University of Amsterdam
Faculty of Law
Master thesis
International and European Law: Public International Law
‘Environment and trade: RTAs as a source of inspiration for the WTO legal system’
R.L.E. van Eijndhoven
International and European Law: Public International Law
Supervisor: Dr. I. Venzke
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Abstract
This thesis examines whether environmental provisions in RTAs can be a source of inspiration for the legal texts of the WTO agreements. The question of whether trade and environment are mutually supportive or conflicting concepts has sparked a heated debate over the past decades. The answer to the question remains debatable and to date no consensus has been reached among the free trade advocates and environmentalists. Despite all-round increased attention on this topic, environmental concerns have until now only played a marginal role in the legal context of the WTO. Now that the Doha Negotiations have failed, it is argued that an alternative route to achieve consensus among the WTO members is necessary. This thesis argues that the environmental provisions in the RTAs could shed a first light on how states legally try to solve the tension between trade and the environment. Through a comparative exploratory research of the WTO agreements and 33 RTAs, it was found that none of the identified environmental provisions are supported by a large enough number of WTO members to justify the claim that consensus will be immediately reached in relation to this topic. However, it is maintained that the provisions on environmental exchange of information (supported by 88 WTO members) and the provisions governing the prevalence of MEA provisions in case of conflict with WTO obligations (supported by 48 WTO members) are nevertheless specific and tangible solutions that can be a source of inspiration for the WTO legal texts of the WTO agreements.
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Table of contents
Abstract ... 2 Abbreviations ... 5 1: Introduction ... 6 1.1. Methodology ... 72: The trade-environment debate ... 10
2.1. Historical background ... 10
2.2 The debate: trade and the environment ... 11
2.3. The Doha Negotiations ... 12
2.4. Conclusion ... 13
3: The relationship between RTAs and the WTO legal system ... 14
3.1. The VCLT ... 14
3.2. RTA provisions in WTO Agreements ... 15
3.3. RTAs and environmental provisions ... 17
3.4. Conclusion ... 17
4: the WTO legal system: environmental provisions ... 18
4.1. The objective of the WTO legal system ... 18
4.2. The GATT 1994: The environmental exception clauses ... 19
4.2.2 Necessity requirement ... 20
4.2.3. Chapeau of article XX GATT 1994 ... 21
4.3. The Agreement on Technical Barriers to Trade (TBT agreement) ... 21
4.4. The Agreement on the application of sanitary and phytosanitary measures (SPS Agreement) 22 4.5. The Agreement on Agriculture ... 22
4.6. The Agreement on Subsidies and Countervailing Measures (SCM Agreement) ... 23
4.9. The General Agreement on Trade in Services (GATS) ... 24
4.10. Conclusion ... 24
5: Environmental Provisions in Regional Trade Agreements. ... 26
5.1. Analysis of the environmental provisions in RTAs... 26
5.2.1. Environmental cooperation ... 26
5.2.2 The Relationship between RTAs and MEAS ... 29
5.2.3. Upholding of Environmental laws ... 30
5.2.4. Transparency and right to information ... 31
5.3. Conclusion ... 31
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6.1. Demarcation of this research ... 35
6.2. Further research ... 36
Annexes. ... 37
Table 1. Overview of environmental provisions in the WTO legal system. ... 37
Table 2: Main types of environmental provisions in RTAs. ... 38
Table 3. Comparison of WTO and RTA provisions ... 40
Table 4. Identified environmental provisions in selected RTAs ... 43
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Abbreviations
CARICOM Caribbean Community and Common Market
CEMAC Economic and Monetary Community of Central
Africa
CTE Committee on Trade and Environment
ECOWAS Economic Community of West African States
GATT General Agreement on Tariffs and Trade
GATS General Agreement on Tariffs and Services
MEA Multilateral Environmental Agreement
NAFTA North Atlantic Free Trade Agreement
PPMS Process and Production Methods
RTA Regional Trade Agreement
SADC Southern African Development Community
SCM Agreement Agreement on Subsidies and Countervailing Measures
SPS Agreement Agreement on the Application of Sanitary and
Phytosanitary Measures
TBT Agreement Technical Barriers to Trade Agreement
TRIPS Agreement The Agreement on Trade-Related Aspects of
Intellectual Property Rights
VCLT Vienna Convention on the Law of Treaties
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1: Introduction
The question of whether trade and environment are mutually supportive or conflicting concepts has sparked a heated debate over the past decades. The answer to the question remains debatable and to date no consensus has been reached on what the implications are for the international legal trade regime. Despite the all-round increased attention for this topic, environmental concerns have until now only played a marginal role in the agreements of the World Trade Organisation (WTO). Clauses to protect the environment are rarely existing in these agreements and new attempts have been made to incorporate new type of environmental provisions through the multilateral Doha negotiations of the WTO. However, since 2014 these negotiations have come to a halt while Regional Trade Agreements (RTAs) have increased in number over the past few years. Within these RTAs, the number of
environmental provisions have also risen and seem to become of increasing importance for negotiated regional agreements.
Despite the fact that the answer to the debated question above has not been decided, the proliferation of environmental provisions in RTAs gives the impression that states feel the need to address this tension between trade and the environment. Now that the Doha Negotiations have failed, the environmental provisions in the RTAs could shed a first light on how states legally aim to solve the tension between trade and the environment. For this reason, this research asks the following research question:
‘Can the environmental provisions in Regional Trade Agreements (RTAs) be a source of inspiration for the legal texts of the WTO agreements?’
A lot of research has been done on the role of the environment in the WTO.1 However, this research is mainly based on the link between Multilateral Environmental Agreements (MEAs) and the WTO.2 Research on environmental provisions in RTAs has also been conducted over the past few years but here the link with the WTO is absent.3 A recent study4 of the WTO has examined provisions in RTAs
1 See e.g.: S. Charnovitz, ‘The WTO’s Environmental Progress’ in W.J. Davey & J. Jackson (eds), The future of International law (Oxford University Press ) 247-269; F. Francioni (eds), Environment, Human Rights and International Trade (Hart Publishing 2003); P.M. Dupuy & J. E. Viñuales, International Environmental law
(Cambridge University Press 2015) 391-403.
2 G. van Calster & D. Prévost, Research Handbook on Environment, Health and the WTO (Edward Elgard
Publishing Limited 2013); E. Opoku Awuku, International Trade and the environment: The Impact of the WTO
on Developing Countries and Environmental Protection. Ghana’s timber industry and forest sector as a case study (Wolf legal Publishers 2006).
3 See: C. George ’Environment and Regional Trade Agreements: Emerging Trends and Policy Drivers’(2014)
OECD Trade and Environment Working Papers 2014/02 <https://www.oecd-
ilibrary.org/docserver/5jz0v4q45g6h-en.pdf?expires=1532374531&id=id&accname=guest&checksum=ED6354CF5D3591B25B520281EDE06F00> accessed 23 July 2017; A. Berger.C. Brandi & D. Bruhn, ‘Environmental Provisions in Trade Agreements: Promises at the Trade and Environment interface’(2017) DIE briefing paper 16/2017; D. Colyer, ‘Environmental Provisions in Free Trade Agreements (2008&2009) (Department of Agriculture Resource Economics
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and their potential benefit for the WTO context. However, this study does not specifically address the
environmental provisions of RTAs and the effect they could have on the WTO legal regime. This
thesis aims to fill this gap in the literature.
