Integration between WTO Law and International Environmental Agreements

There is an insufficient degree of integration between Word Trade Organization (WTO) law and International Environmental Agreements. Critically discuss

1. Introduction

During the last decades the level of awareness about environmental issues and the vital role of this field has raised between nations in all around the world. As a result of this expansion , environmental issues lead us to new regulations in both international and domestic level. Enhancing of multilateral environmental agreements (MEA) and their related provisions like trade affecting measure, attracted world trade organization (WTO) attention to the issues which our environment is dealing with. As a result , the major reason which made WTO to liberalize world trade is set against protection of environment when its in urgency situations. This tension between trade and environmental policies has given rise to an extensive debate and one interesting question is whether it is possible to cumulatively liberalize trade and introduce a higher protection for the environment¹ hot debates and expansion of this issues caused ongoing Doha Round conflict with it very soon , the round which was the WTO first one which directly deal with environmental concerns. The relationship between the WTO and MEAs has lately been lively debated. Several proposals have been made in attempt to clarify the relationship, but so far no consensus has been reached.

As environmental concerns mainly are left outside the WTO system these issues instead are left to be dealt with in other international agreements. Therefore, MEAs are essential as to regulate provisions for the protection of the global environment and to address important environmental problems. Examples of issues addressed in MEAs are air pollution, biodiversity, climate change and hazardous waste disposal. Environmental issues like these constitute examples of issues that can not be addressed accurately on a national level. To solve or at least decrease these problems international efforts will have to be made ² Today more than 250 MEAs are in force regulating environmental issues and of these around 30 may affect trade³ Although sustainable development, involving environmental aspects, always has worked as a principle of trade liberalization the recent development with an increasing number of MEAs has increased the intensity of the debate concerning linkages between trade and non-economic issues and the relationship between WTO rules and specific trade obligations set out in MEAs. This as a consequence of that those MEAs often conflict with fundamental principles of the WTO system.

Potential as well as factual conflicts may arise on several levels between the WTO system and provisions set out in MEAs. Measures that are permitted or accepted in one agreement can be forbidden in another. Furthermore, potential conflicts often arise already before national environmental measures are imposed or even when new agreements are negotiated.

The relationship between existing WTO rules and specific trade obligations set out in MEAs is one topic that is aimed to be explicitly treated during the Doha round.⁴ Even though this tense relationship, for many years now, has been subject to discussions in several forums, such as the WTO and FN, no acceptable solution has been found. As an example the WTO Committee on Trade and Environment (CTE) has examined the relationship since 1995, yet without any real result. Even though the Doha Round explicitly is meant to deal with this relationship their mandate is limited as to some specific MEAs and even to specific measures. Another important limitation is that only the parties of a specific MEA are concerned. In addition, the negotiations are complicated by developing countries’ fear for that the introduction of environmental provisions into the WTO system is grounded in protectionist purposes for the developed countries.⁵ In theory, this relationship should not really be as problematic, as MEAs regulate multilateral measures and not unilateral ones, just like the WTO. Therefore, arbitrary and discriminatory behaviour should be avoided to a greater extent.⁶ Additionally, it could be of interest to mention that conflicts of norms have been subject to rather extensive discussions while conflicts of jurisdictional matters only have been debated to a rather limited extent.⁷

2. Purpose and Demarcation

The purpose of this paper is to deal with the problematic and tense relationship between the WTO system and MEAs which cause insufficient integration between these two systems. Even though, as mentioned, no factual dispute yet has been brought before the WTO dispute-settling mechanisms this relationship is of great importance as there is a significant risk for future conflicts. As a consequence, of the absence of a factual conflict, the discussion concerning how such conflicts shall be resolved becomes speculative. Nevertheless, the discussion is essential as parties as well as non-parties to the agreements need the relationship to be foreseeable. For this purpose they need to know how the agreements should be interpreted as to not cause negative affects on for example the effectiveness with the objectives of a specific MEA.

The relationship between environmental and trade agreements has been a subject of political and legal discussions for quite some time, for example in the context of the foundation of the World Trade Organization (WTO) in 1995.

International trade agreements are primarily aimed at the removal of trade barriers. International environmental agreements, on the other hand, partly contain obligations for countries to restrict the trade with certain dangerous goods (like chemicals or waste) or components of the natural environment (like protected species). This leads to a certain tension between trade and environmental agreements. There is also the risk that international trade agreements narrow the scope of states to establish environmental protection measures. This is especially discussed critically in the context of the negotiations about the Transatlantic Trade and Investment Partnership (TTIP).

