The EU proposal on environmental treaties is trade restrictive

Developing countries have expressed fears that moves by the European Union to get legitimization for trade restrictive measures under Multilateral Environmental Agreements would allow the North to use the WTO to force their environmental standards on other countries

GENEVA - The European Union's move for a decision at the Singapore Ministerial meeting of the WTO relating to trade measures purportedly under Multilateral Environment Agreements (MEAs) would enable the industrial countries to use the WTO to force their own environmental standards on other countries.

The EU disavows any intent to create a protectionist instrument.

But its proposals for changing the GATT/WTO provisions to get ex ante legitimization for trade restrictive measures purportedly taken under Multilateral Environment Agreements (MEAs), both against parties and non-parties to an MEA will in fact achieve this.

The EU MEA would encompass all the way from UN negotiated instruments commanding global consensus to instruments fashioned by a few industrial countries but technically thrown open for universal adherence.

Blanket exception

The EU proposes amending Article XX, the general "exceptions" article of the General Agreement as well as of the WTO's Dispute Settlement Understanding towards this end and hopes to get a recommendation to this end through the CTE and have it adopted at the Singapore Ministerial meeting.

In advance of the CTE meeting, the EU has circulated a "non-paper", outlining its ideas and views. Last October, the EU had informally formulated what it had called then "elements" of its proposals.

The EU proposal defines an MEA (that would attract blanket exemption) as an international instrument adopted in conformity with the Vienna Law of Treaties, "open to participation" by all parties concerned about the environmental objectives and reflecting "through adequate participation" interests of parties including parties with relevant significant trade and economic interests.

Thus defined, it would cover not only agreements negotiated at international conferences convened by the UN or its specialized agencies and open to all members, and commanding overwhelming consensus and near-universal adherence, but even agreements that a few countries draft together and then invite others to join, giving such an MEA (and measures purported to be taken under it), protection in the WTO/GATT rules.

As one expert noted, an agreement involving the governments of North America, Europe, Japan and a few others would qualify to be such an MEA and others would be forced to join and accept these standards, whether their own situations warranted it or not; and whether or not they join, their GATT rights would be subordinate.

One Third World delegate said that the EU proposal would mean that in pursuit of environment objectives, which were legitimate and has not so far been challenged in the WTO, the industrial countries could fashion MEAs and straightaway jump to taking trade restrictive measures, rather than positive measures to encourage others to gradually enhance their own standards.

Most environment agreements, in disputes among members, have elaborate and protracted procedures, and in disputes arising out of the MEAs, the WTO would generally ask the members concerned to settle it in the MEA. But when non-members are involved, MEA members will get superior rights, via trade restriction routes.

Briefing paper

The EU move has been welcomed by several of the environment NGOs of the North, and the secretariats of some international environment NGOs, based in the North. These NGOs have long been campaigning for such an ex ante carve-out of MEAs from the WTO scrutiny and obligations.

The World Wide Fund for Nature (WWF), in a briefing paper issued in January, has generally welcomed the EU moves, and has said that the term "multilateral" should include "regional" agreements constructed to reflect the "legitimate environmental concerns of all interested countries" and that in all such cases it should not be left to the WTO to define the "necessity" or "proportionality" of the trade measures employed, but that the secretariats of such agreements and UNEP should be involved on an equal footing.

The WWF paper has endorsed the approach (of expanding the scope of the Art XX exceptions through an "Understanding") in the EU text now circulated, namely, if the MEA met the procedural criteria (of an MEA), a WTO panel should not examine the legitimacy or necessity of the measures taken to achieve the environmental objective of the treaty.

An earlier version of the EU had a provision to the effect that the MEA should reflect a "genuine international consensus". The WWF had sought deletion of this phrase - on the basis that there could be differences on interpretations of the phrase. The latest EU text does not contain that phrase. It merely requires that the MEA should be open to participation by all parties "concerned about the environmental objectives" - it is not clear whether the intention is to limit the meaning of all parties - and through adequate participation (in the MEA) of parties with relevant significant trade and economic interests.

Several of the European and North American NGOs, seeking enhanced environmental standards in their communities and placing restrictions on their industries and industrial processes, have long been arguing for making environmental actions not susceptible to the WTO trade rules and dispute settlement mechanisms, and for enabling the importing countries to restrain imports of products and processes of like products that are severely restricted or banned in their own countries on environmental grounds.

On the issue of MEAs and the trade system, developing countries generally have disfavoured any blanket ex ante exemptions, for existing or future agreements, but have preferred a case-by-case approach.