In this thesis, it will be argued that specific environmental provisions in a large number of regional trade agreements can be a source of inspiration for the legal texts of the WTO agreements. This argument is based on the fact that consensus is needed to amend the texts of the agreements under the WTO.5 It is shown that environmental provisions in RTAs can be a starting point from which this consensus can be derived.
To show the relevance of this kind of approach, the following chapters will first outline the legal debate revolving around trade and the environment in the international trade context and the current status of this debate in the Doha negotiations. In the second chapter, it will become clear why the current legal relationship between RTAs and the WTO is not satisfactory to deal with the tension between trade and the environment. The existing environmental provisions of the WTO legal agreements are explained in chapter 3 and provide a picture of how the environment is currently regulated in the international trade regime. In the fourth chapter the environmental provisions of the analysed RTAs are discussed. Here it is shown whether new innovative environmental standards can be derived from these RTAs and what their features are. Chapter 5 will conclude on these findings, set out the demarcations of this research and provide suggestions for further research.
1.1.
Methodology
This exploratory comparative research will focus on how environmental provisions in RTAs relate to the WTO legal system. This will be done by using three type of sources: secondary literature, treaty law and case law. First, to analyse the debate relating to trade and the environment, secondary literature will be collected and analysed. The arguments of this debate relate often to economic or policy arguments but for the purpose of this research only these arguments will be discussed that have any legal relevance for incorporating environmental provisions in the international trade regime. To identify the environmental provisions in the WTO agreements and RTAs, I will base my research primarily on the text of the WTO agreements and RTAs (GATT 1994, TBT etc). In order to identify these environmental provisions in RTAs that are different to and reach beyond the legal texts of the WTO agreements, it reaches beyond the scope of this research to examine all individual RTAs and all individual environmental provisions that are in force. For this reason a selection has been made of both the number of included RTAs and the number of specific environmental provisions. The RTAs were selected based on, first, the need that the text of the environmental provisions should go beyond provision in regional trade agreements’ (2016) WTO working paper ERSD 12
<https://www.wto.org/english/res_e/reser_e/ersd201613_e.htm> accessed 24 July 2018.
4 R. Acharya (eds), Regional Trade Agreements and the Multilateral Trading System (Cambridge University
Press 2016).
5
Marrakesh Agreement Establishing the World Trade Organization (15 April 1994) 1867 UNTS 154, 33 ILM 1144 [hereinafter: Marrakesh Agreement or WTO Agreement] art X.
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the text of WTO agreements and ,second, that the environmental provisions should be supported by the largest number (ideally all) of WTO members. Based on these principles, 33 RTAs were selected, based on the following criteria:
- Every WTO member should be included in the analysis and therefore every WTO member should be a signatory to at least one of the selected RTAs.
- Regional Trade Agreements with the largest number of signatories are prioritised. - After this, Regional Trade Agreements that are concluded latest in time are prioritised.
The number of environmental provisions were selected based on secondary literature. Monteiro6 discerns 62 types of environmental provisions (see also table 2) that can be found in 270 RTAs. Another study, provides a less comprehensive categorization of environmental provisions, but they generally overlap with the study of Monteiro.7 Monteiro has shown that a wide range of environmental provisions can be discerned (table 2). Table 3 shows to what extent these environmental provisions differ from the provisions applied in the WTO legal agreements. Here it is shown that there are a number of provisions in RTAs that contain environmental provisions that coincide with the text of the WTO agreements. These are provisions concerning preamble language8, sanitary and phytosantiary measures9, the general exceptions10 and other exceptions, exemptions, exclusions and safeguards11, the plant varieties rights12, and mineral resources management.13It is not suggested that all the individual provisions contain reference to the language of the WTO but some of them at least do. This means that all the other provisions are to be considered provisions that go beyond the language of the WTO agreements and seem to entail broader commitments relating to the protection of the environment. To get a general idea of which environmental provisions are supported by a large number of WTO members, I have first selected the type of environmental provisions of Monteiro’s data that are incorporated in the largest share (>25% or >68) of RTAs. Although the benchmark of 25% of the RTAs is certainly not representative for an equal percentage of the member states implementing these type of provisions, it still may provide a first indication of what type of environmental provisions WTO members sought to regulate. Apart from the preambular language in RTAs and the provisions on general exceptions, seven specific provisions stand out vis a vis the highest number of RTAs that have included them: ’schedule of commitments on environmental services14
(37%), cooperation on specific
6 J. Monteiro, ’Typology of environment-related provision in regional trade agreements’ (2016) WTO working
paper ERSD 12 <https://www.wto.org/english/res_e/reser_e/ersd201613_e.htm> accessed 24 July 2018.
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Organisation for Economic Co-operation and Development, Assessing implementation of environmental
provisions in regional trade agreements (Joint Working Party on Trade and Environment,
COM/TAD/ENV/JWPTE(2016)4/FINAL, 2016) 7.
8 See Appendix table 3-A 9 See Appendix table 3-C.2.3. 10
See Appendix table 3-C.14
11 See Appendix table 3-C.15 12 See Appendix table 3-E.1 13
See Appendix table 3- G.3.
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environmental issues15 (30%), upholding of environmental laws16 (29%), transparency and right to information17 (29%.), relationship between the RTA and MEAs18 (28%), specific forms of
environmental cooperation19 (28%), cooperation on specific sectors20 (27%).
Based on these calculations, four categories of environmental provisions were formed that are likely to be found most frequently in the 270 researched RTAs. These environmental categories are
‘environmental cooperation’, ‘upholding of environmental laws’, ‘environmental transparency and right to information’, and ‘the relationship between the RTA and MEAs’.
To identify the environmental provisions in the selected RTAs the following keywords have been applied: ‘Animal, Biological diversity, Climate, Ecology, Endangered Species, Environment, Environmental Cooperation, International Agreements, MEAs, Natural resources, Plant, Pollution, Renewable, Sustainable, Waste and Wildlife’. Finally , this research is based on environment-related provisions (environmental provisions) that will be defined as ‘any provision that refers directly to the protection of the environment, sustainable development and other environment-related issues’. This means that provisions that have an indirect effect on the environment and are not explicitly addressed in the treaty text will not be primarily covered by this research.
15 See Appendix table 2-I.1.2. 16
See Appendix table 2- C.7.
17 See Appendix table 2- H.1. 18 See Appendix table 2-D.7. 19
See Appendix table 2-I.3.
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2: The trade-environment debate
The trade- environment link has engaged commentators for at least two decades.21 However, the impact of trade liberalisation on environmental protection and its legal implications remain
ambiguous. First the historical emergence of the link between international trade law and international environmental law is discussed and second, the diverging legal arguments on the need to reconcile these two bodies of law, and third the current status of the environment chapter in the Doha negotiations. It is concluded that a new approach is needed to provide a feasible solution to this debate.
