International Trade and Enviro Protection

Schoenbaum, T.J. (2002) ‘International Trade and Environmental Protection’ in Birnie, P.W. and Boyle, A. International Law and the Environment. Oxford, Oxford, pp697-750.

Definitions

Chapeau - Introductory clause which qualifies an Article. Refers to "Hat" so may mean "sits above".

• 1. Intro  - Promoting free trade has been goal since GATT 1947. Since Marrakesh these have been administered by WTO. Forum for negotiations. Contrasted with disrtibuted nature of env agreements fuels trade/env debate. Fear that env disputes may fall in front of trade body who are inimical of env concerns. Few have come to WTO however impact of those have been significant. There will always be conflicts between free trade and env. Issues include - (i) rules of multilateral trading may restrict multilateral env agreements that use trade restrictions to protect env (e.g trade in endangered species, treaty on transboundary movemet of wastes) (ii) frustrate attempts to protect resources beyond national boundaries (ie oceans) (iii) rules for international tradeing stop nations for putting high standards in place locally (iv) rules obstruct efforts to compel other countries to adopt high env standards. Cannot seek to give preference to env - it is about a balance between trade and env. Preamble to Marrakesh "optimal use of world resources with ob of sustainable dev....based on different levels of development" . Principle 12 of Rio declaration calls for "open international eco system that -> sustainable growth". Careful not to allow env policty to dicriminate. WTO has been frustrated in terms of how to balance both these issues. MEA's also have to seek this balance with trade related environmental mechanisms (TERMS) being a near deal breaker. (ie biosaftey , kyoto)
• 2. The multilateral trading system 
•  The WTO - 150 members, oversees implementation of Multilateral trade agreements (MTA's)GATT, GATS (services), TRIPS, TRIMS (trade related investment measures), TBT (technical barriers to trade), SPS (Sanitary and photosanitary).  Many can contain trade related env measures or expections (mainly introduced as part of Urugay round of negotiations). Main organs are a ministerial conference, general council (also WTO dispute settlement body) and trade policy review body, council for trade in g&S, trade related aspects of IP. Decisions usually by concensus or majority. Certain decisions only by specified majority vote.
• Principle GATT/WTO norms relevant to environment - (a) Most favoured nation principle (Article I) and national treatment principle - equal treatment of like products regardless of internal national legislation. 'treatment no less favourable to that accorded to like products of national origin" and must not be applied for 'domestic protection'. Article II - schedule of concessions and lowered tarriffs. Article III is broadly there to prevent members from affecting competitive relationship - taxes, charges and other. Also cannot use quotas (article XI) or other measures. These articles are often paired in terms of judgements of cases.(b) GATT environmental exceptions - Article XX looks at exemptions for GATT and although the word environment is not used, it could be :"subject to the requirement that such measures are not applied in a manner that would constitute arbitary or unjustifiable discrimination between countries....agreement should not be construed to prevent adoption of ...measures .. (b)necessary to protect human, animal or plant life, (g) relating to the conservation of exaustible natural resources." .. Note that there is a preamble to XX called the chapau - which protects using XX to discriminate.  Clearly not a straight forward mechanism in GATT for env. There are committees to try to resolve - committee on trade and the env, dispture resolution committee and resolution 31(i) of Doha - committing WTO members to negotiate relationship between WTO rules and MEA's.
• Committee on trade and the env (CTE) - Formed in uraguay 1994 to address - [(a) relationships between multilateral trade and env (b) charges and taxes/product regulations (c) transparency of trade measures for env purposes (d) relationship bw dispute settlement and mechanisms in multilateral trade and those used for env (e) effect of env measures on market access esp in relation to developing countries. (f) Export of domestically prohibited goods (g) IP (h)work program envisaged in the decision on trade in services and the environment (i) input into relevant bodies. ] There has been very little progress on this work from the CTE - little analysis etc. More a figure head at this point in terms of institutionalising environnment in WTO. Issue is deep deivisions between eco developed (who want env measures directly inserted) and the majority developing (who see this as discrimination). Also growing division with EC/USA in terms of GMO and precautionary principle.