As the EU itself notes, no genuine MEA with environmental objectives commanding a near-universal consensus and with trade restrictions has been challenged at the WTO. And GATT panels in recent periods have acknowledged the right of countries to take measures in pursuit of environmental objectives, only demanding that there should be a clear nexus and the countries taking measures would need to demonstrate that no other course than departing from their GATT obligations would achieve their objectives, and that those seeking protection for their trade measures under "exceptions" have to prove their case. But the EU proposal would shift the burden on to complainants, allowing them to challenge the measures only on the basis of their being, arbitrary, discriminatory and protectionist - and not whether other measures non-violative of GATT/WTO obligations could have been taken to achieve the same objective

In its paper, the EU argues that it is attempting to strike a balance, in a legal and procedural framework, to reconcile the need for the WTO to accommodate the legitimate goal of environmental protection, when it is the expression of "international consensus and cooperation", while at the same time preserving the equitable and non-discriminatory character of the multilateral trading system.

Some of the developing country delegates who have been actively participating in the work of the CTE privately say that they are opposed to the EU proposal effectively providing a carte blanche for trade restrictions claimed to be imposed under an MEA by a member of the MEA against non-members, taking away the GATT/WTO rights of such non-members. They are also opposed to the piece-meal approach to the mandate of the CTE, and want all issues on its agenda to be addressed, and a package of recommendations encompassing all to be put to the Singapore meeting.

A diplomat of a major developing country said it was difficult to understand the preoccupation with the Singapore meeting deadline and pressures to get agreements at that meeting.

What a Ministerial Conference could decide could be done by the WTO General Council and very recently it had done so in taking a decision on looking at the conflicts between the WTO and regional agreements - an issue originally envisaged to be tackled at Singapore. If a consensus is achieved today, the General Council can decide it without waiting for Singapore. If there is no consensus, the Singapore deadline should not be used to hustle a consensus, he said.

Amending Article XX exceptions

The EU proposal, for amending Article XX "exceptions" of the General Agreement, as well as adoption of an "understanding" circumscribing the jurisdiction of a WTO Dispute Settlement Panel in hearing and adjudging complaints of WTO members would have the Ministers reach an "understanding" (which in GATT terms has the same effect as an amendment).

The proposal would maintain the chapeau of Art XX that measures applied as "exceptions" are not to be applied in a manner that is arbitrary or an unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade.

But the Understanding proposed by the EU would provide that measures taken under specific provisions of an MEA "shall be presumed to be necessary for the achievement of the environmental objectives of the MEA..." or alternatively ".... necessary for the protection of the environment..."

Environmental protection

To acquire such a protection, the EU proposal requires that the MEA in question:

* is open to participation by all parties concerned about the environmental objectives of the agreement,

* reflects, through adequate participation, the interests of parties concerned, including parties with relevant significant trade and economic interests.

At one stage during the GATT consideration of this issue in the Ukawa committee, after the collapse of the 1990 Brussels talks on the Uruguay Round, and in the CTE set up after the Marrakesh accord, some of the developing countries had said that MEAs to gain legitimacy would need to be those negotiated at UN summoned international conferences (where a treaty can be adopted only by two-thirds majority voting), and the membership of the MEA that emerges must have membership from all regions, and be representative of countries at various stages of development.

Trade measures

The proposed EU wording about "adequate" participation and "relevant significant trade and economic interests" is much weaker, and capable of subjective interpretations.

Instead of the Rio approach of "positive" international cooperation measures, rather than trade sanction measures, to achieve enhanced environmental protection and standards, the EU move would enable countries to straightaway jump to trade measures.

The EU proposal also envisages that in terms of dispute settlement, when a panel is established on a complaint against a trade measure pursuant to specific provisions of an MEA, the panel would be asked to scrutiny whether the MEA satisfies the criteria of the Art XX Understanding.

If it does, the measures taken pursuant to the specific provisions of the MEA are to be deemed by the panel as necessary (in terms of Art XX exceptions) to achieve the environmental objectives of the MEA.

But if the MEA does not satisfy the characterization specified, then measures taken pursuant to it have to be justified by the Party taking the measures in terms of the "necessity" of the measures.

The Panel however would be free to see whether the measures are still contrary to the requirements of the chapeau to Art XX, namely, they are not an arbitrary or unjustifiable discrimination between countries where same conditions prevail nor a disguised restriction on international trade.

The WTO panels would also be required to use the possibility of seeking technical expertise in judging on the legality of trade measures taken pursuant to an MEA, if necessary in consultation with the Secretariat of the MEA in question. - SUNS3705

The above article first appeared in the SUNS of which Chakravarthi Raghavan is the Chief Editor.