2.1. Historical background
Both the 1948 Havana Charter22 and the 1927 Convention for the Abolition of Import and Export Prohibitions and Restrictions23 show that even in the earlier history of trade regulation the need to reconcile trade and environment was recognized. The explicit environmental exceptions mentioned in both documents look familiar when compared to provisions of the GATT 1994.24 It was however not until 1971, in the run up to the Stockholm Conference, that the GATT Council Meeting established a Working Group on Trade and Environment that aimed ‘to examine, upon request, any specific matters
relevant to the trade policy aspects of measures to control pollution and protect the human environment especially with regard to the application of the provisions of the General Agreement taking into account the particular problems of developing countries’25, but this Working Group remained inactive until 1992. In the same year, the UN Conference on Environment and Development in Rio de Janeiro addressed the issues of environment and trade. Procedural guidelines were set out that integrated trade and environment policies. From that time onwards, several other processes, more or less simultaneously, reignited the debate on the trade and the environment linkage.26 This is for instance illustrated by the negotiations on the North American Free Trade Agreement (NAFTA) where concerns arose in relation to the environmental implications of the agreement. Additionally, in 1991, in a dispute between the US and Mexico27, it was decided that United States’ regulations that restricted imports of tuna were contrary to GATT 1994 rules. Finally, in 1994, the Marrakesh Agreement was signed that established the WTO and reference to sustainable development was made in the preamble
21See e.g. D.C. Esty, Greening the GATT: Trade, Environment, and the Future (Institute for International
Economics 1994); E. Brown Weiss, J.H. Jackson, N. Bernasconi-Osterwalder (eds), Reconciling Environment
and Trade (2nd edn, Martinus Nijhoff Publishers 2008).
22 Havana Charter for an International Trade Organisation (24 March 1948) UN Doc. E/Conf. 2178 art
45(1)(a)(iii) and (x).
23 Convention for the Abolition of Import and Export Prohibitions and Restrictions (8 November 1927) 97 LNTS
391 art 4.
24
General Agreement on Tariffs and Trade 1994 (15 April 1994), Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1867 UNTS 187, 33 ILM 1153 [hereinafter GATT 1994].
25 GATT Council Meeting on Nov. 9, 1971, C/M/74 (November 17, 1971). 26
P.M. Dupuy & J. E. Viñuales, International Environmental law (Cambridge University Press 2015) 392.
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of this agreement. Furthermore, The Committee on Trade and Environment (CTE) was set up via the adoption of a Ministerial Decision on Trade and Environment. The CTE has contributed to the debate by clarifying the linkages between the two concepts through studies and discussions, but never came to a specific resolution of these issues.28 In 2001 at the Doha Ministerial Conference, the CTE was entrusted to launch negotiations on specific trade and environment issues.29 Now that the Doha negotiations have stalled, progress in this field is not expected to arrive soon.
2.2 The debate: trade and the environment
The key question underlying this debate is whether trade and the environment are mutually supportive or contradictory concepts. This sub-section will focus primarily on this debate from a legal point of view.
At one side of the debate, environmentalists key critique is that international trade rules are too trade specific and set aside environmental regulations unless environmental safeguards are built into the international trade system.30 They consider that an update of the international trade regime is necessary to guarantee environmental protection. As a result, environmentalists have drafted lists of amendments to the GATT 1994 that they wish to see endorsed.31 Generally, these lists contain a myriad of desired measures such as the reform article XX of the GATT 1994, the regulation of import prohibitions, exports restraints and the implementation of a code for product standards. Additionally, these lists contain measures to restrict production processes and methods, unilateral and extraterritorial actions, taxes and subsidies for environmental protections and measures to enforce international environmental agreements. Some environmentalists consider modest changes desirable to accommodate the trade restricting regulations taken up in MEAs, others envisage a more complete makeover where nationally determined environmental policies are given serious attention. It is for example argued that the GATT has currently no provision that allows a party to apply trade actions to deal with low environmental standards of another party.32 Deterioration and pollution spill overs of the global commons are
28
); E. Brown Weiss, J.H. Jackson, N. Bernasconi-Osterwalder (eds), Reconciling Environment and Trade (2nd edn, Martinus Nijhoff Publishers 2008) 25; P.M. Dupuy & J. E. Viñuales, International Environmental law (Cambridge University Press 2015) 392.
29
Idem.
30 D.C. Esty, Greening the GATT: Trade, Environment, and the Future (Institute for International Economics
1994) 42.
31 See: E. Patterson, ‘GATT and the Environment- Rule Changes to Minimize Adverse Trade and Environmental
Effects’ [1992] Journal of World Trade 26, no.3 (June); C. Arden-Clarke,‘An Action Agenda for Trade Policy Reform to Support Sustainable Development: A United Nations Conference on Environment and Development Follow –Up’ in D. Zaelke, Trade and the Environment: Law, Policy and Economics (Island Press 1993); P. L. Lallas, D. C. Esty and D.J. van Hoogstraten,’Environmental Protection and International Trade: Toward Mutually Supportive Rules and Policies’ [1992]The Hardvard Environmental Law Review 16, no.2. (Fall); R. J. Prudencio, S.J. Hudson, The Road to Marrakech: An Interim Report on Environmental Reform of the GATT and
the International Trade System (Washington, National Wildlife Foundation, 25 January 1994).
32 See e.g. P. L. Lallas, D. C. Esty and D.J. van Hoogstraten,’Environmental Protection and International Trade:
Toward Mutually Supportive Rules and Policies’ (1992)16 The Hardvard Environmental Law Review no.2. (Fall);
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therefore difficult to address. Secondly, no specific provision exist in the GATT that allows the restrictions in trade that are imposed by MEAs to be legitimate.33
On the other side of the spectrum, free trade advocates fear that that promoting unilaterally determined environmental choices will tear down the international trading regime.34 Environmental standards may then become an obstacle for free trade. They are specifically concerned that environmental standards may be applied as disguised restrictions to trade and that environmental programs of which the environmental benefits are uncertain will lead to unfounded burdens on free trade.35 Additionally, pro free trade advocates argue that in fact environmental regulation will be consistent with the
international trade rules. They36 maintain that environmental measures are only prohibited by
unjustifiable discriminatory or disguised restrictions on trade. As long as requirements of article I and III of the GATT 1994 are met, environmental regulations may be adopted by states. In case a measure or regulation is nevertheless considered to be contrary to these articles, a justification can still be achieved under GATT 1994 article XX (b) or (d). Nevertheless, environmentalists consider the requirements of article I and III of the GATT 1994 and the narrow interpretation of article XX37, insufficient. The analysis of the measures proposed by the environmentalists has led to a new debate of what in the WTO exactly needs to be amended and no unanimous satisfying solution has been put forward so far.
2.3. The Doha Negotiations
The environmental negotiations during the Doha Rounds were the first time that real attempts have been made to restart this discussion in the form of negotiations to amend the WTO.38 Despite the fact that since 2014, the negotiations have reached a deadlock, preparations have been made to negotiate an environmental chapter. The November 2001 declaration of the Fourth Ministerial Conference in Doha, Qatar, identified five focus points from which negotiations could start off. The first focus point was the clarification of the relationship between trade measures taken under environmental agreements and WTO rules.39 The second point of focus related to procedures to expand the scope in cooperation regarding the exchange of information between the secretariats of multilateral environmental
33 Idem.
34
J. Baghwati & T.N. Srinivasan, ‘Trade and Environment: Does Environmental Diversity Detract from the Case for Free Trade?’(1995) Discussion Paper Series No. 718; P. Sorsa, ‘GATT and the Environment’ (1992) 15 World Economy no. 4, 115; J. Bogardus,’The GATT and the Environment; Irreconcilable Differences. Notes and Comments’(1996) 5 Dalhousie Journal of Legal Studies 237.