WTO and environmental agreements: how are they related? 

How do the WTO trading system and “green” trade measures relate to each other? What is the relationship between the WTO agreements and various international environmental agreements and conventions?

There are about 200 international agreements (outside the WTO) dealing with various environmental issues currently in force. They are called multilateral environmental agreements (MEAs).

About 20 of these include provisions that can affect trade: for example they ban trade in certain products, or allow countries to restrict trade in certain circumstances. Among them are the Montreal Protocol for the protection of the ozone layer, the Basel Convention on the trade or transportation of hazardous waste across international borders, and the Convention on International Trade in Endangered Species (CITES).

Briefly, the WTO’s committee says the basic WTO principles of non-discrimination and transparency do not conflict with trade measures needed to protect the environment, including actions taken under the environmental agreements. It also notes that clauses in the agreements on goods, services and intellectual property allow governments to give priority to their domestic environmental policies.

The WTO’s committee says the most effective way to deal with international environmental problems is through the environmental agreements. It says this approach complements the WTO’s work in seeking internationally agreed solutions for trade problems. In other words, using the provisions of an international environmental agreement is better than one country trying on its own to change other countries’ environmental policies (see shrimp-turtle and dolphin-tuna case studies).

The committee notes that actions taken to protect the environment and having an impact on trade can play an important role in some environmental agreements, particularly when trade is a direct cause of the environmental problems. But it also points out that trade restrictions are not the only actions that can be taken, and they are not necessarily the most effective. Alternatives include: helping countries acquire environmentally-friendly technology, giving them financial assistance, providing training, etc.

The problem should not be exaggerated. So far, no action affecting trade and taken under an international environmental agreement has been challenged in the GATT-WTO system. There is also a widely held view that actions taken under an environmental agreement are unlikely to become a problem in the WTO if the countries concerned have signed the environmental agreement, although the question is not settled completely. The Trade and Environment Committee is more concerned about what happens when one country invokes an environmental agreement to take action against another country that has not signed the environmental agreement.

Disputes: where should they be handled?

Suppose a trade dispute arises because a country has taken action on trade (for example imposed a tax or restricted imports) under an environmental agreement outside the WTO and another country objects. Should the dispute be handled under the WTO or under the other agreement? The Trade and Environment Committee says that if a dispute arises over a trade action taken under an environmental agreement, and if both sides to the dispute have signed that agreement, then they should try to use the environmental agreement to settle the dispute. But if one side in the dispute has not signed the environment agreement, then the WTO would provide the only possible forum for settling the dispute. The preference for handling disputes under the environmental agreements does not mean environmental issues would be ignored in WTO disputes. The WTO agreements allow panels examining a dispute to seek expert advice on environmental issues.

One of the main reasons for being insufficient integration degree between WTO and international Environmental Agreements are those conflicts which are existed in norms and jurisdictional cases.

3. Conflicts of Norms and Jurisdictions:

Conflicts may arise where WTO rules conflict with other provisions of public international law and where other tribunals make concurring claims. The need for a clarification of the relationship between these set of rules of international law and these international tribunals is evident due to the increased interaction between WTO law and other sources of international law as well as the increased reluctance to invoke non-WTO law before the WTO adjudicating bodies. In the following the diversities of this relationship will be treated. It is vital to bear in mind that the jurisdictional limitation, regarding which disputes that can be drawn under the dispute settlement of the covered agreements, accounted for in article 1.1 of the DSU, has to be separated from the matter of which law that could be applicable under the DSU.⁸

3.2 Conflicts of Norms

Conflicts of different and distinct legal issues may arise between the WTO and MEAs. Firstly; there could be conflicts between the rights and obligations contained in two different treaties that apply between the same states, who are members of the WTO as well as parties to a specific MEA. For example a MEA authorizing the imposition of measures restricting imports and exports can be challenged before the WTO system as conflicting with the MFN-principle in article I of the GATT, as not fulfilling the requirements for equal treatment of like products between the WTO members. Additionally, the principle of national treatment, article III, could be infringed where import restrictions in MEAs restrict the use of certain substances in products which could be challenged as violations of national treatment due to their PPM-based distinction of like products. Moreover, any trade affecting measure in form of a ban, embargo and prohibition etcetera could be challenged before the WTO as conflicting with the prohibition on quantitative restrictions in article XI of the GATT.⁹

