricultural exports, includingAustralia, Canada, New Zealand and devel-oping countries such as Chile, Thailand,Argentina and Indonesia—has focused onmarket liberalization both in terms of tariffand subsidy reduction. While the CairnsGroup has called for substantial tariff decreas-

es across the board, the G20 underscores theneed for special and differential treatment(S&DT) of developing countries, meaningless onerous commitments on their part.Both the G20 and Cairns Group tend toplace little emphasis on non-trade concerns.Regarding the environment specifically,Argentina made a proposal early on in thenegotiations noting that developing countrieshave a strong interest in preserving their nat-ural resource base.

The EU—which is reforming its internalCommon Agricultural Program (CAP) inparallel with WTO negotiations—has agreedto give up export support. The EU takes acautious approach to tariff reduction, and isbetting on designating “Sensitive Products”for which smaller tariff cuts would have to bemade, thus protecting local producers.Regarding domestic support, the EU general-ly argues that cuts should be made on trade-distorting support and the Green Box shouldbe left alone (the EU is in the process of mov-ing much of its support into the Green Box,an area in which the U.S. is far ahead).

On non-trade concerns, viewed as legitimatesocietal goals and extended to include animalwelfare, the EU argues these should beaddressed in a targeted, transparent and non-distorting way under the Green Box.European consumers are also demandingaction on food safety. There is much publicconcern regarding issues such as hormone-treated beef and genetically modified organ-isms (GMOs).

The U.S. has been arguing that both devel-oped and developing countries need to con-tribute to a substantial increase in real marketaccess opportunities both by cutting tariffsand dismantling trade-distorting subsidies.The U.S. has indicated that special and dif-ferential treatment has to be applied on aneed-basis, indicating that major exporterssuch as Brazil and Argentina can hardlyexpect the same treatment as poorer, morevulnerable countries. Non-trade concerns,

Agriculture

33

II


according to the U.S., should be dealt with inthe Green Box exclusively.

In this regard, the Group of Ten (G10), agroup of net food importers includingSwitzerland, Norway and Japan, has taken abroader approach supporting the integrationof non-trade concerns into all aspects of theagreement. These countries with uncompeti-tive agriculture sectors have high tariffs andsubsidies, and wish to maintain them giventhat they do little harm in the way of exportsor international competition. According tothe group, agriculture is “special” because ofits provision of critical public goods. Thegroup asserts that agricultural products areunique to every society, and agriculture is“multi-functional,” contributing to the via-bility of rural areas, food security, the cultur-al heritage and environmental benefits suchas the agricultural landscape and agro-biolog-ical diversity. While most other Members areof the view that non-trade concerns can beaccommodated in the Green Box, the G10argues public goods often are only provided

“jointly” with production, and therefore sup-port should sometimes target production,especially in uncompetitive mountainous,remote or climatically disadvantaged areas.

What Future for the Green Box?

While the numbers quoted for the amount ofsubsidies developed countries pay their farm-ers vary across sources, one thing is clear: thesubsidies amount to billions of dollars peryear, and developing countries have no wayof competing. Therefore, the general positionamong developing countries is that these sub-sidies have to go, and there is widely held sus-picion regarding the supposedly non-distort-ing measures of the Green Box. As long asdeveloped countries provide their farmerswith massive subsidies, there is no level play-ing field, be it for hyper-efficient large-scalesugar producers in Brazil or for farmers hand-picking their cotton in Mali. On the otherhand, developing countries do argue thatthey should be able to retain the right to sub-sidize in order to strategically promote theirown development; and especially to supportlow-income and resource-poor farmers.

As part of current agriculture negotiations,the Green Box is to be reviewed and clarified.Disagreement immediately emerged overwhat this should entail. The EU and G10were of the opinion that the review should bejust a “health check-up.” The G20 andCairns Group preferred a much more sub-stantial review, including the tightening ofcriteria and improved monitoring and sur-veillance to ensure that the new disciplinesare being adhered to. While environmentalmeasures as such were not the concern, devel-oping countries worried that “box shifting”would take place—i.e., that developed coun-tries would simply make slight modificationsto their current Amber Box subsidies andthen move them into the Blue or Green Box.

In short, significant disagreements persist onthe likely or desirable future of the GreenBox.


34


that lobby to maintain high levels of subsi-dization in much of the developed world. Itwill also require a shift in the trade negotiat-ing strategy of developing countries from sim-ply prioritizing market access to include anemphasis on special and differential treat-ment, as well as ensuring provision for thetools necessary to protect and develop theirsmall-scale farming sector.

This change in the focus of agricultural nego-tiations represents both a challenge and anopportunity for developed and developingcountries.

Adriano Campolina is the Regional Director forthe Americas for ActionAid International, basedin Brazil.


Organic Production, Agricultural“Environmental Goods” and Standards

Organic production is often promoted as apossible win-win for developing countryexporters and the environment. In practice,however, developing countries find it chal-lenging to comply with the myriad of stan-dards and labelling requirements importersimpose on organic goods. Organic agricul-ture has, nonetheless, generated interest incurrent negotiations on environmental goodsand services slated for accelerated tariff reduc-tion and removal.

Most industrial goods considered environ-mental are of developed country interest; theidea of agricultural environmental goods, inwhich developing countries would have acomparative advantage, has emerged as acounterbalance. In this context, clean-burn-ing low-carbon biofuels, such as ethanol pro-duced from sugar cane, are of potential inter-est. Biofuels can be used to displace somepetrol, and have the advantages of beingmore highly processed and generating newrural jobs. While the greatest demand forbiofuels is in developed countries seeking tofulfill their obligations under the KyotoProtocol on climate change, they are pro-duced at a competitive cost only in theSouth.

As standards regarding food safety andhygiene have been increasing in developedcountries, these non-tariff barriers have beencharacterized by some developing countriesas the new frontier of protectionism. A num-ber of standards and eco-labelling schemes—often imposed by the powerful supermarketschains—are expensive for producers to com-ply with.

Dispute Settlement DrivingNegotiations?

In addition to the negotiations themselves,the fate of agriculture subsidies is influencedby the outcomes of key dispute settlementcases at the WTO.

Agriculture

35

IIDealing withthe hiddenagenda onagriculturalsubsidiesBy Vangelis Vitalis

One expected out-come of the “DohaDevelopment Round“will be commitments by developed countriesto reduce and eliminate some, if not all, agri-cultural subsidies.

Unfortunately, however, there is also a veryreal possibility that this process will be under-mined by attempts to retain certain subsidiesand limit overall reductions. This is not sur-prising. What is perhaps surprising is thevehemence with which environmental argu-ments are being used to defend such moves.

Particularly striking is the argument advancedby some sectoral interests and an assortmentof non-governmental organizations (NGOs)and politicians. They argue that reductions inagricultural subsidies in some countries in theOrganization for Economic Cooperation andDevelopment (OECD) should be limited orfrozen altogether because this may cause out-put in developing countries to increase withpotential negative consequences for the envi-ronment there and/or globally.

It is important to be clear at the outset aboutwhat the argument underpinning thisapproach is. Basic principles are a good start-ing point. There is no doubt that a reduction,or indeed an increase, in subsidies will affectthe environment in a number of ways. Theseimpacts occur through changes in the struc-ture of production across countries, scale ofeconomic activity, mix of inputs and outputs,and production technologies.

Nevertheless, these changes should not beused as a reason to freeze or limit subsidyreform. After all, developed-world living stan-dards are built on the conversion of naturalresources into intellectual and humanresources. This substitution of natural capital






MMiirrrroorrss::



CCoonnttaaccttss



IICCQQ:: 7700996666443333









36


with human capital is a trade-off that everycountry rightly regards as its own sovereignchoice and was reaffirmed by the RioDeclaration.

If the developed world is really so concernedabout the potential negative effects on theenvironment by subsidy reductions, then theright response is not to freeze reform, but toimprove the targeting of technical and devel-opment assistance. Here’s a practical realworld example. OECD member subsidies to cot-ton farmers lowers world prices by some 25 percent. A reduction in such support would cer-tainly have a positive effect on economicgrowth through improved market access andglobal prices for a number of developing coun-tries.

One of the reasons suggested for retention ofsuch support, however, has been the likelynegative effects on the environment as a con-sequence of raised production in developingcountries and the pressure this might have onresources like water and energy. Uzbekistan isa case in point. It has significant cotton inter-ests. Improved world prices would certainlyhave positive implications for poverty reduc-tion and economic growth in this Central Asianeconomy where nearly 80 per cent of the pop-ulation lives on less than US$2 a day. It is alsotrue that increased output in response toimproved market access may have negativeimplications for water, which is already ascarce resource that is drawn almost exclusive-ly from the Aral Sea. Currently, more than 40per cent of the water taken from the severelystressed Aral Sea to irrigate the cotton fields ofUzbekistan evaporates before it even reachesthose fields (Uzbek farmers use open channels,not closed pipes, for irrigation). Further pres-sure on the Aral Sea water resource would havesignificant negative spillovers to other parts ofthe Uzbek economy.

If those groups and countries citing theirconcern for the environment are serious, thenthe answer is not to stall subsidy reform, butto focus on how technical and developmentassistance might plug the gaps. Thus, whenmarket access is improved for Uzbek cotton asa consequence of subsidy reductions with theattendant benefits in terms of farm incomes,developed country policy-makers should be ina position to consider how best to fund flank-ing measures to ameliorate any potentialenvironmental problem (such as enhancedtechnical assistance for improved irrigationtechniques. Put simply, install pipes toreplace the open irrigation ditches inUzbekistan.). A win-win outcome in action.

In sum, fundamental reform of agriculturaltrade must be pursued with the vigour andindeed the rigour it requires. It should not bederailed by spurious environmental considera-tions. There is no question that trade nego-tiators should bear the sustainability aspectsin mind when negotiating agricultural tradeliberalization. They should, however, be look-ing to international assistance and othersources to address these kinds of issues,rather than restricting the growth prospectsof developing countries.

These are urgent issues. Negotiators must notshy away from them in their pursuit ofimproving the global inter-linkages and com-plementarities between social, economic andenvironmental development—that is, sustain-able development.

Vangelis Vitalis is a former Chief Advisor at theOECD and currently a Senior Trade Negotiatorfor the New Zealand Ministry of Foreign Affairsand Trade. This essay is written in his personalcapacity.


For example, Brazil won a challenge itbrought against U.S. cotton subsidies. Part ofthe challenge focused on subsidies the U.S.claimed were non-distorting and hence fellunder the Green Box. The panel, however,found the subsidies to be connected to pro-duction, meaning they cannot be classifiedunder the Green Box, but must be countedtowards trade-distorting support. This casehighlighted the need for clearly defined crite-ria related to the Green Box, and providedchallengers of the Green Box with new nego-tiating capital.

Brazil, Thailand and others also initiated andwon a similar case against EU sugar subsidies.Other cases, such as on soy, may also belaunched by developing country exportersagainst developed country subsidies. In thefuture, care must be taken to ensure that envi-ronmental programs do not lead to trade-dis-torting effects. As an example, subsidies to bio-fuel production could become tricky—whilesubsidies focusing on better managementpractices regardless of which crop is being pro-duced can hardly be seen as affecting trade,subsidies to certain crops used as feedstock forbiofuels could cause problems.

Trends and FutureDirectionsGlobal agriculture is characterized by volatileand declining commodity prices, as well asstrong market concentration and verticalintegration of agribusiness. Farmers areretaining less and less of the profits derivedfrom agriculture and, with liberalization, thepressure to become more efficient (and cutcorners) will increase. Farm size is on theincrease; the number of farmers on thedecrease. The likely medium-term outcomesof the Doha Round agriculture negotiationswill change the global distribution of agricul-tural production, and lead to more agricul-tural products being traded internationally.

The accompanying environmental changesand challenges will surely be enormous, but

are not well understood. Take climatechange: agriculture can serve both as a sourceof carbon emissions and a carbon sink, whilealso being directly impacted by atmosphericcarbon fertilization and a changing climate,including unpredictable local weather pat-terns and increasing extreme weather events.Increased global transport of agriculturalcommodities and produce leads to higheremissions of carbon dioxide. Different cropsand different regions of the world will beaffected by climate change in different ways;but exactly how, is not yet known.

According to recent Dutch modelling exer-cises, liberalized trade, increasing incomesand population growth are likely to lead toincreased agriculture and related pressures ontropical forests by 2030, particularly in Asiaand Africa. European agriculture is expectedto become less intensive—certainly not deci-mated—especially under scenarios in whichclimate policy drives more land into the pro-duction of biofuels rather than food crops. Interms of the use of marginal lands for agri-culture rather than to harbour valuable bio-diversity and pressure on the agricultural landitself, the dismantling of harmful produc-tion-linked subsidies in developed countriescan help support the local environment. Onthe other hand, some of the intensive farmingpractices might just relocate to developingcountries, with a few agribusiness transna-tionals reaping the economic benefits with-out paying the environmental costs.Agrobiodiversity has also declined, with 75per cent of the food in the world now beingderived from seven crops only (wheat, rice,corn, potatoes, barley, cassava and sorghum).The genetic variability of crops has similarlydecreased, meaning those widely used varieties are more vulnerable to diseases and climatechange. This trend is likely to continue.

Some opportunities for environmentalimprovement also exist, however. With thecurrent disciplines being negotiated at theWTO, the emphasis on subsidies is shiftingtowards non-distorting measures, such as

Agriculture

37

II


those promoting environmental protection.Outside the WTO as well, producers andconsumers are recognizing the importance ofsustainable agriculture. As expressed byArgentina in its submission on non-trade con-cerns and natural resources: “These are the

assets on which our agriculture is based. Weare good at producing agricultural productsand therefore we have to take special care ofland and water protection. To do so we needto implement sound environmental policies.”


38


Biotechnology continues to capture publicattention worldwide. A wide range of interestgroups are united in their opposition to it,expressing concerns over environmental risks,impacts on rural livelihoods, the economicdominance of multinational companies andethical complications. On the other side arethose who are equally convinced of thepotential of biotechnology to contribute tofood security and environmental protectionas well as powerful business interests.

The need to address the potential environ-mental risks of biotechnology found interna-tional recognition in Agenda 21, adopted atthe Rio Earth Summit in 1992, whichincludes an entire chapter on the environ-mentally sound management of biotechnolo-gy. Also negotiated in 1992, the Conventionon Biological Diversity (CBD) explicitlyrefers to the need to “regulate, manage orcontrol the risks associated with the use andrelease of living modified organisms resultingfrom biotechnology” and calls for a protocolto regulate the “safe transfer, handling anduse” of such organisms. In the context of theCBD, biotechnology is defined as “techno-logical application that uses biological sys-tems, living organisms, or derivatives thereof,to make or modify products or processes forspecific use.” The Convention also recognizes

the importance of facilitating access to andtransfer of biotechnology, in particular fordeveloping countries that provide the geneticresources.

The mandate to negotiate a protocol came inresponse to a number of environmental andhealth-related concerns over the use ofbiotechnology. Some fear that genes from her-bicide tolerant varieties could “escape” bybeing transferred to another crop or wild rela-tive, which in turn could become “super-weeds” that are difficult to control. Moreover,plants engineered to produce a toxin mightharm non-target species, such as making theplant “toxic” to wildlife that feed on the crop.Certain genetic use restriction technologies(GURTs)—also called “terminator technolo-gies” by their critics—which allow seeds to bealtered so that they do not germinate whenreplanted, have been particularly controversial.While agrobiotech businesses claim to pro-mote GURTs as a way of addressing environ-mental concerns by preventing transgenicplants from spreading, opponents see the tech-nology as an attempt to control the world’sseed supply and maximize profits by forcingfarmers to purchase new seeds every year.

Regarding health risks, the use of antibioticresistance marker genes has raised significantconcerns. These genes are inserted in the

Issues and Debates

39

IIBiotechnologyHeike Baumüller

•“Since Seattle, there has been little reference to biotechnology in WTO discussions,although it clearly underlies countries’ negotiating positions in related areas, such

as the patentability of life forms, the relationship between the trade and environment regimes, eco-labelling and agriculture.”

•


modified organism to identify geneticallytransformed plants; i.e., only plants with themarker gene will grow on material that con-tains antibiotics. Some fear that these genesmay be transferred into bacteria in the stom-ach, thereby making potentially harmful bac-teria resistant to antibiotics. Other health-related concerns include increased allergenicityand toxicity of biotech food, unintended sideeffects resulting from the process of geneticmodification itself and changes in nutritionalvalue. Despite ongoing research in this area,significant uncertainties remain over the actu-al risks associated with biotech products.

These concerns and uncertainties, coupledwith strong opposition to biotechnology insome countries, have given rise to a wholerange of import regulations and measures tar-geted at biotech products. Several SouthernAfrican countries, for instance, bannedimports of food aid found to contain geneti-cally modified corn (although most of themsubsequently allowed imports provided thatthe grain was milled prior to or upon arrival).The reaction in these countries was partlyattributed to fears that farmers may cultivatethe corn that could potentially affect exportsof grain-fed beef to countries with strictimport regulations, such as the EuropeanUnion. Similarly, in 2000 the discovery ofStarlink corn (a corn variety approved for feeduse by U.S. authorities, but not for humanconsumption) in food grain exports led Japanto ban the import of U.S. corn for severalmonths. Biotech-exporting countries, fortheir part, have criticized import regulationsin some markets as unnecessarily restrictive,alleging significant losses in trade revenues,and as an obstacle to developing countries’agricultural and economic development.

At the multilateral level, it was during thenegotiations of the Cartagena Protocol onBiosafety that trade considerations came tothe fore, turning the negotiating process intoa delicate balancing act between trade inter-ests, on the one hand, and environmentaland health concerns on the other. Among the

countries with significant biotech interests,the U.S.—joined in the “Miami Group” byCanada, Australia, Argentina, Chile andUruguay—made every effort to contain thescope of the Protocol, in particular its appli-cation to trade in agricultural commodities,and to ensure that multilateral trade ruleswere not affected by the Protocol’s provisions.The Europeans and many developing coun-tries, in contrast, pushed for a strong Protocolwith a broad scope, emphasizing the impor-tance of precautionary decision-making.

Meanwhile, a parallel process was unfoldingat the World Trade Organization (WTO),where several countries sought to placebiotechnology on the agenda. As part of thepreparatory process for the WTO MinisterialConference in Seattle in December 1999, theU.S. called for “disciplines to ensure trade inagricultural biotechnology products is basedon transparent, predictable and timelyprocesses.” Discussions on trade in biotechproducts were also supported by Japan, whileCanada proposed the establishment of aworking group on biotechnology in theWTO. At Seattle, however, these proposalswere vehemently rejected by the EU’sEnvironment Ministers in direct contradic-tion of their own trade spokespersons.

Following the failed attempt to bringbiotechnology into the WTO, the BiosafetyProtocol negotiations became the battle-ground for countries to iron out their differ-ences, culminating in the adoption of theProtocol in 2001. The Protocol was greetedwith varying degrees of enthusiasm, beinghailed by some as a “victory” for the environ-ment and consumers, while others regard it asa “biotrade” protocol that had sacrificedbiosafety concerns to trade interests. TheProtocol, which regulates the transfer, han-dling and use of living modified organisms(LMOs)—with the focus clearly on the trans-fer of such organisms—establishes a notifica-tion and approval process for the trans-boundary movement of LMOs. Although anumber of issues remain to be resolved, the


40


Protocol allows for the precautionary deci-sion-making in cases of scientific uncertainty.

Since Seattle, there has been little reference tobiotechnology in WTO discussions, althoughit clearly underlies countries’ negotiating posi-tions in related areas, such as the patentabilityof life forms, the relationship between thetrade and environment regimes, eco-labellingand agriculture. Instead, disagreements arebeing carried out in the WTO dispute settle-ment system, where the U.S., Canada andArgentina in May 2003 launched a caseagainst the EU’s de facto moratorium on theapproval of new biotech products in placesince 1998, as well as a number of nationalbans imposed by EU member states. Thethree complainants argued that these meas-ures are not scientifically justified or based onrisk assessment. The EU denied the existenceof any moratorium and defended the nation-al measures as temporary, provisional andbased on the precautionary principle. In itsruling, which the EU chose not to appeal, theWTO panel sided with the complainants onprocedural grounds, but refrained from takinga stance on the safety of biotech products orthe legality of stringent import regulations.

Another, often neglected forum for debate arethe international standard-setting bodies, par-ticularly the Codex Alimentarius Commission,the International Plant Protection Convention(IPPC) and the World Animal HealthOrganisation (OIE). These organizations wereexplicitly cited as international standard-settingbodies in the WTO Agreement on theApplication of Sanitary and PhytosanitaryMeasures (SPS) and their standards are pre-sumed to be consistent with the Agreement.This recognition has given the previously vol-untary standards a quasi-legal status, therebyincreasingly turning these organizations—andin particular the Codex AlimentariusCommission which deals with food safety stan-dards—into political fora, where much of thetrade and biotech debate has effectively moved.

Biotechnology

41

IIMaking theCartagenaProtocol workBy Veit Koester

The ongoing debateon genetically modi-fied organisms (GMOs)commenced in the1970s and the gener-al trend is still that all GMOs are being put inthe same box. They are either white or black.This, despite the fact that different GMOs mayentail completely different risks and benefits.

No wonder, then, that the public is confused.No wonder so many people around the worldwant to rely on its own decisions and there-fore demands to be fully informed and seekslabelling in order to make its own informedchoices. No wonder, either, that a kind of GMOwar is raging between EU on the one side andthe U.S. and others on the other as the EUrejects importation of most GM products.

The issue of GMOs is complicated in itself. Itis made all the more complicated by a numberof related issues. Biodiversity is, to a largeextent, the raw material for GMOs. However,the protection of biodiversity is not a simpleissue. It includes the requirement that accessto genetic resources is based on priorinformed consent and benefit-sharing. Add tothis the question of indigenous and local com-munities’ knowledge related to biodiversityand intellectual property rights (IPRs), andthe trade and environment negotiations nowunderway in the WTO. The use of GMOs alsohas significant trade implications. An estimat-ed 300 million metric tons of genetically mod-ified grains, oilseeds and pulses are tradedinternationally each year, and the global areaof these crops increased from less than fivemillion hectares in 1996 to almost 70 millionhectares in 2003.

The issue is particularly important for devel-oping countries. While GMOs may pose risks tothe environment or human health, they mayalso have the potential to advance sustainable




42


development. This was the philosophy under-lying the Cartagena Protocol on Biosafety(2000), which entered into force in 2003. Thisis why the Protocol—a central mechanism forinternational cooperation on the preventionand management of risks associated withGMOs—was strongly advocated by developingcountries.

Hence, it seems obvious that developingcountries should support the Protocol, pro-mote its implementation and ensure that itworks. For this to happen, it is necessary tobuild consensus on broader standards andguidance as early as possible, as opposed togetting stuck in the nitty gritty. Developingcountries will suffer most if supplementaryinstruments are not in place in the Protocol. Apoorly functioning Protocol will likely result inthe GMO agenda being taken over by the WTOsystem, which arguably would be more prob-lematic for developing countries.

While Southern solidarity remains an impor-tant value for developing countries, it hasremained difficult to achieve and uphold inthis area. The negotiation of the Protocoldemonstrated specific difficulties in reachingcommon positions among developing coun-tries because different developing countrieshave very different approaches to the impor-tation and use of GMOs. These difficulties areprobably even greater now because the num-ber of developing countries relying, to someextent, on genetically modified crops hasincreased. A common approach presupposescoordination among developing countries.This could be facilitated by regional coopera-tion. However, it is equally important todevelop policies reflecting national needs andconditions. Most importantly, national policiesshould be truly national and not influenced by

industrialized countries. Much is at stake,including the risk of being influenced bymultinational corporations. A balancedapproach is needed; one that neither under-regulates, nor over-regulates.

National policies should be the result of coor-dinated approaches between trade and envi-ronment ministries. Fighting for the precau-tionary principle in the framework of theProtocol and, at the same time, being skepti-cal of applying environmental principles totrade-related issues in WTO negotiations—asit appears is the strategy of some countries—does not make much sense. In this respect, itis essential to build developing country capac-ity, particularly in the area of policy coherencebetween the trade and environmental regimes.

The Cartagena Protocol on Biosafety is a cen-tral instrument for international regulation ofissues relating to the safe handling and man-aging of GMOs, especially in the transbound-ary context. The Protocol is, to a large extent,the creation of developing countries.Therefore, it is in their interest to contributeactively and constructively to ensuring thatthe Protocol is a well-functioning instrument.

The reality is that industrialized countries willbe able to find ways and means to cope withthe advent of GMOs, even if the Protocol doesnot function well. The real question is whetherdeveloping countries will be able to do so. Inmany respects, the Protocol represents thebest chance for developing countries to pur-sue a balanced and equitable outcome to dealwith the complex issues raised by GMOs.

Veit Koester, from Denmark, was with his coun-try’s Ministry of Environment and is now theChairman of the Compliance Committees of theCartagena Protocol and the Aarhus Convention.This essay is written in his personal capacity.


Interests and Fault LinesThe production of biotech crops is dominatedby a handful of countries. In 2006, just sixcountries accounted for 96 per cent of globalcrop area: the United States (54 per cent);Argentina (18 per cent); Brazil (11 per cent);Canada (six per cent); India (four per cent);and China (three per cent). Other minorbiotech producers include (in order of hec-tarage) Paraguay, South Africa, Uruguay, thePhilippines, Australia, Romania, Mexico,Spain, Colombia, France, Iran, Honduras,Czech Republic, Portugal, Germany andSlovakia. Herbicide-tolerant or insect-resistantsoy, corn, cotton and canola are the main GMcrops under cultivation.

Policy-makers in the U.S. generally regardmodern biotechnology as just another formof genetic modification that has been prac-ticed ever since farmers started to crossbreedplants. This attitude is clearly reflected in theregulatory framework, which does not estab-lish specific legislation or institutions to dealwith biotechnology, but rather splits theresponsibility between the existing ones.Biotech products have been on the market inthe U.S. since 1994 and the American publichas by and large been supportive of—or atleast not openly opposed to—geneticallymodified organisms (GMOs).

The European Union, in contrast, has estab-lished a distinct and thorough risk assessmentand approval process for biotech products. TheEU cites the Biosafety Protocol in support of itsapproach, which it sees as recognition by theinternational community that such productsrequire their own authorization process. Its reg-ulations also respond to widespread resistanceto biotech crops and foods among Europeanconsumers, who are insisting on their “right toknow” and “right to choose.” Among other fac-tors, this skepticism can be traced to a generalmistrust towards food safety authorities andgovernments’ ability to manage food crises, inparticular following the handling of the spreadof mad cow disease in the late 1990s.

While the U.S. and EU positions are com-paratively clear-cut, any generalization for therest of the world will necessarily be ratherbroad. This is partly due to the fact thatbiotechnology cannot be characterized as atypical North-South issue, but rather findsfervent opponents and supporters on bothsides. Broadly speaking, countries with signif-icant biotech interests, such as Argentina andCanada, have largely followed in the foot-steps of the U.S., while many other countrieshave moved more cautiously, aiming to set upthe necessary regulatory frameworks beforeembarking on the biotech path. Many inthese countries have stressed the need to takeinto account the local environment andcapacity constraints when assessing and man-aging the risks associated with biotechnology.They would also like to see local research anddevelopment capabilities strengthened toallow for the development of GMOs adaptedto local needs. They also consider it impor-tant to ensure the ability of poor farmers toaccess and reuse seeds that are not protectedby patents.

The Latin American region is marked bystark differences in their dealings withbiotechnology, with Argentina and Brazilamong the region’s leaders in terms of pro-duction, while others, in particular theCentral American and Andean countries,continue to lag behind in setting up regula-tory systems and developing their biotech-nology research capacities. Brazil is a particu-larly interesting case. While some govern-ment officials and industry groups havepushed for the adoption of GMOs and thecountry counts among the research leaders inthe developing world, civil society groupshave waged a continued battled against theintroduction of biotechnology. In the mean-time, biotech seeds have been smuggledacross the Argentinean border into the south-ern states, assuring Brazil a place among thetop agrobiotech producers in the world.

Asia, and notably China, has been generallyquicker to engage in the biotech business,

Biotechnology

43

II


opting in particular for medical and industri-al applications. Several Asian countries,including China, Korea, Japan and Thailand,have set up stringent import regulations, withJapan and Korea emerging, like the EU, asmarkets particularly averse to GMOs. Withregard to agricultural biotechnology, theregion has focused much of its attention onGM cotton grown in China, India andIndonesia. Some countries are also consider-ing the introduction of GM rice, raising seri-ous concerns among environmental groupsthat the GM rice could contaminate tradi-tional varieties, in particular given that Chinais a centre of origin for rice. Critics point tosimilar experiences in Mexico where traces oftransgenic corn had been found in native lan-draces despite a ban on GM corn cultivation.

Most African nations, in contrast, havebecome pawns in the biotech game andremain far behind in this field. They oftenlack the scientific, financial and institutionalcapacities to conduct biotech research (withthe notable exception of South Africa andmore recently Kenya and Egypt). Opinionsappear deeply polarized in some regions,while others show a cautious willingness toassess the merits and dangers of biotechnolo-gy. Biotech crops adapted to harsh condi-tions, such as drought tolerance, or withnutritional benefits, such as added vitaminsor vaccines, have most to offer for the conti-nent, provided that concerns over the owner-ship of seeds, the need to assess the risks with-in particular local conditions and the adapta-tion of biotechnology to local requirementsare addressed.

Labelling

The U.S. regulatory system does not requirelabelling for biotech product, which is in linewith its approach that GMO products arenot distinct from conventional products perse. Other biotech producers, such as Canadaand Argentina, have followed a similarapproach, while South Africa and Australiaonly require labels for a restricted set of

GMOs. The EU stands at the other end ofthe spectrum with a stringent labelling andtraceability system that even covers productsderived from GMOs, but where the GMcontent is no longer detectable (such as soyoil made from GM soy). The EU considerssuch a system essential to enable consumerchoice, allow for withdrawal of a productshould unforeseen risks occur, and monitorpotential effects on human health and theenvironment. Labelling mechanisms are alsobecoming increasingly prevalent in somedeveloping countries, such as Brazil, Mexico,China, Thailand and Korea.

Given these differences in approach, labellingof LMO commodity shipments emerged asone of the most contentious issues during thenegotiations of the Biosafety Protocol anddetailed documentation requirements wereleft to be developed after the Protocol’s adop-tion. African countries insist that the LMOcontent of a shipment, whether known orpotentially present, should be clearly speci-fied. The EU was pushing for requirementssimilar to its own regulations, including theuse of “unique identification” to clearly iden-tify each transgenic plant line and flexibilityfor countries to set thresholds for the acci-dental presence of LMOs. In contrast, themain LMO exporters, such as the U.S.,Australia and Canada, would have liked tokeep documentation requirements to a mini-mum so as not to hinder trade, and they donot support the inclusion of the unintention-al presence of LMOs. The final agreement onlabelling rules reached in March 2006 wasonly possible by leaving the most contentiouspoints sufficiently ambiguous to accommo-date the different positions.

Labelling of biotech foods also continues tobog down discussions at the CodexCommittee on Food Labelling, which hasbeen working on a related standard since1993. Given the quasi-legal status of theCodex standards, countries’ positions havereflected their domestic labelling practices inan effort to obtain international backing and


44


a stronger defense for their national labellingregulations should they ever become subjectto a WTO challenge. This is clearly reflectedin the two labelling options that have crystal-lized in the debate. Under the first, which issupported by the U.S. and Canada, labellingwould only be required where the biotechproduct differs significantly from its conven-tional counterpart with regard to composi-tion, nutritional value or intended use. Theemphasis here is clearly on food safety. Underthe second option, which is favoured by theEU, Switzerland, India, Norway, Brazil andothers, all genetically modified foods wouldbe labelled to provide consumers with thefreedom to choose.

Precaution

The role of a precautionary approach inbiotech trade and decision-making remainshotly debated. Many consider the BiosafetyProtocol’s references to the precautionaryapproach in the preamble and the flexibilityfor countries to reject LMO imports wherethey lack scientific certainty as the first oper-ationalization of the precautionary principlein international law. In WTO law, more lim-ited space for precautionary decision-makingis provided in Article 5.7 of the SPSAgreement, which allows countries to takeprovisional SPS measures in cases where sci-entific information is insufficient, providedthat these measures are reviewed within “areasonable period of time” and Memberscontinue to “seek additional information.”The Codex principles for risk analysis ofbiotech foods include elements of precaution,requiring authorities to take into accountuncertainties identified in safety assessmentand allowing them to implement appropriaterisk management measures. At the CodexCommittee on General Principles, however,differences over the inclusion of references toprecaution in the risk analysis principles havestalled talks for the past few years.

At the international level, the U.S. has stronglyresisted references to the precautionary prin-

Biotechnology

45

IIBiotechnologyand the multi-lateral tradingsystemBy Gustavo Alanís-Ortega

The multilateral trad-ing system is in realdanger. And negotia-tors, public officials and civil society fromaround the world seem to be disregardingthis. They are letting inertia and legaloidmeandering strip away the system from itsusefulness and relevance.

The latest culprit? The overblown “biosecuri-ty” menace put forward by the “immoral,”“vicious” and “greedy” biotechnology multi-nationals. The contention is that with their“reckless” flooding of international marketswith diverse biotechnology products, theyconstitute the most refined form of“Frankenstein” science that, along with anopen system of trade, will produce catastro-phes of a global scale, from food security tobiodiversity loss and social instability.

If this were really true, what should we doabout it?

If the current strategy of several key players inthis controversial debate sheds any light onthis matter, the answer would be to introducethe “precautionary principle” into the excep-tions provisions of the WTO. Should we dothat? Let’s explore this question.

It is, of course, true that there is a long his-tory of scientific “breakthroughs” that eventu-ally reveal a sinister side. It could be that thebiotechnology boom may prove to be more ofa nuisance than a blessing. And of course,civil society has a duty to point this out andhelp exhaust every source of doubt, howeverminimal. And it is the purpose of public poli-cy to develop and enforce regulation that off-sets any undesired effects on society as awhole of any technological advances.Furthermore, if a transboundary, regional orglobal case appears, public policy mustaddress this on the appropriate level.




46


A first step in addressing the potential “sinis-ter” side of biotechnology on a global scale isthe Convention on Biological Diversity’s (CBD)Cartagena Protocol on Biosafety, whichincludes the “precautionary approach” todecision-making regarding potential biosafetyhazards, even if the relevant decision relatesto trade. This is a remarkable and major tri-umph in the development of multilateral envi-ronmental agreements (MEAs).

The Cartagena Protocol could be a successstory if it got enough support and scrutinyfrom civil society. Unfortunately, it is not get-ting the support it deserves. It would repre-sent an unforgivable mistake on all sides ifefforts like the Cartagena Protocol and otherMEAs were not taken to their full potential.Nevertheless, more needs to be done; this iswhere the multilateral trading system comesinto play. But what should be done?

It is essential to clarify the relationshipbetween the multilateral trading system andmultilateral environmental agreements, whichuse trade measures to be effective. This couldmean that certain “approaches” or “princi-ples” that countries agreed to on a specificenvironmental matter could be fully recog-nized, in one way or another, within the mul-tilateral trading system. However, little hasbeen advanced since the issue appeared inthe Doha agenda. The excuse of “no negotia-tion until agriculture” has been used to side-line important issues relevant to all countriesand, in many cases, these issues have gonedirectly to dispute settlement instead of thenegotiating table.

While the Biotech dispute at the WTO did lit-tle to clarify the role of the precautionaryprinciple or approach in the WTO, the possi-bility of such a clarification through futuredisputes cannot be ruled out. It is worrisomethat this would occur without negotiations onthe part of the WTO membership as a whole.The point is: there is a strong possibility for amajor precedent to be set that could changethe way trade is conducted, but in theabsence debate and negotiations withinpotentially affected parties.

How crucial is this potential precedent? It isworth noting that no system based on non-discrimination and equal treatment can func-tion under the principle of “precaution.” If themultilateral trading system has any value forits Members, it is its reliance on non-discrim-ination. Any deviation from this principleshould at least be the result of negotiationsamong the entire WTO membership, and notthe result of a single case of dispute settle-ment.

On the other side, it is also a fact that envi-ronmental agreements cannot function with-out discrimination. That is why negotiation isso important, and hence the issue of clarify-ing the relationship between the WTO andMEAs. Unfortunately, after the initial thrustfrom organized civil society that helped putthe environment on the negotiating agenda atWTO, follow-up has dwindled and what littleremains of the efforts from civil society hasgone instead to influence dispute settlementoutcomes.

This shift in strategy from many civil societyorganizations has two awkward results forglobal environmental stewardship.

First, this shift in strategy tends to focus onthe multilateral trading system as one of twoextremes: either a “solution to all problems,”or an “entity of evil.” The first vision tries toinduce substantive change into the system(such as the introduction of the precautionaryprinciple). On the other hand, proponents ofthe second vision work to undermine the sys-tem. The result, in the best of cases, will be adysfunctional and irrelevant multilateral trad-ing system as well as an incompetent multi-lateral environmental system.

Second, this shift in strategy diverts attentionaway from MEAs by disregarding them as amatter of principle. MEAs are the best tool forglobal environmental stewardship that wehave as of now. True, MEAs are perfectible;yet, the key contributions from civil society—effective participation and scrutiny—havepractically disappeared.

There is no doubt that biotechnology—and itspotential crimes and misdemeanors—is amajor concern with respect to the need to



ciple—stressing the need for science-based,case-by-case decision-making—and disputesthat the Biosafety Protocol enables countriesto invoke the principle. The EU, in contrast,has introduced the precautionary principle asthe basis of policy with its inclusion in the1993 Maastricht Treaty and is a strongdefender of the principle as a basis of inter-national law. Developing countries appear tobe ambivalent in their support for either posi-tion. Many of them strongly advocated men-tion of the precautionary approach in theBiosafety Protocol negotiations while takinga non-committal stance (in the case of manyAfrican countries) or opposing such refer-ences (in the case of some Latin Americanand South-East Asian countries) in theCodex Alimentarius Commission.

Trends and FutureDirectionsGiven continued scientific uncertainties,high economic stakes, deep-seated divisionsand ongoing trade liberalization that will

bring the various perspectives into ever closercontact, the biotechnology debate is likely toremain controversial for some time.Developing countries are often stuck in themiddle of these debates, facing the challengeof assessing their interests and evaluatingthem against associated risks and opportuni-ties. Strengthening scientific, regulatory andinstitutional capacities—including to betterunderstand countries’ regulatory flexibility totake measures that respond to their self-defined goals in light of multilateral tradeinterests and obligations—combined withinclusive policy-making processes and priori-ty-setting, will be fundamental perquisites toallow for informed decision-making on theirbiotech future.

The agreement on documentation require-ments has given the Biosafety Protocolrenewed political credibility and parties cannow turn to the task of implementing thetreaty’s provisions, although a number oftrade-related issues, including compliancemeasures and liability, remain to be ham-mered out. The labelling debate can also beexpected to start afresh in 2012 when thedocumentation decision is again up forreview. The main challenge now will be to getthe key biotech exporting countries on board.While the U.S. cannot be expected to jointhe Protocol in the near future, efforts willneed to focus on involving some of the otherbiotech exporters, such as Canada, Australiaand Argentina, who will have to weigh thecompetitive advantages and disadvantages ofjoining the pact.

Moreover, there is a need for greater recogni-tion of the growing role of the internationalstandard-setting bodies in light of their rele-vance to the WTO system, notably theCodex Alimentarius Commission wherenegotiations on an international standard fordomestic biotech labelling continue. To date,participation of developing countries in thestandard-setting process remains limited,owing in part to the complexity of the dis-cussions and the lack of capacities and

Biotechnology

47

IIcontinued from page 46

safeguard both the environment and trade.However, biotechnology should not be anexcuse to disregard environmental negotia-tions and eventual agreements. And it mustnot be a stumbling block towards a more fairand equitable negotiated multinational trad-ing system. Furthermore, it should serve as areminder for organized civil society that moreinvolvement and scrutiny are necessary if wewant a better system of environmental gover-nance and a more accountable way of manag-ing its relationships with the trading system.

Gustavo Alanís-Ortega is President of the CentroMexicano de Derecho Ambiental (CEMDA) andteaches environmental law at the UniversidadIberoamericana in Mexico City.


resources to engage in the negotiations. Thishas led to the adoption of standards thatreflect the domestic standards of industrial-ized countries, with insufficient regard for thecapacities of developing countries to imple-ment these standards and for the products

and issues of interest to them. Thus, capacitybuilding and technical assistance efforts should focus on improving effective partici-pation of developing countries to ensure thatagreed standards take into account theirinterests and constraints.


48


The pursuit of economic growth withouttaking into account the broader public policyagenda on human development (e.g., educa-tion, health and nutrition); equity (e.g.,livelihood security, income distribution andgender equality) and the environment isunlikely to result in lasting poverty reduction.As a response to these concerns, the lastdecade has seen increasing recognition by thedonor community of the need to assist devel-oping countries in integrating environment,development and trade concerns into policy-making and in maximizing net sustainabledevelopment gains from trade.

At the fourth WTO Ministerial Conferencein Doha, promises of new technical assistancecommitments, together with numerous refer-ences to capacity building in as many as 12paragraphs of the Doha MinisterialDeclaration, played a critical role in securingdeveloping countries’ acceptance to initiate abroad-based round of negotiations. Thelaunch of negotiations on fisheries and envi-ronmental goods and services also generatedmomentum for trade and environmentcapacity building as reflected in Paragraph 33of the Doha Declaration, which highlightsthe importance of technical assistance in thisarea. Since Doha, many developing countriesconsider technical assistance and capacity

building (TACB) to be a key element of a“development” round.

Interests and Fault LinesTACB concerns are not exactly a “negotiatingitem,” but it is clear that recipient and donorcountries are motivated somewhat differently.Even though all countries share the broadergoal of capacity enhancement in developingcountries, and while Doha commitments areresulting in increased financial and organiza-tional resources, there are serious concernsthat the type of assistance provided so far hasnot adequately responded to the specificneeds of developing countries and failed toyield the desired outcome.

Developing country interests in trade, envi-ronment and development TACB relate topolicy formulation; participation in interna-tional rule making and standard setting;domestic regulatory reforms and implemen-tation of international commitments; andcompliance with environmental and foodsafety standards. In this section, we will firstlook at each of these developing countryinterests and then review the issues from theperspective of the providers of technical assis-tance and capacity building.

Issues and Debates

49

IICapacity BuildingChristophe Bellmann

•“There is also a need to provide developing countries with assistance to

identify possible policy options to implement their rights and obligations underinternational treaties and to strengthen the reform of domestic institutions and

regulatory frameworks.”

•


Enhancing Domestic Policy-making

For most countries, a major policy challengeconsists of integrating environment, develop-ment and trade objectives into a mutuallysupportive policy framework that maximizesthe net sustainable development gains fromtrade. Building on earlier work by SolignacLecomte, the accompanying figure provides aschematic description of the various stages ofan ideal stylized policy process. First, the def-inition of domestic interests needs to beframed in the broader context of the nationalsustainable development strategy and devel-oped through a participatory process involv-ing both state and non-state actors. Theinterests identified through this process thenform the basis of the country’s negotiatingpositions, the orientations and content ofdomestic regulatory reforms, and the tradepromotion strategy. Finally, roles are attrib-uted and resources are allocated to pursuethose policy objectives.

It is inappropriate for technical assistanceproviders to intervene in the definition ofnational interests and the assessment of dif-ferent policy options, not least because theirown interest might conflict with recipient

priorities. However, donors may want to sup-port an integrated policy-making process bystrengthening domestic analytical capacitiesand facilitating policy dialogues with relevantstakeholders. This can be accomplished inthree main ways: Through building domesticanalytical capacities, promoting participa-tion, and facilitating the policy-makingprocess.

Building domestic analytical capacities. A solidunderstanding of the costs and benefits oftrade liberalization from a sustainable devel-opment perspective is a sine qua non condi-tion for informed decision-making. However,with very few exceptions, developing coun-tries lack the analytical capacities to conductapplied research at home, undertake informedcost-benefit-risk analysis and to anticipate thenecessary social and environmental adjust-ments associated with trade liberalization.Most of the analysis produced in this field isgenerated in the North. Building backstop-ping analytical capacity in developing coun-tries requires strengthening centres of excel-lence (universities, think tanks) that look attrade in the broader context of sustainabledevelopment and can provide informedinputs into the policy-making


50

Figure 1. Domestic policy formulation process on trade and sustainable development.

Non-State Actors Sustainable DevelopmentPolicy-makers

Trade Policy-makers

National/Regional Sustainable Development Strategy

Participation in InternationalNegotiations/Dispute

Settlement

Regulatroy Reforms andImplementation of International

Commitments

Trade Promotion andCompliance with

Standards

Advancement of National/Regional Sustainable Development Strategy

Trade and SustainableDevelopment Policy


process, but that are independent institutions.The creation of specific academic curricula indeveloping country universities would alsocontribute to filling this important gap.

Promoting participation. International traderules affect a broad range of stakeholders con-cerned with multiple agendas, such as fishstocks management, water sanitation, biodi-versity conservation, soil erosion and pesticideuse. While governments should maintaintheir role as decision-makers and arbitratorsbetween different national interests, inclusive-ness and participation in policy-making arefundamental for assuring legitimacy, goodgovernance and acceptable results for thesociety at large. It is also essential to ensureintegrated policy-making that goes beyondshort-term mercantilist interests and reflectsbroader public policy concerns. Traditionally,the conception of stakeholders or constituen-cies in the trade and environment field hasbeen narrow, limited mostly to ministries oftrade and ministries of environment. Thisconception needs to be broadened to includethe variety of actors who are actively involvedin sustainable development policy-making.

Facilitating the policy-making process. Theactive participation of relevant and well-informed stakeholders is not sufficient initself. It is equally important to put in placeformal (inter-ministerial committees andpublic-private dialogue platforms) and infor-mal (lobbying) mechanisms through whichinteraction can take place. In most countries,very little has been done so far on the inte-gration of environment, development andtrade; there are concerns that the few embry-onic mechanisms that have been put in placeoften remain “empty shells” due to a lack ofpolitical leadership or a low level of under-standing of the issues. Donors could play arole in supporting the establishment of per-manent advisory committees for trade, envi-ronment and development, which couldbecome the focal point for inter-agency coor-dination and the integration of sustainabledevelopment concerns into policy-making.

Capacity Building

51

IIThe Andean experience oncapacity building

By Luisa Elena Guinand and María ElenaGutiérrez

The trade and environment negotiationsunderway in the World Trade Organization(WTO) underscore the need of the Andeancountries to assess the implications of thenegotiations and to strengthen their capacityto design and implement public policies ontrade, environment and development. TheAndean Community’s member countries—Bolivia, Colombia, Ecuador, Peru andVenezuela—have responded to the challenge,given the significant issues at stake for thesub-region.

The Andean countries are considered to be“the global epicenter of biodiversity” and bio-diversity issues are particularly important tothese countries. Together, the five Andeancountries shelter approximately 25 per cent ofthe planet’s biodiversity and are centers oforigin of important phytogenetic resources.They are also home to various indigenouscommunities, which for years have preservedand used these resources and developed a richbase of traditional knowledge. With theprogress of biotechnology and the opening ofnew markets for biodiversity-derived products,the granting of patents for inventions indeveloped countries is increasing, withoutnecessarily fully complying with multilateralbiodiversity agreements. Significant effortsare being made by Andean countries to clari-fy the debate on biodiversity-related issuesand to put forward specific proposals in theWTO trade negotiations.




52


Capacity building efforts in the Andean sub-region have concentrated on issues related tobiodiversity, especially those surroundingintellectual property rights (IPRs), geneticresources and traditional knowledge.Initiatives by the General Secretariat of theAndean Community (CAN) have focused onfostering dialogue among relevant authoritiesin Andean countries by strengthening theAndean Committee on Genetic Resources,undertaking regional projects, and positioningthe region in international negotiation fora,specifically with respect to defining an inter-national regime on access to genetic resourcesand benefit sharing.

In coordination with the Andean DevelopmentCorporation (CAF), a program to supportAndean negotiators was launched in 2001focusing on access to genetic resources, pro-tection of traditional knowledge and intellec-tual property in various negotiating fora. Inthis context, workshops have been conductedto encourage dialogue between representativesof intellectual property and environmentalinstitutions in Andean countries. A guidebookprepared by Andean experts was published toprovide technical support for Andean negotia-tors on access to genetic resources and pro-tection of traditional knowledge. The sub-region has been investing in capacity buildingto empower indigenous experts from Andeancountries to participate in the policy-makingprocess on traditional knowledge and biodi-versity-related issues. The importance of thiseffort lies in its value at the level of theAndean Community, whereby the formulationof policies and regulations is conducted fromthe bottom up, thus ensuring that stakehold-ers’ interests are represented from the outset.

Another area of regional capacity buildingwithin the Andean Community is Biotrade.Biotrade involves the collection or production,processing, and sale of goods and servicesderived from native biodiversity (species,genetic resources and eco-systems) underenvironmental, social and economic sustain-ability criteria. This can represent an impor-tant source of income for countries with vastnatural wealth, such as those in the AndeanCommunity. Biotrade activities are aimed at

preserving biodiversity while promoting thedevelopment of the local population thatdepends on these resources. The developmentof Biotrade National Programs started in 1997.During the World Summit on SustainableDevelopment in Johannesburg in 2002, atriple partnership was consolidated betweenCAF, CAN and United Nations Conference onTrade and Development (UNCTAD) to launchthe Andean Biotrade Program. Capacity build-ing activities to stimulate biotrade havefocused on enhancing the dialogue and jointactions between stakeholders to promoteexports.

Although the Andean countries have madecapacity enhancement a priority, a number ofchallenges remain. First, there are very fewinstitutions and individuals knowledgeable onthe issues that are of high priority in thesecountries. Second, there is a lack of humanand financial resources, not only within thesecountries but also internationally. Third,because of the high political instability inthese countries, key individuals tend to movefrom one job to another and built capacitiesare lost. Fourth, defining the key prioritiesand getting consensus on these prioritiesitself requires significant effort. Fifth, tradeinstitutions and decision-makers tend not tointeract with environmental institutions anddecision-makers. Sixth, the capacity buildingprograms of international agencies tend tofocus on their own agendas rather than on theactivities of interest to Andean countries, andparticularly to local communities. Finally,funding for capacity building tends to bescarce, unpredictable and short-term.

As one looks towards the future, it is clearthat the demand from Andean countries forcapacity building on trade and environmentwill increase. As the Andean environmentalagenda develops, so will capacity buildingneeds expand to include issues such as cli-mate change, water management and the rela-tionship between trade and investment. Themost important lesson that has been learnt isthat capacity building efforts will be mostsuccessful when they are country-driven.When the agenda on trade and environment isset by stakeholders in a participative manner,



Table 1. Stakeholders who should participate in policy formulation.

Stakeholder Groups Relevant Institutions

Trade Policy-makers Ministry of Trade

Ministry of Foreign Affairs

Ministry of Finance

Permanent Missions (Geneva, New York, Brussels)

Sustainable Development Policy-makers Ministry of Environment

Ministry of Agriculture

Ministry of Health

Ministry of Education

The Legislature National Parliaments

Non-state Actors Private Sector

Academia/Research/Scientists

Farmers/Fisher Groups

Community-based Organizations, Indigenous People

Consumers

Development and Environment NGOs

Trade Unions

Media

Capacity Building

53

II

Participation in International RuleMaking and Standard Setting

There is a need to assist developing countriesin advancing their sustainable developmentinterests in international negotiations. Thiscan come in the shape of strategic advice, for-mulation of negotiating proposals, coalitionbuilding, public awareness campaigns andfinancial support for participation in negotia-tions. For example, developing countries needto design offensive and defensive strategies notonly on the various negotiating items but alsoon the implications of other related areas ofthe negotiations. The fact that Western andSouthern African countries, for example, havebeen virtually absent from the negotiations onfisheries subsidies, even though many of themhave major trade and natural resource man-agement interests, is symptomatic of the needfor TACB in this area.

Beyond the WTO, developing countries aresimultaneously negotiating at multiple levels,ranging from multilateral negotiations undervarious multilateral environmental agree-ments (MEAs) to bilateral and regional freetrade agreements. Another major area of con-cern relates to the ability of countries to partic-ipate in international standard setting bodies,such as the Codex Alimentarius Commission.Developing country participation is crucialas standards developed by those institutionsform the basis of international harmoniza-tion, which is encouraged under the WTOAgreement on the Application of Sanitaryand Phytosanitary Measures (SPS). The riskfor many countries is to end up with stan-dards set at levels inappropriate to their situ-ation or which require infrastructure that isunavailable domestically.


Regulatory Reforms and Implementationof International Commitments

There is also a need to provide developingcountries with assistance to identify possiblepolicy options to implement their rights andobligations under international treaties andto strengthen the reform of domestic institu-tions and regulatory frameworks.

Translating WTO or MEA commitmentsinto domestic law can be costly and burden-

some. The implementation of the SPSAgreement, for example, involves buildingnew public agencies, educating personnel,establishing notification and enquiry points,upgrading national standards to world-classlevels and creating domestic capacities toundertake risk assessment. Beyond the cost ofimplementation, many developing countriesface difficulties in implementing their obliga-tions under different international instru-ments in an integrated and coherent manner.The absence of international mechanisms toensure policy coherence among the differentregimes not only generates legal insecurity, italso places the burden on individual govern-ments to reconcile any inconsistencies. Whilethe WTO agreements and MEAs are mutual-ly supportive in principle, experience hasshown that conflicts between regimes mightarise at the implementation stages. This wasthe case, for example, in the highly contro-versial debate on the compatibility betweenthe WTO Agreement on Trade-relatedAspects of Intellectual Property Rights(TRIPS) and the Convention on BiologicalDiversity (CBD). While this challengeapplies equally to developed and developingcountries, the latter are often not sufficientlyequipped to resolve potential conflicts.

Compliance with EnvironmentalRequirements in Export Markets

A growing number of products from devel-oping countries are subject to environmentaland health measures in Northern markets.These measures involve economic instru-ments, technical regulations and standards,and quantity import controls. Knowledge ofexisting standards is limited in developingcountries and the cost of compliance can behigh, particularly if new requirements areregularly introduced. For example, the SPSregulations in the European Union thatestablish “farm to fork” tracing requirements,maximum residue levels of pesticides orhygiene regulations have a significant effecton the ability of developing and particularlyleast-developed countries to export products


54


the probability that countries will adopt aproactive role in trade negotiations isenhanced.

Thus, capacity building efforts have an impor-tant role to play in developing a participatory,multi-stakeholder agenda. However, given thatthis is a lengthy process, capacity buildingprograms need to be designed for the mediumterm, assigning predictable resources in coor-dination between agencies. For example, theAndean process on biodiversity and IPRs tookfour years to reach consensus on a regionalposition on biodiversity. This process involvedlinking biodiversity issues with trade negotia-tions, disseminating knowledge on these linksbetween national environmental and tradeauthorities (specifically intellectual propertyauthorities), positioning the issue at the sub-regional level so that it could be presented inbilateral, regional and multilateral negotia-tions, and, finally, reaching agreement amongAndean countries to jointly negotiate at theWTO to amend the TRIPS Agreement to includethe requirements of disclosure of origin, bene-fit sharing and prior informed consent.

Luisa Elena Guinand, from Venezuela, is theCoordinator for Environment and SustainableDevelopment at the General Secretariat of theAndean Community,

María Elena Gutiérrez, from Peru, studies sus-tainable development and conservation biologyat the University of Maryland, U.S.


such as fruits, vegetable or fish. Access to, andlocal adaptation of, environmentally soundtechnology (EST) plays an important role tohelp countries upgrade their productionprocesses and meet growing consumer prefer-ences for green products in the North.

On the other hand, voluntary instrumentssuch as eco-labels or geographical indicationshave the potential to help developing coun-tries enhance their market penetration andfacilitate the creation of specific niches forenvironmentally preferable products (EPPs).The production and promotion of EPPs orproducts based on traditional knowledge,which are often produced by poor rural com-munities, can also contribute to povertyreduction. Taking advantage of these oppor-tunities, however, often involves high invest-ment, well-adapted marketing tools andknowledge of potential export markets. Inpractice, few countries have the capacity topromote such forms of sustainable tradewithout long term and well-targeted TACB.

Providers of Technical Assistance andCapacity Building

The supply of TACB encompasses a widevariety of services provided by a myriad ofinternational, bilateral and non-governmen-tal donors. It mostly takes the form of train-ing packages and seminars for governmentofficials, manuals and handbooks, policyresearch and dialogues. Providing an accurateoverview of trade and sustainable developmentTACB, however, is complex; not least becauseof the lack of reliable data and the large num-ber of small-scale, one-time workshops or con-ferences. Another difficulty relates to the cross-cutting nature of the trade, environment anddevelopment debate. Many technical assis-tance services related to agriculture, intellectu-al property rights and market access oftenaddress environmental concerns even if this isnot their primary objective.

The most elaborated source of informationon TACB is the joint WTO-OECD DohaDevelopment Agenda Trade Capacity

Building Database (see http://tcbdb.wto.org),which compiles data reported from bilateraldonors and regional and multilateral agencies.According to this source, donor commit-ments on trade and environment amountedto US$84.2 million in 2001. This figuredecreased to US$25.4 million in 2003 eventhough the number of activities increasedfrom 64 to 70. It should be noted, however,that this database only provides a partial andprobably underestimated overview. Reportsby donors including major ones are oftenincomplete. It is clear, however, that trade andenvironment related TACB remains a margin-al area of capacity building. In 2002, forexample, it only represented four per cent ofthe WTO’s assistance, with only 21 of a totalof 488 courses and seminars focusing on tradeand environment issues. In subsequent years,this percentage decreased to less than 1.8 percent, with eight activities out of 451 in 2003and nine out of 501 in 2004.

The main providers of trade and environ-ment TACB can be divided into three broadcategories.

• International and regional organizationsassist government officials to adjust tointernational rules and disciplines, imple-ment obligations, comply with environ-mental requirements, participate in inter-national negotiations and exercise theirmembership rights.

• Bilateral governmental donors vary consid-erably in the scale and geographical cover-age of their TACB. The main providersinclude the European Union and its mem-bers, the United States, Japan and Canada.They address a wide range of needs by pro-viding assistance either multilaterally bycontributing to international agencies orbilaterally through national developmentcooperation and environment ministries.They also contribute to projects undertak-en by non-traditional providers, such asnon-governmental organizations (NGOs).

Capacity Building

55

II


• Non-traditional providers have becomeimportant TACB providers over the lastdecade. They include environment anddevelopment NGOs, consumer groups,activists, think tanks and universities.Most rely on funding from bilateraldonors and private foundations. Theiractivities focus on policy analysis, policydialogue, support to negotiations andadvise on implementation of internationalcommitments. As opposed to multilateralagencies, they tend to deal with a broaderset of stakeholders, including governmentofficials, the private sector and grassrootsorganizations. They also fill importantgaps in areas where traditional donors areless active such as policy dialogues.

Trends and FutureDirectionsEnsuring that the limited resources allocatedto TACB effectively respond to the expecta-tions of developing countries requires a com-prehensive review of existing policies andpractices by donors as well as recipients. Thissection identifies a few strategic considera-tions that should be explored further and arelikely to be critical in shaping the future ofTACB discussions.

A Sustainable Development Approach

Despite recent efforts to promote a holisticapproach, most TACB activities remain com-partmentalized and have failed to move fromisolated to integrated policy-making. In partic-ular, a sustainable development approach thatgoes beyond short-term mercantilist interestsand effectively encompasses environmental,human development and equity concerns stillevades the design and delivery of trade-relatedcapacity building activities. A significantextent of trade and environment related TACBservices, for example, focuses narrowly on theagenda of the WTO Committee on Trade andEnvironment (CTE) with little attentiongiven to other dimensions of the trade, envi-ronment and development interface.

A Beneficiary-driven Approach

Overall, technical assistance services remainessentially conceived by the providers with alow degree of diversification and responsive-ness to the particular needs of the beneficiaries.Seminars and training packages are largelystandardized with little attention being paidto the country’s level of development or cul-tural differences. Neither is assistance tailoredto regional needs, environmental concernsand economic interests of the country inquestion. For example, most technical assis-tance focuses on multilateral negotiationswith few initiatives for bilateral and regionalnegotiations. TACB also tends to be centeredon export needs, without ensuring that localconsumers benefit. Technical assistance forcompliance with SPS standards, for example,often results in better quality and safety stan-dards, but only for exported goods and rarelyfor the local market.

Building Local Capabilities

Frequently, TACB is designed as a transfer ofknowledge and solutions from the North to theSouth. Trade experts come to lecture or traindeveloping country officials. Local skills andcapabilities to find solutions are not createdwithin local institutions. Donors should also beaware of the risks associated with placing exces-sive emphasis on individual capacity buildingover institutional development. Experience hasshown that technical assistance programs tar-geted at individuals all too often result in thoseindividuals leaving the civil service for morelucrative positions in the private sector or ininternational organizations once they haveaccumulated expertise. In contrast, fewresources are invested in strengthening centersof excellence in developing countries, whichcan provide lasting analytical capacities toinform the policy-making process.

Targeting the Right Participants

Despite a wide recognition of the need topromote policy dialogue, a large majority ofactivities remain focused on training and


56


Capacity Building

57

II

Tabl

e 2.

Cap

acit

y bu

ildin

g ne

eds

and

tech

nica

l ass

ista

nce

serv

ices

pro

vide

d by

the

mai

n do

nors

.

Mai

n Ty

pes

of T

echn

ical

Ass

ista

nce

Nee

ds

Tech

nica

lPo

licy

Form

ulat

ion

Part

icip

atio

n in

Re

gula

tory

Ref

orm

Tr

ade

Prom

otio

n As

sist

ance

Inte

rnat

iona

l &

Impl

emen

tati

on&

Com

plia

nce

Prov

ider

sN

orm

Set

ting

wit

h St

anda

rds

Anal

ysis

Polic

y Ru

le

Stan

dard

Lega

l and

Im

plem

enta

tion

Co

mpl

ianc

eSu

stai

nabl

e Di

alog

ueM

akin

gSe

ttin

gIn

stit

utio

nal

of I

nter

nati

onal

w

ith

Trad

e Re

form

sCo

mm

itm

ents

Inte

rnat

iona

l Pr

omot

ion

Stan

dard

s

Inte

rnat

iona

l and

Reg

iona

l Org

aniz

atio

ns

UNEP

/ UN

CTAD

ITC

WTO

OECD

Code

x

Bila

tera

l Don

ors

U.S.

EU Japa

n

Cana

da

Non

-tra

diti

onal

Pro

vide

rs

ICTS

D

IISD

Fiel

d

WW

F


teaching policy-makers instead of promotinglong-term interaction among stakeholders.Among policy-makers, beneficiaries are oftenmid-level government officials who have littleinfluence in their ministries and who maynot be in a position to share or put in prac-tice what they have learned. TACB providersshould consider selecting participants morecarefully to ensure that they reach out to keypeople within different stakeholder groups.

Establishing Long-term Relationships

Technical assistance services, all too often,take the form of one-off conferences or work-shops with little or no efforts to build long-term relationship. Activities are isolated,unlinked to others and lacking follow-up,evaluation and ex post assessment to adjustfuture activities to country needs. They alsocontinue to be delivered in an uncoordinatedand ad hoc manner by different institutions.

Promoting Diversification of TACBSupply

Finally, most of the financial resources areconcentrated in a limited number ofproviders. While donor coordination andsynergy are essential, particularly if TACB isto promote integrated policy-making, there isa case for a more diversified supply of techni-cal assistance to allow beneficiaries to chooseamong different providers. Of course, thispresupposes the beneficiaries’ ability to makeappropriate choices and highlights theimportance of effective policy formulation indeveloping countries. Such “competition”might help to improve the quality of techni-cal assistance and ensure that the services pro-vided effectively respond to the beneficiaries’specific needs.


58


At first glance, climate change may appear tobe rather a non-issue at the World TradeOrganization (WTO). There has been somediscussion of the UN Framework Conventionon Climate Change (UNFCCC) and itsKyoto Protocol within the debate on the rela-tionship between the WTO and multilateralenvironmental agreements (MEAs) in theWTO Committee on Trade and Environment(CTE), but this discussion has yielded little inconcrete terms. However, climate change is anemerging issue at the WTO. It can be seen asa new generation environmental challengethat transcends the confines of a limited, tra-ditional definition of an environmental prob-lem to be resolved by a targeted environmen-tal treaty with some accommodation in thetrade realm.

Dealing with climate change is fundamentalto economic activity in all its forms—how weproduce, use and trade energy and goods.Emissions of carbon dioxide, the number onegreenhouse gas amongst the six covered bythe Kyoto Protocol, is a side effect of mostproduction processes. Therefore, climatechange mitigation measures have implica-tions for most WTO agreements in someform or other, be it rules on subsidies, taxa-tion, intellectual property, technology trans-

fer, agriculture or environmental goods andservices.

The use of fossil fuels for the production ofenergy to power industrial processes andtransportation is leading to the buildup of anatmospheric shield of carbon dioxide, whichtraps heat and warms up the Earth. Theresult is changing patterns of precipitationand drought, increasing extreme weatherevents and sea-level rise. These changes affectpoor countries and vulnerable people dispro-portionately, in the form of failed crops, dev-astating floods and vector-borne diseases.Species and habitat loss is also exacerbated.Efforts to curb climate change particularlyfocus on how we use energy.

As the Kyoto Protocol entered into force inFebruary 2005 high levels of energy use con-tinued in industrialized countries. Rapid eco-nomic growth in China and India was driv-ing up energy consumption rates worldwideand greenhouse gas emissions were rising at arate of 1.9 per cent a year. The InternationalEnergy Agency (IEA) projects that energydemand and prices will continue to soar, withthe world set to use 60 per cent more energyin 2030 than in 2005. Scientists estimate thatthe greenhouse gas emissions of the past twocenturies, mostly from developed countries,

Issues and Debates

59

IIClimate Change and EnergyMalena Sell

•“At the global level, climate change mitigation and adaptation and trade liberaliza-tion are managed under separate and complex legal regimes. The UNFCCC and Kyoto

Protocol do not mandate specific policies and measures but set targets for emis-sions reductions that countries must reach; binding targets, in the case of Kyoto.

Countries have multiple regulatory measures at their disposal.”

•


have contributed to raising temperaturesworldwide by 0.6 degrees centigrade (ºC).Over the next century, the Earth’s tempera-ture could increase by an estimated 1.4ºC atthe very least. If economic growth continueson its current trajectory, and emissions arenot reduced, temperature could rise by5.8ºC, with disastrous consequences for theenvironment.

At the global level, climate change mitigationand adaptation and trade liberalization aremanaged under separate and complex legalregimes. The UNFCCC and Kyoto Protocoldo not mandate specific policies and meas-ures but set targets for emissions reductionsthat countries must reach; binding targets, inthe case of Kyoto. Countries have multipleregulatory measures at their disposal. Thesemeasures, the Protocol states, “should notconstitute a means of arbitrary or unjustifi-able discrimination or a disguised restrictionon international trade,” and they should beimplemented in ways that minimize adversetrade effects.