35
J. Baghwati & T.N. Srinivasan, ’Trade and Environment: Does Environmental Diversity Detract from the Case for Free Trade?’(1995) Discussion Paper Series No. 718.
36 S. Charnovitz, ‘The Regulation of Environmental Standards By International Trade Agreements’ (1992),
International Environmental Reporter (25 Augustus); J. Jackson, ‘World Trade Rules and Environmental Policies: Congruence or Conflict?’(1992) 49 Washington and Lee Law Review No.4 (Fall) 1227.
37
See chapter 4 for a more in depth analysis of this provision.
38 Director-General P. Lamy,’Globalization and the Enviornment in a Reformed UN: Charting a Sustainable
Development Path’ (24th Session of the Governing Council/Global Ministerial Environment Forum, Nairobi, 5 February 2007).
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agreements and the WTO.40 The third point was to create criteria for the observer status to
international governmental organizations.41 Fourthly, negotiations were agreed on the reduction or elimination of tariff and non-tariff barriers to environmental goods and services.42 Finally, the parties agreed to focus on the clarification of the topic of fisheries subsidies. This topic has been put forward because some studies have suggested that fisheries subsidies can be damaging to the environment if fishermen are not restricted in fishing certain fish, the species may become extinct. Additionally, the Trade and Environment Committee was instructed to take the following areas into consideration while working on these items:’ the effect of environmental measures on market access (especially for developing countries), the focus on win-win situations in which both trade and the environment are mutually supportive, the continuation of the clarification of the relationship between the TRIPS Agreement and the Biological Diversity Convention, the impact of eco-labelling on trade and whether WTO rules would hamper eco-labelling.43 Additionally, ministers also recognized the importance of technical assistance and capacity building programs relating to trade and environment for developing countries.44 Furthermore, sharing expertise and experience with members relating to environmental reviews was encouraged.
2.4. Conclusion
The debate on environment and trade has shown that no consensus has been achieved on what exact changes should be made to the international trade regime. Environmentalists have argued that the current state is not sufficient, whereas free trade advocates do only advocate for small changes or consider the status quo sufficient. Nevertheless, the environmental chapter of the Doha negotiations show that parties are aware of a potential tension between trade and the environment: attempts are made to incorporate the environmental concerns in the multilateral trade system. However, the fact remains that real amendments of the WTO agreements in multilateral negotiations remain a challenge and due to the new deadlock of these negotiations in the Doha rounds, progress is not expected any time soon. For this reason, it is argued that new approach is needed that should both provide a feasible and tangible answer to the environment-trade debate. The analysis of environmental provisions in RTAs can provide such feasible answer since these provisions are expected to be more specific and are already supported by a number of WTO members. The next chapter will strengthen this argument by explaining the shortcomings in the current legal relationship between the WTO and RTAs.
40 Idem. 41 Idem. 42 Idem. 43
Doha WTO Ministerial 2001, Ministerial Declaration (20 November 2001) WT/MIN(01)/DEC/1 para. 32.
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3: The relationship between RTAs and the WTO legal system
This chapter focuses on the relationship between WTO law and RTAs. Here the rules of the Vienna Convention on the Law of Treaties45 (VCLT), article XXIV of the GATT 1994, article V of the GATS and article 2(c) of the enabling clause that regulate the formation of RTAs under WTO law arediscussed and it is analysed whether these rules would be applicable in case a conflict between
environmental provisions in RTAs and the WTO would occur. By applying the criteria as reiterated in the Turkey-Textiles case, it is concluded that environmental obligations of RTAs would cede in case they conflict with other GATT 1994 obligations.
3.1. The VCLT
The rules of international law on treaty conflict, as laid down in the VCLT, provide first guidance on the relationship between the WTO and RTAs. These rules and principles are to a great extent
considered to be customary international law.46 Several articles are relevant in this context. In article 26 of the VCLT47, it is decided that parties need to comply with the principle of pacta sunt servanda. This obligation means that they should abide by the rules that they have negotiated and cannot deviate from them.48 As a result, parties are prohibited to enter into successive agreements that are
incompatible with the obligations of earlier negotiated treaties.49 In the case that two treaty obligations are indeed incompatible, it remains the question what the actual effect of this incompatibility will be.50 Article 30 of the VCLT51 contains rules in relation to treaties with the same subject matter. Provisions of a RTA may stipulate that the treaty is subject to an earlier or later treaty or that the treaty should not be considered to be incompatible with an earlier or later treaty. Article 30 also decides that treaties concluded by the same parties with the same subject matter that are concluded later in time, will generally prevail. However, these rules only apply in the case that the subject matter of the treaties is identical.
Article 30 VCLT does therefore not apply to treaties that entail a more specialized or detailed subject matter. The principle of lex specialis (a law governing a special subject matter overrides a law that governs a general subject matter) is a general principle of law and applies to treaties that are not covered by article 30 VCLT. Additionally, article 30(4) VCLT governs the situation in which a later treaty is negotiated among fewer of the same members than the earlier treaty. In a case where a RTA is thus negotiated between some of the WTO members and is later in time, article 30(4) of the VCLT
45
Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force 27 January 1980) 1115 UNTS 331 [hereinafter: VCLT 1969].
46T. Cottier and M. Foltea, ‘Constitutional Functions of the WTO and RTAs’ in L. Bartels and F. Ortino (eds), Regional Trade Agreements and the WTO legal system (Oxford University Press 2006) 53.
47 VCLT 1969 art 26. 48
T. Cottier and M. Foltea, ‘Constitutional Functions of the WTO and RTAs’ in L. Bartels and F. Ortino (eds),
Regional Trade Agreements and the WTO legal system (Oxford University Press 2006) 53. 49 Idem.
50
Idem.
15
seems to hold that the rules of the RTA prevail for these members that have concluded the RTA (lex
posterior). However, article 41 VCLT places limits in these type of modification by stipulating that
parties to a multilateral agreement can alter this agreement only if this a) is provided for in the
multilateral treaty b) is not prohibited by the treaty c) does not affect the rights of third parties d) does not lead to an incompatibility with the effective execution of the object and purpose of the treaty as a whole.52
When applying these rules to the relationship of WTO law with RTAs, this practically means that WTO rules apply in the case that a RTA is concluded prior to the establishment of the WTO, unless the RTA is of a more specialized nature. Similarly, RTAs that are concluded after the establishment of the WTO, will generally prevail. However, this legal construction will often lead to undesirable results since RTAs and WTO law follow a different line of development. It can therefore be argued that these rules alone may not be sufficient to define this relationship.53 Additionally, article 41 decides that parties can only supersede their obligations under the WTO Agreement if this is explicitly permitted and not prohibited by the WTO rules. These rules will be addressed in the next subsection.