Moreover, two parties to a MEA could disagree on how to interpret a specific MEA provision, or one party could even challenge an imposed measure, related to a specific part of a MEA that it has not signed itself. Additionally, disputes concerning imposed trade measures which are affecting non-parties may arise between two WTO members, who are not both parties to the relevant MEA. Furthermore, parties to a MEA could use trade measures as to put pressure on a non-party to force this country to join, which may violate the WTO principle of non-discrimination¹⁰

Concerning different types of potential conflicts, the most common type are those raised by non-members of a MEA concerning trade measures imposed according to these MEAs. This as it is more

unlikely for a WTO member, which has voluntarily joined the MEA, to later challenge the same before the adjudicating bodies of the WTO. Additionally, a country, which is a member to the WTO as well as to the MEA, has basically waived their WTO rights in the areas where the MEA applies. Furthermore, the majority of the trade affecting measures contained in MEAs are directed at non-parties¹¹

Discussions and negotiations within the GATT/WTO

When the multilateral trading system was reconstructed after the Second World War, the environmental consequences of economic integration were not a primary concern for policy makers. This may explain why references to the environment were only indirect in the original GATT. The issue was first put on the agenda in the early 1970s but it was only in the 1990s that a real discussion on the relationship between trade and environment started within the GATT. This discussion is ongoing in the WTO, among others in the WTO’s Committee on Trade and Environment (CTE). Aware of the importance of policy coordination at the national level, the CTE has actively been seeking an exchange of ideas with environmental and trade experts from Member governments. Although this exchange of ideas has certainly helped to enhance our understanding of the linkages between trade and environment, progress has been slow when it comes to mitigating the potential tensions between multilateral trade law and national environmental policies.

The debate on trade and environment was further institutionalised within the GATT through the Marrakech Decision on Trade and Environment (1994). In this decision GATT Members noted that it should not be contradictory to safeguard the multilateral trading system on the one hand, and act for the protection of the environment and the promotion of sustainable development on the other hand. They further noted their desire to coordinate policies in the field of trade and environment, “but without exceeding the competence of the multilateral trading system, which is limited to trade policies and those trade related aspects of environmental policies which may result in significant trade effects.” The Marrakech Decision also foresaw the establishment of the Committee on Trade and Environment (CTE) which took place in January 1995. The tasks allocated to this Committee were to “identify the relationship between trade measures and environmental measures, in order to promote sustainable development” and “to make appropriate recommendations on whether any modifications of the provisions in the multilateral trading system are required, compatible with the open, equitable and non-discriminatory nature of the system ..”.

To summarize, an active debate on the issue of trade and environment was initiated when EFTA countries pointed out in 1991 that it was desirable for the GATT’s framework of rules to work, to provide clear guidance to both trade and environment policy makers and to avoid that its dispute settlement system was faced with issues it was not equipped to tackle. Today, GATT Articles III and XX (from 1947) (and, to a certain extent, also the 1994 WTO Agreement on TBT) form the legal basis for the analysis of conflicts between national environmental policies and the multilateral trading system. The following sections will argue that these provisions and resulting WTO jurisprudence only give a very imperfect reflection of potentially complex economic linkages between environmental policies and trade flows. As a consequence and notwithstanding the intensive debate within the GATT/WTO, the multilateral trading system still does not seem to provide full certainty as to how environment-related trade disputes are being dealt with.

Lack of progress in the debate and negotiations around trade and environment can be explained by a number of factors. First of all it should be noted that any tension on the international level between the two policy areas arises because countries differ and therefore have different priorities when it comes to environmental policies. It is because of these differences that countries also defend different interests when discussing or negotiating issues relating trade and environmental policy, which makes it sometimes difficult to find a common ground. Developing countries are particularly sceptical towards the trade and environment debate, as they fear that developed countries press the issue at the WTO with a protectionist intent. Yet it is also the case that the relationship between environmental policies on the one hand and trade and trade policies on the other hand is a very complex one.

Conclusion:

The Future

Regarding how the WTO-MEA relationship should be clarified, the “status-quo” approach may not constitute an accurate solution as it seems insufficient to not create a link between trade and environmental issues. The relationship between WTO rules and trade-restrictive MEAs has to be clarified. If this should be done through the implementation of a waiver or by the establishment of a voluntary consultative mechanism etcetera is hard to decide. But it would probably be appropriate if an environmental specialised body would deal with the creation of environmental standards. The approach involving a clarification of the WTO-MEA relationship along the lines of co-operation and not through an amendment to the WTO rules seems very satisfying. Nevertheless, it is important to bear in mind that such a development relies on mutual trust and the outcome may depend on the strengths of the respective countries, which may be disadvantageous for developing countries.