WTO trade rules—through, among others,disciplines on subsidies, border measures,technical requirements, government procure-ment and taxes—determine the optionscountries have to use economic and otherregulatory tools. International trade negotia-tions may impose constraints on countriesimplementing climate and sustainable energymeasures if the links between climate changemitigation and adaptation goals and trade-supported instruments are not clear.Therefore, actively pursuing the right toretain and expand the necessary policy spacein trade negotiations, allowing Members theflexibility to enact policy in support of cli-mate change mitigation and adaptation isincreasingly becoming a consideration forsome countries in the Doha Round.

The Doha Round negotiations provide anopening for Members to ensure that the mul-tilateral trade rules support climate changepolicy. New opportunities include negotia-

tions on the accelerated liberalization of tradein environmental goods and services (EGS)—conducted with a view to phasing out tariffsand non-tariff barriers—which could be har-nessed for the promotion of sustainable formsof energy use and trade. Subsidy reform, anessential liberalization component in the DohaRound negotiations, suggests potential lessonsfor the energy sector. Based on the experiencesin agriculture as well as the fisheries negotia-tions, the feasibility of disciplining energy sub-sidies in the WTO context could be exploredin future negotiations. In addition, the WTOAgreement on Agriculture and negotiationswill affect carbon management globally, aschanges in land use patterns have majorimpacts on the carbon balance. The overhaulof agricultural subsidies provides an opportu-nity to promote genuinely sustainable agricul-tural production and practices, including theexpansion of biofuels—clean-burning, car-bon-neutral fuels derived from agriculturalcrops that can be used to partially replace liq-uid petroleum products.

Interests and Fault LinesWhile there has not yet been an overall dis-cussion on trade rules and climate change,certain dimensions of the issue have beendebated, including at the CTE. In discus-sions on the WTO-MEA relationship, Kyotocountries have generally pushed an expansivereading of the Protocol’s obligations. Forexample, Switzerland has suggested utilizingthe concept of “obligation de résultat” in theinterpretation of the Kyoto Protocol in theWTO context, given the flexibility countrieshave in how to implement it, and thus lack ofdefined specific trade obligations (STOs).Non-parties, such as the U.S., have under-scored that they are by no means bound byKyoto obligations. Developing countrieshave kept a relatively lower profile in thedebate this far.

Environmental Goods and Services

If governments are to foster technologies thatemit low or no greenhouse gases, and goods


60


that are energy efficient, they need to distin-guish them from conventional technologies.As part of the Doha mandate, WTOMembers are to negotiate on the reduction,or elimination of tariffs and non-tariff barri-ers on environmental goods and services.Lower tariffs would reduce their costs, there-by increasing trade and providing an eco-nomic incentive to manufacturers to producemore of them.

Renewable energy technology has beenflagged as possible environmental goods. Asdiscussions progress, three types of possibleenvironmental goods leading to positive cli-mate outcomes can be envisaged: low-carbonfuels such as ethanol or bio-diesel; renewabletechnologies such as solar cells or wind tur-bines; or energy efficient environmentallypreferable products (EPPs) such as efficientrefrigerators. As such, EGS could function asan incentive for innovation both for newenergies and for new energy efficient tech-nologies.

However, key definitional issues in the EGSdebate have stirred controversy. All Membersagree that goods and services whose “end-use” is for an environmental purpose arelegitimate (end-of-pipe technologies).Beyond this basic criterion, there is no con-sensus. Developing countries have opposedincorporating process and production meth-ods (PPMs) into the definition on the basisthat this would create a de facto trade barrierfor them, since only the wealthier countrieshave the financial and technical resources tocomply with high standards. Carbon dioxideemissions during the production process andtheir impact on climate change could only beacknowledged if PPMs were considered inthe definition of an environmental good.Members also disagree on the desirability ofincluding EPPs, such as energy efficientproducts, as environmental goods, in partbecause this would require a dynamic, or “liv-ing” list given the drive for constantly updat-ing and improving technologies.

Climate Change and Energy

61

IIDoing tradeand climatepolicy togetherBy ZhongXiangZhang

Climate and tradepolicies both affectthe use of naturalresources. Their link-ages are recognized in the objectives of thecorresponding agreements to safeguard thetwo regimes. The ultimate objective of theUnited Nations Framework Convention onClimate Change (UNFCCC) is to stabilize green-house gas concentrations in the atmosphere.An underlying principle to guide this effort isthat “measures taken to combat climatechange, including unilateral ones, should notconstitute a means of arbitrary or unjustifiablediscrimination or a disguised restriction oninternational trade.” At the same time, theWorld Trade Organization (WTO) Agreementrecognizes that trade should be conducted“while allowing for the optimal use of theworld’s resources in accordance with theobjective of sustainable development, seekingboth to provide and preserve the environmentand to enhance the means for doing so.”

Clearly, the main aim of both the UNFCCC andthe WTO is to ensure efficiency in the use ofresources, either from the perspective of max-imizing the gains from the comparativeadvantage of nations or of ensuring that eco-nomic development is environmentally sus-tainable. Therefore, the objectives of theUNFCCC (and its Kyoto Protocol) and the WTOdo not explicitly conflict with each other.

However, the possibility of conflicts may arisein implementing the Kyoto Protocol. With theKyoto Protocol having entered into force,Annex 1 countries are preparing, adopting andimplementing comprehensive measures tomeet their emissions targets set under theProtocol. The Kyoto Protocol gives these coun-tries considerable flexibility in the choice ofdomestic policies to meet their emissionscommitments. Possible climate measuresinclude carbon/energy taxes, subsidies, energy




62


efficiency standards, eco-labels, governmentprocurement policies, and flexibility mecha-nisms build into the Kyoto Protocol. The imple-mentation of these measures has the potentialto affect trade and thus raises concerns aboutcompatibility with WTO rules. In order to meettheir Kyoto emissions targets with minimumadverse effects on their economies, it is verylikely that Annex 1 governments with differen-tiated legal and political systems might pursueemission reduction policies in such a way as tofavour domestic producers over foreign ones.Such differential treatment could occur in gov-erning eligibility for, and the amount of, a sub-sidy, in establishing energy efficiency standards,in determining qualification as eco-labeledproducts and the procedures for establishingeco-labels, and in specifying criteria for tendersand conditions for participating in governmentprocurement bids. In the case where a countryunilaterally imposes a carbon tax, it may adjusttaxes at the border to mitigate competitivenesseffects of cheaper imports not subject to a sim-ilar level of the carbon tax in the country of ori-gin. Measures of this sort raise complex ques-tions with respect to their WTO consistency andthe conditions under which border taxes can beadjusted to accommodate a loss of internation-al competitiveness.

It should be emphasized that some of thesepotential trade practices may be particularlyworrisome and detrimental to developingcountries because they often do not have thetechnical and financial capacity to adapt theirprocess and production methods (PPMs) tothose required in the importing developedcountries. Developing countries have not com-mitted themselves to legally binding green-house gas emissions targets as have theirdeveloped counterparts. Hence, importingdeveloped countries could claim that theabsence of emissions commitments in thesetrading partners would be equivalent to givingan implicit export subsidy, which favours theirenergy-intensive sectors as the costs of envi-ronmental degradation are not reflected in theprices of those exported products.

On this ground, importing countries may imposecountervailing duties, although doing so posesa “slippery slope” problem of where to draw an

appropriate line in distinguishing desirable“like” products from unacceptable non-productrelated PPMs without opening the door to abuse.Also, eco-labels are increasingly based on a life-cycle analysis of the environmental effects ofproducts, which may contain product and non-product related PPMs criteria. Where developedcountries use an eco-label as the criterion topurchase products from developing countries,this may constitute a de facto market access bar-rier and adversely affect developing countries’ability to export to developed countries.

Clearly, these domestic climate policies havethe potential to bring countries into conflictwith their WTO obligations. In many cases,however, such conflicts are not so intractableas to threaten the integrity of either the KyotoProtocol or the WTO agreements. Provided thatWTO rules are carefully scrutinized at the timewhen Annex 1 governments design and imple-ment measures to achieve the required reduc-tions in greenhouse gas emissions, these con-flicts can be avoided or at least minimized.

Another issue of particular interest to devel-oping countries, which has garnered atten-tion, concerns embodied carbon dioxide (CO2)emissions in international trade. Emissionsfrom production in developing countries arehigher than from consumption. The develop-ing countries are in effect emitting CO2 tomeet the consumption needs of rich developedcountries. Clearly, under the Kyoto accountingframework of in-country production emissions,a country’s measured emissions levels may bemisleadingly low if it produces very few emis-sions but imports large quantities of goodswhose production gives rise to significantemissions, indicating that a production-basedindicator which does not take into accounttrade flows can give a misleading underesti-mation of the emissions caused by a country’sconsumption patterns. This issue remains cen-tral to any discussion on establishing an equi-table distribution of future mitigation effortsby industrialized and developing countries.

ZhongXiang Zhang, from The Netherlands, is aSenior Fellow at the East-West Center, Honolulu,Hawaii, and a visiting professor at the ChineseAcademy of Social Sciences, Peking Universityand Chinese Academy of Sciences, Beijing.


In general, developed countries have a com-parative advantage in producing many tech-nologies and products with an environmentalend-use. Their export interests are apparent,while developing countries have yet to iden-tify products of particular interest to them inthe negotiations. In this regard, the idea ofincluding agricultural environmental goodsof developing country export interest hasbeen floated. Among products not yet clearlydefined as being either industrial or agricul-tural are different forms of biofuels, whichdeveloping countries could produce for anexport market.

Energy Subsidies and Taxation

Conventional energy is heavily subsidized,and the energy market distorted. For renew-able, climate-friendly energy to take off it istoday widely recognized that governmentsupport or incentives are needed. The WTOAgreement on Subsidies and CountervailingMeasures sets the ground rules for permittedsubsidies in the trade context. Subsidiesshould not target exports, should be generalrather than aimed at specific industries, andshould not lead to discrimination against“like” imported products.

Governments also use taxes and tax breaks toprovide incentives to energy producers andusers to become climate friendly. A carbon taxcan be applied in various ways: as an excise taxon consumption; as an excise tax on energyinputs; as an excise tax based on energy pro-duction processes; and as a border tax adjust-ment. Nothing in the WTO prevents a mem-ber from deciding how much tax to apply toa good. It only requires that the tax be appliedequally to domestic and foreign products thatare similar or “like.” WTO law deems prod-ucts to be “like” if they are “directly competi-tive or substitutable.” To apply a carbon tax tofossil fuels and exempting renewable energiesfrom a similar tax requires proving to theWTO that the two energy sources are not likeor “directly competitive or substitutable.” It isobvious that fossil fuels are directly competi-


63

IICan trade bean instrumentof climate policy?By Gao Pronove

If political economyhas a single truth tooffer it is this: freetrade increases theproductive powers of capital.

When trade is allowed to flow freely aroundthe planet it rationalizes the global division oflabour, enhances economic efficiency, andleads to productivity gains on an internationalbasis. And, indeed, compelling evidence existsthat since the creation of the open interna-tional trading system in the wake of World WarII, the gradual movement toward free tradehas made important contributions to globaleconomic growth.

Yet, the six-decade history of the world trad-ing system has revealed another truth: freetrade can undermine non-market social goals,such as poverty alleviation, equitable devel-opment and environmental preservation. Thetask confronting forward-looking policy-mak-ers is how to harness the best of what freetrade has to offer, while not losing sight of theultimate objective: a world characterized byjust, balanced and sustainable development.

The idea that free trade can help achieve non-market social goals was prominent in the mindsof the founders of the postwar world tradingsystem, who saw free trade as part of a largersocial project among developed countries inthe West: the creation of a robust welfare statesnestled within full employment economies gen-erating high and rising real wages. If free tradeand these social goals came into conflict, freetrade was to yield; for free trade was a meanstowards an end, not an end in itself.

Yet somewhere along the line this hierarchy ofpriorities was turned on its head. Free tradebecame an end in itself. While this revolu-tionary change got its start prior to the for-mation of the World Trade Organization (WTO),




64


the WTO has emerged as its chief enforcer.Given the extraordinary scope of its free traderules and the unprecedented power of its dis-pute settlement mechanism, the WTO standsas the chief obstacle to the implementation ofpublic policies that require subordinating freetrade to the attainment of non-market socialobjectives.

Nowhere is this clearer than in the field ofenvironmental policy. It is now well estab-lished that conflicts exist between theenforcement provisions of numerous multilat-eral environmental agreements and WTO traderules; and while these conflicts have yet to beadjudicated, the balance of opinion is that,when they are, the WTO and its mercantilistimpulse is likely to triumph. Indeed, in con-flicts between free trade and the environmentinvolving domestic environmental policies,WTO dispute settlement panels have tended tofind in favour of free trade.

The implication for policy-makers concernedwith sustainable development is clear: how tomaneuver within an international policy-mak-ing environment dominated by the free traderules of the WTO? Two complimentary pathsare open. One is to change the priorities of theWTO; in effect, pushing the organization toreturn to the priorities that guided thefounders of the postwar international tradingsystem—priorities that made free trade servenon-market social goals. But reform of theWTO is a long-term proposition. In the nearterm, policy-makers must devise solutions tosocial problems, including environmentaldegradation that work with the market, notagainst it, and thus are beyond the reach ofthe WTO.

Perhaps the most exciting example of such anapproach is found in the field of climatechange where the Kyoto Protocol established aglobal regime for emissions trading. The KyotoProtocol envisages a global system where gov-ernments regulate the greenhouse gas emis-sions of economic entities (especially energyproducing and energy-intensive industries) sothat they meet global quotas using marketforces. How governments regulate the use ofpolicy instruments such as taxes, duties, sub-sidies, procurement measures, quotas, andother instruments of change may or may notinterface with the WTO. If and when they do,it would be a challenge to mold trade rules tomeet a global problem like climate change.

A global system of permits such as that envis-aged under the Kyoto Protocol also introducesa new tradable good—environmental permitsthat directly affect economic activity. How theWTO will nurture such trade to meet environ-mental objectives will be a major opportunityto promote sustainable development. The cur-rent talks on trade and environment do noteven begin to consider such scenarios.

Indeed, there is much to do on trade and envi-ronment and how we use trade rules andmechanisms to achieve social and environ-mental goals that promote a just and sustain-able future. Free trade has brought a mixedbag that has both advanced our material well-being and advanced the degradation andexploitation of natural resources and the envi-ronment. Can the WTO contribute to advancingthe protection of our planet while maintainingeconomic growth and development? This is thecore challenge for the future.

Gao Pronove, from the Philippines, is theExecutive Director of Earth Council Geneva.


tive; the issue then becomes to prove that theyare not like or substitutable. As a general rule,the WTO has not distinguished goods on thebasis of how they are produced, i.e., based onPPMs. Countries implementing climate poli-cy could argue that similar goods with similarend use produced in different ways are“unlike.” However, this has yet to be done,and would require either the judgment of adispute settlement panel, or an agreementbetween WTO Members, to recognize thedistinction. A carbon tax on productionmethods could possibly also be defended as anenvironmental exception under GATTArticle XX, with the support of the WTO’sPreamble recognizing sustainable develop-ment.

Border Tax Adjustments

As countries choose different energy paths inthe short to medium terms, some will be fac-ing higher costs up front. Countries takingon carbon reduction commitments mayexperience some negative competitivenesseffects, and there have been calls—amongEuropean parliamentarians, for example—for the use of border tax adjustments (BTAs)to offset such competitiveness effects withregard to countries that are not limiting theiremissions under the Kyoto regime or underother future regimes. The WTO allowsMembers to apply border tax adjustments.However, the legality of applying a border taxadjustment based on a product’s implicit car-bon content is still undecided and BTAs arecontroversial.

Agriculture

Global shifts in cropping patterns are expect-ed to result from an eventual Doha Roundagreement in the area of agriculture. In termsof subsidy reform, promotion of practicesthat increase carbon sequestration, as well asproduction of crops that serve as feedstockfor biofuels could potentially expand. Bettermanagement practices include no-till or low-till agriculture, use of shelterbelts, terracing ofslopes and organic farming.

While there are few agricultural subsidy pro-grams focusing on carbon sequestrationspecifically, these may become more promi-nent in the future. As they relate mainly tobetter management practices or set-aside pro-grams, they would fall naturally into theGreen Box (subsidies that do not distorttrade). Current subsidy reform, with theemphasis shifting towards decoupled pay-ments and extensification, may also naturallylead developed countries towards practicesthat support carbon sequestration. On theother hand, trade in agricultural productsglobally is likely to increase as a result of tar-iff and subsidy reduction; and with it green-house gas emissions.

The production of feedstock for biofuels rep-resents an emerging opportunity within agri-culture to contribute to climate mitigation.Overall, the greatest potential for the produc-tion of biofuels can be found in the Southwhere climatic conditions are favourable;whereas developed countries, under theirKyoto commitments, potentially provide thelargest markets. Currently, Brazilian ethanolprocessed from sugar cane is the only biofuelproduced at a competitive price. The U.S. isthe second largest producer, mainly convert-ing corn into ethanol. The production of bio-fuels in the EU is centered on biodieselderived from oilseeds (such as rape seed).Significant research is going into newoptions, particularly ethanol productionbased on dedicated energy crops, such aspoplars or switch grass.

International trade in biofuels is limited duein part to tariff barriers. The Doha Roundnegotiations on the liberalization of EGScould provide some opportunities forexpanded international markets. For develop-ing countries in need of seed funding to con-vert to biofuels or enter the biofuels market,the potential of the Clean DevelopmentMechanism (CDM)—which allows devel-oped countries to offset some of their ownemission reduction commitments by fundingreductions in developing countries—could


65

II


be explored. However, as biofuel productionincreases, this will create complex interac-tions with the production of commoditiesand food prices, which currently are poorlyunderstood. Safeguards may be needed toensure sustainable farming methods.

Energy in Accession Negotiations

Discussions of energy—traditionally left out-side the WTO—have become more explicitthrough the accession processes of the oil-exporting countries, most notably members ofthe Organization of the Petroleum ExportingCountries (OPEC) but also Russia andCentral Asian countries. These accession nego-tiations are in effect a bargain between energyexporters and importers. In the bilateral dis-cussions, WTO Members, such as the UnitedStates and the European Union, have usedtheir leverage to seek to force these countries toabandon dual pricing policies—selling energymuch cheaper domestically than for export.

The acceding countries are also being askedto liberalize their energy services under theirschedule of commitments in the GeneralAgreement on Trade in Services (GATS). Theidea of some form of competition agreementhas been floated as well, although it has nowbeen officially dropped from the Doha agen-da. Overall, these discussions on energy rep-resent a potential opening for wider discus-sions on the topic at the WTO.

Trends and FutureDirectionsIn the medium term, at the latest, the issue ofWTO rules and climate change action willbecome much more concrete, and is likely todraw more attention. While a small body of

academic literature exists on the relationshipbetween trade and climate change rules, it istheoretical and even hypothetical to theextent that it has failed to generate significantinterest among practitioners. However, thissituation is changing, both due to the entryinto force of the Kyoto Protocol and imple-mentation of parallel initiatives (often drivenby the private sector), and discussions on thenext (post-2012) commitment period underthe Kyoto Protocol regime.

However, the world remains divided betweenthose countries that believe in strict Kyoto-style targets and timelines, such as theEuropeans, and those that prefer to tackle cli-mate change through a focus on new tech-nologies and voluntary initiatives—a campled by the U.S. and Australia.

Both camps agree that the UNFCCC is theforum for a future agreement. What form thisinstrument will take, and how it will beimplemented will have major implications forthe global trading system. Implementationwill likely require fundamental socio-economicadjustment in production and trade acrosssectors and countries.

As the post-Kyoto agreement begins to takeshape, close cooperation is needed betweenthe climate negotiations and those on trade.Already, ministries of trade and industry arekey players in new climate policy, althoughclimate change negotiators are scantlyinvolved in international trade policy-mak-ing. Better information exchange betweenand knowledge across the two spheres shouldbe the starting point. Foreseeing potentialconflicts and resolving them in time wouldprevent complicated and costly legal disputesat the WTO.


66


The relationship between trade and environ-ment has been one of the main battle lines inthe development of trade law. The battle-ground for skirmishes on this issue has pri-marily been the dispute resolution mecha-nisms of the international trading system.

The battle line was drawn initially withrespect to two disputes under the GeneralAgreement on Tariffs and Trade (GATT).The Tuna-Dolphin cases between Mexico andthe United States in 1991 and between theEuropean Union and the United States in1994 concerned a U.S. import ban on tunacaught in a manner that harmed dolphins.This embargo was applicable to domestic andforeign fishing vessels as well as third coun-tries where tuna was processed before its finaldestination into the United States. In bothcases, the measures to preclude direct tradeand indirect trade through a third countrywere found to be inconsistent with theGATT.

The Tuna-Dolphin cases raised two importantissues that are at the crux of the trade andenvironment debate. First, they challengedthe meaning of “like” products within thecontext of the GATT principles of mostfavoured nation and national treatment.From an environmental perspective, productsshould be distinguished based on process andproduction methods (PPMs) (i.e., how they

are produced)—so that tuna caught in a man-ner that harms dolphins is differentiated fromtuna caught without harming dolphins. Thepanel, however, held that “likeness” should bedetermined based on the physical characteris-tics of a product and not the manner in whichthey are processed or produced. This interpre-tation was favoured by many developingcountries, which feared the imposition ofenvironmental standards addressing non-product related PPMs. The concern of devel-oping countries was that introducing PPMs asa criterion to determine “like” products couldopen the door to trade protectionism andrestrict market access for their exports.

Secondly, in the Tuna-Dolphin cases, theGATT panel was confronted with the ques-tion of whether a country could extend itsenvironmental regulations beyond its bordersas a necessary measure for the protection ofanimal, plant life or health or exhaustible nat-ural resources as provided under the ArticleXX exceptions to GATT obligations. Thepanel found that the GATT does not permitextraterritorial protection of life and healthand that, even if it did, in this case, theUnited States had not taken all necessarymeasures or explored all other availableoptions including negotiation of internationalagreements to pursue its objective of dolphinprotection.

Issues and Debates

67

IIDispute ResolutionHoward Mann and Yvonne Apea

•“One of the most important spin-offs from the trade and environment debate andrelated disputes in the WTO has been the emergence of investor-state arbitration

processes as a tool to challenge environmental protection measures.”

•


The Tuna-Dolphin decisions and their impacton public opinion signaled several things,depending on the audience. For developingcountries, they signaled both the risk of envi-ronmental protection acting as a brake ontrade liberalization and the opportunity to usetrade law to confront environmental barriersto trade. Developing countries, in particular,vehemently voiced their concern that envi-ronmentalism had become the new frame-work for constraining development andvowed to fight the acceptance of green pro-tectionism in the trading system. For manydeveloped countries and their non-govern-mental organizations (NGOs), they signaledthe risk of trade rules overriding legitimateand necessary environmental protectionmeasures, both domestic and international.By the entry into force of the North AmericanFree Trade Agreement (NAFTA) on 1 January1994 and the World Trade Organization(WTO) on 1 January 1995, the legal, politi-cal and policy relationship between trade andthe environment had taken firm root in tradeinstitutions and policy debates. It was theTuna-Dolphin cases that created the politicalconditions for this development.

In large part due to the public pressure fromNGOs following the Tuna-Dolphin cases aswell as the results of the 1992 UnitedNations Conference on Environment andDevelopment (UNCED), the Agreementestablishing the WTO recognized the needfor trade to be consistent with the goal ofsustainable development and established aCommittee on Trade and Environment(CTE).

Ultimately, the debate of the early 1990s ledto important changes in how both tradeagreements and environmental agreementsare constructed and interpreted, mobilized anew generation of civil society activists, wasone factor leading to public activism at trademeetings, and set a political context that con-tinues to generate both attempts at concilia-tion and ongoing antagonism on trade andenvironment issues.

Interests and Fault LinesThe role of GATT and WTO disputes hasbeen seminal in the evolution of the trade andenvironment debate. While the restrictive legalinterpretation in the Tuna-Dolphin cases char-acterized the initial debate as one of trade ver-sus the environment, the dynamics of the rela-tionship have evolved significantly since theestablishment of the WTO, largely throughthe WTO dispute settlement system. The firstWTO case to be brought to the newly createdAppellate Body was environment-related. Thisdispute concerned the import of reformulatedgasoline into the U.S. from Venezuela. Fromthis case forward, the Appellate Body hasreshaped the legal interpretations of the Tuna-Dolphin cases in the GATT, establishing a rolefor multilateral environmental agreements(MEAs) in the context of trade law and settingnew tests for balancing trade and environmen-tal issues. The Appellate Body has devised atwo-tier approach to analyzing the exceptionsprovisions set out in GATT Article XX in theenvironment-related cases that have comebefore it.

Trade Versus Environment

In Reformulated Gasoline, the Appellate Bodyruled on a January 1995 claim by Venezuelaand Brazil that U.S. laws for conventional andreformulated gasoline discriminated againstgasoline from their refineries and, therefore,were in breach of GATT obligations and couldnot be justified under the exceptions provi-sions. GATT Article XX(g) provides an excep-tion from the trade rules for measures thatrelate to the conservation of exhaustible natu-ral resources. In Reformulated Gasoline, theAppellate Body held that WTO law must beunderstood and applied within the context ofthe broader body of international law. TheAppellate Body emphasized that “in the pre-amble to the WTO Agreement and in theDecision on Trade and Environment, there isspecific acknowledgement to be found aboutthe importance of coordinating policies ontrade and the environment.”


68


These major shifts in legal approach by theAppellate Body had the effect of altering howthe trade and environment relationship wasto evolve in the following years. This shift ininterpretation was fully revealed in theShrimp-Turtle case. Originally launchedagainst the United States by India, Pakistan,Thailand and Malaysia in 1997, the disputeconcerned an import ban by the UnitedStates on shrimp that was not harvested in away that was certified as complying with U.S.standards to protect endangered sea turtles.

Initially, the four countries that brought thedispute to the WTO were successful in theirclaim. In 1998, the Appellate Body ruled thatthe U.S. regulation in question unjustifiablyand arbitrarily discriminated between coun-tries where the same conditions prevail.Nevertheless, the legal reasoning and inter-pretation of Article XX innovatively dealtwith the difficult issue of non-product-relat-ed PPMs. The final approval of the U.S.measure in the Shrimp-Turtle case includeselements of two issues: the accommodationof North-South interests and the protectionof the global commons.

This case marked a major milestone in theshift from trade versus environment to anintegrated approach to trade and environ-ment. The Appellate Body called for multi-lateral solutions to address concern forendangered turtles. The decision in effectaccepted that there was an international con-sensus to protect certain species of endan-gered sea turtles. A “line of equilibrium” wasset between the right of a country to marketaccess and the right to take measures relatingto the conservation of exhaustible naturalresources—endangered sea turtles—underArticle XX(g). The Shrimp-Turtle decisionsmade clear that environmental protectioncould be integrated into trade law. The isola-tion of the trading system from the broadercorps of international law was thus ended,emphatically. A new era of considering howto incorporate the environmental into tradelaw had begun.

Dispute Resolution

69

IIReforming theDSUBy Welber Barral

At the end of theUruguay Round, theDispute SettlementUnderstanding (DSU)was seen as anenhanced mechanismfor guaranteeing pre-dictability in the world trading system. TheDSU eliminated the unstable, consensus-based enforcement provisions in the GeneralAgreement on Tariffs and Trade (GATT); thus,the expectations about its capability to makethe system more rule-oriented and stable werehigh.

A decade later, opinions as to the success ofthe DSU are mixed. The DSU created the mostused international court in human history andcontributed remarkably to the legitimacy andlegal security of the World Trade Organization(WTO). Furthermore, the evolution of case lawcontributed to international law in general byfacing complex issues and raising the interestfor legal aspects of international relations;indeed, a remarkable contribution in times ofchronic unilateralism.

The glass-half-empty critics, however, recallthat most developing countries have neverused this mechanism and accuse its pro-tradebias of eclipsing other development concerns.Political criticisms abound: governments haveaccused panels and the Appellate Body ofjudicial activism, of being a threat to sover-eignty, of adopting extended interpretationsthat lead to deadlocks.

Most of these criticisms disregard the fact thatany mechanism for dispute resolution isderived from a limited political commitment.As a consequence, WTO panels and theAppellate Body are constantly treading a fineline: they must bring a solution to the disputeusing the literal interpretation of pro-trade,purposely ambiguous, compromise language,while respecting the rights and obligations ofWTO Members.




70


In any case, some of these shortcomings wereimplicitly recognized in Doha. Hence, theMinisterial Declaration dedicates a paragraphto the reform of the DSU (Paragraph 30).Reform would not be linked to the negotiationsand should have been completed by May 2003.

That deadline proved unrealistically opti-mistic, for the reform of the DSU is stuck inthe mud of mistrust that has pervaded Genevasince 2001. DSU reform became an element inthe customary trade-offs in trade negotiationsand its result, consequently, will most cer-tainly follow the destiny of the overall nego-tiations. The proposals advanced so far havethe potential to solve procedural flaws (likethe “sequencing” problem); other proposalscould reinforce special and differential treat-ment for developing countries and make effec-tive the hortatory provisions in the DSU.

WTO Members, however, are skeptical aboutbringing any proposal to reform the DSU thatcould be specifically directed at sustainabledevelopment. Such an omission is politicallyunderstandable. On the one hand, it derives fromthe apprehension of developing countries thatany mention of concerns other than trade couldlegitimate protectionist devices. On the otherhand, this omission is based on the reasoningthat sustainable development, if and whentaken into account in the WTO, should be con-sidered in substantive provisions, such as in theexceptions provisions set out in GATT Article XXor the Agreement on the Application of Sanitaryand Phytosanitary Measures (SPS). Moreover, theargument follows, substantive results should benegotiated in the Committee on Trade andEnvironment if it moves beyond the rhetoricalphrases that have plagued its meetings so far.

Undeniably, changing the WTO agreements isthe best option to address environmental con-cerns. Nevertheless, procedural rules may bringconsiderable implications for the interpreta-tion of these texts, as demonstrated by casessuch as U.S.-Reformulated Gasoline and EU-Beef Hormones. One idea to improve the deci-sions in this sense involves giving more leewayfor the system to consider development,including sustainable development, as a crite-rion for interpreting WTO commitments. Thatinvolves changes in the way these commit-

ments are construed by panels. In jurispruden-tial terms, this proposal involves the accept-ance of principles of international public poli-cy as valid hermeneutical tools. In practicalterms, it could be achieved by reforming DSUArticles 1 and 7 in order to mandate a legalinterpretation integrated with the corpus ofinternational development law.

Such a move would clarify the relevance ofmultilateral environmental agreements andother pro-development multilateral commit-ments (such as the United Nations MillenniumDevelopment Goals) in the interpretation ofobligations under the multilateral trading sys-tem. Another practical proposal would be torephrase DSU Article 11 in order to allow pan-els to take international environmental com-mitments into account whenever evaluatingdomestic trade policies.

Evidently, the proposals above are dangerous-ly generic, and any language that intends toimprove interpretative rules should be careful-ly crafted. Otherwise, negative politicaleffects—in terms of legal uncertainty and lossof legitimacy—will certainly occur. In addi-tion, any proposed change should considerthe mistrust from developing countries (as tothe risk of protectionism) and from developedcountries (as to the risk of judicial activism).

In conclusion, a decade of experience with theDSU has shown that the system tends to a lit-eral identification of commitments expressed inthe WTO agreements. The insertion of develop-ment-related language in the agreements isconsequently the first thought whenever theworld trading system is mentioned.Nevertheless, procedural changes in the DSUmay become equally relevant. Dispute settle-ment is not only a technical device for calmingtwo litigating parties, but also a political toolfor bringing stability and legitimacy to the sys-tem. Changes in procedural aspects, especiallythose related to legal interpretation, may movedevelopment concerns (including sustainabledevelopment) to center stage. Presenting polit-ically acceptable proposals is therefore thecomplex task faced by those concerned withsustainable development.

Welber Barral, from Brazil, is a professor of lawat the Federal University of Santa Catarina,Florianópolis, Brazil.


The corollary also turned out to be true overthis same period. MEAs were paying moreattention to trade rules when designing trade-related provisions. The StockholmConvention on Persistent Organic Pollutants(2001), the Cartagena Protocol on Biosafety(2000), and the Rotterdam Convention onPrior Informed Consent Procedures forCertain Hazardous Chemicals and Pesticidesin International Trade (1998) refer to theirrelationship with other international agree-ments. For example, the relationship betweenthe Biosafety Protocol and WTO rules wasone of the crucial issues during the negotia-tion of the Protocol; the preamble states thatthe Protocol shall not be interpreted asimplying a change in rights and obligationsof parties under other existing internationalagreements, and take into account that thisshall not mean that the Protocol is subordi-nate to other international agreements.

In the subsequent Asbestos case, whichinvolved a challenge by Canada to a Frenchimport ban on asbestos and asbestos-contain-ing products, the Appellate Body further illus-trated its ability to interpret WTO rules ofimportance to the environment in expandingthe test for “like” products to include toxicityin a report issued in 2001. The AppellateBody addressed the inclusion of the healthimpacts of a product as part of the “like”product analysis required to establish a breachof GATT Article III (national treatment). Inits simplest form, if two products are not con-sidered to be “like,” the treatment they receiveunder national regulations can differ.

A key question in the Asbestos case waswhether the negative human health impactsof a product could be considered in deter-mining whether products were “like.” TheAppellate Body ruled that such effects were arelevant factor. Although market substi-tutability remained the key test in determin-ing “likeness,” the Appellate Body made clearthat the health impacts of a product were partof the public perception of market substi-tutability. Here again, the WTO dispute set-

tlement system struck a compromise betweentrade and non-trade concerns. If health con-siderations, such as toxicity, are relevant tothe determination of “likeness,” will the envi-ronmental effects of production methods benext? The Shrimp-Turtle and Asbestos deci-sions took this expectation one step closer toreality.

Developing Country Concerns

The Appellate Body’s interpretation ofArticle XX, particularly with respect to non-product-related PPMs in the Shrimp-Turtlecase and the inclusion of non-economic fac-tors to differentiate between “like” productsin the Asbestos case are considered problemat-ic by many WTO Members. Many develop-ing countries, in particular, are concernedabout the resort to unilateral actions in envi-ronmental and potentially other non-tradematters. However, much of the concernexpressed hides a critical fact in practice: theacceptance by three of the original four com-plaining states in the Shrimp-Turtle case tonegotiate an international agreement on seaturtle conservation. Malaysia was the onlycomplainant to seek to reverse the ruling onthe need to negotiate in the first decision ofthe Appellate Body.

In Shrimp-Turtle, it is clear that, in allowing aunilateral U.S. import ban on shrimp, whichin particular came from developing coun-tries, the Appellate Body was conscious of theNorth-South relationship. As such, theAppellate Body sought to impose a coopera-tive process that emphasized “good faith”negotiations towards the development ofbilateral or multilateral agreement for theprotection and conservation of sea turtles. Itsought to buffet any negative impacts of therequirement to negotiate with obligations forcapacity building and technical assistance tosupply the necessary technologies, supportnegotiating costs, ensure sufficient transitionperiods, and seek balanced solutions thatwere in keeping with developing countrycapacities.

Dispute Resolution

71

II


Protection of the Domestic Versus theInternational Environment

A key aspect of the evolution of trade andenvironment disputes was the AppellateBody’s rejection of the Tuna-Dolphinjurisprudence that only measures taken toprotect the domestic environment (not theglobal commons or shared environmentalresources) were consistent with trade law. TheAppellate Body recognized the need to seethe environment in a more holistic way not-ing that, in the particular circumstances ofthe Shrimp-Turtle case, there was a sufficientlink between the policy goal of protectingmigratory and endangered marine popula-tions which transcended U.S. jurisdictionand the trade measures that the U.S. hadadopted for their protection. Nonetheless,the trade measure was originally found toconstitute arbitrary discrimination in that itsought to impose guidelines on other coun-tries without assessing the appropriateness ofthose guidelines for the specific conditionsprevailing in those countries. However, thepanel charged with ruling on Malaysia’s chal-lenge to the U.S. implementation of theAppellate Body decision affirmed that theapplication of the revised guidelines by theU.S. had addressed the concerns set out bythe Appellate Body, given the offers of tech-nical support and good faith negotiationstowards an agreement by the U.S.

In the Shrimp-Turtle case, the Appellate Bodyestablished, but did not elaborate upon, a“sufficient nexus” test that required a linkbetween the protection of the domestic envi-ronment and the international environment.In Shrimp-Turtle, this nexus was based on thefact that the endangered sea turtles migratedthrough U.S. territorial waters. It is clearfrom a comparison of the Shrimp-Turtle andAsbestos cases that having a sufficient nexus isnot the only condition for regulationsimpacting a foreign jurisdiction’s environ-mental policies and measures. In the Asbestoscase, the Appellate Body gave a wide berthfor France to set its domestic human health

protection goals and the measures to achievethese goals. However, in Shrimp-Turtle, theAppellate Body placed significant restrictionsboth as to the process for establishing meas-ures applicable to activities outside a coun-try’s jurisdiction and to the nature of suchmeasures. This differentiation is a reflectionof the balancing of trade and environmentalinterests.

Tariff Preferences

Environmental advocates point to the April2004 WTO Appellate Body ruling in theGeneralized System of Preferences (GSP) dis-pute as further cementing the AppellateBody’s endeavor to achieve a balanced rela-tionship between trade and environmentconcerns. In this case, India challenged theWTO consistency of tariff preferencesaccorded under the EU’s special arrangementfor combating drug production and traffick-ing (drug arrangement) for being “discrimi-natory” as the benefits granted were onlyavailable to certain developing countries. TheAppellate Body overturned the panel’s earlierdecision and held that developed countrieswere not prohibited by WTO rules fromgranting different tariffs to products originat-ing in different developing countries underthe Generalized System of Preferences (GSP)provided that identical treatment was madeavailable to all “similarly-situated” GSP ben-eficiaries that shared the “development,financial and trade needs” to which the treat-ment in question was intended to respond.

Significantly, the Appellate Body found thatbecause the preferences granted under thedrug arrangements were not available to allGSP beneficiaries that were similarly affectedby a drug problem they were not justifiedunder the enabling clause. In contrast to thedrug arrangements, the Appellate Bodynoted that the EU’s “special incentivearrangements for the protection of labourrights” and the “special incentive arrange-ments for the protection of the environment”(which were not at issue in this case) includ-


72


ed detailed provisions setting out the proce-dure and substantive criteria that apply to arequest by a country to become a beneficiary.This would imply, albeit subtly, that theseenvironment arrangements were WTO com-patible, confirming that WTO Members arefree to include sustainable development con-cerns in their GSP schemes provided theymeet the relevant conditions and are justifiedunder the relevant WTO rules.

Investment Agreements and Investor-State Arbitration

One of the most important spin-offs from thetrade and environment debate and related dis-putes in the WTO has been the emergence ofinvestor-state arbitration processes as a tool tochallenge environmental protection measures.Originally seen as a logical extension of traderules to the flow of capital, many trade nego-tiators and trade institutions in the early- tomid-1990s took up the cause for investmentagreements. The NAFTA, with its Chapter 11on investment, became the first of its type ofintegrated regional trade and investmentagreements. Over 2,400 bilateral investmentagreements have been concluded, notablywith little notice or fanfare.

A key feature of these instruments has been aspecial dispute settlement system known asthe investor-state arbitration process. Thisallows private foreign investors to sue thehost state in an international arbitrationunder international investment rules.Environmental protection measures and keydevelopment-oriented policy measures havebeen the subject of several challenges byinvestors under this system. A key feature ofthe investor-state cases is that they can lead toimmediate awards of damages, and awards ofover $100 million are no longer uncommon,with some reaching almost half a billion dol-lars. Whereas trade cases result in periods tochange the measure at issue, the potential forawards and the ability of investors to take thecases directly means that resort to investorarbitrations can be anticipated to increase.

Dispute Resolution

73

IIPPMs, tradelaw and theenvironmentBy Robert Howse

A widely held assum-ption is that interna-tional trade law,especially the law ofthe World TradeOrganization (WTO), prohibits states from reg-ulating imported products based on the envi-ronmental impacts of their process and pro-duction methods (PPMs). This assumption hashad a profound influence on the debate ontrade and environment. However, the text ofthe WTO treaties contains no such prohibition.It is an invention of practice under theGeneral Agreement on Tariffs and Trade(GATT)—the WTO’s predecessor regime; bycontrast, the recent case law of internationaltrade in the WTO does not support the notionof a prohibition on PPM-based environmentalregulations that affect imported products.

The only textual reference to the PPMs con-cept in the WTO treaties is in the Agreementon Technical Barriers to Trade (TBT), estab-lishing that technical regulations for purpos-es of the Agreement include regulations thataddress not only the characteristics of prod-ucts but their “related” process and produc-tion methods. The word “related” here indi-cates that since the TBT Agreement deals withtrade in goods, regulation of process and pro-duction methods apart from the goods thatare there as a result is not a TBT issue. Suchregulation may well be a services or intellec-tual property matter and thus fall under someWTO Agreement not concerned with trade ingoods as such.

The PPMs notion was brought into being inthe context of the notorious GATT era Tuna-Dolphin dispute. The United States hadimposed a ban on sale in the U.S. of bothdomestic and imported tuna that was fishedin a manner that led to excessive incidentalkilling of dolphins. In theory, assuming thatthe ban were imposed evenhandedly on bothdomestic and imported tuna, under the law of




74


the GATT it would be viewed as an “internallaw, regulation or requirement” that met theNational Treatment obligation in Art. III:4 ofthe GATT that such measures provide “no lessfavourable” treatment to imports than to“like” domestic products.

The GATT dispute panel found such a conse-quence unacceptable. The underlying thinkingwas apparently that such a measure, even ifevenhanded, imposed unilaterally on thecountry of export American environmentalstandards, which would be an illegitimateexercise of extraterritoriality. The panel con-sidered it intuitively obvious that such meas-ures could not be consistent with the GATTregime. In order to create a legal foundationfor this intuition, the panel suggested thatthe National Treatment obligation in ArticleIII:4 of the GATT pertained only to measuresthat directly regulated the imported “product”as a physical commodity, in this case tuna;measures that purported to regulate how a“product” was produced would need to beassessed, not as “internal laws, regulations orrequirements” under Article III:4, but ratheras quantitative restrictions under Article XI.While Article III:4 allows evenhanded meas-ures that fall within its ambit, Article XI oper-ates differently; once a measure is determinedto fall within Article XI, then it is per se ille-gal under GATT, subject only to certain excep-tions. The panel also found that the ban couldnot be justified under either the animal healthand life (Article XX(b)) or conservation(Article XX(g)) exceptions in the GATT. Here,the panel was more direct in its reasoning,asserting the view that measures that aresomehow “extraterritorial” cannot be justifiedunder GATT Article XX exceptions.

As jurisprudence, the panel’s approach wasclearly wrong. From the early ItalianAgricultural Machinery case on, GATT panelshad, in fact, rejected the notion that a meas-ure did not fall under Article III because it didnot regulate directly the imported product asa physical commodity. After all, the text ofArticle III did not apply to measures regulat-ing products, but to any internal law, regula-tion, or requirement affecting, inter alia, themarketing and sale of the product.

Perhaps for these reasons, an alternative the-ory of the PPM doctrine was already visibleeven from the second panel in the Tuna-Dolphin case. This theory was that, even ifArticle III:4 were applicable, domestic andimported products are “like” even if they havedifferent PPMs. Only different physical charac-teristics can distinguish products as not“like.” Thus, dolphin-unfriendly imported tunais “like” dolphin-friendly domestic tuna andmust be treated the same.

The Tuna-Dolphin rulings were controversialand never adopted, but the idea of PPMs asillegal in the GATT stuck and became conven-tional wisdom. In the WTO era, a case camebefore the dispute settlement system not dis-similar to Tuna-Dolphin. The Shrimp-Turtle dis-pute concerned a U.S. ban on shrimp fishedwithout technologies that prevented killingsof endangered species of sea turtles. In thatcase, the U.S. did not challenge the PPM con-struction, but instead invited the WTOAppellate Body to reject the GATT notion thatmeasures directed at other countries’ PPMpolicies could not be justified under ArticleXX. In broad measure, the Appellate Bodyagreed with the United States, but addressedconcerns of unilateralism and inequity (par-ticularly where measures were targeted atdeveloping countries) through its interpreta-tion of the chapeau of Article XX, i.e., therequirement that justified measures not arbi-trarily or unjustifiable discriminate betweendifferent countries. The impact of the Shrimp-Turtle case is to blunt the importance of thePPM assumption, since the very kinds ofmeasures supposedly prohibited through thatassumption may well be justifiable under theconservation or life and health exceptions inArticle XX.

The assumption has also been bypassed byrecent jurisprudence of the WTO AppellateBody on “like” products in Article III:4 (theAsbestos case); consumer habits and tastesmay be of decisive importance in determiningwhether products are “like,” thus belying thenotion that only physical differences in them-selves count in the analysis. In sum, from alegal perspective, the PPM assumption has



Trends and FutureDirectionsMany environmental observers are concernedthat the current Doha Round of trade nego-tiations will provide an opportunity for arollback of the perceived gains in the tradeand environment debate, such as outlinedabove. Critics point to the limited negotiat-ing mandate given to the CTE in SpecialSession in Paragraph 31 of the DohaMinisterial Declaration.

Several developed countries are pushing formore transparency and public participationin the context of the review of the WTODispute Settlement Understanding (DSU);an agenda that is favoured by many in theenvironment community interested in partic-ipating in key trade and environment dis-putes. For instance, the U.S. and the EU havesubmitted proposals in favour of opening upthe dispute settlement process to the public,as well as the establishment of guidelines forhandling amicus curiae submissions.

In 2005, the WTO panel hearing the EU’schallenge against continued retaliatory sanc-tions on its exports imposed by the U.S. and

Canada in the long standing Beef Hormonesdispute announced that the proceedingswould be open to the public. This develop-ment, the first of its kind in the history ofWTO dispute settlement, comes in responseto a joint request filed by all three countries. Itwill be interesting to see how this step towardsopening up dispute proceedings in the WTOis reflected in the DSU review negotiations.Two questions are raised. Firstly, whether thissets a precedent for future practice in disputesettlement proceedings and, secondly,whether public participation in the Beef-Hormones proceedings could revive the debateon transparency in the DSU review.

To date, the position of panels and theAppellate Body with respect to amicus curiaesubmissions has been that, while they are underno obligation to consider these briefs, they havethe authority and discretion to accept and con-sider them. Amicus briefs have been submittedby environmental and other NGOs in Shrimp-Turtle, Asbestos and the recent U.S.-EU biotechdispute involving genetically modified organ-isms (GMOs). Civil society’s push for trans-parency and access to the WTO dispute settle-ment system has faced opposition from theWTO membership, particularly developingcountries, which tend to be largely opposed tosuch participation because it can create animbalance in the process. Moreover, develop-ing countries are wary of green protectionism.In practice, this opposition has not stopped theacceptance of amicus briefs, despite the fact thatWTO Members have yet to adopt any formalprocedures to regulate how to deal with thesesubmissions.

With a view to advancing the objectives ofsustainable development, policy-makers havesought to work towards a convergencebetween trade and environment. To this end,trade negotiators made reference to the envi-ronment in the preamble to the WTOAgreement, and the WTO dispute settlementprocess has shown its ability to accommodateenvironmental concerns. While the balancemay not be perfect and stakeholders from dif-

Dispute Resolution

75


not been overruled, but made largely irrele-vant jurisprudentially. At the same time, thepolicy concerns remain—i.e., the meaning ofunilateralism and its acceptability in address-ing global environmental commons issues, aswell as equity between developed and devel-oping countries and worries about green pro-tectionism.

Robert Howse, from Canada, is the Alene andAllan F. Smith Professor of Law at theUniversity of Michigan Law School and a formerCanadian diplomat.


ferent perspectives continue to disagree over amyriad of issues, it is clear that a return totrade versus the environment is no longeracceptable. Thus, developments in WTOrules will have to be based on a better mutualaccommodation of interests in pursuit of

development that is sustainable. MEAs,which represent a multilateral consensus onspecific environmental concerns, are likely tobe used as an interpretive aid to trade rules inthe interests of incorporating WTO law intothe wider corps of public international law.


76


Issues and Debates

77

II

The relationship between the environmentand trade liberalization in industrial goods iscomplex and of great interest to the trade,environment and development communities.Literature and impact studies point to thenegative environmental impact of liberaliza-tion in forestry, fisheries and minerals in theabsence of sound environmental policies. Atthe same time, liberalization may have envi-ronmental benefits. Tariff barriers onprocessed or value-added products are in gen-eral much higher than the raw naturalresource exports from which they are derived.As a result, many developing countries haveexported large quantities of natural resourcesfor the sake of relatively little export revenue.Reducing high tariffs on processed, value-added products could ensure that developingcountries earn more through their exports ata lower cost to their natural resource stocks.

Non-tariff measures (NTMs, referred to inthe negotiations as non-tariff barriers orNTBs) used by developed countries thatoften fulfill important environmental orhealth policy objectives continue to be per-ceived by developing countries as significanttrade barriers to their exports (particularly forfishery and forestry products). Developingcountries, on the other hand, generally apply

high tariffs on manufactured products.Hence, the focus of attention for developedcountries in market access negotiations isoften tariffs, while for developing countries itis NTMs. The exception is developing coun-try demands for the elimination of extremelyhigh tariffs on particular tariff lines (tariffpeaks) and higher tariffs for higher value-added products (tariff escalation) in devel-oped country markets.

Many studies also point, in particular, to thebenefits of eliminating barriers to imports ofso-called “environmental goods.” There is anongoing debate, especially within the contextof World Trade Organization (WTO) negoti-ations, on the scope of what constitutes envi-ronmental goods. While developed countriesenjoy a comparative advantage in the pro-duction of industrial environmental goodsused for environmental remediation, andargue for the definition to include theseproducts, many developing countries areinterested in including environmentallypreferable products (EPPs). However, thestandards these products might have to meetto qualify as “environmental,” such as certifi-cation, standardization and labelling, mightimpose equivalent costs and could be con-strued as barriers to trade.

Environmental Goods and Non-agricultural Market Access

Nathalie Bernasconi-Osterwalder, Linsey Sherman and Mahesh Sugathan

•“Many studies also point, in particular, to the benefits of eliminating barriers toimports of so-called ‘environmental goods.’ There is an ongoing debate, especially

within the context of WTO negotiations, on the scope of what constitutes environmental goods.”

•


Relevant WTO Negotiations

The Doha Ministerial Conference in 2001mandated the WTO Committee on Tradeand Environment (CTE) to launch specificnegotiations on trade and environmentincluding on the reduction or elimination oftariff and non-tariff barriers to environmentalgoods and services (EGS) under Paragraph31(iii) of the Doha mandate. This is anentirely new issue for the WTO and it estab-lishes a direct link between negotiations inthe CTE and in the Negotiating Group onMarket Access (NGMA) on industrial goods(or non-agricultural market access, NAMA).(See related discussion on EnvironmentalServices.)

Negotiations relating to NAMA are primari-ly taking place in the NGMA, where much ofthe discussion in the negotiations has cen-tered on cutting tariffs. In that context, dis-cussion has focused on variations of differentformulae that, if agreed, would then beapplied by Members to systematically reducetheir current tariff levels. The type and con-struction of the formula has been a point ofcontroversy and WTO Members have beendivided on the issue largely, but not exclu-sively, along developed-developing countrylines. In addition, small groups of countrieshave begun additional “informal” negotia-tions on the complete elimination of tariffs inspecific sectors, including environmentally-sensitive sectors, such as forestry and fish-eries.

The second significant aspect of currentNAMA negotiations is the discussion relatedto NTMs. At the insistence of developingcountries in Doha, NTMs were included inthe negotiations on NAMA, both to addressthe use of non-transparent NTMs in devel-oped countries and to counterbalance theeffects of reducing their own tariffs. In thenegotiations on NTMs, Members have beenrequested to notify those measures problem-atic for their exporters to the NGMA. SeveralMembers, from both developed and develop-

ing countries, have notified various environ-mental, safety and/or health standards as bar-riers to their exports. It is important to notethat these notifications are not intended toindicate whether or not measures are per-ceived as illegal or whether or not they pur-sue legitimate public policy objectives.Notification simply reflects the perceivedrestrictive effects on trade of these measures.

Interests and Fault LinesTariff Negotiations: Sectoral Agreements

Although sectoral agreements for tariff elimi-nation have generally been opposed by devel-oping countries, this process has moved for-ward informally amongst interestedMembers, such as the United States, NewZealand and Thailand. Most developingcountries have not considered it to be in theirinterest to scatter tariff negotiations into indi-vidual discussion groups on a sectoral basis.However, it is expected that a small group ofcountries will agree to eliminate tariffs in avariety of sectors, which they will present tothe NGMA as finished deals. In this case, thebenefits would be extended to all Members,although the commitments would only bebinding on the small group of countriesinvolved. Sectors that have been proposed foraccelaterated liberalization also include anumber of environmentally-sensitive sectors,such as fisheries, forestry products, chemicalsand raw materials.

There are no indications that WTOMembers are taking environmental consider-ations into account as they engage in tariffelimination negotiations in sensitive sectorsin the NGMA. This, despite the fact thatsome evidence exists to show the likely nega-tive environmental impacts some countrieswill experience as a consequence of completetariff elimination. For example, the EuropeanUnion commissioned a sustainability impactassessment (SIA) of the WTO negotiations,released in June 2005, which focused, interalia, on liberalization of the forestry productssector. Using a model scenario of full liberal-


78


ization (zero tariffs), the SIA study predictsthat developing and some transitionaleconomies that have problems with forestgovernance could face significant social andenvironmental costs, which could outweighany economic gains from additional tradeliberalization in the absence of adequate safe-guards.

While some proponents of sectoral agree-ments argue that increased economic activitywill allow developing countries to reinvest inenvironmentally sound infrastructure, theEU SIA finds that complete liberalization ismore likely to magnify existing policy andinstitutional strengths and weaknesses ratherthan drive forest governance change. Duringthe course of discussions at the WTO, someMembers have been in favour of full liberal-ization of all raw materials, citing “win-win”opportunities for exporting countriesthrough increased market access, and forindustrialized countries through cheaper rawmaterials for processing industries. Others,for instance Japan, have recognized thepotential dangers posed to conservation byliberalization of raw materials, such as fish-eries and forestry products.

Currently, only a few countries, such asCanada, the United States and the EuropeanUnion, regularly conduct environmentalimpact assessments of trade negotiations andagreements. In most cases, assessmentsundertaken with respect to developed coun-tries find that these countries have sufficientdomestic regulatory frameworks in place tocounterbalance any negative environmentaleffects in sensitive sectors. However, manydeveloping countries do not yet have theresources to develop strong regulatoryschemes and their domestic environmentmay be unduly affected by the sectoral tariffliberalization being promoted by developedcountry trading partners.

Non-tariff Measures Negotiations

Since agreement on the “July Framework” in2004, the Chair of the NGMA conducted a


79

IILiberalizationof environ-mental goods:A double-edged swordor a panacea?By BeatriceChaytor

When I first wrote about the issue of environ-mental goods and services in 2002, my prem-ise was that the negotiations could serve as amodel for so-called “win-win” scenarios in thetrade and environment debate. Wins for bothenvironment and trade objectives and wins forboth developed and developing countries. Athird win—for development—was seen aspossible through the generation of new mar-kets in environmental goods and services. Afew years down the line, however, the negoti-ations continue without much progress, miredin clashes over definition and classification.

Win-win scenarios are still possible followingthe liberalization of environmental goods inparticular, but all World Trade Organization(WTO) Members must find viable economicand environmental interests in the negotia-tions. Firstly, the lists put forward by theOrganisation for Economic Co-operation andDevelopment (OECD) and the Asia PacificEconomic Cooperation (APEC) forum must beupdated to reflect the current state of theenvironmental goods industry, and includeenvironmentally preferable products (EPPs).In this way, developing countries can use theupdate exercise as a way of mainstreamingsome of their core interests in the multilater-al trading system; the focus on developmentand equity with technology transfer andcapacity building as essential aspects of thenegotiations.

Secondly, the definitional discussion is super-ficial if it fails to substantively address someof the most critical issues at the heart of thetrade and environment debate: such as “likeproduct,” process and production methods(PPMs) and eco-labels. Naturally, there iswariness about the consideration of PPMs in




80


broadening the definition of environmentalgoods; this could be the slippery slope to theentry of PPMs generally in trade and environ-ment issues and into the WTO. At the same time,liberalization of environmental goods may pres-ent considerable gains in international trade forsome developing countries. Moreover, thesegains would not just be restricted to traditionalareas, such as organic or sustainably harvestedgoods.

Developing countries must surmount the psy-chological hurdle of PPMs and be strategic indefining their interests within the negotia-tions. In what products do they have specificcomparative advantage? What distinguishesthose environmental goods from other prod-ucts? What specific trade barriers are faced bycategories of these environmental goods? Arethey tariff or non-tariff barriers? PPMs shouldbe tackled head on as a useful tool for creat-ing space for comparative advantage, particu-larly where there is a widening of the scopeand definition of environmental goods.Developing countries must decide how toadvance their desired outcome at both thenational and international levels. They shouldachieve their “wins” one step at a time, tak-ing a medium to long-term view.

At the national level, what particular environ-mental issues need addressing? For instance,with respect to cleaner energy, water treatment,air purification and fuel efficiency. Can theseissues be addressed through the use of environ-mental goods? If so, those environmental goodsneed to be assigned customs codes at thenational level to distinguish them from otherproducts. At the international level, developingcountries across the economic spectrum mustparticipate fully in the World CustomsOrganization (WCO) to harmonize these nation-al codes to ensure that environmental productsfor which developing countries have a competi-tive advantage are included in the various clas-sifications. For example, products dealt withunder the Convention on International Trade inEndangered Species of Wild Fauna and Flora(CITES) and the Basel Convention on theTransboundary Movements of Hazardous Wastesand Their Disposal have already being includedin customs codes developed by the WCO.

That said, things are not that simple, especial-ly where huge economic interests are at stake.There is general consensus that the environ-mental industry in OECD countries is wellorganized, with a fairly mature industry in tra-ditional environmental goods. The entry intoforce of the Kyoto Protocol will only add to thedemand for cleaner energy and energy/fuelefficient products that will widen the marketfor such goods. Add to this the rise of biotech-nology products and the environmental goodsindustry potentially widens. Industry analystssuggest that OECD countries will not dominatethe environmental goods industry for long.Some countries in Latin America and Asia arealready competitive in technology thataddresses air pollution, health and sanitationand water quality. I would hazard a guess that,even if the definition of environmental goodsis restricted to the narrow OECD-APEC lists, themore advanced developing countries are stilllikely to emerge as the biggest winners in theenvironmental goods trade. Even though thevast majority of least developed countries donot yet have well developed markets or indus-try in such products (making them “slow win-ners” in this trade), South-South trade in greenproducts would enhance the wins among awider group of developing countries.

All WTO Members need to take a realistic look atthe liberalization of environmental goods that isunderway. The industry, far from exhibiting thestatic nature inherent in the APEC and OECDlists, is a fast moving, dynamic sector that hasthe potential to allow some countries to leapfrog the current technological divide, contrast-ing the impasse in the WTO with the dynamismof the environmental goods industry. Developingcountries have a lot to play for here. While theydiscuss widening the definition of environmen-tal goods in the WTO and work on harmonizationof customs codes in the WCO, developing coun-tries should make sure that the domestic regula-tory and market environment exists for theirproducts (whether technological or otherwise)to remain competitive and innovative.

Beatrice Chaytor, from Sierra Leone, served asa trade negotiator for her country and is nowthe Director of the Policy, Planning andResearch at the Sierra Leone Ministry of Tradeand Industry. This essay is written in her per-sonal capacity.


notification exercise in which Members wereinvited to notify NTMs that hindered theirexports in various markets to the NGMA.The notification exercise has been perceivedto be extremely difficult and complex formany, especially smaller, developing coun-tries. As a result, many developing countrieshave not notified the NTMs that are prob-lematic for their industry and, therefore, theoverall picture of notifications is not repre-sentative of developing country concerns.

Several proposals support a horizontalapproach to negotiations, which would haveMembers discuss several selected NTMsacross all sectors. Some Members, however,have strongly advocated a vertical approach,according to which Members would focus onNTMs of interest to particular industries.This suggestion could be problematic forsome developing countries that do not wantto establish any formal link between a verticalapproach in NTMs negotiations and the pos-sibility of sectoral initiatives in tariff formulanegotiations. Those Members supporting avertical approach to modalities favour the useof plurilateral group discussions, with theresults to be applied on a most favourednation (MFN) basis. In other words, a smallgroup of interested countries would decide toaddress NTMs in a particular sector and thenapply the benefits of these new rules to allMembers (although those not party to thediscussions would not be bound by therules). Additionally, others have proposedthat NTMs covered in existing WTO agree-ments, such as the Agreement on TechnicalBarriers to Trade (TBT), should be addressedthrough dispute settlement as a “compliance”issue and not through negotiations. Theirargument is that the NTMs faced byexporters in practice sometimes occurbecause Members are not appropriatelyimplementing their commitments.

Some of the NTMs that have been identifiedas problematic to certain industries and noti-fied to the NGMA are important tools fordomestic environmental policies. For


81

IIAre environ-mental goodsgood for theSouth?By Amb. MagdaShahin

After over a decade ofrelentless efforts anddifficult negotiations,discussion on the relationship between tradeand environment in the WTO seems to haveentered a vicious circle, which—if it goes outof control—could very well undermine the“Doha Development Round.” Although theongoing debate has not brought the key con-cerns surrounding the relationship much clos-er to being resolved, it has helped clarify theunderlying rationale and purpose of the issuesinvolved.

Before the Doha Ministerial Conference inNovember 2001, developing countries hadnever shown interest in giving additionalground to the environment in the tradedebate, least of all in a round that is supposedto be, at least by proclamation, a developmentround. It had seemed clear that the trade andenvironment debate in the WTO, with its tenitem agenda mandated at the SingaporeMinisterial in December 1996, was leadingnowhere. Had it not been for the maneuveringof the Nordic countries, the trade and envi-ronment relationship would have remained aforlorn issue in the WTO. Disregarding alto-gether the ten items on the agenda of theCommittee on Trade and Environment (CTE),the three items in Paragraph 31 of the DohaMinisterial Declaration were carefully negoti-ated into the “Doha Development Agenda.”The real innovative addition was sub-para-graph 31(iii), which calls for the reduction orelimination of tariffs and non-tariff barriers toenvironmental goods and services.

The issue was force-jumped into the frontseat, and negotiations on the reduction of tar-iff and non-tariff barriers became a priority.With the inclusion of this topic, WTO Membersagreed to venture again into a cycle of end-less debate between environmentalists and




82


business interests, who want to see as broada definition as possible for environmentalgoods, and “developmental tradists,” whoresist enlarging the definition. The basic ques-tion that remains unanswered, is: Why shoulddeveloping countries legalize preferentialtrade in terms of zero tariffs for environmen-tal goods?

Even if the narrow definition of environmentalgoods prevails and they are defined accordingto end-use criteria based on a process andproduction methods (PPM)-free rationale, thecomplexities attached to favouring environ-mental goods as exceptions would tilt theentire market access debate in favour ofdeveloped countries. It is worth recalling thatthe original intention of bringing marketaccess and competitiveness concerns into theinterface between trade and environment wasto balance an already lopsided debate. Withthe market access component of the debatenow focused on environmental goods andservices, to the predominant interest of devel-oped countries, the objective of the formermarket access discussions (under Item 6 ofthe Marrakech Agreement agenda for the CTE)have been rendered void and futile.

With the objective of safeguarding the inter-ests of developing countries—which haverefused any automatic linkage between tradeliberalization and environmental protection—Item 6 was the only item on the CTE agendastressing the link between trade, environmentand development and the inter-relatednessbetween poverty and environmental degrada-tion. It was intended to promote goods andservices of export interest to developing coun-tries, with a view to promoting developingcountry participation in the trading systemand enabling them to protect their environ-ment and improve their capability to imple-ment sustainable development.

Importantly, the concept of environmentalgoods is relative. What may be defined as anenvironmental good in one country could betreated very differently in another. Developedcountry recycling regulations, which discrimi-nate against environmentally friendly andbiodegradable products from developing coun-tries, remain a valid example of the subjectiv-ity of the concept. Moreover, using the listsforwarded by European and Asian countries asa basis for defining environmental goods isprone to risks, given that these lists are asbiased towards the interests of the sponsoringcountries. Developing countries should not belured into accepting different lists at theirface value. With regard to environmental serv-ices, why should developing countries con-cede on issues related to the services negoti-ations, when developed countries have not yetbudged on the movement of natural persons—the so-called Mode 4 supply of services—which constitutes the priority issue for devel-oping countries?

On the whole, Doha Round negotiations seemto be in a state of flux. Environmental goodsare not necessarily good for developing coun-tries. A case has not yet been made for whythis issue merits priority in a developmentround. Maybe not coming to a conclusion onthis issue would not be a bad thing. At thiscritical juncture of the negotiations, weshould avoid detracting the developmentround with issues that do not help integratedeveloping countries in the multilateral trad-ing system.

Ambassador Magda Shahin is Egypt’s AssistantForeign Minister for International EconomicAffairs and earlier served as her country’sAmbassador to Greece and its chief trade nego-tiator. This essay is written in her personalcapacity.


instance, the United States has notified poli-cies that promote fuel efficiency, distinguish-ing between vehicles based on engine size,while China has notified regulations thatpromote energy efficient policies for house-hold appliances, air conditioning units andheating, as implemented for instance in theEU. Bringing such a broad range of measuresinto the NAMA negotiations could weakenexisting environmental standards and limitMembers’ ability to adopt new legislation forlegitimate policy objectives. While thisshould be avoided, it is also important torecall the objectives of the “DohaDevelopment Agenda;” it is essential thatMembers address the relationship betweenlegitimate standards and regulations of devel-oped countries, and the lack of capacity ofdeveloping country exporters to meet thesestandards and regulations. In this regard,effective and operational technical and finan-cial assistance will play an important role.

Defining Environmental Goods

The Doha mandate does not provide guid-ance on the definition of environmentalgoods, or on the modalities for negotiatingtariff reductions. In early 2002, Membersagreed to shift the Paragraph 31(iii) mandateon liberalizing environmental goods to theNGMA. However, since there is no clear def-inition of environmental goods, the CTE inSpecial Session (CTE-SS) has continued toexamine the scope and definitional aspects ofthis mandate. The most commonly discussedapproach to the negotiations is the “list”approach, whereby Members submit lists ofenvironmental goods they wish to negotiate,based on which the CTE-SS would agree ona final list of products to be liberalized. Indiahas suggested an alternative approach, whichwould classify goods as environmental basedon their use in “environmental projects.”

Those advocating the list approach (primarilythe developed countries) propose that, fol-lowing submissions of goods from Members,the CTE-SS would negotiate a final list of

goods considered to be environmental. Manyadvocates of the approach consider this to bethe only practical option for coming to agree-ment on a set of products for which tariffswould be reduced. The Organization forEconomic Cooperation and Development(OECD) and the Asia Pacific EconomicCooperation (APEC) Forum have producedlists of environmental goods, from whichmany WTO Members have drawn in draft-ing their proposals. However, many develop-ing countries have raised concerns aboutfocusing exclusively on these lists, particularlysince they were created largely by developedcountries and do not contain products ofexport interest to many developing countries.Another criticism of the list approach is that itfocuses on goods with an environmental end-use only, and does not include goods pro-duced in an environmentally sound manner.

