Trade and Environment

1. Trade and Environment Conceptual Issues Trade and environment issues can be divided into two broad categories • the impact of changes in trading rules and liberalisation on the environment Environmental damage is associated with the production and consumption of goods. International trade alters production and consumption, thus affecting the environment. • the impact of changes in environmental regulations on international trade prospects. The use of policy instruments (both regulatory and economic instruments) to protect the environment can either affect international trade and act as non-tariff barriers to trade, or create opportunities for environmentally-sound products because of an increased awareness of environmental problems.

2. Trade and Environment Major Issues The main issue surrounding the trade-environment linkage is the concern, by both developed and developing countries, that environmental issues are being used in a strategic manner to capture or protect markets.

3. Developing Countries Position • Fear that developed countries use environmentally related trade policies to protect their own industry • Fear that developed countries use environmentally related trade policies to impose environmental preferences

4. Developed Countries Position • Fear that developing countries strategically ignore environment to promote exports • Fear that developing countries environmental policies threaten global commons

5. These fears are mutually supportive For example, the developed countries fear of strategic behaviour on the part of developing countries is complementary to the developing countries fear of protectionism on the part of the developed countries. The same holds for the fear of the global commons and the imposition of foreign preferences. The difference in priorities towards environmental problems has been one of the major reasons for the present friction in international trade.

6. Trade has served as the driving force behind much of a country's economic success. With a marked increase in interest on trade and environmental matters globally, developed as well as developing countries are aware of the imperative need to restore environmentally sound and sustainable growth, but at the same time they are concern that trade measures could be used as new forms of non-tariff barriers (NTB) to undermine the competitiveness of their export-led growth.

19. The Committee on Trade and Environment (CTE) • established by the WTO General Council in January 1995. The CTE mandate and terms of reference are contained in the Marrakesh Ministerial Decision on Trade and Environment of 15 April 1994.

20. The terms of reference of the CTE include: • to identify the relationship between trade measures and environmental measures to promote sustainable development. • to make appropriate recommendations on whether any modifications of the provisions of multilateral trading system are required, which must be compatible with openness, equitability and nondiscriminatory nature of the system. In particular, the recommendations must consider:

21. the need for rules to enhance positive interaction between trade and environmental measures with special consideration to the needs of (least developed) developing countries; • the avoidance of protectionist trade measures, and the adherence to effective multilateral disciplines to ensure responsiveness of the multilateral system to environmental objectives set forth in Agenda 21 and the Rio Declaration, in particular Principle 12; • surveillance of • trade measures used for environmental purposes, • trade-related aspects of environmental measures which have significant trade effects, and • effective implementation of the multilateral disciplines governing those measures.

22. The Work of CTE Ten items were listed in the Marrakesh Ministerial Decision on Trade and Environment which were taken up by CTE.

23. The Work of CTE • The relationship between the provisions of the multilateral trading system and trade measures for environmental purposes, including those pursuant to MEAs; • The relationship between environmental policies relevant to trade and environmental measures with significant trade effects and the provisions of the multilateral trading system;

24. The Work of CTE • The relationship between the provisions of the multilateral trading system and • i. charges and taxes for environmental purposes • ii. requirements for environmental purposes relating to products, including standards and technical regulations, packaging, labeling and recycling;

25. The Work of CTE • The provisions of the multilateral trading system with respect to the transparency of • i. trade measures used for environmental purposes, and • ii. environmental measures and requirements which have significant trade effects;

26. The Work of CTE • The relationship between the dispute settlement mechanisms in the multilateral trading system and those found in MEAs; • The effect of environmental measures on market access, especially in relation to developing countries (least developed, in particular), and environmental benefits of removing trade restrictions and distortions;

27. The Work of CTE • The issue of exports of domestically prohibited goods (DPGs); • The relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS);

28. The Work of CTE • The work programme envisaged in the Decision on Trade in Services and the Environment; • Input to the relevant bodies of appropriate arrangements for relations with inter-governmental organizations and NGOs referred to in Article V of the WTO.

29. The Work of CTE The CTE has concentrated its efforts in the analysis of trade measures for environmental purposes (Item 1) and environmental policies and measures (Item 2). The CTE's work has helped improve the trade community's understanding of the use of trade measures applied pursuant to MEAs, and has facilitated dialogue with environmental policymakers at the national and international levels.