Trade and Environment M3

Module

3

The relationship between Multilateral Environmental Agreements and the WTO

ESTIMATED TIME: 6 hours

OBJECTIVES OF MODULE3

• Present an introduction to multilateral environmental agreements (MEAs)
• Explore the relationship between MEAs and the WTO, including potential for conflict
• Provide an overview of the Doha negotiating mandate on the relationship between MEAs and the WTO

1

I.introduction to MEAs

IN BRIEF

Multilateral Environmental Agreements (MEAs) have emerged as an important means for countries to tackle environmental problems, particularly those regional or global in scope. Several MEAs contain provisions for measures to control trade, in order to prevent damage to the environment or as a tool to encourage compliance with their objectives. There are therefore a number of interlinkages between WTO and MEAs requirements.

IN DETAIL

I.A.BACKGROUND

It has been widely recognized by both environmental and trade policymakers that multilateral solutions to transboundary environmental problems, whether regional or global, are preferable to unilateral solutions. Resort to unilateralism runs the risk of arbitrary discrimination and disguised protectionism which could damage the multilateral trading system.

The 1992 Rio Conference has strongly endorsed the negotiation of MEAs to address global environmental problems. Agenda21 of the 1992Rio Conference states that measures should be taken to "avoid unilateral action to deal with environmental challenges outside the jurisdiction of the importing country. Environmental measures addressing transborder or global environmental problems should, as far as possible, be based on international consensus." Likewise, the 2012Rio+20 Conference Declaration "encourage[s] parties to MEAs to consider further measures, […] as appropriate, to promote policy coherence at all relevant levels, improve efficiency, reduce unnecessary overlap and duplication, and enhance coordination and cooperation among MEAs […]".[1]

WTO Members have been discussing the issue of the relationship between WTO and MEAs since 1995, as the issue also forms part of the work programme of the Regular CTE."

RECALL

The 1994Marrakech Ministerial Decision on Trade and Environment sets out the Work Programme of the Committee on Trade and Environment (CTE). Items 1 and 5 cover the relationship between the rules of the multilateral trading system and the trade measures contained in MEAs, and their dispute settlement mechanisms.

It is reported that there are around 250MEAs currently in force. Out of these agreements, about 20 would actually include traderelated provisions.

Discussions in WTO have tended to focus mainly on the following agreements:

the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal;

the Convention on Biological Diversity (CBD)andthe Cartagena Protocol on Biosafety;

theConvention on International Trade in Endangered Species of Wild Fauna and Flora (CITES);

the Montreal Protocol on Substances that Deplete the Ozone Layer;

theRotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade;

the StockholmConvention on Persistent Organic Pollutants; and

the UnitedNations Framework Convention on Climate Change (UNFCCC)andits Kyoto Protocol.

Example of a successful MEA: The Montreal Protocol on Substances that Deplete the Ozone Layer

The Montreal Protocol on Substances that Deplete the Ozone Layer(the Montreal Protocol) (adopted in 1987, entered into force in 1989), a protocol to the Vienna Convention of the Protection of the Ozone Layer, is an international treaty designed to protect the ozone layer by gradually phasing out the production of certain chemical substances that deplete the ozone layer, so-called ozone depleting substances (e.g. CFCs).
The Montreal Protocol is often cited as an example of successful multilateral cooperation to tackle a global environmental problem. One of the main reasons for the Protocol's success has been its ability to engage the global community to respond. In 2009 the Montreal Protocol became the first United Nations treaty to achieve universal ratification. The Protocol's wide membership has helped ensure that all countries are actively engaged in reducing their negative impact of the ozone layer, with no countries free-riding on the actions of others.
Another possible reason for the Protocol's success is the support it provides to developing countries. With the assistance of the Multilateral Fund for the Implementation of the Montreal Protocol, developing countries had, by mid-2010, permanently phased out over 270,000 tonnes of ozone depleting substances that had been used to produce various products and have eliminated virtually all of their production of CFCs and halons.
By 2012, the Parties had phased out the consumption of over 98 per cent of all the chemicals controlled by the Protocol. Global observations have verified that atmospheric levels of key ozone depleting substances are going down and it is believed that with the implementation of the Protocol’s provisions the ozone layer should return to pre-1980 levels by the middle of this century.
More information can be found on the Ozone Secretariat's website.

exercises:

1.Why are multilateral solutions to environmental problems preferred to unilateral solutions?

2.Please give examples of MEAs discussed in the WTO?

I.B.TRADE MEASURES IN MEAs

IN BRIEF

Trade measures in MEAs may be used for several purposes. For instance, such measures can be used to control trade in order to prevent damage to the environment. Trade measures can also be used as tools to encourage compliance with the objectives of the MEAs, for instance, in cases where the threat of such measure may encourage a non-party to comply.[2]
Trade measures can take the form of an export and/or import ban; export and/or import permits and licenses; packaging, labelling or transportation requirements; notification requirements; or reporting requirements. Such measures may be taken vis-à-vis another State party to the MEA, or against a State that is not a party to that MEA

Figure 1: Use of Trade Measures in MEAs

IN DETAIL

The following table contains some examples of MEAs and the trade measures they include.