UNCTAD has done extensive work, outsidethe context of the WTO negotiations, on acategory of goods described as environmen-tally preferable products (EPPs), which hasgenerated substantial discussion. Althoughan agreed definition has yet to emerge,UNCTAD defines EPPs as “products thatcause significantly less ‘environmental harm’at some stage of their life cycle than alterna-tive products that serve the same purpose.”Brazil, Switzerland, New Zealand and theEuropean Union support including EPPswithin the list framework. Members that aresupportive of a narrow list argue that broad-ening the definition would result in theinclusion of “multiple-use” products, whichcould be used for both environmentallysound and destructive purposes.

Given rapid technological advances, there isalso concern that a static list of environmen-tal goods could become obsolete in a fewyears. Therefore, New Zealand and the EUhave proposed the concept of a “living list,”to which products could be added and delet-ed as technology evolves. The fact that “envi-ronmental friendliness” is a relative conceptposes potential problems, especially where


83

II


superior substitutes exist or may be used in thefuture. For instance, some experts believe thatif hydrogen evolved into a fuel for popular use,natural gas would have less claim to be consid-ered an environmental good. Yet, once tariffsfor natural gas have been eliminated, it wouldbe difficult to raise them again.

Some developing countries have also notedthe lack of special and differential treatmentprovisions in current list approach proposals.Cuba has outlined areas where developmentconcerns are not being taken into account inthe CTE-SS discussions and formally sup-ports a proposal from China, which suggestsa “common list” of goods and a “develop-ment list,” “which comprises those productsselected by developing and least-developedMembers from the common list for exemp-tion or a lower level of reduction commit-ment.” New Zealand has also proposed a“dual list” approach, supported by the UnitedStates, with a core list applicable to allMembers and a complementary list, fromwhich Members would self-select an agreedpercentage of products for tariff reduction.

The reality is that most developing countrieslack a comparative advantage in traditionallydefined environmental goods that are capitalor technology-intensive. In many cases,process and production methods (PPMs)would be the only criteria for including suchproducts of export interest to developingcountries. However, most WTO Members,particularly developing countries, want toavoid using PPM criteria to define EPPs,partly based on the fear of setting a precedentfor introducing this concept in the WTO.

India’s environmental project approach was pre-sented as an alternative to the list approach; itwould define environmental goods based ontheir use in a given environmental project.National authorities would grant projects“environmental” status for a set period oftime, during which tariffs and NTBs wouldbe reduced on designated goods for use in theproject. This would be a continuous process,

as new projects become designated “environ-mental” and existing projects are terminated.The CTE-SS would formulate the criteriathat a designated National Authority coulduse to screen projects for approval.

Many developing countries support a proj-ect-based approach, largely because it solvesthe problems associated with multiple-useproducts and directly addresses special anddifferential treatment for developing coun-tries. They argue that the mandate fromDoha is essentially environmental-benefitoriented, and market access is a means to thatobjective; not the objective itself. However,some WTO Members are concerned that thisapproach could prevent small and medium-sized enterprises from benefiting from tariffreductions on environmental goods, becausethey do not have the capacity to mount large-scale projects, or the resources to engage inpossibly complex certification procedureswith national authorities. There are also someconcerns on the appropriate definition of an“environmental project,” as well as how thiswould be administered multilaterally on anMFN basis.

Trends and FutureDirectionsThe outlook for multilateral trade liberaliza-tion in environmental goods remains cau-tious and uncertain. Lists submitted so farhave focused on “end-of-pipe” equipmentand remedial technologies. The environmen-tal and developmental benefits of these envi-ronmental goods should be clearly demon-strated. Moreover, negotiators may also needto consider the environmentally sound anddevelopmentally supportive characteristics ofEPPs. At the same time, negotiators shouldspecifically focus on increasing market accessfor environmental goods produced by devel-oping countries in order for developingcountries to be fully engaged in, and fullybenefit from these potentially importantnegotiations.


84


In addition, a transparent negotiating processis essential to assess the environmental trendsthat are likely to result from proposed liberal-ization in sensitive sectors, such as forestryand fisheries products, chemicals and rawmaterials. Negative environmental impactscould be particularly significant in these areasfor countries that do not have establishedstructures of environmental governance.Negotiators should take these challenges intoaccount and identify flanking measures or,where necessary, refrain from negotiating fur-ther liberalization.

It should also be noted, however, that whileWTO negotiations on non-agricultural mar-ket access could have major environmentalconsequences, trade liberalization throughautonomous policies and bilateral andregional trade agreements could be just asinfluential. For example, if a country, such asChina, has enormous demand for environ-mentally-sensitive natural resources anddecides to autonomously reduce its appliedtariffs regardless of the WTO, this could alsohave environmental (and developmental)consequences in the exporting countries.


85

II



86


Paragraph 31 (iii) of the Doha MinisterialDeclaration which calls for the “the reductionor, as appropriate, elimination of tariff andnon-tariff barriers to environmental goodsand services” has raised more questions andspeculation on possibilities than any otheritem in the Doha negotiating agenda ontrade and environment. During the negotia-tion process, the issue has taken on dimen-sions that might not have been anticipated atthe time the issue was originally singled outfor liberalization and there continue to beuncertainties about how to proceed.Negotiations related to environmental goodsare primarily taking place in the Committeeon Trade and Environment (CTE) and theNegotiating Group on Market Access(NGMA), and issues related to environmen-tal services are being negotiated within theSpecial Sessions of the Council for Trade inServices.

Before focusing on the specifics of the envi-ronmental services discussions, it might beuseful to start with a two-fold conceptualiza-tion of environmental goods and services(EGS), as a category. The first is the conven-tional view that focuses on treating a specificenvironmental problem through the end-useof a particular good or service. This charac-terizes the traditional classification of EGSand includes goods such as wastewater treat-

ment equipment or solid waste disposal serv-ices. The second conceptualization is broaderand includes environmentally preferableproducts (EPPs) and services. The environ-mental benefits may arise from the moreenvironmentally benign production method,during the course of it use—e.g., throughlesser pollution and energy-consumption—or during the disposal stage of the product. Inmany, if not most, cases these will have non-environmental counterparts and this raisesthe question of like products and services.There may also be an overlap between thesetwo categories and some EPPs may be used toprevent or treat environmental problems aswell. (See related discussion on EnvironmentalGoods.)

Both these conceptualizations of EGS areimportant in the context of trade, environ-ment and development. Trade liberalizationin EGS both narrowly and broadly definedcould enable a freer flow of goods and servic-es relevant to environmental protection.However whether this will translate intogreater access to these goods and services indeveloping countries remains to be seen. It ishere that the role of suitable flanking policiesand their mainstreaming into WTO rulesmay be important.

Arguably, greater and cost-effective access toenvironmental services in developing coun-

Issues and Debates

87

IIEnvironmental Services Mahesh Sugathan and Johannes Bernabe

•“Arguably, greater and cost-effective access to environmental services in developing

countries would potentially help them progress towards implementing theJohannesburg Plan of Implementation and achievement of key MDGs…”

•


tries would potentially: (a) help developingcountries progress towards implementing theJohannesburg Plan of Implementation andachievement of key MillenniumDevelopment Goals (MDGs) particularlythrough the provision of critical services suchas clean water and sanitation aided by appro-priate goods and technology; (b) provide ameans of employment and economic activityparticularly in the case of trade in environ-mental services via Mode 3 (commercial pres-ence); (c) enable developing country firms toeconomize on resource and energy use; and(d) increase access to new technologies andknowledge.

Interests and Fault LinesThe mandate for negotiating liberalization oftrade in environmental services arose out ofthe built-in agenda stipulated under ArticleXIX of the General Agreement on Trade inServices (GATS), which provides for succes-sive rounds of progressive liberalization acrossall services sectors, with the first round begin-ning in January 2000. In this context, nego-tiating proposals of WTO Members with akeen interest in this sector, such as theEuropean Union (EU), Canada, Switzerland,Australia, Colombia and Cuba, were submit-ted to the Council for Trade in ServicesSpecial Session (CTS-SS), with a view to pre-senting these countries’ vision of how envi-ronmental services should be liberalized.

Subsequently, requests were put forward byMembers in the framework of the bilateralrequest and offer process whereby oneMember can ask another Member to open upcertain sectors to which the Member willrespond with a specific offer.

Moreover, under the plurilateral requestprocess initiated at the 2005 Hong KongMinisterial meeting as a complement to thebilateral process, a group of countries—ledby the EU and including Australia, Canada,Japan, Korea, Norway, Switzerland, ChineseTaipei and the United States—circulated acollective request in February 2006 for a

number of large developing countries to openthe environmental services markets.

While some Members’ offers have includedliberalization of trade in environmental serv-ices, it is fair to say that the breadth of coun-tries as well as the depth of these offers fallquite short of the expected levels. This situa-tion is of particular concern for someMembers—most especially, the EC—whoview liberalization of environmental servicesas a fundamental element of any successfuloutcome. Although a fair number (48) ofWTO Members made commitments in envi-ronmental services during the UruguayRound, proponents of liberalization in thissector had hoped that this situation wouldimprove under the Doha Round of servicesnegotiations, through an increase in thenumber of Members undertaking commit-ments as well as in an improvement in thebreadth and scope of commitments. This hasnot materialized. Moreover, there is a contin-uing lack of substantive engagement bydeveloping countries in the discussions andnegotiations, especially by those who regardthis issue as one where they have primarily adefensive interest. These may in large part beattributed to the factors discussed below.

Classification

The main stumbling block in substantive dis-cussions relates to classification issues.Traditionally, the basis for most Members’commitments in environmental services hasbeen the WTO Services SectoralClassification list (W/120), which in turncross-refers to the UN Provisional CentralProduct Classification (UN CPC). SomeMembers however argue that the W/120classification is no longer consistent withcommercial reality of the way industry oper-ates.

Hence, even before the launch of the DohaRound of services negotiations, theEuropeans made a submission proposing toupdate the classification system used for envi-ronmental services. They argued that W/120


88


did not reflect changes in the environmentalindustry, which was developing beyond tradi-tional end-of-pipe/pollution control/remedi-ation/ clean-up towards integrated pollutionprevention and control, cleaner technologyand resources and risk management. Theyproposed an alternative classification whichreferred to (i) “core” environmental services,or those which can undisputedly be classifiedas “purely” environmental and where theservices are classified according to the envi-ronmental media (i.e., air, water, solid andhazardous waste, noise etc.); and (ii) environ-mental related sub-sectors which could be thesubject of “cluster” negotiations togetherwith the services in the “core” environmentalactivities. These sub-sectors pertained to serv-ices which have an environmental end-use orcontribute to the production of an environ-mentally-friendly good or service, such asdesign, engineering, research and develop-ment, and consulting services.

This approach has, however, elicited reserva-tions from a number of WTO Members,who are particularly concerned with the riskof making unintended, crosscutting commit-ments in a broader set of services activitiesthan had been originally envisaged. Forinstance, under the European proposal,architectural services, integrated engineeringservices, consulting services for tourism,transport, fishing, sustainable land use etc.—insofar as they may have an environmentalcomponent when performed in conjunctionwith certain activities—would be the basisfor a more “holistic” approach towards liberal-izing environmental services. Other countriesfear that the inclusion of such “environment-related sub-sectors” would necessarily includeall activities, whether or not they have anenvironmental component. In the course ofnegotiations, the EC has refined their pro-posal on the “cluster” approach, and clarifiedthat it intended the cluster of activities to beused primarily as an aide memoire or a check-list of activities which Members can refer towhen they engage in bilateral request-and-

Environmental Services

89

IIMaking tradeliberalizationwork for thepoorBy SitanonJesdapipat

When read carefully,the General Agreementon Trade in Services(GATS) is simply an investment agreement indisguise. The modes of liberalization and clas-sification of environmental services are so com-prehensive that one wonders how the fate ofdeveloping countries can escape the fine net ofthe private sector.

Unbridled liberalization can create a one-waystreet for the private sector to take away serv-ices traditionally provided by the government,and place high price tags on them. It repre-sents a costly recourse for developing coun-tries, once they are committed to the process.Although access and affordability are widelyand often questioned, other inevitableimpacts have not yet been adequatelyaddressed. Local communities, for example,can be deprived of their right to help them-selves, to innovate and reap the benefit fromappropriate technologies; such as, for exam-ple, cheap, simple and cost-effective end-of-pipe water treatment. Instead, expensive,complex and sometimes outdated “white ele-phant” technologies exclusively importedfrom foreign producers are not only encour-aged, but often mandated.

Not only is it difficult to tame privatization—especially when local capital weds foreigncapital—it can also force local communitiesand individuals to unnecessarily becomedependent on foreign technology, the choiceof which is often driven by the needs of theinvestor rather than those of the users. Theinability to innovate and self-help marks theend of development in its truest sense. Thetrue social and environmental costs of liberal-ized trade can be significant for developingcountries, especially if local innovation isforegone for the sake of increased foreigninvestment at all cost.




90


One, therefore, wonders if freer trade at anycost is really good for developing countries.Given the nature and extent of the depend-ence it can create, can this really be a lastingmotor of sustainable development? A morepertinent question, perhaps, is how to inno-vate a global policy that can ensure more thana short-term win-win outcome for privateinvestors and host countries.

If trade is to be an instrument for deliveringimproved human well-being and if the profitmotive is to be used as a vehicle for sustain-able development, then the processes, instru-ments and end results all have to be realignedto be humane. This is different from thenotion of human development that empha-sizes efficiency, empowerment, participationand equity—which are necessary but insuffi-cient conditions for humane development.

Specifically, if freer trade is to be an instru-ment for humane development, then partici-pation and democratization of negotiations ontrade in services must be a precondition, withdue respect for systems of local governance,local priorities and local innovation. It isobvious that unequal capacity to negotiatecannot ensure a fair and efficient outcome.Because trade in services can often affectbasic human necessities such as water, it iscritical that prior to negotiations on free tradein services, careful and transparent assess-ments of the potential impacts of liberaliza-tion be conducted and broad structured par-ticipation be ensured—or even mandated, ifthe North are to practice the good governancethey preach.

Importantly, communities and consumers ofenvironmental services—particularly the poor-est and most vulnerable communities—must be

allowed to use maximum flexible safeguards toprotect their long term interests in the processof implementation. Moreover, domestic capaci-ty needs to be enhanced to adequately imple-ment commitments. Otherwise, developingcountries may become victims of their ownnaïve, honest, but poorly informed negotiat-ing positions.

The final text of a negotiation, however, isnot the sole indication of freer services trade.The consequences of an agreement are thetrue test of the value of free trade—that is,the extent to which weaker parties stand tolose or gain from an unequal balance of powerin the negotiating process. Equally importantare how injuries are redressed and win-winexpectations actually realized. Given that thedistribution of benefits may not be fairly andjustly managed, it is also crucial that a redis-tribution of benefits is dealt with as an inte-gral part of the final package of the tradenegotiations. Otherwise, freer trade will notsucceed in serving the objectives of sustain-able development, and might even workagainst such a goal.

While all of this is true for most trade negoti-ations, it may be most true for negotiationsrelated to trade in environmental services.This is because such services are often thefoundation of the most basic human needs,and bring large multinational corporationsface-to-face with poor and vulnerable popula-tion groups in the most unequal negotiations.The poor can often have the most to lose fromsuch negotiations, and it is their intereststhat must be protected above all else.

Sitanon Jesdapipat, from Thailand, is aTechnical Advisor for the Red Cross/RedCrescent Climate Centre in the Netherlands.


offer negotiations on the environmental sec-tor, or when they negotiate other sectorswhere these related services may fall under.

Among developing countries, Colombia hasproposed that the following additional activi-ties be included in the list of environmentalservices: (i) the implementation and auditingof environmental management systems, (ii)the evaluation and mitigation of environmen-tal impact, and (iii) advice in the design andimplementation of clean technologies. In thisrespect, Colombia implicitly acknowledgedthat the W/120 classification scheme needsupdating and needs to incorporate new serv-ices not envisaged in W/120. Such a revisedmodel would then be used for the negotiationof environmental services, with the caveat thatthe services to be negotiated must be specificto the sector and should not duplicate activi-ties listed elsewhere in W/120.

However, none of the proposed alternativeclassification schemes appear to have yetgained acceptance among the general mem-bership of the WTO. Deliberations at theWTO Committee on Specific Commitments,which provides the main forum for technicaldiscussions on classification and schedulingissues on services trade, remain at a standstill.Given this and that Members are free to makeuse of their own classifications, it is likely thatMembers will continue to decide unilaterallytheir own classification and schedulingapproach and will use W/120 by default;though perhaps with a few commitments onadditional environmental services culled bycross-reference to other specific activities con-tained in the UN CPC that are not presentlydetailed in W/120.

Environmental Infrastructure Servicesand the Issue of Water

It has been argued that foreign commercialpresence through Mode 3 could help ease theconstraint on domestic resources in develop-ing country provision of safe water as well astreatment of polluted water. Some see theGATS as a suitable instrument to offer bind-

ing and predictable market access for foreigninvestment in this sector. Others includingmany developing countries question thevalue of this, particularly as it raises issues ofaffordability to poorer sections of the popula-tion as well as fears about private ownershipand control of water.

These fears were brought into focus when theEuropean Union proposed that “water forhuman use and wastewater” should be includ-ed under “environmental services” in its alter-native classification. The proposal marked ashift away from the W/120 classification whichdoes not address water at all and mentions onlysewage treatment and tank emptying.

General obligations under the GATS such asthe most favoured nation (MFN) or nationaltreatment do not apply to “services suppliedunder government authority” that are notsupplied on a “commercial basis” or in “com-petition with other service suppliers.” In thecase of water supply, for instance, only if thesector already has private actors or if the solestate entity in charge supplies water on thebasis of commercial considerations, would aWTO Member be required not to discrimi-nate between water supply service providersfrom different Member states or grant themthe same treatment as domestic entities.Assuming that private participation andcommercial considerations do exist in thedelivery of environmental infrastructure serv-ices, Members may wish to preserve regulato-ry “policy space” and incorporate adequatesafeguards in their GATS commitments so asto facilitate other models for delivery of waterand the use of policy instruments, such assubsidies or tax incentives.

In response to widespread concerns raised bycivil society groups and some developingcountries, the EU subsequently retracted itsproposal and the plurilateral request explicit-ly excludes any request for water for humanuse (i.e., the collection, purification and dis-tribution of natural water).

Environmental Services

91

II


Domestic Regulations

Detailed knowledge of domestic regulatoryand administrative regimes will be relevantfor trade negotiations in environmental serv-ices as in other services. This is becausedomestic regulations touch upon provision ofservices through Mode 3 (commercial pres-ence) and Mode 4 (movement of natural per-sons) through foreign investment, health,environment, immigration and intellectualproperty rights laws and regulations.

WTO Members should therefore assessongoing negotiations in the WTO WorkingParty on Domestic Regulation in light oftheir regulatory requirements. It is arguedthat various kinds of contractual arrange-ments, such as build-operate-transfer (BOT),are actually a combination of governmentprocurement and market access concessions.Any future disciplines on government pro-curement and subsidies could have implica-tions for market access commitments alreadymade.

Environmental Services of ExportInterest to Developing Countries

The prevalent proposals on the classificationof environmental services reflect sectorswhere developed countries enjoy a compara-tive advantage, as many of these sectors arecapital and technology-intensive. However,many developing countries are interested inmarket access for environmental services thatthey could possibly export, particularly inMode 4. Cuba for instance—where servicesegments such as environmental studies,assessments and consultancy services are par-ticularly well developed—has exported suchservices to Brazil, the Dominican Republic,Haiti, Mexico, Nicaragua, Spain andVenezuela. Assessing the opportunities in thissector will however imply as assessment of theimpact of foreign immigration regulationsthat are a part of domestic regulation, as wellas other requirements such as quality assur-ance and educational requirements. Provisionof consultancy services through Mode 1

(cross-border supply) could also hold outopportunities for developing countries forexport of environmental services.

Trends and FutureDirectionsAs in the case of environmental goods, theoutlook for trade liberalization in environ-mental services remains cautious and uncer-tain. Very few commitments have been madeby developing countries in environmentalservices. Their reluctance, according to severaldelegates, is largely attributable to prevalentuncertainty particularly on regulatory auton-omy in key services such as water supply. Thisis despite the increasing need for environ-mental services in all developing countries,and particularly in rapidly growing countriessuch as China. Moreover the rapidly expand-ing environmental service industry in devel-oping countries such as those based on con-sultancy and Mode 4 need to be reflected inthe market access commitments of developedcountries.

The key challenge is to get Member countries,especially developing countries, excited aboutthe issue and for them to take a more proac-tive, as opposed to defensive, stance on envi-ronmental services. This will require signifi-cant investments of analysis and research onthe part of developing countries themselves.

Finally, it is important to stress the need toadopt a coordinated strategy between envi-ronmental goods and services as they are fre-quently inter-linked. At present Membershave not agreed to adopt a single strategywithin the context of the WTO negotiationsbut are likely to tailor individual strategies torespond to specific country interests in bothgoods and services negotiations. Some havesuggested that Paragraph 51 that calls uponthe CTE and Committee on Trade andDevelopment (CTD) to identify and debatethe environmental and developmentalaspects of the Doha negotiations should playa more useful role in this regard.


92


Technology is considered to be one of the keydeterminants of socio-economic develop-ment and its transfer and dissemination tothe developing world is deemed essential inthe context of sustainable development.Environmental technologies—or environ-mentally sound technologies (ESTs)—haveemerged as a distinct category of technolo-gies; the need for innovation, transfer anddissemination of which has been emphasisedin several international agreements, includingthe 1992 Rio Declaration emerging from theRio Earth Summit, and various multilateralenvironmental agreements (MEAs).

Rapid industrialization coupled with urban-ization and population growth has causedserious environmental problems in manyparts of the developing world. Recognition ofthe increased magnitude of these problems bythe public, industry and governments haslead to tremendous growth in the market inESTs. Although, some developing countrieshave been able to develop limited domesticcapacities in the production of these tech-nologies, the majority are still dependent onthe developed world for high-end and sophis-ticated technologies.

The significance of ESTs

While the transfer of ESTs has several com-monalties with the transfer of any other tech-

nology, ESTs are distinct in terms of their sig-nificance for sustainable development. ESTshave featured prominently on the agenda ofinternational environmental and trade nego-tiations. Developing countries require ESTsto ensure (a) compliance with MEA targets;(b) environmental requirements in exportmarkets; and (c) improving environmentalquality and achieving sustainable develop-ment in the domestic context. The signifi-cance also stems from the fact that the dis-semination of ESTs is defined by increasinginternational consensus for environmentalprotection in addition to commercial inter-ests that go along with the initiative.

Over thirty years ago, the UN Conference onthe Human Environment (UNCHE) in1972 in Stockholm highlighted the need topromote scientific research and developmentin the context of environmental problems.The UNCHE emphasized that ESTs shouldbe made available to developing countries onterms that would encourage their wide dis-semination without constituting an econom-ic burden.

Two decades, later the Agenda 21 action planfor sustainable development, adopted at the1992 UN Conference on Environment andDevelopment (UNCED), reiterated theimportance of ESTs, calling for the transfer ofenvironmentally sound technology “on

Issues and Debates

93

IIEnvironmental TechnologiesSandeep Singh

•“Although, some developing countries have been able to develop limited domesticcapacities in the production of these technologies, the majority are still dependent

on the developed world for high-end and sophisticated technologies.”

•


favourable terms including concessional andpreferential terms.”

International discussions on trade, environ-ment and development in the World TradeOrganization (WTO), the United NationsConference on Trade and Development(UNCTAD) and other parts of the UnitedNations system have repeatedly referred tothe importance of access to and transfer oftechnology. The WTO Committee on Tradeand Environment (CTE) has focused on therelationship between the generation of, accessto, and transfer of ESTs and the Agreementon Trade-related Aspects of IntellectualProperty Rights (TRIPS). WTO Membershave also raised the issue of access to andtransfer of technology with respect to envi-ronmental requirements and market access,eco-labelling, trade liberalization and MEAs.

Comprehending ESTs

There is no universally accepted definition ofESTs. However, Agenda 21 sets out that ESTsare technologies that “protect the environ-ment, are less polluting, use all resources in amore sustainable manner, recycle more of theirwastes and products, and handle residualwastes in a more acceptable manner than theytechnologies for which they are substitutes.”

In the context of industrial manufacturing,ESTs can be broadly clustered in two cate-gories: end-of-pipe technologies and cleanertechnologies. End-of-pipe technologies areessentially those focusing on removal andtreatment of pollutants from the wastestream at the end of the manufacturingprocess. Technologies necessary for solidwaste treatment, wastewater treatments andair pollution control fall into this category.Cleaner technologies are those that seek tooptimize the process of production by mak-ing necessary changes in order to avoid gen-eration of pollution.

There are four major components of ESTs:hardware, software, brainware and supportnet. The hardware component relates to the

physical equipment, structure of componentsand layout. Software is the “know-how”needed to accomplish a specific task, such asthe operation and maintenance of equip-ment. The “brainware” component is moreintricate as it includes the necessary knowl-edge and understanding related to the appli-cation and justification of hardware and soft-ware deployment. It is also called the “know-what” and “know-why” of technology.Finally, “support-net” comprises the complexnetwork needed to support the effective useand management of technology.

From the sustainable development perspec-tive, transfer of “brainware” and “support-net”are crucial to ensure effective innovation andtechnology transfer to the developing world.

The Trade and Environment Context

In the evolving debate on trade and environ-ment, the issue of ESTs has always been animportant one. In the WTO negotiations,Paragraphs 31(iii) and 37 of the DohaMinisterial Declaration and Paragraph II(ii)of the Decision on Implementation-relatedIssues and Concerns are relevant to ESTs.Paragraph 31(iii) provides a mandate tonegotiate “the reduction or, as appropriate,elimination of tariff and non-tariff barriers toenvironmental goods and services.” The defi-nition of environmental goods could includeESTs as well. Paragraph 37 mandates WTOMembers to examine the relationshipbetween trade and technology transfer ingeneral. Paragraph 11(ii) reaffirms that theprovisions of Article 66(ii) of the TRIPSAgreement are mandatory. Article 66(ii) ofthe TRIPS Agreement commits developedcountries to provide incentives to their ownenterprises to transfer technologies to least-developed countries.

Interests and Fault LinesBroadly, there are two sets of overlappinginterests in trade in and transfer of ESTs—commercial interests and environmental inter-ests. In the majority of cases, the set of com-


94


mercial interests are altogether different fordeveloping and developed countries.Developed countries dominate the productionof these technologies and are primarily inter-ested in capturing emerging markets in thedeveloping word. According to UNCTAD,the worldwide market in environmental goodsand services (EGS)—of which environmentaltechnologies are an important pillar—is biggerthan the pharmaceutical market, with 85 percent captured by Western firms. Hence, thetrade interests are significant.

Although some developing countries are alsonet exporters of these technologies, e.g., Indiain the case of renewable energy technologies,for most part developing countries are netimporters. The commercial interest of devel-oping countries mainly lies in the fact that theimport of environmental technologies enablesthem to meet environmental requirements onexports of other products to Western coun-tries. On the other hand, some developingcountries that have over time developed somecapacity in the environmental sector are alsoconcerned about maintaining and further aug-menting their capacity. The environmentalindustry in most developing and least-devel-oped countries is largely dominated by smalland medium-sized enterprises.

From the submissions in various WTO bod-ies, it is clear that developed countries are pri-marily interested in selling environmentalequipment and necessary knowledge of main-tenance and operation. This constitutes onlythe “hardware” and “software” components oftechnology transfer. As outlined in the accom-panying figure, such transfers correspond tothe inputs needed to deliver a capitalgood/plant or to modernize an existing one,and the know how to operate and maintain it.

Developing countries, on the other hand, areincreasingly realizing that their developedcounterparts tend to gain additional marketaccess, but remain reluctant to transfer coretechnologies. Increased trade in environmen-tal equipment might enable recipient coun-

Environmental Technologies

95

IIEncouragingtrade in biofuelsBy Suani TeixeiraCoelho

The Doha MinisterialDeclaration of theWorld Trade Organiz-ation (WTO) mandatednegotiations to liberalize trade in environmen-tal goods and services (EGS) to enhance themutual supportiveness of trade and environ-ment. In the negotiations to date, it hasbecome clear that developed and developingcountries look at this issue from different per-spectives. While developed countries expectgreater access to emerging markets for theirexport-oriented environmental services andtechnologies, developing countries seek topursue economic, social and environmentalpolicies and expand their exports of environ-mental goods and technologies.

For developing countries, the liberalization ofEGS can make an important contribution tothe UN Millennium Development Goals, theJohannesburg World Summit on SustainableDevelopment objectives and the KyotoProtocol. For example, the Kyoto Protocolcalls for the replacement of fossil fuels byrenewable sources of energy so as to reducecarbon dioxide and other greenhouse gasemissions. Opportunities exist for renewableenergy technologies in all countries, especial-ly for biofuels—not only for developed coun-tries that can use them to replace fossil fuels,but also for developing countries that canproduce biofuels for internal use and/orexport.

Biofuels are a renewable energy source derivedfrom biomass, and include ethanol, biodiesel,and methanol (when produced from wood orcrops). Bioenergy accounts for about 15 percent of the world’s energy consumption, whichis used mainly in developing countries.Despite the advantages of biofuels in con-tributing significantly to sustainable develop-ment, only a few countries foster their use,and trade in biofuels is still incipient. As the




96


WTO looks at environmental technologies,there is a strong case to be made for elimi-nating tariffs and non-tariff barriers to thetrade of biofuels. Trade liberalization ofrenewable energy, including biofuels, couldprovide a “win-win-win” solution throughpromoting trade, improving the environment,and also alleviating poverty.

Today, Brazil represents a benchmark inrenewable energy use, an example that couldbe followed by other countries. The mainenvironmental benefit from the use of ethanolemanates from the fact that alcohol fuel ismade from biomass energy derived from agri-cultural crops—a renewable energy source.Other positive externalities include: job cre-ation; reduction of health costs related topollution in urban areas; diversification ofenergy sources; secure supply and economicfeasibility; development of new car enginetechnologies; and development of environ-mentally sustainable agricultural productionprocesses.

In Brazil, ethanol is used in cars as an octaneenhancer and oxygenated additive to gasoline(blended in a proportion of 20 to 26 per centin volume of anhydrous ethanol-gasoline in amixture called gasohol) in dedicated hydratedethanol engines or in the recently introducedflexible fuel vehicles (FFVs) that run on anyblend of alcohol and gasoline. Sales of FFVscommenced in 2003 and dominate the currentmarket. By 2007, all new models of automo-biles sold in Brazil are expected to be FFVs,allowing the user to choose which fuel to use,according to price and availability.

Consumers also appear to prefer ethanol,which sells for 60 to 70 per cent of the priceof gasoline at the pump, due to the signifi-cant reduction in production costs. The break-even ethanol/gasoline price ratio is 70 percent (without any government subsidies).These results show the long-term economiccompetitiveness of ethanol fuel as compared

to gasoline. A common argument used against renewable energy—and, indeed, against manyenvironmental technologies—is the lack ofeconomic competitiveness. However, theBrazilian experience shows that costs candrop continuously through the so-called“learning curve effect.”

Alcohol fuel that can be used in automotivevehicles is also a feasible option for devel-oped countries which are obliged to reducetheir carbon emissions through the KyotoProtocol,that can be used in automotive vehi-cles. In their search for cost effective andenvironmentally sound alternatives to fossilfuels, developed countries should considerimporting biofuels from developing countries.

The WTO has a role to play with respect tomaking biofuels more attractive as an alterna-tive to fossil fuels. Working towards trade lib-eralization and sustainable development, theDoha Declaration set the stage for negotia-tions on the reduction or, as appropriate,elimination of tariff and non-tariff barriers forEGS. Considering the current import duties inmany developed countries on environmentalgoods (including environmental technolo-gies), negotiations to liberalize trade couldforge the necessary trade-offs to enhancetrade in biofuels.

An enhanced commitment to market access isone of the foundations of the “DohaDevelopment Round,” which includes support-ing accelerated liberalization of trade in envi-ronmental goods and technologies of interestto developing countries. Production andexport of biofuels represents a concreteoption to reduce poverty and enhance sus-tainable development in developing coun-tries.

Suani Teixeira Coelho, from Brazil, is São PauloState’s Deputy Secretary of State for theEnvironment and Head of the BrazilianReference Center on Biomass, University of SãoPaulo. This essay is written in her personalcapacity.


tries to upgrade their end-of-pipe pollutioncontrol capacities as well as promote cleanerprocesses in the short term. As a result of lowtrade barriers, they are likely to have relative-ly easy access to relevant engineering andmanagerial services, capital goods and rele-vant knowledge for operation and mainte-nance.

In the long term, however, merely transfer-ring capital goods does not necessarily raisethe technological level of recipient countries.Environmental technologies are not a staticconcept; technologies that are in use todaywill become outdated tomorrow. Hence,with a short-term approach, the recipientcountries are likely to remain dependent onthe technology suppliers.

The recipient country should promote thegeneration of indigenous technologicalcapacity—stream C in the accompanying fig-ure; i.e., “brainware” and “support net”—andthe necessary knowledge and expertiserequired for implementing technologicalchange. Recipient countries need to developtheir own capacity to produce and manageESTs that are suitable for their respective andspecific requirements.

This remains a missing link in the ongoingWTO negotiations.

Paragraph 31(iii): EGS Negotiations

Under the Paragraph 31(iii) negotiations, ithas been proposed by some WTO Membersthat the negotiations to reduce trade barriersshould take place according to a list-basedapproach, rather than a definitional approach,as it is difficult to agree upon a common defi-nition of environmental goods. Such a listcould include both end-of-pipe pollution con-trol equipment and cleaner technologies.

Most developed countries have taken anoffensive position and are in support of rapidtrade liberalization in selected goods andtechnologies as their companies stand to gainin terms of increased market access in devel-oping country markets. These countries

include the United States, Japan, theEuropean Union, Korea and New Zealand.

Developing countries, on the other hand,have not shown much enthusiasm to put for-ward proposals in the negotiations thus far asmost of the proposals by developed countriesonly discuss the need for reductions in tradebarriers in developing countries. Submissionby India and China have highlighted theimportance of concrete technology transferinitiatives, the negative impact of rapid reduc-tion of tariffs on infant environmental indus-tries in developing countries and issues relatedto the development of the environmentalindustry in these countries in the long-term.However, not much progress has yet beenmade on defining the scope of the negotia-tions mandated under Paragraph 31(iii).

Paragraph 37: Working Group on Tradeand Transfer of Technology

The Working Group on Trade andTechnology Transfer was established underthe mandate of Paragraph 37 of the DohaMinisterial Declaration. Its mandate coverstechnology transfer in general and includesESTs. As developing countries are the maindemandeurs of technology transfer, they areplaying an active role in the Working Group.Joint submissions from several developingcountries outline the provisions in the WTOagreements stipulating the need for technolo-gy transfer. In particular, developing coun-tries have called upon the Working Group toexamine the following:

• The provisions in various WTO agree-ments relating to technology transfer witha view to making these provisions opera-tional and meaningful.

• Those provisions that may have the effectof hindering transfer of technology todeveloping countries and how to mitigatetheir negative effects.

• The restrictive practices adopted by multi-national enterprises in the area of technol-ogy transfer.


97

II


• The impact of tariff peaks and tariff escala-tion in developed countries on technologytransfer and come up with recommenda-tions to remove the adverse impact.

• The difficulties faced by the developingcountries in meeting the standards set bydifferent agreements because of non-availability of the relevant or requiredtechnology.

• The need for internationally agreed disci-plines on transfer of technology with aview to promote trade and development.

While developing countries have outlined anambitious agenda for the Working Group,developed countries, including the U.S. andJapan, have shown little enthusiasm toembark on substantive debate, defining theexercise as merely analytical and academic.The expectation of developing countries isthat the Working Group can formulateappropriate recommendations to assist themin strengthening their technology base.

Paragraph 11(ii): Links to IntellectualProperty Rights

The mandate of Paragraph 11(ii) is alsoapplicable to technology transfer in general,which covers ESTs as well. The TRIPSCouncil has taken a decision that requiresdeveloped countries to submit annual reportson actions taken or planned in pursuance oftheir commitment under Article 66.2. Ingeneral, however, developing countriesremain skeptical about sincere efforts bydeveloped countries in this regard. Theymaintain that developed countries need toestablish norms and practices that lower thetransaction costs of intellectual property andtechnology dissemination.

Other Fault Lines

In negotiations on trade and environmentissues, the focus has mostly been only onremoving trade barriers. A close analysis ofthe associated problems, however, reveals thatreducing trade barriers is only one of the fac-

tors that could encourage technology trans-fer. It does not address the basic issue ofaffordable prices that are often determined bypatent holder Western companies.

There has been no emphasis on provision forfinance for ESTs and on the lack of capacitywith regard to technology identification,assessment and selection, adaptation andassimilation in many developing countries.Without tackling these issues, the currentapproach may have negative consequencesfor some developing countries, which havedeveloped a certain level of capacity to pro-duce ESTs. Competition from Western com-panies may erode this capacity, which clearlyfalls in the infant industry category. In addi-tion, as a result of significantly lower tariffs,Western companies are likely to prefer thetrading route, thereby negatively affectinginvestment in the environmental sector indeveloping countries.

Trends and FutureDirectionsLike innovation, technology transfer is adynamic and complex process, which isshaped and influenced by interactionsbetween various factors ranging from inter-national political economy to the adaptabili-ty and affordability of technology. Transferand dissemination of appropriate ESTs todeveloping countries needs to be perceived interms of achieving the twin objectives oftransferring plant and equipment withacquiring the necessary operation and main-tenance knowledge, as well as generating newknowledge.

Unfortunately, the current approach in thetrade-environment negotiations only focuseson the former. The transfer of “know-what,”“know-why” and “support-net”—which isessential for enhancing the technologicalcapacity of developing countries—has been amissing link. In the EGS negotiations, com-mercial interests have clearly overshadowedthe environmental objectives of the initiative.


98


Thus far, developed countries have onlyshown interest in maximizing market accessfor their industries, with little willingness topromote effective technology transfer.

It is also important to note that the technol-ogy transfer that takes place among devel-oped countries is fundamentally differentfrom the one that takes place from developedcountries to developing countries. The for-mer is relatively straightforward because thetechnological level is comparable whereas thelatter is more fluid due to the technologicaldisparity between supplying and receivingcountries.

The differences between developed anddeveloping countries go beyond technologi-cal levels to differences in terms of organiza-tional and managerial systems, economiccharacteristics, telecommunication systems,skills, and value systems, among others, all ofwhich matter for transfer of ESTs. Trade lib-eralization helps in the process but does notguarantee dissemination of “appropriateESTs.”

Another trend worth noting is restrictivepractices by multinational companies ashighlighted in developing countries’ submis-sions in the Working Group on Trade andTechnology Transfer. With the removal of

barriers on investment many multinationalsare setting up wholly owned subsidiaries indeveloping countries and are increasinglybecoming reluctant to transfer technologythrough licensing or joint ventures.

Transfer and dissemination of technology isthe central focus of the TRIPS Agreement’sobjectives. Article 8.2 of the Agreementclearly notes that abuse of intellectual proper-ty rights may adversely affect the internation-al transfer of technology. Thus operationaliz-ing these provisions is important becauseproviding developing countries with access toappropriate technologies is an essential wayto accelerate their economic and social devel-opment. It would be worthwhile if the reviewof the TRIPS Agreement also takes intoaccount the impact of implementing theTRIPS Agreement on the transfer and dis-semination of technology and the relatedtrade and development prospects of develop-ing countries.

In sum to be effective, transfer of ESTsshould harness the development of indige-nous capabilities, which in turn have manydimensions ranging from technology search,assessment and selection, adaptation andassimilation, replication, development and,ultimately, innovation.


99

II

Figure 1. Technological content of technology transfer arrangements.

Technologytransferred

Stream A: Engineering services,Managerial services,

Capital goods

Stream B: Skill and know-howfor operation and maintenance

Stream C: Knowledge,expertise and experience forgenerating and managing

technical change

Technologicalcapacity

New productioncapacity



100


Seventy-five per cent of commercially exploit-ed fish stocks worldwide are either depleted orthreatened by overfishing. Estimates suggestthat commercial fishing fleets’ overcapacity isas high as 250 per cent. Here is a clear case ofa “tragedy of the commons”—despite theglobal interest in conserving fish stocks, thereare immediate economic incentives for own-ers of fishing vessels to catch as much fish aspossible. This incentive naturally increaseswhen fishing is subsidized.

Subsidies represent nearly 20 per cent of fish-ing industry revenue and total fisheries subsi-dies worldwide have been estimated atUS$20 billion per year. These subsidies to thefisheries sector have both trade and environ-mental consequences. Reducing the cost offishing or enhancing its profitability byincreasing revenue allows subsidized produc-ers to reduce prices, gain market share andlimit access to common fisheries resources fornon-subsidized fleets. This subsidy cycle rein-forces tendencies to over-fish and over-invest.

The Worldwide Fund for Nature (WWF)reports that 90 per cent of all reported fish-eries subsidies are granted by only sevenmajor industrialized economies: Japan, theEuropean Community (EC), the UnitedStates, Canada, Russia, Korea and ChineseTaipei. These subsidies have significanteffects on developing country fisheries,

through trade distortions that inhibit devel-oping countries access to markets of industri-alized countries and through production dis-torting distant water fishing operations thatdeprive local people access to their fisheriesresources. Analysis from the United NationsEnvironmental Programme (UNEP) of theenvironmental impact of different types ofsubsidies under different management condi-tions has shown that under most real-worldconditions—i.e., less than perfect manage-ment schemes and fully exploited fishstocks—subsidies have harmful, and oftenirreversible, environmental effects.

Subsidies are recognized as trade distortingmeasures, interfering with the principle ofcomparative advantage. Consequently, theWTO Agreement on Subsidies andCountervailing Measures (SCM) prohibitscertain types of subsidies to industries andenables WTO Members to challenge otherMembers’ subsidies that distort trade. Article1 of the Agreement defines a subsidy as anyfinancial contribution by a government thatconfers a benefit on a domestic industry. TheSCM Agreement is based on the colors oftraffic lights: red (prohibited), amber (action-able) and green (permitted). The Red Boxcontains subsidies that are prohibited per sewithout the necessity to demonstrate theiradverse effects (Article 3). The Amber Box

Issues and Debates

101

IIFisheries SubsidiesAnja von Moltke

•“…the lapsing of the ‘Green Box’ means that even environmentally

or developmentally positive fisheries subsidies could be subject to challenge if they are trade distorting.”

•


contains subsidies that are subjected to disci-plines in case specific “adverse effects” aredemonstrated. The disciplines include theremoval of the adverse effects or the removalof the subsidy itself (Articles 5, 6 and 7).Provisions for the Green Box, containing non-actionable subsidies, i.e., subsidies that hadbeen exempted from any discipline on thebasis of certain conditions (Article 8), expiredin 2000. In addition, Article 27 sets out pro-visions giving developing countries specialtreatment, including transition time for least-developed countries (LDCs) to phase outexport subsidies.

Fisheries subsidies are currently disciplinedonly by the general rules found in the SCMAgreement. However, there are several rea-sons why this Agreement has limited rele-vance to fisheries subsidies. First, the narrowWTO focus on trade distortions as theyrelate to export markets clearly does not cap-ture the notion of other economic distor-tions, specifically those related to patterns ofproduction or environmental harm. Hence,there is no ex ante prohibition, even on themost economically and environmentallyharmful fisheries subsidies.


102

Figure 1. Government financial transfers to marine capture fisheries in OECD countries 2000(million US$).

Source: OECD, (2004). Synthesis Report on Environmentally Harmful Subsidies, OECD, Paris.

Australia (1)

Belgium

Canada

Denmark

European Union

Finland

Germany

Greece

Iceland

Italy

Japan

Korea

Mexico

Netherlands

New Zealand

Norway

France

Poland

Spain

Sweden

Turkey

United Kingdom

United States

0 500 30002500200015001000

Portugal

Ireland

Cost Reducing TransfersDirect Payments General Services


Second, Article 6 of SCM Agreement consid-ers a demonstration of adverse trade effectsthrough comparison of indicators such asmarket shares or prices in an export market.The distinctive trade distortions of fisheriessubsidies (limiting access of non-subsidizedfleets to exhaustive resources) would renderthese effects much more difficult to demon-strate.

Third, the lapsing of the “Green Box” meansthat even environmentally or developmental-ly positive fisheries subsidies could be subjectto challenge if they are trade distorting.Finally, the SCM definition of a subsidy cre-ates ambiguities with regard to some kinds offisheries subsidies, most notably payments foraccess, fisheries management services andinfrastructure. Such support mechanisms arepotentially important to development andenvironmental management and thus needto be clarified.

Interests and Fault LinesFisheries subsidies have been addressed in theWTO Committee on Trade andEnvironment (CTE) since 1997. At theWTO Seattle Ministerial Conference in1999, a group of countries, the so-called“Friends of Fish” (Argentina, Australia, Chile,Ecuador, Iceland, New Zealand, Norway,Peru, Philippines and the United States), putforward proposals to discipline fisheries sub-sidies that distort trade, harm the environ-ment and impede development. Those pro-posing strong disciplines are often countrieswhose foreign revenue comes from fisheriesexport or those who strongly depend on thefisheries sector for food security. Japan andKorea, who are amongst the larges subsidiz-ers, were against developing such disciplinesbeyond those that generally apply under theSCM Agreement. They argued that the fish-eries sector was not different from other sec-tors of the economy and, therefore, did notrequire specific disciplines. Furthermore,they raised substantial questions on the causallink between subsidies and overexploitation

Fisheries Subsidies

103

IIFisheries subsidies andbeyondBy John Kurien

“It is a very commonclever device thatwhen anyone hasattained the summitof greatness, he kicksaway the ladder by which he had climbed up,in order to deprive others of the means ofclimbing up after him.” – Frederick List

This is a good characterization of the currentnegotiations on fisheries subsidies undertakenas part of the “Doha Development Agenda” ofthe World Trade Organization (WTO).Developed nations have provided substantialsubsidies—sometimes even as high as 60 to80 per cent of the value of the harvest—todevelop their fisheries and fishing communi-ties over the last several decades. Today, mostof these countries are raising questions aboutthe wisdom of continuing to provide suchsupport and pointing fingers at developingcountries; most of whom only offer trivialamounts of subsidies, if any at all.

Much is being said today about the presumedimpacts of subsidies on fish stocks. Subsidieslead to overcapacity, we are told. This causesenhanced fishing effort leading to overfishingand resource depletion. Stop subsidies.However, not a word about the singular roleplayed by subsidies in enhancing the qualityof human development of fishing communi-ties in developed countries!

This partial statement about the effects of sub-sidies is unfortunate. I personally attributeboth development of their fishing communitiesand the depletion of their fishery resources tosubsidies. In my understanding, even the directrelationship between subsidies and overcapac-ity and overfishing is largely untenable. Theissue is far more complex.

There are several interacting and dynamiccausal factors, which can promote the expan-sion of fishing activity and harvesting capac-ity and lead to overfishing. The first and most




104


overarching factor is the rapid global expan-sion of the market for fish and fisheries prod-ucts. At any given level of technology, this isa prime cause for expansion of fishing activity(effort) and, subsequently, for the physicalexpansion of harvesting capacity (craft andgear). Given the perishability of fish, fisherswill catch more than they need for subsistenceonly if there is a market for their product.

A second factor spurring fishing effort andcapacity are changes in harvesting technolo-gy. Technological change and its spread aregreatly spurred in the context of an expand-ing market. The classic example is the diffu-sion of bottom trawling in Asian waters in the1960s following the expansion of the marketfor shrimp in the United States, Europe andJapan. Today, bottom trawling is a bane toAsia’s fisheries resources.

Thirdly, there is the opening up of accessrights to the resource. Historically, sociallyand culturally determined closed and/or lim-ited access was a barrier to entry into fish-eries resources. State control over the coastalwaters altered the rules and norms governingaccess. While coastal waters were legally pro-nounced as state property, they deterioratedinto a realm of open access where only pos-session rights prevailed. This created moreincentives for unbridled fishing activity andraised fishing capacity.

Fourthly, market expansion creates demandsfor new products, which greatly expands fishprocessing facilities. The requirement for rawmaterial for processing in these facilities fuelsthe expansion of backward linkages into thefishing activity and enhances capacity.

Finally, there are financial and other supportsor subsidies in the system. These can exacer-bate an already existing overcapacity prob-lem. Such incentives, provided directly orindirectly by government or private sources(e.g., multinational fishing companies) play arole in enhancing activity and capacity. Theextent to which this support is sustained willdepend on the individual or joint presence ofthe other four mentioned factors.

For developing countries, trade in fisheriesproducts provides a major source of quick andvaluable foreign exchange earnings. In valueterms, the global exports of fisheries productsincreased from US$6 billion in 1980 to US$58billion in 2003, with developing countriesaccounting for half this trade. Net receiptsfrom fish trade by developing countriesincreased from around US$4 billion to US$18billion during this period. This revenue wasgreater than that from the total net exports ofother agricultural commodities, such as cof-fee, bananas, rice and tea.

Supporting activity and investments in fish-eries makes eminent sense for developingcountries. The natural resources are availableif properly managed. Skilled human capacityin the fisheries sector is plentiful. A judiciouscombination of these two factors will yieldsubstantial economic and social returns overthe long term.

Developing countries, which have a compara-tive advantage in fisheries products, shouldadopt a proactive strategy. They should paygreater attention to management of theirfisheries resources, develop markets for theirproducts and enhance the welfare of theirfisherpeople. This will involve a menu ofmeasures.

First, a program for aquarian reforms shouldbe undertaken to grant priority rights ofaccess to the productive coastal waters exclu-sively to those who fish and to grant the rightof first sale of the produce to this “communi-ty” of fishers. This will create incentives forresource stewardship and greater producercontrol over the lower end of the commoditychain. The result will be greater incomes forthe 30 million fishers and their dependents.

Secondly, developing countries need to nego-tiate reductions in tariff escalation to ensurethat they graduate from exporting fish as araw material to offering value-added foodproducts.

Thirdly, developing countries should explorethe scope for technological blending. Theskills of artisanal small-scale fishers and thebest of science-intensive technologies can



of fish resources and argued that the effects ofsubsidies on resources depended on the dif-ferent resource status and fishery manage-ment regimes.

Despite this dissent, the MinisterialConference in Doha in 2001 resulted inagreement to launch negotiations aiming to“clarify and improve WTO disciplines onfisheries subsidies, taking into account theimportance of this sector to developing coun-tries” (Paragraph 28). In this context, explicitreference is also made to Paragraph 31 of theDoha Declaration, which recalls the aim of“mutual supportiveness of trade and environ-ment” and agrees on further negotiations ontrade and environment.

Since then, while references to fisheries arestill occasionally made in the CTE, the nego-tiations on fisheries subsidies are primarilytaking place in the WTO Negotiating Groupon Rules, which is under the authority of theWTO Trade Negotiations Committee(TNC). A considerable shift has taken placeduring 2004, mainly due to changing posi-tions by the EC and Japan, moving the nego-tiations from the question whether new rulesare needed to the question of nature andextent of such rules.

In December 2005 at the 6th MinisterialMeeting in Hong Kong, Ministers thenagreed to identify and prohibit fisheries sub-sidies that lead to overfishing and overcapaci-ty. For the first time, this mandate explicitlyincludes environmental criteria for the newdisciplines. Ministers also acknowledged that“appropriate and effective special and differ-ential treatment” should form an integralpart of the negotiations, highlighting the sec-tor’s importance to poverty reduction, liveli-hood and food security concerns.

Despite these considerable advances, thereremain several unresolved issues that are cen-tral to meeting the Doha goals. Debates play-ing out in the Rules Group negotiations stillinclude: the structure for prohibiting andallowing subsidies, the application of the traf-

fic-light approach to specific subsidy types,special and differential treatment for develop-ing countries, the use of sustainable develop-ment criteria, as well as transparency andnotification requirements.

Top-down Versus Bottom-up Approaches

Most of the proposals on new disciplinesbuild upon the “traffic light” approach ofSCM Agreement. Two alternative frame-works to implement this approach, however,are still characterizing the negotiation: the“top-down” approach (negative list) and the“bottom-up” approach (positive list). The“top-down” approach originally proposed bythe “Friends of the Fish” starts from a generalprohibition on fisheries subsidies and focusesthe negotiations on identifying and definingexceptions. The “bottom-up” approach, sup-ported by Japan, Korea, Chinese Taipei andthe EC, centers the negotiation on identify-ing and defining subsidies that would be pro-hibited. This approach, they believe, wouldavoid a “race for exceptions.”

Although it is often argued that the finalresult of both approaches could be very simi-lar, the method might have implications onthe scope of prohibitions, notificationrequirements, burden of proof as well as thelevel of transparency achieved in the negotia-tions themselves. For example, whereas the“top-down” approach puts the burden ofproof on subsidizing countries to define theirprograms, the “bottom-up” approachrequires the countries who seek to strengthenthe disciplines to prove that some programsare harmful and need to be prohibited.

Prohibited Subsidies: The “Red Box”

While prohibiting subsidies that contributeto overcapacity and overfishing is now theexplicit goal of the negotiations, it is clearthat these concepts themselves are not appro-priate as a legal basis for a “red light” catego-ry. Neither of the two terms could be the cri-teria for an ex ante prohibition, since no sub-sidy would be “designed” to lead to overca-

Fisheries Subsidies

105

II


pacity or overfishing. Furthermore, the judg-ment of whether a certain practice leads toovercapacity or overfishing is clearly beyondthe competence of the WTO.

For this reason, other criteria for prohibitingsubsidies have been suggested, includingenhancing capacity and effort. Such subsidiescan be distinguished by design or context,without information about the actual impact.Some Members have argued, however, thatcosts and revenues factors can be quantifiedmore easily, thus lending themselves to directapplication in improved subsidy disciplinesfor fisheries and ensuring that the WTO isnot drawn into areas beyond its traditionalcompetence.

Those countries favouring a “bottom-up”approach, have proposed exhaustive lists ofsubsidies types to be banned, including forexample, subsidies for vessel construction ormodernization, the transfer of fishing vesselsto foreign countries’ waters and illegal, unre-ported and unregulated (IUU) fishing.Despite increasing concern and evidenceabout subsidized IUU activities, their effectsof distorting competition and exacerbatingthe problem of overcapacity, there is no agree-ment on whether WTO disciplines would beable to effectively tackle this problem.

Proposals based on the “top-down” approachstart with an outright ban, but envisageexemptions for all Members. Proposed exemp-tions include for instance subsidies that canhelp the transition to sustainable fisheries,such as short-term emergency relief, or that aremost important for development purposes.

Non-actionable Subsidies: The “GreenBox”

The essence of non-actionable subsidies isdifferent from the exceptions to the Red Box,since the Green Box would protect certainsubsidies from challenge under WTO rules.The main categories of subsidies proposed forthe Green Box include: government expendi-ture for management frameworks and


106


create artifacts that are environmentallybenign, with more emphasis on the quality ofthe fish harvested than on the throughputfrom the ecosystem.

Fourthly, ensuring international consumer sol-idarity for this agenda is important. This canshape the contours of sustainable fish con-sumption and play an important role in mod-ulating market forces. This will place premi-ums on seasonally and sustainably harvestedresources.

Fifthly, developing countries should negotiateto ensure international agreements that fosterfair trade, ensure equitable access toresources and honor commitments in supportof developing countries.

Finally, developing countries should providejudicious financial support in the form of sub-sidies, taking into consideration the “publicgood” nature of marine fisheries resources andthe “merit good” nature of the human devel-opment requirements of fishing communities.Funds for this objective could be earmarkedfrom their expanding export earnings fromfish.

Developing countries need several ladders toclimb to the heights of just, participatory andsustainable fisheries development. The subsi-dies ladder is one among them. Don’t kick itdown yet!

John Kurien, from India, is a professor at theCentre for Development Studies,Thiruvananthapuram.


research; subsidies for infrastructure; subsi-dies to improve safety or product quality orto promote environmentally preferable fish-ing gear; subsidies for subsistence fishingactivities and subsidies for the reduction ofcapacity (tie-up schemes, decommissioningprograms, retraining, early retirement).

Capacity-reducing subsidies merit specialattention. Decommissioning subsidies in par-ticular have a record of worsening the state ofthe fish stock, since they often have unintend-ed impacts on industry behaviour. To avoidreinvestment of the subsidy (or perceivedreduction of investment risk by vessel owners),several countries have proposed strict condi-tions like mandatory physical scrapping ofdecommissioned vessels, prohibitions on theintroduction of new vessels, commitment to atime-limit of the program, or rigorous controlsto prevent increased effort.

Actionable Subsidies: the “Amber Box”

Some Members are also calling for an amberlight category to contain subsidies thatrequire withdrawal if they have adverseeffects. For them, all subsidies that are notprohibited by the “Red Box” would fall intothis category, giving the Member state thathas suffered adverse effects the possibility ofchallenging the subsidy before a disputepanel. Chile suggest that, when the subsidiz-ing Member has failed to notify an amberlight subsidy, it would bear the burden ofdemonstrating that this subsidy does notcause trade injury to the complainingMember. For other subsidies, the complain-ing Member would have to provide evidenceshowing adverse trade effects of such subsi-dies.

The United States considers a “dark amber”category in which a subsidy would be pre-sumed to be harmful unless the subsidizinggovernment could affirmatively demonstratethat no overcapacity, overfishing or otheradverse trade effects have resulted from thesubsidy. For the Amber Box, the currentSCM definition of “serious prejudice,” that

Fisheries Subsidies

107

IIFixing Cotonou’s rules of originregime

By Roman Grynberg and NatallieRochester

The environmental and commercial implica-tions of the rules of origin regime for cannedand loined fish products under the CotonouAgreement between the European Union (EU)and 77 developing and least developed coun-tries may seem an arcane subject to some, butit is of great significance to the livelihoods ofmany.

Rules of origin determine which goods canbenefit from the lower rates of customs dutyunder preferential trade arrangements such asthe Cotonou Agreement. Under the CotonouAgreement, products from African, Caribbeanand Pacific (ACP) countries enter the EU dutyfree. In the case of a can of tuna from non-ACP countries, the rate of import duty intothe EU is 24 per cent. When a product, suchas a can of tuna, uses inputs from a numberof countries, it is necessary to have a rulethat determines whether that can qualifies forpreferential treatment. The current rules oforigin used by the EU are complex and sus-ceptible to abuse.

The Cotonou Agreement and related annexesprovide for the preferential access of ACPexports into the EU and the rules of originthat allow products to qualify for preferentialtreatment. In the case of canned and loinedfish, fish caught in ACP territorial waters (12miles from shore) automatically qualify irre-spective of who catches the fish. However,catches from the exclusive economic zone orEEZ (200 miles from shore or beyond) are




108


subject to vessel ownership criteria. Only ifthe vessel is owned by an EU or ACP countrywill that can of fish be deemed to have orig-inated in the ACP and to qualify for preferen-tial access into the EU market.

This has a number of effects. First, it encour-ages fishing effort in the territorial sea andincreases competition between medium-scaleor industrial fleets and artisanal and subsis-tence fishers. Second, this rule of origin cre-ates a long-term subsidy for EU distant waterfleets in ACP territorial waters. As few ACPstates have large capital intensive purse seinefleets, this in effect means that fish, such astuna, must be caught by EU fleets in order toqualify for preferential treatment. Such a pre-determined supply chain results in price dis-tortion for EU-caught fish.

Consequently, there is an incentive for tuna-rich ACP states with canning capacity (e.g.,Ghana, Mauritius, Papua New Guinea, Senegal,the Seychelles and the Solomon Islands) togrant access to their EEZ to the EU rather thanother states, even though it may be cheaperto import raw material for processing fromstates geographically closer than the EU, oreven more lucrative to export raw fish to theEU. This rule of origin, therefore, imposes sig-nificant costs on developing countries andlimits the potential to develop their fisheriesindustries in a sustainable manner. It alsoskews investment patterns, dissuading non-EU distant water fishers and increasing ACPdependence on EU firms.

For example, Mauritius, one of the threeIndian Ocean countries with a FisheriesPartnership Agreement (FPA) with the EU,incurs an increase in the cost of sourcing fishto comply with the EU rules of origin regime,thereby reducing its overall competitiveness.Mauritius processes around 50,000 metrictonnes (MT) per year. In 2003, Mauritius paidan average of US$61 more than the worldprice for fish sourced in the Indian Ocean perMT and US$31 more per MT in 2004. In effect,this means that part of the 24 per cent mar-gin of preference given to ACP states is beingpassed up the value chain to EU vessels. InPapua New Guinea, the volume of exports ofthe country’s tuna cannery to the EU was lim-

ited because that cannery and the relatedfishing capacity were controlled by Philippineinterests. In order to overcome the con-straints on exports caused by the rule of ori-gin, Papua New Guinea went to the UnitedNations and redefined its territorial sea toinclude its extensive archipelagic waters.Thereafter, it was able to export freely to theEU.

Development of the ACP fisheries industryrequires greater domestic ownership of fleetsand increased capabilities to produce value-added fisheries products, which would diversi-fy ACP fisheries exports to Europe andincrease potential revenues from fisheriestrade with the EU. Often, these ambitions arein direct conflict with the EU objective ofsupplying its canneries with raw fish, asopposed to importing value-added fisheriesproducts. Through bilateral access agree-ments, ACP states charge European vessels anaccess fee to fish in ACP waters. These tradi-tional “cash for access” agreements have beenoverhauled and renamed Fisheries PartnershipAgreements, which are supposed to ensurethe interests of EU distant water fleets as wellas sustainable fisheries in the waters of theACP partner. The 24 per cent preferential mar-gin under the current EU rules of originregime gives a subsidy to those ACP stateswith fish canning capacity to provide EU ves-sels with access to ACP waters. This also pro-vides tariff protection for EU canneries andACP canneries exporting to the EU. Together,these effects concentrate harvesting of fish-eries resources in certain ACP waters. Thisraises crucial issues about the food-securitysituation in ACP countries.

To have the preferential origin of a country,fish must be “wholly obtained” in that coun-try or, where this is not the case, have under-gone sufficient processing there. In order tomake these rules of origin less destructive andmore conducive to sustainable developmentof ACP fisheries, the definition of “whollyobtained” fish should be amended to allowfish caught by any vessel within an ACPstate’s EEZ to qualify for preferential treat-ment, so as to reduce the subsidy to EU ves-sels.



protects the interests of a country against thenegative trade effects of subsidies, would haveto be clarified to include economic distor-tions at the fisheries production level.

Special and Differential Treatment

The Doha Declaration mandates that negoti-ations take into account the importance ofthe fisheries sector to developing countries.Whereas early negotiations emphasized theneed for clarity in general disciplines beforeevaluating necessary special and differentialtreatment (S&DT) provisions, leading devel-oping countries to assert that S&DT must benegotiated as a central aspect of general disci-plines. Many developing countries argue forS&DT on the basis that fisheries, particular-ly artisanal and small-scale fisheries, are a vitalsource of food security, employment and for-eign exchange.

According to the International Collective inSupport of Fish Workers (ICSF), artisanalfisheries comprise 45 per cent of global fish-eries and 90 per cent of fish workers world-wide. Despite the need to provide developingcountries with the opportunity to developtheir fishing industries, it is important to bearin mind that artisanal fleets often represent a

larger proportion of total catch and are moreprofitable than industrial fleets in developingcountries. Similar to industrial fishing, theeffects of subsidies depend on the state offisheries and on the existing managementconditions. For instance, subsidies providedto artisanal fleets in under-managed fisherieswill have the same “race for fish” effects ascapacity-enhancing subsidies that lead to seri-ous resource depletion and poverty concerns.

Determining the type of S&DT necessary forthe artisanal sector is made particularly difficultby the lack of a clear definition of the term.Brazil has advanced the issue by differentiatingbetween artisanal as subsistence fishing andsmall-scale fishing. Subsidies for subsistencefishing would be allowed for both developedand developing countries whereas subsidies tosmall-scale fishing, presumed to cause adverseeffects by increasing capacity, would be action-able. In addition, Brazil looks towards theapplications of S&DT for vessel constructionand modernization and gear acquisition, underthe condition that the fishery is “not patently atrisk.” This would be the case if the status offisheries is “overexploited, depleted or recov-ering, according to the FAO.” Argentina pro-poses to add a management dimension by

Fisheries Subsidies

109

II

Figure 2. Marine and inland capture fisheries: Top producer countries in 2002.

Source: Modified from FAO, (2004) The State of World Fisheries and Aquaculture, FAO, Rome, Italy.

Norway

Thailand

Russian Fed.

India

Japan

Indonesia

United States

Peru

China

0 2 18141064

Chile

Million metric tons

16128

2.7

2.9

3.2

3.8

4.3

4.4

4.5

4.9

8.8

16.6


requiring subsidizing developing countryMembers to adhere with the FAO Code ofConduct for Responsible Fisheries.

Small island developing states (SIDS) areamong the most vulnerable regarding overex-ploitation of fisheries and market distortionsthat result from subsidies of large fishingpowers. However, they share a concern thatnew disciplines could limit their possibilitiesto further develop their fisheries and to con-clude agreements with foreign fishing nationsor fleets to allow access to their exclusive eco-nomic zones (EEZs). A group of twelve SIDSproposes to include under S&DT: develop-ment assistance to coastal states, assistance toartisanal and small-scale fisheries, fiscalincentives to fisheries development, andaccess fees (i.e., government-to-governmentpayments in return for access to a country’sEEZs).

In many cases, access agreements constitutesignificant sources of income in SIDS, meetlegitimate development needs and are, infact, authorized by the UN Convention onthe Law of the Sea. It is clear, however, thatthe terms of access agreements have notalways favoured host countries. Many devel-oping countries have witnessed the depletionof stocks as a result of activities of subsidizedforeign fleets. Several countries suggest thatWTO disciplines could contribute to reform-ing access agreements towards greater sus-tainability and transparency, without imped-ing or discouraging access payments onwhich many small vulnerable economiesdepend.

Transparency

Support programs in the fisheries sector arenotorious for their lack of transparency. Lackof reliable information has made it particu-larly difficult to quantify, analyze and reporton subsidy programs. Several Member stateshave called for negotiations on strengtheningSCM notification provisions (Article 25) inorder to improve data availability andenforcement of notification requirements.


110


This would also lessen fraudulent declarationsof origin and other forms of corruption thatundermine the fisheries industry. Under thecurrent EU rules of origin, it is possible for anACP country to use fish caught in neighbour-ing ACP states and these fish are considered“originating” fish. However, where countriesare not ACP states, and not part of the sameregional organization, the ACP state cannotuse the fish of these countries. Thus, forexample, the Mauritius cannery can use fishcaught in the Seychelles, but not fish caughtin the neighbouring Maldives because theMaldives is not part of the same economical-ly-integrated regional entity.

Highly migratory fish stocks, such as tuna,require regional management mechanisms.Current EU rules of origin encourage fishing ina particular area by particular boats and,therefore, impede a balanced regionalapproach to fisheries management. The limit-ed scope under these rules of origin for the“cumulation” of origin with neighbouringstates reinforces the dependence on EU fleetsas suppliers of raw fish.

Roman Grynberg, from Canada and Australia, isthe Director for Economic Governance at thePacific Islands Forum Secretariat.

