WTO, Trade and Environment

1. WTO, Trade and Environment By Badr Zerhdoud IHEID Research Assistant and Executive Course Global Health Diplomacy Course Manager

2. Structure of the workshop • Definition of environment • The historical background of its protection • 1972 Stockholm Conference on Human Environment • 1992 Rio Conference on Environment and Development • Role played by the Dispute Settlement Body (DSB) • Review of some major case-law rendered by the DSB • Practical dimension: 1) Copenhagen consensus 2) Negotiation (simulation)

4. Environment and human activities

5. Definitions of the environment • Oxford English Dictionnary: « the objects or the region surrounding anything ». It would include the features and the products of the natural world and of the human civilization.

6. Approaches to defining the environment vary • Principle 2 of the 1972 Stockholm Declaration on Human Environment: it refers to « the natural resources of earth as including air, water, land, flora and fauna and ecosystems » • 1982 World Charter of Nature: no definition of environment but «need to respect nature through principles applicable to all life forms, habitats, all areas of earth, ecosystems and organisms, land, marine and atmospheric resources »  • 1991 Espoo Convention: environment is defined as in including « human health and safety, flora, fauna, soil air, water, climate, landscape, and historical monuments or other physical structures or the interaction among these factors » • EC Directive 79/117 art.2 (10): Environment comprises the «relationship of human beings with water, air, land and biological forms ».  

7. Historical background of the protection of the environment Can be divided in 4 periods: • XIXth century-1945: Rise of the idea that the industrial process required some limitations on the exploitation of certain natural resources (flora and fauna). Adoptions of: bilateral fisheries treaties (1909 Water Boundaries Treaty between USA and Canada), 1902 Convention for the Protection of birds useful to agriculture, 1911 USA-UK treaty relating to the preservation and protection of fur seals,1933 London Convention on the preservation of fauna and flora in their natural state… • 1945-1972: Creation of international organizations with competence in environmental matters and adoption at regional and global level of conventions in various areas such as: • sources of pollution (oil, nuclear testing), • quality of freshwaters (Moselle, Lake Constance, Lake Leman, Rhine) • conservation of living resources (1959 Antarctic treaty, 1968 African Convention on the conservation of nature and natural resources, 1971 Ramsar convention on the wetlands of international importance)

8. Historical background of the protection of the environment (2) 3) 1972-1992: Setting of a system of co-ordinating responses to international environmental issues through notably UNEP (created in 1972). For the first time, a ban in the international trade of some products ws adopted (1973 CITES Convention) 4) 1992-today: • Period of integrating environment into all activities, in compliance with international environmental obligations • Increase of international jurisprudence (ICJ, WTO Dispute Settlement, ITLOS)

9. Key Environmental dates • 1972 Stockholm Conference on the Human Development Background: In 1968, the General Assembly convoked a world conference on human development. This major conference took place with: • 6000 peoples • 113 States • Representatives of major intergovermental organization • 400 NGOs • 1500 journalists

10. 1972 Stockholm Declaration on the Human Development (1) • Principle 1: Fundamental right of life in an environment of quality • Principles 2 to 7: States that natural resources are not only made of oil and minerals but include as well air, water,earth, fauna & flora. Due to their importance, they should be protected for present and futur generations • Principle 9: Financial & Technical assistance • Principles 10 to 12: International trade and economic consequences of environmental protection

11. 1972 Stockholm Declaration on the Human Development (2) • Principles 13 to 15: Necessity for integrated, coordinated and rational development planning • Principles 18 to 20: Refers to science and technology, exchange of information, teaching ansd information about environmental matters • Principle 22: Call for the development of international law with regard to liability and compensation for victims of pollution • Principle 26: Condemn the use of nuclear weapons

12. 1972 Stockholm Declaration on the Human Development (3) • Outcome: The Stockholm Declaration, adopted 16 June 1972, is the first document in international environmental law to explicitly recognize the right to a healthy environment. • Establishment of the UNEP • Action Plan which led to the adoption of a series of conventions on specific environmental subjects

13. Key Environmental dates (2) 1992 Rio Conference on Environment and Development • Objective: Based on the 1987 Brundtland Report, calling for sustainable development, the Conference aimed at adopting new rules on environmental protection. The North and the South divided in the instruments and on the goals • Background: • 7000 delegates • 115 heads of States or governments • 1400 NGOS • 9000 journalists

14. 1992 Rio Conference on Environment and Development • Principle 2: Sovereign Right to exploit its natural resources pursuant to its own environmental priorities • Principle 12: Sustainable economic system (« States should cooperate to promote a supportive and open international economic system thta would lead to economic growth and sustainbale development in all countries ») • Principle 15: Precautionary approach (« the lack of full scientific certainty shall not be used as a reason for postponing cost effective measures to prevent environmental measures ») • Principle 16: Environmental impact assessment as a national instrument