MEA / Objective / Trade Measure
Basel Convention / Reduce transboundary movements of hazardous wastes; minimize the generation, in terms of quantity and hazardousness, of wastes; and promote the environmentally sound management of hazardous and other wastes. / Parties may only export a hazardous waste to another party that has not banned its import and that consents to the import in writing. Parties may not import from or export to a non-party. They are also obliged to prevent the import or export of hazardous wastes if they have reason to believe that the wastes will not be treated in an environmentally sound manner at their destination.
CITES / Regulate international trade in wildfauna and flora for conservation purposes. Provides framework for sound management of wildlife trade based on the best biological information available; analyses how different types of trade regulations can affect specific populations. / CITES doesnot allow the issuance of import/export permits involving the commercial international trade in an agreed list of threatened species. It also regulates and monitors (by use of permits, quotas and other restrictive measures) trade in other species that might become endangered.
Montreal Protocol / Develop a regime that limits the release of ozone-depleting substances (ODS) into the atmosphere. / The Protocol lists certain substances as ozone depleting, and bans all trade in those substances between parties and non-parties. Similar bans may be implemented against parties as part of the Protocol's noncompliance procedure. The Protocol also contemplates allowing import bans on products made with, but not containing, ozone-depleting substances—a ban based on process and production methods.
Rotterdam (PIC) Convention / Promote shared responsibility and cooperative effort among Parties in the international trade of certain hazardous chemicals in order to protect human health and the environment from potential harm and to contribute to their environmentally sound use. This is done by facilitating information exchange about their characteristics, by providing for a national decision-making process on their import and export and by disseminating these decisions to Parties. / Under the Convention, Parties can decide, from the Convention's agreed list of chemicals and pesticides, which ones they cannot manage safely and, therefore, will not import. When trade in the controlled substances does take place, labelling and information requirements must be followed. Decisions taken by the parties must be trade neutral—if a party decides not to consent to imports of a specific chemical, it must also stop domestic production of the chemical for domestic use, as well as imports from any non-party.
CBD and Protocol on Biosafety / CBD: ensure conservation of biological diversity, sustainable use of its components and fair and equitable sharing of the benefits arising out of the utilization of genetic resources.
Biosafety Protocol: Ensure an adequate level of protection in the field of safe transfer, handling and use of Living Modified Organisms (LMOs) that may have adverse effects on the conservation and sustainable use of biological diversity, also taking into account risks to human health. / Parties may restrict the import of some living genetically modified organisms as part of a carefully specified risk management procedure. LMOs that will be intentionally released into the environment are subject to an advance informed agreement procedure, and those destined for use as food, feed or processing must be accompanied by documents identifying them.

Table 1: Examples of MEAs and their Trade Measures

TIP
Further information on MEAs containing trade measures and their relevant provisions can be found in a document entitled "Matrix on Trade Measures Pursuant to Selected Multilateral Environmental Agreements" (TN/TE/S/5/Rev.3).

exercises:

3.Why do some MEAs use trade measures?

II.RELATIONSHIP BETWEEN MEAs AND THE WTO: POTENTIAL CONFLICT?[[3]]

IN BRIEF

Measures taken pursuant to MEAs could give rise to questions of consistency with certain WTO rules, such as the non-discrimination principle, or the prohibition of quantitative restrictions.

IN DETAIL

II.A.MEA rules and GATT Articles I, III and XI

Under GATT Article I, any advantage or privilege granted by a country to any product originating in any other country shall be accorded to like products originating in the territories of all other WTO Members.
Pursuant to GATT Article III, WTO Members must not discriminate between imported and domestic like products.
Under GATT Article XI, no prohibitions or restrictions other than duties, taxes or other charges such as quotas, import or export licenses shall be applied on the import or export of any product.

Figure 2: WTO Principles

The situation could materialize where an MEA authorizes trade between its parties in a specific product, but bans trade in that very same product with non-parties (hence, an inconsistency with the Most Favoured Nation (MFN) clause, which requires countries to grant equivalent treatment to "like" imported products).

Example 1: The Montreal Protocol on substances that deplete the Ozone Layer

Article4 of the Montreal Protocol on Substances that Deplete the Ozone Layer bans imports of controlled ozone depleting substances from nonParties to the Protocol, who may be Members of WTO. Under the Protocol, similar restrictions are not imposed vis-à-vis other Parties. The application of such a measure could give rise to questions relating to GATT ArticleI (MFN); Article III (National treatment); or GATT ArticleXI (Prohibition of quantitative restrictions).

