13 November 2020
Trade and Environment: Revisiting Past Debates and Weighing New Options
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The WTO Trade and Environment Week will address issues ranging from the impact of COVID-19 on global trade and fossil fuel subsidy reform to climate change, plastic pollution, and trade and environmental sustainability.

With only a decade remaining to achieve the 2030 Agenda for Sustainable Development and question marks looming over the SDGs’ select targets with a 2020 deadline, we revisit some of the history behind the trade and environment debate.

The Week provides a welcome opportunity to reinvigorate the discussions on the trade and environment nexus and promote policy engagement and research in the area.

Since the earliest days of the World Trade Organization (WTO), one of the most prominent areas of debate has been whether the trading system, as it is currently designed, is able to serve the vast and varied needs of our natural environment. These questions have become more complex over time, as the impacts of climate change have worsened, our fisheries have faced increasing levels of exploitation, biodiversity losses have escalated, and plastic waste pollution has grown, to name but a few examples.

The WTO Trade and Environment Week, being held virtually from 16-20 November, will bring together governments, international organizations, and the wider community working on trade and environment for discussions on many of these issues. The week features a slate of events that span topics ranging from the impact of COVID-19 on global trade to fossil fuel subsidy reform.

Among the sessions included in the agenda are a high-level event by the WTO and the UN Environment Programme (UNEP), several WTO member-led discussions, and two sessions organized by civil society. The International Institute for Sustainable Development (IISD) is leading one of these events, while the other is led by Geneva Trade Platform, UNEP’s Environment and Trade Hub, the Graduate Institute Geneva’s Global Governance Centre, and Chatham House’s Hoffmann Centre for Sustainable Resource Economy. The events are public and have been timed to coincide with the November meeting of the WTO’s Committee on Trade and Environment (CTE) to help inform its deliberations.

New policy processes due to kick off

Many of the Week’s sessions are expected to focus on experience sharing and policy debate. In addition, two new policy “processes” are set to be launched by groups of WTO members.

One such effort targets the issue of plastic pollution, and is led jointly by China and Fiji. The proponents state that they aim “to begin identifying [priorities] of future work” for a new informal process on “how the WTO could contribute to domestic, regional, and global efforts to reduce plastics pollution and transition to more circular and environmentally sustainable plastics trade.” The announcement of the event refers to some examples of where this work could go, flagging transparency and deeper interagency cooperation as options, and encourages the involvement of all WTO members.

Also on the docket is the launch of “structured discussions on trade and environmental sustainability” by a group of WTO members, including Australia, Canada, Costa Rica, the EU, Mexico, New Zealand, Norway, Switzerland, and Chinese Taipei. What these discussions will aim to achieve in practice, who will be involved, and what they will mean for the multilateral trading system (MTS) and its development dimension will be key for environmental and trade watchers alike. The announcement for the launch states that these structured discussions will “allow interested WTO members, as well as non-WTO experts,” such as academics, non-governmental organizations (NGOs), international organizations, and the private sector, “to come together to explore the nexus between trade and environmental sustainability.”

WTO member-led events span a range of topics. Many sessions focus on climate change, including the potential role of e-commerce, along with how trade facilitation could help countries rebuild after climate change-induced natural disasters. There is also a dedicated session on the role of fossil fuel subsidy reform in enabling a more resilient and environmentally-friendly economic system in the post-pandemic years.

In addition to sessions highlighting government-led initiatives, one event asks what can be learned from multi-stakeholder collaborations, such as the Global Plastic Action Partnership led by the World Economic Forum (WEF). Another government-led event aims to discuss how young people view the trade-environment nexus and why.

The delicate balance between trade and environmental governance

The energy and engagement around the trade and environment nexus come at an important milestone for the SDGs. Five years after the world’s governments adopted the Goals, some of the trade-related SDG targets are now facing a 2020 deadline for delivery, including SDG 14.6 linked to a WTO deal on disciplining harmful fisheries subsidies. With only a decade remaining to achieve the 2030 Agenda for Sustainable Development – and question marks looming over the SDGs’ select targets with a 2020 deadline – it is worth revisiting some of the history behind the trade and environment debate and assessing where things currently stand.

When the WTO entered into force in January 1995, the Marrakesh Agreement included in its preamble the notable mention of sustainable development as an objective. In parallel, various agreements within the overall rulebook also referred to environmental objectives and foresaw instances where countries may need to deviate from global trade rules to protect natural resources, under certain conditions.

