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Understanding Trade and Environment issues Alan Oxley Australian APEC Centre International Trade Strategies May 2002.

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Presentation on theme: "Understanding Trade and Environment issues Alan Oxley Australian APEC Centre International Trade Strategies May 2002."— Presentation transcript:

1 Understanding Trade and Environment issues Alan Oxley Australian APEC Centre International Trade Strategies May 2002

2 The presentation The debate The debate The international framework The international framework The interface The interface Approaches Approaches

3 The Trade and Environment Debate The Doha WTO mandate The WTO Shrimp Turtle Decision The debate The issues

4 The WTO Doha Mandate Environment now a mainstream negotiating issue in the WTO - for the first time Environment now a mainstream negotiating issue in the WTO - for the first time An EU initiative (demand) An EU initiative (demand) This give the EU leverage This give the EU leverage Essential we understand the implications Essential we understand the implications

5 The WTO Shrimp/Turtle Decision WTO Appellate Body ruled that the US may restrict imports of shrimp from four countries because they do not apply conservation policies to protect migratory turtles WTO Appellate Body ruled that the US may restrict imports of shrimp from four countries because they do not apply conservation policies to protect migratory turtles The WTO has approved unilateral trade sanctions to enforce environmental standards The WTO has approved unilateral trade sanctions to enforce environmental standards A shock result – WTO does not permit unilateral sanctions A shock result – WTO does not permit unilateral sanctions Implications are unclear Implications are unclear

6 The debate EU and European environmental groups want new rights to restrict trade to protect the environment. EU and European environmental groups want new rights to restrict trade to protect the environment. The US wants to right to ban imports unilaterally The US wants to right to ban imports unilaterally Most countries are opposed Most countries are opposed

7 EU environment goals To apply the following environment policies: - to use The precautionary principle when regulating the environment To apply the following environment policies: - to use The precautionary principle when regulating the environment - to use whole of life cycle management to regulate the environment. - to use ecolabels to certify whole of lifecycle management - to use whole of life cycle management to regulate the environment. - to use ecolabels to certify whole of lifecycle management

8 What does EU want in trade? To use trade sanctions to secure adoption of environment principles To use trade sanctions to secure adoption of environment principles To exempt use of trade restrictions based on the precautionary principle from scientific challenge. To exempt use of trade restrictions based on the precautionary principle from scientific challenge. To be able to restrict trade on the basis of the environmental impacts of how products are made or processed. To be able to restrict trade on the basis of the environmental impacts of how products are made or processed. To be able to protect EU agricultural producers from cheap exports on environmental grounds. To be able to protect EU agricultural producers from cheap exports on environmental grounds.

9 US interests To protect right to use unilateral sanctions To protect right to use unilateral sanctions (Under the Clinton Administration) to include environment in trade agreements – NAFTA and Jordan FTA. (not Bush Administration policy, but strong support for linkage among Democrats in the Congress ) (Under the Clinton Administration) to include environment in trade agreements – NAFTA and Jordan FTA. (not Bush Administration policy, but strong support for linkage among Democrats in the Congress ) To protect science based controls on trade. To protect science based controls on trade.

10 The issues Respect for national sovereignty Respect for national sovereignty Effective environment policy Effective environment policy Effective trade policy Effective trade policy The balance of benefits The balance of benefits

11 The International framework The World Trade Organization The World Trade Organization The United Nations The United Nations

12 The WTO The basic activities The basic activities The WTO Agreements The WTO Agreements Basic principles of the WTO Basic principles of the WTO How WTO provides economic benefit How WTO provides economic benefit

13 The Basic activities Create rules to govern trade Create rules to govern trade Reduce barriers to trade Reduce barriers to trade

14 The WTO Agreements Before 1994 (end of the Uruguay Round) - the GATT - a handful of minor agreements Before 1994 (end of the Uruguay Round) - the GATT - a handful of minor agreements After GATT, GATS, TRIPs - eleven other agreements - a revised disputes system - a new organization After GATT, GATS, TRIPs - eleven other agreements - a revised disputes system - a new organization

15 Economic principles of GATT Promote exchange of goods Promote exchange of goods Reflect comparative advantage - export what you produce best, import what others produce best Reflect comparative advantage - export what you produce best, import what others produce best GATT prevents discrimination - it curbs the powerful GATT prevents discrimination - it curbs the powerful

16 GATT establishes rights in international law The WTO rules are enforceable The WTO rules are enforceable GATT protects the right to exploit comparative advantage GATT protects the right to exploit comparative advantage GATT protects right to develop GATT protects right to develop