Natallie Rochester, from Jamaica, is a ServicesAnalyst with the Caribbean Regional NegotiatingMachinery. This essay is written in her personalcapacity.


Emphasizing that “increased transparency is acondition sine qua non to deal effectively withthe problem of fisheries subsidies,” the ECsuggests a “scoreboard” of notifications perMember and per type of program that wouldbe made publicly available by the WTOSecretariat. Taking this suggestion further,any subsidy that is not notified would be pre-sumed to be prohibited. The exact content ofthe notifications, including the biological andregulatory condition of the fishery, subsidyamounts, recipients and ways of granting,also needs to be established.

Trends and FutureDirectionsSince the World Summit on SustainableDevelopment (WSSD) in 2002, whichrequired states to “eliminate subsidies thatcontribute to illegal, unreported and unregu-lated (IUU) fishing and to overcapacity,” sig-nificant progress on the issue of fisheries sub-sidies has been made. Whereas just a fewyears ago, views differed on whether therewas a need for new disciplines, there is nowcommon ground even on some technicalquestions on the design of the new disci-plines.

Fisheries Subsidies

111

II

Table 1. Impact of decommissioning schemes.

Decommissioning Payment Retirement Reduction Reduction Increased Program based on of vessel of total in total capacity/effort

vessel catch from fishing capacity effort in specific or revenues? required? achieved? achieved? fisheries

encouraged?

Denmark No Yes Yes No No

Norwegian No Incentives Yes No NoPurse Seine provided

United Kingdom No No No No Yes

Chinese Taipei No Yes No No Yes

Netherlands No No No No Yes

U.S. NE Multi-Species Yes Yes No No YesGroundfish

Canada Atl. Yes No No No unclearGroundfish

Canada Inshore Yes No No No ProbablyLobster

France Scallop No No Yes No unclear

Japan Akita No Yes Yes Yes No

Japan Shimane No Yes Probably not Probably not Probably

Sources: UNEP, (2004) Analyzing the Resource Impact of Fisheries Subsidies, UNEP. Geneva.



112

Table 2. Impact of eight categories of fisheries subsidies on fish stocks.

Catch Controls Open Access

Over- Full Less than Over- Full Less than capacity capacity full capacity capacity full

Fisheries Infrastructure H H NH H H NH

Management Services NH NH NH NH NH NH

Access to Foreign Waters H H NH H H NH

Decommissioning PH PH — H PH —

Capital Costs H H H H H H

Variable Costs H PH PH H H PH

Income Supports PH PH PH H H PH

Price Supports H H PH H H PH

NH = Not HarmfulPH = Possibly or Probably HarmfulH = Harmful— = Not Applicable

Source: Modified from UNEP, (2004) Analyzing the Resource Impact of Fisheries Subsidies: A Matrix Approach. UNEP,Geneva.

A number of significant challenges, however,remain. First, it is essential to ensure thatnew disciplines are transparent and formu-lated to achieve the Hong Kong mandatewhich clearly includes environmental anddevelopment criteria. To achieve transparen-cy, it will be important to capture all subsidyprograms by new rules and exclude onlythose that are clearly beneficial (e.g., for envi-ronmentally preferable gear) under appropri-ately strict conditions. Elaborating new rulesvia a negative, rather than a positive listapproach may minimize circumventionrisks. Since there is still disagreement on theapproach to take, the WTO Rules Groupneeds to continue the discussion on the dif-ferent types of subsidies, their respectivetreatment under new disciplines as well asstrict modalities for their notification. Newmechanisms for enforcement and regularreview are also indispensable.

Second, since the difficulty in designing newrules comes in substantial part from the inter-disciplinary nature of the problem, the com-petencies and authorities of the WTO need tobe respected. The challenge is to develop disci-plines that contribute directly to sustainabledevelopment and conservation, thus avoidingthe need for judgments by the WTO related toenvironmental or management conditions offisheries. Furthermore, institutional mecha-nisms for enforcement and compliance wouldneed to contain expert advice from multilater-al institutions with fisheries expertise, such asthe Food and Agriculture Organization(FAO), regional fisheries management organi-zations, or UNEP. Enhanced coordination andinformation exchange among those bodies,other concerned stakeholders and especiallywithin and between governments, are essentialto meeting the sustainable development goalsinherent in these negotiations.


Fisheries Subsidies

113

IIThird, negotiations must give more attentionto the unique challenges faced by developingcountries, including their heavy dependenceon fisheries, on international revenue fromtrade in fisheries, and on income from fish-eries access agreements. Developing countrieshave a legitimate interest in sustainablyexpanding their local fishing activities and inparticipating in sustainable, equitable accessagreements. In determining what kind ofS&DT is appropriate for developing coun-tries, it is important to bear in mind, however,that overfishing is a large problem in the vastmajority of developing countries. While pro-viding temporary benefits to the fishingindustry, capacity-enhancing subsidies mostlywork at the expense of future fish suppliesand food security. Furthermore, since S&DTprovisions are meant to protect developingcountries whose fishing industries operate ona small scale and whose impact is relativelylow, clear limits of eligibility of S&DT provi-sions particularly for large industrial fishingnations need to be set.

Limited diplomatic resources have made itparticularly difficult for many LDCs to beactively engaged in the negotiations. If thenew disciplines are to take due account ofLDCs’ interests, as required in the “DohaDevelopment Agenda,” national and inter-national capacity building and resources foractive participation in the WTO and otherinternational fora are indispensable.

No other issue intersects trade, environmentand sustainable development as much asfisheries subsidies. The nexus is one thatmust be carefully maneuvered to achieve thegoal of sustainable development. Fisheriesnegotiations offer a unique opportunity forthe WTO to operationalize the sustainabledevelopment objective in the WTO pream-ble and to prove that win-win-win outcomesfor trade, environment and development aremore than rhetoric.



114


Over the last three decades, the national andinternational framework for the protection ofthe natural environment has evolved rapidly.As legislation has expanded, however, so toohave opportunities to evade it. Internationalenvironmental crime—i.e., deliberate evasionof environmental laws and regulations byindividuals and companies in the pursuit ofpersonal financial benefit, where the impactsare transboundary or global—is a serious andgrowing problem.

It has been made worse by the general trendtowards trade liberalization and deregulation;wherever the legal movement of productsacross borders is facilitated, so too are illegalmovements. Yet the topic has hardly everbeen discussed at the World TradeOrganization (WTO). In fact, those hostileto various measures proposed to control ille-gal trade have often cited WTO rules as anobstacle to their adoption; though whetherWTO rules really would impede them isentirely speculative.

The major categories of natural resourcestraded illegally are wildlife, timber and fish. Itis of course impossible to know for sure thetotal value of illegal trade in these products,but educated guesses put it at a minimum ofUS$20 billion a year, perhaps up to 25 percent of the total legal trade and over five per

cent of the size of the global drugs trade.Other natural resources, including oil, dia-monds and other gemstones, and mineralssuch as coltan, are also traded illegally, but ingeneral less extensively than the three maincategories considered here. They are alsomore commonly associated with conflict,which raises slightly different questions.

Why does international environmental crimeexist? In practice, there are a number of driv-ers behind the formation of environmentalblack markets:

• Enforcement failure. Where illegal activitiesexist because of problems with enforce-ment, including suitability of regulations,costs of compliance (detection of environ-mental contraband is often very difficult),lack of resources and expertise, corrup-tion, and political and economic disrup-tion.

• Regulatory failure. Where illegal activitiesresult from a lack of appropriate regula-tion, including failures to determineand/or protect property rights.

• Differential costs or values. Where illegalactivities are driven by regulations creatingcost differentials between legal and illegalproducts, by differential compliance costs(or different consumer prices) in different

Issues and Debates

115

IIIllegal Trade in Natural ResourcesDuncan Brack

•“The major categories of natural resources traded illegally are wildlife,

timber and fish. It is of course impossible to know for sure the total value of illegal trade in these products, but educated guesses put it at a minimum

of US$20 billion a year…”

•


countries, by demand for scarce productsfor which substitutes are not available oraccepted, and by a lack of concern for theenvironment.

The reported incidence of illegal activities hasundoubtedly grown in recent years, partlybecause the implementation of new multilat-eral environmental agreements (MEAs) hasprovided new opportunities for evasion, andpartly because greater public and governmen-tal awareness has led to more investigation ofthe issues.

Other contributory factors include the gener-al trend towards trade liberalization, as noted,and increased regional economic integration,which both make enforcing border controlsmore difficult, and the growth of transna-tional corporations, amongst whom regula-tions are difficult to enforce. The transforma-tion of the former Soviet bloc, and the diffi-culties of environmental law making and lawenforcement and the rise of organized crimein many ex-Soviet economies, have also con-tributed to the problem, as has the growinginvolvement of developing countries inMEAs, but—in many of them—a lack ofadequate resources to implement their provi-sions effectively.

Wildlife

The Convention on International Trade inEndangered Species of Wild Fauna and Flora(CITES) was agreed in Washington in 1973and came into force in 1975. It has 169 par-ties, and is generally regarded as one of themore successful of the international conserva-tion treaties.

The illegal trade in wildlife, in contraventionof the controls established by CITES, is per-haps the highest-profile area of internationalenvironmental crime. The poaching andsmuggling of commodities such as ivory,rhino horn, tiger bones, sturgeon eggs, beargalls, wild-caught parrots and other wildlifewith a high commercial value directly threat-ens some or all of the populations of these

species in the wild. Unfettered trade in deriv-atives from hundreds of other less charismat-ic species also serves to further deplete wildpopulations subject to many other pressures.Because of its diverse origins, multiplicity ofproducts, broad consumer base and innatelyclandestine, high-value/low-volume nature, itmay also be one of the hardest to control—though there are many instances whereenforcement authorities have learnt to coop-erate with some success.

The wildlife trade flows predominantly fromless developed to more developed countries(i.e., South to North) and reflects consump-tion patterns ranging from medical needthrough to the frivolous. Major sources ofdemand are the exotic pet and flower trade,ingredients for traditional East Asian medi-cine, cultural materials (such as ivory for per-sonal hanko seals in Japan and rhino hornsfor dagger handles in the Yemen) and exoticcurios and accessories. The clandestine natureof the illegal trade means that live specimensare frequently transported in terrible condi-tions and many die en route; mortality levelsof 80 per cent, for example, were associatedwith the wild-caught bird trade from Africato Europe in the late 1980s.

CITES relies on a system of export andimport permits issued by national manage-ment authorities for controlling the trade insome 34,000 species of wildlife; it does notseek to regulate habitat protection or controlharvesting operations within countries. Themost obvious way of circumventing thesetrade controls is through direct poaching andsmuggling. Fraudulent applications for gen-uine CITES permits, faked certificates, mak-ing false declarations to customs or launder-ing illegal specimens as captive-bred or aspre-Convention stockpiles, have also beenused to aid and abet illegal traffic.

Compiling data from various sources, thetotal global commercial exchange of wildlifehas been estimated at between US$10–20billion a year, of which some US$5 billion


116


may be in contravention of CITES.Smuggling of wildlife species can be highlylucrative. An African grey parrot exportedfrom the Ivory Coast, for example, may beworth US$20 at the time of capture, US$100at the point of export, US$600 to animporter in the US or Europe and overUS$1,100 to a specialist retailer.

Logging

Illegal logging takes place when timber is har-vested, transported, bought or sold in viola-tion of national laws. By logging in protectedareas (such as national parks) or over theallowed quota, by processing the logs (intoplywood, for example, or pulp for paper) with-out acquiring licenses, and by exporting thetimber and wood products without payingexport duties, companies may be able to gen-erate much greater profits for themselves thanby adhering to national laws and regulations.The extent of illegal logging in some countriesis so large, and law enforcement is so poor, thatthe chances of detection and punishment maybe very small—and the incentives to operateillegally correspondingly large.

The impacts of these illegal activities are mul-tiple. Most obviously, these are environmen-tal: illegal logging depletes forests, destroysthe habitats of endangered species andimpairs the ability of land to absorb carbondioxide emissions. They are also economic:estimates from Indonesia suggest that thegovernment is currently losing more thanUS$1 billion a year in unpaid taxes (out of atotal budget, in 2003, of about $40 billion).World Bank studies in Cambodia in 1997suggested that illegal extraction, worthUS$0.5–1 billion, was over 4 million cubicmeters a year, at least ten times the size of thelegal harvest. If that level of extraction con-tinues, the country will be logged out withinten years of the industry starting, removing avaluable source of employment and exportrevenues for the future.

Illegal logging also undermines respect forthe rule of law and of government, and is fre-

Illegal Trade in Natural Resources

117

IIIllegal trade intropical timberBy Chen Hin Keong

Illegal logging andillegal timber tradenot only underminesconservation, but alsoresults in reducedprofitability of legaltrade, loss of foreignrevenue and currency exchange, uncollectedforest-related taxes and depleted forestresources and services.

Illegal logging not only affects the main trop-ical timber producing countries in SoutheastAsia, Central Africa and the Amazon, but alsothe temperate forests of regions such as theCaucuses and the Russian Far East. There areno reliable statistics of the percentage of tim-ber entering international trade that is illegal,though figures of between 20-80 per centhave been reported. Even ranges of figures forindividual countries vary widely, with the fig-ures for Indonesia, ranging between 40 to 80per cent of total wood production.

One reason why these figures are difficult toquantify is because illegal logging and illegaltimber trade encompasses a wide range ofpractices. This may include illegal occupationof forest lands; obtaining logging concessionsthrough bribes; logging protected species;logging outside of concession boundaries orwithin protected areas; illegal timber trans-port, trade and smuggling; transfer pricingand other illegal accounting practices; under-grading, under-measuring, under-valuing;misclassification of species; and illegal pro-cessing of timber.

The lack of an internationally accepted defini-tion of what constitutes legality of timberproducts further complicates the issue. In thesimplest form, the Convention onInternational Trade in Endangered Species ofWild Fauna and Flora (CITES) provisions ofusing a permit and certificate system,through the provisions of the text relating tolegal procurement, is a proxy for ensuring thattimber that is traded is not illegally obtained.




118


However, the legality or illegality of ship-ments of timber in international trade mayvary at different points of the trade chain.

Logging should therefore not be examined inisolation from the trade in timber. To a largeextent, the latter drives the former and is oneof the main causes of uncontrolled loggingand illegal logging. There are a number of ele-ments that contribute to illegal timber trade,one of which is lack of transparency.Increased transparency, in particular theanalysis and comparisons of data for timberexports and imports, could provide valuableindicators of possible illegality. The discrep-ancy in international timber statistics is aserious issue as statistics are one tool bywhich governments and other stakeholderscan monitor the situation of forestry in coun-tries.

Trade discrepancies may also be an indicatorof illegality, though a number of factors couldcontribute toward such trade discrepancies.These may vary from “routine” practices, suchas changes in fiscal year, method of productvaluation, time lag between export andimport, exchange rate fluctuations, and con-version of product weights to volumes, com-bined shipment of mixed products, to possibleillegal activity, mis-specification of productcharacteristics, fraudulent trade data andsmuggling.

There are a number of international initiativesto address issues in illegal logging and timbertrade. In 2001, the Forest Law Enforcementand Governance and Trade (FLEGT) processeswere initiated in Asia, followed by similar ini-tiatives in Africa in 2004, and in Europe andNorth Asia in 2005. At the 2002 World Summiton Sustainable Development (WSSD) inJohannesburg, the Asia Forest Partnership(AFP) and the Congo Basin Forest Partnership(CBFP) were announced. In recent years, somegovernments have resorted to bilateral orregional agreements with their trading

partners in an attempt to gain urgent supportand focus on issues relating to illegal loggingoccurring within their countries. TheInternational Tropical Timber Agreement(ITTA), as the only tropical timber commodityagreement between producer and consumernations, is solely concerned with internation-al tropical timber trade and places illegal log-ging high on its agenda for action.

Pre-dating these international initiatives,CITES already provides a mechanism to regu-late trade in CITES-listed timber species andproducts. CITES is, in fact, considered the onlyinternational mechanism that could regulateinternational trade in wild species includingtimber trade between CITES parties.

At the national level, timber tracking systemscan provide a chain of custody to a level ofconfidence that can assure consumers thatthe majority of timber products leaving thosecountries are from legal domestic or importedsources. Most developing countries alreadyhave some form of timber tracking systems forlogs and some primary processing, thoughthese are by no means comprehensive.

Approval granted by the authorities for onesegment of the chain, in many cases, has nobearing on the approval to be given at thenext stage in the chain. Hence, illegallysourced timber products could find their wayinto international markets even if regulatoryconditions and documentation for export andimport is met. For instance, illegal exportfrom one country may be acceptable as legit-imate import into another as long as theimport requirements are met.

Therefore, the burden of combating illegallogging and illegal timber trade should be theresponsibility of both producer and consumercountries, including stakeholders in govern-ments, industry, civil society and consumers.

Chen Hin Keong, from Malaysia, is the SeniorForest Trade Advisor to TRAFFIC International,based in Malaysia.


quently associated with corruption, particu-larly in the allocation of timber concessions.For example, Judge Barnett’s report on thetimber industry in Papua New Guinea in1989 described companies “roaming thecountryside with the assurance of robberbarons, bribing politicians and leaders, creat-ing social disharmony and ignoring laws.”

The substantial revenues from illegal loggingsometimes fund national and regional con-flict. In Cambodia, Khmer Rouge forces weresustained primarily by the revenue from log-ging areas under their control for several yearsin the mid-1990s, until, under donor pres-sure, Thailand and the Cambodian govern-ment cooperated to close their joint border tolog exports at the end of 1996, forcing theinsurgents to open peace negotiations.

Finally, as illegally logged timber is invariablycheaper than legitimate products, it distortsglobal markets and undermines incentives forsustainable forest management. A U.S.industry study published in 2004 estimatedthat world prices were depressed by between7 and 16 per cent (depending on product) bythe prevalence of illegal products in the mar-ket, resulting in a loss to U.S. firms of at leastUS$460 million each year in foregone sales.As the World Bank observed in 1999, “wide-spread illegal extraction makes it pointless toinvest in improved logging practices. This is aclassic case of concurrent government andmarket failure.”

It is believed that more than half of all log-ging activities in the most vulnerable forestregions—Southeast Asia, Central Africa,South America and Russia—may be con-ducted illegally. Worldwide, estimates suggestthat illegal activities may account for over atenth of the total global timber trade, repre-senting products worth at least US$15 billiona year.

Fishing

As with the illegal wildlife trade, illegal fish-ing poses threats to species survival (includ-

ing other species caught alongside the fish,such as sea turtles or seabirds), but it alsocauses major economic costs through exhaus-tion of fish stocks, a problem in particular fordeveloping countries, which often rely on fishas a major source of protein. UN terminologyrecognizes “illegal, unreported and unregulat-ed” (IUU) fishing: illegal fishing takes placewhere fishing is against the law; unreportedfishing takes place where legal instrumentsare in place to control fishing, but no require-ments for reporting, or penalties for non-reporting, exist; and unregulated fishingoccurs where legal instruments are notrequired, not applied, or not adequate.

A United Kingdom study of ten developingcountries in Africa and Oceania in 2005 esti-mated that IUU fishing was worth an average23 per cent of the total declared catch. Thestudy showed a strong inverse relationshipbetween the extent of IUU fishing and thelevel of fisheries monitoring, control and sur-veillance in the country, and also its generallevel of governance. Extrapolating these find-ings worldwide gave an estimated annualvalue of IUU fishing of US$4.2 billion toUS$9.5 billion.

One of the best-known examples of IUUfishing is that of the Patagonian toothfish, alarge, long-lived and slow-growing deepwaterfish increasingly in demand as a replacementfor over-exploited whitefish such as cod.Systematic commercial exploitation startedonly in the late 1980s, but rapidly exhaustedstocks off Argentina and South Africa. In1996–97, authorized catches under theConvention on the Conservation ofAntarctic Marine Living Resources(CCAMLR) amounted to 10,370 tonnes(with an additional 22,386 tonnes in catchesin exclusive economic zones), but estimatesfrom port landings and trade data suggestedthat an additional 42,800 tonnes were caughtillegally. The price of the toothfish fell drasti-cally, and illegal fishing in 1997–98 was esti-mated to have reached the lower figure of33,500 tonnes.


119

II


Extensive exploitation of toothfish stocks wasundertaken by ships operating out of non-CCAMLR states. As Convention memberstates gradually closed their ports to unli-censed landings, the pirate ships switched totransshipping their haul directly to freightersat sea; the catch was then processed on land,often passing through free trade zones. Thisdemonstrates many of the problems connect-ed with controlling IUU fishing: non-signa-tory states to the relevant convention, shipsflying flags of convenience to escape domes-tic controls, and the enormous difficulty oftracking illegal activities across a huge area ofocean.

Even in comparatively well-regulatedEuropean waters, illegal fishing is rife, createdlargely by the shrinking quotas—includingthose set under the European Union’sCommon Fisheries Policy—for commerciallyvaluable human consumption stocks.Misreporting of catches and retention ofundersized fish or fish caught over the allowedquotas is common; recent estimates suggestthat up to 40 per cent of the total catch of theScottish fleet, for example, may be illegal.Financial and contractual pressure from retail-ers (usually supermarket chains) to supply reg-ular quantities of fresh fish often forces theprocessors to buy from the black market,which in turn undercuts legitimate sales.

Interests and Fault LinesEveryone is opposed to international envi-ronmental crime; at least ostensibly. In reali-ty, of course, many private individuals, com-panies and government officials benefit fromillegal trade, either directly, or indirectly,through bribery and corruption.

In the long run, it will be difficult to addressthe root causes of illegal trade without deal-ing with many other issues, including thelegal and regulatory structure (sometimeslaws are so complicated and contradictorythat it is impossible—or at least uneconom-ic—to operate legally), government budget-ary policy (in some countries the armed

forces operate logging concessions to generatethe income they need), and corruption. Thisis why illegal trade is increasingly being seenmore broadly as an issue of governance.

It is nevertheless clear that when resourcesand political will are focused on the issue,enforcement operations can have dramaticeffects. In response to international pressurestimulated by non-governmental organiza-tions (NGOs), in spring 2005, Indonesialaunched a huge crackdown on the illegaltrade in merbau logs from West Papua toChina. 400,000 cubic meters of logs wereseized in just two months (equivalent to 3 percent of the annual global tropical log trade),and 173 arrests were made; shortages of mer-bau and price rises were reported in bothIndonesia and China, and almost a quarter ofa billion dollars of revenue losses to theIndonesian government were prevented.However, this is far from the usual story.Enforcement agencies are generally under-staffed and under-resourced and often lackpolitical backing.

In recent years, attention has focused on therole of consumers in fuelling illegal tradethrough providing markets for illegal prod-ucts. The Group of Eight (G8), for example,which includes all of the biggest consumingcountries of natural resources apart fromChina, expressed concern over environmen-tal crime in general, and illegal logging inparticular, in 1998 and 2005. Most attentionin recent years has focused on the debate overthe control of illegal logging, with a series ofWorld Bank-coordinated Forest LawEnforcement and Governance conferencesbringing together consumer and producercountry governments, industry and civil soci-ety in East Asia (2001), Africa (2003) andEurope & North Asia (2005). In 2003 theEU launched its Forest Law Enforcement,Governance and Trade (FLEGT) initiative,of which the centerpiece is a new licensingsystem designed to exclude imports of illegaltimber and timber products from cooperat-ing producer countries.


120


Trade control mechanisms like this arebecoming more common, often learningfrom thirty years’ experience with CITESexport and import permits. CITES has hadconsiderable success, though it is hamperedby the lack of a financial mechanism to pro-vide assistance with compliance and enforce-ment. Most of the species it protects are notof significant commercial importance, whichmeans that important trading interests havenot, in general, been threatened, but this isbeginning to change, with the gradual intro-duction of more widely traded timber andfish species to the CITES appendices.

No single global agreement governs fisheriesmanagement, though a number of regionalfisheries agreements have introduced tradecontrols to tackle IUU fishing. The CatchDocumentation Scheme for the Patagoniantoothfish, introduced under CCAMLR in2000, is designed to exclude illegally caughttoothfish from international markets. TheScheme has had a clear impact on the price oftoothfish, with legal fish able to command a20-30 per cent price premium—overcoming,at least to an extent, the problem of legal har-vesting being undercut by cheaper illegalactivities. In 2003, a number of governmentsestablished the High Seas Task Force, withthe objective of defining practical solutions tothe problem of IUU fishing.

As noted above, the EU FLEGT initiativeintroduces a timber licensing scheme, similarin principle to the CCAMLR CatchDocumentation Scheme; it came into forcein December 2005. Producer countries withwhom the EU will negotiate bilateral “volun-tary partnership agreements” will ensure thatall exports destined for the EU have beenlegally produced and processed at every stageof their chain of custody; some form of inde-pendent verification of the licenses is likely.Building up the scheme through a series ofbilateral agreements—a necessity given thelack of a multilateral framework for the tim-ber trade—does, of course, render it vulnera-ble to evasion by shipping products via non-

partner countries, but the EU is hopeful ofreaching regional agreements. A number of EUgovernments have also started to use publicprocurement policy to source only legal (and,where possible, sustainable) timber and timberproducts, and several private certificationschemes—such as the Forest StewardshipCouncil—exist which can guarantee this. Insome countries, particularly the UnitedKingdom, this combination of policy measuresis beginning to have a clear market impact.

The use of trade controls such as licensingand public procurement has raised concernsamongst some major timber-exporting coun-tries, which fear the emergence of potentialbarriers to markets for their exports. Mostdeveloping countries, however, seem ready toaccept the EU licensing scheme (it also con-tains a promise of capacity-building assis-tance), and the main antagonist at present isthe U.S., whose timber industry is based on alarge number of small forest owners amongstwhom certification systems are difficult topromote. During the G8 discussions on ille-gal logging in 2005, the U.S., while contentto support enforcement assistance (particu-larly of the high-tech variety) to timber-pro-ducing countries, was notably less enthusias-tic about procurement and licensing systems.

Trends and FutureDirectionsDespite the increasing attention paid to theseareas in recent years, and despite some indi-vidual success stories, there is little evidenceas yet of systematic progress in reducing ille-gal trade in natural resources. Mechanismsdesigned to exclude illegal products frominternational markets, however, seem likelyto grow in scope and size. Trade controls ofthis type bring about at least the potential forconflict with WTO rules, and opponentshave sometime raised the specter of a clash asan argument against their adoption.

There has never been a WTO dispute involv-ing CITES or CCAMLR, and the applica-


121

II


tion of permit and license systems within amultilateral framework makes it unlikely.The Kimberley Process, which is designed toexclude conflict diamonds from world mar-kets and therefore shares a number of charac-teristics with trade controls aimed at illegalproducts, has, however been discussed explic-itly within the WTO. In late 2002, a numberof participating states applied to the WTOGeneral Council for a waiver from theirWTO obligations in this regard, and thewaiver was duly granted in February 2003.Most Kimberley Process signatories, however,did not support this move, implying as it didthat the Process contravenes basic WTO dis-ciplines, which they did not accept.

The potential interaction of the EU’s FLEGTtimber licensing scheme with the WTO hasalso been discussed, though mostly outsidethe WTO. Japan has raised the general issueof illegal logging and the possibility of tradecontrols within the WTO Committee onTrade and Environment (CTE), but withoutgenerating any debate or conclusions. Theintroduction of the EU scheme through aseries of bilateral agreements rather than aspart of a multilateral framework raises ratherdifferent questions from those around licens-ing systems in MEAs, but it seems highlyunlikely that any of the countries involved in

the agreements (which will be the only onesaffected by the trade restrictions) would opena dispute within the WTO. WTO rules will,however, constrain the EU’s adoption ofadditional measures to control imports ofillegal timber from non-partner countries(currently under discussion). However, themost likely outcome—the adoption of legis-lation to make the possession or handling oftimber produced illegally overseas illegal inthe EU—is not a border measure and shouldnot raise any WTO problems.

In theory, the general topic of illegal trade andhow to control it could usefully be discussedwithin the WTO. WTO negotiators’ inbuiltbias towards trade liberalization, however, andhostility towards any discussion of traderestrictions, and their limited knowledgeabout environmental policy in general andenvironmental crime in particular, must createdoubt over whether such a discussion wouldgenerate any useful outcome. As long as themeasures adopted to control flows of illegaltrade in natural resources abide by the generalWTO principles of non-discrimination, trans-parency and predictability—and there is noreason why they should not—the matter oftheir interaction with the WTO shouldremain, as it now is, entirely speculative.


122


Much of the debate on environment, tradeand intellectual property rights (IPRs)revolves around a basic challenge: How tobalance the increasing shift of knowledge andtechnology from the public domain to pri-vate ownership that has occurred because ofthe strengthening of the global IPR regime inthe 20th century?

This global regime—which includes the WorldTrade Organization (WTO) Agreement onTrade-related Aspects of Intellectual PropertyRights (TRIPS), agreements under the WorldIntellectual Property Organization (WIPO)and a new generation of bilateral and regionaltrade agreements with IPR obligations—hasgiven titleholders exclusive rights over the useand marketing of the resulting products andprocesses. This protection has made it consid-erably more profitable for business to invest inresearch and development. At the same time,however, many existing genetic resources andforms of traditional knowledge (TK) have beenused or incorporated in “inventions or discov-eries” (whether products or processes) in thirdcountry markets.

This situation has raised a variety of environ-mental, socio-economic and ethical concerns,including that the IPR system encourages“biopiracy” and the “misappropriation” (ille-

gal access and use) of genetic resources andTK. Critics have warned that global IPRrules increase the monetary incentives forsuch actions, without imposing any corre-sponding obligation to promote biodiversityconservation or other social objectives.

A variety of other concerns have been voicedabout unbalanced intellectual property pro-tection, including:

• limitations placed on access to seeds foruse and breeding;

• shift in research priorities in the agricul-tural and environmental field away fromless profitable research that responds topublic needs towards technologies withhigh marketing potential;

• increased prices for and reduced access toenvironmentally sound technologies;

• promotion of research into geneticallymodified organisms without requiringappropriate risk assessments;

• erosion of genetic diversity resulting froman increased focus on a limited number ofhigh-yield agricultural varieties;

• the appropriateness of the IPR system toprotect traditional ecological knowledge;and

Issues and Debates

123

IIIntellectual Property RightsDavid Vivas-Eugui and Heike Baumüller

•“International discussions on traditional knowledge tend to appear in two distinct

formats: one defensive and one proactive. Defensive initiatives are designed toguard against the ‘misappropriation’ of the rights of indigenous peoples and localcommunities while proactive initiatives tend to assign legitimate and legal rights.”

•


• ethical considerations related to thepatenting or “privatization” of life forms.

These concerns have given rise to a complexand overlapping regulatory framework at thenational, regional and international levels.While some agreements seek to introduceever-higher levels of protection for intellectu-al property, others seek to mitigate some ofthe cited environmental, ethical and socio-economic concerns. The consequence hasbeen a tapestry that is rich in contradictionsand unanswered questions.

At the international level, the 1961International Union for the Protection ofNew Varieties of Plants (UPOV) was the firstinstrument to reflect the philosophical shiftaway from national sovereignty over biologi-cal materials as a common heritage, towards asystem of private ownership rights benefitingthose who could manipulate new plant vari-eties. The 1991 version of UPOV went fur-ther in this direction, by further strengthen-ing breeders’ rights and providing the optionof protecting plant varieties through breeders’certificates of patents.

To balance these breeders’ rights, theInternational Undertaking on Plant GeneticResources for Food and Agriculture adoptedunder the auspices of the United NationsFood and Agriculture Organization (FAO) in1983 was based on the principle that plantgenetic resources for food and agriculture area “heritage of mankind” and should be avail-able without restriction. The agreementintroduced the concept of farmers’ rights“arising from past, present and future contri-butions by farmers to the conservation andmaintenance of plant genetic resources forfood and agriculture,” allowing farmers to re-use, sell and exchange these resources. Theagreement was revised in 2003 to become theInternational Treaty on Plant GeneticResources for Food and Agriculture (ITPGR-FA), establishing a multilateral system thataims to facilitate access and benefit-sharing(ABS) arising from the use of such resources.

The 1992 Convention on BiologicalDiversity (CBD) sought a balance betweennational sovereignty over biological resourcesand a need to respect, preserve and maintainthe knowledge, innovations and practices ofindigenous and local communities. Like theITPGRFA, the Convention’s Article 8(j)highlights the critical importance of indige-nous and local communities’ traditionalknowledge for the conservation and sustain-able use of biodiversity. The issue of IPRs hasrepeatedly cropped up in CBD debatesamongst parties since the Convention’s adop-tion and plays a central role in the ongoingnegotiations of the international regime onABS which were launched in April 2004.

The TRIPS Agreement, which was adoptedin 1992, offered the most radical extension ofprivate rights to date. The TRIPS Agreementprovides that patents shall be available for anyinvention, whether products or processes, inall fields of technology subject to certain cri-teria. Article 27.3(b) allows countries toexclude plants and animals from patentabilityas long as plant varieties are protected eitherby patents, or by an effective sui generis sys-tem (of its own kind), or by any combinationthereof. The definition of micro-organismsfor purposes of patentability remains a con-tested issue under the TRIPS system.

Finally, in 2001, WIPO added to the debateover intellectual property protection and thepublic patrimony, with the establishment ofthe Intergovernmental Committee (IGC) onIntellectual Property and Genetic Resources,Traditional Knowledge and Folklore. WIPOuses IPRs primarily as a tool for strengthen-ing private ownership rather than as a meansfor achieving public policy objectives, such asthe conservation and sustainable use ofgenetic resources, benefit-sharing or preserv-ing access to commonly shared resources asembodied in the CBD and the ITPGRFA.

Some have raised the concerns that the mod-ern IPR system might not be suitable for pre-serving and protecting traditional systems of


124


knowledge sharing and genetic resource use.However, within the context of the currentIPR system, efforts have also been made totake advantage of existing IPRs for the purposeof environmental and biodiversity protection.Among them, so-called geographical indica-tions might provide a potential tool to pro-mote the preservation and lucrative use of TK.

Interests and Fault LinesThere are multiple issues related to thedebates at the intersection of trade, environ-ment and IPRs. Three are of particularimportance (a fourth area, related to environ-mental technologies, is discussed elsewhere).

Access and Benefit-sharing (ABS)

A central challenge for policy-makers hasbeen to address the problem of resources thathave been patented without disclosure ofsources, and/or sharing of benefits. This chal-lenge has given rise to extensive discussionsand has served to highlight the different aimsand objectives of the various agreementswhich comprise the global IPR regime.

A key concern has been that IPR filing proce-dures allow the granting of patents regardlessof whether a particular invention uses or incor-porates illegally accessed genetic material orassociated TK (i.e., without prior informedconsent and benefit-sharing). This concern hasbeen most acute in cases where the trans-boundary movement of genetic resources orTK has circumvented national regulationsdesigned to ensure the existence of priorinformed consent and benefit sharing and toprevent the illegal access. Indeed, only a dozencountries have implemented the CBD at thenational level, while only a few have intro-duced legal measures which target illegal accessto genetic resources. In contrast, a great major-ity of countries have incorporated the mini-mum standards of intellectual property protec-tion at the national level (in some cases, alsoadopting TRIPS-plus provisions).

While discussions on amending the TRIPSAgreement in light of the CBD objectives and

Intellectual Property Rights

125

IIThe limits ofgeographicalindications By DwijenRangnekar

In recent years, geo-graphical indications(GIs) have been seenby some as a means toachieve multiple policy objectives including:protecting the environment, promoting sustain-able development, securing rural livelihoods,protecting and rewarding holders of traditionalknowledge and developing niche markets. Thereis a need for developing countries to review justhow much GIs can deliver, and how.

There is an obvious overlap between some ofthese policy objectives. For example, effortsat re-balancing economic interests betweenprimary producers and others in the supplychain of globally traded agricultural com-modities focus on increasing value-additionat the source and changing market accessregulations in the North (e.g., tea and cof-fee). Here, GIs (e.g., Jamaican Blue Mountaincoffee or Darjeeling tea) can help developniche markets and localize economic returns.

It is also true that GIs can dovetail into sus-tainable development strategies as they canbe used alongside other socially constructedmarkers like “organic,” “fair trade” and “ethi-cally traded.” In the case of traditional knowl-edge, authentication marks and GIs can beused to localize control in the manufactureand sale of handicrafts as exemplified by the“Igloo tag” for certifying authenticity of InuitArt and the “Maori Made Mark” to protectMaori cultural expressions.

According to the GI definition used by the WTOAgreement on Trade-related Aspects ofIntellectual Property Rights (TRIPS) the indica-tion can only be used by those within the des-ignated territory. It is this “club-like” exclu-sionary property of GIs that has appealed to awide variety of commentators. The rules are, ineffect, the codification of long established cul-tural repertoires of producing a good; thus,




126


easily compatible as a means for protectingartifacts embodying traditional knowledge.Tying the rules of club membership strongly toa particular territory would allow for a greatershare of economic returns to be locally appro-priated.

Surprisingly, the relationship between GIs andtrademarks has not been a focus of policy dis-cussions. This raises important concerns. Forinstance, the TRIPS Agreement generally pro-hibits the protection of trademarks that aremisleading with respect to the geographicalorigin of the good (Article 22.3) and providesfor an outright ban in the instance of GIs forwines and spirits (Article 23.2). However,there are differences on what is considered“misleading” and the lowering of the thresh-old of distinctiveness (e.g., “Texmati” and“Kasmati”) renders the prohibition void.Trademarks incorporating indications of geo-graphical origin are also refused on thegrounds that their grant could hinder othercompanies located in the geographical region.Guidance is needed on situations where GIscan take precedence over trademarks (or viceversa) and in which circumstances the twocan co-exist.

It is also necessary to qualify the enthusiasmsurrounding GIs. While there is promising evi-dence in each of these areas, it would beunwise to impose on GIs the multiple expec-tations of protecting traditional knowledge,localizing economic control and enabling sus-tainable development. Moreover, in everyinstance, GIs work in concert with other poli-cy interventions. At times, the results havebeen adverse (e.g., Tequila).

In addition to these qualifications, there areother important factors to be considered. Tobegin, use of TRIPS provisions is contingent

on the prior protection of the indication inthe country of origin; thus, demandeurs forstronger protection urgently need to completetheir homework.

Second, at the heart of a club are membershiprules and compliance mechanisms. Thisrequires all firms throughout the supply chainto cooperate in agreeing on a set of rules andadhering to them. In addition to the organi-zational task, it is crucial that consumers areaware of the rules.

Third, while intelligent framing of rules allowsfor localization of economic control, it isimportant to examine the distribution ofreturns along the supply chain. There is no apriori reason for assuming that the returns willbe equitably distributed between firms.

Fourth, as GIs protect an “indication” and nota product, process or the embodied knowledgeas such, they will remain deficient when usedto protect traditional knowledge. To be clear,GIs can be part of a larger strategy for theprotection of traditional knowledge.

Fifth, much like trademarks, GIs are aboutbuying and selling. Thus, their benefitsdepend on complementary efforts at protect-ing and promoting the “indication.” In manycases (e.g., tea and coffee), this involvesovercoming high levels of consolidation at themarket end of the supply chain.

Finally, developing country demandeurs needto evaluate their negotiating strategies so asto effectively shape the agenda.

Dwijen Rangnekar, from India, is the ResearchCouncils U.K. Senior Fellow jointly at theSchool of Law and the Centre for the Study ofGlobalization and Regionalization, Universityof Warwick.


principles have been ongoing for some time inthe WTO, the Doha Ministerial Declarationgave new impetus to the debate by explicitlyreferring to these issues for the first time.Thus, Paragraph 19 instructs the TRIPSCouncil “to examine, inter alia, the relationbetween the TRIPS Agreement and the CBD,the protection of traditional knowledge andfolklore [...]. In undertaking this work, theTRIPS Council shall be guided by the objec-tives and principles set in Articles 7 and 8 ofthe TRIPS Agreement and shall take fully intoaccount the development dimension.” Giventhe linkages of these TRIPS-related issueswith environmental concerns, the WTOCommittee on Trade and Environment(CTE) has a mandate to give particular atten-tion to “the relevant provisions” of the TRIPSAgreement. Discussions in the CTE havelargely mirrored those in the TRIPS Council.

In an effort to bring the TRIPS Agreementinto line with the CBD objectives, a group ofdeveloping countries, led by India and Brazil,have been pushing for an amendment to theTRIPS Agreement, which would requirepatent applicants to disclose the origin of bio-logical resources and associated TK. Theamendment would also require applicants toprovide evidence of prior informed consentand benefit-sharing. These proposals havereceived strong support from the AfricanGroup as well as other developing countriesat the WTO. The African Group has gonefurther by advancing a separate proposal,which calls for Article 27.3(b) to be revised soas to prohibit patenting of plants, animalsand micro-organisms.

The EU has signaled its willingness to discussmandatory origin disclosure for geneticresources and TK in the form of a “self-stand-ing” requirement. However, the EU believesthat such a requirement should not constitutea formal or substantial patentability criterionand that consequences for failure to discloseshould lie outside patent law. Other countries,such as Switzerland, would prefer these issuesto be dealt with outside the WTO, through an


127

IIProtectinggeneticresourcesBy Manuel Ruiz

Since 2002, the Groupof Like-minded Mega-diverse Countries hasbeen calling for andpromoting the estab-lishment of an interna-tional regime on access to genetic resources andbenefit-sharing (ABS). In its founding declara-tion at the World Trade Organization (WTO)Ministerial Conference in Cancun in 2003, andstatements thereafter, the Group has repeatedlycalled for the establishment of an internationalregime on ABS. As a result, with the backing ofthe political mandate of the Convention onBiological Diversity’s (CBD), the Ad Hoc ExpertWorking Group on ABS has started the process ofcreating an international ABS regime.

What is the nature of the international regimeon ABS and, more importantly, does it need tobe created? The answer to these questions isnot as straightforward as the enthusiasmamong certain countries would suggest.

Firstly, it is difficult to obviate the fact that aninternational regime on ABS already exists inpractice. A “regime” is defined as a set of inter-national, regional and national laws, policiesinstruments, rules, principles and practiceswhich govern a certain issue. One could argue,then, that an ABS regime already exists in theform of the complex interrelations, overlap andcontradictions of a host of international instru-ments—the UN Food and AgricultureOrganization’s (FAO) International Treaty onPlant Genetic Resources for Food andAgriculture, the CBD and the Bonn Guidelineson ABS, Decision 391 of the AndeanCommunity on ABS, the Organization of AfricanUnity (OAU) model law, ABS institutional poli-cies and codes of conduct, and more.

As a second comment, a different issue iswhether this regime operates in an effectiveway and takes into account the needs andinterests of (especially) developing countriesand countries of origin. From preliminary,




128


almost anecdotal information, one could con-clude that this regime is still in the process ofbecoming fully functional and achieving anequitable balance of interests among coun-tries. If this is so, then the question is notwhether we need to negotiate an internation-al regime (which brings us dangerously closerto negotiating yet another international ABSinstrument, which will almost certainly looklike the Bonn Guidelines, albeit of a bindingnature), but how do we ensure that theregime currently in place becomes opera-tional.

Thirdly, if this is so, it is then important toidentify where there may be gaps and problemsin the existing international ABS regime andhow they can be overcome and solved. Onearea is the need to establish a necessary link-age between ABS instruments and intellectu-al property rights (IPR) regimes—especiallyin the case of patents, plant breeders’ rightsand plant variety protection. Whether the gapimplies a need for new patentability criteria,new disclosure requirements or certificatesindicating legal provenance and origin priorto granting IPRs, these issues have all beenpart of considerable debates in the CBD, theWorld Intellectual Property Organization, theCouncil for Trade-related Aspects ofIntellectual Property Rights, FAO and others.This is certainly an area where the currentinternational ABS regime is missing necessarycommitments and even differentiated obliga-tions among countries. This gap in the ABSregime could be overcome through a precisedecision, a mandate to amend national legis-lation, or, even, a protocol or annex to theCBD, as well as developing strong and coher-ent negotiating positions in the diverse forain which ABS-related matters are being dis-cussed.

Fourthly, given the current push to modify IPRstandards worldwide—to satisfy industrializedcountries’, and especially U.S., interests—there is a need to counter balance this pressureby either precluding the standardization of

patent, plant breeders’ rights or plant varietyprotection rules (which should really respondto countries’ scientific, social, industrial andeconomic needs) as the ideal negotiatingposition or ensuring that biodiversity-relatedconcerns are recognized and specificallyaddressed in new legislative instruments,whether at the national or international lev-els. Two examples of the way in which devel-oping countries have creatively addressed thissituation are India’s Plant Varieties andFarmers Rights Act (2001) and the AndeanCommunity Decision 486 on IntellectualProperty (2000), containing provisions ondisclosure and ensuring legal provenance ofresources and traditional knowledge (TK) priorto the granting of patents. By allowing for theprotection of local innovation through farm-ers’ rights incorporated in the plant varietyprotection regime and by requiring disclosureof origin and legal provenance of resourcesand TK respectively, both these instrumentscontribute to a creative interpretation of theTRIPS Agreement, the practical use of its flex-ibilities and the establishment of positivesynergies between the IPR and ABS systems.

Finally, the key to the success of the CBD isnot to overburden its already impossibleagenda. Much can be achieved simply bybuilding upon the potentially useful and prac-tical options available—for example, linkingthe ABS and IPR regimes. Moreover, aftermore than ten years, it is time to implementand apply existing tools and instruments toensure the realization of the CBD’s objectives.It is often said that international instrumentsare naturally cumbersome, certainly complex,and tend to be slow in becoming operational.To a considerable extent this is true. To over-come this tendency closer cooperation needsto be undertaken between scientists, legalexperts and policy-makers.

Manuel Ruiz, from Peru, is Director of theProgramme on International Affairs andBiodiversity of the Peruvian Society forEnvironmental Law (SPDA).


amendment to WIPO’s Patent CooperationTreaty (PCT) allowing countries to requirepatent applicants to declare the source of anygenetic resources and TK used.

Australia, Canada, Japan and the United Statescontinue to oppose such proposals, arguingthat the IPR system should not be used as ameans to enforce ABS systems and that thesetypes of requirements could become a legalnightmare for patent applicants. Rather, theypropose the WIPO IGC as the appropriatevenue. Importantly, in 2003, the WIPOGeneral Assembly approved a new mandatefor the IGC, which “will focus on its interna-tional dimension without prejudice to workpursued in other fora.” Also, “no outcome isexcluded, including a possible development ofan international instrument(s).”

The need for disclosure requirements in thepatent filing procedure has been raised duringother negotiations, including the CBD’s BonnGuidelines on Access to Genetic Resourcesand Fair and Equitable Sharing of the BenefitsArising out of their Utilization, which wereadopted in 2002. The issue was resolved byadding requirements for disclosure of the ori-gin of the genetic resources and TK as a possi-ble means of compliance. In addition, coun-tries were encouraged to include disclosure

requirements on genetic resources and associ-ated TK in patent applications.

Discussions on disclosure requirements havelargely focused on the appropriate forum thatshould deal with this issue. Given that dis-cussions in WIPO have resulted in moreemphasis on the protection of private rightsof IPR titleholders than the promotion ofsustainable development and the protectionof developing countries’ biodiversity, manydeveloping countries, including Brazil andthe African Group, continue to questionwhether the IGC is the appropriate body toaddress disclosure requirements. They areconcerned that hosting the discussions in theIGC will distract from the negotiations in theTRIPS Council.

Traditional Knowledge (TK)

Traditional knowledge refers to the knowl-edge, innovations and practices of indigenousand local communities, which has been devel-oped based on experience over time andadapted to the local culture and environment.TK is often collectively owned by indigenousand local communities. Appreciation of thevalue of TK has increased as its use in modernindustry—especially, plant based medi-cines—and agriculture has grown.


129

II

Table 1. Comparison of the main elements of the TRIPS Agreement, CBD and ITPGRFA.

TRIPS Agreement CBD ITPGRFA

Objectives Promotion of innovation Conservation, Agro-biodiversity, and technology transfer sustainable use food security

Scope Inventions, creations s Genetic resources and Plant genetic and sign traditional knowledge resources for food and

agriculture (crops/forages)

Legal rights Exclusive/private rights Sovereign rights and Public good/collective Public good/collective rightsrights

Mechanism Right to capture benefits Access and benefit- Benefit-sharing sharing (system)


International discussions on traditionalknowledge tend to appear in two distinct for-mats: one defensive and one proactive.Defensive initiatives are designed to guardagainst the “misappropriation” of the rightsof indigenous peoples and local communitieswhile proactive initiatives tend to assign legit-imate and legal rights. Defensive proposalsmay include disclosure or certificationrequirements as part of patent filing proce-dure, as well as requirements for proof ofprior informed consent and the existence ofmutually agreed terms. On the other hand,proactive international measures wouldinclude the setting of clear objectives, therecognition of customary law, required com-pensation for right holders, the grant ofexclusive rights, maintenance of databases orregisters on TK, and the establishment ofincentives for the promotion of the use of tra-ditional practices.

These debates, of course, take place in multi-ple fora. In the WTO, for example, theAfrican Group has sought proactive measuresand proposed that TK be classified as a cate-gory of intellectual property rights.Meanwhile at WIPO, the IGC agreed in2004 to accelerate its substantive work on theprotection of TK and folklore. This includesthe identification of policy objectives andcore principles, as well as the compilation andanalysis of specific policy options. This workis expected to provide the foundations forpolicy-making at both the domestic andinternational levels, including a possibleinternational instrument for the protectionof TK and folklore.

Similar debates are also taking place in theCBD and, in particular, with respect to thedevelopment of the international ABSregime. Thus, the CBD Working Group onArticle 8(j) and related provisions, dealingwith indigenous issues, has been mandated tomake recommendations to ensure that theABS regime includes sui generis systems andmeasures for the protection of TK. TheWorking Group is examining several other

issues, including: the role that databases andregisters might play in the protection of TK;the potential for existing and new forms ofIPRs to contribute to the objectives of Article8(j) and related provisions; and non-intellec-tual-property-based sui generis forms of TKprotection.

Groups representing indigenous peoples feelthat their participation in discussions regard-ing protection of TK has been limited. Theyhave cautioned that without the meaningfulparticipation of indigenous peoples, there willbe no legitimacy for any of the results of theseinternational discussions. However, for manyof these groups, TK is not on the top of theagenda. Many believe that there are moreurgent needs to be addressed including cus-tomary law, self-determination, human rights,land rights, and religious and ethical issues.

At the national level, many countries havestarted to develop a new generation of TKlaws with the aim of preserving, protectingand promoting TK. These laws have used avariety of approaches, including customarylaw, ABS systems, IPR-derived frameworks,and sectoral systems of protection (medici-nal, agriculture, folklore).

Geographical Indications (GIs)

Indications of geographical origin—e.g.,Bordeaux wine, Parmigiano Reggiano—havebeen historically recognized as indicators ofthe origin, reputation and quality (or otheraspects) of a product. The TRIPS Agreementestablishes new standards and norms for suchindications. It introduces geographical indi-cations (GIs) as a new category of IPRs, pro-viding a relatively narrow definition of GIs as“indications which identify a good as origi-nating in the territory of a Member, or aregion or locality in that territory, where agiven quality, reputation or other characteris-tic of the good is essentially attributable to itsgeographical origin.”

Geographical indications can be linked tobiodiversity conservation and sustainable use;


130


they could be used to protect products thathave a positive impact on the environment orhelp in the preservation of plant varieties.Cases of Cacao de Chuao or Quinoa Realshow positive links with biodiversity andhuman development. In other cases, GIscould have a negative impact on biodiversityconservation. Mexico’s Tequila industry, forinstance, relies on a single plant variety (blueagave), which has led to the promotion ofgenetic homogeneity and intensive land useto respond to the huge market demands. It isimportant to note, however, that GIs protectthe name of the product but not the productitself or the know-how that might have beenused in its production. Thus, anyone is freeto replicate the GI-protected product outsidethe region as long as the name is not used.

The WTO negotiating mandate on GIs istwo-fold. First, Paragraph 18 of the DohaMinisterial Declaration instructs the TRIPSCouncil “to negotiate the establishment of amultilateral system of notification and regis-tration of geographical indications for winesand spirits.” While these negotiations shouldhave been finalized by 2003, Members failedto reach an agreement and the deadline hasbeen postponed. Second, the possibility ofextending the higher level of GI protectionthat is currently accorded to wines and spiritsto other products (“GI extension”) has beenraised by developing countries as an “imple-mentation issue”—issues were developingcountries need certain adjustment in currentagreements in order to generate some benefits.

Unlike most other provisions in the TRIPSAgreement, the positions on the subject of geo-graphical indications do not reflect the usualNorth-South divide. Demandeurs for expandedGI protection include developing countriessuch as Cuba, India, Kenya, Pakistan, Peru, SriLanka, Thailand, as well as Switzerland and theEU. Opponents, which can be broadly catego-rized as “new world” countries includeArgentina, Australia, Canada, Chile, Japan andthe U.S. This latter group strongly resists pro-posals for GI extension, and favours a system


131

IIFocusing onthe localagendaBy Stella WattimahSimiyu

The first principle ofthe Rio Declarationstates that humanbeings are at the cen-ter of concern for sustainable developmentand that they are entitled to a healthy andproductive life in harmony with nature. Thisprinciple should anchor all development andenvironmental frameworks negotiated theinternational level, including those on issuesrelated to intellectual property rights (IPRs).

Of the controversies arising out of interna-tional debates on trade and environment thatmay potentially have adverse or positiveimpacts on local communities and nationaleconomies in Africa, the two most emotiveand yet potentially liberating issues areaccess and benefit-sharing (ABS) and relatedIPRs with reference to trade in biodiversityproducts.

At the national and international levels, theseissues are often negotiated independently, indisparate fora, by different experts, and bydifferent government agencies. Thus, conser-vation related agencies and experts talk with-in the frameworks of the Convention onBiological Diversity (CBD) and theInternational Treaty on Plant GeneticResources for Food and Agriculture, whiletrade-related agencies and ministries discussthese issues in the World Trade Organization(WTO) and World Intellectual PropertyOrganization (WIPO). Especially in developingcountry contexts, there is little if any interac-tion between the stakeholder groups.

However, at local community level, theseissues are not independent, rather, they areinextricable linked. Thus, at higher levels,there is a potential risk of these issues beingturned into disenfranchised intellectual andlegal pursuits at the expense of deliveringbenefits to local communities who are in direneed and whose lives and livelihoods largely




132


depend on biodiversity products. Ultimately,the opportunity to enhance the local commu-nity capacity for innovation to meet localneeds could be lost forever because we disag-gregated something globally that was inextri-cably linked locally.

In Africa, for example, 80 per cent of the pop-ulation relies on traditional medicine andmedicinal plants. With the highest incidenceof Malaria, HIV-AIDS, and other major killerdiseases in epidemic proportions, provision ofhealth care is not a luxury. Plants are not asource of supplements but rather the mainsource of foods and medicine. However, in abid to protect local knowledge, local expertsin traditional medicine and medicinal plantshave adopted a commercial perspective inanticipation of potential IPR benefits. Hencethe impact of the ABS and IPR debate couldquickly become both a curse and a blessing.

The potential and opportunity is real. Butefforts are largely focused on gaining benefitsfrom local products in international markets.The opportunity for the better utilization ofthese products locally, and for ensuring thatthe benefits of these products are channeledto local communities is being squandered.Importantly, the potential “trade” use ofgenetic resources is overwhelming both thetraditional “livelihoods” use and the biodiver-sity use of these resources.

Short of fast-tracking innovation on thisknowledge, its value to local communities isfrozen in time. Elements of the ABS and IPRdebates and resultant seminars and work-shops have focused more on the protection ofthe knowledge. No interim mechanisms havebeen devised to identify potential opportuni-ties, develop creative ways and means toempower the communities and practitionersto innovate, or to define a favourable regula-tory and policy framework for ABS and IPR asa means for improving local livelihoods. Letsnot forget that the local forest may be thepharmacy, supermarket, gas station and gro-cery for many communities.

To be effective, the results of ongoing negoti-ations on ABS and IPR will need to augmentand support structures and mechanisms atlocal level to empower communities and meettheir needs for foods, medicines, natural prod-ucts and environmental services. Anythingshort of this will be of limited value to thevery people who have safeguarded thesegenetic resources so diligently for so long.There is therefore a great anticipation that theproposed international regime on access andbenefit sharing aim to balance local needswith national and international priorities.

Stella Wattimah Simiyu, from Kenya, is theProgramme Officer on Global Strategy for PlantConservation at Botanic Gardens ConservationInternational, currently seconded to the CBDsecretariat.


that would merely serve as a database wherecountries are free to register their GIs.

Arguments in favour of an extension of thepresent system have been largely economic. Thedemandeurs note that there are no economic orsystemic reasons for protecting GIs for winesand spirits differently from others. Extendingthe higher level of protection, they argue, wouldavoid free-riding on the reputation of a genuineGI, enhance consumer choice, provide legal cer-tainty and market opportunities (thereby foster-ing the development of local rural communi-ties), and encourage a quality agricultural andindustrial policy. Opponents, however, counterthat GI extension would not provide meaning-ful benefits and would create additional admin-istrative burdens.

Trends and FutureDirectionsSignificant activity is happening in each ofthe three areas discussed above. The trends,however, are mixed.

Access and Benefit-sharing

Creating synergies between the IPR regimeand ABS systems will have to be a multi-stepprocess. Key steps include final ratification byall signatories of the CBD and the ITPGR-FA, including the main user countries ofgenetic resources, such as the U.S. and Japan.Subsequently, it will be important to ensurefull implementation of these treaties and theTRIPS Agreement. Specific tasks and compe-tencies will need to be assigned to the variousfora—in accordance with their specific man-date—in order to promote coherence whileavoiding duplication of work and “forumshopping.” Finally, measures should be incor-porated into the IPR system, as well as in thefuture international ABS regime, to addressillegal access and transboundary movementof genetic resources.

While strong opposition to all these stepsremains, advances in the ratification andimplementation of the CBD and the ITP-

GRFA are strengthening international legalframeworks. This will make it difficult for theIPR system to ignore biodiversity-relatedconcerns and should augment the need tofind mutually supportive solutions. Evensome traditionally reluctant countries, suchas the EU and Switzerland, are slowly warm-ing to the idea of bringing more coherencebetween the intellectual property regime andbiodiversity protection systems. Developingcountries can be expected to continue theirpursuit of concrete results in the WTO andWIPO in order to make current IPR rulessupportive of biodiversity concerns.

Traditional Knowledge

While countries might differ on the meansfor providing proactive TK protection at theinternational level, there is a growing accept-ance of the need for such protection.Governments will need to reconcile divergentviews on many definitional issues, including:

• scope (wide versus restricted);

• the legal nature of defensive/positivemeasures (binding or not);

• type of objectives (protection, promotion,preservation, commercialization);

• potential solutions (whether based onIPR/ABS systems or on customary law);and

• the means to implement those solutions(enforcement mechanisms).

Recent submissions by the African Group,Brazil and India on behalf of several develop-ing countries in WIPO and the WTO willhelp to keep these issues on the agenda.However, developing countries and indige-nous peoples will need to coordinate theirefforts if these discussions in multiple fora areto yield solutions that are both acceptableand coherent.

Meanwhile, at the national and regional lev-els, the number of ABS/TK laws will likelycontinue to grow. Many countries have


133

II


already approved legislation (sectoral orother) on the matter, including Bolivia,Brazil, China, Colombia, Costa Rica, India,Panama, Peru, the Philippines, Portugal,Thailand and Venezuela.

Geographical Indications

The debate in the TRIPS Council on GIextension remains at an impasse. Membersgenerally agree that the hierarchy betweenwines and spirits and other GIs has no ration-al or legal foundation, but is an outcome ofearlier negotiation trade-offs. Thus, a case canbe made that acceding to demandeurs in theDoha Round will be balanced by concessionsin other areas of the trade negotiations. It willbe up to negotiators and policy-makers toassess the benefits from increased GI protec-tion against those concessions. However, thefact that progress on other “implementation

issues” appears directly linked to progress onGI extensions may complicate the debate andraise the stakes for developing countries inparticular.

At the same time, countries have yet to takefull advantage of the existing protection thatis already provided by the TRIPS Agreementand to develop the necessary legislation toput this into practice. Nothing in the TRIPSAgreement prevents Members from design-ing their own national or regional GI systemin such a way that takes into account humanfactors in a manner supportive of sustainabledevelopment. Efforts in the near futureshould focus on closing this gap and assessingthe potential that GIs might have for achiev-ing environmental and social goals so as tobetter inform the underlying legal and policyframeworks.


134


Over the last 20 years, the attitude of devel-oping countries to foreign direct investment(FDI) has undergone a sea-change; with mostcountries liberalizing their rules on foreignparticipation in their economies and activelyseeking foreign investment. While foreigninvestment can bring with it a host of bene-fits—employment, tax revenues, technologytransfer, skills and know-how—it can alsohave negative consequences for sustainabledevelopment, particularly where domesticregulatory capacity is weak, ineffective or cor-rupt.

In terms of some of the key environmentalimpacts of enhanced FDI, there may be scaleeffects, arising from the sheer increase of eco-nomic activity and its attendant draw uponnatural resources and generation of variousexternalities. Likewise, there may be dis-cernible technology effects, depending on thenature of technologies brought in.Additionally, there may be regulatory effects,depending on the host states’ decisions tostrengthen or enforce environmental stan-dards—or, conversely, to freeze or lowerthem—in the context of heightened globalcompetition for FDI. It has become clear thatthe scope for regulation of foreign investmentwill also be conditioned by internationaltreaties. In particular, concerns have arisenthat investment treaties may limit the ability

of governments to regulate investment in thepublic interest, to impose necessary perform-ance requirements, or to impose and enforceappropriate health, safety and environmentalregulations.

While the past half-century has seen thegradual elaboration of a broad, multilateralarchitecture governing global trade, the gov-ernance of international investment offers avery different picture. Enterprises wishing toinvest abroad need to be familiar with a stag-gering array of bilateral, regional and, to alimited extent, multilateral rules and regula-tions. Periodic efforts to elaborate a single,overarching multilateral agreement have beenmet with indifference or indignation andhave ended in ignominy. Beginning withattempts to include investment rules as partof the ill-fated International TradeOrganization in the 1940s, and followingunsuccessful efforts to elaborate conventionsat the United Nations (UN) andOrganization for Economic Cooperation andDevelopment (OECD) in subsequentdecades, the World Trade Organization(WTO) is only the latest institution to grap-ple with this thorny topic.

Despite much effort, investment has onlymanaged to gain a toehold in the WTO sys-tem. To the extent that trade in servicesrequires a commercial presence by a foreign

Issues and Debates

135

IIInvestmentLuke Eric Peterson

•“In view of the negligible success at the multilateral level, many have sought tohedge their bets by pursuing so-called bilateral investment treaties or investment

rules in the context of wider bilateral or regional free trade agreements.”

•


service-provider in the territory of anotherstate, the provider may enjoy certain invest-ment rights under the WTO GeneralAgreement on Trade in Services (GATS).Additionally, under WTO rules, investmentmeasures, such as local content rules or trade-balancing requirements, would be prohibit-ed, to the extent that they impact upon tradeand violate the GATT (General Agreementon Tariffs and Trade) rules on national treat-ment and quantitative restrictions.

At the 1996 Singapore Ministerial Conference,an agreement was struck to create a commit-tee—the Working Group on Trade andInvestment—to analyze the investment issue.At the Doha Ministerial in 2001, this Groupwas given a new mandate: to clarify seven spe-cific issues and to launch negotiations “on thebasis of a decision to be taken, by explicit con-sensus.” Members disagreed sharply as to themeaning of this opaque phraseology, withsome insisting that negotiations were a fore-gone conclusion, subject only to agreementabout procedural modalities (such as time andnumber of negotiation sessions), while othersinsisted that negotiating would only belaunched once there was a convergence on sub-stantive modalities (consensus as to the natureand direction of the obligations to be negotiat-ed). In the end, these differences of opinionproved intractable and contributed, in part, tothe breakdown of the Cancun Ministerialmeeting. In the summer of 2004, WTOMembers conceded that “no work towardsnegotiations on [investment] will take placewithin the WTO during the Doha Round.”

In view of the negligible success at the multi-lateral level, many have sought to hedge theirbets by pursuing so-called bilateral invest-ment treaties (BITs) or investment rules inthe context of wider bilateral or regional freetrade agreements (FTAs). Figures compiledby the UN chart a fivefold rise in the numberof BITs during the 1990s—with nearly 2,500investment treaties concluded. At the sametime, there has been a surge in bilateral FTAs,many of which also contain investment rules.

On occasion, these bilateral and regionalinvestment rules may be formulated with aneye towards broader industrial and develop-ment goals of the host countries, however,most investment treaties are conceived withthe interests of capital exporters very much inthe foreground. While most BITs do notmandate market access per se, they do set intoplace a series of protections tailored to theinterests of those foreign investors who havebeen given a green light to establish invest-ments in a given territory. Standard investorprotections include the provision of: non-dis-crimination against foreign investment; com-pensation in the event of nationalization orexpropriation; minimum standards of treat-ment (e.g., “fair and equitable treatment”);repatriation of capital; and mechanisms fordispute settlement.

Although bilateral investment treaties date tothe late 1950s, for several decades they had alow profile. This changed with the inclusion ofinvestment provisions in the North AmericanFree Trade Agreement (NAFTA) in the early1990s. The NAFTA investment commit-ments had the potential to cast a shadow overa wide range of government measures, admin-istrative decisions and even court decisions.This first became clear when the U.S.-basedEthyl Corporation filed suit under theNAFTA in an effort to challenge a Canadiantrade ban on the gasoline additive methylcy-clopentadienyl manganese tricarbonyl(MMT). Ethyl alleged that Canada had violat-ed its legal commitments to foreign investors,and the firm sought multi-million dollar com-pensation. Rather than contest this claim, theGovernment of Canada offered partial com-pensation and rescinded the offending govern-ment measures. An increase in similar “copy-cat” litigation soon followed under theNAFTA, as well as under other BITs.

Today, questions still remain unansweredabout the meaning and policy implications ofkey investment treaty disciplines, particularlyas they relate to the environment. It is unclearto what extent governments may regulate


136


investments for health, safety or environmen-tal reasons without running afoul of theirtreaty obligation to compensate foreigninvestors affected by “indirect” forms ofexpropriation. In a 2005 NAFTA arbitrationbetween the Canadian-based MethanexCorporation and the United StatesGovernment, the arbitration tribunalobserved that legitimate non-discriminatoryregulations should not be considered to con-stitute a form of “indirect expropriation” of aforeign investment. It is unclear, however,whether this position will be followed by sub-sequent tribunals (which are not bound bythe doctrine of precedent). Likewise, it isunclear to what extent the fear of treaty liti-gation by foreign investors will continue todiscourage new regulation or be used to pres-sure governments to abandon proposed poli-cies, particularly in developing countrieslacking the resources to engage in expensiveand time-consuming international arbitra-tions with foreign investors. Some also fearthat national treatment obligations (i.e., totreat foreign investors on a comparable foot-ing to domestic investors) might jeopardizethe ability of governments to impose progres-sively more stringent environmental regula-tions as a given eco-system reaches its envi-ronmental carrying capacity.

Concerns have been raised about the prefer-ence of arbitration tribunals to interpret keytreaty provisions in manners more favourableto commercial interests. This concern hasbeen exacerbated by the relative absence ofenvironmental and social provisions in mostinvestment agreements, and the failure to listenvironment and sustainable development astreaty objectives, which could impact uponthe subsequent treaty interpretation by arbi-tral tribunals.