Concerning the dispute-settling mechanisms of the WTO, they are clearly the most effective and well developed. However, the areas of competence of the WTO are naturally limited. When it comes to questions of, for example, complex environmental issues, the WTO system is not equipped with enough resources to solve such matters in a satisfactory manner. At the same time, the adjudicating bodies of the WTO could be overburdened if they should handle also such matters, which in turn could undermine the whole system. Furthermore, the WTO mechanisms should be improved as to ensure considerations of the MEAs’ expertise. Consequently, it seems logical that the WTO regime should stay within its mandate and that it should not be extended to also cover other non-trade related issues. Instead, the different international organizations shall continue to work within their respective field of competence.

The relationship between the WTO and MEAs needs to be clarified, not through the creation of a hierarchy between them as it could undermine vital environmental legislation but through multilateral negotiations. Such negotiations are probably best solved outside the WTO system, not only as the WTO dispute settlement bodies are restricted in their jurisdictional power in several ways but also as these issues have to be solved taking into account further interests than trade liberalization.

Biblography

Primary Sources

Articles and Literature

• See Brack, Duncan and Gray, Kevin, Multilateral Environmental Agreements and the WTO, Report of the Royal Institute of International Affairs, 2003
• See Busse, Mathias, Trade, Environmental Regulations and the World Trade Organization: New Empirical Evidence, Journal of World Trade 38(2): 285-306, 2004
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• See Dunoff, L. Jeffrey, International Dispute Resolution: Can the WTO Learn from MEAs?, page 63-70 in Schalatek, Liane, Trade and Environment, the WTO, and MEAs, Facets of a Complex Relationship, The Heinrich Böll Foundation, Washington, 2001
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• See Hudec, E. Robert, GATT Legal Restraints in the Use of Trade Measures against Foreign Environmental Practices in Bhagwati, N. Jagdish and Hudec, E. Robert, Fair Trade and Harmonization: prerequisites for Free Trade? Volume 2, Cambridge, Mass., MIT Press, 1996
• See Krajewski, Markus, The Dispute Settlement “Chill Factor” and Conflicts of Jurisdiction – Dispute Settlement in MEAs and in the WTO, page 91-102 in Schalatek, Liane, Trade and Environment, the WTO, and MEAs, Facets of a Complex Relationship, The Heinrich Böll Foundation, Washington, 2001
• See Eckersle Robyn The Big Chill: The WTO and Multilateral Environmental Agreements
• See Marceau, Gabrielle, Conflicts of Norms and Conflicts of Jurisdictions, The Relationship between the WTO Agreement and MEAs and other Treaties, Journal of World Trade 35(6): 1081-1131, 2001
• See Van den Bossche, Peter, The Law and Policy of the World Trade Organization, Cambridge University Press, Cambridge, 2005
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Internet

• http://www.wto.org/english/tratop_e/envir_e/envir_neg_mea_e.htm, The Doha mandate on multilateral environmental agreements (MEAs), 2009-05-13
• http://www.wto.org/english/tratop_e/dda_e/symp_devagenda_prog_03_e.htm, Relationship between MEAs and the WTO: Where are the negotiations heading? WTO Symposium: Challenges ahead on the road to Cancún, Summary report, 2009-05-13
• https://www.wto.org/english/tratop_e/envir_e/envir_neg_mea_e.htm
• UNFCCC, http://unfccc.int/kyoto_protocol/items/2830.php, Kyoto Protocol, 2009-03-30

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3 Brack, D and Gray, K, Multilateral Environmental Agreements and the WTO, page 4f.

4 WTO Doha Ministerial Declaration, paragraph 31.

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6 Brack, D and Gray, K, Multilateral Environmental Agreements and the WTO, page 7.

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9 Caldwell, J, Multilateral Environmental Agreements and the GATT/WTO Regime, in Schalatek, L, Trade and Environment, the WTO, and MEAs, Facets of a Complex Relationship, page 45

10 Van den Bossche, P, The Law and Policy of the World Trade Organization, page 298.

11 Caldwell, J, Multilateral Environmental Agreements and the GATT/WTO Regime, in Schalatek, L, Trade and Environment, the WTO, and MEAs, Facets of a Complex Relationship