17 WTO and developing countries WTO is the only international system which can increase trade and raise living standards in developing countries WTO is the only international system which can increase trade and raise living standards in developing countries Until 1994, Industrialized countries denied developing countries their full benefits: Until 1994, Industrialized countries denied developing countries their full benefits: - they restricted trade in garment, textiles and agriculture Final barriers are progressively being reduced Final barriers are progressively being reduced Concern that US and EU will seek new rights to restrict trade Concern that US and EU will seek new rights to restrict trade

18 WTO gives members wide discretion to protect the environment Article XX exemptions are wide - WTO rules can be waived to protect human, animal and plant health and safety Article XX exemptions are wide - WTO rules can be waived to protect human, animal and plant health and safety Some conditions: - rights are not be abused for economic reasons, - sound science must underpin trade controls Some conditions: - rights are not be abused for economic reasons, - sound science must underpin trade controls

19 The United Nations Creates a mechanism for global security Creates a mechanism for global security Fosters collaboration on global problems Fosters collaboration on global problems Promotes and brings into effect global treaties Promotes and brings into effect global treaties Hosts most environmental treaties Hosts most environmental treaties

20 Environment in the UN UNCED is the Supreme body - the UN Conference on Environment and Development (UNCED – a special session of the UN General Assembly UNCED is the Supreme body - the UN Conference on Environment and Development (UNCED – a special session of the UN General Assembly UNEP (United Nations Environment Program) a program of ECOSOC - UNEPs program is limited only to action taken by UN members - key activity is to support several international UNEP (United Nations Environment Program) a program of ECOSOC - UNEPs program is limited only to action taken by UN members - key activity is to support several international environment agreements environment agreements

21 UNCED Adopted Agenda 21 Adopted Agenda 21 Endorsed three conventions: - climate change - biodiversity - desertification Endorsed three conventions: - climate change - biodiversity - desertification Adopted trade and environment principles Adopted trade and environment principles Established the UN Commission on Sustainable Development to oversee Agenda 21 Established the UN Commission on Sustainable Development to oversee Agenda 21

22 MEAs supported by the UN -1 CITES (banning trade in endangered species CITES (banning trade in endangered species Basle (banning trade in hazardous waste) Basle (banning trade in hazardous waste) Montreal/Vienna (to protect the Ozone layer) Montreal/Vienna (to protect the Ozone layer) Cartegena Protocol (restricting trade in certain GMOs) Cartegena Protocol (restricting trade in certain GMOs)

23 MEAs supported by the UN -2 PIC – convention on prior informed consent on trade in chemical PIC – convention on prior informed consent on trade in chemical POPs – convention banning trade in persistent organic pollutants POPs – convention banning trade in persistent organic pollutants Kyoto Protocol - limiting greenhouse gases ALL BUT KYOTO HAVE TRADE PROVISIONS Kyoto Protocol - limiting greenhouse gases ALL BUT KYOTO HAVE TRADE PROVISIONS

24 Convention banning trade in endangered species Lists species endangered and at risk Lists species endangered and at risk Obliges parties not to trade in the products covered with non-parties [Trade bans conflict with WTO] Obliges parties not to trade in the products covered with non-parties [Trade bans conflict with WTO]

25 Basel Convention banning trade in hazardous materials Defines certain products as hazardous Defines certain products as hazardous Obliges parties to prohibit exports in those products unless the exporting government is satisfied that environmental management in the importing country is satisfactory Obliges parties to prohibit exports in those products unless the exporting government is satisfied that environmental management in the importing country is satisfactory Oblige parties to ban trade with non-parties Oblige parties to ban trade with non-parties A Protocol obliges parties to ban imports from OECD countries [Trade bans conflict with WTO] A Protocol obliges parties to ban imports from OECD countries [Trade bans conflict with WTO]

26 Vienna Convention/Montreal Protocol on Chlorofluorocarbons Bans production and consumption of designated chemicals deemed harmful to the Ozone Layer Bans production and consumption of designated chemicals deemed harmful to the Ozone Layer Requires parties to ban trade with non-parties [Trade bans conflict with WTO] Requires parties to ban trade with non-parties [Trade bans conflict with WTO]

27 Cartegena Protocol Establishes global notification point for advice on release of Living Modified Organisms (LMOs) Establishes global notification point for advice on release of Living Modified Organisms (LMOs) Obliges some exporters to secure prior consent to importers to trade Obliges some exporters to secure prior consent to importers to trade Permits parties to ban imports of LMOs Permits parties to ban imports of LMOs Obliges parties to trade with non-parties on terms comparable to trade with parties [Trade bans conflict with WTO] Obliges parties to trade with non-parties on terms comparable to trade with parties [Trade bans conflict with WTO]