As increased attention has come to focusupon the potential implications of theseinvestment treaties, some governments, par-ticularly in the developing world, have beenhesitant to negotiate an even more ambitiousmultilateral accord on investment. Somewhat

Investment

137

IIInvestmentrules for sustainabledevelopmentBy Konrad vonMoltke

Investment deter-mines the future ofany market economy.It is at the heart of efforts to promote sustain-able development. Without investment, allefforts to achieve sustainable development willbe futile. As more investment becomes inter-national in character, international agreementswill be needed to ensure that such investmentalso promotes sustainable development. Theserules will be of paramount importance todeveloping countries if they wish to avoid themistakes concerning environment and develop-ment that were made over the past century bythe industrialized world.

Governments and commentators have thus farfailed to adequately recognize differencesbetween international trade and internationalinvestment. The issue linkage “trade andinvestment” trips off the tongue with deceptiveease. Yet, trade and investment are distincteconomic activities, as far removed from oneanother as the two sides of a balance sheet—assets and liabilities on one side; profits andlosses on the other. The two are inextricablylinked, yet nobody would confuse assets withsales. Indeed, to do so is a criminal offense inmost market economies. It should consequent-ly be self-evident that trade and investmentrequire distinct regimes with rules and institu-tions that fit the needs of each activity.

The genius of the World Trade Organization(WTO) has been its ability to fashion rules thatare appropriate to trade. Yet the temptation totake this success and apply it to investmentmust be resisted. It is hard to imagine how WTOrules can be made to fit the needs of invest-ment. Indeed, even the negotiation process ofthe WTO is designed to meet the needs of traderules, with a process of give and take, and mayprove quite unsuitable to the development ofinvestment rules, where right and wrong prevail.




138


Governments have thus far negotiated invest-ment agreements that address a limited part ofthe international investment agenda, namelyinvestor protection. There are now nearly 2,500bilateral investment treaties (BITs), but thereis no clear evidence that this vast structure hascontributed to better investment or has pro-moted development in poorer countries. Yet,governments persist in their attempts to createsuch rules by including them in bilateral andregional trade agreements or by folding theminto other issues such as trade in services ornon-tariff barriers to trade.

In the past ten years, governments twicesought to transform these patchwork invest-ment rules into a universal agreement—andtwice they failed. First at the Organisation forEconomic Co-operation and Development(OECD) with the Multilateral Agreement onInvestment (MAI) and again at the WTO withthe attempt to include investment in the DohaRound. Yet, no lessons seem to be learned fromthis experience. Governments persist in negoti-ating rules that do not meet the core challengeof international investment, namely how tobalance private rights and public goods in amanner that is legitimate, transparent andaccountable. Such rules would also create astructure that promotes sustainable develop-ment.

Ultimately rules for international investment areabout good governance for the global economy.Financial flows are already fairly unrestrainedand countries compete to attract investment sothat investor access is usually possible—whatremains at stake are the conditions of accessand operations, and that requires a continuousbalancing of investor rights and the develop-ment priorities of the host state. That goal ismuch more difficult to achieve than simple lib-eralization of trade or opening of investmentopportunities. It should be evident that invest-ment agreements will be unlike trade agree-ments—and the institutions required to supportthem will be unlike those of the WTO.

These differences are most obvious when itcomes to dispute settlement. Trade disputesare about rules made by states and can besettled between states. Investment disputes

are often about individual investments; theyinvolve an investor and a state and thus requireinstitutions that are capable of recognizing thelegitimate interests of both (private) investorsand public authorities. Settlement of invest-ment disputes bears only passing resemblanceto the settlement of trade disputes, and it mustmeet the essential criteria of being legitimate,transparent, and accountable.

The differences in dispute settlement are justthe tip of the iceberg: international investmentrules involve different parties, different issues,different principles, and different institutionsthan trade rules. Attempts to link them totrade agreements risk obscuring these differ-ences and producing rules that neither promoteinvestment nor support development.

International investment agreements involvethree critical actors in the investment process:investors, host governments where invest-ments are located, and home governments ofthe investors. Each of these actors has rightsand obligations in relation to internationalinvestment, and rules governing these rightsand obligations must be proportionate to theinvestments themselves: large investments inactivities that are sensitive from the perspec-tive of environment and development mustcarry more obligations than smaller invest-ments in activities of lesser sensitivity. Gettingthis balance right requires a process of negoti-ation that is transparent and that is guided bya desire to promote public welfare even asinvestment is rendered more predictable andinvestor rights are protected.

Are there prospects that governments willfinally begin to craft such internationalinvestment rules that serve both investorsand the goals of public policy? Ultimatelygovernments will have little choice but to doso because the logic of investment is inex-orable, and international investment requiresappropriate international rules. The questionis only how long the detour to reach that out-come will continue to be.

The late Konrad von Moltke, from Germany, wasa Senior Fellow at the International Institutefor Sustainable Development (IISD) andAdjunct Professor of Environmental Studies atDartmouth College.


paradoxically, bilateral agreements continueto be negotiated—albeit for other, oftenpolitical, reasons. Nevertheless, it is clear thatmany developing countries are becomingmore mindful of the experience with theNAFTA and bilateral treaties, which has ledto calls for revisions or amendments to thestandard treaty format.

Interests and Fault LinesAt the WTO, a number of countries havecriticized the Doha negotiating agenda’sinclusion of the investment issue as overlyambitious, and have noted the lack of capac-ity of smaller developing countries to mean-ingfully engage in this discussion. Beyondthis general concern, a host of more specificconcerns have been raised in the WorkingGroup on Trade and Investment, especiallyincluding a growing sense that the concretemeaning of many standard investment treatydisciplines has yet to be fully clarified.

Indeed, litigation under investment treaties isa relatively recent phenomenon, and dozensof disputes remain unresolved, with the con-sequence that tribunals have rarely had tointerpret the meaning of key disciplines, suchas national treatment, most-favoured nation(MFN) treatment and, to some extent,expropriation—much less, clarify how theymay impact upon regulation and policy insensitive areas such as the environment. Dueto the lingering uncertainty about the mean-ing of some of the basic investment disci-plines, governments have been wary aboutcementing those disciplines into a bindingmultilateral pact.

At the most basic level, the WTO discussionshave seen disagreement as to the breadth ofinvestments that might be covered. Somedeveloping countries, such as China, favour anarrow definition covering only productive,long-term foreign direct investment, whiledeveloped countries tend to support a broad-er definition, which encompasses financialand other portfolio assets. Generally, bilateralinvestment treaties have adopted the latter

Investment

139

IIInvestmentlaw as ifdevelopmentmatteredBy Marcos A.Orellana

Why was it that weneeded internationalrules to govern inter-national investment? Collective memoryseems to be fading. Did it have anything to dowith sustainable development, or was inter-national law an instrument co-opted by therich and powerful to re-discipline and exploitthe decolonized nations of the world? Not thelatter, many would argue. But certainly notthe former either.

The search for investment law has been moti-vated by the desire to provide some measureof security to creative and imaginativeinvestors who ventured into territories riddledwith conflict or otherwise controlled by rudi-mentary governments and inadequate legalsystems. Of course, these territories were richwith timber, minerals, oil and other commodi-ties that could be extracted utilizing cheaplabour, without worries of environmental reg-ulation, typically at a huge profit. So, firstwith canons and gunboat diplomacy, and laterwith coups d’états and the promise of readycash for debt-stricken countries or their lead-ers, international investment law jumped ontothe scene.

Somehow the developmental dimension ofinvestment law was thrown out with the bathwater. A narrow mention of development did,however, find its way into the opening line ofthe International Centre for Settlement ofInvestment Disputes (ICSID) Convention’spreamble, which refers to the role of interna-tional investment in international coopera-tion for economic development. Developmentconcerns have since raised their head as anelement in the definition of “investment” ininternational arbitral jurisprudence, for exam-ple, Salini v. Morocco (Juris), thus influencingthe scope of arbitral jurisdiction. It is herethat a fork in the road becomes apparent. One




140


of the two diverging paths is the so-called“ideological” route; where arbitral panelshave simply assumed that investment auto-matically benefits the host state with tech-nology, capital and know-how. The other isthe “reality” route, where panels ask for indi-cators that can empirically measure the devel-opment impacts of investment.

The ideological approach is obviously attrac-tive to operators used to dealing with formalrepresentation, sanitized rates of return andno questions asked. This route, however, isnot contextualized within sustainable devel-opment goals and can ignore impacts relatedto social inequity, environmental damage, andeven the economic priorities of the host coun-try. A few examples illustrate the problem:open-pit mining that affected sacred indige-nous lands in California (Glamis case); waterdelivery services that excluded poor peoplefrom coverage in Bolivia (Bechtel case); a cig-arette export business that could only beprofitable if it violated Mexican tax laws(Feldman case). These cases illustrate invest-ments that failed to deliver on their promisedcontribution to development, but neverthe-less entangled the host state in internationallitigation.

The reality route to investment law can alsobe problematic. This is partly because devel-opment is not a black and white, fill-in-the-box, or go-down-the-list exercise. It involveshighly contextual value judgments and evalu-ations. Clearly, arbitral tribunals are ill-equipped to determine what constitutesdevelopment because there are no preciseindicators to assist them. Additionally, partic-ularly in constitutional democracies, ad hocarbitral tribunals lack the legitimacy to bal-ance the fundamental developmental issues atstake. In the face of such practical and theo-retical obstacles, the search for minimumdevelopmental standards and screening mech-anisms is underway.

The Clean Development Mechanism (CDM) ofthe Kyoto Protocol, for example, embodies anattempt to screen and recognize projects thatcontribute to global sustainability and thereduction of greenhouse gas emissions. Otherscreening mechanisms relating to investments

have been criticized by capital exportingcountries on the grounds that they can beopen to corruption unless transparency isensured at every turn, including in adminis-trative agencies and dispute settlement.

International financial institutions that havea development and poverty eradication man-date seem to be making some progress. Iftheir traditional approach was to measuredevelopment by counting royalties, incomegeneration, transfer of funds, etc., theInternational Finance Corporation (IFC) andthe World Bank are reinventing themselvesand elaborating a set of indicators that wouldenable these institutions to screen projectsponsors, determine their developmentimpact, and exclude those with a proven neg-ative track record. Major private banks havealso announced their decision to apply IFCenvironmental and social standards. ExportCredit Agencies from OECD countries also haveagreed to benchmark their projects againstthe standards applied by the IFC or regionaldevelopment banks. This diversity of stan-dards and benchmarks speaks to the increas-ing importance of development concerns ininvestment financing.

While it is long past time for investment lawto recognize these developments, it actuallyseems to be moving in the opposite direction.Recent bilateral investment treaties (BITs)grant broad rights and enforcement powers toinvestors, and restrict the ability of nationaland local governments to regulate the activi-ties of foreign investors to meet local devel-opmental, environmental and social priorities.In addition, the promise of good governancethrough investment disciplines is frustratedby unacceptable discrimination that providesforeign investors with greater rights thanlocals. Moreover, the huge transaction costsand potential liability associated with threatsof litigation can stifle the development ofnecessary domestic laws and regulations inthe public interest.

Recent analysis on state contracts, such asthe Baku-Tbilisi-Ceyhan Pipeline projectagreements, reveals an extreme model ofinvestment protection that deprives hoststates of their regulatory powers and vitiates



approach, serving to buttress the developedcountries argument.

One issue, which is slowly emerging andwhich may have important consequences forenvironmental and other regulatory agencies,is the reach of treaty provisions on so-calledminimum standards of treatment, for exam-ple to provide foreign investors with fair andequitable treatment, or, in the case of sometreaties, to ensure that permitting, licensingand other administrative processes are trans-parent, coherent and responsive to investorinterests. While these latter criteria may beviewed as requirements of good governance,it remains the case that the bureaucraticapparatus of many host governments may fallshort of these substantive treaty obligations.When not accompanied by appropriate levelsof financial and technical assistance, interna-tional investment treaty commitments maysimply serve to put developing countries inviolation of international law, and to provideforeign investors with a vehicle for extractingcompensation for such failings. Another per-verse consequence may be a heightenedreluctance on the part of governments tointroduce new regulations, or to seek enforce-ment of existing health or environmental reg-ulations, lest such activity fail to live up to thestandards of transparency and proceduralfairness laid out in the investment agreement.

Although transparency is often guaranteed toforeign investors, it rarely extends to outsideactors seeking to monitor the impact of for-eign investments. Local communities and civilsociety groups can play a crucial role inmounting public pressure for environmentalregulatory compliance. Yet, investment treatiesgenerally fail to acknowledge this role, muchless provide for tools—transparency, disclosureof information, public consultation—thatmight permit local actors to engage in aninformed dialogue over foreign investmentand environmental regulatory compliance.

Another contentious matter has been thequestion of whether the grant of non-dis-

crimination should extend to the so-calledpre-establishment stage of an investment.While investment agreements routinely offernational treatment and/or MFN treatment toforeign investments which have been dulyestablished in the host territory, it is less com-mon for this prerogative to be granted toprospective investments. Under general inter-national law, host governments enjoy fullcontrol of entry and establishment, and onlya handful of countries have agreed to cedesome of this control in their investmenttreaties. For its part, India has argued in itsinterventions at the WTO that commitmentsto accord non-discrimination at the pre-establishment phase are neither feasible, nornecessary, insisting that: “developing coun-tries need to retain the ability to screen andchannel FDI in tune with their domesticinterests and priorities.” Depending upon agiven country’s priorities, such screeningcould include assessments of prospectiveinvestments for their environmental suitabil-ity or their contribution to domestic develop-ment goals.

Notwithstanding the opposition, pre-estab-lishment commitments are found in a small,but growing, number of bilateral agreements.The U.S. and Canada have included suchprovisions in many of their BITs and FTAs,and recently other countries such as Japan,Korea, Singapore and Mexico have begun toincorporate such provisions into investmentagreements. In the event that such pre-estab-lishment commitments are undertaken, theycould either apply across-the-board, but sub-ject to specific exceptions, through a negativelist approach; or only to sectors which havebeen expressly designated by parties to anagreement, through a positive list approach. Inthe WTO context, there has been persistentdisagreement as to which is the more appro-priate approach. Some developed countries,including Canada, have championed themerits of a negative list approach, while manydeveloping countries have spoken in favourof a positive list approach (notwithstanding

Investment

141

II


their general opposition of pre-establishmentcommitments in any form).

A negative list approach raises concerns insofaras it may be beyond the capacity of less devel-oped countries to analyze fully theireconomies and future policy priorities, inorder to enter exceptions for all areas whichshould be sheltered from liberalization. Bycontrast, a positive list approach offers greaterscope for committing only to sectors that thehost government feels comfortable in commit-ting. Given the relative irreversibility of suchcommitments once they are made, consider-able foresight is required to ensure that crucialpolicy space is not ceded unintentionally.

On a related note, fault lines have also emergedover the use of performance requirements—i.e., the imposition of certain obligations on

foreign investors at the point of entry or atsome later stage in the investment. While theWTO Agreement on Trade-related InvestmentMeasures (TRIMs) prohibits a category of per-formance requirements that impact negativelyupon trade (e.g., requirements to export a givenpercentage of goods), governments generallyremain free to impose a broad range of otherrequirements on foreign investors includingrequirements to establish joint venture, hirelocal employees (including from minority ordisadvantaged groups), or invest in localresearch and development. Arguments contin-ue as to the efficiency and effectiveness of suchrequirements, with some observers insistingthat many are counter-productive and mayserve to scare away investment, while othersnote that certain performance requirementscan contribute to important policy objectives.One conceivable use for such performancerequirements may be to mandate high envi-ronmental standards, or to diffuse more envi-ronmentally-friendly technologies.

Some governments, including India andBrazil, have called for a scaling back of theperformance requirements currently prohib-ited under the TRIMs Agreement, and haveresisted efforts to use bilateral trade andinvestment agreements to prohibit furthercategories of performance requirements.Meanwhile, the United States has called foran expansion of the TRIMs Agreement at thesame time as it has used its bilateral agree-ments to ban a wider array of such require-ments.

To some extent, disagreements over theimposition of specific performance require-ments upon foreign investors foreshadow anunderlying disagreement about the appropri-ateness of holding foreign investors (and eventheir home states) to broader responsibilitiesor obligations. The overwhelming propor-tion of agreements are narrowly focusedupon investor rights, rather than responsibil-ities (such as to undertake environmentalimpact assessments, to respect basic humanrights, abstain from corrupt practices, and


142


their laws. These types of contracts forcedeveloping countries to capitulate to investordemands and are triggering in a new era ofinternational corporate rule: where foreigninvestors are insulated from the reach of locallaws and subject to their own self-regulation.Undoubtedly, a corporate dream come true—if only in the short term.

Environmental, health, and safety regulation isessential to safeguard fundamental rights oflocal communities and workers. Any projectthat cannot guarantee these minimum andnecessary prerequisites cannot contribute tosustainable development, and must not receiveinternational protection. If development reallymatters, then investment law needs to come toterms with this simple reality.

Marcos A. Orellana, from Chile, is SeniorAttorney with the Center for InternationalEnvironmental Law (CIEL) in Washington D.C.and Adjunct Professor at American UniversityWashington College of Law.


general corporate social responsibility). Atthe WTO, a number of countries—includ-ing China, Cuba, India, Kenya, Pakistan andZimbabwe—have called for an examinationof “legally-binding measures aimed at ensuringcorporate responsibility and accountabilityrelating to foreign investors.” Such proposalshave been rebuffed by others, including theEuropean Union, which insists that an inter-national investment agreement would bebinding only on states, not individual enter-prises.

One feature of many investment agreements,which has contributed to calls for a balancingof investor rights with responsibilities, hasbeen the grant of direct legal personality toinvestors; i.e., enabling them to mount aninternational arbitration against host states.In stark contrast to the WTO dispute settle-ment rules, which are exclusively reserved forstate-to-state disputes, most recent invest-ment agreements provide recourse to so-called investor-state arbitration. This noveldevice has permitted investors to challengegovernment measures, policies or actionswhich are thought to contravene the substan-tive provisions of a given treaty. The investor-state mechanism has given rise to a substan-tial volume of litigation in recent years.

Notably, the 2001 Doha Declaration—which charged the Working Group on Tradeand Investment with its new mandate—refers only to the need to clarify how invest-ment disputes would be settled betweenmember-states under any prospective WTOinvestment agreement. Some developingcountries, joined by Canada, are opposed tothe inclusion of an investor-state dispute set-tlement mechanism in the WTO (eventhough such a device is common in bilateralagreements to which they may be party).Others, including Chinese Taipei, haveargued for the usefulness of investor-state dis-pute settlement in the WTO, partly becausethe overwhelming proportion of bilateralinvestment agreements already accords thisimportant privilege to investors.

Just as investor-state dispute settlement wasnot included in the Doha mandate, neitherwas the contentious issue of expropriation.While this appeased many developing coun-tries, business groups were not enthusiasticabout any multilateral agreement whichfailed to protect against expropriation.

Trends and FutureDirectionsThe consistent failure to launch multilateralinvestment negotiations has meant that theconstellation of bilateral investment treatiesand investment provisions in bilateral andregional free trade agreements has continuedto expand. Indeed, some of the mostinvestor-friendly provisions which have beenso controversial at the multilateral level (e.g.,prohibitions against categories of perform-ance requirements, commitments coveringinvestment at the pre-establishment stage) arealready enshrined in newer-model bilateralagreements concluded by the U.S., Canadaand Japan with a variety of other countries.Discussions in the WTO Working Group onTrade and Investment remained conspicu-ously silent on the fundamental question ofthe relationship between the existing bilateralagreements and any multilateral agreementthat might emerge.

Investor enthusiasm for these bilateral agree-ments can be seen both in the strong surge inlitigation under the agreements, and in thefact that many influential business groupswere agnostic about a proposed WTO invest-ment agreement. The prevailing view in theUnited States and in other industrializedcountries seems to have been that the busi-ness community could secure morefavourable terms in bilateral agreements thanin any multilateral agreement launched underthe auspices of a so-called “Development”Round.

As the bilateral arena continues to see a flur-ry of negotiations, some governments are tak-ing notice of the potential environmental

Investment

143

II


impacts of such agreements. Recent negotiat-ing templates unveiled by Canada and theU.S. seek to clarify that non-discriminatoryhealth and environmental regulations willrarely be deemed to constitute an indirectform of expropriation; thus seeking to allaysome concerns that public interest regulationcould be construed as conflicting with invest-ment rules on expropriation. However, civilsociety groups have called for more compre-hensive efforts to incorporate environmentalconsiderations into investment agreements.

While greater attention is starting to be paidto the potential impact of ambiguous treatylanguage upon the right to regulate in sensi-tive sectors such as health and environment,it remains the case that investment agree-ments continue to commit developing coun-tries to a series of extensive and sometimesunclear legal obligations. This is particularlythe case when binding commitments areundertaken to liberalize certain sectors. Anabsence of foresight may lead to consterna-tion in future, as the policy implications of(perhaps ill-considered) treaty commitmentscome to exert pressure on governments.Moreover, the bilateral negotiating dynamictends to be highly asymmetrical—with apowerful (often developed) government

insisting that negotiations proceed from atemplate of its own design.

While the prospects for a multilateral agree-ment seem dim following the decision toexclude investment from the current roundof multilateral trade negotiations, it may betime for a fundamental rethinking of interna-tional investment agreements, perhaps lead-ing to the elaboration of a balanced, modelagreement which could set forth a morenuanced package of rights and responsibili-ties for investors and governments alike. Tothis end, in 2005 the International Institutefor Sustainable Development (IISD)unveiled a proposed Model Agreement onInvestment for Sustainable Development. Anysuccessful multilateral agreement will need toappeal to all stakeholders—Northern andSouthern governments, business and civil soci-ety groups—if it is to supplant and supple-ment the existing expanse of bilateral, regionaland multilateral rules which have grown upover the last half-century. In the interim, bilat-eral and regional investment agreements con-tinue to proliferate at a remarkable rate, in theabsence of clarity about the full implications ofsuch agreements for health and environment,and in a context where developing countryinterests are more easily marginalized.


144


Issues and Debates

145

II

The Doha Round includes a negotiating man-date on clarifying the relationship betweentrade measures in multilateral environmentalagreements (MEAs) and the rules of the WorldTrade Organization (WTO). In particular,Paragraph 31 of the Doha Declaration seeks“mutual supportiveness of trade and environ-ment” and calls for negotiations on “the rela-tionship between existing WTO rules and spe-cific trade obligations set out in multilateralenvironmental agreements.” It also calls for“procedures for regular information exchangebetween MEA Secretariats and the relevantWTO committees, and the criteria for thegranting of observer status.”

However, the issue is not a new one and dis-cussions on it have been ongoing in theWTO for over a decade. The number ofMEAs has rapidly risen in recent years and,according to the WTO, nearly 250 MEAs arecurrently in place, of which some 20 containclear trade-related provisions. Such provi-sions have made their way into these MEAsfor a variety of reasons, including: (a) creatinga regulatory framework to correct market orpolicy failures; (b) regulating transboundarymovements of environmentally-harmful sub-stances; (c) removing market incentives that

promote or cause environmental harm; (d)encouraging compliance with MEAs; and (e)promoting broader participation by states inMEAs to address free-rider situations.

For instance, trade measures contained in theMontreal Protocol on Substances thatDeplete the Ozone Layer (the MontrealProtocol) were instrumental in reducing globalemissions of ozone-depleting substances. TheBasel Convention on the Control ofTransboundary Movements of HazardousWastes and Their Disposal (the BaselConvention) has led to a reduction in thedumping of hazardous wastes in developingcountries. The Convention on InternationalTrade in Endangered Species of Wild Faunaand Flora (CITES) has served to ensure thatinternational trade in wild animals and plantsdoes not threaten their survival.

MEA trade measures are usually part of abroader package of measures that MEA par-ties negotiate to achieve the MEA’s objectives.These include non-trade measures like tech-nical and financial assistance and capacitybuilding to assist MEA parties (especiallydeveloping countries) to comply with theirobligations and to encourage non-parties tojoin the MEA. Trade measures can take many

Multilateral EnvironmentalAgreementsVicente Paolo B. Yu III

•“…the WTO dispute settlement system has already played a significant role in

defining the relationship between MEAs and the WTO. For example, in its decisions on the U.S.-Reformulated Gasoline and U.S.-Shrimp-Turtle cases, the WTO

Appellate Body recognized the legal inter-relationship between trade law and public international law.”

•


different forms, including: (a) reportingrequirements; (b) labelling or other identifi-cation requirements; (c) notification require-ments and consent procedures; (d) exportand/or import bans; and (d) transformationmeasures, such as taxes, charges and other fis-cal measures, and non-fiscal measures such asgovernment procurement.

Theoretically, MEA trade measures and WTOrules can and should interact in a positive andsynergistic way. In their original intent, bothMEAs and the WTO are instrumentsdesigned to promote the shared objectives ofthe international community. As such, bothMEAs and the WTO should be mutually sup-portive. Nevertheless, while there has not beenany dispute in the WTO related to MEA-based trade measures to date, concerns about apotential conflict persist. This potential forconflict can stem from multiple sources:

• Inconsistency of legal provisions. Measurestaken by an MEA party are inconsistentwith its WTO obligations, or vice-versa.

• Competing or overlapping jurisdictions. Thedispute settlement mechanisms of bothMEAs and the WTO have policy jurisdic-tion over, or are used to settle disputesrelating to, the same policy or legal issue.

• Party/non-party disputes. Countries that areparties to both an MEA and the WTO usetrade measures allowed by the MEAagainst countries that are WTO Membersbut are not parties to that MEA.

• National policy incoherence. Failures in policycoordination and coherence among nationaltrade and environmental officials result ininconsistent national implementation ofMEA trade measures and WTO rules.

Moreover, the current situation of legal uncer-tainty about the WTO-MEA relationship hasled to unease amongst some WTO Membersand has motivated the negotiating mandate forclarification of the WTO-MEA relationship inthe Doha Round. Importantly, the develop-ment of MEAs and the WTO have followed

two separate but parallel paths, which reflectsfundamental differences in their underlyinglegal philosophies. Both MEAs and the WTOcontain dispute settlement procedures thatresort to higher bodies of international law—tothe International Court of Justice (ICJ) or theAppellate Body (AB) respectively. However,while dispute settlement is central to theWTO, MEAs generally emphasize compliancethrough supportive measures (e.g., financialand technical assistance). Thus, resort to formaldispute settlement in international trade rela-tions is more common than in MEAs. Whileboth MEAs and the WTO agreements are theresult of multilateral cooperation to pursuemutually beneficial goals, the approach inMEAs is based on mutual cooperation whilethat in the WTO is rule-based.

Clarifying the MEA-WTO Relationship

As already mentioned, the desire to clarify theMEA-WTO relationship is not a new one.The United Nations Conference onEnvironment and Development (UNCED) inRio de Janeiro, Brazil in 1992 and theUruguay Round trade negotiations from 1986to 1994 sought to clarify the relationshipbetween MEA trade measures and the rules ofthe multilateral trading system. At UNCED,countries agreed to a set of principles on sus-tainable development, including Principle 12of the Rio Declaration which deals with thetrade and environment interface:

“States should cooperate to promote asupportive and open international eco-nomic system that would lead to econom-ic growth and sustainable development inall countries, to better address the prob-lems of environmental degradation. Tradepolicy measures for environmental pur-poses should not constitute a means ofarbitrary or unjustifiable discrimination ora disguised restriction on internationaltrade. Unilateral actions to deal with envi-ronmental challenges outside the jurisdic-tion of the importing country should beavoided. Environmental measures address-


146


ing transboundary or global environmen-tal problems should, as far as possible, bebased on an international consensus.”

At around the same time, trade negotiators atthe Uruguay Round created the WTO withprovisions that recognize the objective of sus-tainable development for the global trade sys-tem while seeking to prevent the use of envi-ronmental regulations in ways that unneces-sarily restrict trade. These include: the “sus-tainable development” clause in the WTOAgreement’s preamble; the “environmental”exceptions in the General Agreement onTariffs and Trade (GATT) Article XX(b) and(g) and in the General Agreement on Trade inServices (GATS) Article XIV(b); and variousenvironment-relevant provisions in theAgreements on Technical Barriers to Trade(TBT), the Application of Sanitary andPhytosanitary Measures (SPS), Trade-relatedAspects of Intellectual Property Rights(TRIPS) and Agriculture.

Specific MEAs have also included clarifyingprovisions to reinforce the understanding thatnothing in the MEA will adversely affect acountry’s right or obligation under other exist-ing international agreements, including WTOagreements. Such provisions are included in theUN Convention on the Law of the Sea (UNC-LOS), Article 311(2); the UN Convention onBiological Diversity (CBD), Article 22(1); theCartagena Protocol on Biosafety (the BiosafetyProtocol) to the CBD, Preamble, clauses 9 to11; the UN Convention to CombatDesertification (UNCCD), Article 8(2); andthe UN Rotterdam Convention on the PriorInformed Consent Procedure for CertainHazardous Chemicals and Pesticides inInternational Trade (the RotterdamConvention), Preamble, clauses 8 to 10.

Such provisions are considered by some to be“WTO saving” clauses because they suggestthat WTO rules may trump MEA trademeasures. Additionally, the WTO’s strongcompliance mechanism—unmatched by anyMEA—has led several governments and

Multilateral Environmental Agreements

147

IIThe logic ofthe WTO-MEArelationshipBy Amb. AlejandroJara

The Doha Declarationmandates negotia-tions on the relation-ship between existingWorld Trade Organization (WTO) obligationsand “specific trade obligations” (STOs) set outin multilateral environmental agreements(MEAs). After more than five years of negoti-ations and many proposals, it is still difficultto envisage the final result, but a number ofimportant questions about the WTO-MEA rela-tionship are being answered.

Some MEAs have STOs, which may lead to theapplication of trade restrictions or prohibitions.Is a conflict with the WTO possible? Assumethat, pursuant to an obligation under an MEA,country B applies a trade measure that restrictsgoods exported by country A. Both are WTOMembers and signatories to the MEA. However,country A considers that this restriction exceedswhat is “necessary” to meet the obligationspursuant to the MEA, and invokes the disputesettlement mechanism (DSM) of the WTO.

Obviously, country B would argue that themeasure is justifiable under the generalexception of either Article XX(b) of GeneralAgreement on Tariffs and Trade (GATT) 1994 orArticle XIV(b) of the General Agreement onTrade in Services (GATS). Both provisionsallow measures necessary to protect human,animal or plant life or health, thus makingroom for trade measures under an MEA, yetestablishing limitations to prevent disguisedprotectionism or arbitrary discrimination.

Under the DSM, a panel and the Appellate Bodymust examine the complaint and will determinewhether the measure is “necessary” to protecthuman, animal, or plant life or health. Whilethe consistency of the MEA’s objectives withthe Article XX exception can be assumed, itdoes not automatically follow that all measuresapplied in pursuance of such objectives are“necessary” or that they do not arbitrarily or




148


unjustifiably discriminate between countrieswhere like conditions prevail.

This scenario is hypothetical but not implau-sible, and it poses important political and sys-temic questions.

First, the public policy objective to protecthuman, animal or plant life or health is definedby the MEA. Presumably international coopera-tion is required because national measures areinsufficient. Is the WTO the appropriate forumto test the necessity of a trade measure takenby a government in pursuance of the MEA’sobjectives? A public policy objective containedin an MEA is no different from a similar objec-tive defined in a country’s legislation. No gov-ernment could object to the examination bythe DSM of a trade measure applied underdomestic legislation; likewise, there could beno objection if the same measure is taken pur-suant to an MEA.

Secondly, is the WTO equipped to examinecases that are technically complex andinvolve policies other than trade? The DSMalready has had to deal with complex cases inthe areas of Trade-related Aspects ofIntellectual Property Rights (TRIPS) and GATSinvolving a myriad of public policies.Furthermore, the complexity is the same underan MEA or domestic legislation.

Some may react strongly against the notion ofa trade forum determining the necessity orproportionality of an environmental measure.However, what is the alternative? A systemthat allows an MEA-based measure to auto-matically prevail over WTO trade obligationscould be abused and lead to protectionism.The WTO jurisprudence in the few environmen-tal cases that have come before it seems to belargely satisfactory to interested actors. Atpresent, MEAs have weak dispute settlementsystems, partly because compliance problemsare usually related to capacity or resource con-straints, which are better addressed throughcooperation and technical and financial assis-tance programs. With stronger dispute settle-ment provisions in MEAs, controversies overthe “necessity” of a domestic measure, in allprobability, would be examined by that spe-cialized forum rather than the WTO.

Would it be different if the aggrieved party isnot a signatory of the relevant MEA but aMember of the WTO? The party would have noalternative other than recourse to the DSM toprotect its WTO rights. The dispute wouldprobably center on whether the measure qual-ifies as an Article XX exception. Consequently,it should make no difference whether thecomplainant is or is not a party to the MEA.

In the final analysis, a balance of interests isrequired. All stakeholders must perceive thattheir concerns and interests can be protected.This is particularly true of the poorer andweaker countries that often cannot activelyparticipate or engage in the law-making andcooperation processes of MEAs, but haverecourse to action under the WTO.

There is little room for conflict of law or juris-diction. Moreover, the problem is more politi-cal than legal. Indeed, it could be said thatthe Doha mandate on MEAs and the WTO wasconceived as a means to neutralize hostilityto the Doha negotiations by environmentalstakeholders. The same holds true for themandate that envisages liberalization of envi-ronmental goods and services. Paying particu-lar attention to such goods and services isfine, but liberalization will occur regardless ofthis mandate. Political solutions could be amore appropriate means of addressing theseissues than upsetting a system which protectsall interests in a balanced manner.

A political solution could take the form of asubstantive and formal declaration byMinisters spelling out the legal frameworkcontained in the relevant exceptions of theWTO, as confirmed by jurisprudence. Thus, theinternational community would be reassuredthat MEA-related trade measures are allowedprovided they are not disguised protection ordiscriminate arbitrarily or unjustifiably.

Alejandro Jara, from Chile, is a Deputy Director-General of the World Trade Organization (WTOand was formerly the Chair of the WTOCommittee on Trade in Services Special Sessionand Ambassador and Permanent Representativeof his country to the WTO. This essay is writtenin his personal capacity.


environmental non-governmental organiza-tions (NGOs) to raise concerns about thepotential for a clash between MEA trademeasures and WTO rules. The fear is thatthese can combine to create a “chilling” effecton environmental policy because of thepotential legal challenges to the “WTO-con-formity” of MEA trade measures; and thatthis could discourage the use of trade meas-ures in existing MEAs or the inclusion oftrade measures in new MEAs in the future.

Based on the seminal 1996 report of theWTO’s Committee on Trade andEnvironment (CTE) to the SingaporeMinisterial Conference, WTO Membersagreed that: (a) MEAs are as the best solutionto transboundary environmental problems; (b)trade measures, while not necessarily the mosteffective policy instruments for MEAs, can insome cases play an important role in carryingout their objectives; (c) existing WTO rulesprovide enough leeway for WTO Members toapply MEA trade measures in a WTO-consis-tent manner; (d) better national-level trade andenvironmental policy coordination was thebest solution to prevent WTO disputes overthe use of MEA trade measures; and (e) in caseof such a dispute, especially where one of theparties is not a party to the MEA concerned,the WTO dispute settlement system would beable to handle the dispute.

Indeed, the WTO dispute settlement systemhas already played a significant role in defin-ing the relationship between MEAs and theWTO. For example, in its decisions on theU.S.-Reformulated Gasoline and U.S.-Shrimp-Turtle cases, the WTO AppellateBody recognized the legal inter-relationshipbetween trade law and public internationallaw. The sentiment of the Appellate Body hasbeen that WTO law is “not to be interpretedin clinical isolation from” public internation-al law; when relevant, international environ-mental law can be a legitimate source ofapplicable legal principles for the interpreta-tion and application of WTO provisions.


149

IIMEA miscon-ceptions andcontradictionsBy Rob Monro

The vigorous debateon the relationshipbetween World TradeOrganization (WTO)rules and multilateralenvironmental agreements (MEAs) has mostlyfocused on clarifying legal complexities.However, in order to support developmentthat is truly sustainable, discussions both inMEAs and the WTO need to examine thepotential contribution of trade to the conser-vation and sustainable use of naturalresources. Despite the South’s biological rich-ness and significant natural resources, usingtrade as a means of directing this comparativeadvantage towards poverty alleviation andsustainable development is not only largelyignored, but actively discouraged; notably bydeveloped countries.

The reluctance to condone trade in biodiversi-ty goods and services stems from a variety ofreasons. These range from a misconceivedrelationship between international trade andenvironmental conservation to emotionalfeelings toward plants and animals.Misconceptions of conservation are vigorouslypromoted and reinforced by a growing andpolitically powerful “green” protectionistmovement rooted in a Western-centric urbanculture. These misconceptions lead to policycontradictions. Even well-intentioned conser-vation policies end up defeating their objec-tives by failing to address the root of theenvironmental problems, or refusing to takethe realities and needs of local communitiesinto account.

Examples of ill-informed international deci-sions influenced by emotionally charged envi-ronmental campaigns include the elephantivory trade issue in the Convention onInternational Trade in Endangered Species ofWild Fauna and Flora (CITES), the moratoriumon commercial whaling imposed by theInternational Whaling Commission (IWC) and




150


the CITES listing of all whale species onAppendix I, and trade restrictions on harp sealskins in the United States and EuropeanUnion.

These trade restrictions have two commonelements. The first is that their financial cost(in terms of foregone income) is largely borneby some of the poorest communities in theworld. Such communities—for example, ruralcommunities in Africa, the Maori in NewZealand, indigenous Andean communities inSouth America, the Inuit and Saami peoplesin North America and the Arctic, etc.—tend tobe particularly dependent on natural resourcesfor their livelihoods. The second, and equallydisturbing, factor is that the resources orspecies in question are very often not reallyendangered or threatened with extinction. Forexample, there are an estimated 150,000 ele-phant in Botswana and Zimbabwe alone, some800,000 pilot whales only in the NorthAtlantic, and around 4 million harp seals offthe coast of Greenland alone.

Within the context of the WTO, an example ofmisguided conservation initiatives is the cam-paign launched in June 1999 by U.S. environ-mental groups to oppose tariff reductions onwood products. This campaign was so suc-cessful that it resulted in a letter to U.S.President Clinton from 48 members of the U.S.Congress urging the U.S. to withdraw fromWTO negotiations towards the elimination oftariffs on paper and wood products. Echoingthe alarmist sentiments of environmentalgroups, the letter argued that eliminating tar-iffs would encourage unsustainable loggingand violate U.S. environmental laws.Ironically, Canada had reported at the March1999 meeting of the WTO Committee on Tradeand Environment (CTE) that lower U.S. tariffs(through the elimination of tariff escalation)as required under the North American FreeTrade Agreement (NAFTA), had led toincreased economic and environmental effi-ciency because of a relative shift in Canada’scomparative advantage in paper production.

Canada’s experience with paper—as well asothers experiences, including in wildlife

products under Zimbabwe’s CAMPFIRE pro-gram—belies the Western-centric culturalperception of “wild” resources as sacrosanctand the misguided belief that any harvest orconsumption of these resources will inevitablylead to their extinction or unsustainabledepletion. As has been amply demonstrated inZimbabwe’s sustainable use experiment underthe CAMPFIRE program, when landholders andlandowners are allowed to manage and bene-fit from natural resources under secure prop-erty rights regimes—as they are with domes-ticated species such as cattle, cotton ortobacco—it enables wild species to effective-ly compete as a viable economic land useagainst other land use practices. Other landuse practices, such as agriculture, for exam-ple, can often be more environmentally harm-ful, requiring massive land clearance resultingin loss of natural habitat and biodiversity, andinvolving the application of artificial fertiliz-ers and pesticides.

Thus, far from leading to environmentaldestruction and loss of wild species, econom-ic and financial returns from trade in biodi-versity goods and services can provide thevery incentive or motivation for landholdersand landowners to conserve and invest in theenvironment. Yet, the irony is that by oppos-ing such trade and so depriving environmen-tal resources of real economic value, environ-mentalists are directly removing the incentivefor their protection. It is time to stop thisfarce and for environmental agreements andtrade policy to find common cause in seekinginnovative approaches to use trade and mar-kets for the benefit of the world’s threatenedbiodiversity and its equally threatened poor.

The difficult reality is that for most ruralcommunities in the South, particularly forrural Africans, the priority is human survival,not biodiversity conservation. Thus, unlessbiodiversity can directly and tangibly con-tribute to human survival, prospects for itsconservation are bleak.

Rob Monro, from Zimbabwe, was the head ofZimbabwe Trust, an NGO which was one of thefounders and promoters of the CAMPFIRE pro-gram.


Interests and Fault Lines This environmental mandate was placed onthe “Doha Development Agenda” at the insis-tence of the European Union (EU) andSwitzerland. For their part, developing coun-tries—which have broadly supported theobjective of sustainable development and theprotection and preservation of the environ-ment in a manner consistent with their devel-opment needs—were hesitant in acceptingthis inclusion, especially the clause related tothe WTO-MEA linkage. From the outset,developing countries have stressed that cur-rent WTO provisions are adequate to dealwith any possible conflicts between MEAtrade measures and WTO rules and, there-fore, it is not necessary to alter current WTOrules or to elaborate new rules to addresshypothetical legal conflicts between MEAsand the WTO. Instead, many developingcountries have suggested that the “first-best”solution is to devote additional financialresources and capacity building towards meet-ing the objectives of MEAs. This concernnotwithstanding, developing countries acqui-esced to these negotiations hoping that—inexchange for and in the context of the overallDoha negotiating agenda—broader develop-mental and trade interests in agriculture, serv-ices, special and differential treatment, andother areas would be addressed effectively.

The CTE in Special Session, which has beenthe venue of recent trade and environmentnegotiations, has dealt with five aspects of theMEA-WTO linkage: (a) definition of anMEA; (b) definition of specific trade obliga-tions (STOs) in an MEA; (c) legal relation-ship or hierarchy between MEAs and theWTO; (d) “party versus non-party” issue; and(e) possible outcomes of the negotiations.

In terms of MEA definition, countries areexamining various criteria, including the legaleffect of the agreement, the multilateral char-acter of the MEA, “openness” of the MEA toparticipation by all WTO Members; andsubstantive environmental content or objec-

tive of the agreement. Most developing coun-tries favour a narrower definition, whichwould encompass only those MEAs currentlyin force. Moreover, these MEAs should havebeen negotiated under United Nations aus-pices, and must be open to effective partici-pation by all WTO Members.

Proponents of the WTO-MEA negotiations—including the EC and Switzerland—favour abroader definition of MEAs. For example, theEC would like to include regional agreements,as well as treaties between at least three partiesthat have the main aim of protecting the envi-ronment or are relevant to the environmentalexceptions in GATT Article XX(b) or (g), andwhich were negotiated under the UN or underprocedures for negotiation open to all WTOMembers. Japan has suggested that MEAs thathave not yet entered into force should also becovered by the negotiations.

Specifically on the question of which MEAs tofocus upon, there has been some convergenceamongst WTO Members. The followingMEAs are frequently mentioned in this con-text: CITES; the Montreal Protocol; the BaselConvention; the Rotterdam Convention; theStockholm Convention on Persistent OrganicPollutants (the Stockholm Convention); andthe Biosafety Protocol.

However, there has been less agreement as towhich specific trade measures in these MEAsshould be the subject of discussion. On thequestion of defining specific trade obligations,some countries (for example, the UnitedStates and Hong Kong) would like to limitSTOs to include trade measures that aremandatory and specific, with negotiationsbased on the list of MEAs with trade meas-ures provided by the WTO Secretariat.Others, including the EC, advocate pursuinga general approach that would establish theprinciples governing the MEA-WTO rela-tionship, including what constitutes an STO.

In this regard, the EC has identified four cat-egories of measures arising from MEA tradeobligations: (a) trade measures explicitly pro-


151

II


vided for and mandatory under MEAs (e.g.,CITES, the Stockholm Convention, theBiosafety Protocol); (b) trade measures notexplicitly provided for nor mandatory underthe MEA itself but consequential of the “obli-gation de résultat” of the MEA; (c) trade meas-ures not identified in the MEA which has onlyan “obligation de résultat” but that Partiescould decide to implement in order to complywith their obligations; and (d) trade measuresnot required in the MEA but which Partiescan decide to implement if the MEA containsa general provision stating that parties canadopt stringent measures in accordance withinternational law (e.g., the Montreal Protocol,the Rotterdam Convention).

Some countries—including Argentina, ChineseTaipei, India, Korea and Norway—haveattempted to define relevant terms in the phrase“specific trade obligations set out in MEAs” inorder to develop criteria. India, for example, hassuggested that relevant STOs should be:mandatory (i.e., MEA trade obligations that aregeneral or rely upon the discretion of the MEAparties for their adoption or implementationshould not be considered to be STOs); clearlydefined in the MEA (i.e., whereby the MEAsets out the result to be achieved and measuresto be used); or related to the import or export ofa tangible item and to which MEA parties haveto adopt or comply with.

In trying to define the relationship betweenMEAs and the WTO, there has been generalagreement that MEAs and the WTO representequal bodies of international law and theirimplementation should be mutually support-ive. Countries, however, diverge on how tooperationalize this relationship. The EC,Switzerland and some other, mostly developed,countries favour developing commonly agreedgeneral principles, such as “no hierarchy” and“mutual supportiveness and deference” in orderto clarify the MEA-WTO relationship. Othercountries, such as Japan, have suggested thatmandatory trade measures explicitly providedfor in an MEA should be presumed to beWTO-consistent.

Most developing countries, however, opposesuggestions for new WTO rules on the MEA-WTO relationship, arguing that these couldalter existing WTO rights and obligations.Interestingly, many of these same countrieswere often leading proponents for trade meas-ures to be incorporated into MEAs during theirnegotiation. However, these countries havesince sought to retain the right to question theimplementation of MEA trade measures at theWTO, if such implementation adverselyaffects their WTO rights. Accordingly, thesecountries have raised concerns about proposalsto recognize a priori those MEA trade measuresas WTO consistent.

It is generally understood that, as stipulatedin the mandate, the party vs. non-party issue isexcluded from the Doha negotiations.Hence, MEA obligations which may requireMEA parties to take trade actions againstMEA non-parties and the relationshipbetween such measures with WTO rules isnot part of the current negotiations.

Finally, in discussions on the possible outcomesof the negotiations, some countries, such asJapan and Switzerland, propose that thenegotiations should result in an interpretativedecision or understanding. This would setout general principles to clarify the MEA-WTO relationship in order to provide guid-ance for WTO dispute settlement panels inthe event of a dispute. The introduction of an“MEA exceptions clause” by amending GATTArticle XX has also been suggested. However,most developing countries, along with theU.S. and Australia, have stated that the nego-tiated outcome should not change the existingbalance of WTO rights and obligations.

Trends and FutureDirectionsTogether with enhancing national policycoherence and coordination, negotiations oncriteria for the granting of observer status toMEA secretariats and on procedures to facil-itate information exchange between MEA


152


secretariats and the WTO may be amongstthe most cost effective and least controversialways to advance this issue. Currently, onlysome (albeit the main) MEA secretariats haveobserver status in the CTE regular sessionsand their participation in the CTE Special(negotiating) Sessions as observers is ad hocand limited. This issue has become linked tothe broader but stalled debate in the WTOon the granting of observer status to otherinternational organizations. Future headwayon this issue could provide useful opportuni-ties to strengthen the WTO-MEA linkage.

The increasing number of trade disputes withenvironmental implications shows that the like-lihood of WTO trade disputes involving MEAtrade measures exists. The dispute resolutionsystem would can be expected to continue toplay an important role in defining the WTO-MEA relationship. To the extent that this is nec-essary, relevant environmental organizations—including MEA secretariats and environmentalNGOs—should be consulted by the WTOdispute resolution panels on an ad hoc basis, fol-lowing the Appellate Body’s guidelines for thesubmission of amicus curiae briefs. However,many WTO Members have stressed that theWTO dispute settlement mechanism is not theideal venue for dealing with MEA issues; rather,MEA issues should be resolved in MEA fora.Hence, it would be much more desirable ifMEA dispute settlement mechanisms werestrengthened and spillover of MEA disputesinto the WTO be minimized.

Negotiations on the MEA-WTO relationshiphave prompted MEA secretariats, togetherwith the United Nations EnvironmentProgramme (UNEP), to look at how WTOrules could interact in a mutually supportiveway with MEA trade provisions. MEA deci-sion-making bodies may need to review theirown activities and strengthen the implementa-tion of their respective obligations.Furthermore, changes in global economic andenvironmental conditions will require a strongmultilateral framework for coordinated action.These conditions could push countries to

strengthen and reaffirm the role of the UN asthe primary global governance institution.

The CTE and the WTO Committee onTrade and Development (CTD) have helddiscussions relating to the integration of sus-tainable development into the Doha negotia-tions pursuant to Paragraph 51 of the DohaDeclaration. However, both the CTE and theCTD have encountered difficulties imple-menting this mandate. Indeed, sustainabledevelopment remains a difficult concept totranslate into concrete policy. However, thereis an opportunity embedded within thisCTE-CTD dialogue to meaningfully opera-tionalize the WTO’s preambular emphasis onsustainable development as an overarchinggoal for trade policy.

In general, developing countries recognize thatenvironmental protection is an important pol-icy objective within the context of sustainabledevelopment and is essential to the develop-ment process. However, they remain vigilantto disguised protectionism in the form ofunjustified environmental measures. In thisrespect, improving market access and guardingagainst eco-protectionism remains a criticalissue for developing countries in the trade andenvironment debate. The role of the WTO,developing countries argue, is to ensure mar-ket access and prevent abusive trade protec-tionism. This unease is unlikely to disappearsoon and future developments related to theWTO-MEA relationship will have to contin-ue grappling with this.

Finally, the importance of countries undertak-ing policies that are coherent and consistentwith the objective of sustainable developmentis well recognized. However, in practice, muchremains to be accomplished in this regard.The most important future challenge forboth the WTO and for MEAs is how to meetthe sustainable development objective which,theoretically, is the principal motivator ofboth regimes. In terms of trends and chal-lenges, this means that the future of theWTO-MEA relationship will be determined


153

II



154

not only by how the WTO relates to trademeasures contained in MEAs, but also byhow MEAs evolve to relate to global trade

policy in general, including but not limitedto WTO agreements.

Table 1. Conventions and their highlights.

Convention Highlights

Convention on Biological Diversity(CBD)

The objective of the CBD is theconservation of biological diversity,the sustainable use of its compo-nents and the fair and equitablesharing of the benefits arising outof the utilization of geneticresources.

• Countries must respect, preserve and maintain knowl-edge, innovations and practices of indigenous and localcommunities that are supportive of biological diversity,an agenda on traditional knowledge running parallel tothe WTO Agreement on Trade-related Aspects ofIntellectual Property Rights;

• Guidelines on access and benefit-sharing of geneticresources require prior informed consent of the countryproviding resources;

• Countries will cooperate to ensure that patents and otherintellectual property rights are supportive of biodiversity;

• Environmental impact assessments must be conductedon any project likely to have significant adverse effectson biodiversity.

• Establishes an advanced informed agreement (AIA) pro-cedure that applies to the first transboundary movementof a particular living modified organism (LMO) for inten-tional introduction into the environment;

• National decisions on whether to use LMOs as food orfeed or for processing (FFP) must be notified to theother parties;

• Countries can use a precautionary approach when mak-ing decisions on whether to allow imports of a LMO;

• LMOs intended for contained use or intentional intro-duction into the environment must be labelled as suchand have documentation.

Cartagena Protocol on Biosafety

The objective of the BiosafetyProtocol is to ensure an adequatelevel of protection in the field ofsafe transfer, handling and use ofLMOs that may have adverseeffects on the conservation andsustainable use of biological diver-sity, also taking into account risksto human health.





MMiirrrroorrss::



CCoonnttaaccttss



IICCQQ:: 7700996666443333









155

IIConvention Highlights

• Creates a system that restricts and regulates trade inspecies whose survival is threatened to varyingdegrees;

• Appendix I species are the most endangered, includingthose directly threatened with extinction, whileAppendix III are the least threatened;

• Includes trade requirements for each Appendix thatcan range from trade bans or quotas for more threat-ened species—agreed upon at the Conference of theParties and by the CITES Plants and AnimalsCommittees—to documentation or notification require-ments for less threatened ones.

Convention on International Tradein Endangered Species of WildFauna and Flora (CITES)

The objective of CITES is the con-trol of international trade inendangered species and their prod-ucts by the provision of a frame-work for the sound management ofwildlife trade.

• Has legally binding target of 5 per cent reduction ofemissions of six key greenhouse gases in developedcountries by 2008-2012 compared to 1990, whicheffectively represents a 20 per cent cut compared tolevels that are projected for 2010 without measures;

• Industrialised countries are able to trade emissionscredits among themselves and use a “clean develop-ment mechanism” to encourage sustainable develop-ment by financing emissions-reduction projects indeveloping countries for credit;

• The UNFCCC says that measures taken to combat cli-mate change should not constitute a means of arbitraryor unjustifiable discrimination or a disguised restrictionon international trade.

Kyoto Protocol to the UNFramework Convention on ClimateChange (UNFCCC)

The Kyoto Protocol aims to stabilizegreenhouse gas concentrations inthe atmosphere at a level thatwould prevent dangerous human-induced interference with the cli-mate system.

• Has phase-out schedules for ozone-depleting chemicalsthat constrain production, consumption and export andimport, with different schedules for developed anddeveloping countries;

• All parties to the Convention must ban exports andimports of controlled substances to and from non-parties;

• Production and consumption of CFCs, halons and otherozone depleting chemicals have been phased out indeveloped countries since 2000 and a schedule is inplace to eliminate the use of methyl bromide, a pesti-cide and agricultural fumigant, in developed countries,thereby affecting relative production costs.

Montreal Protocol on Substancesthat Deplete the Ozone Layer

The Montreal Protocol aims to pro-tect the ozone layer by taking pre-cautionary measures to controlequitably total global emissions ofsubstances that deplete the ozonelayer.



156

Convention Highlights

• Parties can notify the Secretariat of their decision toprohibit the import of hazardous wastes specified inAnnexes I or III of the Convention, in which case otherParties have to prohibit the export of those wastes tothe party that has notified;

• Any party wishing to export hazardous wastes to anoth-er party (which has not notified the Secretariat thatimports of the waste are prohibited as per the lastpoint) must notify, in writing, the potential importingparty and ask them for permission for the transbound-ary movement;

• Aims to ensure that the transboundary movement ofhazardous wastes and other wastes is reduced to theminimum consistent with environmentally sound andefficient management;

• Requires packaging, labelling, and transport of haz-ardous wastes.

Basel Convention on the Controlof Transboundary Movements ofHazardous Wastes and theirDisposal

The Basel Convention aims to pro-tect human health and the envi-ronment against the adverseeffects which may result from thegeneration and management ofhazardous and other wastesthrough control of the transboundary movements of hazardous wastes.

• Creates a “prior informed consent” (PIC) procedure inorder to formally obtain and disseminate the decisionsof importing countries whether they want to receiveshipments of hazardous chemicals that are covered bythe Convention;

• Chemicals are subject to the PIC procedure when notifi-cations have been received from both Conventionregions, or are severely hazardous pesticide formula-tions that have been nominated for coverage becauseof the hazard they pose to developing countries oreconomies in transition, and have been recommendedby the Convention’s Chemical Review Committee;

• Requires information on national bans or severe restric-tions of a chemical; exports a chemical from a countrywhich bans or severely restricts it; and for safety datawith any shipment of Convention chemicals to be usedfor occupational purposes.

Rotterdam Convention on thePrior Informed Consent Procedurefor Certain Hazardous Chemicalsand Pesticides in InternationalTrade

The Rotterdam Convention aims topromote shared responsibility andcooperative efforts among Partiesin the international trade of cer-tain hazardous chemicals in orderto protect human health and theenvironment from potential harmand to contribute to environmen-tally sound use.



157

IIConvention Highlights

• Requires that POPs be handled, collected, transported,stored and disposed of in an environmentally friendlyway, including by not transporting them across inter-national boundaries without taking into account rele-vant international rules, standards and guidelines;

• The Convention also has promotional measures aimedat the minimization and, where feasible, eliminationof the releases of unintentionally produced POPs;

• Eliminates import and export of POPs except for envi-ronmentally sound disposal, specific national exemp-tions, or to a non-party to the Convention who certi-fies that it will use them sustainably.

• Establishes countries’ sovereignty over exclusive economic zones (EEZs) that extend 200 nautical milesfrom the territory of states;

• Obliges states to determine the allowable catch, whichwill allow fish stocks to be maintained at sustainablelevels, and adopt conservation measures to maintain orrestore populations of harvested species at levels whichcan produce maximum sustainable yield, as qualified byrelevant environmental and economic factors;

• Also obliges states which are unable to fish all theirallowable catch to sell rights to that catch to otherstates.

UN Convention on the Law of the Sea

The Convention is based on theprinciple that states should cooper-ate to ensure conservation andpromote the objective of the opti-mum utilization of fisheriesresources both within and beyondthe exclusive economic zone.

Stockholm Convention onPersistent Organic Pollutants

The aim of the Convention is toprotect human health and theenvironment from PersistentOrganic Pollutants (POPs) byreducing or eliminating theirrelease into the environment.



158


In a globalized economy, domestic policiesincreasingly have international repercussions.International agreements and rules, throughpooling sovereignty to address trans-borderor global problems, also reduce domestic pol-icy space.

This is most true for developing countriesthat are often at the receiving end of the poli-cies of developed countries. Developingcountries have less capacity and leverage tonegotiate favourable international disciplinesacross international arenas, since these tendto be already captured by vested interests indeveloped countries (such as in agriculture orintellectual property rights). To redress theseimbalances, the impact on developing coun-tries should be taken into account and shouldbe an integral part of policy-making in devel-oped countries and in negotiating interna-tional rules.

Beyond equity reasons, this would also be inthe economic interest of developed countries.In an interdependent global economy, devel-oped countries derive benefits from theadvancement of pro-poor sustainable devel-opment in developing countries. These poli-cies can foster growing demand for high-value exports of goods and services, whereaspersistent global poverty, environmentaldegradation and failing states may triggernegative economic, security, migratory,

health and environmental consequences on aglobal scale.

Recently, the need to enhance policy coher-ence has been given particular attention ininternational discussions. In September2000, the Heads of State and Government of189 countries adopted the United NationsMillennium Declaration, which sets explicittargets for the reduction of human misery,enhancement of social development and pro-motion of environmental regeneration. Italso calls on developed countries to ensurepolicy coherence and adequate financialresources for developing countries. The eightMillennium Development Goals (MDGs)developed in this framework contain 18 tar-gets and 48 indicators that build on the out-comes of earlier UN conferences and actionagendas. In March 2002, the UN Conferenceon Financing for Development approved theMonterrey Consensus, which reaffirms thesedevelopment goals and introduces a mutualaccountability framework for developed anddeveloping countries with verifiable indica-tors of development progress.

The Monterrey Consensus furthered themomentum to address policy coherence bymaking development a shared responsibilityof developing and developed countries.Developing countries committed to goodgovernance and improved policies for devel-

Issues and Debates

159

IIPolicy CoherenceOtto Genee

•“Many countries now realize that economic growth and poverty reduction cannot besustained if development is achieved without consideration to the environment.”

•


opment and poverty reduction, while devel-oped countries agreed to more and effectiveaid and policy coherence. Under the umbrel-la of global partnership for development,MDG 8 formulates a systemic target to“developing further an open, rule-based, pre-dictable, non-discriminatory trading andfinancial system.” Other indicators on aid,market access and debt sustainability fordeveloping countries were developed to mon-itor progress. MDG 7 adds the goal of ensur-ing environmental sustainability in develop-ing and developed countries to the povertyreduction and specific social objectives ofMDGs 1 to 6. It calls for sustainable devel-opment principles to be integrated intonational policies and to reverse the rapiddegradation of environmental resources.

The Johannesburg World Summit onSustainable Development (WSSD) inSeptember 2002 offered further guidance onachieving coherence between economic,social and environmental policies. It recom-mends mutually reinforcing integration intocountry strategies and international policies.Many countries now realize that economicgrowth and poverty reduction cannot be sus-tained if development is achieved withoutconsideration to the environment. Fisheries isan example of a sector where greater coher-ence is urgently needed between trade, fish-eries management and developmental poli-cies at the domestic and international level inorder to address the serious crisis of over-fish-ing by putting in place effective fisheriesmanagement and subsidies regimes.

In the “Doha Development Agenda,” theWorld Trade Organization (WTO) Membersmade a commitment to place the interestsand needs of developing countries at theheart of the new round of multilateral tradenegotiations and to ensure that trade sup-ports development to the benefit of develop-ing countries. Despite the insistence of theEuropean Union (EU), only a limited num-ber of trade and environment issues wereplaced on the negotiating agenda, given

resistance by the U.S. and many developingcountries.

Policy coherence is particularly relevant totrade with its many dimensions and theplethora of “behind-the-border” trade-relatedrules in the WTO, as well as bilateral andregional trade arrangements. If trade liberal-ization and WTO disciplines are to fostereconomic growth, poverty reduction and sus-tainable development, better coordinationwith other policies and policy communitiesat the national and international levels isessential. While developing country govern-ments bear responsibility for policy coher-ence at the national level, the internationalpolicy context in which their domestic poli-cies are framed should be supportive ofcoherence and promote sustainable develop-ment.

Interests and Fault LinesHow does the limited mandate for trade andenvironment negotiations in the WTO fitinto the broader framework of policy coher-ence for development and could this man-date enhance negotiating leverage from aSouthern perspective?

Trade Policy Coherence in the WTO

The importance of enhancing coherencebetween trade and environment has been dis-cussed for some time in the form of calls formutual supportiveness of policies. The needto address the complex linkages betweentrade and environment was recognized in theRio Principles and Agenda 21, adopted at theRio Earth Summit, and in the UruguayRound of trade talks.

This first “trade and” issue resurfaced with thecreation of the WTO and its Committee onTrade and Environment (CTE). The CTEhas devoted a considerable amount of time toidentifying the linkages between trade andenvironment policies, including the scope for“triple-win” outcomes that benefit trade,development and environment. Particularattention has been given to the potential envi-


160


ronmental benefits of removing trade restric-tions and distortions in the agriculture, fish-eries, forestry and energy sectors. The CTEhas also examined the market access impactsof environmental measures, particularly withregard to developing country exports.

In this respect, developing countries haveraised concerns regarding eco-labelling and“green protectionism.” Environmental andhealth standards and regulations and relatedconsumer and business preferences come inmany forms, such as requirements on prod-uct-content, packaging, labelling, traceabilityand certification. An issue of internationalpolicy coherence discussed in the CTE hasbeen the compatibility of trade obligations inmultilateral environmental agreements(MEAs) with WTO rules.

Beyond the unresolved legal debate, lies thedeeper question of how trade measures canstrengthen environmental policy to deal withglobal problems. Trade measures in MEAshave usually been included as part of a broad-er package that includes technical and finan-cial assistance, which are often more appro-priate to deal with the environmental prob-lems. Implementation of MEAs, however,may be less than perfect because these sup-portive measures are often voluntary andbecause of perennial funding problems.

The Doha Ministerial Declaration mandatednegotiations in the CTE in Special Sessionon the relationship between existing WTOrules and specific trade obligations set out inMEAs, procedures for information exchangewith MEA secretariats, and the reduction orelimination of tariff and non-tariff barriers toenvironmental goods and services (EGS).This agenda seems too narrow and unbal-anced to benefit developing countries, partic-ularly in view of the negotiating power bal-ance in the WTO.

Nevertheless, better access to EGS and relat-ed technology could prove beneficial to theenvironment and resource management indeveloping countries. Proposals to make

Policy Coherence

161

IIPromoting policy coherence By Bernice WingYee Lee

Are environmentalprotection policies inEurope legitimate ormerely market accessbarriers for developing countries? Can tradenegotiations at the World Trade Organization(WTO) take into account the social and envi-ronmental impacts of trade liberalization?How can the agricultural policies of rich coun-tries be designed in a way that would notadversely affect the poor in small and vulner-able economies?

These questions highlight the kind of dilemmasfacing policy-makers today. Realigning themyriad policy directions towards international-ly agreed sustainable developmental goals andtargets lies at the heart of the concept of pol-icy coherence, which is fast becoming oneamong many “silver bullets” that is supposedto help achieve sustainable development. Thisis not unlike the way governance, or multi-stakeholder engagement, infiltrated the devel-opment vernacular in the 1990s.

We now know that policy coherence should notbe promoted for its own sake. Only with clarityof purpose can policy-makers design clearmechanisms and processes to ensure coherencefor the greater public good. Championed bystalwarts of the development assistance com-munities, “policy coherence for development”(PCD) is a catchphrase for those frustrated byhow development objectives for poverty reduc-tion, food security, or rural development areundermined by policies advocated by otherarms of the same government.

While rich country representatives at theWorld Bank are telling poor countries toinvest in comprehensive primary education,their counterparts at international financinginstitutions are asking those same govern-ments to cut their education budget to serv-ice external debt payments—often owed torich country private sector banks.




162


Such contradictory policy advice is at bestconfusing, and often appears hypocritical. Aredeveloped countries simply incapable of coor-dinating actions to deliver what they professto propound, or are they just taking with onehand what they offer with the other?

Unsurprisingly, developing country represen-tatives often claim that they prefer to dealwith countries that are open about their mer-cantilist ambitions—better the devil youknow. Constrained by dependence on externalresources and confronted by conflictingadvice from different Northern countries, aswell as from different departments withineach of these governments, developing coun-try governments often find it difficult to pur-sue their own policy goals based on an objec-tive analysis of their priorities. In this con-text, more policy coherence on the part of theNorthern countries would indeed be a helpfulstarting point.

Attempts to promote “policy coherence fordevelopment” within rich countries are signif-icant and laudable. Domestic politics is but anarbitration process to mediate among diverseinterest groups. Environment and develop-ment lobbies tend to be under-represented orunder-heard in domestic political arenas indeveloping countries, not least because theyare often weaker than private sector orexporters’ interests. Promoting policy coher-ence within rich countries can bolster thehand of pro-sustainable development domes-tic constituencies and help foster new ones.

Problems however arise when this domesticanalogy is applied to the global sphere, wherewe attempt to promote policy coherenceamong international regimes. This comes inthe form of advocacy for coherence among,for example, trade and environment regimes,or between finance and trade regimes. Eventhough the emergence of these regimes wasoften underscored by interests in deliveringglobal public goods, they have been devel-oped along very different trajectories withdiverging assumptions. The institutional evo-lution of multilateral agreements is oftenshaped by different ideologies and changinglevels of political will, which may fluctuate

from one government to the next within thesame country.

In the absence of a shared global vision forachieving sustainable development, and aglobal democratic mechanism to arbitrateamong interests of different internationalregimes, policy coherence alone will not avoidthe reality of power politics. Promoting coher-ence among unequal regimes—pitchingfinance against the environment for exam-ple—is unlikely to challenge the dominanceof powerful interests without correspondingnormative realignment around sustainabledevelopment goals.