Example 2: CITES

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an often-cited example of the use of trade measures to tackle environmental objectives. Agreed in 1973 and in effect since 1975, CITES requires parties to implement a number of trade-related environmental measures ("CITES measures"). The objective is to save certain species of wildlife from extinction by regulating and monitoring their global trade. CITES measures range from permits and quotas of enlisted species to suspension of trade. Certain WTO rules may therefore be relevant to CITESmeasures, e.g., GATT Articles I and III (Most-Favoured Nation and National Treatment) and GATT Article XI (Prohibition of Quantitative Restrictions).It is interesting to note that, in fact, during all the time the GATT/WTO and CITES have co-existed, now spanning more than 40 years, there has never been a single challenge under the WTO's dispute settlement system against a measure taken by a GATT contracting party, or WTO Member, implementing CITES obligations.[4]

II.B.MEAs and the General Exceptions of GATT Article XX

In the context of a dispute on the application of a trade measure under an MEA, the respondent could invoke a defence under GATT ArticleXX.

According to Article XX, a Member can justify derogating from its obligations in respect of a measure that is either necessary to protect human, animal or plant life or health, or that relates to the conservation of exhaustible natural resources, provided certain conditions are met.

The relevant parts of Article XX of GATT read:

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) necessary to protect human, animal or plant life or health;
(...)
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;
(...)

Measures taken pursuant to an MEA would likely fall under at least one of the exceptions described in ArticleXX (i.e. the protection of human, animal or plant life or health, or the conservation of exhaustible natural resources).

However, in order to be able to justify a derogation from its GATT/WTO obligations, the Member having taken the measure would still have to meet the test of the introductory paragraph, or"chapeau", of ArticleXX (i.e.that the measure does not constitute unjustifiable or arbitrary discrimination, or a disguised restriction on international trade). (see Module6).

TIP
For a GATT-inconsistent environmental measure to be justified under Article XX, a Member must perform a two-tier analysis, proving:
first, that its measure falls under at least one of the exceptions (e.g. paragraphs (b) or (g)), and then,
that the measure satisfies the requirement of the introductory paragraph (the "chapeau" of ArticleXX), i.e. that the measure is not applied in a manner which could constitute "a means of arbitrary of unjustified discrimination between countries where the same conditions prevail", and is not "a disguised restriction on international trade".

II.C.WHICH dispute settlement SYSTEM?

While disputes between two parties to an MEA, who are both WTO Members, are expected to be settled in the MEA, disputes between an MEA party and a nonparty (both of whom are WTO Members) would probably come to the WTO since the nonparty would not have access to the dispute settlement provisions of the MEA.

To date, no disputes regarding trade provisions contained in an MEA have come to the WTO. Some WTO Members have argued in the CTE (in their proposals on negotiations about the MEA-WTO relationship) that the existing principles of public international law suffice in governing the relationship between WTO rules and MEAs. The1969 Vienna Convention on the Law of Treaties as well as the principles of customary law could themselves define how WTO rules interact with MEAs.

The legal principles of "lex specialis" (the more specialized agreement prevails over the more general) and of "lex posterior" (the agreement signed later in date prevails over the earlier one) emanate from public international law, and some have argued that these principles could help the WTO in defining its relationship with MEAs. Others have argued that there is a need for greater legal clarity.

II.D.POTENTIAL CONFLICT? THE CASE OF EC- SWORDFISH

Although there has never been a formal dispute between the WTO and an MEA, the ECSwordfish case has illustrated the risk of conflicting decisions rendered by two bodies having competence over a different subjectmatter.

In this case, the European Union (EU), then still called the European Communities, asserted that its fishing vessels operating in the South East Pacific were not allowed, under Chilean legislation, to unload their swordfish in Chilean ports. The EU considered that, as a result, Chile made transit through its ports impossible for swordfish. The EU claimed that the above-mentioned measures were inconsistent with GATT 1994, and in particular Articles V and XI.

Chile however maintained that the EU had failed to cooperate with Chile to ensure the conservation of swordfish, a highly migratory species, in violation of the UN Convention on the Law of the Sea. As a result, conservation measures had becomenecessary to ensure sustainable fisheries for swordfish.

Figure 3: EC-Swordfish Example

On 12 December 2000, the Dispute Settlement Body of the WTO (DSB) established a panel further to the request of the EU. In March 2001, the EU and Chile agreed to suspend the process for the constitution of the WTO panel (this agreement was further reiterated in November 2003).

At the same time, proceedings in the Case Concerning the Conservation and Sustainable Exploitation of Swordfish Stocks in the South-Eastern Pacific Ocean were instituted on 19 December 2000 at the ITLOS by Chile and the EU. Chile requested, inter alia, the ITLOS to declare whether the EU had fulfilled its obligations under UNCLOS Articles 64 (calling for cooperation in ensuring conservation of highly migratory species), 116-119 (relating to conservation of the living resources of the high seas), 297 (concerning dispute settlement) and 300 (calling for good faith and no abuse of right). The EU requested, inter alia, the Tribunal to declare whether Chile had violated Articles 64, 116-119 and 300 of UNCLOS, mentioned above, as well as Articles 87 (on freedom of the high seas including freedom of fishing, subject to conservation obligations) and 89 (prohibiting any State from subjecting any part of the high seas to its sovereignty).