Trade and Environment

Dr. M.P Chengappa

Importance of environment in Trade

Without environmental safeguards, trade may Couse environmental harm by promoting economic growth that results in the unsustainable consumption of natural resources and waste production. Trade rules and trade liberalization often entail market access agreements that can be used to override environmental regulations unless appropriate environmental protections are build into the structure of the trade system. Trade restrictions should be available as leverage to promote world wide environmental protection, particularly to address global or trans boundary environmental problems and to reinforce international environmental agreement.

The environmental impact of trade

Trade may make a significant positive contribution by providing the opportunity for the global spread of environmental technologies and services to address particular environmental problems. Trade may foster economic efficiency and growth, raising incomes and providing more money for environmental protection. If there is marker or intervention failure, however, trade may lead to degradation and depletion of natural resources. The market failures occur when markets do not reflect environmental values. Intervention failure occurs when public policies do not correct for, create or exacerbate market failures. Such failures can distort the incentives for protecting the environment.

The Aspects of WTO and Environment

Environment and trade policies should be mutually supportive . An open multilateral trading system makes possible a more efficient allocation and use of resources and thereby contributes to an increase in production and income and to lessening demands on the environment. It thus provides additional resources needed for economic growth and improved environmental protection. A sound environment, on the other hand provides the ecological and other resources needed to sustain growth and underpin continuing expansion of trade
Trade and Environment both seek to regulate Economic Activity.

 Article XX of the GATT prohibits the use of quantitative restrictions such as quotas, import and export licenses. However, there is a general exceptions to protect human, animal or plant life or health as well as measures designed to conserve exhaustible natural resources, provide 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.

What is trade measure?

When a trade measures is used to protect the environment it is known as an environmental trade measures. Among the most common trade measures are quantitative restrictions, procedures based on information and consent requirements, and labeling requirements. Import or export quantitative restrictions are employed basically to eliminate supply and demand of products with direct negative effects on the environment.

 The GATT exceptional provisions represent an attempt to strike a balance between permitting the regulation of trade to promote non-commercial goals in certain recognized areas, such as health and environment.

The committee on Trade and Environment

Need for rules to enhance positive interaction between
trade and environment with special consideration to needs of developing countries Avoidance of protectionist trade measures and to establish a responsive multilateral trading system with balances from Rio and Agenda 21 Art. XX of GATT: nothing shall prevent a state from adopting or enforcing any trade related measure if
It is necessary to protect human, animal or plant life or health Relating to conservation of exhaustible natural resources, if such measures are made effective in conjunction with restriction on domestic production or consumption

Constitution and structure of the committee on Trade and Environment

The Committee on Trade and Environment is composed of the entire membership of the WTO. Mandate of the Committee on Trade and Environment the primary aim of the committee is to establish a constructive relationship between trade and environment. To identify the relationship between trade and measures and environmental measures, in order to promote sustainable development. To make appropriate recommendations with regard to the multilateral trading system.

Multilateral Environmental Agreement

MEAs allow imposition of trade barriers whereas the WTO does not Labeling requirements for environmental purposes- eco labeling is the tool to provide necessary information to the environment conscious consumers on products that have less environmental impact than other similar products.

Agreement on Technical Barriers to Trade

The TBT Agreement respects standards and regulations of all countries provided they stand to protect human, animal or plant life or health and not as a pretext to promote protectionism.

Preamble of WTO
The WTO is the mechanism for implementing the GATT agreement. Only International Organization dealing with global rules of trade between nations Preamble speaks about the use of worlds resources: in accordance with the objective of sustainable development, seeking both to protect and preserve the environment.. a manner consistent with their respective needs and concerns at different levels of economic development

The Agreement on sanitary and phytosanitary standards

This agreement deals with standards necessary to protect humans, animals and plants from certain hazards associated with associated with the movement of plants, animals and foodstuffs in international trade. SPS measures refers to any measure, procedure, requirement or regulation, taken by governments to protect human, animal, or plant life or health from the risks arising from the spread of pests, diseases, disease causing organisms or from additives, toxins, or contaminates fond in food, beverages, or feedsstuffs.