These newer provisions have since been put through various legal tests under the WTO’s dispute settlement system, with famous examples including the “shrimp-turtle” case (DS58 and DS61), which dealt with a US import ban on shrimp caught in ways that could hurt endangered sea turtles, and the long-standing row between the US and Mexico over Washington’s “dolphin-safe” tuna labeling practices and their implications for Mexican fishers (DS381), which had also been raised under the General Agreement on Tariffs and Trade, which predated the WTO. Other WTO cases tackled the legality of local content requirements involving subsidies that support renewable energy projects. Two related disputes asked whether animal welfare qualified as a “public morals” exception that could be applied under WTO rules (DS400 and DS401).

In practice, using some of the environmental exceptions embedded in trade law can prove difficult. Some of the questions raised over the years include whether the measures used were necessary to achieve their intended objective and whether they led to unfair discrimination among countries.

Questions have also emerged over the potential for incoherence between the Organization’s rulebook and the various multilateral environmental agreements (MEAs) negotiated under other forums, whose topics range from the transport and disposal of hazardous wastes to tropical timber trade. Nearly two dozen of these, according to the WTO, set out specific trade measures for fulfilling the MEA’s objectives. For many years, there were active WTO negotiations to deal with some of the early challenges that the trading system faced in ensuring coherence with these MEAs and their own trade-related provisions. These negotiations considered how to promote greater engagement across the respective secretariats. The WTO’s environmental negotiations also had a market access pillar where governments aimed to reduce or eliminate tariffs and non-tariff barriers on environmental goods and services.

When these environment-related negotiations were launched in 2001 as part of the larger Doha Round of trade talks, the Doha Ministerial Declaration also envisioned the prospect of future negotiations on other environmental issues, such as “the effect of environmental measures on market access, especially in relation to developing countries” and least developed countries (LDCs), along with revisiting the WTO’s intellectual property rules in relation to environmental issues, as well as the issue of environmentally-oriented labelling requirements. Whether these other topics turned into negotiating agenda items depended on the regular Committee on Trade and Environment, which was given four years from when these efforts were launched in 2001 to determine whether to recommend negotiations. Ultimately these topics were not added to the negotiating agenda. 

Learning from a changed landscape

The above-mentioned Doha Round had the objective of reworking the WTO’s rules to address many of the problems that had already become apparent in the institution’s early years, especially its development-related imbalances. The Doha Round has since largely stalled, with the exception of a few negotiating areas, including fisheries subsidies, which is dealt with in the Rules Negotiating Group. This impasse also affected the other environment-focused negotiations in the WTO, though many of the ideas raised there have since inspired developments in other international and regional processes.

Efforts to cut tariffs on environmental goods led to a non-binding commitment under the Asia-Pacific Economic Cooperation (APEC) forum to develop a list of products where tariffs would be cut to 5% or less. Shortly after, several WTO members worked to negotiate an Environmental Goods Agreement (EGA) to eliminate tariffs on a list of products, aiming to extend the benefits to the WTO’s full membership, though that entire process has been on hold since late 2016.

In parallel, countries have sought over decades to develop deeper economic relationships through negotiating regional trade agreements (RTAs). Many of them now feature dedicated chapters on environmental issues, some of which are partly or fully subject to dispute settlement. Some RTAs also include specific references to the Paris Agreement on climate change as an important objective to uphold.

However, many of the environmental challenges that were apparent in the WTO’s early years are still present, and some have proven particularly thorny to resolve. Economic and environmental goals are often phrased in political terms as involving painful trade-offs – even as a growing body of work from multiple quarters is demonstrating that environmental sustainability is not a luxury but an economic necessity. With the various new agreements and governance frameworks emerging in recent years, including the ever-growing web of regional trade agreements and the Paris Agreement, and the growing engagement among many WTO members on these topics, the Week provides a welcome opportunity to reinvigorate the discussions on the trade and environment nexus.

Many of these same issues that WTO members will be raising throughout the Week are also the subject of policy research and engagement efforts at civil society groups, think tanks, private sector entities, and universities, as was shown during the sustainability pillar of the inaugural Geneva Trade Week in late September. As governments explore their options, they will need to draw from the expertise, engagement, and advocacy that have been developed by a wide range of stakeholders in order to achieve robust, environmentally-credible, and development-oriented outcomes. By participating in the coming week’s discussions and beyond, civil society and academia will help WTO members integrate environmental concerns to the fullest possible extent, while providing a valuable reminder of the need to include all stakeholders in these policy-making processes.

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This policy brief was written by Sofía Baliño, Communications and Editorial Manager, Economic Law and Policy, IISD. 

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