At the global level, it is often in the dialecti-cal interaction among different regimes thatwe see the consolidation and effective articu-lation of agreed global norms. This has hap-pened, for example, in WTO jurisprudencewhere environmental norms have been upheldand consolidated through the dispute settle-ment process. These processes of re-articula-tion and consolidation are crucial because—in addition to policy coherence—internationalinstitutions and regimes need to maintain rel-evance and be responsive to lessons learnedfrom past policy prescriptions. These processesare also necessary for mediating potentialtensions among these different regimes.

Today, with the range of internationallyagreed goals and targets, we face unprece-dented opportunities for galvanizing politicalwill to deliver on sustainable development.We also face many hurdles due in part to widedivergence on what are believed to be viablesustainable development paths and models.In this context, policy coherence, despite itselusiveness, can provide a much needed toolto assist policy-makers in understanding andmediating these disparities, and in chartingpotential areas of convergences. There isgreat hope that, armed with deeper under-standing and less ideology, the internationalsustainable development community willbegin to practice what it preaches.

Bernice Wing Yee Lee, from Hong Kong, China,was the Policy Analysis and Strategy Advisor atthe International Centre for Trade andSustainable Development (ICTSD).


these negotiations more meaningful fordeveloping countries by including environ-mentally preferable products (EPPs), such asnatural fibers and organic agricultural prod-ucts, face problems in agreeing to broadenthe dominant definition of environmentalgoods and differentiating products at theborder based on their environmental end-use. Moreover, market access for most EPPs ishampered more by regulatory impedimentsalready governed by WTO disciplines—suchas under Agreements on the Application ofSanitary and Phytosanitary (SPS) Measuresand on Technical Barriers to Trade (TBT)—than tariffs. This highlights the need forensuring policy coherence not only amongsttrade and other policy areas but also withintrade rules themselves.

Although the concerns of some developingcountries about broadening the trade andenvironment negotiating agenda are under-standable, attempts to circumscribe it withinthe CTE, as opposed to other WTO negoti-ating groups, could prove self-defeating pre-cisely because it undermines the possibilitiesof coherence and beneficial trade-offs.Currently, negotiations in several areas rele-vant to trade and environment, such as non-agricultural market access (NAMA) and theAgreement on Trade-related Aspects ofIntellectual Property Rights (TRIPS), takeplace in dedicated negotiating groups, not inthe CTE. The CTE is referring most relatedissues to these groups and is having difficultyperforming its overview role foreseen inParagraph 51 of the Doha Declaration.Positive trade-offs for developing countriesare more likely to be found in the core WTOmarket access areas of agriculture, manufac-tured goods, services and rules, including onnon-tariff barriers and fisheries subsidies.

The Broader Policy Coherence Challenge

A major reason why policy coherence is diffi-cult to achieve is the elusiveness of the con-cept. It needs to be defined more clearly anddissected into its various dimensions to

become useful in policy-making and opera-tional in international negotiations.

Is it, for example, a goal or a process? Policycoherence is often equated to having a fairand transparent process of policy-making inplace. This is considered to be sufficient tosolve the problem. However, even in perfectcircumstances, some incoherence betweenvarious policies of any government isunavoidable, since governments representdiverse constituencies with different andoften competing interests. Defining coher-ence as consistency between all policy objec-tives across all areas turns it into a neutralconcept of optimal coordination structuresand, thus, rather meaningless.

Policy coherence, therefore, needs to aim fora key objective. What could this objective bein the context of a Southern agenda on tradeand environment? The CTE negotiatingmandate only refers to mutual supportivenessof trade and environment without defining aclear policy objective. Development, as elab-orated in the MDGs and including the focuson environmental sustainability contained inMDG 7, can be the overarching objective.Indeed, because the MDGs are international-ly agreed development targets, such a formu-lation of the objective of policy coherencemight also provide a certain political leveragein negotiations across international fora.

In trying to incorporate this broader notionof policy coherence, the Organisation forEconomic Co-operation and Development(OECD) has developed a practical workingdefinition of policy coherence for develop-ment (PCD), which implies “working toensure that the objectives and results of a gov-ernment’s development policies are notundermined by other government policieswhich impact on developing countries andthese other policies support developmentobjectives where feasible.” This definition hasbeen further unpacked into four interrelatedlevels at which governments and institutionscan seek greater policy coherence, namely:

Policy Coherence

163

II


1. Internal coherence is the consistencybetween the goals and modalities of a gov-ernment’s development policy.

2. Intra-country coherence is the consistencyamong aid and non-aid policies.

3. Inter-donor coherence is the consistency ofaid and non-aid policies across OECDcountries.

4. Donor-recipient coherence is the consistencyof policies adopted by developed anddeveloping countries and internationalinstitutions to achieve shared developmentobjectives.

It has been noted that while distinct decision-making structures may govern these fourinterrelated levels of PCD, decisions at onelevel may have implications for one or moreother levels. The traditional focus in devel-oped countries has been on level 1 coherenceissues, i.e., how the means and aid instru-ments align with development goals, with aconcentration on volume and quality of aid.There is a growing realization that, even if alldonors reach the target of 0.7 per cent ofGNP and the effectiveness of aid is raised, aidalone will not be sufficient to achieve theMDGs by 2015. More attention is thereforebeing given by developed countries to levels 2and 3 coherence issues, such as the ineffec-tiveness of tied aid, the need for two-wayintegration between trade, agriculture andaid policies—for example, real market access,abolishing trade-distorting subsidies andmore aid for trade to address supply-side con-straints—and the need for multilateral rulesto reduce subsidies. This is leading toimproved coordination across departmentsand pleas for a “whole-of-government”approach to development in OECD coun-tries. However, considerable policy adjust-ments are still required in trade, agriculture,environment, climate change, migration, etc.

The defining feature of PCD, however,remains the identification of trade-offs andsynergies across policies towards achieving

(sustainable) development. In an ideal world,concerned policy communities interact,stakeholders are involved in the decision-making process and balanced decisions aretaken on the basis of a comprehensive analy-sis of possible effects using tools such asimpact assessments. The effect of measures ismonitored and kept under review and, if nec-essary, policies are adjusted or accompaniedwith supportive measures. In the real world,however, governments have to find a workingconsensus among diverse interests underuncertain conditions and often have to settlefor second-best solutions. As a result, expec-tations should not be exaggerated as to whatpolicy coherence can accomplish. Doing noharm to development should be the firstprinciple and the minimum to be expected,with synergy between policies being an addedbonus to be aimed for.

Trends and FutureDirectionsIn principle, the MDGs, the MonterreyConsensus, WSSD, the “Doha DevelopmentAgenda” and the UN World Summit haveput in place mutually supportive policyprocesses, all of which call for broad-basedpolicy coherence for sustainable develop-ment. These building blocks of the globalpartnership, however, require institutionalimprovements and dedicated capacity todeliver coherent results.

While some modest PCD results have beenachieved, the overall picture is disappointingand remains unbalanced in terms of mutualaccountability between developed and devel-oping countries. In individual recipientcountries, donors devote more attention toresult-based management systems and con-verge around the poverty reduction strategyprocess (PRSP) sponsored by the WorldBank and the International Monetary Fund.

Some donors have been helping developingcountries to mainstream sustainable develop-ment in PRSPs or to implement MEA obli-


164


gations. However, the record of currentPRSPs in fully integrating sustainable devel-opment is poor and, at best, an add-on.Donors need to do more through pro-poorenvironment-related initiatives and in assist-ing developing countries to strengthen theintegration of environmental concerns intopolicies. Making PRSPs a truly country-owned, MDG-based, and multi-stakeholderprocess should be the goal. However, theprocess has tended to focus too heavily onrecipient countries’ performance, neglectingthe impact of other developed country poli-cies on their chance of achieving the MDGs.

The Millennium Task Force of the UnitedNations faults developed countries for show-ing a persistent lack of coherence in theirdevelopment, finance, foreign, trade andenvironmental policies. They lack firm com-mitments, action plans, specific timeframesand result-based frameworks in the area ofPCD. This should not come as a surprisesince decision-making in any country impliesweighing competing and conflicting interests.Moreover, foreigners do not vote. Political willand stakeholder power ultimately decidewhich interests prevail. Yet, the credibility ofdeveloped countries and their developmentpromises is now at stake. Consumers and tax-payers in developed countries and the poor indeveloping countries may again end up bear-ing the cost of incoherent policies, while well-connected interest groups in developed coun-tries reap the benefits. The Millennium TaskForce recommends that developed countriessubject themselves to, at least, the same stan-dards of accountability as expected fromdeveloping countries. In addition, there is aneed for reform of the global “rules of thegame,” starting with more systematic moni-toring and evaluation of international agree-ments and regulatory regimes.

Obviously, not all PCD issues can beaddressed at the same time, nor should theynecessarily be the subject of immediate inter-national negotiations. For reasons of politicaleconomy, priorities must be set and coalitions

Policy Coherence

165

IINew policycoherencechallengesBy StéphaneGuéneau

The creation of theWorld Trade Organiz-ation (WTO) hastenedthe conversion ofwhat had largely been a multilateral traderegulation system into a public policy coordi-nation system. For example, according to the“single undertaking” principle, the membercountries of the WTO are obliged to accept a“package” that includes, amongst others,agreements on sanitary standards, services,intellectual property and agriculture. In addi-tion, through the decisions of its DisputeSettlement Body, the WTO can intervene inpublic policy in areas such as health, culture,social rights and the environment.

The emergence of the WTO’s central role inglobal governance has emphasized the impor-tance of policy coherence. This, however, hasalso raised a number of challenges. First,there is often a lack of synthesis between sec-toral policies. The contradictions betweenagricultural policies and development assis-tance policies of industrialized countries arethe most obvious examples of policy incoher-ence. This lack of coherence is also evident inother fields, such as sanitary safety and theenvironment. For example, an infinitesimalreduction of a product’s sanitary risk can leadto standards that considerably limit theexport possibilities for some of the world’spoorest countries.

Secondly, there is a lack of consistencybetween the WTO’s objectives and its proce-dures. The preamble to the WTO Agreementproposes to achieve sustainable developmentgoals by seeking to ensure economic growth,raise income and standards of living, bringabout full employment, and by allowing forthe optimal use of the world’s resources. Inpractice however, trade liberalization is thetop priority for the WTO. This is reflected inthe current negotiations consisting essential-ly of reciprocal bilateral exchanges of strict




166

private partnerships, etc.—which would makeit possible to meet these objectives.

The second relates to sustainability impactassessments (SIA). The special and differen-tial treatment provisions that were so difficultto win during the negotiation of the WTOagreements, now look rather insignificantcompared to the equity issues posed by out-come of the negotiations. Developing coun-tries, therefore, are demanding more justice,equity and coherence between sustainabledevelopment and trade policies. As a result,SIAs of trade policies and agreements couldbe a tool for achieving policy coherence. SIAswould make it possible to develop a commondefinition of the measures to be implementedin order to meet sustainable developmentobjectives.

Discussions of policy coherence must also takeinto account global socio-political realities.As the world’s economic and trade balanceevolves, any attempt to improve coherencewould have only very limited effect if cooper-ative relations with emerging players are notexamined. For example, what will be theeffect of eliminating subsidies for cotton pro-ducers when fluctuations in China’s demandwill be the adjustment variable for global cot-ton prices? How effective can a European pol-icy for the public purchase of sustainably har-vested timber be if the lion’s share of Africa’stropical timber exports will soon be exportedto China rather than to Europe?

In fact, policy coherence cannot be achievedsolely by improving institutional instruments.It also means rethinking the structure of theinstitutions we have created, tackling theNorth-South divide that we are still trappedin, examining the new and emerging realitiesof global trade flows, and taking the overar-ching goal of sustainable development as theoperational, rather than as a rhetorical, objec-tive of trade policy.

Stéphane Guéneau, from France, is a PolicyAnalyst and at the Institute for SustainableDevelopment and International Relations(IDDRI) in Paris, France.


mercantile trade concessions. These are a farcry from an international trade system aimedat achieving sustainable development as stat-ed in the preamble.

It is not that the architects of the WTO didnot anticipate such discrepancies. TheCommittees on Trade and Development (CTD)and on Trade and Environment (CTE) wereformed precisely to examine and ensure somemeasure of coherence. The mandates of theseCommittees, however, are rather narrowlydefined. For example, the Committee on Tradeand Environment (CTE) focuses on the com-patibility between environmental policies andglobal trade rules; but it cannot address theeffect of trade liberalization and trade policieson sustainable development.

Furthermore, the solutions suggested for alle-viating policy incoherence tend to inclinetowards demands for further liberalization; forinstance, by improving market access andeliminating subsidies. The demand for policycoherence, then, translates merely to a call forother policy areas to conform to the norms oftrade policy. For example, a country’s policieson food security, rural development, land useplanning, sanitary measures, environmentalprotection and the management of risks relat-ed to new technologies, such as geneticallymodified organisms, are formulated based onlegitimate public policy choices. Why shouldthese public policy objectives be subordinat-ed to the overriding objective of trade liberal-ization?

If we are to deal with the challenge of policyincoherence, at least two issues deserve furtherexploration. The first concerns WTO reform.Why not completely change the procedurallogic of negotiations, focusing on objectivesinstead of means? In this context, the devel-opment goals set out at the United NationsMillennium Summit could serve as a commonbasis for international negotiations. Trade lib-eralization would be one of many tools—including international aid, strengthened stan-dards, economic policy, investment, public-


formed around converging interests. Thefinal policies will only be coherent if the are-nas in which they are negotiated are linked.Coherence should not come as an after-thought and needs to be built into the nego-tiation of these policies.

Reporting, monitoring and dialogue alsohave a useful role to play to achieve morecoherence in reporting obligations on policiesand mutual peer reviews between developedand developing countries. Independent mon-itoring, performance rating and research onthe impact of developed country policies ondeveloping countries is also necessary. TheWTO should also devote more attention tothe policy coherence efforts of its Members’trade policies, individually, in the Trade

Policy Review Mechanism (TPRM) and, col-lectively, in the Committee on Trade andDevelopment (CTD).

In any institutional environment—be it indeveloped or developing countries—achiev-ing greater PCD will ultimately be a political,legal and administrative process. There is nosubstitute for showing political will and lead-ership, which has to come from the very topof governments and international organiza-tions. Political will and WTO commitmentsneed, however, to be followed through inappropriate coordination structures and con-sultation mechanisms, adequate capacity andPCD action plans, down to the level of work-ing practices of ministries, to have real impacton the ground.

Policy Coherence

167

II



168


The growth of regional and bilateral tradeand investment agreements since the mid-1990s is one of the most significant develop-ments in the landscape of the internationalsystem of trade rules since the creation of themultilateral regime half a century ago. In thefirst 46 years of its existence, as the GeneralAgreement on Tariffs and Trade (GATT), themultilateral regime received notification of124 such agreements. In the 11 years sincethe creation of the WTO in 1995, it hasreceived another 186, with an exponentiallygrowing number in the planning or negotia-tion stages.

But the numbers only tell part of the story.Such agreements have been around for manyyears; in fact the GATT in 1947 made spe-cific allowance for customs unions and freetrade agreements (FTAs). Until the 1990s,however, with notable exceptions such as theEuropean Union (EU), those agreementswere dysfunctional, testaments to the failedexperiment of import substitution at theregional level.

Today’s FTAs are different, focused mainlyon exports and market access. As well, manyof the moribund “first generation” agree-ments have been remade as effective instru-ments of economic integration. And SouthAsia, the Middle East and Africa—formerly

mistrustful of the neo-liberal philosophy oftrade liberalization—are now negotiatingFTAs with the fervor of the newly converted.

This new dynamic complicates the debateson trade and environment. Each of the hun-dreds of FTAs has its own approach to envi-ronmental matters. Even those negotiated bya single country can differ widely. For exam-ple, the U.S.—instigator of many bilateraldeals since the North American Free TradeAgreement (NAFTA) of 1994—has evolvedthrough a number of different environmentalapproaches in reaching its current model.Moreover, the existence of a complex web oftrade law regimes outside the multilateral sys-tem can pave the way for better solutions atthe multilateral level, but it can also consti-tute a formidable obstacle to progress. Whatis clear, however, is that those interested intrade and environment debates should keep aclose watch on developments in the world ofFTAs.

Interests and Fault LinesA number of key issues have received verydifferent treatment in the various existingFTAs. As we shall see, in the best of cases,FTA negotiations offer a laboratory in whichbetter solutions may be found to the prob-lems facing trade and environment at the

Issues and Debates

169

IIRegional ArrangementsAaron Cosbey

•“The issue of how to reconcile environmental and trade law has dogged the WTOsince its inception. NAFTA, in an illustration of the fact that regional agreements

can move beyond impasses at the multilateral level, incorporates specific language on the relationship.”

•


multilateral level. In the worst of cases, theycan cement into place approaches that areworse than current multilateral practice, orthat offer poor examples of the way in whichthe multilateral system should proceed. Ifthey follow poor practice from the multilat-eral level, they can also complicate theprocess of multilateral reform, given the exis-tence of myriad regional agreements with thesame problematic provisions.

Environment and SustainableDevelopment as FTA Objectives

FTAs can affirm environmental integrity orsustainable development as one of theirobjectives either in the preamble, or in thebody of the agreement where objectives aretypically listed. A handful of East-AsianFTAs, for example, include preambular lan-guage similar to that found in the agreementestablishing the WTO: affirming that eco-nomic growth should be carried out in amanner consistent with sustainable develop-ment.

For example, Mercosur’s treaty of establish-ment asserts that its development goals mustbe achieved while preserving the environ-ment. The EU’s framework agreement forregional negotiations under which it is put-ting in place Economic PartnershipAgreements with Africa, Caribbean andPacific (ACP) developing countries specifical-ly affirms sustainable development as a goalof the agreements. Almost all of the recentFTAs signed by Canada and the U.S. followthe NAFTA language in resolving to promotesustainable development, and to strengthenthe development and enforcement of envi-ronmental laws and regulations.

Among other things, the importance of suchlanguage is as a guide to interpreting theintent of the provisions contained therein.The WTO’s Appellate Body, for example,relied on preambular language to help inter-pret GATT provisions in a landmark envi-ronmental case (Shrimp-Turtle dispute).

Environmental Exceptions in theAgreement

The GATT, the General Agreement on Tradein Services (GATS) and other bodies ofWTO law have general exceptions that mightinclude exceptions for environmental meas-ures. In the GATT, for example, there is anexception for measures necessary to protecthuman, animal or plant life or health (ArticleXX b), and another for measures relating tothe conservation of exhaustible naturalresources (Article XX g). The GATS containsa general exceptions clause in Article XIVidentical to that in GATT Article XX.Almost all modern FTAs include similarexceptions, many simply reproducing theGATT language.

There are, however, some key variations.Recent U.S. FTAs, for example, note that theparties understand that Article XX(b) coversenvironmental measures, and that ArticleXX(g) applies to measures related to the con-servation of living exhaustible naturalresources. These significant (and sometimescontroversial) interpretations are not explicit-ly spelled out in the GATT text. It is inter-esting to note that Mexico, after signing anagreement with such “GATT-plus” languagein the North American context, reverted to asimple reference to the GATT text in its sub-sequent FTA with Chile.

Multilateral Environmental Agreementsand Trade Law

The issue of how to reconcile environmentaland trade law has dogged the WTO since itsinception. NAFTA, in an illustration of thefact that regional agreements can movebeyond impasses at the multilateral level,incorporates specific language on the rela-tionship. It allows that in the event of anyconflict between NAFTA law and the obliga-tions of specific trade-related multilateralenvironmental agreements (MEAs), the lattershall prevail provided that the least trade-restrictive measure available is chosen tocomply with those obligations. This particu-


170


lar innovation has not been taken up in manyother agreements. Two FTAs subsequentlysigned by Canada do have such language, andMexico’s subsequent agreement with Chilereproduces this text, but it appears in noother FTAs.

Environmental Impact Assessment

A limited number of FTAs have been subjectto environmental impact assessments (EIA)before approval. NAFTA was the first, andthe U.S., Canada and the EU now routinelysubject their FTAs to such assessments, asdoes New Zealand (but with a much less rig-orous process). Unlike the North Americanvariety, the scope of the EU assessments goesbeyond environmental to social issues, and itsscope does not stop at the EU borders. In thefinal event, the EU exercises tend to be high-ly detailed assessments of the sustainabledevelopment implications of the agreementfor the EU’s negotiating partners.

U.S. negotiators typically require negotiatingpartners also to undertake environmentalreviews of trade agreements, but the tradepartners who have done such assessmentshave not seen fit to conduct these exercises insubsequent FTAs. After doing so for the U.S.and, in the case of Singapore, for Canada,neither Thailand nor Singapore conductedan EIA for their FTAs with Australia. Thissuggests that many Southern governmentssee limited value in such exercises. Singapore,for instance, argued in its FTA with Koreathat an EIA was not needed becauseSingapore’s environmental regime could dealwith all potential impacts.

A key feature of many of the EIAs is thedirection they give to subsequent capacitybuilding and environmental cooperationactivities, which tend to follow the areas ofneed identified in the impact assessments.

Regulatory Impacts: Services andInvestment

Almost all modern FTAs have provisions lib-eralizing trade in services (though the depth

Regional Arrangements

171

IIFostering sustainable development with RTAs

By Hank Lim and Matthew Walls

Regional trade agreements (RTAs) and coopera-tive mechanisms present both opportunities andchallenges for sustainable development. Whilerecent RTAs may lead to greater trade diversionand inefficient resource allocation, negotiatinga regional or bilateral agreement can also reducethe constraints that limit or slow progress inmultilateral talks and can therefore lead tobreakthroughs, or “WTO-plus” standards,unachievable in the short-term at the WTO.

RTAs have a further benefit in that they maycontribute to regional cooperation or integra-tion on issues outside of, but impacted bytrade. For instance, neighbouring countriesmay find it useful to cooperate on trans-boundary issues or shared interests to over-come limited financial and personnelresources, or to resolve potential disputes.However, RTAs may just as easily result incountries making tradeoffs to protect domes-tic industries, or the stronger economic part-ner unilaterally imposing its standards as con-dition for market entry. RTAs, then, need to beframed in ways that are beneficial to sustain-able development.

To date, few RTAs signed by Southeast Asiancountries incorporate the environment intothe core text of the agreements. This is hard-ly surprising, as members of the Associationof Southeast Asian Nations (ASEAN) wereamong the developing countries that opposedstringent environmental standards as dis-guised trade barriers. The priorities of ASEANgovernments have focused on sustainablegrowth, rather than sustainable development.




172


In practice, this means devoting their limitedfinancial resources to encouraging trade andindustry, and avoiding any conditions thatmay limit growth. However, the region’srecent experiences of fire and haze inIndonesia, and dwindling water levels on theMekong River, with their dramatic illustrationsof the economic and social impacts of envi-ronmental degradation, have succeeded inraising awareness of the environment.

While regionalism cannot be a substitute forthe weaknesses of global institutions, it is alsotrue that regional approaches can provide sig-nificant benefits. The preconditions to success-ful regionalism do not necessarily exist indeveloping countries in general. Within ASEAN,the prevailing political culture and internalinstitutional weaknesses remain a problem.

ASEAN’s trade agreements, for instance, sufferfrom a toothless dispute settlement mechanism,and members have failed to follow-through oninitiatives to build capacity in the region’s lessdeveloped countries. An environment fund wasestablished in 2004 to pool ASEAN’s limitedfinancial resources. While it was a belated recog-nition of the economic importance of a soundenvironment, the fund only attracted US$5 mil-lion in commitments. This is mainly because ofthe absence of regional and domestic institu-tions to enforce the agreements.

Southeast Asia can learn from the experienceand success of the China Council forInternational Cooperation in Environment andDevelopment (CCICED). It was established byChina’s State Council in 1992, and since thenhas contributed significantly in providing con-structive and pragmatic recommendations tothe Chinese government on environmental pro-tection and sustainable development. One ofthe most important features that contributed toCCICED’s effectiveness in influencing the policy-making process is the interactive and two-wayapproach that connects international researchinstitutions with China’s domestic needs, andthe group’s proximity to the highest powerstructure in China (the State Council).

If a CCICED-type group proves to be unfeasible,a Track-II (non-official but close to the power

structure) approach could be an effective mech-anism to provide linkages among importantstakeholders in research and policy-makers bothat home, in the region and internationally.

The key point is that regional trade agreementsare here to stay and working within their con-straints offers many opportunities to encouragesustainable development. Since the primaryobjective of developing countries is to increaseeconomic and human welfare, the standardpreferential trading arrangement is one of themajor options available for them. The ASEANSecretariat and Track-II institutes could help inestablishing best-practices to incorporate sus-tainable development in its RTAs.

Developing a standardized environmentalimpact assessment methodology and establish-ing criteria to operate capacity building fundsare all areas that can strengthen regionalcooperation in trade and environment. Also,while RTAs between developing countries maynot incorporate environmental issues to thesame extent as a trade agreement with a devel-oped country partner, developing countriesstand to benefit from cooperation since theyshare similar concerns about equitably usingindigenous knowledge, developing infantindustries and protecting their rich biodiversi-ty, the lynchpin of their tourism industries.

A useful approach for ASEAN and other devel-oping countries may be to adopt a phasedapproach in their regional arrangements;namely, focusing first on cooperation tostrengthen indirect non-economic and eco-nomic goals and then expanding the environ-mental content as the arrangement matureswith time. These goals may take the form ofsocio-cultural, regional security and environ-mental security within a long-term frameworkthat envisions ultimately liberalizing goodsand services and sustainable development.

Hank Lim, from Singapore, is the Director ofResearch at the Singapore Institute ofInternational Affairs.

Matthew Walls, from Canada, is a freelance jour-nalist and environmental consultant based inSingapore.


of commitments varies greatly) and settingrules to protect foreign investors (an area thatwas traditionally the remit of bilateral invest-ment treaties (BITs)).

With few exceptions, the modern FTA serv-ices texts follow the lead of the GATS, whichcontains a controversial article mandatingnegotiations to ensure that domestic regula-tion of services investments be “no more bur-densome than necessary.” The intent is toremove hidden barriers to entry of foreignservice providers, but recent GATS rulingspresage a strict interpretation of “neces-sary”—one that may erode parties’ policyspace to regulate in the public interest inareas such as water services and other serviceswith environmental implications.

To date the FTAs differ only marginally fromthe GATS approach on domestic regulation.This means, of course, that if the existing lan-guage is found to be problematic, fixing it atthe multilateral level will not be enough; thetask will be a more complex one of fixing it atmany levels. One key difference between theGATS and the FTA services provisions is thatmany of the latter are far more comprehen-sive, covering everything but those sectorsthat are listed as exceptions. GATS works theother way around, covering just listed-in sec-tors. The greater scope of the FTAs meansthat any problems (or improvements) aremagnified in effect.

In the area of investment there are a numberof environmental concerns, but the mostprominent stems from the standard protec-tions against expropriation. These cover bothdirect (i.e., the nationalization of an invest-ment) and indirect expropriation. The latterrefers to measures that stop short of takingover an investment, but which make life sodifficult for the investor that the effect is likea direct expropriation. In a number of casesunder NAFTA and BITs, investors havetaken the government to binding arbitration,claiming that non-discriminatory regulatorymeasures, used to protect public health and

the environment, hurt their profits to theextent that they amounted to indirect expro-priation. The effect of such proceedings mayagain be to shrink policy space for regulationin the public interest.

The only FTAs to address these issues are therecent U.S. treaties (beginning with the 2003U.S.-Singapore FTA), which append inter-pretive text explaining that regulatory meas-ures undertaken for the public good can onlyrarely be seen to be indirect expropriation.Along with this innovation, the new modelU.S. text makes provision for opening up theinvestor-state arbitral process to the public,accepting friends of the court (amicus curiae)briefs, and considering an appellate bodymechanism.

Most services and investment liberalization isdriven by demands from Northern negotia-tors, in the belief that Northern serviceproviders are more competitive, and that thedomestic systems of investment protection inthe South are inadequate.

The impacts in these two areas are excellentexamples of FTA provisions that on the sur-face have nothing to do with environment,but which through their substantive provi-sions may have significant effects. They high-light the need for FTA negotiators to studythe lessons learned in other agreements onthe tensions between commercial and non-commercial objectives, and argue for somesort of assessment process, whether formal orinformal, to accompany FTA negotiations.


The WTO debates on Trade-related Aspectsof Intellectual Property Rights (TRIPS) andenvironment are discussed in depth elsewherein this book. One of the key issues is thepatenting of life forms, and on this questionthe TRIPS Agreement gives WTO Membersthe flexibility to refuse to allow such patentsin the case of plants and animals (other thanmicro-organisms). Where patents cannot beused for plants, then a sui generis (that is,


173

II


specifically designed for the purpose) systemof protection must be used. These provisionsare under review in the Doha Round of talks,with the U.S. pushing to reduce the flexibili-ties, and most developing countries pushingto have them expanded.

The debate has to some extent been side-stepped by the U.S. in its bilateral negotia-tions, where it wields much more power thanit does at the multilateral level. In all itsrecent agreements, the U.S. has limited theflexibility found in the TRIPS Agreement ina number of ways, two of which in particularare important to the trade and environmentdebates.

First, in some agreements (such as withMorocco, Jordan, Laos and Singapore respec-tively), the U.S. has removed the exclusionfor patenting of life forms; plants and animalsmust be subject to patent protection. In oth-ers (such as U.S.-Bahrain), animals areexcluded. In still others (such as CAFTA), theTRIPS exclusions are adopted for both plantsand animals.

Second, in all its modern agreements, theU.S. has specified that the parties mustaccede to the International Convention forthe Protection of New Varieties of Plants(UPOV, 1991). The U.S. has been arguing atthe multilateral level that UPOV 1991should be defined as the only acceptable suigeneris system allowed as an alternative toplant patenting. Most developing countriesdisagree, and some have put in place theirown systems of intellectual property rights—systems which innovate by recognizing thevalue of traditional knowledge, and assertingbreeders’ rights to the seed they have cultivat-ed informally over the years. Adopting theUPOV 1991 would preclude the use of suchhomegrown, sustainable development-ori-ented systems. This case illustrates both the“WTO-plus” character of many of the FTAs,but also the potentially more unbalancednegotiating dynamic at that level.

Environmental Governance

Environmental governance in regional andbilateral FTAs refers to the mechanisms used toencourage upward harmonization of standards,to deal with environment-related disputes, toensure enforcement of environmental laws, tofoster environmental cooperation on matters ofshared concern, and to foster environment-related capacity building. The various regionaland bilateral FTAs offer a wide spectrum ofapproaches to these challenges.

NAFTA broke new ground by creating sideagreements on labour and the environment.The latter has arguably been successful in fos-tering cooperation on issues of shared interestsuch as migratory species, persistent organicpollutants, waste management, data stan-dardization and capacity building. It has beenless successful at making trade and environ-ment mutually supportive; at the end of theday, trade officials do not feel the need forinput from their environmental counterparts.

One interesting feature of the agreement is afacility that allows citizens to complain to anindependent body that one of the NAFTAgovernments is failing to enforce is own envi-ronmental laws. There is no real penalty forbeing caught out—only the power of shame.Other than the CAFTA, which has a similarfacility, subsequent agreements signed by theU.S. and Canada differ markedly inapproach. Most involve only state-to-statemechanisms for complaining about environ-mental enforcement—mechanisms that areunlikely to ever be exercised (NAFTA alsohas one, but it has never been used). TheCanadian agreements focus more on capacitybuilding for environmental management,but few of them are well funded. The morerecent U.S. agreements seem to have movedin this direction as well.

The EU, in its agreements with the ACP andMediterranean countries, also focuses moreon capacity building. The language is impres-sive, but there are not yet many institutionsset up to carry out the objectives.


174


Other agreements only slowly assumed anenvironmental role, none having been envi-sioned at the outset. Both Mercosur and theAssociation of Southeast Asian Nations(ASEAN) have active programs of regionalcooperation on environmental issues ofshared interest such as environmental infor-mation sharing and environmental standards.Mercosur, for example, has anEnvironmental Framework Agreement underwhich work is ongoing in a number of areasof regional interest, such as eliminating intra-bloc environmental non-tariff barriers, sec-toral work in areas like illegal logging, workon international standards such as ISO14000. Some of the areas for cooperation arenot actually trade-related, such as ASEAN’saction plan on haze pollution, but were occa-sioned by the existence of a FTA as a forumfor cooperative dialogue. Under bothASEAN and Mercosur, the environmentalprograms of work arose as the need becameobvious, as opposed to being built in to theagreements from the start.

Trends and FutureDirectionsThe most predictable trend in this area is anincrease in the number of FTAs worldwide.Based on past trends, if future FTAs areamong neighbours that share ecosystems theywill probably give rise to environmentalcooperation. In partners separated by greatdistance such cooperation is understandablyrare.

In the case of South-South agreements, thereare typically few environmental provisions atthe outset, but the existence of regional orbilateral fora for discussion, even if createdfor narrow economic purposes, will tend tofoster other types of cooperation as well. Suchagreements will undoubtedly foster impor-tant efforts toward regional and bilateralenvironmental cooperation. To the extentthey do, they will help make trade and envi-ronment mutually supportive.


175

IIThe “shadow” trading systemof RTAs

By Adil Najam and Dirk Swart

There are good reasons why developing coun-tries are attracted to free trade agreements,despite the additional burdens and costs thatthey impose. Not least of these is the promiseof access to a few, sometimes just one, sig-nificant market. It is not surprising, then,that recent years have seen a rather spectac-ular proliferation of minilateral and bilateralagreements.

This sum of bilateral and regional agreementsadds up to the creation of a “shadow” inter-national trading system that runs adjacent tothe WTO-centric multilateral trading system.This has some significant knock-on conse-quences:

• It encourages hub and spoke arrange-ments. This is bad for both hubs (in mostcases the European Union or the UnitedStates) and spokes (mostly developingcountries), but worse for spokes.

• It can help maintain trade barriers, espe-cially in areas that hit developing countrieshard like agriculture and textiles by formal-izing a system of preferences, allowing agri-cultural protection to continue and intro-ducing or extending onerous rules of origin.

• It can undermine the WTO principles ofmost favoured nation and reciprocity intariff dismantling.

• The trade agreements often include broad-er political and social issues.




176


In other words, there is a new emergent real-ity of a web of regional and bilateral agree-ments which have so proliferated and coversuch a diversity of issues that, between them,they add up to a new “shadow” system. Thereare four primary consequences for developingcountries.

A busier system and proliferation of foraincreases costs of participation for theSouth. In addition to the obvious overhead ofsmaller Southern countries having to splittheir negotiating forces to handle separateagreements, smaller countries suffer from aloss of policy space for differences in regula-tory approaches.

New fora can create duplications, inefficien-cies and disadvantages and communicationlosses. Preferential trading agreements canoffer attractive short term political wins andcan be sold as less restrictive options. However,the immediate gains from this low hangingfruit are often offset later on. They can fore-close the possibility of future changes and canenmesh countries in a web of agreements cre-ating substantial costs in administering anumber of agreements with differing terms.This can create an environment that is evenmore restrictive than the multilateral systemthey circumvented. Finally, additive regional-ism can mean that countries joining existingagreements are presented with few choices.They can accept the boiler plate (‘everyone elsesigned’) format or not, and the price of beingexcluded can be high.

A busier system can result in giving theSouth more voice, but less say. There areadvantages for countries to focus on bothmultilateral and preferential arrangements,and many countries do not have the resourcesto opt for both. Where should they focus theirefforts? First, regional agreements should beviewed not as an alternative to the WTO, butas a separate opportunity. Choosing to opt forpreferential agreements may not be beneficialin a feudal domain where only one or twoplayers call the shots. Developing countriescan have more “voice” in regional arrange-ments—simply because there are fewer play-ers. However, since the domination of the

dominant players is more profound, they oftenenjoy much less say—in terms of the abilityto actually shape the specific terms of suchagreements.

Bilateral agreements encourage a trade“feudal system” with Southern spoke coun-ties at the bottom. It is no surprise thatNorthern countries are enthusiastic propo-nents of preferential agreements. In a huband spoke system, hub countries are better offthan spoke countries and also benefit fromincreased negotiating power when others seekto join the system. Unfortunately, the logicalend to a hub and spoke system is hub aggre-gation where one or two large countries setthe terms of their agreements which then per-colate through to other countries as a sort ofa trade “feudal system.” This is a fundamentalchange to the world trading environment.

Preferential trading agreements have mixedeffects on developing countries. It will intro-duce a spaghetti bowl of agreements thatcould well become a nightmare to administerand, in the end, result in spoke countries hav-ing less, not more options, and reduced nego-tiating power.

There is a risk that the new system will halt—if it already hasn’t—the slow and steady gainsthe WTO has brought. Preference erosion willdecrease the interest in remaining engaged inthe multilateral arena. Recent experience sug-gests that developing country influence in theWTO has increased over time. The WTO hasitself changed as more developing countrieshave acquired membership and as a greatersegment of world trade flows through them.Although negotiating in the WTO is cumber-some and can be frustrating, it offers benefitsnot available elsewhere. The South needs toremain engaged in the WTO, and encouragethe North to remain engaged as well.

Adil Najam, from Pakistan, teaches interna-tional negotiation and diplomacy at theFletcher School of Law and Diplomacy, TuftsUniversity.

Dirk Swart, from South Africa, is a non-aca-demic staff member at Cornell University andan independent researcher.


This trend may balance against (and in somecases will be in reaction to) negative environ-mental scale and structural effects, particularlyin the context of liberalized trade in naturalresource-based products between partnerswith inadequate regimes for environmentalprotection. That is, as a result of liberalizationsome countries may see pressures to expandactivity in sectors that involve high levels ofenvironmental damage. The importance ofenvironmental assessment, and of effectiveenvironmental management regimes, may behighlighted by FTA-induced economicchanges.

Northern negotiating partners will likelycontinue to propose FTA provisions thatseem “green,” such as punitive state-to-statemechanisms to ensure environmental lawsare enforced, and will continue to includelanguage espousing environmental protec-tion and sustainable development. Based onexperience to date, these provisions will havelittle final impact. There is some promise tothe tendency of countries/regions such asCanada, the U.S. and the EU to center theenvironmental aspects of FTAs on buildingcapacity for environmental management. Butthe real question will be the level of resourcesthat will be devoted to fulfilling these objec-tives.

At the same time, however, where their inter-ests are so served, Northern partners willprobably continue to press for provisions thatmay have deleterious environmental effects,in the areas of so-called deeper integration:investment, services, intellectual propertyand other “non-environmental” arenas.

In the end, the proliferation of rules at theregional and bilateral level will complicateefforts to address environmental matters inthe WTO setting. In some cases, such ascapacity building for environmental manage-ment or trade law-MEAs conflicts, the FTAsoffer innovative solutions to problems thatdog negotiations in the WTO. In other con-texts, such as with intellectual propertyrights, the innovations offered by FTAsarguably move away from sustainable devel-opment and environmental protection. Herethe existence of FTA legal commitments mayfrustrate efforts to attain those goals in themultilateral setting.

Regional and bilateral agreements present aninteresting environmental opportunity; clear-ly the further away from the multilaterallevel, the easier it is to get agreement on mat-ters of shared environmental interest. This isboth because fewer countries are negotiating,and because regional groupings sharing


177

IIFigure 1. RTAs in force by date of entry into force.

200

150

100

50

0

1948

2004

2000

1996

1992

1988

1984

1980

1976

1972

1968

1964

1960

1956

1952

No.

of R

TAs

YearSource: WTO


ecosystems tend to share more or less com-mon environmental concerns and priorities.Bilaterals between non-neighbours, of course, may involve no shared ecosystems, but ofteninvolve the forcing of the environmental issueby a developed country partner.

If, as some claim, the potential environmen-tal benefits of trade agreements are mainly tobe found in the area of capacity building andcollaboration for better environmental

management, regional and bilateral agree-ments probably hold more green potentialthan the WTO. On the other hand, if themain environmental benefits of FTAs arederived from the economic growth theymight bring (as per the somewhat discreditedenvironmental Kuznets’ Curve hypothesis),then the greater potential probably lies withthe multilateral route.


178


While the management of international trade isgoverned by the policies and rules negotiatedby governments, the practice of internationaltrade consists of hundreds of thousand of dailyinteractions between individual companiesand their customers. In order to be able to sella product or service a company must firstaccess the market in which the consumer isbased. There are two main types of marketaccess requirements: technical regulations,which are mandatory requirements developedand implemented by governments; and stan-dards, which are voluntary requirements mostoften developed and implemented by privatebodies. Standards and technical regulations arecollectively referred to as non-tariff barriers totrade (NTBs).

As tariff levels have been lowered with thesuccessful implementation of binding tariffschedules in the World Trade Organization(WTO), non-tariff barriers to trade havebecome relatively more important. Giventheir lack of technical and institutional capac-ity to deal with NTBs, developing countriesin particular are concerned that an increasingnumber of standards and technical regula-tions will restrict their exports in the sameway that high tariff walls or low quotas usedto. While the main focus is often membercountries of the Organisation for EconomicCo-operation and Development (OECD),

standards and technical regulations alsoreduce trade between developing countries.

The increased fear of protectionism throughstandards and technical regulations comes ata time when governments are increasinglylooking to market-based approaches toaddress the challenges of sustainable develop-ment. The 2002 World Summit onSustainable Development (WSSD) Plan ofImplementation characterizes this shift awayfrom command and control and towardsmarket-based policies. The confluence ofthese two trends has led developing countriesto show particular concern to the potentialimpact of an increase in standards and tech-nical regulations that address issues such asenvironmental conservation, health and safety,and social issues—many of which may havean impact on market access for their exports.

At the same time, consumers and civil socie-ty groups are increasingly calling for actionsto reduce or mitigate the impacts of economicgrowth and trade liberalization—often lead-ing to policies that enhance the importanceof environmental and social standards. Insome instances, this pressure has led to theintegration of environmental standards ingovernment policies. An example is therecent German legislation that requires allFederal Government Agencies to buy timberfrom sustainably managed forests. While the

Issues and Debates

179

IIStandards and LabellingTom Rotherham

•“The increased fear of protectionism through standards and technical regulations

comes at a time when governments are increasingly looking to market-basedapproaches to address the challenges of sustainable development.”

•


legislation does not ban imports of unsus-tainable timber products, it does greatlyincrease the market for sustainably producedtimber and increases pressure on exporters toimplement voluntary standards.

While the majority of sanitary and phytosan-itary (SPS) measures to protect human, plantand animal health and safety are developedand imposed by governments, this is not thecase for environmental and social issues. Inthese cases, the pressure on companies toadopt environmental and social standards iscoming primarily from market forces, includ-ing from other private companies. Inresponse to consumer demand, pressure fromcivil society groups and, increasingly, interestfrom the financial sector, major companies inOECD countries are implementing “sustain-able” corporate procurement policies. Thecorporate social responsibility (CSR) agendais also an important contributor to this trend.Particularly in industries where market con-centration and consumer awareness ofimpacts is high, these policies are forcingenvironmental and social standards throughsupply chains.

Social and environmental supply require-ments are already a fact of life in OECD-based industries, such as forestry and textiles,a trend led by the highly concentrated retailsector. Coffee retailers—representing almost50 per cent of the total market—have recent-ly committed to develop and implement acommon baseline environmental and socialstandard for their suppliers. Leading mem-bers of the information and telecommunica-tions sector in OECD countries have alsodeveloped a sector-wide environmental andsocial standard for their supply chain. Why,then, is so much attention being given toissues such as eco-labels and environmentalstandards in the WTO—a body that regu-lates the actions of governments and notthose of private companies?

From past experience, we understand thatstandards can evolve rapidly from tools forproduct differentiation, to market segmenta-tion, to baseline requirements, to instru-ments of public policy, and, eventually, evento technical regulations.


180

Figure 1. Evolution of market requirements.

Risk Management

Supply-chain Requirement

SRI Criteria

Export Credit

Government Procurement

Licensing Criteria

InternalControl

MarketRequirement

PublicPolicy

Regulation

Code

Standard

TechnicalRegulation


One reason for this is that consumers are alsovoters. The public pressure that led compa-nies like B&Q (United Kingdom), IKEA(Sweden), Home Depot (United States) andother major buyers of timber products toimpose sustainable forest management stan-dards on their supply chain also has an influ-ence on the German Government. Also, oncea standard exists, is deemed effective, and isimplemented by a significant proportion ofcompanies in a sector or region, it is relative-ly straightforward and politically easy for agovernment to integrate it into public poli-cy—which may then have an impact onexporters in other jurisdictions.

Interests and Fault LinesFor a long time, the debate amongst WTOMembers with most important repercussionsfor the use of environmental and social stan-dards in trade policy was over the issue ofprocess and production methods (PPMs),and non-product related PPMs in particular.Some Members argued that the concept of“like product,” which is a cornerstone of theinternational trade rules, precluded the dif-ferentiation of products based on anythingother than the physical characteristics of aproduct itself, and not based on how it wasmade. In effect, this would have made it ille-gal for trade measures to address the full life-cycle of a product, and so limit them toaddressing consumption effects, not produc-tion effects. This position was supported bythe unadopted dispute panel reports in the1991 U.S.-Mexico and the 1994 U.S.-ECTuna-Dolphin cases.

However, the concept of “like product” hasevolved with the recent rulings of the WTOAppellate Body. In the 2001 Shrimp-Turtlecase, the Appellate Body ruled that WTOMembers can use the exceptions provisions inArticle XX to justify the “[imposition of ]conditions on imports’ PPMs to accomplishenvironmental objectives both outside theirjurisdiction and in the global commons,” aslong as they are applied in ways that do not

Standards and Labelling

181

IIEco-labelsfrom aSouthern perspectiveBy Veena Jha

Eco-labelling is a factof the internationalmarket place. How-ever, environmental-ists would have us believe that they are adominant factor in the marketplace. Marketsurveys indicate a small but growing impor-tance of this mechanism. Their effects aremore evident in the purchasing practices ofbulk buyers rather than of individual con-sumers. The challenge is how to accommodateeco-labelling programs in the TechnicalBarriers to Trade (TBT) Agreement, withoutcompromising the basic rules of the WorldTrade Organization (WTO).

The situation is complicated by the lack of anagreed interpretation on whether private, vol-untary eco-labelling schemes are within thescope of the TBT Agreement. Existing WTOjurisprudence, as well as market reality,appears to indicate that eco-labelling alreadyexists in the market place and is widely usedas an instrument to inform consumers about aproduct. So, there are no restrictions to theuse of eco-labelling as a market based volun-tary instrument.

Discussions in the WTO have focused on multi-criteria eco-labelling schemes, especially thosethat are based on non-product related processand production methods (PPMs). The effects ofeco-labelling on the market place and interna-tional trade, particularly on imports fromdeveloping countries have been limited. Itwould appear that the interest in eco-labellingin the context of international trade is, at leastin part, attributable to the fact that, from aconceptual and trade policy point of view, itinvolves many complex issues, such as PPMs,the definition of international standards, andtechnical equivalence. So far, little progresshas been made in dealing with the PPM issuein the context of eco-labelling, particularly inthe context of “equivalency.”




182


While there may be some advantages to devel-oping countries of clarifying the status ofeco-labelling with respect to WTO rules, theremay also be some disadvantages. Clarificationof the status of eco-labelling may result ingreater WTO discipline in certain sectors (e.g.,forest products, textiles, cut flowers), whereexports from certain developing countrieshave been adversely affected by suchschemes. It may provide an opportunity toforce greater WTO discipline for purely privateprograms and NGO campaigns in areas wheretrade has been adversely affected. It mayreduce pressure for unilateral measures.

Equally, there is a risk of establishing prece-dents with respect to PPMs, particularly if suchprecedents were to apply to labour, animal andhuman rights issues. This is particularly sobecause the new generation of eco-labels oftenencompass diverse issues such as labour rights,animal rights, and corporate social responsibil-ity. There is also a risk that clarifying the sta-tus of eco-labels with respect to WTO ruleswould encourage the wider use of eco-labellingin international trade, and often mesh protec-tionist intent. It may also become more diffi-cult to challenge an eco-labelling measure inthe multilateral trading system.

Even if the disadvantages were not at all sig-nificant, developing countries have littledirect benefits from eco-labels. They do notuse eco-labelling to any significant extent intheir domestic markets. To the extent that itis demanded through the supply chain, assis-tance has generally been forthcoming fromfirms for obtaining these labels. Very few, ifany, examples can be found where eco-labelshave obtained price premiums, market sharesor improved environmental performance. Inshort, eco-labels may have potentially adverseor at best neutral trade effects for developingcountries.

The dichotomy between developed and devel-oping country interests on this issue wasnever more evident than in the context of thediscussions on environmental goods and serv-ices (EGS). Instead of agreeing on the defini-tion of EGS or some appropriate criteria, theapproach of developed countries was to comeup with an illustrative list of EGS for use in

the negotiations mandated in the DohaDeclaration. In fact, the concept of inherent-ly environmentally friendly products such asorganic products, jute and coir products wasraised, but this discussion was not conclusive.This showed that EGS was more a marketingthan an environmental instrument. The sameapplies to eco-labelling, where many coun-tries have adopted their own standards.

What is worse is that environmental standardsmay actually result in the cartelization of anumber of industries and sectors. For exam-ple, an environmental directive in severaldeveloped importing countries, led to theshrinking of fisheries exporters in India fromnearly 400 to merely 100. This was because anumber of small-scale fishermen could notcomply with the standard and were forced outof business. In this case, the environmentalstandard actually had an impoverishingeffect.

Another matter of concern is that as compar-ative advantage in several areas of productionis shifting to developing countries from devel-oped countries, complex trade restrictiveenvironmental standards are kicking in. Forexample, in the textile and clothing sector,which is the mainstay of a number of devel-oping countries, an elaborate and complextrade restrictive TBT and sanitary and phy-tosanitary (SPS) non-tariff barrier, a new sys-tem called REACH (Registration, Evaluationand Authorization of Chemicals) has beenadopted in the European Union. A report fromthe U.S. Department of Commerce noted that,if adopted, some 30,000 chemical substanceswill be subject to this legislation and that theU.S. textile industry is likely to be widelyaffected, as technical requirements and test-ing procedures will be complex, time consum-ing and costly. The extent of the impact ondeveloping country industries could be muchmore severe.

To conclude, environmental considerations,while legitimate objectives, have the poten-tial to create trade distortions. These distor-tions can have damaging effects on develop-ing countries and can even exacerbate pover-ty. In addition, developing countries have totrade-off multiple social, development and



discriminate between WTO Members. Thisopened the door to the integration of non-product related PPMs into the trading system.The Appellate Body report in the EU Asbestoscase also found that non-product related PPM-based measures could be justified under bothArticles XX and III. Several independentexperts on trade law have also suggested thatthere is nothing in the WTO agreements tosupport the view that non-product relatedPPMs should be treated any differently fromother types of requirements. While there arelingering ripples of dissent—in particularamong many developing countries—it is nowincreasingly held that the use of non-productrelated PPM-based trade measures could possi-bly be justified under international trade rules.

Although there are some concerns that theprovisions dealing with standards are notrobust enough, most WTO Members agreethat voluntary standards and eco-labels arelegitimate policy tools. However, even if thiswere not the case, the finding would haveonly indirect repercussions for environmentalor social standards because, for the most part,the bodies that develop and impose standardsfall outside of the jurisdiction of the WTO.

Standards are addressed in two WTO agree-ments: the Agreement on the Application of

Sanitary and Phytosanitary Measures (SPSAgreement), which covers standards andtechnical regulations related to human, plantand animal health, including food safety; andthe Agreement on Technical Barriers to Trade(TBT Agreement), which covers the rest. AllWTO agreements are negotiated betweengovernments, and therefore define only therights and obligations of government bodies.While many of the standards covered underthe SPS Agreement are developed by govern-mental bodies, most other standards are devel-oped and implemented by non-governmentalbodies. There is no effective mechanism in theTBT Agreement to directly impose require-ments on these private standards bodies. Thereis only an indirect mechanism by which gov-ernments are encouraged to take reasonablemeasures to ensure that standards bodies oper-ating within their jurisdictions comply withthe Annex 3 Code of Good Practice for thePreparation, Adoption and Application ofStandards. Nevertheless, WTO rules set theframework in which private companies oper-ate.

Discussions on environmental standards(including eco-labelling) have taken placewithin the WTO Committee on Trade andEnvironment (CTE) since its inception in1994. Since then, the CTE has covered thesame issues that have cropped up again andagain—particularly “like” products; processand production methods; international stan-dards; and technical assistance. However, itwas not until the 2001 Doha Round—whichgave the CTE a mandate to address “labellingfor environmental purposes”—did a WTObody have both a formal mandate to discussenvironmental standards and a strict report-ing deadline. Despite initial efforts, notablyby Canada and the EU, to keep the issue onthe table, discussions have made virtually noheadway and the WTO negotiations areunlikely to lead to any major advances.

Although the CTE acts as a convener for dis-cussions on eco-labelling it does not have anyformal authority for rule-setting in the area.


183


environment objectives. It is not clear thatthe ordering preference of developing coun-tries between social and environmental objec-tives would be the same as that of developedcountries.

Veena Jha, from India, is the coordinator ofthe UNCTAD Initiative on “Strategies andPreparedness for Trade and Globalization inIndia.” This essay is written in her personalcapacity.


The TBT Committee is the only body withformal negotiating authority over the TBTAgreement. While Members of the TBTCommittee could, in theory, grant negotiat-ing authority to the CTE, they are unlikely todo this because most are not convinced thatthere is a difference between environmentalstandards and other types of standards, andtherefore question the need for different rulesand treatment. Also, there is no distinction inthe WTO rules between standards and labels:voluntary labelling measures are treated asstandards; mandatory labelling measures aretreated as technical regulations. Until a legaldistinction is made between standards ingeneral and labelling in particular, anythingthat the CTE might recommend on eco-labelling would also risk affecting all environ-mental standards and technical regulations.

Finally, any shift towards acceptance of non-product related PPM-based standards wouldalmost certainly be seen by developing coun-tries as increasing the likelihood that labourstandards could become linked with trademeasures—something that is met with strongopposition from many quarters, and fromdeveloping countries in particular.

In general, while the TBT and SPSCommittees may be useful fora in whichWTO Members can discuss and set policyobjectives (for example, on technical equiva-lence, special and differential treatment,transparency, etc.) the capacity to deliver onthese policy objectives arguably lies outsidethe realm of trade ministries. In order to fur-ther work in this area, the United NationsConference on Trade and Development(UNCTAD) has established a StandingCommittee on Environmental Requirementsand Market Access—which can be an alter-nate forum for addressing issues in a moreeffective multi-stakeholder context.

Capacity as a Barrier

Even if the legal and policy issues surround-ing environmental standards were resolvedtomorrow, exporters in developing countries

would still have to struggle to identify whatstandards are required for which market, toaccess and pay for the technology needed tocomply with standards, to demonstrate com-pliance with them, and to stay continuallyvigilant for changes to the requirements. It isbecoming increasingly evident that the realtechnical barrier to trade is the lack of insti-tutional and technical capacity to deal withstandards. This is particularly acute in devel-oping countries, but also an important issuefor most small and medium-sized enterprises(SMEs).

Insufficient technical capacity in three basicaspects makes it difficult for companies tobenefit from the TBT and SPS Agreements:rule-making (standards and technical regula-tions); conformity assessment; and accredita-tion. Indeed, OECD and UNCTAD casestudies which have looked at the barriersimposed by environmental standards, haveconsistently highlighted the capacity prob-lems that exist in each of these three aspects.So, as the reality of environmental and socialstandards is increasingly recognized, atten-tion is turning away from discussions on legalissues towards the basic technical and institu-tional capacity needed to deal with them.This is appropriate because capacity is need-ed whether or not the requirements are beingdriven by governments or through supplychains.

Although the TBT and SPS Agreementsimpose binding obligations on Members toprovide technical assistance to help otherMembers develop their standards bodies,metrology and testing labs, conformityassessment bodies and accreditation agencies,there is very little that can be achievedthrough the WTO. The promises of techni-cal assistance made in the TBT and SPSAgreements were made by trade ministriesthat do not have the financial means to fulfillthem. Any significant increase in technicalassistance for the TBT-related institutionscan only come from development ministries,who have limited budgets and their own


184


processes for assessing development priori-ties. The main problem caused by environ-mental standards and regulations—as withany standard or regulation—arises not due tolegal deficiencies in the TBT or SPSAgreements, but rather due to deficiencies inthe capacity of countries to deal with them.And this is not something that can be fixedinside the WTO.

Consider, for example, Article 2.4 of theTBT Agreement, which strongly encouragesMembers to base their national standards andtechnical regulations on existing internationalstandards, and Article 2.6, which encouragesMembers to participate in the developmentof international standards. Most internationalstandards are developed within a select groupof formal international standards bodies(ISBs). The most important of these tradi-tional ISBs have specific jurisdictions; thus,the International Telecommunications Union(ITU) is the recognized forum for the devel-opment of international standards fortelecommunications and the CodexAlimentarius Commission of the Food andAgriculture Organization (FAO) and theWorld Health Organization (WHO) is theforum for the development of internationalfood safety standards.

The problem is that there is no such bodywith presumed jurisdiction over environmen-tal standards. Indeed, there are very few inter-national environmental standards: most aredeveloped at the national level. Those that aredeveloped for international application arelargely developed by non-governmentalorganizations working outside the formalnetworks of national standards bodies. TheGlobal Eco-labelling Network (GEN) andthe International Social and EnvironmentalAccreditation and Labelling Alliance (ISEALAlliance) are attempting to fulfill this role,but at the moment lack the institutionalstrength or national networks to be able toundertake the roles of traditional ISBs, suchas the ITU, the International Organizationfor Standardization (ISO), or the


185

IIConfronting eco-labellingmyths

By Nicola Borregaard and Annie Dufey

The last decade witnessed a growing interestin the market for sustainable products indeveloping countries. For example, in a recentsurvey by the Inter-American DevelopmentBank (IDB) of trade and environment activi-ties of Latin American countries the develop-ment of strategies towards the production andconsumption of sustainable products wasidentified as one of the seven priority areas inwhich Latin American environmental authori-ties should and would like to be more active.Amongst the existing initiatives, the surveyidentified various programs related to bio-trade, including Colombia’s Green MarketsProgram; Uruguay’s Law 17.283 on NaturalUruguay; Chile’s Public-Private Working Groupon Environmental Goods and Services; andnumerous other initiatives at the sub-sectorallevel, especially in the forestry, tourism andagricultural sectors.

A variety of initiatives are also underway at theinternational level to assist developing coun-tries to develop these markets and to facilitateand harmonize certification. Examples include:the Asia Pacific Economic Cooperation (APEC)Voluntary Initiatives for SustainableProduction; the International Social andEnvironmental Accreditation and LabellingAlliance’s (ISEAL) Code of Conduct for SettingSocial and Environmental Standards; and theInternational Task Force on Harmonization andEquivalence in Organic Agriculture.

Despite this activity—and the trends theysignify—certain myths about eco-labelling




186


and sustainable products persist. The assump-tions that underpin these myths are prevalentin important economic and political sectors indeveloping countries and will need to be con-fronted before wide-scale headway can bemade across the South in changing the statusquo. At least three of these myths are of par-ticular importance.

Myth #1: Sustainable product markets areniche markets. Clearly, what was conceivablycorrect at the beginning of the 1980s and,possibly, for most products even until theearly 1990s, is not the case any longer.Sustainable products constitute one of thefastest growing markets. Organic products, forexample, now have significantly gone beyondthe one per cent market share threshold thatmight once have categorized them as nichemarkets. Indeed, approximately five per centof world trade today is in so-called “greenproducts.” The dynamism of markets for prod-ucts from sustainable forest management, forexample, raises expectations as to theincreasing importance of markets for a diverserange of sustainable products.

Myth 2: Certification is a private sectorbusiness; there is no role for government.In developing countries, especially in thosewith more neo-liberal economic approaches,there is a common understanding that certifi-cation schemes are private sector opera-tions—market responses to market needs byclients or consumers. Indeed, for some sus-tainable products, it has been the private sec-tor, together with environmental or othernon-governmental actors, that has elaboratedand implemented certification schemes andcriteria.

The most obvious example is the certificationof sustainable forestry management. However,in a number of other cases, the role of gov-ernment has been important. This has beenso, for example, in the case of sustainablefisheries where the existence of a regulatoryframework that prevents the respectivespecies from being overexploited is onerequirement, amongst others, for certifica-tion. In the case of organic agriculture, gov-ernment hasassumed a regulatory role as anoverseer of the certification schemes or as the

accreditation agency. Importantly, govern-ment has also tended to assume its role as anactive promoter of sustainable products andan internalizer of environmental and socialexternalities.

Myth 3: Developing countries have a com-petitive advantage in the production ofsustainable products. Against initial suppo-sitions that developing countries would havea competitive advantage in the production ofsustainable products, it is now widely under-stood that the production of sustainable prod-ucts implies a variety of costs and expertisesthat go beyond the traditional equation oflabour, land and capital and that have a sig-nificant influence on supply and demand andthe final market outcome. This includes costsand expertises related to: the internalizationof social and environmental externalities, cer-tification, market information and intelli-gence, and the development of local markets.

Most developing countries are only beginningto take into account environmental and socialexternalities. Governments have tendedtowards reactive environmental management,mostly through regulatory instruments, a fewpreventive mechanisms and even fewer instru-ments directed at the identification and pro-motion of opportunities for sustainable prod-ucts. In industrialized countries, on the otherhand, support payments that compensate forpositive externalities may be very significant;up to 20 per cent of production costs in somecases. Moreover, the internalization of negativeexternalities generated through the productionof conventional products is also significantlymore advanced in industrialized countries.

Sustainable product certification proceduresare often complex and expensive. They requirewell-established, efficient and effective insti-tutions of certification, standardization,metrology and accreditation, which develop-ing countries often lack. They require aninterdisciplinary approach which poses a chal-lenge for traditional certification and accredi-tation institutions. On the other hand, the“one size fits all” approach of many interna-tional certification schemes often fails to con-sider the realities in developing countries.



International Electrotechnical Commission(IEC). While it would benefit all WTOMembers if the development of environmen-tal and social standards were undertaken in astronger institutional framework, there is rel-atively little that the WTO itself can do onthis.

A False “Developing Country Syndrome”

At the moment, almost any discussion aboutenvironmental and social standards that dealswith developing countries adopts a defensivenarrative—the implications are that develop-ing countries have more to lose than to gain;that requirements are being imposed by richcountries; that, if they could, developingcountries might prefer avoiding any environ-mental and social regulations at all. Reality, ofcourse, is more nuanced.

First, it is clear that developing countries havetheir own environmental and social priorities,which are also addressed through standardsand technical regulations applied at thedomestic level. It is likely that the objection isnot to the principle of higher standards, butrather the mechanism through which theyare imposed and the fact that the require-ments are not appropriate in, or consistentwith the developing country context.

Second, environmental and social require-ments are not going to stop North-Southtrade; but they may affect trade patterns.Those countries or regions that are able todevelop the capacity to deal with these stan-dards will almost certainly benefit at theexpense of the laggards. There is, of course,nothing new in this type of competition.

Third, most environmental and socialrequirements do not address issues that are ofinterest to non-OECD countries. Most stan-dards and technical regulations are presentlydeveloped by OECD-based interests inresponse to OECD-related concerns. As soonas developing countries learn to use standardsand technical regulations for their own strate-gic purposes, there is no reason to doubt that

they can also address developing country pri-orities and benefit developing country inter-ests. For this to happen, developing countriesmust be empowered to become “standards-makers,” not just “standards-takers.” Ofcourse, the best way to empower developingcountries is to facilitate their active participa-tion in standard setting processes and worktowards accepting the standards that they setfor themselves.

Trends and FutureDirectionsThere are two trends that seem likely to influ-ence the future of sustainable developmentstandards and labelling. First is the recogni-tion that some environmental and socialissues are of financial significance to the suc-cess of a company. This reality is leadingmany large investors to pay closer attentionto environmental and social practices—notonly of the companies in which they invest,but also of the suppliers with whom thesecompanies do business. Large companieshave thousands of first-tier suppliers, andtens of thousands of second- and third-tiersuppliers. Pressure on one company cantherefore have a ripple effect on tens of thou-sands of companies.

The second trend is the integration of envi-ronmental and social issues into a single con-cept, often referred to as corporate socialresponsibility or CSR. The concept is alreadybeing mainstreamed: the ISO is currentlydeve loping an international standard onSocial Responsibility. If the speed and direc-tion of the evolution of standards into tech-nical regulations is influenced by consumerpreferences and by the nature of the stan-dards that exist, then it is almost certain thatthe codes and standards that are being used toaddress corporate social responsibility issuestoday will evolve first into the kinds of instru-ments that can be integrated into trade poli-cy, and then evolve further into technical reg-ulations that address environmental andsocial issues. This could most likely lead to


187

II


clashes between those in favour of integratingsustainability issues, including labour stan-dards, into trade policy and those opposed tothem.

As pressure mounts on governments to inte-grate standards into public policies there willalso be increased pressure to demonstrate thatstandards and labelling schemes are effective.At the moment, there are very few data avail-able on the effectiveness of standards in gen-eral, or on the effectiveness of one standardover another. This will require the develop-ment of more refined methodologies for dis-tinguishing between different types of stan-dards and labels, and commonly acceptedapproaches for monitoring their environ-mental, social and trade impacts.

From the perspective of future discussions atthe WTO, the main question will almost cer-tainly be whether there is a need for addition-al rules to deal with social and environmentalmeasures; or of public policy measures in gen-eral. Those in favour will have to explain whyWTO Members have seen the logic in defin-ing special rules to govern standards andtechnical regulations on human, plant andanimal life and health (the SPS Agreement),but do not see the value in doing so for otherpublic policy issues.


188


The proliferation of certification schemesdemands market information and intelligencethat is not always available in developingcountries and can make the task of sellingsustainable products more complex and, attimes, very costly. Moreover, there are scarcetrade statistics and market information avail-able for sustainable products. The geographi-cal separation between developing countryproducers and industrialized country con-sumers implies increased costs for obtainingreliable information.

Developing countries’ domestic markets forsustainable products are still in the earlystages of development. This implies thataccess to external markets is crucial for pro-duction to expand. It also means that it is dif-ficult initially to acquire experience and train-ing in the market for sustainable productslocally.

In conclusion, developing country decision-makers need to confront these myths and basetheir policies on the emerging trends and expe-riences if they are to capture what is clearly agrowing market in sustainable products.

Nicola Borregaard, from Chile, is Advisor to theChilean Minister of Economy and Energy. Thisessay is written in her personal capacity.

Annie Dufey, from Chile, is Research Associateat the International Institute for Environmentand Development (IIED).


In an era where tariffs and certain non-tariffbarriers, such as quantitative restrictions, arein decline, attention is shifting to other obsta-cles encountered in international trade,including customs procedures and technicalregulations. By various accounts, inefficientor outmoded customs procedures are a seri-ous (and expensive) impediment to the glob-al economy. Trade facilitation may bedefined, in general terms, as an effort to bringgreater efficiency to those customs andadministrative practices affecting trade acrossborders.

The term can be defined in broader terms,however, as encompassing the entire businesssupply chain, including any and all reformsthat facilitate the flow of goods and servicesacross borders. Such a broad view is favouredby many business groups, which see a need tobring greater efficiency to all stages of tradingactivity, including through the use of infor-mation technology, transportation, port andinfrastructure improvements and the adop-tion of internationally accepted standardsand norms. A narrower view of trade facilita-tion has been adopted by the World TradeOrganization (WTO), which identifies theconcept as the simplification and harmoniza-tion of international trade procedures,including activities, practices and formalities

involved in collecting, presenting, communi-cating and processing data required for themovement of goods in international trade.