28 Agreement on Prior informed consent Obliges parties to secure consent of importers before exporting designated chemical products [No conflict with WTO] Obliges parties to secure consent of importers before exporting designated chemical products [No conflict with WTO]

29 Convention banning Persistent Organic Pollutants (Rotterdam) Bans listed chemicals Bans listed chemicals Obliges parties not to export prohibited products to non-parties [Trade bans conflict with WTO] Obliges parties not to export prohibited products to non-parties [Trade bans conflict with WTO]

30 Comparing Cartegena and WTO import regimes SPS Restrictions are to protect human, animal and plant life and health Restrictions are to protect human, animal and plant life and health Restrictions based on Restrictions based on - international standards,or - science and risk assessment - international standards,or - science and risk assessment Exporters have right to contest controls in WTO disputes systems - non-complying measures must be removed Exporters have right to contest controls in WTO disputes systems - non-complying measures must be removed CARTEGENA Restrictions are to contribute to obviating adverse effects on biodiversity * Restrictions are to contribute to obviating adverse effects on biodiversity * Legal right to impose restrictions without scientific justification ** Legal right to impose restrictions without scientific justification ** Exporter have right to request review of import controls - no recourse to independent arbitration Exporter have right to request review of import controls - no recourse to independent arbitration

31 Conflict and confusion WTO does not permit discrimination in trade or use of trade sanctions WTO does not permit discrimination in trade or use of trade sanctions Several MEAs create discrimination and use trade sanctions Several MEAs create discrimination and use trade sanctions Countries oppose one thing in the WTO and support it in the UN Countries oppose one thing in the WTO and support it in the UN

32 The interface MEAs and the WTO MEAs and the WTO The precautionary principle The precautionary principle Ecolabelling Ecolabelling

33 MEAs and the WTO The debate is about what should be done in the WTO – amend it permit trade sanctions in MEAs? - this is what the EU wants from the Doha Round NOTE: Why is this question only asked about WTO rules? The debate is about what should be done in the WTO – amend it permit trade sanctions in MEAs? - this is what the EU wants from the Doha Round NOTE: Why is this question only asked about WTO rules?

34 The precautionary principle Employ no risk strategies to protect the environment rather than managed risk strategies Why? So political judgements can be made in favour of environmental arguments Employ no risk strategies to protect the environment rather than managed risk strategies Why? So political judgements can be made in favour of environmental arguments Impact on trade? Compare the terms of decision- making in the WTO with the Cartegena Protocol Impact on trade? Compare the terms of decision- making in the WTO with the Cartegena Protocol

35 Article XX of the GATT Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: ((b) (b) necessary to protect human, animal or plant life or health;

36 The Objective of the Cartegena Protocol (Article 1) lays down the criteria for taking decisions to restrict imports: to contribute to ensuring an adequate level of protection in the field of the safe transfer, handling and use of living modified organisms resulting from biotechnology that may have adverse effects on the conservation and sustainable use biological diversity, taking into account risks to human health and specifically focussing on transboundary movements

37 Ecolabelling The Ecolabel certifies that products meet whole of lifecycle environmental impacts The Ecolabel certifies that products meet whole of lifecycle environmental impacts The product must be made in a way that meets every environmental standard set in the importing economy. The product must be made in a way that meets every environmental standard set in the importing economy. If not, its imports is banned. The importer sets the standard If not, its imports is banned. The importer sets the standard

38 What are the positions of industrialised economies on these issues?

39 IssueUnilateral measures to protect the environment EUOpposed USNot opposed: defends own measures vigorously CanadaOpposed Switzerland AustraliaOpposed New ZealandOpposed

40 IssueLegitimize discriminatory trade measures in MEAs EUWants WTO rules Clarifiedto protect measures from challenge USOpposed: existing provisions in WTO sufficient CanadaGenerally opposed, favours clarification SwitzerlandGenerally supports legitimization AustraliaOpposed, WTO rules adequate New ZealandLimited support

41 IssueRestrict trade on product and processing grounds (ppms) EUWants WTO rules clarifiedto allow whole of life cycle regulation US CanadaWant issue examined. SwitzerlandSame position as EU AustraliaOpposed New Zealand

42 IssueEnacting the Precautionary Principle EU*Favours WTO applying version favoured by EU and in Cartagena USOpposed: support SPS science based measures CanadaSame as US Switzerland AustraliaSame as US New ZealandSame as US * Position qualified after Doha