3.2. RTA provisions in WTO Agreements
The principles and rules that regulate the relationship between RTAs and the WTO legal regime are of paramount importance to understand how the two regimes interact. Two issues draw to the attention. First, it will be shown that RTAs, by nature, restrict the application of the MFN principle54 and are therefore under WTO law only allowed under certain circumstances. The WTO legal regime thus lays down the requirements under which RTAs (and other preferential agreements) may be concluded. In this context, WTO regulation specifies that RTAs must be notified to the WTO under either Article XXIV of the GATT 1994, paragraph 2 (c) of the Enabling Clause of the GATT 1994 for RTAs that focus on the liberalization of trade in goods or Article V of the GATS concerning the liberalization of trade in services. The Enabling Clause is only concerned with agreements between developing countries that focus on the liberalization of goods. Article XXIV applies to regional agreements concluded between developed countries and between developed and developing countries. Article V of the GATS applies to all parties.
Article XXIV allows for the formation of free trade areas or custom unions between members and requires that duties and other restrictive rules of commerce on ‘substantially all trade’ between the parties is eradicated.55 Furthermore, these free trade areas or custom unions may not impose higher restrictions in relation to third-party countries than before the negotiations and should apply
substantially the same external trade regime.56 Additionally, a procedural provision57 requires parties
52 VCLT 1969 art 41(1). 53
T. Cottier and M. Foltea, ‘Constitutional Functions of the WTO and RTAs’ in L. Bartels and F. Ortino (eds),
Regional Trade Agreements and the WTO legal system (Oxford University Press 2006) 53. 54 GATT 1994, art I.
55
GATT 1994 art. XXIV(8).
16 to notify the establishment of an RTA to the WTO.
The Enabling Clause allows developing countries to enter into regional or global agreements that regulate the mutual reduction or elimination of tariffs and do not need to conform to the criteria as set out in Article XXIV of the GATT 1994. The criteria of conditions that apply to these agreements are prescribed by the members themselves. In EC-Tariff Preferences58, it was held that the Enabling Clause is an integral part of the GATT 1994 and should be considered an exception to the MFN obligation enshrined in article I GATT 1994. The Appellate Body reiterated further that the burden of proof for the Enabling Clause lies with the member that pleads is. In the case that a measure pursuant to the Enabling Clause is challenged, the complaining party then needs to set out the specific
conditions that the respondent party allegedly does not meet. Subsequently, it is to the responding party to make its defence. 59 The respondent party must make its defence by proving that the challenged measures meet the requirements as set out by the complaining party.60
Article V of the GATS states that the formation of economic integration agreements also goes together with the implementation of some requirements. The agreement needs to have ‘substantial sectoral coverage’ and ‘substantially all discrimination’ between the parties should be eliminated.61
States cannot impose obligations that create higher barriers to trade for third-party countries. In the case that a member does not comply with a commitment of the agreement because of withdrawal or
modification of a commitment, 90 days’ notice should be applied in advance by that member.62
The question consequently relevant for this research is whether WTO regulation (article XXIV GATT 1994 and article V GATS) can be invoked to justify RTA obligations that are inconsistent with WTO obligations and whether these articles can thus function as a defence. In The Turkey-Textiles case63,
which concerned the question whether quantitative restrictions could be justified by article XXIV of the GATT 1994, the Appellate Body interpreted paragraph 5 of this article as such that it entailed a right to form RTAs but that this RTA was subjected to the conditions as laid down in paragraph 5 and 8 of this article. The Appellate Body64 emphasized that the terms ‘shall not prevent’ the formation of a customs union in the chapeau indicate that the adoption of measures that are inconsistent with certain other GATT 1994 provisions are allowed when the conditions in article XXIV are fulfilled. Since the Appellate Body spoke of ‘certain’ provisions, it is not clear if this article functions as defence for the breach of every other (and thus environmentally relevant) GATT 1994 provisions. Nevertheless, if it
57 GATT 1994 art. XXIV(7).
58
WTO, European Communities - Conditions for the Granting of Tariff Preferences to Developing Countries-
Report of the Appellate Body (19 January 2004) WT/DS246/AB/R, para 90. 59 Ibid, paras 104-105.
60 Ibid, para 114.
61 General Agreement on Trade in Services ( 15 April 1994), Marrakesh Agreement Establishing the World
Trade Organization, Annex 1B, 1869 UNTS 183, 33 ILM 1167 [hereinafter GATS] art V, para 1.
62 GATS art V, para 4.
63 WTO, Turkey – Restrictions on Imports of Textile and Clothing Products- Report of the Appellate Body ( 22
October 1999) WT/DS34/ABR [ hereinafter: Turkey – Textiles]
17
can functions as a defence for the breach of other provisions of the GATT 1994 then at least these provisions should not 1) negatively affect the trade rights of third parties or 2) pose restrictive rules of commerce on ‘substantially all trade’.
3.3. RTAs and environmental provisions
The question remains whether article XXIV and article V GATS allow WTO members to adapt their trade relations to environmental concerns: e.g. may a RTA party introduce a trade related
countermeasure for the breach of an environmental provision implemented in the RTA? In this case, it can be argued that this will go against the purpose of the WTO agreements to facilitate liberalization of trade since environmental provisions are likely meant to restrict trade to protect the environment. Thus, in the case environmental obligations under the WTO and RTAs would clash, it is not likely to assume that these provisions tip the balance between trade and environment in favour of the
environmentalist.
Additionally, the panels and the Appellate Body of the WTO may interpret provisions of regional and bilateral agreements differently depending on the nature of the agreement.65 In the case that a dispute settlement body linked to an RTA has clarified the meaning of an environmental provision this might be relevant for WTO dispute settlement too. The environmental provisions of RTAs may help panels and the Appellate Body to decide on the scope of WTO law. Additionally, the language in
environmental provisions can provide models for possible similar WTO language but only whenever the WTO member consent to this provisions. Where this consent is absent, environmental provisions in RTAs can only determine the scope of WTO law.
3.4. Conclusion
This chapter has shown that the relationship between RTAs and the WTO is not sufficiently clear and appears to be not satisfying enough to regulate the balance between the environmental provisions in RTAs and the provisions of WTO. It is shown that in case that WTO members would specifically consent to these environmental provisions, environmental provisions in RTAs can function as a model for possible similar WTO language. The next chapter will identify the environmental provisions in WTO agreements that are currently in place.
65
I. van Damme, ‘Role of Regional International Law in the WTO Agreements’ in L. Bartels and F. Ortino (eds), Regional Trade Agreements and the WTO legal system (Oxford University Press 2006) 567.
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4: the WTO legal system: environmental provisions
This chapter aims to gain a better understanding of the type of environmental provisions that are already incorporated in the WTO agreements. By identifying these provisions first, it will be easier to see if and how environmental provisions in RTAs can add to this framework. The WTO legal regime consists of several agreements that are negotiated and signed by its member states and that lay the ground rules of international trade. A number of these agreements have also included environmental provisions among which: the GATT 1994, the General Agreement on Trade in Services (GATS) The Agreement on Technical Barriers to Trade (TBT), The Agreement on Application of Sanitary and Phytosanitary Measures (SPS), The Agreement on Agriculture, the Subsidies and Countervailing Measures Agreement (SCM), and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).66 This chapter will outline these environmental provisions in these WTO agreements and will additionally look at how these environmental provisions are interpreted in the jurisprudence of the WTO. An overview of these provisions is provided by table 1 in the Annexes.4.1. The objective of the WTO legal system
The Marrakesh agreement that established the World Trade Organization (WTO Agreement) and its annexes, was the agreement in which most of the important environmental implementation took place. The Preamble to the GATT 1994 already acknowledged that trade relations should entail the objective to develop ‘the full use of the resources of the world’.67 The WTO Agreement’s preamble, however, went a step further by stating that trade should expand 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 development’.68
In US-Shrimp69, it was held by the
Appellate Body that the preamble of this agreement shows that the WTO negotiators recognize that ‘optimal use of the world’s resources should be made in accordance with the objective of sustainable
development’ and that states ‘should’ protect the environment ‘either within the WTO or in other international fora’.70
This interpretation was further confirmed by the compliance panel in 2001 who stated that ‘sustainable development is one of the objectives of the WTO Agreement’.71
As a result, the preamble of these agreements has decided the scope of the agreement and functions as a justification for a stronger environmental dimension to the WTO.