15. 1992 Rio Conference on Environment and Development • Outcome: • Adoption of the Rio Declaration on the Environment and Development • Adoption of the Agenda 21 (a blueprint for sustainable development) • 2 proposed conventions: • Convention on biodiversity • Convention on climate change

16. World Environmental challenges • Climate change • Air and Water pollution • Deforestation • Desertification • Preservation of biological diversity • Preservation of endangered species

17. Environment and WTO • The WTO does not have a system of rules specifically dealing with the protection of the environment. • The basic tenet is that governments are free to set and enforce their own environmental standards within their territories as far as it is not discriminatory • Therefore………..

18. Environment and WTO • The Preamble of the Marrakesh Agreement establishing WTO states that: « WTO members recognize that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.”

19. Environment and WTO (2) Exceptions to the application of the WTO-GATT Agreement : “ 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: • Article XX (b) deals with measures «necessary to protect human, animal, plant life or health » • Article XX (g) deals with measures « relating to the conservation of exhaustible natural resources » GATS Agreement - Article XIV (b)permits in some cases the suspension of GATS provisions to protect human, animal pr plant life or health

20. Environment and WTO (3) Conditions for the application of Article XX: • Measures are not applied ion a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail • Measures adopted constitute a disguised restriction on international trade

21. Dispute Settlement Body(1) • 1947 GATT agreement: no explicit provision for a formal, juridical dispute settlement • 1952: The contracting parties resorted to the panel procedures which became the standard means of dispute settlement within GATT.

22. Dispute Settlement Body(2) • Article 2.1 of the DSU: Establishes the DSB. In this regard, the DSB shall have the authority to: • Establish panels, • Adopt panel or Appellate Body reports, • Maintain surveillance of implementation of rulings and recommendations, • Authorize suspension of concessions and other obligations under the covered agreements

23. Dispute Settlement Body (3) • Article 4: Consultations (prior to panel dispute settlement) • A Member has 10 days to reply to a request for consultations and 30 days to enter into consultations in good faith • If it fails to comply, the other Member may « proceed directly to request the establishment of a panel » • If consultations fail to resolve the dispute within 60 days, the complaining Member may request the establishment of a panel

24. Dispute Settlement Body (4) • Article 6 and 7: Establishment and terms of reference • Article 8: Composition of panels • Article 13: Amicus • Article 21: Implementation

25. GATT and WTO Case-law • Tuna/Dolphins • Reformulated gasoline • Shrimps/Turtles

26. Tuna/Dolphins 1 case Facts: • Dispute before the GATT in 1991 opposing Mexico to USA • Tuna fish and dolphins were found together in a number of areas including Eastern Tropical around the world, leading to incidental taking of dolphins • Adoption by USA of the 1972 Marine Mammal Protection Act aiming at reducing the incidental accident of dolphins during commercial fishing. It imposed: • General prohibition of taking and the import to USA of marine mammals except where an explicit authorization was given • The Secretary of Commerce to require any nation from which yellow tuna or tuna products were to be exported to USA to certify that it acted to prohibit the import of such products from countries not meeting the MMPA standards • In 1991, USA did adopt an embargo against Mexican tuna based on Pelly Amendment which gave the President discretionary authority to order a prohibition of imports. • In this respect, Mexico complained that US embargo did affect its tuna exports.

27. Tuna/Dolphins 1case • The Panel held that: « A contracting party may not restrict imports of a product merely because it originates in a country with environmental policies different from its own (…) If the contracting parties were to permit import restrictions in response to differences in environmental policies under the General Agreement, they would need to impose limits on the range of policy differences justifying such responses and to develop criteria so as to prevent abuse ». • In the light of Article XX(b), the word « necessity » is meant the USA would have to show that it had exhausted all options less restrictive of trade before resorting to imports. Besides, the Panel noted that the « possibility of international cooperation with respect to dolphin conservation was an option thta USA did not exhaust ». • Thus, the MMPA was contrary to article XI WTO-GATT agreement and was not justitied under article XX (b) and (g). But Mexico and USA finally agreed to resolve the dispute throuhg the diplomatic process

28. Reformulated Gasoline case (1) Facts: • USA adopted an environmental legislation with regard to conventional and reformulated gasoline sold in US territory, so as to conform to a minimum level of cleanness. • The baseline of cleanness was determined on a refinery-specific, individual basis or on the basis of average 1990 Us gasoline quality, depending if it was domestic refiner, an importer or a foreign refinery • Brazil and Venezuela challenged the US requirements arguing that the differential treatment constituted a breach of the national treatment • USA invoked the article XX (b) and (g) to justify its national measures