43 IssueEcolabelling EULegitimize labels verifying compliance with whole of lifecycle management USSupports transparency, opposes whole of life cycle ecolabelling CanadaSupports voluntary whole of life cycle ecolabelling SwitzerlandWants clarification of WTO rules Australia New Zealand

44 IssueSubsidies with environmental impacts EUExamine trade distorting subsidies in energy USEliminate fishing subsidies, allow subsidies to address environment issues CanadaAddress distorting impact in fisheries and forests SwitzerlandWants clarification of WTO rules AustraliaEliminate export subsidies New ZealandEliminate export & fish subsidies

45 IssueEnvironmental impact assessments of trade agreements EU USSupport CanadaSupport Switzerland AustraliaSupport New Zealand

46 Are the MEAs good environment policy?

47 Most of the MEAs breach UNCED principles The trade and environment principles adopted at UNCED urged - respect for national sovereignty - avoidance of use of trade sanctions - members of the UN to enter collaborative international agreements to provide global solutions instead of using trade coercion The trade and environment principles adopted at UNCED urged - respect for national sovereignty - avoidance of use of trade sanctions - members of the UN to enter collaborative international agreements to provide global solutions instead of using trade coercion

48 Studies show poor environmental value of the trade measures in MEAs UNCTAD and the OECD have both made studies of the environmental value of the trade measures in the MEAs and assessed it as low UNCTAD and the OECD have both made studies of the environmental value of the trade measures in the MEAs and assessed it as low Many private studies show trade measures are generally ineffective to protect the environment Many private studies show trade measures are generally ineffective to protect the environment

49 The problem? – conflicting rules The source? - new rules in MEAs Are they desirable rules? If the rules are not desirable, why change the WTO? Review the issue

50 The new rules in the MEAs Use trade coercion to secure objectives Use trade coercion to secure objectives Allow trade to be restricted according to how a product is made or handled (PPM) Allow trade to be restricted according to how a product is made or handled (PPM) NOTE: it is not the norm in international treaties to impose conditions on non-parties NOTE: it is not the norm in international treaties to impose conditions on non-parties

51 Who wants the new rules? The EU The UNEP Secretariat Who doesnt? UNCED – trade and environment principles UNCTAD – assessment of MEAs OECD – assessment of MEAs Most members of the WTO

52 What is wrong with the new rules? 1 Trade coercion is the rule of the jungle 2 Restricting trade by how a product is made: - undermines the capacity of the WTO to provide benefits - forces first world environment standards on everyone 3. Why not use instead purpose-made conventions where countries adopt common measures into national law? 3. Why not use instead purpose-made conventions where countries adopt common measures into national law?

53 Approaches

54 The basic, global problem Lack of common understanding Lack of common understanding Lack of effective communication Lack of effective communication Weak policy processes Weak policy processes

55 Methodical approaches are required What is the environmental problem? What is the environmental problem? What is the best way to address it? What is the best way to address it? Does trade impede the solution? Does trade impede the solution? What trade controls currently exist? What trade controls currently exist? Is the problem a trade and environment problem? Is the problem a trade and environment problem?

56 The issue is no longer just conflict between WTO and MEA provisions The issue is restoring respect for national sovereignty and ruling out trade coercion in both the WTO and the UN environmental fora. The issue is restoring respect for national sovereignty and ruling out trade coercion in both the WTO and the UN environmental fora. The Problem is not in the WTO it is poor environment policy in the UN. The Problem is not in the WTO it is poor environment policy in the UN. This problem cannot be fixed by trade officials alone This problem cannot be fixed by trade officials alone

57 Action to solve the problem Clear positions are required by governments on each of the following issues: - sovereignty Clear positions are required by governments on each of the following issues: - sovereignty - discrimination - coercion - leverage - precautionary principle - production & process methods/ecolabelling - sound principles in trade policy - sound principles in environment policy The fundamental principles of good international governance need to be restated The fundamental principles of good international governance need to be restated

58 Action to solve the problem Specific outcomes must be secured: 1. Achieve domestic coherence on trade and environment policies 2. Re-align environment work in the UN with fundamental UN principles - cease including ineffective and inappropriate provisions in environment agreements 3. Protect fundamental provisions in the WTO Specific outcomes must be secured: 1. Achieve domestic coherence on trade and environment policies 2. Re-align environment work in the UN with fundamental UN principles - cease including ineffective and inappropriate provisions in environment agreements 3. Protect fundamental provisions in the WTO


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