66 The Agreement on Government Procurement (GPA) also contains environmental provisions but since this is a
plurilateral agreement of the WTO it lacks relevance for this research.
67 S. Charnovitz, ‘The WTO’s environmental Progress’ in W.J. Davey and J.H. Jackson (eds), The future of International Economic Law (Oxford University Press 2008) p 249; GATT 1994 Preamble.
68 Marrakesh Agreement Preamble.
69WTO, United States - Import Prohibition of Certain Shrimp and Shrimp products-Report of the Appellate Body
(6 November 1998) WT/DS58/AB/R paras 152-153.
70 ibid para 185.
71 WTO, United States – Import Prohibition of Certain Shrimp and Shrimp Products-Report of the Panel – Recourse to Article 21.5 of the DSU by Malaysia (21 November 2001) WT/DS58/RW [hereinafter: US –
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4.2. The GATT 1994: The environmental exception clauses
The General Exception clause of the GATT 1994 agreement is one of the main articles through which environmental protection becomes part of the trade law regime.72 Especially article XX, paragraphs (a), (b) or (g) of the GATT 1994 have been called forth as a defence for environmental protection: WTO members are allowed to exempt themselves from other obligations of the GATT 1994 in the case that the proposed measures are ‘necessary for the protection of public morals’73, ‘necessary for the protection of human, animal and plant life or health’74 or ‘relating to the conservation of natural resources’.75 Case law shows that the type of environmental policies that fell in the domain of these exception clauses have up till now related to the protection of dolphins76, the reduction of human, animal and plant life caused by retreaded tyres77 ,the protection of certain fish species78 (tuna, salmon, dolphins) and clean air.79 However, in the majority of the cases in which this general exception clause has been invoked80, the defence based on article XX has failed, due to the fact that the challenged measures did not meet the requirements of the chapeau of article XX.81 The dispute settlement body has faced several issues when interpreting this article: the issue of process and production methods (PPMS), the necessity requirement and the chapeau of Article XX. Each will be discussed below.
4.2.1. PPMS
Process and production methods can be an important instrument for environmental policy: a product that is produced in an environmentally friendly way will contribute both to economic development and the environment. The US-Tuna/Dolphin I82 and II83addressed the importation of tuna caught in nets that are harmful to dolphins. Both these cases conclusively held that process-based regulatory measures that were based on the process or production methods of a product and were not related to the physical characteristics of the product, are considered to be violations of the principles of
72
P.M. Dupuy & J. E. Viñuales, International Environmental law (Cambridge University Press 2015) 401.
73 GATT 1994 article XX(a). 74 GATT 1994 article XX(b). 75
GATT 1994 article XX(g).
76
WTO, United States – Restrictions on Imports of Tuna-Report of the Panel (1991) BISD 395/155 [hereinafter: Tuna/Dolphin I]; WTO, United States – Restrictions on Imports of Tuna- Report of the Panel (16 June 1994) DS29/R [hereinafter: Tuna/Dolphin II].
77
WTO, Brazil – Measures Affecting imports of Retreated Tyres- Appellate Body Report (3 December 2007) WT/DS332/AB/R [hereinafter: Brazil-Retreaded Tyres]
78 Tuna/Dolphin I ;Tuna/Dolphin II; WTO, United States – Import Prohibition of Certain Shrimp and Shrimp Products- Report of the Appellate Body (12 October 1998) WT/DS58/AB/R [hereinafter: US-Shrimp/Turtle]. 79
WTO, United States- Standards for Reformulated and Conventional Gasoline- Report of the Appellate Body (20 May 1996) WT/DS2/AB/R [hereinafter: US- Gasoline].
80 See for instance: Brazil-Retreaded Tyres; WTO, European Communities- Measures Prohibition the
Importation and Marketing of Seal Products- Reports of the Appellate Body (22 May 2014) WT/DS400/AB/R,
WT/DS401/AB/R [hereinafter: EC- Seal Products]; WTO, China – Measures Related to the Exportation of
Various Raw Materials – Reports of the Panel (5 July 2011) WT/DS394/R,WT/DS395/R, WT/DS398/R
[hereinafter: China-Raw materials] Supra n 80.
81 P.M. Dupuy & J. E. Viñuales, International Environmental law (Cambridge University Press 2015) 402. 82
US-Tuna/Dolphin I.
20
discrimination under article III(4) of the GATT 1994. However, In the US-Shrimp/Turtle Case84,The
Appellate Body saw generally no harm in the application of a process and production method that made the exclusion of turtles from fishing nets possible, but it did conclude that these measures were applied in a discriminatory manner contrary to the chapeau of article XX. To what extent
environmental process and production methods can be allowed is therefore certainly not decided. However, the consequences of permitting discrimination based on environmental process and production measures can have further consequences. It is, for instance, argued that the legitimacy of such measures will results in adapted standards that developing countries cannot comply with because they have other priorities than developed countries.85 Furthermore, there are concerns that such an allowance would lead to an increase in protectionist measures. The latter issue could potentially be resolved by either improving the standard-making of a rule making processes by making them more transparent or to consider the special needs that developing countries need and construct appropriate measures accordingly.86 A second solution could entail the establishment of rules that govern the use of PPMS in such a way that it is clear in which cases they may be applied.87
4.2.2 Necessity requirement
In Brazil-Retreated Tyres88, the Appellate Body spelled out the meaning of what is ‘necessary’ to protect human, animal or plant health under article XX(b). In this regard, it held that the measure must be both suited to achieve its objective and be proportionate, in the sense that no other less trade restrictive available measures must be available.89 Furthermore, the Appellate Body acknowledged that some public health or environmental problems can only be addressed with a comprehensive policy which consists of multiple interacting measures.90 Recent case law has also shed a new light on the meaning of article XX(a). In the EC-Seal products91 case, a European ban on the import of seal products was considered ‘necessary to protect public morals’. Despite the fact that the measure failed to meet the requirements of the chapeau of article XX, this was the first case that an environmental concern as animal welfare could be brought under the protection of the public morals clause of Article XX(a). It is interesting to note that this development in the case law can open the door for a wider interpretation of the content of ‘public morals’ and may even increasingly reflect environmental concerns.
84 US- Shrimp/Turtle, para 186.
85 W. Yang, ‘Environmental Provisions in the WTO agreements and their implications for China as a member’
(2002) 11 RECIEL no 3, 321.
86 Idem. 87
Idem.
88 Brazil-Retreaded Tyres.
89 Brazil- Retreaded Tyres, supra n 111, para. 150 & para. 156. 90
Brazil- Retreaded Tyres, supra n 111, para. 151.; China- Raw Materials, supra n 80, para 7.481 & 7.485.