• WTO dispute settlement - Great streagnths of WTO is its binding dispute mech. First remitted to consultations if this doesnt work ->pannels on appellate body. Decisions must be implemented within 15 months. Interpretations are not static but evolutionary. Importantly this Article 3(2) States that it must interpret WTO agreements under existing international law - which broadens the consideration beyond free trade. Has started to develop more nuanced environmentally friendly concepts. Still have to resolved - what is the most appropriate forum for settlement of a dispute over a MEA.
• 3. Multilateral trade agreements and trade restrictions - Remains the question - how will GATT  accomodate MEA's that push for trade restrictions? Example CITES or basel convention on transboundary movements of wastes. Creation of WTO reset GATT from 47 to 94' theoretically allowing it to trump MEA's. Highly complex due to flexible nature of many MEA's and use of additional trade restrictive measures. As with Montreal protocol - even where trade/env interface is dealt with at design phase, dynamic nature of MEA's require ongoing monitoring. Also  need protocol for non-compliance. Four ways to address the relationship bw MEA's and Trade (a) each MEA could be examinised case by case under article IX(3) of the Agreement establishig the WTO. This provision allows a waiver under exceptional circumstances. Is probably not workable - WTO would abdicate from setting criteria to influence MEA's and "exceptional circumstances" is vague. (b) Certain MEA's take precedent. This would provide for existing but not future.(c) Ammend article XX by adding a providion to MEA's (d) Adopt a collective interpretation of Article XX that would recognise existing MEA's and provide mechanism for future.A model may ybe Article XX (h) which creates an exemption for trade measures.Such exemption may provide that  (i) negotiations should be under UNEP (ii) that the problem dealt with must be of serious env harm (iii) must be a significant relationship between the MEA and the trade restriction (iv) the MEA must be formally notified to the WTO.  Unlikely that these will be adpoted due to the deadlock of the CTE therefore it will probably come down to the dispute fuction of WTO.
• 4. Trade Restrictions to protect resources beyond national juristiction -  (a) Unilateral trade sanctions under 1947 GATT . First addresssed in Tuna-Dolphi case. Acting under Marine Mammal Protection Act (MMPA) US banned imports of yellow fin tuna.  Mexico complained - dispute settlement found that US violated GATT XI(1). US sought to justify under Article III (1) ad (4) since US fishermen were subject to same rules. A seconnd ruling condemed again based on the legality of embargos of countries that processed tuna caught by offending countries. Found that it did not pass the "necessary" test.  Found that a trade measure takenn to force another country to change its env policy, and that would only be effective if such chage occured could not be viewed as necessary. This case must now be viwed in light off further measures
• (b) Extraterratorial scope of Article XX (b) and (g) under GATT - Two different panels came to different conclusions about application of (b) and (g). First panel ruled that natural resources only under regional control of country concerned. The second panel - said the provision sof (g) could apply outside domestic borders. However it still ruled that it oculd only be enforced on domestically controlled vessells. However any treaty must be considered "in context" and states have a obligation to protect extraterritorial resources.
• (c) The new WTO approach under 1994 GATT - The decisions on (b) and (g) were not binding and were not taken up but mapped out some theory. The WTO appellate body has new approach to article XX that makes greater allowance for env protect. (i) GATT article XX(g) - a consistent theory of interpret has been advance in US gasoline standard and turtle shrimp cases. It takes a more generous view on XX(g) in terms of exhaustible resources - need not be rare to be endangoured. The second test is harder - the statement "relating to" . Again appelate body took a wider approach - in examining whether the ban was reasonably related to conservation aims. There was also a definitive definition of the third term "made effective in conjunction with restrictions of domestic production or consumption. Basically needs to be parrallel restrictions.  (ii) Article XX (b) - Appellate body has followed phrase 'necessary to to protect human, animal or plant life or health'. It is said this is to much of an infrigment on soverign and ignores domestic constraints. WTO should employ a defferential standard of review. e.g upholding French ban on Asbestos - given it was proven harmful. Burden of proof on contesting country.  (iii) The chapeau - Sits above XX and qualifies exceptions - canot be arbitary discrimination, unjustifiable discrimination, and disguised restriction on international trade. In the shrimp-turtle case the action was seen to violate criteria against arbitary discrimination. This is because USA did not consult how the regulatory programm that they were enforcing would suit other countries, the certification process was unfair, the regulations were 'unjustifiable' because they required different phase in periods for countries, and that generall the US should have negotiated some core subject matter. Two key conclusions - Appellate body did not strike it down or rule it illegal as per previous GATT panels. They refered to unilateral action as 'disruptive'.  This leaves the door open (just) for unilateral measures. US could have carefully complied and then negotiated more collaboratively and were spurned then the other party would have breached good faith negotiations as per international law. Second it provides a basis for (g) and (b) to be upheld in a pro-env manner.