Depending upon the type of reforms con-templated, trade facilitation measures may bebrought about by unilateral action on thepart of governments; through assistance fromaid donors (e.g., providing for improvedinfrastructure); by bilateral or regional tradeinitiatives or agreements (e.g., trade facilita-tion provisions are built into the Canada-Costa Rica Free Trade Agreement); or bymultilateral action (e.g., negotiations at theWTO).

Advocates of trade facilitation note that thepotential gains accrue not only to multina-tional business but also to developing coun-tries and small and medium-sized enterprises.For example, efforts to rein in corruption,improve revenue collection, or reduce clear-ance times often represent win-win situationsfor governments and business alike.However, even proponents concede thatthere may be significant front-end costs asso-ciated with many trade facilitation initiatives.Moreover, there may be legitimate policy rea-sons for “throwing sand” into the wheels ofcross-border commerce—including security(e.g., drugs, weapons, and people-traffick-

Issues and Debates

189

IITrade FacilitationLuke Eric Peterson

•“Many investment treaties impose transparency and administrative obligations ongovernments for purposes of the treatment of foreign investors and investments;

these provisions may commit governments to facilitate the movement of goods andservices related to foreign-owned businesses in their territories.”

•


ing), health and safety, and environment. Byand large, there has been little analysis of thepotential environmental implications of fur-ther trade facilitation efforts—whether aspart of the WTO Doha Round talks, or othertrade negotiating contexts.

Trade facilitation has long seized the imagi-nation of myriad international organizationsand business groups, including the WorldBank, the United Nations Conference onTrade and Development (UNCTAD), theInternational Chamber of Commerce (ICC),and the World Customs Organization(WCO). The ICC has produced detailedguidelines on customs administration for useand adoption by governments and business.The World Bank and UNCTAD have initi-ated a number of programs for moderniza-tion and harmonization of customs practicesin developing countries. Meanwhile, theWCO is a purpose-built international organ-ization dedicated to improving customsadministration, through the development ofinternational instruments and guidelines,such as the 1973 Kyoto Convention on theSimplification and Harmonization ofCustoms Procedures.

In terms of binding international rules ontrade facilitation, these are more often foundin bilateral, regional or multilateral trade andinvestment agreements. For example, theFree Trade Agreement between Canada andCosta Rica contains a stand-alone chapter ontrade facilitation, mandating specific legalobligations, as well as future cooperation on ahost of customs, standards and transporta-tion issues. Less noticed, but of future signif-icance, is the potential for bilateral invest-ment protection treaties to incorporate tradefacilitation obligations. Many investmenttreaties impose transparency and administra-tive obligations on governments for purposesof the treatment of foreign investors andinvestments; these provisions may commitgovernments to facilitate the movement ofgoods and services related to foreign-ownedbusinesses in their territories.

At the WTO, trade facilitation provisions arefound in various agreements, including theGeneral Agreement on Tariffs and Trade(GATT) 1947/1994, and the UruguayRound Agreements on Technical Barriers toTrade (TBT), the Application of Sanitary andPhytosanitary (SPS) Measures, CustomsValuation and Preshipment Inspection.

In 1996, at the Singapore meeting of WTOTrade Ministers, Member governments man-dated the WTO Council on Trade in Goodsto explore and analyze how trade procedurescould be simplified and to assess the scope forWTO rules in this area. Subsequently, at theDoha Ministerial Conference in 2001, aWorking Group on Trade Facilitation wasestablished, with a particular remit to exam-ine three issues:

• GATT Article V (Freedom of Transit),Article VIII (Fees and Formalities connect-ed with Importation and Exportation), andArticle X (Publication and Administrationof Trade Regulations).

• Trade facilitation needs and priorities ofWTO Member governments, particularlydeveloping and least-developed countries.

• Technical assistance and capacity building.

Full-fledged negotiations on trade facilitationwere not launched in 2003 at the WTOCancun Ministerial Conference, due to wide-spread opposition to the other Singaporeissues (investment, competition and trans-parency in government procurement) withwhich trade facilitation had been bundled.

It was only in July 2004, following anunbundling of the four Singapore issues, thatWTO Members agreed to launch trade facil-itation negotiations. As part of the bargainstruck by WTO Members, extensive consid-eration is to be given to the needs of develop-ing countries. Accompanying commitmentsfor special and differential treatment fordeveloping countries exceed those in otherWTO agreements because new obligationson trade facilitation are to be tied expressly to


190


the successful delivery of technical assistanceand capacity building to developing countries.

According to the modalities for negotiationsagreed by WTO Members, efforts will focusnarrowly upon clarification and improve-ment of three existing GATT articles as theyrelate to the movement and clearance ofgoods:

• Freedom of Transit (Article V).

• Fees and Formalities connected withImportation and Exportation (ArticleVIII).

• Publication and Administration of TradeRegulations (Article X).

Additionally, the WTO negotiations are sup-posed to encourage effective cooperationbetween customs and other authorities onissues related to trade facilitation and cus-toms compliance. While the environment isnot mentioned as a specific element of thesenegotiations, there may be environmentalimplications, which warrant closer examina-tion in future.

Interests and Fault LinesIn the context of the narrow negotiationsbeing pursued at the WTO, countries havemade extensive submissions to theNegotiating Group on Trade Facilitation. Anoverview of these different submissionsreveals that various developing countries haveput forward concrete proposals for improv-ing—and in some cases expanding—GATTArticles V, VIII and X.

For example, Argentina has proposed thatMembers translate all their relevant trade facil-itation regulations and post these on-line.While Argentina notes in a 2005 communica-tion that such efforts would require financialsupport for many poorer Members, it antici-pates that long-term revenue gains would berealized thanks to enhanced trade flows.

Turkey has also made several suggestions forimprovements in a 2005 submission—

Trade Facilitation

191

IIPutting theenvironmentinto tradefacilitationBy SachinChaturvedi

Unlike other Singaporeissues, trade facilita-tion is one area inwhich most developing country governments arebeginning to find agreement.

However, in the euphoria of their success indelinking trade facilitation from otherSingapore issues, developing countries arenow proceeding to undermine several key con-cerns in the trade facilitation negotiations,especially related to the environment. Thecurrent mandate of the trade facilitationnegotiations is too narrowly defined and thereis a real danger that the environmental impli-cations will be overlooked.

Developing countries should be concernedabout two major issues in the trade facilita-tion negotiations. First, there is a need towork out the various linkages between multi-lateral environmental agreements (MEAs) andtrade facilitation. Second, the current formatof the negotiations completely overlooksenvironment-related trade barriers, particular-ly with respect to their impacts on developingcountries.

The crucial question is how to define tradefacilitation. In the current context, tradefacilitation refers to the smooth flow ofimports into developing countries, but notexports from developed countries. In the earlyyears of the debate, there was discussion ofthe cross linkages with sanitary and phy-tosanitary (SPS) measures and technical bar-riers to trade (TBT), with an environmentalfocus. Somehow, and sadly, that componenthas quietly disappeared.

There is the fear that environmental concernsbeing raised in various multilateral fora maybe marginalized while adopting trade facilita-tion measures in the WTO. For example, GATT




192


Article V refers to an early cargo and consign-ment clearance of transit goods. This clear-ance would be disastrous in the absence ofadequate infrastructure to assess possible vio-lations of specific obligations under theConvention on International Trade inEndangered Species of Wild Fauna and Flora(CITES); the Basel Convention on the Controlof Transboundary Movements of HazardousWastes and their Disposal; as well as geneti-cally modified organisms (GMOs) in transitpursuant to the Cartagena Biosafety Protocol.

Of major concern are the infrastructural limita-tions of Land Customs Stations; key facilitiesneed to be improved to meet even minimumstandards. In many parts of the developingworld, there is a need to develop an effectivemechanism with neighbouring countries forbetter border control. Another major problemfor many developing countries is that LandCustoms Stations are not automated, forexample to scan transit containers. This posesa risk management and a potential quarantinethreat. A rough estimate suggests that Indiaalone would require more than US$1 billion toimplement some of the necessary measures tomodernize customs located at transit routes.

Simplified customs documentation, whichdoes not make reference to specific obliga-tions under MEAs, should also be a cause ofconcern for developing countries. For exam-ple, current automation programs do notincorporate environmentally sensitive goodsin order to separately reflect specific concernspursuant to MEAs. This renders ineffective theprior informed consent (PIC) procedures con-tained in several important MEAs. The prob-lem is more acute in countries, such asSingapore, which have long been a majorentrepot for importing and exporting illegalwildlife products, including tiger bones andtiger bone medicines. Singapore’s enforce-ment of CITES and its prosecution of traffick-ers are essential to stemming illegal wildlifetrade in the region.

Working on a case study of South Asian coun-tries, we found that emerging environment-related measures have become potent tradebarriers that threaten a substantial proportionof South Asian exports. The WTO agreementson SPS and TBT aim to ensure that these stan-dards and regulations are not used for protec-tionist purposes and do not cause adverseimpacts on trade. However, at present there isconsiderable discretion for importing coun-tries to impose domestic standards and regu-lations, such as for the inspection of imports,specific treatment or processing of products,minimum allowable levels of pesticide residue,labelling and packaging requirements, andprocess and production methods. The flexibil-ity in the TBT and SPS Agreements is beingexploited by many developed countries toimpose stringent environmental standards andregulations that act as a significant barrier forexports from developing countries.

While not intending to negate the gains fromthe trade facilitation negotiations, the currentscope of the negotiations does not adequate-ly incorporate environmental concerns, espe-cially those related to the objectives of keyMEAs. While various measures have beenworked out for capacity building and techni-cal assistance, especially for automation, thenegotiations should also explicitly deal withthe issue of environmentally sensitive goods.On the other hand, developing countries needto explore the impact on their exports of envi-ronment-related trade barriers. A comprehen-sive approach needs to be developed toaddress these issues. In this respect, commit-ments for enhanced technical assistance maybe a necessary but not sufficient step in theright direction.

Sachin Chaturvedi, from India, is a ResearchFellow at the Research and Information Systemfor Developing Countries (RIS), based in NewDelhi, India.


including the creation of single trade facilita-tion enquiry points, as well as systems forpre-arrival acceptance of relevant data anddocuments to accelerate customs clearance—while recognizing the need to differentiateobligations on the basis of the ability ofMembers to put them in place.

The African Group has warned that someproposals tabled in the negotiations exceedthe negotiating mandate by virtue of their“espousing additional commitments,” ratherthan clarification, improvement and reviewof GATT Articles V, VIII and X. Whileacknowledging that the trade facilitationneeds of African countries are “enormous,”the Group lays particular emphasis upon theequally enormous cost implications of suchneeds, and the degree to which WTO workmust be tied to adequate financial and tech-nical assistance.

Echoing this sentiment, the South Centre—an intergovernmental organization based inGeneva—has noted that the modalities fortrade facilitation negotiations expressly ruleout any attempt to force governments “toharmonize their trade facilitation regimes atlevels that may not be realistic or achievableby developing countries in view of their lowereconomic development.” Moreover, theCentre makes much of the agreementamongst WTO Members that developingcountries not be held to new obligations,where those obligations require infrastructureimprovements which are beyond the finan-cial capacity of those governments (andwhere external aid is not forthcoming).

The narrow remit of the WTO negotiationson trade facilitation is a testimony to thetrepidation with which many developingcountries view a more ambitious trade facili-tation agenda. A perennial concern is theneed for technical and financial assistance tounderwrite improvements in customs andadministrative processes.

As was underscored by a recent high levelCommission on Africa report, much needed

improvements in infrastructure and gover-nance on the African continent will requiresignificant external financial support.Likewise, developing country WTOMembers have ensured that the introductionof even minimal new trade facilitation obli-gations will be accompanied by adequatesupport to implement those obligations.

Analysis of the environmental impacts oftrade facilitation is in its infancy. While therehas been considerable discussion and analysisof the SPS and TBT Agreements and theirenvironmental impacts, little attention hasbeen given to the environmental impacts ofother trade facilitation initiatives, includingthose under negotiation in the Doha Round.

Areas where environmental objectives mightbe impacted by trade facilitation measuresinclude efforts to enforce multilateral envi-ronmental agreements (such as those for gov-erning trade in endangered species or govern-ing the transboundary movement of chemi-cals, hazardous wastes or living modifiedorganisms). It will be important to ensurethat more efficient border processes do notlead to an increased incidence of cross-bordermigration by invasive alien species, an issuebeing addressed in the Convention onBiological Diversity (CBD).

Importantly, trade facilitation discussionshave called for liberalization and streamliningof transportation (to facilitate shipping,express delivery, etc.). This has the potentialfor both positive and negative environmentalexternalities. On the positive side of theledger, more efficient border procedurescould reduce waiting lines at busy bordercrossings, and reduce emissions associatedwith vehicular idling, having a particularlybeneficial impact upon border communities.

Conversely, increased cross-border vehiculartraffic can pose a challenge as varying envi-ronmental standards are applied to vehicles indifferent jurisdictions. Recently, a U.S. deci-sion to permit Mexican trucks into theUnited States has led to controversy, as the

Trade Facilitation

193

II


decision was taken without requiring a fullenvironmental impact assessment. Choice oftransit routes may have significant environ-mental implications, especially where ship-pers or exporting countries desire to trafficgoods through environmentally sensitiveareas.

Trends and FutureDirectionsAs yet, no one has considered whether aWTO trade facilitation agreement mayrequire special environmental provisions andsafeguards, or whether the existing safeguardswill suffice. It may be important to first assessthe full scope for potential environmentalimpacts of trade facilitation, before resolvingsuch questions.

Meanwhile, developments outside the WTOalso warrant greater scrutiny. Although con-siderable attention is now being focused onthe Doha Round trade facilitation negotia-tions, the deeper trade facilitation commit-ments are likely to emerge outside of theWTO.

In a 2005 briefing, International Lawyers andEconomists Against Poverty (ILEAP) cau-tioned that regional and bilateral economicagreements are incorporating trade facilita-tion obligations that exceed in ambitionthose contemplated at the multilateral level.A further area which has not been examinedin the trade facilitation literature, but whichmay have sizable impacts, is the WTO-plustrade facilitation commitments found inbilateral investment treaties (BITs).

While not cast expressly as trade facilitationdisciplines, certain provisions of investmenttreaties may have binding trade facilitationimplications, at least insofar as they apply tocircumstances where foreign investors areengaged in import or export activity.

A standard obligation found in most invest-ment protection treaties is an undertaking toprovide “fair and equitable treatment.”

Arbitral tribunals charged with interpretingthis obligation have since held that thisimposes various duties on host states, includ-ing providing foreign investors with basic dueprocess, good faith treatment and transparen-cy. In a notable dispute between a Spanishfirm and Mexico, a tribunal at the WorldBank’s International Centre for Settlement ofInvestment Disputes (ICSID) decreed in2003 that the fair and equitable treatmentobligation requires governments to act:“totally transparently in its relations with theforeign investor, so that it may know before-hand any and all rules and regulations thatwill govern its investments, as well as thegoals of the relevant policies and administra-tive practices or directives, to be able to planits investment and comply with such regula-tions.”

Some investment treaties will be more explic-it in dictating that administrative transparen-cy is one of the obligations owed to foreigninvestors. For example, a bilateral investmenttreaty between the United States andKyrgyzstan includes obligations to issue regis-trations, permits, licenses and other approvalsexpeditiously. Parties must also endeavor tomake public all laws, regulations, administra-tive practices and procedures, and adjudica-tory decisions that pertain to or affect invest-ments.

Investment treaty provisions tend to be legallybinding, and subject to a novel investor-statedispute arbitration, permitting foreign busi-nesses to bring claims for damages in cases ofalleged breach of the treaty obligations.Disputes under investment treaties have pro-liferated in recent years, and the full importof treaty obligations is still coming into view.

Extensive concerns have been expressed bycivil society organizations about the resourceconstraints faced by developing countries inthe context of WTO negotiations—and aconsequent need for new disciplines to bedecoupled from dispute settlement and/oraccompanied by adequate financial assis-


194


tance. Thus, it is certainly remarkable thatinvestment treaty obligations—with theirbinding investor-state dispute settlementmechanisms—have been overlooked in thedebate over trade facilitation.

Others have raised concerns about the capac-ity of poorer developing countries to meetthe exacting administrative and proceduralobligations set forth in investment treaties.Foreign investors facing significant delays,convoluted customs processes or a lack ofadministrative transparency may be in a posi-tion to mount international arbitrationsagainst developing countries in an effort torecoup monetary compensation for allegedviolations of investment treaty obligations.

Clearly, this may be counter-productive inso-far as those countries which lack the resourcesto meet high administrative and bureaucraticstandards could be obliged, nevertheless, topay compensation to foreign investors underthe terms of these binding treaties.

Apart from treaty obligations relating to dueprocess and administration, it is also arguedthat investment treaties may provide recoursefor foreign investors to challenge technical,scientific or other regulatory standards ortreatment imposed by border agencies.Litigators have argued that the imposition ofsanitary and phytosanitary measures shouldbe challengeable outside the WTO context,by invoking investor protections—and therecourse to international arbitration—foundin many international investment treaties.

Indeed, a claim against the United States hasbeen brought on behalf of Canadian ranchersseeking to use the NAFTA’s investment obli-gations to challenge an import ban on livebeef cattle from Canada; an import banimposed by U.S. following the discovery ofBSE-infected cattle in Canada. Dependingupon how such claims are resolved by tri-bunals, they may have health or environmen-tal consequences, and may serve to clarifywhen border measures can be justified. It willbe important for developing countries toensure that investment treaties provide suffi-cient policy space for legitimate health orenvironmental measures; often such treatieshave not been drafted with sufficient safe-guards in mind, even if arbitral tribunals arebecoming more sensitive to such concernsover time.

More generally, there is a need for greatercoordination and coherence in developingcountry positions at the WTO and outsidethe WTO. Otherwise, investment treaties,along with other regional or bilateral eco-nomic treaties, may represent a means ofbringing in extensive commitments throughthe “back door,” which would never haveotherwise been accepted as part of the DohaRound.

(This was written with inputs from MaheshSugathan.)

Trade Facilitation

195

II



196


Resources

197

IIISection III Resources



198


The Doha Ministerial Declaration is widelycredited with putting the trade and environ-ment issue squarely into the WTO negotiat-ing agenda. The issue itself is not new to themultilateral trading system, but its inclusionin the negotiating agenda is significant.Although sustainable development and envi-ronment are mentioned explicitly in only afew paragraphs—the Preamble andParagraphs 31, 32, 33 and 51—environmen-tal debates are relevant to much of theDeclaration, reflecting the crosscuttingnature of these issues.

The following annotated rendition of theDoha Declaration text seeks to highlightsome of the most important of these tradeand environmental linkages, particularly inthe context of sustainable development. Thepurpose of the annotations is to highlight

how trade and environment concerns perme-ate the entire multilateral trading agenda andshould not be seen as being limited only tothe paragraphs that explicitly mention suchconcerns. Importantly, it should be stressedthat the annotations point out the possibilityof linkages being made without implyingthat these are the only linkages possible, norproposing that these are necessarily the mostdesirable linkages, nor suggesting how thecurrent negotiations are or should be incor-porating such linkages in their discussions.What is presented here is not an exhaustivelist of the possible linkages; rather, it is a rep-resentative set of examples that seek todemonstrate the myriad ways in which theenvironment and sustainable developmentlogic has, and should, permeate the entiremultilateral trading agenda.

Resources

199

III

The Doha Ministerial Declaration:Annotating the Trade and

Environment LinkagesBy Adil Najam and Trineesh Biswas


MINISTERIAL DECLARATIONAdopted on 14 November 2001

1. The multilateral trading system embodied in the WorldTrade Organization has contributed significantly to economicgrowth, development and employment throughout the past fiftyyears. We are determined, particularly in the light of the globaleconomic slowdown, to maintain the process of reform and lib-eralization of trade policies, thus ensuring that the system playsits full part in promoting recovery, growth and development. Wetherefore strongly reaffirm the principles and objectives set out inthe Marrakech Agreement Establishing the World TradeOrganization, and pledge to reject the use of protectionism.

2. International trade can play a major role in the promo-tion of economic development and the alleviation of poverty. Werecognize the need for all our peoples to benefit from theincreased opportunities and welfare gains that the multilateraltrading system generates. The majority of WTO Members aredeveloping countries. We seek to place their needs and interestsat the heart of the Work Programme adopted in this Declaration.Recalling the Preamble to the Marrakech Agreement, we shallcontinue to make positive efforts designed to ensure that devel-oping countries, and especially the least-developed among them,secure a share in the growth of world trade commensurate withthe needs of their economic development. In this context,enhanced market access, balanced rules, and well targeted, sus-tainably financed technical assistance and capacity-building pro-grammes have important roles to play.

3. We recognize the particular vulnerability of the least-developed countries and the special structural difficulties they facein the global economy. We are committed to addressing the mar-ginalization of least-developed countries in international trade andto improving their effective participation in the multilateral tradingsystem. We recall the commitments made by Ministers at ourmeetings in Marrakech, Singapore and Geneva, and by the inter-national community at the Third UN Conference on Least-Developed Countries in Brussels, to help least-developed countriessecure beneficial and meaningful integration into the multilateraltrading system and the global economy. We are determined thatthe WTO will play its part in building effectively on these com-mitments under the Work Programme we are establishing.

4. We stress our commitment to the WTO as the uniqueforum for global trade rule-making and liberalization, while alsorecognizing that regional trade agreements can play an importantrole in promoting the liberalization and expansion of trade andin fostering development.


200


5. We are aware that the challenges Members face in a rap-idly changing international environment cannot be addressedthrough measures taken in the trade field alone. We shall contin-ue to work with the Bretton Woods institutions for greater coher-ence in global economic policy-making.

6. We strongly reaffirm our commitment to the objectiveof sustainable development, as stated in the Preamble to theMarrakech Agreement. We are convinced that the aims ofupholding and safeguarding an open and non-discriminatorymultilateral trading system, and acting for the protection of theenvironment and the promotion of sustainable development canand must be mutually supportive. We take note of the efforts byMembers to conduct national environmental assessments of tradepolicies on a voluntary basis. We recognize that under WTOrules no country should be prevented from taking measures forthe protection of human, animal or plant life or health, or of theenvironment at the levels it considers appropriate, subject to therequirement that they are not applied in a manner which wouldconstitute a means of arbitrary or unjustifiable discriminationbetween countries where the same conditions prevail, or a dis-guised restriction on international trade, and are otherwise inaccordance with the provisions of the WTO Agreements. Wewelcome the WTO´s continued cooperation with UNEP andother inter-governmental environmental organizations. Weencourage efforts to promote cooperation between the WTO andrelevant international environmental and developmental organi-zations, especially in the lead-up to the World Summit onSustainable Development to be held in Johannesburg, SouthAfrica, in September 2002.

7. We reaffirm the right of Members under the GeneralAgreement on Trade in Services to regulate, and to introduce newregulations on, the supply of services.

8. We reaffirm our declaration made at the SingaporeMinisterial Conference regarding internationally recognized corelabour standards. We take note of work under way in theInternational Labour Organization (ILO) on the social dimen-sion of globalization.

9. We note with particular satisfaction that this Conferencehas completed the WTO accession procedures for China andChinese Taipei. We also welcome the accession as new Members,since our last Session, of Albania, Croatia, Georgia, Jordan,Lithuania, Moldova and Oman, and note the extensive market-access commitments already made by these countries on accession.These accessions will greatly strengthen the multilateral trading sys-tem, as will those of the 28 countries now negotiating their acces-sion. We therefore attach great importance to concluding accession

The Doha Ministerial Declaration: Annotating the Trade and Environment Linkages

201

III

This is an important andpolitically symbolic reitera-tion of the commitment tosustainable development. Itcould also have operativesignificance, since priorAppellate Body decisionshave used such preambularcommitments as a basis fortheir rulings.

This reiterates that legiti-mate measures to supportthe environment or humanhealth are allowed underWTO rules, as in for example Article XX of theGATT, but points out thatthey are only allowed so longas they do not treat countriesdifferently or unnecessarilyrestrict trade.

In recognition of the factthat WTO rule-making isone part of multilateralnegotiations on sustainabledevelopment taking placeelsewhere, this statementreminds Members of ongoing processes and highlights synergies.


proceedings as quickly as possible. In particular, we are committedto accelerating the accession of least-developed countries.

10. Recognizing the challenges posed by an expandingWTO membership, we confirm our collective responsibility toensure internal transparency and the effective participation of allMembers. While emphasizing the intergovernmental character ofthe organization, we are committed to making the WTO’s oper-ations more transparent, including through more effective andprompt dissemination of information, and to improve dialoguewith the public. We shall therefore at the national and multilat-eral levels continue to promote a better public understanding ofthe WTO and to communicate the benefits of a liberal, rules-based multilateral trading system.

11. In view of these considerations, we hereby agree toundertake the broad and balanced Work Programme set outbelow. This incorporates both an expanded negotiating agendaand other important decisions and activities necessary to addressthe challenges facing the multilateral trading system.

WORK PROGRAMMEImplementation-Related Issues and Concerns

12. We attach the utmost importance to the implementa-tion-related issues and concerns raised by Members and are deter-mined to find appropriate solutions to them. In this connection,and having regard to the General Council Decisions of 3 Mayand 15 December 2000, we further adopt the Decision onImplementation-Related Issues and Concerns in documentWT/MIN(01)/17 to address a number of implementation prob-lems faced by Members. We agree that negotiations on outstand-ing implementation issues shall be an integral part of the WorkProgramme we are establishing, and that agreements reached atan early stage in these negotiations shall be treated in accordancewith the provisions of paragraph 47 below. In this regard, we shallproceed as follows: (a) where we provide a specific negotiatingmandate in this Declaration, the relevant implementation issuesshall be addressed under that mandate; (b) the other outstandingimplementation issues shall be addressed as a matter of priorityby the relevant WTO bodies, which shall report to the TradeNegotiations Committee, established under paragraph 46 below,by the end of 2002 for appropriate action.

Agriculture

13. We recognize the work already undertaken in the nego-tiations initiated in early 2000 under Article 20 of the Agreementon Agriculture, including the large number of negotiating pro-posals submitted on behalf of a total of 121 Members. We recall


202

Environmental advocateshave long called for greater

transparency in the international system, whichthis phrasing recognizes by

urging better disseminationof information and through

seeking input from the public.

One of the so-called “implementation issues” is

the relationship between theConvention on Biological

Diversity (CBD) andWTO, within which the

possibility of amending theAgreement on Trade-related

Aspects of IntellectualProperty Rights (TRIPS)

agreement to require disclosure of the source ofgenetic resources used bypatent applicants alongwith evidence of prior

informed consent and bene-fit-sharing could be raised,

an issue which has alsobeen raised in the context

of Paragraph 19 of theDeclaration.


the long-term objective referred to in the Agreement to establisha fair and market-oriented trading system through a programmeof fundamental reform encompassing strengthened rules and spe-cific commitments on support and protection in order to correctand prevent restrictions and distortions in world agriculturalmarkets. We reconfirm our commitment to this programme.Building on the work carried out to date and without prejudgingthe outcome of the negotiations we commit ourselves to com-prehensive negotiations aimed at: substantial improvements inmarket access; reductions of, with a view to phasing out, all formsof export subsidies; and substantial reductions in trade-distortingdomestic support. We agree that special and differential treat-ment for developing countries shall be an integral part of all ele-ments of the negotiations and shall be embodied in the Schedulesof concessions and commitments and as appropriate in the rulesand disciplines to be negotiated, so as to be operationally effec-tive and to enable developing countries to effectively take accountof their development needs, including food security and ruraldevelopment. We take note of the non-trade concerns reflected inthe negotiating proposals submitted by Members and confirmthat non-trade concerns will be taken into account in the negoti-ations as provided for in the Agreement on Agriculture.

14. Modalities for the further commitments, including pro-visions for special and differential treatment, shall be establishedno later than 31 March 2003. Participants shall submit theircomprehensive draft Schedules based on these modalities no laterthan the date of the Fifth Session of the Ministerial Conference.The negotiations, including with respect to rules and disciplinesand related legal texts, shall be concluded as part and at the dateof conclusion of the negotiating agenda as a whole.

Services

15. The negotiations on trade in services shall be conductedwith a view to promoting the economic growth of all trading part-ners and the development of developing and least-developed coun-tries. We recognize the work already undertaken in the negotiations,initiated in January 2000 under Article XIX of the GeneralAgreement on Trade in Services, and the large number of proposalssubmitted by Members on a wide range of sectors and several hori-zontal issues, as well as on movement of natural persons. We reaf-firm the Guidelines and Procedures for the Negotiations adopted bythe Council for Trade in Services on 28 March 2001 as the basis forcontinuing the negotiations, with a view to achieving the objectivesof the General Agreement on Trade in Services, as stipulated in thePreamble, Article IV and Article XIX of that Agreement.Participants shall submit initial requests for specific commitmentsby 30 June 2002 and initial offers by 31 March 2003.


203

III

Environment has been onefrequently cited “non-tradeconcern” within the agricul-ture negotiations. This language supports the legiti-macy of some countries’ concerns regarding the needto take into account theenvironmental impacts ofagricultural practices, reinforcing environmentalexemptions used, for example, in the “GreenBox” of permitted subsidies.

The services negotiationscould have implications forgovernmental regulatorycapacity, as well as for services that are profoundlyrelated to the environment,such as sewage, environ-mental cleanup servicesand water managementand supply.


Market Access for Non-agricultural Products

16. We agree to negotiations which shall aim, by modalitiesto be agreed, to reduce or as appropriate eliminate tariffs, includ-ing the reduction or elimination of tariff peaks, high tariffs, andtariff escalation, as well as non-tariff barriers, in particular onproducts of export interest to developing countries. Product cov-erage shall be comprehensive and without a priori exclusions. Thenegotiations shall take fully into account the special needs andinterests of developing and least-developed country participants,including through less than full reciprocity in reduction commit-ments, in accordance with the relevant provisions of ArticleXXVIII bis of GATT 1994 and the provisions cited in paragraph50 below. To this end, the modalities to be agreed will includeappropriate studies and capacity-building measures to assist least-developed countries to participate effectively in the negotiations.

Trade-Related Aspects of Intellectual Property Rights

17. We stress the importance we attach to implementationand interpretation of the Agreement on Trade-Related Aspects ofIntellectual Property Rights (TRIPS Agreement) in a mannersupportive of public health, by promoting both access to existingmedicines and research and development into new medicinesand, in this connection, are adopting a separate Declaration.

18. With a view to completing the work started in theCouncil for Trade-Related Aspects of Intellectual Property Rights(Council for TRIPS) on the implementation of Article 23.4, weagree to negotiate the establishment of a multilateral system ofnotification and registration of geographical indications for winesand spirits by the Fifth Session of the Ministerial Conference. Wenote that issues related to the extension of the protection of geo-graphical indications provided for in Article 23 to products otherthan wines and spirits will be addressed in the Council for TRIPSpursuant to paragraph 12 of this Declaration.

19. We instruct the Council for TRIPS, in pursuing its workprogramme including under the review of Article 27.3(b), thereview of the implementation of the TRIPS Agreement underArticle 71.1 and the work foreseen pursuant to paragraph 12 of thisDeclaration, to examine, inter alia, the relationship between theTRIPS Agreement and the Convention on Biological Diversity, theprotection of traditional knowledge and folklore, and other rele-vant new developments raised by Members pursuant toArticle 71.1. In undertaking this work, the TRIPS Council shall beguided by the objectives and principles set out in Articles 7 and 8of the TRIPS Agreement and shall take fully into account thedevelopment dimension.


204

The reductions in tariffsthat result from this para-

graph will reduce tariffs ontrade in products with

particular environmentalsignificance, including fish

and forest products, minerals and chemicals.

The nature of the reductionformula, sectoral initiativesand special and differential

treatment for developingcountries will determine the

sustainable developmentimpact.

The mandate to negotiatedisciplines on non-tariff

barriers is relatively broad,and could result in rules on

social and environmentalregulations that impact ontrade, as well as new forms

of dispute settlement todetermine whether they are

legitimate.

The relationship betweenTRIPS and CBD and

issues related to the protection of traditional

knowledge are of great concern to developing

countries in relation totheir environment and

development priorities. Thislanguage drove discussions

on access and benefit sharing, disclosure

requirements for geneticresources in patent

applications and other debates.


Relationship between Trade and Investment

20. Recognizing the case for a multilateral framework tosecure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign direct invest-ment, that will contribute to the expansion of trade, and the needfor enhanced technical assistance and capacity-building in thisarea as referred to in paragraph 21, we agree that negotiations willtake place after the Fifth Session of the Ministerial Conference onthe basis of a decision to be taken, by explicit consensus, at thatSession on modalities of negotiations.

21. We recognize the needs of developing and least-devel-oped countries for enhanced support for technical assistance andcapacity building in this area, including policy analysis and devel-opment so that they may better evaluate the implications of clos-er multilateral cooperation for their development policies andobjectives, and human and institutional development. To thisend, we shall work in cooperation with other relevant intergov-ernmental organizations, including UNCTAD, and throughappropriate regional and bilateral channels, to provide strength-ened and adequately resourced assistance to respond to theseneeds.

22. In the period until the Fifth Session, further work in theWorking Group on the Relationship Between Trade andInvestment will focus on the clarification of: scope and defini-tion; transparency; non-discrimination; modalities for pre-estab-lishment commitments based on a GATS-type, positive listapproach; development provisions; exceptions and balance-of-payments safeguards; consultation and the settlement of disputesbetween Members. Any framework should reflect in a balancedmanner the interests of home and host countries, and take dueaccount of the development policies and objectives of host gov-ernments as well as their right to regulate in the public interest.The special development, trade and financial needs of developingand least-developed countries should be taken into account as anintegral part of any framework, which should enable Members toundertake obligations and commitments commensurate withtheir individual needs and circumstances. Due regard should bepaid to other relevant WTO provisions. Account should betaken, as appropriate, of existing bilateral and regional arrange-ments on investment.

Interaction between Trade and Competition Policy

23. Recognizing the case for a multilateral framework toenhance the contribution of competition policy to internationaltrade and development, and the need for enhanced technicalassistance and capacity-building in this area as referred to in para-


205

IIIIn July 2004, WTOMembers decided not tohave negotiations on tradeand investment, whichcould have had impacts onthe environment.


graph 24, we agree that negotiations will take place after the FifthSession of the Ministerial Conference on the basis of a decisionto be taken, by explicit consensus, at that Session on modalitiesof negotiations.

24. We recognize the needs of developing and least-developedcountries for enhanced support for technical assistance and capac-ity building in this area, including policy analysis and developmentso that they may better evaluate the implications of closer multi-lateral cooperation for their development policies and objectives,and human and institutional development. To this end, we shallwork in cooperation with other relevant intergovernmental organ-izations, including UNCTAD, and through appropriate regionaland bilateral channels, to provide strengthened and adequatelyresourced assistance to respond to these needs.

25. In the period until the Fifth Session, further work in theWorking Group on the Interaction between Trade andCompetition Policy will focus on the clarification of: core princi-ples, including transparency, non-discrimination and proceduralfairness, and provisions on hardcore cartels; modalities for volun-tary cooperation; and support for progressive reinforcement ofcompetition institutions in developing countries through capaci-ty building. Full account shall be taken of the needs of develop-ing and least-developed country participants and appropriateflexibility provided to address them.

Transparency in Government Procurement

26. Recognizing the case for a multilateral agreement ontransparency in government procurement and the need forenhanced technical assistance and capacity building in this area,we agree that negotiations will take place after the Fifth Sessionof the Ministerial Conference on the basis of a decision to betaken, by explicit consensus, at that Session on modalities ofnegotiations. These negotiations will build on the progress madein the Working Group on Transparency in GovernmentProcurement by that time and take into account participants’development priorities, especially those of least-developed coun-try participants. Negotiations shall be limited to the transparen-cy aspects and therefore will not restrict the scope for countries togive preferences to domestic supplies and suppliers. We commitourselves to ensuring adequate technical assistance and supportfor capacity building both during the negotiations and after theirconclusion.

Trade Facilitation

27. Recognizing the case for further expediting the move-ment, release and clearance of goods, including goods in transit,and the need for enhanced technical assistance and capacity


206

Talks on making procurement rules moretransparent could help

developing countries meetgreen procurement

requirements.However, like investment,

the issue was dropped fromthe current Round

of trade talks.


building in this area, we agree that negotiations will take placeafter the Fifth Session of the Ministerial Conference on the basisof a decision to be taken, by explicit consensus, at that Session onmodalities of negotiations. In the period until the Fifth Session,the Council for Trade in Goods shall review and as appropriate,clarify and improve relevant aspects of Articles V, VIII and X ofthe GATT 1994 and identify the trade facilitation needs and pri-orities of Members, in particular developing and least-developedcountries. We commit ourselves to ensuring adequate technicalassistance and support for capacity building in this area.

WTO Rules

28. In the light of experience and of the increasing applica-tion of these instruments by Members, we agree to negotiationsaimed at clarifying and improving disciplines under theAgreements on Implementation of Article VI of the GATT 1994and on Subsidies and Countervailing Measures, while preservingthe basic concepts, principles and effectiveness of theseAgreements and their instruments and objectives, and taking intoaccount the needs of developing and least-developed participants.In the initial phase of the negotiations, participants will indicatethe provisions, including disciplines on trade distorting practices,that they seek to clarify and improve in the subsequent phase. Inthe context of these negotiations, participants shall also aim toclarify and improve WTO disciplines on fisheries subsidies, tak-ing into account the importance of this sector to developingcountries. We note that fisheries subsidies are also referred to inparagraph 31.

29. We also agree to negotiations aimed at clarifying andimproving disciplines and procedures under the existing WTOprovisions applying to regional trade agreements. The negotia-tions shall take into account the developmental aspects of region-al trade agreements.

Dispute Settlement Understanding

30. We agree to negotiations on improvements and clarifi-cations of the Dispute Settlement Understanding. The negotia-tions should be based on the work done thus far as well as anyadditional proposals by Members, and aim to agree on improve-ments and clarifications not later than May 2003, at which timewe will take steps to ensure that the results enter into force assoon as possible thereafter.

Trade and Environment

31. With a view to enhancing the mutual supportiveness oftrade and environment, we agree to negotiations, without pre-judging their outcome, on:


207

III

Environmental aspects oftrade facilitation mightinclude emission implica-tions of transport of goods,as well as controls set up forillegal trade in naturalresources and in endan-gered species.

Some Members havealready proposed the cre-ation of a group of “non-actionable” subsidies fordevelopmental purposes,including those aimed atpromoting environment-friendly production.

Government subsidies tothe fishing industry cancontribute to declining fishstocks and damage marineenvironments. Improveddisciplines on these subsidiescould protect marineresources but will need toincorporate the specialneeds and constraints ofsmall and artisanal fishers.

The dispute settlement sys-tem has been central to theevolution of the trade andenvironment link and islikely to remain so in thefuture. The future directionof the DSU is, therefore, ofgreat relevance to environ-mental concerns.

This clause makes environ-ment an official subject oftrade negotiations.


(i) the relationship between existing WTO rules andspecific trade obligations set out in multilateral envi-ronmental agreements (MEAs). The negotiationsshall be limited in scope to the applicability of suchexisting WTO rules as among parties to the MEA inquestion. The negotiations shall not prejudice theWTO rights of any Member that is not a party tothe MEA in question;

(ii) procedures for regular information exchangebetween MEA Secretariats and the relevant WTOcommittees, and the criteria for the granting ofobserver status;

(iii) the reduction or, as appropriate, elimination of tar-iff and non-tariff barriers to environmental goodsand services.

We note that fisheries subsidies form part of the negotiationsprovided for in paragraph 28.

32. We instruct the Committee on Trade and Environment,in pursuing work on all items on its agenda within its currentterms of reference, to give particular attention to:

(i) the effect of environmental measures on marketaccess, especially in relation to developing countries,in particular the least-developed among them, andthose situations in which the elimination or reduc-tion of trade restrictions and distortions would ben-efit trade, the environment and development;

(ii) the relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights; and

(iii) labeling requirements for environmental purposes.

Work on these issues should include the identification of anyneed to clarify relevant WTO rules. The Committee shall reportto the Fifth Session of the Ministerial Conference, and make rec-ommendations, where appropriate, with respect to future action,including the desirability of negotiations. The outcome of thiswork as well as the negotiations carried out under paragraph 31(i)and (ii) shall be compatible with the open and non-discrimina-tory nature of the multilateral trading system, shall not add to ordiminish the rights and obligations of Members under existingWTO agreements, in particular the Agreement on the


208

The mandate for negotiations on the MEAand WTO relationship is

limited to determining howWTO rules apply to partiesto MEAs that have specific

trade obligations (STOs),but could also have impactsin terms of defining which

MEAs and STOs are intension with WTO rules.

This could lead to betterand deeper interaction

between trade and environmental institutions

This could expand marketaccess, but how environ-

mental goods and servicesare defined is important.

Although not a negotiatingitem, and thus only requir-ing “discussion,” this reflects

developing countries’ fearsthat environmental meas-

ures could affect their abili-ty to export to some markets

and thus their economicdevelopment prospects.

Developing countries inparticular fear that

“eco-labels” could become amajor barrier to market

access. Additionally, the costsof certification can be

excessive for developing-country exporters. Eco-labels

also bring up the controversial PPM issue.

This language defines thelimits on the scope of

negotiations on Paragraphs31 and 32, reiterating that

any measures negotiatedshould not contradict existing WTO rules.


Application of Sanitary and Phytosanitary Measures, nor alter thebalance of these rights and obligations, and will take into accountthe needs of developing and least-developed countries.

33. We recognize the importance of technical assistance andcapacity building in the field of trade and environment to devel-oping countries, in particular the least-developed among them.We also encourage that expertise and experience be shared withMembers wishing to perform environmental reviews at thenational level. A report shall be prepared on these activities for theFifth Session.

Electronic Commerce

34. We take note of the work which has been done in theGeneral Council and other relevant bodies since the MinisterialDeclaration of 20 May 1998 and agree to continue the WorkProgramme on Electronic Commerce. The work to date demon-strates that electronic commerce creates new challenges andopportunities for trade for Members at all stages of development,and we recognize the importance of creating and maintaining anenvironment which is favourable to the future development ofelectronic commerce. We instruct the General Council to con-sider the most appropriate institutional arrangements for han-dling the Work Programme, and to report on further progress tothe Fifth Session of the Ministerial Conference. We declare thatMembers will maintain their current practice of not imposingcustoms duties on electronic transmissions until the FifthSession.

Small Economies

35. We agree to a work programme, under the auspices ofthe General Council, to examine issues relating to the trade ofsmall economies. The objective of this work is to frame respons-es to the trade-related issues identified for the fuller integration ofsmall, vulnerable economies into the multilateral trading system,and not to create a sub-category of WTO Members. The GeneralCouncil shall review the work programme and make recommen-dations for action to the Fifth Session of the MinisterialConference.

Trade, Debt and Finance

36. We agree to an examination, in a Working Group underthe auspices of the General Council, of the relationship betweentrade, debt and finance, and of any possible recommendations onsteps that might be taken within the mandate and competence ofthe WTO to enhance the capacity of the multilateral trading sys-tem to contribute to a durable solution to the problem of exter-nal indebtedness of developing and least-developed countries,


209

III

Technical assistance andcapacity building is likely tobe critical to gainingengagement and supportfrom developing countries,which face very significantcapacity barriers in thisarea.

It should be noted that thelanguage of Paragraph 33encourages national leveltrade and environmentreviews.

Many small economies,particularly island states,also have fragile ecosystems;a combination that canlead to especially pressingtrade and environmentconcerns.


and to strengthen the coherence of international trade and finan-cial policies, with a view to safeguarding the multilateral tradingsystem from the effects of financial and monetary instability. TheGeneral Council shall report to the Fifth Session of theMinisterial Conference on progress in the examination.

Trade and Transfer of Technology

37. We agree to an examination, in a Working Group underthe auspices of the General Council, of the relationship betweentrade and transfer of technology, and of any possible recommen-dations on steps that might be taken within the mandate of theWTO to increase flows of technology to developing countries.The General Council shall report to the Fifth Session of theMinisterial Conference on progress in the examination.

Technical Cooperation and Capacity Building

38. We confirm that technical cooperation and capacitybuilding are core elements of the development dimension of themultilateral trading system, and we welcome and endorse theNew Strategy for WTO Technical Cooperation for CapacityBuilding, Growth and Integration. We instruct the Secretariat, incoordination with other relevant agencies, to support domesticefforts for mainstreaming trade into national plans for economicdevelopment and strategies for poverty reduction. The delivery ofWTO technical assistance shall be designed to assist developingand least-developed countries and low-income countries in tran-sition to adjust to WTO rules and disciplines, implement obliga-tions and exercise the rights of membership, including drawingon the benefits of an open, rules-based multilateral trading sys-tem. Priority shall also be accorded to small, vulnerable, and tran-sition economies, as well as to Members and Observers withoutrepresentation in Geneva. We reaffirm our support for the valu-able work of the International Trade Centre, which should beenhanced.

39. We underscore the urgent necessity for the effectivecoordinated delivery of technical assistance with bilateral donors,in the OECD Development Assistance Committee and relevantinternational and regional intergovernmental institutions, withina coherent policy framework and timetable. In the coordinateddelivery of technical assistance, we instruct the Director-Generalto consult with the relevant agencies, bilateral donors and bene-ficiaries, to identify ways of enhancing and rationalizing theIntegrated Framework for Trade-Related Technical Assistance toLeast-Developed Countries and the Joint Integrated TechnicalAssistance Programme (JITAP).

40. We agree that there is a need for technical assistance tobenefit from secure and predictable funding. We therefore


210

While not a negotiating item as such, discussions (and possible

recommendations) in theWorking Group will be ofrelevance to the transfer of

environmentally-soundtechnologies.

As noted, the provision ofmeaningful technical

assistance and capacitybuilding is likely to be

critical to gaining engagement and support

from developing countrieson trade and

environment issues.


instruct the Committee on Budget, Finance and Administrationto develop a plan for adoption by the General Council inDecember 2001 that will ensure long-term funding for WTOtechnical assistance at an overall level no lower than that of thecurrent year and commensurate with the activities outlinedabove.

41. We have established firm commitments on technicalcooperation and capacity building in various paragraphs in thisMinisterial Declaration. We reaffirm these specific commitmentscontained in paragraphs 16, 21, 24, 26, 27, 33, 38-40, 42 and43, and also reaffirm the understanding in paragraph 2 on theimportant role of sustainably financed technical assistance andcapacity-building programmes. We instruct the Director-Generalto report to the Fifth Session of the Ministerial Conference, withan interim report to the General Council in December 2002 onthe implementation and adequacy of these commitments in theidentified paragraphs.

Least-Developed Countries

42. We acknowledge the seriousness of the concernsexpressed by the least-developed countries (LDCs) in theZanzibar Declaration adopted by their Ministers in July 2001.We recognize that the integration of the LDCs into the multilat-eral trading system requires meaningful market access, supportfor the diversification of their production and export base, andtrade-related technical assistance and capacity building. We agreethat the meaningful integration of LDCs into the trading systemand the global economy will involve efforts by all WTOMembers. We commit ourselves to the objective of duty-free,quota-free market access for products originating from LDCs. Inthis regard, we welcome the significant market access improve-ments by WTO Members in advance of the Third UNConference on LDCs (LDC-III), in Brussels, May 2001. We fur-ther commit ourselves to consider additional measures for pro-gressive improvements in market access for LDCs. Accession ofLDCs remains a priority for the Membership. We agree to workto facilitate and accelerate negotiations with acceding LDCs. Weinstruct the Secretariat to reflect the priority we attach to LDCs’accessions in the annual plans for technical assistance. We reaf-firm the commitments we undertook at LDC-III, and agree thatthe WTO should take into account, in designing its work pro-gramme for LDCs, the trade-related elements of the BrusselsDeclaration and Programme of Action, consistent with theWTO’s mandate, adopted at LDC-III. We instruct the Sub-Committee for Least-Developed Countries to design such a workprogramme and to report on the agreed work programme to theGeneral Council at its first meeting in 2002.


211

III


43. We endorse the Integrated Framework for Trade-RelatedTechnical Assistance to Least-Developed Countries (IF) as aviable model for LDCs’ trade development. We urge develop-ment partners to significantly increase contributions to the IFTrust Fund and WTO extra-budgetary trust funds in favour ofLDCs. We urge the core agencies, in coordination with develop-ment partners, to explore the enhancement of the IF with a viewto addressing the supply-side constraints of LDCs and the exten-sion of the model to all LDCs, following the review of the IF andthe appraisal of the ongoing Pilot Scheme in selected LDCs. Werequest the Director-General, following coordination with headsof the other agencies, to provide an interim report to the GeneralCouncil in December 2002 and a full report to the Fifth Sessionof the Ministerial Conference on all issues affecting LDCs.

Special and Differential Treatment

44. We reaffirm that provisions for special and differentialtreatment are an integral part of the WTO Agreements. We notethe concerns expressed regarding their operation in addressingspecific constraints faced by developing countries, particularlyleast-developed countries. In that connection, we also note thatsome Members have proposed a Framework Agreement onSpecial and Differential Treatment (WT/GC/W/442). We there-fore agree that all special and differential treatment provisionsshall be reviewed with a view to strengthening them and makingthem more precise, effective and operational. In this connection,we endorse the work programme on special and differential treat-ment set out in the Decision on Implementation-Related Issuesand Concerns.

ORGANIZATION AND MANAGEMENT OFTHE WORK PROGRAMME45. The negotiations to be pursued under the terms of thisDeclaration shall be concluded not later than 1 January 2005.The Fifth Session of the Ministerial Conference will take stock ofprogress in the negotiations, provide any necessary political guid-ance, and take decisions as necessary. When the results of thenegotiations in all areas have been established, a Special Sessionof the Ministerial Conference will be held to take decisionsregarding the adoption and implementation of those results.

46. The overall conduct of the negotiations shall be super-vised by a Trade Negotiations Committee under the authority ofthe General Council. The Trade Negotiations Committee shallhold its first meeting not later than 31 January 2002. It shallestablish appropriate negotiating mechanisms as required andsupervise the progress of the negotiations.


212

The special and differentialtreatment accorded to

developing countries inmany negotiations,

including for agriculture,fisheries subsidies and

NAMA, will affect theirability to gradually phase

in measures that may havean environmental effect,

and to adopt measures thattake into account their

unique sustainable development situations.


47. With the exception of the improvements and clarifica-tions of the Dispute Settlement Understanding, the conduct,conclusion and entry into force of the outcome of the negotia-tions shall be treated as parts of a single undertaking. However,agreements reached at an early stage may be implemented on aprovisional or a definitive basis. Early agreements shall be takeninto account in assessing the overall balance of the negotiations.

48. Negotiations shall be open to:

(i) all Members of the WTO; and

(ii) States and separate customs territories currently inthe process of accession and those that informMembers, at a regular meeting of the GeneralCouncil, of their intention to negotiate the terms oftheir membership and for whom an accession work-ing party is established.

Decisions on the outcomes of the negotiations shall be taken onlyby WTO Members.

49. The negotiations shall be conducted in a transparentmanner among participants, in order to facilitate the effectiveparticipation of all. They shall be conducted with a view to ensur-ing benefits to all participants and to achieving an overall balancein the outcome of the negotiations.

50. The negotiations and the other aspects of the WorkProgramme shall take fully into account the principle of specialand differential treatment for developing and least-developedcountries embodied in: Part IV of the GATT 1994; the Decisionof 28 November 1979 on Differential and More FavourableTreatment, Reciprocity and Fuller Participation of DevelopingCountries; the Uruguay Round Decision on Measures in Favourof Least-Developed Countries; and all other relevant WTO pro-visions.

51. The Committee on Trade and Development and theCommittee on Trade and Environment shall, within their respec-tive mandates, each act as a forum to identify and debate devel-opmental and environmental aspects of the negotiations, in orderto help achieve the objective of having sustainable developmentappropriately reflected.

52. Those elements of the Work Programme which do notinvolve negotiations are also accorded a high priority. They shallbe pursued under the overall supervision of the General Council,which shall report on progress to the Fifth Session of theMinisterial Conference.


213

III

Paragraph 51 could poten-tially provide an avenue forassessing the developmentaland environmental impactsof negotiations, perhaps inthe form of a review mechanism.

One practical challenge interms of Paragraph 51 is tofind a way to incorporatethe views of technicalexperts in the two areasinto the deliberations ofCTD and CTE, and tothen find a way for thesedeliberations to be reflectedinto actual negotiationsregarding new WTO rules.



214


Resources

215

III

A Trade and Environment TimelineCompiled By Trineesh Biswas

1881 After phylloxera, a tiny insect from the U.S., devastates European vineyards, sixEuropean countries sign the International Convention Respecting Measures to beTaken Against the Phylloxera Vastatrix, the first multilateral environmental agree-ment.

1882 France and Great Britain sign a Commercial and Maritime Agreement that con-tains an unconditional exception preserving the right of each party to define foritself the measures deemed necessary for “sanitary reasons.”

1900 Eight countries sign the Convention for the Preservation of Wild Animals, Birdsand Fish in Africa, that includes a system of export licenses for certain rare andendangered species, thus establishing one of the first conservation-related trademeasures.

1906 An international conference in Bern adopts a convention that bans the use ofwhite phosphorus in the manufacture of matches in order to protect the healthof match producers. It notably regulates based on production process instead offinal use.

1921 Italy and the Kingdom of the Serbs, Croats and Slovenes (Yugoslavia) sign a con-vention prohibiting trade in fish caught by methods judged to have “an injuriouseffect upon the spawning and preservation” of fisheries.

1920s Bilateral agreements signed during this period begin to move away from uncon-through ditional exceptions for plant- and animal-related laws, and instead start to 1940s subject these exceptions to conditions.

1927 Twenty-nine countries sign the International Convention for the Abolition ofImport and Export Prohibitions and Restrictions, which envisions the abolition ofall non-tariff import and export restrictions but provides countries space to main-tain some restrictions.

1928–1941 In the Trail Smelter case, two separate tribunals hold the Canadian governmentresponsible for the damage in the U.S. caused by sulphur dioxide emissions froma zinc and lead smelter in southern British Columbia. They order Canada tocompensate the United States.

1947 The General Agreement on Tariffs and Trade (GATT) signed by 23 countries inGeneva. Article XX, entitled “general exceptions,” permits Member states to takemeasures “necessary to protect human, animal or plant life or health,” as well asthose “relating to the conservation of exhaustible natural resources,” so long asthe application of the measures does not constitute “a means of arbitrary orunjustifiable discrimination between countries where the same conditions pre-vail, or a disguised restriction on international trade.”



216

1948 Charter of the International Trade Organisation (ITO) written by 56 countries atthe United Nations Conference on Trade and Employment in Havana. However,the U.S. Congress rejects the Havana Charter, and the ITO is not created.

1951 International Plant Protection Convention (IPPC) signed under the auspices of theUN Food and Agriculture Organisation. The Convention comes into force in1952 and regulates phytosanitary measures taken towards pests and internation-al trade.

1957 The Treaty of Rome establishes the European Economic Community. Article 36includes a number of exceptions allowing for restrictions or bans on imports andexports for “the protection of health and life of humans, animals or plants.”

1970 Germany introduces the Vorsorgeprinzip, literally “foresight principle,” intodomestic clean air legislation, introducing the precautionary principle into law.The law says that “society should avoid environmental damage by forward plan-ning.”

1971 The GATT Secretariat prepares a study on the effects of environmental policieson international trade for the 1972 Stockholm Conference. The report reflectsconcerns that policies aimed at environmental protection could become obstaclesto trade.

1971 GATT Council of Representatives establishes the Group on EnvironmentalMeasures and International Trade (the EMIT group). However, since the Groupwas to convene only at the request of contracting parties, it did not meet until1991.

1972 The United Nations Conference on the Human Environment held in Stockholm.The meeting increases prominence of trade and environment issues based uponconcerns about the negative effects of strong environmental legislation on com-petitiveness. Leads to the creation of the United Nations EnvironmentProgramme (UNEP).

1972 OECD Guiding Principles Concerning the International Economic Aspects ofEnvironmental Principles released. Includes the “Polluter Pays Principle,” accord-ing to which the private sector bears pollution abatement costs that are includedin the market price.

1972 Club of Rome publishes a study called Limits to Growth which, in spite of itsclumsy projections, drew attention to the fact that economic growth based oncontinuous and increasing use of non-renewable resources was unsustainable.

1973 Convention on International Trade in Endangered Species of Wild Fauna and Flora(CITES) signed. CITES comes into force in 1975 and regulates internationaltrade in over 30,000 species, banning trade in some while establishing conditionsfor trade in others.

1973–1979 During the Tokyo Round, GATT contracting parties adopt the Agreement onTechnical Barriers to Trade (TBT) after discussions on the extent to which tech-nical regulations and standards implemented for environmental reasons couldpose obstacles to trade flows.


A Trade and Environment Timeline

217

III

1982 GATT Ministerial meeting decides to examine the exports of products that areprohibited in the exporting countries for environmental, health or safety reasonsbut are still exported, mostly to developing countries. Leads to the creation of theWorking Group on the Export of Domestically Prohibited Goods and OtherHazardous Substances in 1989.

1982 A GATT dispute settlement panel rules that a U.S. ban on the import of all typesof tuna and tuna products from Canada violates trade law. The panel rejects theU.S. attempt to use Article XX to justify the ban because no domestic environ-mental measures had been adopted.

1986 Uruguay Round of GATT trade negotiations begins. The round lasts seven yearsand includes the liberalisation of trade in agriculture and services, along withintellectual property rights, for the first time. Each new area has major implica-tions for the environment.

1987 “Precautionary approach” mentioned for the first time at the international level in theMinisterial Declaration of the Second Conference on the Protection of the North Sea.

1987 Montreal Protocol for the Protection of the Ozone Layer adopted, enters into forcein 1989. The Protocol requires developed countries to reduce their consumptionof ozone-depleting substances and developing countries agree to gradually reduceconsumption of such substances.

1987 World Commission on Environment and Development (also known as theBrundtland Commission) submits a report entitled Our Common Future to theUnited Nations. The report defines sustainable development as “satisfying pres-ent needs without compromising the ability of future generations to meet theirown needs.”

1988 European Court of Justice allows Denmark to keep in force a law requiring beerand soda to be sold in reusable bottles, rejecting the European Commission’sargument that the policy constitutes a barrier to the free movement of goodswithin the European Economic Community.

1989 Basel Convention on the Control of Transboundary Movements of Hazardous Wastesand their Disposal adopted and comes into force in 1992. The Conventionrestricts the transboundary movement of hazardous wastes after an increase insuch exports by developed countries.

1991 In the famous Tuna-Dolphin case, a GATT dispute settlement panel rules that aU.S. embargo on tuna imports from Mexico, imposed because Mexican tunatrawlers were using nets that killed more dolphins than permitted by Americanlaw, constitutes an unfair trade barrier.

1992 The United Nations Conference on Environment and Development held in Rio deJaneiro. The Rio “Earth Summit” re-focuses attention on sustainable develop-ment and the role of international trade in both poverty reduction and environ-mental protection. Adopts Agenda 21 as an action plan. Also adopts theConvention on Biological Diversity (CBD), which aims to support the conserva-tion and sustainable use of biological resources and the sharing of benefits arisingfrom their use, and the United Nations Framework Convention on Climate



218

Change (UNFCCC), which seeks to stabilize greenhouse gas concentrations inthe atmosphere in an effort to prevent dangerous anthropogenic interference withthe climate system. Both agreements enter into force in 1994.

1994 Canada, the United States, and Mexico adopt the North American Free TradeAgreement (NAFTA), aimed at liberalizing trade and investment flows. Includesan investor-state arbitration mechanism and an environmental side agreement.

1994 In a follow-up to the 1991 Tuna-Dolphin case, a GATT panel rules that theUnited States’ secondary embargo on tuna imports from countries that trade intuna with embargoed countries (such as Mexico) is also not permissible.

1994 Uruguay Round of GATT negotiations culminates in the signing of the MarrakechAgreement Establishing the World Trade Organization (WTO). The preamble ofthe Agreement includes references to sustainable development, environmental pro-tection, resource conservation, and a consideration for the needs of developingcountries among the WTO goals. Creates a work program on trade and environ-ment and a Committee on Trade and Environment (CTE) to oversee it.

1994 Negotiations on a Multilateral Agreement on Investment (MAI) launched at anOrganisation for Economic Cooperation and Development (OECD) MinisterialMeeting. MAI process goes on to earn heated opposition from civil societygroups, partly for environmental reasons, and ends in failure in 1998.

1994– A rapid expansion in negotiations for bilateral and regional trade agreements. present Some of the agreements that are eventually signed have detailed environment pro-

visions; e.g., free trade agreements between the U.S. and Jordan (2000), Chile(2003) and Morocco (2004).

1996 The WTO holds its first Ministerial Conference in Singapore. The Committeeon Trade and Environment submits its first Ministerial report; it calls for furtherstudy and makes no recommendations for changes to WTO rules.

1998 In the Shrimp-Turtle dispute, a WTO dispute settlement panel rules that coun-tries have the right to take trade action to protect the environment but rulesagainst a U.S. ban on shrimp imports from countries which do not impose meas-ures to keep the incidental kill of sea turtles lower than the level permissible in theU.S., because the U.S. discriminated between WTO Members in the technicalassistance and transition periods that were provided to shrimp producers from theCaribbean but not to producers from Asia.

1998 Rotterdam Convention on the Prior Informed Consent Procedure for CertainHazardous Chemicals and Pesticides in International Trade adopted, and comesinto force in 2004. Adopts a Prior Informed Consent (PIC) procedure, requiringapproval before trade of listed chemicals.

1999 In the run-up to the Seattle WTO Ministerial Conference, the WTO Secretariatreleases a special study on the relationship between trade and environment thatconcludes that trade would “unambiguously improve welfare if proper environ-mental policies were in place.”


A Trade and Environment Timeline

219

III

1999 The third WTO Ministerial Conference in Seattle becomes the centre of massiveprotests by environmental and civil society groups. The meeting ends in failure,with countries unable to agree on whether or not to launch a new round of nego-tiations.

2000 The Conference of the Parties to the Convention on Biodiversity adopts theCartagena Protocol on Biosafety. The Protocol aims to protect biological diversityfrom the risks arising from living modified organisms created by modern biotech-nology.

2001 Stockholm Convention on Persistent Organic Pollutants (POPs) is adopted andcomes into force in 2004. It seeks to eliminate or restrict the production and useof all intentionally produced POPs and imposes certain trade restrictions toachieve this goal.

2001 At the Fourth WTO Ministerial Conference in Doha, Members agree to launcha new round of negotiations that explicitly include environmental issues for thefirst time. Negotiations are launched on the relationship between the WTO andmultilateral environmental agreements; the liberalization of trade in environ-mental goods and services; and improving WTO disciplines on fisheries subsidiesamong other issues.

2002 The Parties to the Convention on Biological Diversity adopt the voluntary “BonnGuidelines on Access to Genetic Resources and Fair and Equitable Sharing of theBenefits Arising out of their Utilization,” setting out international standards onaccess and benefit-sharing rules but falling short of international binding rules.

2002 Governments at the World Summit on Sustainable Development in Johannesburgadopt a Plan of Implementation which, among other actions, launches negotia-tions on an international regime to promote the sharing of benefits from the useof genetic resources (subsequently broadened to also cover facilitating access tosuch resources), and calls for all fisheries subsidies that contribute to illegal, unre-ported and unregulated fishing and to over-capacity to be eliminated.

2005 The Fifth WTO Ministerial Conference in Hong Kong ends without any signif-icant headway on negotiations but with the sense that negotiators are slowlyworking through the Doha negotiating mandate, including its environmentalprovisions.

2006 A WTO dispute settlement panel issues final report on the complaint brought bythe U.S., Canada and Argentina against an alleged EU moratorium on theapproval of new biotech products, finding that the EU did in fact apply a mora-torium that resulted in “undue delay” in approvals between 1999 and 2003 thatwas incompliant with the WTO Agreement on the Application of Sanitary andPhytosanitary Measures. The panel also rules against various national importrestrictions instituted by EU member states, rejecting the EU’s argument that themeasures were necessary for precautionary purposes.



220


Resources

221

III

A Trade and Environment GlossaryCompiled By Sarah Mohan and Heike Baumüller

Access and benefit-sharing The third objective of the Convention on BiologicalDiversity is “the fair and equitable sharing of the benefitsarising out of the utilization of genetic resources, includingby appropriate access to genetic resources and by appropri-ate transfer of relevant technologies, taking into account allrights over those resources and to technologies, and byappropriate funding.” A number of countries have laws, reg-ulations or incentives that aim to govern the way people andcompanies gain the right to use genetic resources and estab-lish the associated obligation to share any gains they subse-quently earn as a result of their use of the resource. In addi-tion, various international and regional negotiations under-way to establish fair international rules to facilitate ABS,such as through patent disclosure requirements in intellectu-al property rules or the negotiation of an international ABSregime. Relevant negotiations are underway at theConvention on Biological Diversity, the World IntellectualProperty Organization and the World Trade Organization.In these talks, countries have differed on their interpretationof the meaning of ABS and the need for international rules.

Adaptation (climate) Adjustment in natural or human systems in response toactual or expected climatic stimuli or their effects, whichreduces the harm felt or exploits beneficial opportunities.

Agenda 21 Adopted at the 1992 United Nations Conference onEnvironment and Development (the “Earth Summit”),Agenda 21 outlines a comprehensive plan of action to betaken globally, nationally and locally by organizations of theUnited Nations system, governments and other stakeholdersin every area in which humans have an impact on the envi-ronment. Chapter 2 of Agenda 21 outlines specific actionareas aimed at “promoting sustainable development throughtrade.”

Agricultural runoff The flow of surface water, topsoil and agricultural chemicalsfrom agricultural fields to nearby water bodies because thesoil cannot absorb the large quantities of water that falls onthe field. Whether it is because of excessive rainfall, landclearing or poor soil quality, agricultural runoff leads to theerosion of valuable soil nutrients necessary for growinghealthy crops and also pollutes local waterways.



222

Agrobiodiversity The variety and variability of animals, plants and micro-organisms which are necessary to sustain the agriculturalecosystem and its ability to support food production andfood security. Agrobiodiversity is affected by the choice ofcrop grown in a field, the way in which it is farmed and har-vested and the well-being of related insects, bacteria, climate,birds and animals. It affects the ability of the natural envi-ronment to support agricultural production necessary forhuman survival.

Amber Box In the context of the WTO Agreement on Agriculture, alldomestic support measures (subsidies) considered to distortproduction and trade (with some exceptions), such as meas-ures to support prices or subsidies directly related to produc-tion quantities. These supports are subject to limits (five percent of agricultural production for developed countries; 10per cent for developing countries).

Amicus curiae brief Literally meaning “friends of the court” briefs, amicus curiaebriefs are submitted by a person (or organization) who is nota party to a lawsuit but who petitions the court or is request-ed by the court to file a brief because that person has a stronginterest in the subject matter. Debates continue whetherWTO dispute settlement panels and the Appellate Bodyshould accept such briefs. In practice, a number of briefshave already been accepted in past cases, notably in disputesdealing with public policy concerns such as the environmentor human health.