Trade Related aspects of Intellectual Property Rights (TRIPS) and the Environment .
The protection of enforcement of Intellectual Property Rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare and to balance of rights and obligation. Article 27 allows the exclusion from patentability of inventions, which is necessary to protect public order or morality, including to avoid serious prejudice to the environment. Article 27(3) (b) requires that members to provide for the

 Provide for the protection of plant varieties and also deals with the relationship between intellectual property protection and the protection of biodiversity. TRIPs and the Transfer of Environment friendly technology: Trips plays a vital role in facilitating access to and transfer of environmentally sound technology and products. Patents are considered to be one of the important elements in contributing to the environment and its preservation. Like for example patents concerning inventions help in the preservation of the Ozone layer, less use of energy, to grow plants so as to absorb more carbon dioxide, to reduce the impact of the obsolete technology on the environment.

 Effective implementation of the TRIPS would foster innovations, including environmentally sound technology and products and ultimately promote sustainable development ad use of the resources of the earth.

WTO and Agriculture

The birth of the Agreement on Agriculture was from the Uruguay Round of multilateral trade negotiations. Salient Features of the AoA Market Access- non tariff barriers such as quotas, minimum support price to go Domestic support and Export subsidies- Banana case- EU alloted 7./. Of its market to African Colonies under Lome treaty, it was challenged by US the preferential treatment was found to be discriminatory by the WTO.

Cases at the WTO Dispute Settlement Body or Appellate Body

Tuna Dolphins case US v Canada/Mexico US imposed import restriction on import of tuna products from Canada, as a retaliation for, Canada seizing 19 fishing Vessels in Canadian waters. It imposed Quantitative restriction on the import of tuna fishes from Mexico. WTO panel held this decision as unreasonable of Art. XX
disguised restriction on international trade cannot be imposed unless it is justified and necessary to protect human, animal or plant life or health; or in relation to conservation of natural resources

The Asbestos case

In 1996, the French Government adopted a decree banning the use and import of asbestos and products containing asbestos, for the purposes of protecting the consumers, workers, and the manufacturers, on domestic market. The authorities justified their ban on public interest and health. Canada which was a major exporter of asbestos to France complained that due to this ban Canada had lost 4000 jobs and argued that asbestos posed no great threat to human life and health.[Art. XX [b]

The Shrimp Products [Turtle]case

US banned shrimp from countries like India, Malaysia, Thailand etc. Justified the nonuse of TED in catching shrimp. Turtles were endangered species under CITES and Art XX of GATT Justified under Endangered Species Act 1973 Appellate Body held the ban to be arbitrary and discriminatory

Outcome of the turtle case

There is a nexus between protection of global common and trade restriction under WTO. Thus USA may claim extra territoriality in cases of such ban for the protection of shrimp outside USA. Extra territorial trade measures must relate to domestic measures to conserve exhaustible natural resources Unilateral trade sanctions are permissible instruments to coerce members of the WTO to change their domestic policies Trade restriction can be imposed on a product, if the way it is processed has deleterious environmental consequences as determined by the importer International environmental conventions support the exceptions within Art XX.

Cigarette Import Ban in Thailand

Thailand banned imported US cigarettes but not domestic cigarettes The U.S. Cigarette Exporters Association (CEA) alleged that the target countries restrictive trade policies with respect to tobacco constitute unfair trade practices. CEA filed an unfair trade practices petition against Thailand. Thai officials maintained that the prohibition of foreign cigarettes was a legitimate measure necessary to protect the health of Thai Citizens. GATT panel found that Thailand's import ban could not be justified under Art. XX (b) of the GATT and decided infavor of the United States.

The Beef hormone case

European Union implemented a ban on imports of red meat from animals treated with six growth promotants, both natural and synthetic.( Hormone treated beef). 90 percent of U.S. beef is produced with the aid of growth hormones. United States challenged Europes right to ban U.S. beef. WTO Panel ruled that the beef ban was not based on scientific evidence, as required under international trade rules. Hence, EU ban was inconsistent with the principles of the SPS Agreement. EU appealed this findings. The ruling of the panel was firmly upheld on appeal stating EU has a right under international trade law.