• (d) Creative unilateralism - 2 justifications for creative unilateralism - first an act can be de lege ferenda (what the law ought to be rather than what it is with a view to future law) may be new state law that can evolve into custom which is defensible under accepted norms of international law. The docterine of opposability in international law allows a state to assert an important interest in ways that are not consistant with international law and promote adoption of law into international practice.  Second justification is that a unilateral action may be a counter measure under international law. Countermeasures must be in response to prior act which is contrary to inernational law and must not be out of proportion to the act. E.g US put forward new principle of law in the tuna-dolphin case. They could argue it was in response to Mexico's disregard for duties of all states etc. In reality Mexico did not push for adoption of GATT. US passed the international dolphin conservation act and negotiated in good faith. Agreement was signed and incedent mortality reduced enough for US to revoke its embargo. Argument that it was the combination of the embargo and the negotiation that worked in the end.
• 5. Trade restrictions to protect the domestic environment- Three key measures
• 5.1 Import Restraints - Must comply with Article I, II, III and XI of GATT or must find an appropriate exemption under XX. Products also need consider agreement on technical barriers to trade, and agreement on sanitary and phytosanitary measures. These allow country to reasonable set env standards without being unreasonable. XX (b) can be broadly invoked to protect the env. SPS is more rigourous and must meet tests such as - not be overly restrictive, only to the extent necessary, based on science (but within precautionary principle), must be based on risk assessment process taking into account eco and enviro science, must comply with the capeau of Article XX, obligation to consider tryig to harmonise standards (permits higher standards if scientifically justified). Few conclusions - members can choose their own level of protection but must be reaedy to justify, the precautionary principle cannot override specific SPS provisions, harmonisation is encouraged but not required, and only the means chosen to implement domestic policies will be tested.. Note that NAFTA is looser
• 5.2 Recylcing and packaging - Several countries have introduced mandatory recyling of its products and packaging.  Packaging ordinance whereby manufactures must collect waste back from recyling services who process for a small fee. EU adpoted a regime in 94'. This sets min targets for recovery and recyling, standard methods for analysis of lifecycles, and measuring toxicity of content. The spread of these types of lifecycle or producer responsibility lawas  alarm manufacters as they will have protectionist effect - particularly with developing nations. But they do have important role and should be carefully adpoted. It is important that there is standardisation and that comepliance doesnt become a barrier for developing nations. Must also police that they are not being used to intentionally or unintentionally discriminate.
• 5.3 Eco-labels - Either mandatory negative cotent labelling, mandatory content neutral labelling, and volentary 'multi-criteria' labeling.  Eco-labeling must comply with GATT/WTO requirements. Even mandatory regimes are ok if they are non-discriminatory. Must also comply with TBT Agreement
• 5.4 Natural Resources - Whether a country may ban or restrict exports of natural resources on the grounds that it is necessary for conservation purposes. GATT article XI (2) (a) allows based on critical shortages or XX (g) as a measure related to exaustible natural resources.
• Pollution Havens : Trade restrictions to improve the environmnet of other countries
• Can occur due to legitimate care for env, degredation, exploitation of resources in other countries, concern over competitive disadvantages, or concern around transboder pollution.
• 6.1 Process and production measures - States may concern themselves with how a product is produced, manufactured or maintaned (PPM). Key ruling is that state cannot discriminate a product with the same physical characteristics (ie Tuna caught differently) but more easily those that lead to product differences (ie use of pesticides, unsanitary processing). Contravercial rulings that protect countries that produce the same product using different means have -> unfair competition and pollution havens. Schloars have called for WTO to overturn the Tuna-Dolphin ruling by redefining like product in GATT Article III to be dependant on how they are produced, adpopting countervailing eco-dumping duties on pollution havens, or employing a new method of balancing trade interests by measuring legitimacy of env policy. The enforcement of PPM's could also be achieved by allowing for more lienient test for WTO to balance protection of env.May not be appropriate to WTO who has ad hoc judges. Issue with this is that it may just encourage nations to violate international law.
