Relationship between WTO and Specific Trade Obligations of the MEA: Developing Country Perspective

The Doha Ministerial Declaration, in paragraph 31(i), mandates negotiations on the relationship between existing WTO rules and specific trade obligations (STOs) set out in Mulitlateral Environmental Agreements (MEAs) aimed at enhancing the mutual supportiveness of trade and environment. How can this mandate be approached from a developing country perspective, bearing in mind the development dimension and the fact that a good number of developing countries were demanders for STOs in various MEAs, in particular those dealing with hazardous substances?

First, from a developing countries' perspective, it is inadvisable that discussions and negotiations remain narrowly focused on STOs, rather than on STOs and positive/supportive measures. Developing countries need to stress that trade measures generally are an integral part of a package of measures. Moreover, there is a certain balance and interplay between the measures of the package. Restrictive trade measures can be accompanied by supportive measures or enhanced flexibility elements that make the whole package acceptable to a developing country party. If properly used, the balance and interplay between the various measures can also help address the enhanced differentiation among developing country parties. In short, developing countries should advocate a practical way forward that pays due attention to the development dimension of the package of measures taken by relevant MEAs. 

Second, the heterogeneous character and objectives of developing countries are best taken into account by a "bottom-up" analysis of practical experience with specific trade obligations in concerned MEAs. This will allow the identification of real areas of conflict between both systems, rather than discussing theoretical or hypothetical areas of tension. The "bottom-up" approach will not rule out that certain systemic issues might arise from the analysis, as advocated by the EU and Switzerland, for instance. 

Third, although it is important to clearly define the term "specific trade obligations", developing countries should avoid the pitfall of a too legalistic debate. It is in the interest of developing countries that STOs in MEAs leave little discretion to parties for unilateral measures that are taken "pursuant to MEAs". This would suggest that STO's should not include those that are discretionary. On the other hand, the UNFCCC and its Kyoto Protocol, which do not provide for STOs, but use trade measures as "obligation de résultat", would therefore fall outside the mandate of paragraph 31(i), although these accords might have the most important trade implications of all MEAs (e.g. through energy performance criteria/requirements, energy taxes etc.). It is therefore advisable that developing countries advocate the introduction of some discipline for discretionary trade measures taken pursuant to MEAs. This could be achieved by introducing text in the negotiated outcome that would emphasize that "WTO advocates the scope for countries to implement sound environmental measures, which are consistent with the objectives of MEAs while adhering to established WTO rules and obligations." It is likely that such language would ultimately find its way into the appropriate environmental accords. 

Fourth, in MEAs, developing countries should insist on clear definitions of STOs alongside the use of objective, science-based criteria for their use. This will be important for assuring effectiveness and efficiency of the STOs in MEAs and avoiding the risk that such measures are regarded as being arbitrary and/or unjustifiably discriminatory or a disguised form of protectionism.

Fifth, it seems logical to focus the next phase of the analysis in the WTO negotiations on an in-depth review of the clarity, effectiveness, efficiency and flexibility of the STOs in a small number of concerned MEAs. Such analysis should aim at identifying those STOs that lack clarity, are inflexible, ineffective and/or highly inefficient and thus might not be compatible with WTO rules. Once such list was established, it could be brought to the attention of MEA Parties. These should be encouraged to form a working group of environment and trade experts under the aegis of the respective MEA, which studies the list of STOs that might give rise to tension and makes recommendations on their improvement and/or the introduction of supportive measures or flexibility elements. 

The list of such STOs is likely to be small. Based on preliminary analysis conducted by UNCTAD and confirmed by similar research by OECD, only the Basel Convention has a number of STOs that might be in conflict with WTO rules. Under CITES, only the use of STOs as enforcement mechanism seems to be an area of tension. 

Such approach is unlikely to be objected to by MEAs, because it's decisive discussion would remain under the control of MEA constituencies. It can also safeguard that the delicate balance between rights and obligations contained in MEAs is maintained. It will require, however, a sincere and open attitude to objectively reviewing the clarity, effectiveness and efficiency as well as flexibility of the concerned trade measures and to consider WTO principles such as least trade restrictive practices. It is important in this regard that individual MEAs can demonstrate that (i) they are effectively dealing with the relevant environmental threat, using trade measures that are the least restrictive to achieve the policy objective; (ii) they are a genuine platform for consensus; and (iii) that they have an effective dispute settlement mechanism.

The suggested approach has much affinity with the pre-Doha proposal of New Zealand to the CTE on an informal consultative mechanism that enjoyed broad support. The proposal by New Zealand emphasizes that when Parties to an MEA have committed themselves to the MEA, there should be no reason on the grounds of international law that those countries would object to the trade measures pursuant to the MEA. In New Zealand's view, potential conflicts between WTO provisions and MEAs are limited; they are only likely to arise where the provisions of an MEA are unclear as to the action they mandate, even among Parties to it, or in situations, where the Parties to an MEA are applying trade measures against a non-Party (see WTO documents WT/CTE/W/162 and WT/CTE/W/180). According to New Zealand, the likelihood of difficulties between the WTO Agreements and MEAs is not to be exaggerated. If difficulties arise, however, New Zealand proposes to use a "voluntary consultative mechanism" that could be deployed on an ad hoc basis to assess whether the concerned trade measure is the most effective instrument available to address the environmental problem at issue. Such voluntary consultative mechanism may facilitate an improved understanding of different points of view; allow for the identification of a range of different policy options; maximize the potential for an agreed solution; minimize conflicts between Parties on trade and environment related policies, while avoiding inefficient environmental and economic outcomes at the same time (see WTO document WT/CTE/W/180). 

While the proposal of New Zealand is still not fully elaborated, before the Doha Ministerial Meeting it had quickly gained ground in the CTE because of its simplicity and the fact that it does not involve a change to WTO rules. The main elements of the proposal can be summarized as follows: 

- Ensuring consultation between countries prior to the imposition of a trade measure to achieve the objective of an MEA. The first-best policy options should be pursued, these will always be the least trade-distortive options that deal with the source of the problem.
- Creating an informal voluntary consultative mechanism that parties to MEAs enter into. MEA negotiators may consider building such mechanisms into new MEAs.
- Eventually involving "significant non-parties" into these consultations.

From a procedural point of view, the approach proposed in this paper does not aim at another comprehensive analytical exercise, rather the CTE could commission short papers on the Basel Convention, CITES, and the Montreal Protocol, and if judged opportune, also on the Biosafety Protocol, the PIC and POPs Conventions. These three or six short reports would then form the basis for a debate in the CTE that identifies those STOs that may become or already are a source of tension with WTO rules. Having identified these STOs will allow a very pointed discussion in the CTE probably leading to two options:
· Whether WTO members want to bring to the attention of the concerned MEAs that a specific trade measure might generate trade tensions and that the proper MEA bodies may wish to hold consultations, including key stakeholders and trade experts, on the concerned trade measures and discuss ways of enhancing their flexibility, including through the use of supportive measures; or
· Whether there is indeed (the not very likely situation of) a larger number of STOs with potential tensions in the studied MEAs that cannot be individually addressed by MEAs and for which a generic solution within the WTO context would have to be found.

Finally, although not required for the further negotiations on the subject, the discussion above outlines the urgent need for developing countries to improve policy coherence at national level regarding the need, shape and attached criteria for STOs and other trade measures in MEAs. Environment and trade ministries, in consultation with national stakeholders, need to develop a consistent agenda on the subject that reflects the developmental priorities and discusses WTO-compatibility issues as an integral part.