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4.2.3. Chapeau of article XX GATT 1994
If a proposed measure does indeed meet the criteria as set out in article XX(a),(b) or (g), then consequently it has to be assessed whether the measure also complies with the conditions of the chapeau of article XX. Generally, this has proven to be rather difficult. The chapeau requires that measures may not be arbitrarily or unjustifiable discriminatory or constitute disguised restrictions on international trade.92 In Us-Gasoline93, for instance, the US had discriminated unjustifiably against the gasoline of Venezuela.94 The standard applied by the WTO panels and appellate bodies is considered to be interpreted quite strictly, but the exact meaning of what arbitrarily or unjustifiable discriminatory measures are or what disguised restrictions to international trade entail still needs further
clarification.95
4.3. The Agreement on Technical Barriers to Trade (TBT agreement)
The TBT agreement regulated the criteria relating to mandatory technical standards and voluntary standards for products. These type of regulations are mainly concerned with testing and certification procedures. The objective of these regulations is to avoid any unnecessary obstacles to trade. The environmental aspect of this agreement is seen in the provision that allows Member States to invoke human, and plant life or health or the environment measures as legitimate exceptions to the general TBT rules.96 Next to this article, it is important to consider that there are other indirectly related environment related provisions in the TBT Agreement which include the requirement of non-discrimination in preparing, adopting and applying technical regulations, standards and conformity assessment procedures97; the requirement that technical regulation should not amount to unnecessary obstacles to trade98; the commitment to adopt international standards as far as possible99;and the requirementto be transparent about these measures by way of notification to the government, the WTO secretariat or by establishing national enquiry points.100 Additionally, The TBT Agreement contains a Code of Good Practice for the Preparation, Adoption and Application of Standards101 which allows for the adoption of voluntary environmental labelling scheme. Organization and agencies are encouraged to accept this scheme when developing labelling requirements.92 GATT 1994 article XX chapeau. 93
US- Gasoline.
94 See also: ’ US-Shrimp/Turtle; Brazil- Retreaded Tyres; EC-Seal Products.
95 W. Yang, ‘Environmental Provisions in the WTO agreements and their implications for China as a member’
(2002) 11 RECIEL no 3, 322.; See for an analysis of the chapeau of article XX: L. Bartels, ‘The Chapeau of Article XX GATT: A new interpretation’ (2014) 40 SRRN Electronic Journal 22 <
https://www.researchgate.net/publication/264118844_The_Chapeau_of_Article_XX_GATT_A_New_Interpretat ion> accessed 25 July 2018.
96 Agreement on Technical Barriers to Trade (1994) 1868 UNTS 186 [hereinafter: TBT agreement]. Preamble
and art 2(2). 97 Ibid, art 2(1). 98 Ibid, art 2(2). 99 Ibid, art 2(4). 100 Ibid, art 2(91)-2.(94) 101 Ibid, annex 3.
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4.4. The Agreement on the application of sanitary and phytosanitary measures (SPS
Agreement)
The SPS Agreement is concerned with the rights and obligations of member states in relation to the development of sanitary and phytosanitary measures on food safety and animal and plant health issues.102 It is up to the member states to determine the appropriate levels of protection against sanitary and phytosanitary risks. 103 The SPS Agreement nevertheless requires that the selected measures to provide this level of protection need to be based on scientific principles104 and on a risk assessment.105 Ecological and environmental conditions are taken as criteria for this risk assessment.106 Furthermore, governments are required to consider ‘ecosystems’ as one factor in determining pest or disease free areas.107 Additionally, the SPS Agreement entails similar obligations as the TBT agreement and the general exceptions clause of article XX GATT 1994. Article 2(3)108 of the Agreement stipulates that members are prohibited to use sanitary and phytosanitary measures that arbitrarily or unjustifiably discriminate between members where identical or similar conditions prevail or are applied in a manner that would constitute a disguised restriction on international trade. Additionally, Article 7109 of the agreement requiresthat changes in measures are notified by the state members and information is provided on these measures in according with the provisions of Annex B of the TBT agreement.
4.5. The Agreement on Agriculture
The Agreement on Agriculture regulates the trade in agricultural products. The preamble of the Agreement on Agriculture stipulates that the protection of the environment should be taken into consideration when committing to the reformation of agriculture.110 Two important environmental implications stem from agriculture. Firstly, one of the objectives of the Agreement on Agriculture is to encourage export competition by gradually reducing export subsidies and domestic support
programmes that distort production and trade. Due to this objective, the reduction of subsidies in support of environmentally detrimental activities will diminish. Secondly, the Agreement on Agriculture allows for exemptions of domestic support and subsidies that have a minimal effect on trade from reduction commitments. In this regard, environmental programmes can be exempted from the reductions in subsidies and contribute to sustainable agriculture.111 These ‘green box’ policies
102 Agreement on the Application of Sanitary and Phytosanitary Measures (1994) 1867 UNTS 493 [hereinafter:
SPS agreement] annex A, para 1 lists four categories of SPS measures eligible for the application.
103 Ibid, art 2(1). 104 Ibid, art 2(2). 105 Ibid, art 5. 106 Ibid, art 5(2). 107 Ibid, art 6(2). 108 Ibid, art 2(3). 109 Ibid, art 7.
110 Agreement on Agriculture (15 April 1994), Marrakesh Agreement Establishing the World Trade
Organization, annex 1A, 1867 UNTS 410 [hereinafter: Agreement on Agriculture] preamble.
111
W. Yang, ‘Environmental Provisions in the WTO agreements and their implications for China as a member’ (2002) 11 RECIEL no 3, 317.
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include funding for initiatives that meet the prescribed criteria set out in paragraph 12 of Annex II.112 This paragraph determines that trade-distorting support measures that have environmental objectives can be justified. However, it remains unclear to what extent trade distortion is considered to be
legitimate under the current Agreement on Agriculture. Some countries have argued that paragraph 12 of Annex II Agreement on Agriculture need to be revised to accommodate the environmental concerns of these countries.113
4.6. The Agreement on Subsidies and Countervailing Measures (SCM Agreement)
The SCM Agreement is relevant in an environmental context because subsidies can have both a positive or negative effects on the environment. When producers are encouraged to take measures that simultaneously enhance environmental conditions, these subsidies can have a positive outcome. However, sometimes unsustainable production activities are pursued that have a damaging effect on the environment. This can occur when certain subsidies do not take sustainable use of resources (such as that of water, soil or fish etc.) into consideration. Generally, the subsidies for agriculture and energy are considered to have both a negative effect on trade and to contribute to environmental damage. It has been argued that multilateral trade rules should be flexible and regulated in such a way as to encourage environmentally beneficial activities or technologies.114 The SCM Agreement does,however, provide for subsidies, called ‘green light’ subsidies, that include subsidies to help to promote or adapt existing facilities to new environmental requirements.115 These subsidies contribute up to 20% of costs of a firm for adapting to these new environmental requirements.116The subsidies related to green industrial policies has increased the trade tensions among WTO members. Many measures taken by countries in relation to their green industrial policies, have been challenged under the WTO by arguing that they are prohibited under article 3.1(b) of the SCM agreement. Most of these measures are specifically related to different forms of renewable energy.117 Canada- Renewable Energy/FIT has shown, for instance, that for subsidies that are contingent upon domestic requirements, can easily be considered to be of a discriminatory nature.