• 6.2 International Env Agreements - one way to deal with PPM/pollution haven issue. If PPM is causing issue states can use well established principles of state responsibility to enter agreements. Where the issue is serious new institutions may be required - as was required with USA/Mexico (US-Mexican Boundary water Commission, a border plan  and a border environmental cooperation agreement).  In this case also used 1992 Agreement to reduce Dolphin mortality. Should refer to existing precedents such as the UNEP regional seas program. As a further measure an appropriate international org should encourage technology transfer.
• 6.3 Environmental Management Systems - There are three approaches to product standards - (i)National treatment, (ii) mutual recognition,  (iii) harmonization.  WTO and Gatt rely on (i) and (iii) although harmonisation is usually to costly in practice. If harmonisaton is not the answer then PPMs can be encouraged via CSR and widespread adpotion of Environmental management systems such as ISO 14000. Becoming accepted that adherance to ISO 140001 will be need to access global marketse.
• 6.4 Investment - Charge that lax pollution standard attract jobs annd industry away from countries with strict policies. Empirical evidance fails to evidence this type of job loss. Even thought developinng nations have lower env standards cost differences in env standards play little part in location decisions. Raw materials and wages far more significant. It would be possible, however for WTO to adopt ammendments that  ensure some consideration of environmental compliance upon investment.
• 7. Export of Hazardous wastes and substances
• 7.1 Domestically prohibited goods - State may bar imports of restricted goods that it sees as dangerous and that are disallowed for consumption domestically. It has been very unclear whether countries can be stopped from exporting hazardous wastes and substances. CTE, Cargagena and stockholm protocol use vague language when dealing with this. A PIC (Prior informed consent) could  extend to export within legal  limites of GATT Article XX(b). The WTO could then provide a clearinghouse for notification and publication of of prohibited goods and dispute resolution.
• 7.2 Waste - Basel convention on control of transboundary movements of waste - Prior consent required from recieving country. Parties must also avoid all shipments of waste if it will not be managed in an environmentally sound manner. Raises problems with WTO in two ways - Conference of the Parties accepted an ammendment to ban export of hazardous waste from industrialised countries to developing.  Also banned export and imports of waste from party and non party states.Alligns with principle 14 of Rio declaration which is that states should cooperate to avoid movement of materials that are harmful to the environment and principle 19 which requires prior notice. Export ban on Hazardous wastes also covered in GATT Article XX(b).
• 8. Evironmental Taxes
• Many see using taxes as a way of appropriately pricing externalities.  They discourage consumption of goods that -> env costs, encourage producers to look at alternatives, implement polluter pays principle (PPP). In one case GATT ruling said "give  parties the possibility to follow PPP but do not oblige them to do so". They are not widespread as people are apposed to taxes, issue is that taxes will hit the  poor hardest in many cases, economies employing them would no longer be competitive. Countries can enter into co-operative trading arrangements that levy's taxes on their producers, or those that tax local companies can levy the same charge on 'like' imports. This clearly raises questions about compliance with GATT. Three catagories of taxes - tax on sale of products, tax can be levied on use of energy or third can be taxed on inputs into producers. GATT specifies two different categories - Article II(1) applies to customs duties and import charges and WTO members are not permitted to higher than agreed rates of concessions. Artical III requires national system. Article II (a) then synthesises in that it provides that nothing in Article II prevents a national charge. DOesnt matter when or where they are levied -they are equalising taxes.  Border tax adjustment (BTA) - holds that goods should be taxed where they are going to be consumed. Can only be levied on products. (i) Taxes on products - eligible for BTA as long as they comply with GATT Article III (like).  Can also be a deposit and return system of tax. (ii)Tax on resource use - effluent or emmission charges. GATT would see these as direct taxes paid out of gross revenues. Not eligible for BTA. (iii) Taxes on inputs - superfund ruling stated that taxes on inputs used to manufacture domestic products could be taken into account in BTA. The value must be on the input and not on the product. Status of inputs consumed in production more problematic (ie carbon tax) GATT is ambigous  but article II(2)(a) seems to proclude BTAas it procludes goods 'with the help of'.