29. Reformulated Gasoline case (2) • The Panel held that: US did not demonstrate that the method of calculation was not the least-restrictive means for achieving its environmental objectives and could have achieved its clean air by simply applying the statutory baseline for both domestic and imported gasoline. • The Appelate Body held that US did not explain why its concerns about verification and compliance in the case of foreign refineries could not be resolved by cooperation. Besides, by imposing statutory requirements on imported gasoline, it indicated a disguised restriction to international trade • Scope of this decision: Article XX analysis must proceed in two steps:1) provisional characterization of the measure falling in one or more of the specific exception in paragraph a-j 2) further appraisal of the same measure under the criteria of the chapeau

30. Reformulated Gasoline case (3) • The interpretation of the Art.XX chapeau is also relevant: « The chapeau is animated by the principle that while the exceptions of article XX may be invoked as a matter of legal right, they should not be applied so as to frustrate or defeat the legal obligations of the holder of the right under the substantive rules of the General Agreement. If those exceptions are not to be abused or misused, in other words, the measures falling within the particular exceptions must be applied reasonably, with due regard both to the legal duties of the party claiming the exception and the legal rights of the other parties concerned ».

31. Shrimp/Turtle case Facts: • In 1987, the U.S Congress issued regulation requiring to all the US flag shrimp trawlers in the Gulf of Mexico and Atlantic Ocean to use « turtle excluder devices » so as to protect sea turtles, included in the 1973 CITES Convention. • In 1989, the US Congress an amendment calling on the Secretary of Sate to negotiate with other nations for the protection of sea turtles, providing that in May 91 any import of shrimps from a country that did not meet the US standards would be prohibited through embargo. • India, Pékistan, Malaysia and Thailand who did comply with US regulations bright a complaint, alleging the violation of Article XI • In May 1998, the panel concluded that the US import on shrimp products was not consistent with Article XI and not justified by article XX (b) and (g). By vir • tue of the DSU, USA did appeal on the ground of « conservation of exhaustible natural resources ».

32. Shrimp/Turtle case • Before the Appelate Body, the USA tried to argue that the measure adopted was not unjustifiable discrimination in the light of article XX and indicated that « it is legal error to jump from the observation that the GATT 1994 is a trade agreement to the conclusion that trade concerns must prevail over all other concerns in all situations ». • The Appelate Body held : «If every WTO Member were free to pursue its own trade policy solutions to what it perceives to be environmental concerns, the multilateral trade system would cease to exist » • It then recognized that USA did violate article XX by unilaterally developing a trade policy . • Scope of this decision: It did interprete the concept of exhaustible natural resources holding that « living species, though in principle capable of reproduction, are in certain circumstances susceptible of depletion, exhaustion, and even extinction because of human activities ». 

33. Copenhagen consensus • Please select according to you the three major challenges for the international community by ranking them from the most important • Lack of education, living conditions of children, conflicts, living condition of women, hunger and malnutrition, money laundering, population of migration, vulnerability to natural disasters, land degradation, drugs, unsafe water and lack of sanitation, air pollution, terrorism, financial instability, deforestation, diseases, arms proliferation, climate change, subsidies and trade barriers.

34. Negotiation simulation General temperature levels have increased significantly causing catastrophic ecological effects including the melting of the ice shelf in Antartica. Aware of such an apocalyptic situation, the UN and some major technical agencies (UNEP, WMO…) have convened an extraordinary session in New York and are calling on the governments of all nations to adopt a political instrument creating stringent obligations with regard to climate change and human activities. Each government will be represented by either a Prime Minister or President according to their respective constitutional rules, along with the Minister of Environment and sometimes by the Foreign Minister. In other words countries will be represented at the highest level. Owing to its exceptional structure, the EU will be represented by the President of the European Commission (Jose Manuel Barroso), the President of the European Council (Mr Sarkozy) and Mr CFSP (Common Foreign and Security Policy: Javier Solana)

35. Negotiation simulation List of countries: Brazil, USA, Canada, EU, Russia, China, Japan, Indonesia, Nigeria, Saudi Arabia, South Africa, Maldives, India. Steps (suggested) to be followed: -Identify the problems and their respective cause -Defend the national interest and build possible coalitions - Suggest the possible means (technical, financial, political) -Draft a political declaration with possibly a call for specific future instruments

36. simulation Ladies and Gentlemen, the fate of the mankind depends on this negotiation. Good luck!!