Article XX (of the GATT) Article XX of the General Agreement on Tariffs and Trade(GATT) sets out “general exceptions” to multilateral traderules. For instance, Members may implement measures thatviolate WTO rules if they are deemed “necessary to protecthuman, animal or plant life or health” (Article XX b) orrelate to “the conservation of exhaustible natural resources”(Article XX g), provided that such measure do not arbitrari-ly or unjustifiably discriminate between countries or amountto disguised restriction on international trade.

Biofuels A renewable source of energy that is to a significant degreecomposed of organisms that were recently alive or theirbyproducts. Such biomass is a form of stored solar energyand can be obtained from plant matter such as corn and soy-beans and can be converted into fuels such as ethanol orbiodiesel.

Blue Box In the context of the WTO Agreement on Agriculture, anydomestic support measures (subsidies) that would normallybe in the Amber Box (i.e., subsidies that are considered todistort production and trade) if the support also requires


A Trade and Environment Glossary

223

III

farmers to limit production. At present, there are no limitson spending on Blue Box subsidies.

Border tax adjustments In order to address the potentially reduced competitiveness ofproducts from countries which require costly environmentalstandards to be met to be purchased, border tax adjustmentsrebate additional costs incurred to meet these standards asproducts leave the country. Alternatively, they can involve tax-ation of products being imported from a country where suchenvironmental standards are not required into a countrywhere they are so that the final price of the product reflectsthe importing countries’ incorporation of environmental pro-tection into market prices. For instance, border tax adjust-ments have been proposed for industrial products from coun-tries that are not parties to the Kyoto Protocol and thereforedo not face the additional cost of implementing measures toreduce greenhouse gas emissions.

Carbon fertilization The stimulation of plant growth by increasing atmosphericcarbon dioxide which is widely thought to be the mainmechanism with which carbon is absorbed by ecosystems.Although it was hoped that such accelerated plant growthmight be a positive aspect of increasing concentrations ofcarbon in the atmosphere, more recent studies have shownthat the initial increase in absorption and growth in reactionto heightened levels of carbon quickly tapers off, limiting fer-tilization’s capacity for increased vegetation growth and car-bon absorption.

Carbon sequestration The process by which carbon is removed from the atmos-phere and stored in so-called “carbon sinks,” such as forests,oceans, or soils, which store carbon for long periods.

Carbon tax A fee charged on sources of energy which emit carbon dioxideinto the atmosphere and thereby encourage global warming.

Centre of origin The geographic location where a particular domesticatedplant or animal species originated. These areas are the likeli-est source of natural genetic variation.

Chain of custody A system that traces the movement of certified products fromharvesting to the final consumer at every step of transporta-tion, processing and exchange.

Clean Development Mechanism An instrument established by Article 12 of the Kyoto Protocolthat enables industrialized countries to satisfy their obligationsto reduce greenhouse gas emissions by investing in emission-reducing projects in developing countries. In order to receivecredits towards their emissions reductions commitments, theprojects must be approved by the host government as beingsupportive of sustainable development and by the Executive



224

Board and a third party as providing additionality of emissionsreductions that compliment domestic efforts of the industrial-ized country to reduce emissions.

Cleaner technologies Technologies whose use generate less pollution than alterna-tive mechanisms of production.

Codex Alimentarius Commission The international body charged with the development of stan-dards for food safety which are presumed to be consistent withthe WTO’s Agreement on the Application of Sanitary andPhytosanitary Standards (SPS Agreement). The Commission,which was established in 1961, includes several committeesthat bring together SPS specialists, food-related scientific andtechnological research through negotiations aimed at creatinginternationally-supported standards that can guide nationallaws and regulations regarding food and consumer protection.

Command and control A regulatory approach which uses laws and penalties to achievepublic policy objectives, such as using legislated maximum pol-lution levels, monitoring and fines to reduce environmentalimpacts of industrial activity. Command and control approach-es can be contrasted with incentive-based or voluntaryapproaches to inducing change in environmental practices, suchas rewards for good corporate citizenship—the latter acts as a“carrot,” while the former uses a “stick” to induce compliance.

Conformity assessment A process undertaken by a business whereby it asks a third partyor government to evaluate the business’s management practices,environmental performance, social record or final productsagainst a national or international standard. The third party canthen issue a certificate confirming conformity with the stan-dard, which is used by the business to assure customers in dif-ferent markets that it is a reliable and responsible company.

Customary law Legal norms that have developed as a result of established pat-terns of behaviour amongst actors that can be objectively ver-ified in a particular setting. At an international level, it involvesthe legal obligation for states to act in a way that is consistentwith customary exchanges between states in the past. It is con-sidered to exist if a particular legal practice is repeatedlyobserved over time, and if relevant actors consider it to be law.

Customs union A type of free trade area in which member countries have acommon external tariff, external trade policy and competi-tion policy. It is an intermediary step between a free tradeagreement and full economic integration.

Decoupled payments Financial contributions from a central government body tofarmers that are independent of the quantity and type ofproducts that the farmer grows. Such subsidies are consideredto cause less distortions to incentives and production deci-



225

III

sions, and thus trade flows, than subsidies which provideincentives that encourage farmers to produce more and there-by encourage over-production that distorts world commodi-ty prices and trade. As trade-distorting subsidies are disci-plined by WTO rules, many countries, including the U.S.,EU, Mexico and others, have tried to transform their agricul-tural domestic support programs into decoupled payments.

Distant water fishing A foreign country’s boats and staff that travel to the waters ofanother country to fish in its national waters. Often, the for-eign country’s government will sign a bilateral access agree-ment with the host country government which authorizesthe ships to fish in the host country’s exclusive economiczone in return for a payment by the foreign country govern-ment and per-ship payments made by individual boats.

Doha Development Agenda see Doha Round

Doha Round The Doha Round of multilateral trade negotiations (some-times referred to as the “Doha Development Agenda”) waslaunched in 2001 at the Fourth Ministerial Conference of theWorld Trade Organization in Doha, Qatar. As set out in theDoha Ministerial Declaration, the negotiations cover a rangeof issues, including agriculture, services, non-agriculturalmarket access, WTO rules, trade and environment, tradefacilitation, trade-related aspects of intellectual property rightsand the dispute settlement understanding. The Round wasscheduled to end by 1 January 2005, but has been extendedwith no new date set for its conclusion (as of May 2007).

Dumping The exportation of products at a price below the exportingcountry’s cost of production where the exports cause damageto producers in the importing country.

Eco-labelling A voluntary label that identifies overall environmental pref-erence of a product or service within a specific product/serv-ice category based on lifecycle considerations (i.e., environ-mental impacts during production, use and /or disposal).

Ecosystem services Amenities provided by the environment that are useful topeople. Examples of ecosystem services include conversion ofcarbon dioxide to oxygen, provision of clean water, preven-tion of erosion, provide nutrients and decompose wastes.

Endangered species A population of organisms which is at risk of becomingextinct. Species become endangered as the result of changesin their habitat, predator/prey relationships, pollution, hunt-ing and other factors. Many countries have laws that providespecial protection for these species, and the Convention onInternational Trade in Endangered Species of Wild Faunaand Flora governs trade in related products.



226

End-of-pipe technologies Technologies that remove pollutants and otherwise treat thewaste that result from manufacturing processes.

Environmental impact An evaluation of the impacts of a given policy change, assessment project or set of rules on the natural environment, including

natural resources, biodiversity and often related livelihoodsand traditional knowledge. The assessment can be conductedat a local, regional, national or global level and can focus onimpacts on particular aspects of the environment, or on par-ticular policy changes such as trade rules.

Environmental Kuznets’ curve The theory that the well-being of the environment worsensas economic development increases, in line with rapid indus-trialization and resulting pollution, but that at a certain pointin time when incomes are sufficiently high and basic needsmet there is more income and willingness to invest in ahealthy environment that results in decreases in environ-mental degradation. The inverted U shaped curve is namedafter Simon Kuznets, who developed the original theory torepresent the change in inequality over time.

Environmentally preferable Products that cause significantly less environmental harm at products some stage of their lifecycle (production/processing, con-

sumption, waste disposal) than alternative products thatserve the same purpose, or products the production and saleof which contribute significantly to the preservation of theenvironment (as defined by the United Nations Conferenceon Trade and Development).

Eutrophication The alteration of an ecosystem through the addition of sub-stantial amounts of chemical nutrients, often includingnitrogen or phosphorus, that impacts particularly marineecosystems by favouring certain plant species and changingthe normal balance and functions of the system.Eutrophication can result in the spreading of algae that canamount to the pollution of waterways to the extent thathuman water consumption is adversely affected.

Exclusive economic zone The 200 nautical miles of sea that extent from a country’scoast over which, under the UN Convention on the Law ofthe Sea, the country exercises sovereignty.

Expropriation In the context of foreign direct investment, expropriation refersto a government measure that either directly nationalizes acompany and invalidates the owner’s claims over its investmentor indirectly makes it so difficult for the investment to be oper-ated by its owner that it is tantamount to direct expropriation.

Extensification In the context of agricultural subsidies, extensification pay-ments are subsidies to producers that have reduced their agri-cultural production that attempts to compensate them for



227

III

the reduced revenues from lower sales. They have gained inpopularity, including in the EU, as a mechanism to encour-age producers to reduce their production, and in this context“extensification” thereby represents the opposite of “intensi-fication” of production.

Externalities A cost or benefit from an economic activity that affectssomebody other than the people engaged in the activity andthat are not reflected fully in prices. Externalities can be bothpositive (such as bees kept to produce honey which also pol-linate farmers’ crops in the neighbourhood) and negative (forinstance pollution that imposes clean-up costs on nearby res-idents).

Fish stock A subpopulation of a marine species which shares characteris-tics, breeding and migration patterns and is limited to adefined geographical area. Fish stocks can be defined asunderexploited, moderately exploited, fully exploited, overex-ploited, depleted or recovering from depletion based uponanalyses of the stock’s availability, growth rates, historical pop-ulation numbers and related data. FAO in 2003 estimatedthat three quarters of the planet’s fish stocks were fully exploit-ed, overexploited or worse, largely as the result of overfishing.

Forest Stewardship Council An international not-for-profit organization that providesindependent audits of forests, certification and labellingagainst its standards of sustainable forest management. FSCwas created in the early 1990s, largely as the result of leader-ship from consumers’ and environmental organizations, andcurrently enjoys the support of several key environmentalorganizations. Along with the Programme for theEndorsement of Forest Certification (PEFC), FSC is one ofthe major global forest certification bodies.

Free trade agreement A group of countries which have agreed to eliminate tariffs,quotas and other barriers to trade on most products tradedamongst themselves. While other issues, including trade inservices, intellectual property rights and environmental issuesmay be touched on in the agreement, FTAs in general do notinvolve the same treatment of non-FTA countries.

Free trade zone A region within a country which has been defined by thecentral government as particularly oriented towards produc-tion for export and which is subject to different regulatoryand tax treatment as a result, including potentially distinctenvironment or labour rules.

Free-rider Actors who benefit from a resource or policy change withoutpaying their fair share of the costs of providing and managingit. In the environmental context, it involves the problem ofactors who would benefit from investments in environmental



228

improvements—for example, investments in air pollutioncontrol that would improve air quality and thus health—butwho, owing to the large overall cost for such investments,would not by themselves have the incentive to pay the cost,but would rather wait until someone else took care of it.

Generalized system of A formal system of exemption from the WTO’s most preferences favoured nation principle, under which developed countries

offer non-reciprocal preferential treatment (such as zero orlow duties on imports) to products originating in developingcountries. Preference-giving countries unilaterally determinewhich countries and which products are included in theirschemes.

Genetically modified organism An organism (plant, animal or human) whose deoxyribonu-cleic acid (DNA) structure has been changed throughprocesses of modern biotechnology by adding, altering ordeleting one or more of the thousands of genes that controlthe characteristics of the organism.

Genetic resources Plant, animal, microbial or other material that comes fromorganisms that can reproduce themselves and that are ofactual or potential value.

Genetic use restriction Dubbed “terminator technologies” by their critics, GURTstechnologies are a tool of modern biotechnology that can be used to

genetically alter organisms to be sterile, i.e., unable to repli-cate themselves, or to require the crops to be treated with achemical for the genetic enhancement engineered into thecrop to function. The biotechnology industry has advocatedthe technologies as a means to prevent the unwanted geneflow. Critics, however, fear that the technologies could haveadverse effects on rural livelihoods by preventing reuse of theseeds by farmers and on biodiversity by risking a transfer ofthe trait to wild varieties. As a result, a de facto moratoriumon field trials of GURTs was instituted by the parties to theCBD in 2000.

Geographical indication A form of intellectual property protection that identifies agood as originating from a particular region or locality(e.g., Bordeaux wine, Parmigiano Reggiano, Darjeeling tea)where the good’s quality, reputation or other characteristicscan be attributed to its geographical origin (as defined inthe WTO Agreement on Trade-related Aspects ofIntellectual Property Rights).

Good governance A process of policy formation, decision-making and imple-mentation by authorities that is characterized by the rule oflaw, absence of corruption and existence of predictability andorder. The term has become particularly popular since thelate 1990s in international institutions such as the World



229

III

Bank and the International Monetary Fund (IMF), whoidentify good governance reforms as essential to develop-ment, growth and the ability to pay back loans.

Green Box In the context of the WTO Agreement on Agriculture, anydomestic support measures (subsidies) that do not (or onlyminimally) distort trade. They have to be government-fund-ed (not by charging consumers higher prices) and must notinvolve price support. Green Box subsidies include paymentsfor environmental programs (provided that they do not dis-tort production and trade).

Greenhouse gases Gases whose release into the atmosphere contributes to globalwarming (the greenhouse effect) because they absorb infraredlight. Examples include carbon dioxide, water vapour andozone.

Green procurement Purchasing of products or services by public or private sectorinstitutions that have a lesser impact on the environmentthan competingproducts or services that serve the same pur-pose (e.g., during manufacturing, packaging, distribution,operation and/or disposal).

Green protectionism The use of environmental policies that are primarily aimed atprotecting the domestic industry rather than the environment.This issue is of particular concern to developing countries whofear that such policies with hinder market access for their goods.

Group of Eight (G8) A group which was created in the 1970s to include eight ofthe most powerful states at the time, namely the U.S.,Canada, Italy, France, Germany, Russia, U.K. and the EU,which still meets regularly every year to discuss global issues.

Group of Ninety (G90) In the context of the WTO negotiations, an alliance of thesmallest and poorest developing countries which put forwardcommon positions to advance the special interests of land-locked and island economies, less developed countries, andcommodity-dependent nations. The group functions as anumbrella group for the African, Caribbean and Pacific (ACP)countries, the African Union, and least-developed countries.

Group of Ten (G10) A group of net food importers who have formed an allianceat the WTO agriculture negotiations to defend themselvesagainst trade liberalization efforts that could hamper theirability to protect their domestic agricultural productionthrough subsidies, high tariffs and other measures. Membersinclude Switzerland, Norway, Japan, Bulgaria, Taiwan,Korea, Iceland, Israel, Liechtenstein and Mauritius.

Group of Thirty-Three (G33) A group of 42 developing countries that have formed in sup-port of the concepts of the “Special Products and the SpecialSafeguard Mechanism” in the WTO agriculture negotia-



230

tions, and in particular for SP and SSM rules that enablethem to protect small farmers in their countries fromimports or import surges that could adversely affect theirlivelihood security, rural development or food security.

Group of Twenty (G20) An alliance of developing countries established ahead of the2003 WTO Cancun Ministerial Conference to advancecommon positions in the agriculture negotiations. Led byBrazil, China, India and South Africa, the group has pushedfor an end to agricultural subsidies in industrialized countries

Habitat The physical environment which surrounds, influences andis used by a particular species.

Human development A process which expands people’s choices and their capabili-ty to lead long and healthy lives, to be knowledgeable, tohave access to the resources needed for a decent standard ofliving and to be able to participate in the life of the commu-nity. This understanding of development is supported by theUN Development Programme’s Human DevelopmentIndex, a composite index including figures relating to lifeexpectancy, literacy and GDP per capita.

Import substitution A process by which a country attempts to replace finishedand manufactured products which were imported in the pastwith locally produced goods, with the aim of reducingimports, and increasing local technological capacities.

International environmental Deliberate evasion of environmental laws and regulations by crime individuals and companies in the pursuit of personal finan-

cial benefit, where the impacts are transboundary or global.

Invasive alien species Species that are introduced deliberately or unintentionallyoutside their natural habitats where they have the ability toestablish themselves, invade, out-compete natives and takeover the new environments.

International Plant The IPPC is an international treaty that aims to prevent theProtection Convention spread and introduction of pests of plants and plant products,

and to promote appropriate measures for their control. It ischarged with the development of standards for plant healthwhich are recognised by the World Trade Organization as pre-sumed to be consistent with the WTO’s Agreement on theApplication of Sanitary and Phytosanitary Standards (SPSAgreement).

ISO 14000 A standard of the International Organization forStandardization concerning the environmental managementpractices used in the production process that certifies com-panies that have minimized the negative environmentalimpact of their operations, that are compliant with relevantlaws, and are making ongoing environmental improvements.



231

III

Kimberley Process An international scheme, agreed to by major diamondexporters and importers with the support of civil society andthe United Nations, according to which cross-boundaryshipments of diamonds must be accompanied by a certificatetestifying that the diamonds were not used to finance warnor human rights abuses. Although most relevant countriesare signatories to the scheme, and it is thus claimed that con-sumers can be assured that they are not purchasing “blooddiamonds,” the lack of mandatory, impartial third partymonitoring limits the efficiency and rigor of the system.

Livelihood security The durability, stability and predictability of income fromwork that enables people to expect that they will in the futurebe able to generate income and use it to purchase the ameni-ties they and their families need.

Living modified organisms Term used in the Cartagena Protocol on Biosafety instead of(LMOs) the more commonly used “genetically modified organism”

(GMO) to refer to “any living organism that possesses anovel combination of genetic material obtained through theuse of modern biotechnology.” The distinction betweenLMOs and GMOs remains somewhat unclear and open todiffering interpretations among the Protocol parties.

Local content rules In investment, these rules require that the investor purchasea certain amount of local materials for incorporation in theinvestor’s product.

Marker genes A gene that is inserted into an organism, along with a mod-ified gene, whose presence in the host organism can be test-ed in order to verify if the organism has in fact received boththe marker gene and the modified gene, that is, to verify thatit has been genetically modified.

Maximum sustainable yield In the fisheries context, the highest average yield over timethat does not result in a continuing reduction in stock abun-dance, taking into account fluctuations in abundance andenvironmental variability.

Miami Group A group of countries with significant domestic biotechnolo-gy activities, including investments in the biotech industryand use of agricultural biotechnology, which during thenegotiations of the Cartagena Protocol on Biosafety arguedfor a limited scope of the new pact in order to reduce impactson cross-boundary trade in GMOs. Includes the U.S.,Canada, Australia, Argentina, Chile and Uruguay.

Millennium Development Goals Eight development goals drawn from the actions and targetscontained in the Millennium Declaration adopted in 2000by the world’s governments at the UN Millennium Summit,which set out specific targets and indicators for reducingpoverty by 2015.



232

Millennium Task Force(s) Groups of experts coordinated by the Millennium Projectthat are tasked with identifying the operational priorities,organizational means of implementation, and financingstructures necessary to achieve each of the MillenniumDevelopment Goals.

Mitigation (climate) Actions taken to reduce the extent and scope of climatechange, the risks it poses for human activities, and to buildlong-term capacity to reduce vulnerability to climate change.

Mode 1 In the context of the WTO Agreement on Trade in Services,one of four modes of trading in services by which services aresupplied from one country to another (e.g., internationaltelephone calls). Officially referred to as “cross-border sup-ply.”

Mode 3 In the context of the WTO Agreement on Trade in Services,one of four modes of trading in services by which a foreigncompany sets up subsidiaries or branches to provide servicesin another country (e.g., foreign banks setting up operationsin a country). Officially referred to as “commercial presence.”

Mode 4 In the context of the WTO Agreement on Trade in Services,one of four modes of trading in services by which individualstravel from their own country to supply services in another(e.g., fashion models or consultants). Officially referred to“movement of natural persons.”

Monterrey Consensus A declaration adopted by heads of state at the 2002 UNInternational Conference on Financing for Developmentwhich affirms the importance of finance for internationaldevelopment, including through official development assis-tance, foreign direct investment, international trade, techni-cal cooperation and reduction of debt.

Most favoured nation One of the two core principles of the WTO system (alongwith national treatment). Under the WTO agreements,countries cannot normally discriminate between their trad-ing partners. Thus, if a country grants another country a spe-cial favour (such as a lower customs duty rate for one of theirproducts), it has to do the same for all other WTO Members(subject to specified exceptions, such as generalized systemsof preferences).

Multilateral environmental An agreement among states which may take the form of “soft agreement law,” setting out non-legally binding principles that parties will

respect when considering actions that affect a particular envi-ronmental issue; or “hard law” which specifies legally-bindingactions to be taken to work toward an environmental objective.

Mutual recognition agreement An agreement between two parties to recognize the otherparty’s tests, certificates and approvals of regulated products



233

III

as conforming to one’s own safety standards prior to export.Such an agreement allows products to be exported andplaced on the other party’s market without having to under-go additional assessments.

National treatment One of the two core principles of the WTO system (alongwith most favoured nation). A country is required to accordother countries the same treatment as its own nationals.Thus, imported and locally-produced goods should be treat-ed equally-at least after the foreign goods have entered themarket. The same should apply to foreign and domestic serv-ices, and to foreign and local trademarks, copyrights andpatents.

Non-point source of pollution In contrast to “point” pollution that is generated by factories,sewage treatment plants and other operations, non-pointpollution comes from several sources, largely through waterfrom rain or snow moving over land, picking up pollutantslike fertilizers and pesticides, and depositing them in lakes,rivers and aquifers.

Non-tariff barriers/measures NTBs are laws, regulations or measures that are created orsupported by government, often with environmental, social,political or economic goals, that can act to restrict trade.While they might not be intended to adversely impact onexports or imports in the way that tariffs do, measures such asstandards or requirements may be too difficult or costly forforeign companies to meet, thereby effectively preventingimports from taking place.

Obligation de résultat A legal concept under French law that can be translated as“the obligation to achieve a particular result.” In the contextof the environment negotiations at the WTO, some coun-tries have argued that trade measures that are implementedto achieve a multilateral environmental agreement’s objec-tives (i.e., as part of their obligation de résultat) should beincluded in the definition of “specific trade obligations.”

Overcapacity In the context of fisheries, this refers to the ability of a fish-ing fleet to harvest fish at greater quantities and more rapid-ly than the fisheries is capable of supporting through itsreproduction rates. As a result of the size of the fleet, thetechnology and the number of employees, supported byindicators on size of vessels, engines, gear and equipment,can be said to generate capacity that leads to fishing beyondsustainable catch levels.

Overfishing A rate or level of fishing mortality that jeopardizes the capac-ity of a fishery to produce the maximum sustainable yield ona continuing basis.



234

Policy space The flexibility that a country has to make policy to meet itssocial, political, environmental and economic objectiveswithin the limits of the multilateral, regional and bilateralagreements which it has ratified.

Precautionary principle While no universally agreed definition exists, observers gen-erally refer to Principle 15 of the Rio Declaration adopted atthe 1992 United Nations Conference on Environment andDevelopment which states that “Where there are threats ofserious or irreversible damage, lack of full scientific certaintyshall not be used as a reason for postponing cost-effectivemeasures to prevent environmental degradation.”

Prior informed consent A requirement, often used before international trade in prod-ucts of environmental concern, that demands that anexporter of a potentially harmful product obtain theinformed approval of the importing government, according tointernationally agreed forms, timelines and criteria, prior tothe arrival of the product in the importing country’s territory.Alternatively, as regards access to, extraction of and patentingof genetic resources that belong to one country by a foreigncitizen, prior informed consent requires the government or agovernment-supported body to approve the movement of thecountry’s genetic resources outside its borders and to the sub-sequent use, treatment and claim to those resources.

Process and production methods The way in which a product is made. In the trade context, adistinction is often made between PPMs depending on theextent to which they affect the final product, namely non-product-related PPMs which have a negligible impact on theperformance or characteristics of the final product, andproduct-related PPMs which affect the nature, properties orqualities of the product itself and its ability to have directimpact on, for example, the environment or human health inthe country of use and/or disposal.

Public goods Things whose consumption by one person does not reduce theamount available for others to consume, and whose consump-tion cannot be controlled or restricted to certain people. Thesecriteria, known as “non-rivalry” and “non-excludability,” areoften fulfilled by ecosystem services such as clean air or water.

Quantitative restrictions A form of trade restriction applied at the border that is basedupon the quantity of goods that can be imported or exported,for example an import quota, as opposed to restrictions basedupon price like tariffs. Quantitative restrictions are for the mostpart prohibited by the WTO in favour of price-based restric-tions, which are more predictable and tend to distort trade less.

Rules of origin Criteria for establishing the country of origin of a productwhich are used to determine the eligibility of a product for


preferential treatment under free trade agreements andGeneralized System of Preferences (GSP) schemes. Oftenbased on whether production or processing leads to a changein tariff classification or in the level of value added in thecountry where the good was last processed.

Sanitary and Phytosanitary For the purpose of the WTO Agreement on the Application Measures of Sanitary and Phytosanitary Measures (SPS Agreement), an

SPS measure is defined as any measure, procedure, requirementor regulation taken by governments to protect human, animal,or plant life or health from the risks arising from the spread ofpests, diseases, disease-causing organisms, or from additives,toxins or contaminants found in food, beverages or feedstuffs.

Sensitive Products All WTO Members will be allowed to designate certain“Sensitive Products” in the agriculture negotiations whichwill be subject to smaller tariff cuts.

Singapore issues Four topics that were proposed for inclusion on the WTOnegotiating agenda at the Singapore Ministerial Conferencein 1996, which were subsequently included in the DohaRound mandate. However, owing to the strong resistance ofmany developing countries to WTO negotiations on invest-ment protection, competition policy and transparency ingovernment procurement, all three were eliminated from thecurrent round of negotiations in July 2004, and only tradefacilitation remained on the negotiating agenda.

Single undertaking In the context of the Doha Round of trade negotiations, anagreement among WTO Members that all negotiating areaswill have to be concluded at the same time unless an area hasbeen excluded specifically from the single undertaking.(“nothing is agreed until everything is agreed”).

Special and differential WTO or FTA rules which allow developing countries to treatment follow different rules than other Members, including

through implementing the normal rules over a longer periodof time, undertaking lower tariff reductions, providing fortechnical assistance, or enabling them to take measures tosupport the most poor and vulnerable parts of their popula-tion or overall development objectives.

Special Products In the Doha Round of trade negotiations, developing coun-tries will be allowed to designate a certain number of agri-cultural products as “Special Products” that are of particularimportance to vulnerable farming communities for reasonsof food security, livelihood security and rural development.These products will be subject to “more flexible treatment”in the tariff reduction negotiations, which many see as entail-ing lower reductions over longer time periods than would bethe case for other products.


235

III


Special Safeguard Mechanism The SSM under negotiation in the Doha Round will beavailable to developing countries to protect their agriculturalsectors against price fluctuations and sudden import surgesby raising tariffs beyond bound levels.

Specific trade obligation Requirements set out in multilateral environmental agree-ments that specify that parties have to take particular meas-ures in relation to cross-boundary movements of certaintypes of products, for example solicit prior informed consentbefore the export of GMOs. Under the environment man-date of the Doha Round, governments have been instructedto clarify the relationship between WTO rules and STOs.

Structural adjustment A process undergone in a country as a result of a policy pack-age that aims to reduce government expenditures, expand thereach of markets and restructure the economy such that it fitsthe prescriptions of the Washington Consensus, the IMFand World Bank for good economic health. Countries oftenundertake structural adjustment processes after severe finan-cial crises and subsequent loans from the IMF in order to sat-isfy the latter’s conditionalities for the loan.

Subsidies Government payments to support activities which theybelieve are important for the country’s culture, history, val-ues, economy or political structure, but that would otherwiseeither not take place or be severely compromised.

Sui generis Literally, “of its own kind,” this term refers to systems of intel-lectual protection of plant varieties that can be created bynational authorities to promote food security and protection ofplant breeders, without necessarily having as strict protection asrequired by patents. The WTO Agreement on Trade-relatedAspects of Intellectual Property Rights (TRIPS) allows in Article27.3b for the adoption of sui generis models of protection.

Sustainability Impact A process undertaken before and during a trade negotiation Assessment which seeks to identify economic, social and environmental

impacts of a trade agreement in an effort to help integratesustainability into trade policy. SIAs are most commonlyconducted by the European Union to assess the impacts ofbilateral and multilateral trade negotiations, both on the EUand its negotiating partners.

Tariff Customs duties on merchandise imports. Levied either on anad valorem basis (percentage of value) or on a specific basis(e.g., US$5 per 100 kilograms).

Tariff escalation Higher tariffs on processed goods than on the raw materialsfrom which they are produced. This practice has been criti-cized for protecting domestic processing industries while dis-couraging the development of processing activity in thecountries where raw materials originate.


236


Tariff peak Particularly high tariffs on selected and often sensitive prod-ucts. For industrialized countries, tariffs of 15 per cent andabove are generally recognized as tariff peaks.

Technical Barriers to Trade Technical regulations and voluntary standards that set outspecific characteristics of a product, such as its size, shape,design, functions and performance, or the way a product islabelled or packaged before it enters the marketplace. In theWTO, these measures are regulated by the Agreement onTechnical Barriers to Trade (TBT Agreement).

Terminator technologies See Genetic use restriction technologies.

Timber concessions A forested region which a company has purchased limitedownership rights to from the government authority responsi-ble for forests. As in many countries forests are the originalproperty of the state as steward of the resource, the concessionpayment grants the company certain rights—for example, tocut down a certain amount of wood using certain practices—but does not necessarily give the forest to them indefinitelyand with the right to evict local peoples who live off the land.

Traditional knowledge The knowledge, innovations and practices of indigenous andlocal communities which has been developed based on expe-rience over time and adapted to the local culture and envi-ronment.

Tragedy of the commons The concept that individual interest in the consumption ofpublicly-available resources leads each individual to consumemore than is supportive of the common good, with thecumulative effect being a depletion of the resource and itscapacity to provide goods and services to all individuals inthe future.

Transgenic plants See Living modified organisms.

Vector-borne disease A disease in which the pathogenic microorganism is trans-mitted from an infected individual to another individual byanother agent (the “vector”), sometimes with other animalsserving as intermediary hosts. For example, the mosquito isa vector that transmits malaria.

Watershed management Strategies aimed at preserving and enhancing the water-retention capacity of a region of land whose water drains intoa specified body of water.

World Organisation for Officially known by its French name Organisation Mondiale Animal Health de la Santé Animale (OIE), the World Organisation for

Animal Health is the international body charged with thedevelopment of standards for animal health which are recog-nized by the World Trade Organization as presumed to beconsistent with the WTO’s Agreement on the Application ofSanitary and Phytosanitary Standards (SPS Agreement).


237

III



238


Resources

239

III

Online and In-print Resources1

Compiled by Sarah Mohan, Heike Baumüller and Ruth Fend

Section I: Setting the contextBrack, D. (2005) The World Trade Organization and sustainable development: A guide to thedebate. Energy, Environment and Development Programme EEDP BP 05/03. ChathamHouse. London, U.K.

Charnovitz, S. (1991) “Exploring the Environmental Exceptions in GATT Article XX.” InJournal of World Trade 25(5): 38-55.

Copeland, B. R. and Taylor, M.S. (2003) Trade and the Environment: Theory and Evidence.Princeton University Press. Princeton, USA.

Cosbey, A. (2004) Lessons Learned On Trade And Sustainable Development. Distilling Six Yearsof Research from the Trade Knowledge Network. IISD-ICTSD Trade Knowledge Network.Geneva, Switzerland.

Cosbey, A. (2000) Institutional Challenges and Opportunities in Environmentally Sound TradeExpansion: A Review of the Global State of Affairs. North-South Agenda Paper No. 41.University of Miami North-South Center.

Eickhout, B., van Meijl, H., Tabeau, A. and van Zeijts, H. (2004) Between Liberalization andProtection: Four Long-term Scenarios for Trade, Poverty and the Environment. Paper prepared forthe 7th Annual Conference on Global Economic Analysis: Trade, Poverty, and theEnvironment, 16–19 June 2004. Washington D.C., USA.

Gallagher, K. P. and Werksman, J. (2002). Earthscan Reader on International Trade andSustainable Development. Earthscan Publications. London, U.K.

GETS (2003) Achieving Harmony in Trade and Environment. Global Environment and TradeStudy. Minnesota, USA.

IISD and UNEP (2005) Environment and Trade – A Handbook (2nd edition). InternationalInstitute for Sustainable Development and United Nations Environment Programme.Winnipeg, Canada.

Neumayer, E. (2001) Greening Trade and Investment: Environmental Protection withoutProtectionism. Earthscan Publications. London, U.K.

South Centre (1998) The WTO Multilateral Trade Agenda and the South. The South Centre.Geneva, Switzerland.

1 The list of resources was compiled from suggestions by the contributors to this book. It also draws on resourcesfeatured in the IISD-UNEP Environment and Trade Handbook and ICTSD’s Web portal Trade-environment.org.


Trade-environment.org is a web portal of the International Centre for Trade and SustainableDevelopment featuring resources, events, news and links on trade and environment. http://www.trade-environment.org.

UNEP (1992) Agenda 21: Programme of Action for Sustainable Development. United NationsEnvironment Programme. Chapter 2 (pp. 20–22).

UNEP (2002) World Summit on Sustainable Development Plan of Implementation. UnitedNations Environment Programme. Para. 91.

WWF MPO (2005) Trade Liberalization, Rural Poverty and the Environment: A Wide-RangingReview of the Debates. WWF Macroeconomic Policy Office. Washington D.C., USA.

Section II1. Agriculture

Blandford, D. and Josling, T (2007) Should the Green Box be modified?. International Foodand Agricultural Trade Policy Council. Washington D.C., USA.

CBD (2005) The Impact of Trade Liberalization on Agricultural Biological Diversity. CBDTechnical Series No. 16. Secretariat of the Convention on Biological Diversity. Montreal,Canada.

ICTSD and IISD (2003–2005) Agriculture. Doha Round Briefing Series No. 2. InternationalCentre for Trade and Sustainable Development and International Institute for SustainableDevelopment. Geneva, Switzerland.

ICTSD and GM (2007) Promoting Sustainable Land Management Through Trade: Examiningthe Linkages Between Trade, Livelihoods and Sustainable Land Management in Degraded Areas.International Centre for Trade and Sustainable Development and the Global Mechanism forthe United Nations Convention to Combat Desertification. Geneva, Switzerland.

Lime, T. (2005) Agricultural Commodities, Trade and Sustainable Development. InternationalInstitute for Economic Development and International Centre for Trade and SustainableDevelopment. Nottingham, U.K.

OECD (2003) Agriculture and Biodiversity: Developing Indicators for Policy Analysis.Organisation for Economic Co-operation and Development. Paris, France.

UNEP (2005) Handbook on Integrated Assessment of Trade Related Measures: The AgricultureSector. United Nations Environment Programme – Economics and Trade Branch. Geneva,Switzerland.

Unisfera (2005) From Boom to Dust ? Agricultural Trade Liberalization, Poverty andDesertification in Rural Drylands. Unisfera International Centre. Montreal, Canada.

Werth, A. (2003) Agri-Environment and Rural Development in the Doha Round. IISD-ICTSDTrade Knowledge Network. Geneva, Switzerland.

Vitalis, V. (2004) Trade, Agriculture, the Environment and Development: Reaping the Benefits ofWin-Win-Win?. Paper presented at the IIED-ICTSD Dialogue “Agriculture, TradeNegotiations, Poverty and Sustainability,” 14–16 July 2004, Windsor, U.K.


240


2. Biotechnology

Anderson, K., Damania, R., Jackson, L.A. (2004) Trade, standards and the political economy ofgenetically modified food. World Bank Policy Research Working Paper 3395. World Bank.Washington D.C., USA.

Bail, C., Falkner, R. and Marquard, H. (2002) Reconciling Trade in Biotechnology withEnvironment & Development? The Cartagena Protocol on Biosafety. Earthscan Publications andthe Royal Institute of International Affairs. London, U.K.

Baumüller, H. and Oliva, M.J. (2006) “WTO/EC Biotech Panel Report: Key Issues andImplications.” Environmental Policy and Law Journal 36(6):257–264.

Baumüller, H. (2003) Domestic Import Regulations for Genetically Modified Organisms and theirCompatibility with WTO Rules. IISD-ICTSD Trade Knowledge Network. Geneva, Switzerland.

Bernauer, T. (2005) “Causes and Consequences of International Trade Conflict overAgricultural Biotechnology.” International Journal of Biotechnology 7(1/2/3).

ICTSD (2007) Biotechnology: Addressing Key Trade and Sustainability Issues. InternationalCentre for Trade and Sustainable Development. Geneva, Switzerland.

FAO (2004) The State of Food and Agriculture 2003–2004. UN Food and AgricultureOrganization. Rome, Italy.

GM Science Review Panel (2003) An Open review of the science relevant to GM crops and foodbased on interests and concerns of the public. GM Science Review Panel. London, U.K.

James, C. (annual) Global Status of Commercialized Transgenic Crops. ISAAA Briefs.International Service for the Acquisition of Agri-biotech Applications. Ithaca, USA.

Meléndez-Ortiz, R. and Sánchez, V. (2005) Trading in Genes: Development Perspectives onBiotechnology, Trade and Sustainability. Earthscan Publications and International Centre forTrade and Sustainable Development. London, U.K.

Musselli, I. & Zarrilli, S. (2002) “Non-trade concerns and the WTO jurisprudence in theAsbestos Case – Possible relevance for international trade in genetically modified organisms.”The Journal of World Intellectual Property 5(3): 373–393.

Nuffield Council (2003) The Use of Genetically Modified Crops in Developing Countries.Nuffield Council on Bioethics. London, U.K.

Serageldin, I. and Persley, G. J. (2003) Biotechnology and Sustainable Development: Voices of theSouth and North. CABI Publishing. Glasgow, U.K.

Zarilli, S. (2005) International trade in GMOs: Legal frameworks and developing country con-cerns. Policy Issues in International Trade and Commodities Study Series No. 29. UnitedNations Conference on Trade and Development. Geneva, Switzerland.

3. Capacity Building

European Commission (2003) Guidelines for European Commission Trade Related Assistance.European Commission. Brussels, Belgium.

Friis Jensen, M. (2002) Reviewing the SPS Agreement: A Developing Country Perspective. CDRWorking Paper. Centre for Development Research. Copenhagen, Denmark.

Online and In-print Resources

241

III


ICTSD and IISD (2003-2005) Technical Assistance and Capacity-building. Doha RoundBriefing Series No. 12. International Centre for Trade and Sustainable Development andInternational Institute for Sustainable Development. Geneva, Switzerland.

JITAP (2005) Toolkit For Module 1 – Institutional Capacity Building: Trade Negotiations,Implementation and Policies. UNCTAD/DITC/TNCD/2004/2. Joint Integrated TechnicalAssistance Programme. Geneva, Switzerland.

Kostecki, M. (2001) Technical Assistance Services in Trade Policy: A Contribution to theDiscussion on Capacity Building in the WTO. ICTSD Resource Paper No. 2. InternationalCentre for Trade and Sustainable Development. Geneva, Switzerland.

Pengelly, T. (2005) Technical Assistance for the Formulation and Implementation of IP policy inDeveloping Countries and Transition Economies. ICTSD Intellectual Property Rights &Sustainable Development Series Issue Paper No 11. International Centre for Trade andSustainable Development. Geneva, Switzerland.

Solignac Lecomte, H.-B. (2001) Building capacity to trade: A road map for developmentpartners. ECDPM Discussion Paper No. 33. European Centre for Development PolicyManagement. Brussels, Belgium.

UNCTAD (2005) Trade Capacity Development For Africa: Compendium Of Papers. TradeNegotiations and Africa Series No. 2. United Nations Conference for Trade and Development.Geneva, Switzerland.

UNEP (2002) Capacity Building on Environment, Trade and Development: Trends, Needs andFuture Directions. United Nations Environment Programme – Economics and Trade Branch.Geneva, Switzerland.

Vivas-Eugui, D, and Bellmann, C. (2004) “Supporting Policymaking, Legal Reform andParticipation in International Standard Setting.” In SAANA Consulting (ed.) Reflecting on IPRTechnical Assistance for Developing Countries and Transition Economies. Helsinki, Finland.

4. Climate Change and Energy

Aldy, J.E. et al. (2003) Beyond Kyoto: Advancing the International Effort against ClimateChange. Pew Center on Global Climate Change. Washington D.C., USA.

Green, A. (2005) “Climate Change, Regulatory Policy And The WTO: How ConstrainingAre Trade Rules?” Journal of International Economic Law 8(1):143–189.

Hazell, P. and Pachauri, R.K. (2006) Bioenergy and Agriculture: Promises and Challenges.International Food Policy Research Institute. Washington D.C., USA.

Howse, R. (2006) WTO Disciplines and Biofuels: Opportunities and Constraints in the Creationof a Global Marketplace. International Food and Agricultural Trade Policy Council.Washington D.C., USA.

ICTSD (2006) Linking Trade, Climate Change and Energy: Selected Issue Briefs. InternationalCentre for Trade and Sustainable Development. Geneva, Switzerland.

IEA (2006) World Energy Outlook 2006. International Energy Agency. Paris, France.

Johansson, T. and Goldemberg, J. (2002) Energy for Sustainable Development: A Policy Agenda.United Nations Development Programme. New York, USA.


242


Kommerskollegium/Swedish National Board of Trade (2004) Climate and Trade Rules –Harmony or Conflict? Kommerskollegium. Stockholm, Sweden.

Koplow, D. (2006) Biofuels: At What Cost? Government Support for Ethanol and Biodiesel in theUnited States. Global Subsidies Initiative. International Institute for Sustainable Development.Winnipeg, Canada.

Martinot, E. (2005) Renewables 2005: Global Status Report. WorldWatch Institute.Washington D.C., USA.

Selivanova, J. (2004) “World Trade Organisation Rules and Energy Pricing: Russia’s Case.”Journal of World Trade 38(4): 559-602.

Sugiyama, T. (2005) Governing Climate: The Struggle for a Global Framework Beyond Kyoto.International Institute for Sustainable Development. Winnipeg, Canada.

UNCTAD (2000) Trade Agreements, Petroleum and Energy Policies. United NationsConference on Trade and Development. Geneva, Switzerland.

UNEP (2003) Energy Subsidies: Lessons Learned in Assessing their Impact and Designing PolicyReforms. United Nations Environment Programme – Economics and Trade Branch. Geneva,Switzerland.

5. Dispute Resolution

Bernasconi-Osterwalder, N., Magraw, D., Oliva, M.J., Orellana, M. and Tuerk, E. (2005) AGuide to WTO Jurisprudence. Earthscan Publications. London, U.K.

Howse, R. (2002) “The Appellate Body Rulings in the Shrimp/Turtle Case: A New LegalBaseline for the Trade and Environment Debate.” Columbia Journal of Environmental Law27(2): 489-519.

Hunter, D., Salzman, J. and Zaelke, D. (2002) International Environmental Law and Policy(2nd ed.). University Casebook Series. Foundation Press. New York, USA.

ICTSD and IISD (2003-2005) Dispute Settlement Review. Doha Round Briefing Series No. 8.International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.

Mann, H. and Porter, S. (2003) The State of Trade and Environment Law 2003: Implicationsfor Doha and Beyond. International Institute for Sustainable Development and Center forInternational Environmental Law. Winnipeg, Canada.

Marceau, G. and Trachtmann, J.P. (2002) “TBT, SPS, and GATT: A Map of the WTO law ofdomestic regulation.” Journal of World Trade 36(5).

Read, R. (2004) “Like Products, Health & Environmental Exceptions: The Interpretation ofPPMs in Recent WTO Trade Dispute Cases.” The Estey Centre Journal of International Lawand Trade Policy 5(2): 123-146.

Sands, P. (2003) Principles of International Environmental Law. Cambridge University Press.Cambridge, U.K.

Tarasofsky, R. (2005) Trade, Environment and the WTO Dispute Settlement Mechanism.Chatham House. London, U.K.


243

III


WTO Dispute Settlement Gateway: http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm.

6. Environmental Goods and Non-agricultural Market Access

Alavi, R. (2007) An Overview of Key Markets, Tariffs and Non-Tariff Measures on Asian Exportof Select Environmental Goods. ICTSD Series on Trade and Environment No. 4. InternationalCentre for Trade and Sustainable Development. Geneva, Switzerland.

Carpentier, C.L., Gallagher, K. and Vaughan, S. (2005) “Environmental Goods and Servicesin the World Trade Organization.” Journal of Environment and Development 14(2): 225–252.

Hamwey, R. M. (2005) Environmental Goods: Where Do the Dynamic Trade Opportunities forDeveloping Countries Lie?. Centre for Economic and Ecological Studies. Geneva, Switzerland.

Howse, R. and van Bork, P. (2006) Options for Liberalising Trade in Environmental Goods inthe Doha Round. ICTSD Trade and Environment Series No.2. International Centre for Tradeand Sustainable Development. Geneva, Switzerland.

ICTSD and IISD (2003-2005) Trade and Environment. Doha Round Briefing Series No. 9.International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.

Kim, J.A. (2007) Issues of Dual Use and Reviewing Product Coverage of Environmental Goods.OECD Trade and Environment Working Paper No. 2007-01. Organisation for EconomicCo-operation and Development. Paris, France.

OECD (2005) Environmental Requirements and Market Access. Organisation for EconomicCo-operation and Development. Paris, France.

OECD (2005) Trade that Benefits the Environment and Development: Opening Markets forEnvironmental Goods and Services. Organisation for Economic Co-operation andDevelopment. Paris, France.

Steenblik, R., Drouet, D. and Stubbs, G. (2005) Synergies Between Trade in EnvironmentalServices and Trade in Environmental Goods. OECD Trade and Environment Working PaperNo. 2005-01. Organisation for Economic Co-operation and Development. Paris, France.

Sustainability Impact Assessment of Proposed WTO Multilateral Trade Negotiations of theInstitute for Development Policy and Management (University of Manchester, U.K.) featuresSIAs of trade liberalisation on the agriculture, fisheries and forestry sectors. http://www.sia-trade.org/wto/index.htm.

Tothova, M. (2005) Liberalisation of Trade in Environmentally Preferable Products. November2005. OECD Trade and Environment Working Paper No. 2005-06. Organisation forEconomic Co-operation and Development. Paris, France.

Vikhlyaev, A. (2004) Environmental goods and services: Defining negotiations or negotiating defi-nitions?. Trade and Environment Review 2003. United Nations Conference on Trade andDevelopment. Geneva, Switzerland.

7. Environmental Services

ICTSD and IISD (2003–2005) Trade in Services. Doha Round Briefing Series No. 3.International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.


244


Kirkpatrick, C. (2006) Trade in Environmental Services: Assessing the Implications forDeveloping Countries in the GATS. ICTSD Series on Trade and Environment No. 3.International Centre for Trade and Sustainable Development. Geneva, Switzerland.

Krajewski, M. (2004) “Environmental Services of General Interest in the WTO: no love atfirst sight.” Journal of European Environmental and Planning Law 95(3): 489-534.

Landell-Mills, N. and Porras, I.T. (2002) Silver bullet or fools’ gold? A global review of marketsfor forest environmental services and their impact on the poor. Institute for EconomicDevelopment. London, U.K.

Sawhney, A. (2007) Building Supply Capacity for Environmental Services in Asia. ICTSD Serieson Trade and Environment No. 5. International Centre for Trade and SustainableDevelopment. Geneva, Switzerland.

UNCTAD (2003) Energy and Environmental Services: Negotiating Objectives and DevelopmentPriorities. UNCTAD/DITC/TNCD/2003/3. United Nations Conference on Trade andDevelopment. Geneva, Switzerland.

Sawhney, S. and Chanda, R. (2003) Trade in environmental services: opportunities and con-straints. Indian Council for Research on International Economic Relations. New Delhi, India.

8. Environmental Technologies

Barton, H. (2007) New Trends in Technology Transfer: Implications for National andInternational Policy. Intellectual Property Rights & Sustainable Development Series No. 18.International Centre for Trade and Sustainable Development and United Nations Conferenceon Trade and Development. Geneva, Switzerland.

Correa, C.M. (1994) “Trends in technology transfer: implications for developing countries.”Science and Public Policy 21(6): 369–380.

Lall, S. (2001) The economics of technology transfer. Edward Elgar Publishing. Cheltenham,U.K.

Maskus, K.E. (2004) Encouraging International Technology Transfer. Intellectual PropertyRights & Sustainable Development Series No. 9. International Centre for Trade andSustainable Development and United Nations Conference on Trade and Development.Geneva, Switzerland.

Tébar Less, C. and McMillan, S. (2005) Achieving the successful transfer of environmentallysound technologies: trade-related aspects. OECD Trade and Environment Working Paper No.2005-02. Organisation for Economic Co-operation and Development. Paris, France

UNCTAD (1990) Transfer and development of technology in the least developed countries: anassessment of major policy issues. UNCTAD/ITP/TEC/12. United Nations Conference onTrade and Development. Geneva, Switzerland.

UNIDO (1996) Manual on technology transfer negotiation. United Nations IndustrialDevelopment Organization. Vienna, Austria.

Veena, J. and Teixeiram, A.P. (1994) Are environmentally sound technologies the emperor’s newclothes? Discussion Paper No.89. United Nations Conference on Trade and Development.Geneva, Switzerland.


245

III


9. Fisheries subsidies

Bostock, T., Greenhalgh, P. and Kleih, U. (2004) Implications of Liberalization of Fish Trade forDeveloping Countries. Natural Resources Institute. Greenwich, U.K.

FAO (2004) The State of the World Fisheries and Aquaculture. United Nations Food andAgriculture Organization. Rome, Italy.

ICTSD (2006) Fisheries, International Trade and Sustainable Development: Policy DiscussionPaper. ICTSD Natural Resources, International Trade and Sustainable Development Series.International Centre for Trade and Sustainable Development. Geneva, Switzerland.

ICTSD and IISD (2003-2005) Negotiations on WTO Rules. Doha Round Briefing Series No.7. International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.

Milazzo, M. (1998) Subsidies in World Fisheries: A Reexamination. World Bank Technical PaperNo. 406. World Bank. Washington D.C., USA.

OECD (2003) Liberalising Fisheries Markets: Scope and Effects. Organisation for EconomicCo-operation and Development. Paris, France.

Schorr, D. (2005) Artisanal Fishing: Promoting Poverty Reduction and Community DevelopmentThrough New WTO Rules on Fisheries Subsidies. United Nations Environment Programme –Economics and Trade Branch. Geneva, Switzerland.

Schorr, D. (2004) Healthy Fisheries, Sustainable Trade: Crafting New Rules On Fishing Subsidiesin the World Trade Organization. WWF. Washington D.C., USA.

Schrank W (2003). Introducing Fisheries Subsidies. Fisheries Technical Paper 437. UnitedNations Food and Agriculture Organization. Rome, Italy.

Sumaila, U.R. and Pauly, D. (2006) Catching more bait: A bottom-up re-estimation of globalfisheries subsidies. Fisheries Centre. University of British Columbia. Vancouver, Canada.

UNEP (2004) Analyzing the Resource Impact of Fisheries Subsidies: A Matrix Approach. UnitedNations Environment Program – Economics and Trade Branch. Geneva, Switzerland.

Westlund L. (2004) Guide for Identifying, Assessing and Reporting on Subsidies in the FisheriesSector. Fisheries Technical Paper No. 438. United Nations Food and Agriculture Organization.Rome, Italy.

10. Illegal Trade in Natural Resources

Agnew, D. and Barnes, C. (2004) Economic Aspects and Drivers of IUU Fishing: Building aFramework. Paper prepared for the OECD Workshop on IUU Fishing Activities, 19–20 April2004. Paris, France.

Brack, D. (2007) Action against illegal logging: interaction with international trade agreements.Paper prepared for the Chatham House workshop on “Forest Governance and Trade:Exploring Options,” 24 January 2007. London, U.K.

Brack, D. and Hayman, G. (2002) International Environmental Crime: The Nature andControl of Environmental Black Markets. Chatham House (formerly Royal Institute forInternational Affairs). London, U.K.


246


Cook, D., Roberts, M. and Lowther, J. (2003) The international wildlife trade and organisedcrime. WWF and TRAFFIC. London, U.K.

HSTF (2006) Closing the Net – Stopping Illegal Fishing on the High Seas. High Seas Task Forceon Illegal, Unreported and Unregulated Fishing. Paris, France.

Illegal-logging.info and Illegal-fishing.info are maintained by the U.K. think-tank ChathamHouse as a central point of information (briefings, documents, links and news stories) onevery aspect of the illegal logging debate. http://www.illegal-logging.info and http://www.illegal-fishing.info.

Roe, D., Mulliken, T., Milledge, S., Mremi, J., Mosha, S. and Grieg-Gran, M. (2002) Makinga Killing or Making a Living: Wildlife trade, trade controls and rural livelihoods. Biodiversity andLivelihoods Issues No. 6. International Institute for Economic Development and TRAFFIC.London, U.K.

11. Intellectual Property Rights

Apte, T. (2007) A Simple Guide to Intellectual Property Rights, Biodiversity and TraditionalKnowledge. Kalpavriksh, GRAIN and International Institute for Economic Development.Dehli, India.

Dutfield, G. (2006) Protecting Traditional Knowledge: Pathways to the Future. IntellectualProperty Rights & Sustainable Development Series No. 16. International Centre for Tradeand Sustainable Development and United Nations Conference on Trade and Development.Geneva, Switzerland.

Dutfield. G. (2004) Intellectual Property, Biogenetic Resources and Traditional Knowledge.Earthscan Publications. London, U.K.

Finger, J.M. and Schuler, P. (2005) Poor People’s Knowledge: Promoting Intellectual Property inDeveloping Countries. World Bank. Washington D.C., USA.

Gupta, A.K. (2006) The Role of Intellectual Property Rights in the Sharing of Benefits Arisingfrom the Use of Biological Resources and Associated Traditional Knowledge. World IntellectualProperty Organisation and United Nations Environment Programme. Geneva, Switzerland.

ICTSD and UNCTAD (2005) Resource Book on TRIPS and Development: An authoritativeand practical guide to the TRIPS Agreement. UNCTAD-ICTSD Capacity Building Project.Geneva, Switzerland.

ICTSD and UNCTAD (2003) Intellectual Property Rights: Implications for Development: PolicyDiscussion Paper. UNCTAD-ICTSD Capacity Building Project. Geneva, Switzerland

ICTSD and IISD (2003–2005) Intellectual Property Rights. Doha Round Briefing Series No.5. International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.

IPRsonline.org is a web portal of the International Centre for Trade and SustainableDevelopment featuring resources, events, news and links on intellectual property rights, tradeand sustainable development. http://www.iprsonline.org/.

IUCN, ICTSD, CIEL, IDDI and QUNO (2005) Disclosure Requirements: Ensuring mutualsupportiveness between the WTO TRIPS Agreement and the CBD. Geneva, Switzerland.


247

III


Khor, K.P. and Khor, M. (2004) Intellectual Property, Biodiversity and Sustainable Development:Resolving the Difficult Issues. Zed Books. London, U.K.

Smolders, W. (2005) Disclosure of Origin and Access and Benefit Sharing: The Special Case ofSeeds for Food and Agriculture. Quaker United Nations Office Occasional Paper. Geneva,Switzerland.

Ullrich, H. (2005) Traditional Knowledge, Biodiversity, Benefit-Sharing and the Patent System:Romantics v. Economics? European University Institute. Florence, Italy.

12. Investment

Cosbey, A., Mann, H., Peterson, L.E. and von Moltke, K. (2004) Investment and SustainableDevelopment: A Guide to the Use and Potential of International Investment Agreements.International Institute for Sustainable Development. Winnipeg, Canada.

Cosbey, A. (2003) NAFTA’s Chapter 11 and the Environment. Discussion Paper prepared forthe CEC’s Public Workshop on NAFTA’s Chapter 11. Commission for EnvironmentalCooperation. Montreal, Canada.

IISD (2005) International Investment Agreement for Sustainable Development. InternationalInstitute for Sustainable Development. Winnipeg, Canada.

IISD (2001) Private Rights, Public Problem: A Guide to NAFTA’s Controversial Chapter onInvestor Rights. International Institute for Sustainable Development. Winnipeg, Canada.

Mann, H. and von Moltke, K. (2005) A Southern Agenda on Investment? PromotingDevelopment with Balanced Rights and Obligations for Investors, Host States and Home States.International Institute for Sustainable Development. Winnipeg, Canada.

Perezcano, H. (2003) “Investment Protection Agreements: Should a Multilateral Approach beReconsidered?” Journal of World Investment 4(6):929–940.

Peterson, L.E. (2004) Bilateral Investment Treaties and Development Policy-making.International Institute for Sustainable Development and Swiss Agency for Development andCooperation. Winnipeg, Canada.

Sampliner, G.H. (2003) “Arbitration of Expropriation Cases Under U.S. Investment Treaties –A Threat to Democracy or the Dog That Didn’t Bark?” ICSID Review: Foreign Investment LawJournal 18(1): 1-43.

UNCTAD (1998) Bilateral Investment Treaties in the Mid-1990s. United Nations Conferenceon Trade and Development. Geneva, Switzerland.

UNCTAD (2003) Foreign Direct Investment and Performance Requirements: New EvidenceFrom Selected Developing Countries. United Nations Conference on Trade and Development.Geneva, Switzerland.

UNCTAD (2004) International Investment Disputes on the Rise. Occasional Note UNCTAD/WEB/ITE/IIT/2004/2. United Nations Conference on Trade and Development.Geneva, Switzerland.


248


13. Multilateral Environmental Agreements

Brack, D. and Gray, K. (2003) Multilateral Environmental Agreements and the WTO.International Institute for Sustainable Development and Royal Institute for InternationalAffairs. Winnipeg, Canada, and London, U.K.

Eckersley, Robin, 2004. “The Big Chill: The WTO and Multilateral EnvironmentalAgreements.” Global Environmental Politics 2(2): 24–50.

Hoffmann, U. (2004) Specific trade obligations in multilateral environmental agreements andtheir relationship with the rules of multilateral trading system – A developing country perspective.Trade and Environment Review 2003. United Nations Conference on Trade andDevelopment. Geneva, Switzerland.

ICTSD and IISD (2003-2005) Trade and Environment. Doha Round Briefing Series No. 9.International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.

Linkages provides current coverage and archived reports of all key environment and develop-ment related meetings and negotiations. http://www.iisd.ca/.

Palmer, A. and Tarasofsky, R. (2007) The Doha Round and Beyond: Towards a lasting relation-ship between the WTO and the international environmental regime. Chatham House andFoundation for International Environmental Law. London, U.K.

UNEP (2004) Economic Instruments in Biodiversity-related Multilateral EnvironmentalAgreements. United Nations Environment Programme – Economics and Trade Branch.Geneva, Switzerland.

WTO Secretariat (2005) Matrix on Trade Measures Pursuant to Selected MultilateralEnvironmental Agreements. TN/TE/S/5/Rev.1. World Trade Organization. Geneva,Switzerland.

WTO Secretariat (2003) Compilation of Submissions Under Paragraph 31(i) of the DohaDeclaration. TN/TE/S/3/Rev.1. World Trade Organization. Geneva, Switzerland.

WWF (2002) Multilateral Environmental Agreements in the WTO: Negotiations Under Para31(1) of the Doha Ministerial Declaration. WWF International Analytical Paper. Gland,Switzerland.

14. Policy Coherence

European Commission (2005) Policy Coherence for Development – Accelerating progress towardsattaining the Millennium Development Goals. COM(2005) 134. European Commission.Brussels, Belgium.

Kumar Duraiappah, A. and Bhardwaj, A. (2005) Measuring Policy Coherence among the MEAs.International Institute for Sustainable Development. Winnipeg, Canada.

Matthews, A. and Giblin, T. (2006) Policy Coherence, Agriculture and Development. IIISDiscussion Paper No. 112. Institute for International Integration Studies. Dublin, Ireland.

Millennium Development Goals set out global targets and indicators for reducing poverty by2015. http://www.millenniumcampaign.org/.


249

III


OECD (2003) Policy coherence: Vital for global development. OECD Observer. Organisationfor Economic Co-operation and Development. Paris, France.

UNCTAD (2004) Trade and Development Report 2004: Policy coherence, development strategiesand integration into the world economy. UNCTAD/TDR/2004. United Nations Conference onTrade and Development. Geneva, Switzerland.

15. Regional Arrangements

Audley, J. (2003) The Art of the Possible: Environment in the Free Trade Area of the Americas.Trade, Equity and Development Paper Series. Carnegie Endowment for International Peace.Washington D.C., USA.

Bilaterals.org. Civil society Web site providing recent news and analysis concerning regionaland bilateral trade and investment agreements. http://www.bilaterals.org/

Cosbey, A., Tay, S., Lim, H. and Walls, M. (2005) The Rush to Regionalism: SustainableDevelopment and Regional/Bilateral Approaches to Trade and Investment Liberalization.International Development Research Centre. Ottawa, Canada.

Colyer, D. (2003) “Agriculture and Environmental Issues in Free Trade Agreements.”The EsteyCentre Journal of International Law and Trade Policy 4(2): 123–143.

Gallagher, K.P. (2004) Free Trade and the Environment: Mexico, NAFTA, and Beyond. StanfordUniversity Press. Palo Alto, USA.

ICTSD (1999) Trade Policy and Sustainability: The Regional Approaches. Proceedings of anInternational Centre for Trade and Sustainable Development conference, 1–2 February 1999,Geneva, Switzerland.

Imai, K. and Gueye, M. K. (2003) “The Relationship Between the WTO and Regional TradeAgreements and Institutions on Trade and Environment in Asia.” In Achieving Harmony inTrade and Environment. Global Environment and Trade Study. Minnesota, USA.

OECD (2007) Regional Trade Agreements and Environment. Organisation for Economic Co-operation and Development. Paris, France.

RegionsWatch is a civil society Web site on regional integration with news, analysis and emailupdates. http://regionswatch.tripod.com/.

Schiff, M. and Winters, L. A. (2003) Regional Integration and Development. World Bank andOxford University Press, Washington D.C., USA.

Steenblik, R. and Tébar Less, S. (2003) Regionalism and the Multilateral Trading System:Environment. Organisation for Economic Cooperation and Development. Paris, France.

16. Standards and Labelling

Charnovitz, S. (2000) Solving the Production and Processing Methods Puzzle. WTO Series No.5. Occasional paper of the Program for the Study of International Organizations. GraduateInstitute of International Studies. Geneva, Switzerland.

CI (2005) Decision Making in the Global Market: Trade, Standards and the Consumer.Consumers International. London, U.K.


250


Gandhi, S.R. (2005) “Regulating the Use of Voluntary Environmental Standards within theWorld Trade Organization Legal Regime: Making a Case for Developing Countries.” Journalof World Trade 39(5): 855–880.

Howse, R. and Regan, D. (2000) “The Product/Process Distinction – An Illusory Basis forDisciplining “Unilateralism” in Trade Policy.” European Journal of International Law 11(2):249–291.

Khwaja, M.A., Rafi Khan, Shaheen, Rafi Khan, Shahrukh and Saeed Qureshi, M. (2003) TheCosts and Benefits of Compliance with International Environmental Standards. IISD-ICTSDTrade Knowledge Network. Geneva, Switzerland.

Mayeda, G. (2004) “Developing Disharmony? The SPS and TBT Agreements and the Impactof Harmonization on Developing Countries.” Journal of International Economic Law7(4):737–764.

OECD (2004) Addressing Market-Access Concerns of Developing Countries Arising fromEnvironmental and Health Requirements: Lessons from National Experiences. OECD TradePolicy Working Paper No. 5. Organisation for Economic Co-operation and Development.Paris, France.

Rotherham, T. (2005) The Trade and Environmental Effects Of Ecolabels: Assessment and Response.United Nations Environmental Programme – Economics and Trade Branch. Geneva, Switzerland.

Rotherham, T. (2003) Implementing Environmental, Health and Safety (EH&S) Standards, andTechnical Regulations: The Developing Country Experience. IISD-ICTSD Trade KnowledgeNetwork. Geneva, Switzerland.

Hoffmann, U. and Rotherham, T. (2006) Environmental requirements and market access fordeveloping countries: promoting environmental – not trade – protection. United NationsConference on Trade and Development. Geneva, Switzerland.

17. Trade Facilitation

Duval, Y. (2006) Cost and Benefits of Implementing Trade Facilitation Measures underNegotiations at the WTO: an Exploratory Survey. ARTNeT Working Paper Series No. 3. Asia-Pacific Research and Training Network on Trade. Bangkok, Thailand.

ICTSD and IISD (2003-2005) Trade Facilitation. Doha Round Briefing Series No. 6.International Centre for Trade and Sustainable Development and International Institute forSustainable Development. Geneva, Switzerland.

ILEAP (2005) A Positive Agenda for Africa in Trade Facilitation Negotiations. Negotiation BriefNo. 8. International Lawyers and Economists Against Poverty. Toronto, Canada.

ITC (2005) Business and the WTO Negotiations on Trade Facilitation. Technical Paper No.ITC/BAS-05-34.E. International Trade Centre. Geneva, Switzerland.

Messerlin, P.A. and Zarouk, J. (1999) Trade Facilitation: Technical Regulations and CustomsProcedures. Paper prepared for the WTO/World Bank Conference on Developing Countries’in a Millennium Round. 13 September 1999. Geneva, Switzerland.

South Center (2004) Detailed Analysis of Annex D to the General Council Decision July 2004.“Modalities for Negotiations on Trade Facilitation.” Analytical Note SC/TADP/AN/CC/2.4.South Center. Geneva, Switzerland.


251

III



252


Edited byAdil Najam Mark Halle



Trade and EnvironmentA Resource Book

Trade and environment policy is increasingly intertwined and thestakes are nearly always high in both trade and environmentalterms. These issues are often complex and discussions tend tobecome very specialized, challenging policy practitioners tounderstand and follow all the various sub-strands of trade andenvironment debates. This Resource Book seeks to demystify theseissues without losing the critical nuances.

This collaborative effort of some 61 authors from 34 countriesprovides relevant information as well as pertinent analysis on abroad set of trade and environment discussions while explaining,as clearly as possible, what are the key issues from a trade andenvironment perspective; what are the most important policydebates around them; and what are the different policy positionsthat define these debates.

The volume is structured and organized to be a reference documentthat is useful and easy to use. Our hope is that those activelyinvolved in trade and environment discussions—as practitioners,as scholars and as activists—will be able to draw on the analysisand opinions in this book to help them advance a closer synergybetween trade and environmental policy for the common goal ofachieving sustainable development.

TRADE AND ENVIRONMENT – A RESOURCE BOOKEdited by Adil Najam

, Mark Halle and Ricardo M

eléndez-Ortiz

Documents

Download/Adil Najam - Trade & Environm… · Edited by Adil Najam Mark Halle Ricardo Meléndez-Ortiz TRADE AND ENVIRONMENT A RESOURCE BOOK Trade and Environment A Resource Book Trade