• 9. Trips Agreement and the Biodiversity Convention
• The WTO Agreement on Trade related impacts of intellectual property rights (TRIPS) guarantees recogition and enforcement of IP backed by dispute settlement mechanism. Two features subsequently focused on (i) Transfer of environmentally friendly technology (ii) general relationship between TRIPS and Convention on Biological diversity. The biodiversity convention provides genetic resources of plants and animals are under the soverignty of the state - developing nations have the right to benefit from the developmet of these genetic resources as well as technology transfer. Also allows for (as far as possible) the rights of indigenous communities in innovations and practices. This may -> significant cross over between those that are signatories to TRIPS and the Convention. Disputes in GATT are enforceable whereas the Convetion are not.
• 9.1 Access to genetic resources - major industries such as pharma, ag, biotech need access to genetic resources. They use wild plants and animals as direct compounds, to provide information for synthetic chemicals, and they can be source of genetic sequence used to develop new breeds for example to counter climate change in ag. Article 15 of Biological diversity convetion allows for bans on exports, however they also have to apply internally and must also not be arbitary or unjustified. Can restrict on commercial basis (ie Costa Rica licensing its plants in exchange for 3% of revenue). This is fine in GATT Article XVII . To comply with discrimination of foreign firms depends on whether it is an internal tax or customs charge. Firms that establish themselves inside country of origin cannot be discriminated against. Athough this may limit the ability of developing nations to achieve rent in reality most genetic material has multiple sources and few are now made from unmodified biological.
• 9.2 Patentability - Important for both beneficial biotech and marketable env tech that generate less waste/pollution. TRIPs will have beneficial effect in promoting R&D. Article 27 (2) excludes those that may be hazardous from patentability. 27(3) allows for plants, animals, and biological processes to be excluded but  micro-biological, micro-organisms, and micro-biological processes must be patentable. Although TRIPS does not require patenting of genetically modified animails an experimental animal for the study of breast cacer would be patentable. TRIPS also offers "Breeders rights" . New plants must be protected either by patents or using Inernational union for the protection of new varieties of plants (UPOV). States adhering to UPOV  undertake a mechnism of granting PBR's under domestic laws.TRIPS further supplements by requiring all WTO states to grant protection to PBR's. Biodiversity convention is in line and places not limits to patentability. Does call for the respect of knowledge innovations of local communities.
• 9.3 Access to and transfer of technology - Convention of Biodiversity and TRIPs may come into conflict depending on how you read Article 16 of the convention. TRIPS - free market transfer. Article 28 confers the right of the patent holder. Biodiversity convention - requires priority access to developing nations, preferential terms for such countries, joint R&D efforts.Clinton administratio was very clear in repudiating  and that sharing needed to recognise the IP owner. Could be one way to reconcile - article 20 and 21 of the convention provide for a financial mechanism and financial resources for transfer of technology.
• 9.4 Compulsory licensing - An important question that may arise under the Biodiversity convention is whether a developing country believes its rights are being denied can resort to compulsory licensing. No specific authorisation but does allow for legislative, administrative and policy measures as appropriate to gain access to and transfer of technology. Compolsory licensing would be contolled by TRIPS. Article 30 is a poor option as it specifically refers to patents. Article 31 authorises under highly restrictive circumstances that would make it impractical. Under trips licensing must be remunerated  based on economic value so a developing nation could not get 'concessional and preferrential terms" as in the biodiversity convention. In 2005 a waiver was granted so that developing nations could could import cheaper generics.
• Conclusions - WTO trade commitee has taken some first steps towards clarifying conflicts between protection of the environment and the rules of multilateral trading system by ventilating the issues, marshalling different views and calling for transparency. Need to give specific recognition. Article XX(b) could be ammended.  Also need clear view on environmental taxes esp energy taxes and food saftey. Tuna-dolphin case demonstrate that powerful states cannot enforce unilateral env policies. US ban on tuna imprts showed there is ways to enact unilateralism around the law. There will be no grand solution for this tension - it will be ongoing and should become a continual concern of WTO. THere has been more trannsparency via hybrid state/NGO called IUCN and increased co-operation between WTO and MEA secretariats.

Other readings

Blame  It on the WTO?: A Human Rights Critique By Sarah Joseph