4.8. The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)
112 Agreement on Agriculture annex II(12). 113
W. Yang, ‘Environmental Provisions in the WTO agreements and their implications for China as a member’ (2002) 11 RECIEL no 3, 317.
114 Idem.
115 Agreement on Subsidies and Countervailing Measures (15 April 1994) Marrakesh Agreement Establishing
the World Trade Organization, Annex 1A, 1869 UNTS 14 [hereinafter: SCM Agreement] art 8, para 2(c).
116 Ibid, art 8, para 2(c)(ii). However, this provision expired after 5 years and has not been renewed. Therefore,
these subsidies are mainly prohibited in the WTO legal system.
117 See for instance: WTO, India – Certain Measures Relating to Solar Cells and Solar Modules –report of the panel (24 February 2016) WT/DS456/1/Add.1; WTO, China – Measures Concerning Wind Power Equipment
(19 January 2011) WT/DS419/3; WTO, Canada – Measures relating to the Feed- in Tariff Program (6 May 2013) WT/DS426/AB/R; WTO, Canada – Certain Measures Affecting the Renewable Energy Sector (6 May 2013) WT/DS412/AB/R;WTO, European Union and Certain Member States—Certain Measures on the
Importation and Marketing of Biodiesel and Measures Supporting the Biodiesel Industry (23 May 2013)
24
The TRIPS Agreement118 regulates the protection of Intellectual Property Rights. Article 27 is in the context of environmental protection the most relevant. This article grants governments the right to stop issuing patents that threaten human, animal or plant life or health, or risk serious damage to the
environment. Article 27(2) stipulates that members may exclude from patentability if this is necessary to protect ‘human animal or plant life or health or to avoid serious prejudice to the
environment’.119
Article 27(3) allows members to exclude plants or animals from patentability and subject them to certain conditions.120
4.9. The General Agreement on Trade in Services (GATS)
The GATS provides the rules for trade in services and contains similar provisions as the GATT 1994. Article XIV of the GATS121 is the most relevant provision vis a vis environmental protection.
Similarly, this provision exempts measures that affect trade in services for the protection of human, animal or plant life or health from the general obligations for trade in services (such as: the MFN principle, national treatment and quantitative restrictions etc.). Additionally, the preamble of the GATS recognizes the rights of government to pursue national policy objectives, which could include environmental protection.122
4.10. Conclusion
For analysis of the WTO legal system, several agreements were analysed, including the GATT 1994, the AOA, the SPS, the TBT, the TRIPS Agreement, the SCM and the GATS. It was noted that the WTO Agreement, the Agreement on Agriculture, and the TBT (and less explicitly the GATS and GATT 1994 ) have preambles referring to the relevance of protection the environment thereby deciding the scope of the agreement. The preamble of the SPS in itself is concerned with sanitary and phytosanitary measures concerning animal and plant health issues (article XX(b) of the GATT 1994). Furthermore, four of the agreements (the GATT 1994, the TBT, the TRIPS Agreement and the GATS Agreement) contain exclusion clauses stating that measures that are ‘necessary to protect human, animal or plant life or health’ or ‘relating to conservation of exhaustible natural resources’(only GATT 1994) are allowed as exception to the regulations of these treaties. The conditions of when this
exception can be invoked has been clarified in the jurisprudence of the dispute settlement body of the WTO. Several cases, have been brought before the Appellate Body, but all of these defences under article XX have stranded due to the requirements of the chapeau of article XX which requires that measures ‘should not be applied in a manner that is arbitrary and unjustifiable or constitute a
118 Agreement on Trade-Related Aspects of Intellectual Property Rights (15 April 1994),Marrakesh Agreement
Establishing the World Trade Organization, Annex 1C, 1869 UNTS 299, 33 ILM 1197 [hereinafter TRIPS Agreement].
119 TRIPS Agreement, art 27(2). 120
Idem.
121 GATS art XIV.
122 In Argentina-Financial Services it was decided that the term national policy objectives may cover ‘a wide
array of objectives’. (WTO, Argentina – Measures Relating to Trade in Goods and Services (14 April 2016) WT/DS453/AB/R [hereinafter: Argentina – Financial Services] para 6.114.
25
disguised barrier to trade’. Most of the discussed provisions to protect the environment are one way
or another related to these requirement that can be found as a recurring theme throughout the WTO agreements. How this requirement should be weighted is subject to discussion but it is questionable whether the discriminatory requirement is sufficient to balance trade and environmental interests adequately.
26
5: Environmental Provisions in Regional Trade Agreements.
This chapter shows how environmental provisions are shaped in RTAs. This research will focus on these provisions that go beyond the environmental provisions (such as the preambular language and the general exception clauses) as identified in the WTO agreements. Additionally, the purpose of this research is to see to what extent environmental provisions can be a basis from which consensus among the WTO members can be derived. Therefore the focus will be on the most often incorporated
environmental provisions. A recent study by the WTO counted 270 RTAs as notified to the WTO by May 2016 of which 263 RTAs contained at least one environmental provision in its main text, annex or side agreements123 and of which 177 RTAs contain progressive environmental provisions that were not limited to preambular environmental statements or general exception clauses.124 From the RTAs that have been notified to the WTO, the number of total RTAs is now set on 287 RTAs.125Because of the dynamic historic process of including environmental provisions in RTAs, the environmental provisions that are integrated in RTAs differ considerably. There are large differences to be discerned in terms of language, scope, depth, legal and institutional implications and location of the provision in the agreement. This chapter however aims to discern a general trend.
5.1. Analysis of the environmental provisions in RTAs
Table 4 provides information in relation to the 33 identified RTAs. It is shown that of these 33 agreements, 12 RTAs do not contain any of the selected types of environmental provisions126 (‘environmental cooperation’, ‘relationship between the RTA and MEAs’, ‘upholding of
environmental laws’ and ‘transparency and right to information’) that are of specific importance for this research. A total of 21 of the RTAs contained provisions relevant for this research: 18 RTAs were identified that included provisions relating to ‘environmental cooperation’, 5 RTAs that covered ‘the upholding of environmental laws’, 9 RTAs that incorporated provisions regulating ‘the relationship between the RTA and MEAs’ and 7 RTA that referred to the ‘transparency and right to be informed’.
5.2.1. Environmental cooperation
Eighteen of the RTAs contained provisions relating to ‘environmental cooperation’. These RTAs were concluded by parties of which a total of 110 are WTO members. First, it is important to note that the environmental provisions on cooperation were quite heterogeneous and were found in various sections or chapters of the regional trade agreement. Some were found in a specific chapter on cooperation, whereas other were included in other chapters (e.g. chapter on environment). Generally, the environmental provisions are incorporated to help address the variety of environmental issues
123 J. Monteiro, ’Typology of environment-related provision in regional trade agreements’ (2016) WTO working
paper ERSD, p. 5 <https://www.wto.org/english/res_e/reser_e/ersd201613_e.htm> accessed 24 July 2018.
124 Idem.
125 As of May 2018, see: WTO, ‘Facts and
figures’https://www.wto.org/english/tratop_e/region_e/region_e.htm#facts accessed 23 July 2018.
