Environment and Trade:
A Framework for Moving Forward in the WTO

Gary P. Sampson
February 1999

Environmentalists and trade advocates have clashed frequently in recent years.

Environmentalists argue that international trade rules restrict the legitimate use of trade measures to enforce environmental standards internationally and undermine environmental standards at home. Trade officials argue that trade measures are not the appropriate tools to deal with environmental problems, nor is the World Trade Organization (WTO) the appropriate institution. They contend that environmentalists need to put their own house in order rather than resort to trade measures to achieve their objectives.

Conflict between the environmental and trade policy communities threatens the goals of both. Environmental groups are able to mobilize significant public opposition to new trade liberalization initiatives. Yet disputes between trade and environmental stakeholders also divert resources from promising joint efforts to protect the environment.

Conflict between environmental protection and the rules and institutions of the trading system is not inevitable. Indeed, the two can play mutually supportive roles. To explore opportunities for mutual gain, the member countries of the World Trade Organization (WTO) will convene a "High Level Symposium" for government and civil society representatives in March. The Symposium will influence the agenda of the WTO's Third Ministerial, the late- 1999 meeting that is expected to set the agenda for a new round of global trade negotiations. The international community will therefore have several opportunities over the next year to begin to reconcile trade and environmental policy goals.

Productive multilateral discussions require the identification of realistic reform proposals on the central issues of the trade and environment debate. But before they address any proposals, it would be helpful for the trade and environmental communities to reach a common understanding of what will be needed to achieve certain kinds of reforms — an agreed framework for action.

A Framework for Action

A useful way to think about efforts to resolve trade and environment conflicts is to organize proposals into groups defined by the necessary degree of government involvement or negotiation. On this basis, one can envisage three categories of initiatives:

• First, measures for which there may be sufficient informal support from WTO Members for the Director-General and the Secretariat to act without formal decision-taking by Members. In cases like these, consultation would be a necessary and sufficient requirement for action.
• Second, initiatives that would require the collective approval of Members, but not necessarily changes in formal rules or obligations. In these cases, consultation would be a necessary but insufficient requirement.
• Finally, objectives that could only be achieved through formal changes in rules, which would probably require a comprehensive trade round.

By helping establish a shard understanding of the steps necessary to achieve certain reforms, this framework can facilitate cooperation and build confidence between the trade and environmental communities.

Critical Trade and Environment Issues

Several critical trade and environment issues must be addressed within this framework.

Transparency and Public Access. The WTO has taken several recent steps to broaden the availability of documents and intensify dialogue with civil society. Under current rules, however, WTO Members still select documents for circulation on a case-by-case basis. This policy is needlessly restrictive. Subject to limited exceptions, all submissions by WTO Members, Secretariat background notes, minutes of meetings, agendas, and other documents should be circulated immediately as unrestricted documents. Exceptions would include documents that could compromise a country's negotiating position, contain proprietary information, or sensitive data on a country's economic circumstances. Documents cleared for public access under this more liberal standard could be quickly and inexpensively circulated through the WTO's website.

Dialogue between the WTO and civil society has improved in recent years, but interaction between the two could still be more productive. During future WTO symposia, for NGOs, for example, the WTO Secretariat could organize government-civil society working groups that would address specific trade and environment issues. Funding from the WTO's regular budget should be allocated both for the WTO's NGO symposia and for the participation of developing country officials in the WTO's new regional seminars on trade and environment issues, in which representatives of regional NGOs participate. Finally, the WTO General Council should examine NGO proposals for a "Standing Conference" on trade and environment issues.

Trade Liberalization and the Environment. Eliminating trade restrictions and distortions can produce "win-win" outcomes in many sectors: environmental benefits and improved market access. New Zealand and the United States, for example, have urged the WTO's Committee on Trade and Environment to consider the potential environmental benefits of removing trade-distorting subsidies in the fisheries sector. Agricultural subsidies and market access restrictions distort trade and exacerbate over-production and other environmental problems.

Governments, with the support of NGOs, need to do more to identify sectors in which the removal of trade distortions would simultaneously benefit trade and the environment. Once promising targets have been identified, governments have a responsibility to put them on the negotiating agenda.

Product-and Process-Related Environmental Standards. WTO rules permit Members to regulate imports on the basis of their essential characteristics, but they prohibit discrimination against imports on the basis of how they were produced. Yet this kind of "process-related" discrimination lies at the heart of much domestic environmental regulation, and many environmentalists see no reason why WTO rules should restrict its use internationally.

At present, there is no sign of agreement on these issues, which pose fundamental challenges for the WTO and its Members. These matters urgently need to be tackled in the near term, perhaps in the next global trade round.

Multilateral Environmental Agreements (MEAs) and the WTO. Several countries have urged the WTO to address the possibility that measures inconsistent with WTO rules could be applied under multilateral environmental agreements (MEAs). Two potential remedies would be to amend certain WTO Agreements or to draft an "Understanding on Interpretation." An amendment to the exception provisions of GATT Article XX, for example, could accommodate MEA measures that might otherwise contravene WTO rules. Alternatively, Members could, in exceptional circumstances, be permitted to seek the approval of WTO Members for a waiver of a WTO obligation in order to meet an MEA obligation.

Dispute Settlement. An unexpectedly large case-load threatens the viability of high-quality adjudication in the WTO's dispute-settlement system. Environmentalists and others also object to the lack of transparency in dispute proceedings.

An alternative consultative mechanism could address both concerns. Under this scenario, subject to the approval of the Member parties, environmental and other disputes could be debated in a fully open manner, led by a moderator nominated by the Director-General. Relevant facts could be put on the table by all interested parties, governmental and non-governmental. If these alternative consultations did not work, governments would still have recourse to the formal dispute process. Transparency would also be improved by a more rapid dissemination of full panel and Appellate Body reports once their "Findings and Conclusions" sections have been made available in all three WTO working languages.

Conclusion

Other analysts might highlight different issues from the five covered above. The objective here is not to be comprehensive, but to offer a framework for thinking about policy initiatives and to propose measures on which the environmental and trade communities can move forward relatively quickly. Progress on those proposals will build the necessary confidence to take on even more difficult challenges.

Gary P. Sampson is Visiting Academic in the Department of International Relations of the London School of Economics. He is also Professorial Fellow at the Centre for International Trade, Melbourne Business School, University of Melbourne. Professor Sampson teaches on a regular basis at the European Institute of Business Administration (INSEAD) in Fontainebleau, France. For 12 years Sampson served as director of a number of GATT/WTO divisions, most recently as Director of the WTO's Trade and Environment Division.

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